Cooper v Cooper & Co Real Estate Albany Limited - [2025] NZHC 478

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1142

[2025] NZHC 478

BETWEEN
MARTIN REES COOPER

Plaintiff

AND

COOPER & CO REAL ESTATE ALBANY LIMITED

First Defendant

ZAIDONG RONG

Second Defendant

CIV-2021-404-1636

BETWEEN

TIEYING MA
First Plaintiff

ZAIDONG RONG
Second Plaintiff

AND

MARTIN REES COOPER

First Defendant

Continued …

Hearing:
12–16 and 19–23 February 2024, 21–25 October, 29 and

31 October 2024

Appearances:

B J Burt, K D Puddle and X Zhu for the Plaintiff

S L Robertson KC, S F Pearson and G W Easton for Defendants R Idoine for the Third Party

Judgment:

12 March 2025

Reissued:

20 March 2025 in redacted and unredated versions

JUDGMENT OF MUIR J

This judgment was delivered by me on 20 March 2025 at 4 pm,

Pursuant to Rule 11.5 of the High Court rules. Registrar/Deputy Registrar Date: ……………………………

COOPER v COOPER & CO REAL ESTATE ALBANY LIMITED [2025] NZHC 478 [12 March 2025]

COOPER & CO REAL ESTATE ALBANY LIMITED
Second Defendant

COOPER & CO. REAL ESTATE ALBANY LIMITED
Third Party

Table of Contents

Para No.

Introduction [1]

Background[10]

Purchase of the Albany Branch[10]

Operation of the Albany Branch[14]

Attempts to formalise the parties’ arrangements[25]

Incorporation of the Albany Company[32]

Operation of the Albany Company[33]

Separation of the parties[47]

Mr Meltzer’s report in detail [51]

Mr Meltzer’s mandate[53]

The written report[54]

Other allegations made by Mr Rong to Mr Meltzer after his appointment[116]

Mr Meltzer’s evidence in this Court[126]

First cause of action [138]

Introduction[138]

Ms Ma’s submission[145]

Mr Cooper’s response[148]

Limitation[151]

Brief consideration of underlying merits[164]

Second cause of action—the law [181]

Section 174 claims[184]

Limitation and s 174 claims[191]

Is the plaintiffs’ s 174 proceeding precluded by the principle of reflective loss?[204]

Creation of contracts by conduct[211]

Quantum meruit[219]

Second cause of action—the individual claims [224]

Overpaid rent and operating expenses[225]

Head office costs[245]

Vendor marketing expenses[306]

Recharges[313]

Franchise fee rebates[316]

Penalties for soliciting sales agents[327]

Profits from redirection of Company inquiries[348]

Loss of the franchise agreement[353]

Retained profits[359]

Purchase of the Silk rent roll[362]

Expenses incurred in 2017, 2018 and 2019[365]

Property management business payments[369]

Waitoki lease and copying costs[375]

The counterclaim[381]

Result[385]

Costs[387]

Introduction

This case represents a further salutary reminder (if ever that were required) of the perils of commencing joint enterprises without appropriate care being given to documenting the relationship.

Prior to the commencement of their joint venture, Ms Tieying (Matty) Ma was a successful real estate agent working in one of Harcourts Cooper & Co’s branch offices. Mr Martin Cooper had been equally successful in building Cooper & Co Real Estate Ltd (CCRE), based on the North Shore and operating under the “Harcourts Cooper & Co” brand.

In 2008 they jointly agreed to acquire Top Bays, a distressed real estate business in Albany. The decision proved to be a fruitful one, delivering millions of dollars of profits to the respective 50 per cent owners over the succeeding years and many millions of dollars more to Ms Ma from the commissions she earnt on property sales, which was her unrelenting focus. The business was run as a branch of CCRE (the Albany Branch).

By contrast, management of the business was left to Mr Cooper, with all the business support necessary for what was originally styled the Albany Branch, provided by the CCRE head office team. Like all branches in the group, including others that had been established as joint ventures, the Albany Branch was charged a proportionate share of head office costs (with no mark-up) by CCRE on a sales agent “headcount” basis.1 These head office costs included overheads such as managing director’s salary and group advertising. The methodology by which these costs were calculated, and the extent to which they were charged, is at issue in this proceeding.

In 2012, the Albany Branch was reconstituted as a standalone company, Cooper & Co Real Estate Albany Ltd (the Albany Company), to which CCRE continued to provide head office support. Ms Ma’s husband Mr Zaidong (David) Rong was appointed a director together with Mr Cooper. Thereafter, by increments, the marriage of interests, formerly so successful, began to deteriorate with, initially, persistent questioning by Mr Rong about the reasonableness of particular head office charges, escalating to the point that Mr Rong engaged

There is some inconsistency in the name attributed to these costs in the evidence, such as: “head office costs”, “head office fees”, “support office costs”, “support office fees”, “support costs” and “support fees”. These are identified in the Third Amended Statement of Claim (3ASOC) as head office fees (being applicable to the period when the business operated as the Branch); and support office fees (being applicable to the period when the business operated as the Company). In this judgment, I adopt the term “head office costs” for all costs of this kind for consistency.

an independent accountant (ultimately at the Albany Company’s expense)2 and culminating in Mr Rong alleging that all support payments from inception were illegal and (what I and others who have reviewed the position before me regard as) unfounded claims of “lying”, “cheating” and “fraud”.

And so the inevitable happened. The New Zealand franchisor Harcourts Group Ltd (HGL) declined to renew arrangements for what it regarded as an increasingly dysfunctional entity and subsequently, upon the application of Mr Cooper and with the consent of Mr Rong, an experienced insolvency practitioner and former auditor, Mr Jeffrey Meltzer, was appointed by the High Court to manage the Albany Company.3 He was tasked to look at a very lengthy list of complaints made by Mr Rong. He identified some (in the overall scheme, largely peripheral) issues and made a commercially robust recommendation for how they should be resolved. The recommendations were largely accepted by Mr Cooper’s interests but not by Mr Rong. He, Ms Ma, and their family trust (the Rong Ma Family Trust) now sue for multiple millions of dollars.4 They claim for breach of fiduciary duty during the period the business operated as the Branch, and under s 174 of the Companies Act 1993 (the Act) for the period postdating the Albany Company’s incorporation.5

Some thousands of documents are before me. The evidence was heard over three weeks. The submissions are prodigious. I am invited to reassess the profits of the Albany Company assuming other models by which its overhead could have been charged and to consider the reasonableness or appropriateness of a vast number of payments made to CCRE over the history of the Albany Company and its predecessor Branch.

To the extent that it is not practical for a Judge to undertake the exercise, the plaintiffs’ invite me to launch an inquiry by a suitably qualified accountant pursuant to r 16.2 of the High Court Rules 2016. This despite the fact that Mr Meltzer has already inquired into the affairs of the Albany Company in detail (involving consideration of 12,000 transactions over two

With Mr Cooper’s interests paying effectively 50 per cent of his approximately $180,000 fees.
Cooper v Rong HC Auckland CIV-2018-404-1853, 30 August 2018.
Expressed in the 3ASOC as being “at least” $9,844,636 although this includes a claim of “at least”
$3,000,000 against Mr Cooper for what is said to be a half share of the value of the lost franchise agreement, and which was not pursued in the plaintiffs’ closing submissions.
That section provides for shareholders, former shareholders, or other entitled persons, to apply to the Court for an order against the company where they consider that the company’s affairs have been, are being, or are likely to be, conducted in a manner that is oppressive, unfairly discriminatory or unfairly prejudicial to them; or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory or unfairly prejudicial to them. See Stephen Revill and Linda Howes Company Law (online ed, Thomson Reuters) at [CA174.01].

financial years with the conclusion that further historic inquiry was not “cost-effective”) and came to the conclusions already indicated.

In addition, the proceeding raises significant limitation issues and, by virtue of the plaintiffs’ attempts to recover as compensation under s 174 alleged losses to the value of their shareholding and/or profits forgone, issues in respect of s 174’s ability to respond to any reflective loss.

Background

Purchase of the Albany Branch

From 1998 to early 2008, Ms Ma was employed in CCRE’s Glenfield branch. She was regularly the top sales agent across all Harcourts franchises.

In mid-2008 Mr Cooper told Ms Ma about an opportunity to acquire the Top Bays real estate business in Albany. This Business was owned by Mr Graeme Udy with whom Mr Cooper had enjoyed a long-term business relationship, having sold him, many years earlier, interests in the Harcourts Cooper & Co branches in Browns Bay and Mairangi Bay. Mr Cooper saw an opportunity to combine his well proven strategies for expansion on the North Shore with Ms Ma’s equally well proven sales record, particularly within the Chinese community. He thought that Ms Ma might wish to start with a 25 per cent interest in the business and move ultimately to 50 per cent but Ms Ma was happy to proceed with 50 per cent from the outset. He indicated that Mr Udy was wanting $50,000 for the agency and suggested they contribute $25,000 each plus $15,000 each towards working capital.

Ultimately, Mr Cooper was able to secure the purchase for $35,000. Ms Ma and Mr Rong’s contribution to acquisition and capital nevertheless remained $40,000 with the intention that this be matched by Mr Cooper. The plaintiffs plead that no such equality of contribution was made and opened their case on this basis. No equivalent submission was however made in closing.6 Nor in my view would it have been sustainable. Grant Thornton on instruction from Mr Meltzer, inquired extensively into the subject, concluding that “we consider it reasonable to conclude that Cooper & Co did contribute $40,000, the agreed amount that was matched by Matty Ma.”7

For this reason, it is addressed together with the claims at issue in the first cause of action. See below at [179]–[181].
Email from Tim Downes (Partner at Grant Thornton) to David Rong recording their role as independent accountants assisting court appointed Mr Jeffery Meltzer (3 July 2019).

Purchase of the Top Bays business was settled in August 2008. The new business, styled Harcourts Cooper & Co Albany, started trading in the later part of 2008 initially from Top Bays’ premises at 5/357 Albany Highway. It operated under a franchise agreement with HGL expressed to be for five years from 1 September 2008 with a right of renewal for a further five years. The franchise was taken in the name of CCRE with guarantees by Mr Cooper and fellow CCRE shareholder Mr Andrew North.8 It is not in dispute that, until incorporation of the Albany Company some four years later, CCRE held the franchise as to 50 per cent for Ms Ma. During this period, the business operated effectively as a branch of CCRE, albeit with separate internal accounting.

Operation of the Albany Branch

As indicated, Ms Ma was not at this stage interested in management of the Company. In an email dated 13 December 2008 she summarised her position “I like to be aside as a shareholder only without being involved in business management”. Nor did she want it to be publicly known that she was a shareholder in the business. She considered that, were this the case, members of the Asian community would bring pressure on her to reduce the commissions payable on their transactions. She and her immediate team received 70 per cent of all sales commissions generated by them—the highest percentage paid within the CCRE related entities.

Although a branch manager (Mr John Cooney) was ultimately appointed in January 2009 to the Albany Branch, all of its day-to-day administration, accounting, human resources, professional indemnity, and related administration was handled by CCRE’s support office staff. The costs associated with this support were then charged on a basis which reflected the proportion of Albany’s sales staff to the total sales compliment within the CCRE Group (including the joint venture branches with Mr Udy in Browns Bay and Mairangi Bay and with Ms Ma in Albany). This method of apportioning head office costs is what is referred to henceforth as the “headcount” methodology. Some of the witnesses referred to it, equivalently, as “bums on seats”.

These charges included a monthly salary to Mr Cooper as managing director of CCRE. Despite Mr Cooney’s appointment, Mr Cooper remained actively involved in management of the Albany Branch, particularly with respect to the recruitment of sales agents as the Branch expanded and in supporting them to become productive members of the Albany team.

The agreement itself was not signed until 3 July 2009.

In their statement of claim, the plaintiffs seek recovery of all sums paid to Mr Cooper for the management services undertaken by him during this period.9 But in her evidence Ms Ma was clear that she did not dispute such entitlement until the Branch transformed into a stand-alone company in 2012.

In the email previously referred to, Ms Ma identified that her accountant needed “to know sure and set management cost (Manager Salary, Admin Salary), for last three months why these outgoings vary in some way”. Ms Paula Barrington, then Finance Manager for CCRE, responded on 19 December 2008 pointing out that the “wages admin code covers a share of the wages for myself, Cindy, Kiri, Aasta, Ross and Rex the sign guys, Mitchell, Jason Carr – all people who work for the company as a whole rather than just one branch.” This seemed to satisfy Ms Ma who made no further substantive enquiry about head office costs during the period that the business operated as a branch.

Growth within the Branch was rapid. By 2012 there were approximately three times as many agents and property managers working in it as had worked in the Top Bay business. It had also become highly profitable.

In around March 2009, the business moved into new premises at 227 Dairy Flat Highway. These had been purchased by Mr Cooper’s interests in December 2008 through a company called 227 Ltd. Mr Cooper says that Ms Ma was told about the purchase, indeed that he discussed with her the idea of them buying the property jointly—something Ms Ma declined. By contrast, Ms Ma says that it was not until February 2013 that she became aware of Mr Cooper’s ownership interest.

The new premises were larger, enabling the expansion that followed. They comprised three stories, only the first of which was initially occupied by the Branch. In May 2010, as it expanded further, it took over the first floor. Then in June 2012, coincident with formation of the Albany Company, it assumed occupation of the second story also. This had formerly been residential accommodation.

The premises had previously been occupied by a branch of the real estate agent group, The Professionals. CCRE took an initial assignment of this lease. On 18 November 2010, a new lease was entered into between 227 Ltd and CCRE, guaranteed by Mr Cooper and expressed to have a retrospective start date of 1 November 2010. It was for a period of six

The latest iteration of which was the 3ASOC filed on 19 February 2024 after the first week of hearing.

years with two rights for renewal and a rent review date of 1 November 2013. It related to the ground and first floors only, specifying an agreed rental of $71,675 plus GST.

Though the business began to prosper there were times when its cashflow did not facilitate payments of dividends to both shareholders. Mr Cooper left profits of $132,623 in the Branch for the first two years in order to maintain liquidity and to ensure Ms Ma could draw her profit share. In doing so he chose to pursue what could, in my view, be described as a “big picture” approach, recognising that a combination of Ms Ma’s sales talents and his proven ability to grow successful agencies would ultimately deliver significant rewards and that it was important for Ms Ma to feel recognised and valued in the interim.

The same approach is evidenced by CCRE’s acquisition of the business of Silk Property Management Limited in 2010 (Silk) for $85,757 on behalf of the Albany Branch. From settlement it attributed all income from Silk to the Branch. When the Albany Company was ultimately incorporated, it then purchased the business at cost price which was paid to CCRE. This transaction is referred to henceforth as the purchase of the “Silk rent roll”. In the result, CCRE funded the initial acquisition but, for approximately two years, gave the benefit of that acquisition to the jointly owned Albany Branch.10 The acquisition of Silk is at issue in these proceedings and is discussed later.11

Attempts to formalise the parties’ arrangements

Early on in their relationship the parties recognised that it would be appropriate for it to be formally documented. A draft joint venture agreement was prepared by Mr Cooper and submitted in July 2009. It was not in a form acceptable to Ms Ma.

On 16 November 2010, Ms Ma, Mr Rong, Mr Cooper, Ms Barrington, and Ms Julia Owens of Blackmore Virtue & Owens (BVO), the accountants to CCRE, agreed that a company structure should be put in place from 1 April 2011.

Five months later, on 22 April 2011, and contrary to the apparent structure agreed in November 2010, Ms Ma submitted a basic draft partnership deed for discussion. On 11 May 2011 Mr Cooper sent this agreement to CCRE’s lawyers, Young Hunter (YH), with a request to identify a suitable compromise arrangement.

On 1 October 2014 Mr Rong agreed that Cooper & Co should reacquire the rent roll, which it did.
See below at [362]–[364].

On 26 July 2011, Ms Owens provided Mr Cooper and Ms Ma with draft joint venture and branch management contracts prepared by YH. These provided for the Albany Branch to operate under a branch management agreement with formation of a new company, Albany Management Ltd owned jointly by Ms Ma and Mr Cooper’s interests. This proposal was rejected by Ms Ma. On 28 November 2011, a further YH draft was circulated proposing formation of a separate company called Cooper & Co Albany Ltd with a separate accounting system and bank accounts. On 16 December 2011, this draft was likewise rejected by Ms Ma and Mr Rong.

Ultimately, what was agreed between the parties was a simple form one page document which in its preamble recited that, up until that point, CCRE had held a “50% share of Harcourts Albany branch” for Ms Ma and that “Matty and Martin will form a new JV company to take over the existing Harcourt Albany branch business.”

The substantive terms were contained in eight bullet points. The parties agreed to form the Albany Company and to obtain a separate franchise agreement for its territory. Mutual pre-emptive rights were recognised. It was agreed that the company should have two directors, one appointed by Mr Cooper and one by Ms Ma and that “major activities undertaken by the company shall have to be approved by both directors.” The directors were stated to have full access to “all the financial figures of the company, monthly profit and loss statements shall be produced and supplied in a timely manner to the directors, and the company shall provide tax paid dividends for profit on a quarterly basis”. The agreement included a dispute resolution provision, never activated in the circumstances which have unfolded, and which provided that if the parties could not themselves resolve their disputes “the matter shall be put to mediation”. The clause further provided that “should any disputes arise, the parties shall endeavour in good faith to resolve the dispute referred to in the notice by using formal dispute resolutions techniques.” The agreement was signed by Ms Ma and Mr Cooper on 29 March 2012.

Three weeks earlier Ms Ma had emailed CCRE’s new Chief Financial Officer, Mr Darrin Brown, requesting that he compare the performance of the Albany Branch (and, in particular, its overheads) with that of the Top Bays agency which the parties had purchased. Mr Brown’s response was comprehensive, pointing out that the two enterprises were very different in scale, that the Albany Branch had bigger premises, higher rent, insurance and rates, the need for more administration to support the significantly increased sales team and noting that “of course all the extra heads create extra costs like more printing power, PI

insurance as higher revenue, more costs on marketing, training, entertainment, telephone as

… these costs vary with number of bums on seats.” He confirmed that being part of the wider CCRE Group meant better fees rebates, better printing and telephone deals (along with other economies of scale), but that he would continue to work on decreasing the costs basis and improving profitability.

Incorporation of the Albany Company

Incorporation of the Albany Company occurred on 19 June 2012. In evidence Ms Ma agreed that the purpose of the incorporation was to carry on the business that had formerly been conducted as a branch, albeit as she said, “independently”. Accounting for the Albany Company commenced as a separate entity on 1 September 2012. Mr Cooper’s interests and those of Ms Ma and Mr Rong were paid regular equal dividends.

Operation of the Albany Company

On 13 August 2012, Mr Rong and Mr Cooper, in their capacity as the Albany Company’s newly appointed directors, signed account operating instructions with ASB for the new account opened in the Company’s name. Mr Cooper, Mr Brown, Ms Barrington and Mr Rong were identified as signatories for the business accounts with any two required to authorise transactions. The directors certified, among other things, that:

All Corporate resolutions and approvals required by law and pursuant to the constitution (if the Company has one) necessary to approve the Transactions and authorise execution of the Document, has been passed or given and remain in force.

On the accounts signatories page, Mr Cooper was identified as “managing director” and Mr Rong, who clearly signed last, as “director”. In that context Mr Rong must be taken to have at least represented to the ASB that this was the nature of Mr Cooper’s role.

From its incorporation the Company assumed the obligations of the Branch under the lease to 227 Ltd. It remained in occupation of the premises until the later part of June or early July 2016 when it moved to new premises at 232 Dairy Flat Highway. This was approximately four months before expiration of the lease on 227 Dairy Flat Highway.

Likewise, the provision of head office services by CCRE continued, essentially unchanged and with no immediate resistance from Ms Ma or Mr Rong. On 8 February 2013 however, Mr Rong wrote to Mr Cooper raising issues about the rental rate on 227 Dairy Flat Highway premises and concluding:

We cannot accept such a high rent and other not reasonable fees. It is compulsory for us to run this company under Company Act (sic). Any things against the Act in our business have to be corrected.

This elicited a very comprehensive response from Mr Cooper, he thanked Mr Rong for “taking the time to watch the costs of the business” on the basis that “[a]fter all any savings you can make [will] be to my benefit as well as we are 50/50 in the business.” He said however that he would “not accept that we cut costs and services we provide to the sales team at Albany from the head office fees we charge.” He then set out, at considerable length, the nature of those services. Mr Cooper then went on to state, in terms which I consider accurately foreshadow the fault lines in this litigation:

These things are all part of the success that builds the company and … help to make the profit we make and build the loyalty we have. I do not think Albany can with draw (sic) from all these things and try and manager (sic) them separately,

Matty does not engage in a lot of these things that much as she is special and finds her own motivation and drive to succeed.

But I am sure a lot of the other staff need these things to help with their success.

If things do not run smoothly we will lose production and lose staff. I am happy to work with you on any cost saving you think we can make but will need to know what you think that area (sic).

…

I hope we can work together to make the business better. I am and always have been open to you (sic) input and suggestions.

Mr Rong did not respond to this correspondence in a way consistent with the case he and Ms Ma now advance. He did not suggest either that the Albany Company engage its own compliment of administrative staff, nor suggest that payment for provision of services by CCRE’s head office was illegal nor demand a refund of all support office charges that had been paid. However, his concern about the reasonableness of components within the charges persisted.

On 3 March 2014, Mr Rong and Ms Ma made initial contact with experienced specialist consultant accountant Mr Peter Byers FCA (Retired) who, by around July 2014, was assisting them with their inquiries.

On 25 November 2014, Ms Owens sent draft financial statements for the 2014 year together with a summary of the Albany Company’s performance to Mr Ma and Mr Rong. In response Mr Rong said that he had not approved head office costs, that Albany was an independent company and that all such costs were to be refunded. On 12 February 2015 he

went further and suggested that head office costs had been “illegally” charged to the Albany Company and that the matter should be reported to the Serious Fraud Office, Inland Revenue Department (IRD) or the police. A similar allegation was made on 18 March 2015 when Mr Rong further advised Ms Owens head office costs had been “illegally debited” by CCRE in excess of $1,000,000.

In light of these escalating allegations Mr Cooper agreed that for the future, Mr Byers be engaged at the Albany Company’s (and therefore effectively his 50 per cent) expense to work with Ms Ma, Mr Rong and BVO to resolve any differences. In July 2015, Mr Byers advised Ms Owens that Mr Rong had accepted his opinion that BVO had prepared the financials “without bias or favour”. In an email from Ms Owens to Mr Byers dated 6 August 2015, she recorded Mr Cooper’s agreement to proposals which Mr Byers had advanced in order to resolve Mr Rong’s concerns. These included preparation of two monthly management accounts, two monthly review meetings to accept and adopt the Company’s management and GST report, and instructions to Lowndes Jordan to prepare a shareholders agreement. BVO confirmed that it was happy for Mr Byers to review their files at any time.

Multiple invitations were issued to Mr Rong to meet and discuss his concerns. Most often, these invitations were declined. Mr Rong’s evidence at trial was that he preferred to address issues by email as he had reservations about safety and inaccurate meeting minutes. I do not regard there as being any adequate foundation for those concerns.

Through 2016 the relationship between the parties continued to limp along albeit that the Albany Company itself continued to be highly profitable.12 Mr Byers continued to communicate regularly with both Ms Owens and her father Mr Athol Owens. On 20 July 2016 Mr Byers advised Mr Owens that the matter of shared expenses remained a concern to Ms Ma and Mr Rong and required, at the least, “full disclosure”. He expressed frustration at the time being taken to produce a draft shareholders’ agreement.

In the week of 1 August 2016 Mr Byers, Mr Owens and CCRE’s then Head of Finance, Mr Ciaran Lowney met to review a draft shareholders’ agreement which had been produced by CCRE’s solicitors and to discuss, among other things, the allocation of head office costs. Mr Owens’ summary of that meeting on 10 August 2016 records that the attendees “went through a number of categories [of head office costs] and we felt there needed

Recording net profits before tax of $1,902,902 in the 2016 financial year and $1,391,970 in the 2017 financial year.

to be a few amendments.” It further records that it was left to Mr Lowney to “review the entire ledger making up the shared expenses … with particular care in relation to the larger sums involved.” He was tasked to ensure, for example, that “ACC levies only included the staff involved in head office activities and not for example, the receptionist at Milford” and to inquire into why a percentage of Mr North’s time appeared to be charged to the Albany Company directly rather than simply included in head offices costs. It was noted that although some amounts may be small, “it was best not to have anything in the shared expenses that might become contentious”.

As a result of Mr Lowney’s inquiries, credits of $23,755.87 were passed in favour of the Albany Company. The principal adjustment related to the direct payment which the Albany Company made to a portion of Mr North’s salary. Although Mr Cooper considered that Mr North provided particular and additional services to the Albany business, removing the charge represented, in his view, the course of least resistance.

At around the same time,13 the Albany Company moved from the premises at 227 Dairy Flat Highway to premises across the road at 232 Dairy Flat Highway. Mr Cooper says that he agreed to this move in an endeavour to assuage Ms Ma and Mr Rong’s concerns about paying rental to a company in which he had an interest, being 227 Ltd, despite the fact that the move was costly and disruptive. There was a subsequent dispute as to whether the Albany Company was obliged to pay rent on the 227 Dairy Flat Highway premises until the conclusion of the lease on 31 October 2016. Notes of a meeting between Mr Byers, Mr Cooper, Mr Owens, Mr Lowney and BVO’s Mr Steven Khoo recorded an action point that the Albany Company “should agree and satisfy its obligations within the terms of the lease and make rental payments until the end of the lease” but that Mr Cooper had identified a tenant for the ground floor which would mitigate its liability. Ultimately, the net amount paid by the Albany Company after it vacated the premises was $29,571.59 plus GST. The plaintiffs seek recovery of that sum.

Separation of the parties

By 2017 the relationship between the parties had become dysfunctional. Mr Cooper offered to buy the plaintiffs out, but they were adamant that they would not sell to him. He then proposed that the plaintiffs buy out his share and invited them to make an offer. On 8 December 2017 Ms Ma offered to buy Mr Cooper’s 50 per cent share of the business for $1

Mr Cooper says June 2016.

on the basis that she retained all rights to pursue him for damages. Mr Cooper rejected the offer and advised Ms Ma that the relationship was over. Shortly after, solicitors for Ms Ma and Mr Rong persuaded ASB not to operate under the existing mandate and to require Mr Rong’s signature to all transactions. Thereafter he refused to approve payment of any head office costs. CCRE claims against the now insolvent company the sum of $432,000 for support services provided, invoiced, but not paid, for the period November 2017 to April 2019, less a HGL commission rebate of $71,270.90 otherwise payable to the Albany Company but in respect of which it asserts an equitable set-off.

On 30 August 2018, the High Court appointed Mr Jeffery Meltzer as an independent manager of the Company with the support of both directors. His mandate included investigating multiple aspects of the Company’s operation between 2012–2018 which were identified as being of concern to the plaintiffs. In the current proceedings the plaintiffs reprise many of the issues referred to Mr Meltzer. They do not accept his conclusions.

The franchise agreement with HGL was expressed to expire on 31 August 2018. Both parties were invited to apply for the franchise going forward and both applied. HGL invited CCRE to enter into a new franchise agreement for the Albany Company, which it accepted. Ultimately, CCRE purchased through Mr Meltzer, the rights on the premises at 232 Dairy Flat Highway and the Albany Company’s fixed assets. The latter were sold for $683,000 plus GST which Mr Meltzer described as effectively the book value of the assets after the allowance for depreciation” and “the first time in his entire career that he had managed to achieve book value for the sale of assets”. He assessed the open market value as being approximately

$150,000. Half of the $683,000 purchase price was promptly paid to the plaintiffs and half to Mr Cooper’s interests reflecting their respective 50 per cent shareholding.

On 9 December 2020, Mr Meltzer provided the parties with his final report on the issues he had been tasked to investigate. His report included a number of what have been described as “mediation type proposals” for resolution of the parties’ differences. Mr Meltzer’s evidence was that Mr Cooper was prepared to accept the proposals but that the plaintiffs were not. Some eight months later the current proceedings were commenced claiming multiple heads of loss including compensation for half of all head office support charges paid for by the Albany Company and predecessor Branch since the inception of the business.

Mr Meltzer’s report in detail

I start here because:

(a)Mr Meltzer has and continues to fulfil a court appointed role.

(b)He was appointed with the support of both the Mr Rong’s and Ms Ma’s interests, and Mr Cooper’s interests.

(c)His qualifications for the role he undertook are unimpeachable.14

(d)No question arises as to his independence.15

(e)He was tasked with investigating many of the complaints which feature in the present proceedings.

(f)He had available to him significant forensic resources in the investigation which followed.

(g)He reviewed many thousands of documents.

(h)The conclusions which he came to must be considered fully informed.

(i)The extent of his inquiry exceeds that realistically possible by this Court.

Against this background, although I am not bound by any of Mr Meltzer’s factual finding or his opinions, I intend to give them appropriate weight.

14 Thirty-five years’ of experience in the insolvency sector after earlier work as an auditor including investigation assignments, “work-out solutions”, receiverships, liquidations, creditor compromises, voluntary administrations and miscellaneous court appointments. In addition, he has previously been Chairman of the Auckland branch of Chartered Accountants Australia and New Zealand (CAANZ), a previous member of the Professional Conduct Committee and Disciplinary Tribunal of the CAANZ, a director of Fidelity Life Insurance Company Ltd and a director of Housing New Zealand Ltd.
15 Mr Rong initially sought to challenge this by reference to the fact that two years prior to Mr Meltzer’s appointment, his Meltzer Mason colleagues, Ms Karen Mason and Ms Rachel Mason-Thomas, were appointed joint and several liquidators of a company Albany Rosedale Ltd (ARL) of which Mr Cooper was the sole director. This was a solvent liquidation facilitated by BVO. BVO is one of a large number of chartered accountancy firms who use the services of Meltzer Mason for solvent liquidations. Mr Meltzer gave evidence that the vast majority of such appointments are managed by the accountants engaged by the company concerned and that such liquidations are done for a fixed fee and comprise a series of standard steps with very little deviation. He confirmed his understanding that neither Karen Mason nor Rachel Mason-Thomas met or communicated with Mr Cooper before, during or after the course of the liquidation. He also confirmed that prior to the plaintiffs’ raising the issue, he had no personal knowledge of ARL. I do not consider any of this realistically impugns Mr Meltzer’s independence or the appropriateness of his appointment. I note that the point was not pursued by Mr Burt in closing submissions.

Mr Meltzer’s mandate

Mr Meltzer’s mandate as the independent manager of the Company was prescribed by way of minute issued by this Court.16 Together with some other instructions as to the scope of his management, it reads:

Mr Meltzer and his authorised agents and/or advisors be authorised to do all things reasonably necessary to:

a.Realise Company assets with the approval of both directors of the Company and discharge Company obligations.

b.Ascertain the financial position of the Company as at 31 August 2018.

c.Ascertain what needs to be addressed by the Company, its directors and/or shareholders after 31 August 2018, to Include the need to retain the Company's presently leased premises in the short term, how the existing business might be managed, sold or otherwise dealt with going forward and any other matter that needs to be addressed In the short to medium term by the Company and its directors. To the extent that Mr Meltzer has a view as to whet must or should be done, he must state this.

d.Investigate:

i.The payments made by the Company to Cooper & Co Real Estate Limited In the years 2012 to 2018 (Invoiced or otherwise) and determine the liability of the Company for such payments.

ii.Liability of the Company for Invoices rendered or payments sought by Cooper & Co Real Estate Limited for support services but as yet, unpaid.

iii.The allegation that listing Inquiries have been directed to agents affiliated to Coopers & Co Real Estate Limited when they ought to have been directed to the Company.

iv.Allegations about the operation of the Company contained in Mr Rong's email of 14 August 2018.

For the purpose of these Investigations Mr Meltzer is authorised to make any enquiries he considers necessary of Cooper & Co Real Estate Limited and Its accountants, BVO, and shall have reasonable access to the records of Cooper & Co Real Estate Limited.

…

The written report

This was delivered on 9 December 2020, a little over two years after Mr Meltzer's appointment. In the course of preparation he reviewed in excess of 12,000 of the Company’s transactions.

Cooper v Rong, above n 3, sch 1.

In the introduction to his report he records that the one page agreement entered into by the shareholders in 2012 did not adequately detail “key governance matters” in that it did not cover the “financial management and administration responsibilities of the Company.” He noted that it was intended that a formal shareholders’ agreement be entered into and that the Company have a properly documented constitution, but that this did not ultimately happen.

Summarising the genesis of the dispute he said:

While Ms Ma and Mr Cooper traded the Albany Branch, all accounting and administration was undertaken by the centralised CCRE support office. Mr Cooper had overall management responsibility for CCRE and all branches. Following formation of the Company in 2012, all accounting and administration continued to be undertaken by the CCRE support office. A monthly management fee was charged by CCRE to the Company. This should have been agreed to by the directors and confirmed in the Minutes of meetings of the directors at the commencement of the trading of the Company. This never happened and it has been the source of disagreement from the outset.

He noted that Mr Rong had access to the Company’s Xero accounting system from March 2014 which would have given him the ability to interrogate the Company’s accounts back to the point of its formation in 2012.

He noted Mr Rong’s position that he had never agreed to CCRE providing accounting and administrative functions and that from September 2017 the Company had appointed its own accountant after a selection process conducted by Mr Byers on behalf of Mr Rong, and Mr Owens and Ms Owens on behalf of Mr Cooper.

He confirmed that BVO had drafted the annual financial statements for the Company through to the year end 31 March 2017 but that on 31 January 2018 it had given notice that it was unable to continue to act for the Company. At the time of Mr Meltzer’s appointment the 2017 annual accounts had not been finalised nor a tax return filed and Mr Meltzer suggested a number of independent chartered accountancy practices who could do so. Ultimately, Grant Thornton was appointed. The financial statements prepared by Grant Thornton identified a

$500 difference only from those prepared in draft by BVO. Mr Cooper was happy to sign the financial statements, but Mr Rong declined to do so. They were filed with Mr Meltzer’s authority.

He confirmed that from the date the Company commenced trading, Mr Rong had raised issues and concerns about its management and administration. He said he had been able to identify “adequate evidence of the concerns raised … and the responses to these

concerns from CCRE”. He noted that there had been numerous meetings with Mr Byers and BVO which were themselves well documented.

He said the Company was very profitable in its six years of trading, generating total profits before tax in excess of $8,000,000 on gross sales revenue of approximately

$56,000,000, that it was consistently the top performer of any branch or company within CCRE and that Ms Ma was consistently the top performing sales agent for HGL.

He said there was a lack of governance at board level with directors who were unable to agree on many matters—principal among them, the financial management of the Company being performed by CCRE support staff. He said that Mr Cooper and CCRE appeared to have continued to operate the Company’s financial affairs in a similar manner to when the Company was operating as the Branch and that Mr Rong did not accept the allocation of costs used by CCRE and all the level of direct costs being incurred. He noted that this led to a fundamental breakdown of the relationship and his appointment.

He noted that in the course of preparing his report he had taken advice from legal counsel and that he had met at length with BVO and Mr Byers.

He confirmed that, on appointment, the two major assets to the Company were first, the fitout, office furniture and computer equipment at the Company’s leased premises (232 Dairy Flat Highway); and second, its property management business. He engaged Global Asset Services to prepare an asset appraisal of the Company’s fixed assets and fitout, which gave a valuation range of between $641,265–724,855 plus GST. He negotiated a purchase price with Mr Cooper of $683,000 plus GST, which he described as “an extremely good offer” for the reason that if the lease had been relinquished, the majority of the fitout would have reverted to the landlord as it was affixed to the building. He considered an open market sale of the fitout and assets would have been in the vicinity of $150,000. He took independent advice from Jones Lang LaSalle Ltd who concluded that “this is an extremely good offer from a party that appears to have a special interest.”

The property management business was in turn sold to Ms Ma for $1. Although an independent valuation of the business indicated a price “in excess of $400,000”, Mr Meltzer concluded that “in reality Ms Ma created this business” and the portfolio was attributable to professional relationships she had developed with the property owners. He concluded therefore that without her involvement, the business had no value. This was acknowledged by Mr Cooper, who agreed to the sale at a nominal price.

Although the Albany Company had traded very profitably since its inception, he did not consider that there was any goodwill in it given that the goodwill “rested with Ms Ma and Mr Cooper”.

As outlined above, Mr Meltzer was tasked to:

Investigate:

i.The payments made by the Company to CCRE in the years 2012 to 2018 (invoiced or otherwise) and determine the liability of the Company for such payments;

ii.Liability of the Company for invoices rendered, or payments sought by CCRE for support services but, as yet, unpaid.

He noted that in the six years under review, CCRE traded with up to nine branches and that there were also three companies in which CCRE held various shareholdings (including the Albany Company). In reference to the head office costs which were on-charged to the branches and companies each month, he noted that where specific costs could be identified these were on-charged directly to the respective branch or company and that other costs were recovered based on a formula of sales person headcount in each branch or company. The calculation of headcount was based on actual numbers of sales personnel each month. He confirmed that head office costs were charged without margin, with five per cent of the total recovered from the property management divisions, five per cent from the “commercial team”, and the remainder of the shared office costs based on sales-person headcount.

He said that his team of accountants compared the headcount methodology with another alternative available methodology—a comparative sales/expense analysis over all branches and companies administered by the support office. He said that the Albany Company’s sales contribution averaged 18.6 per cent of CCRE’s group sales revenue. By comparison, its allocated share of total CCRE head office costs calculated on a headcount basis averaged 14.1 per cent.

He said that his team conducted a detailed review of the transactional data for the period 1 April 2016 to 31 March 2018. He chose that period because of the level of information in the Xero accounting system and in fact that electronic storage of source documentation was readily available, noting that prior to 1 April 2016 all source documents were paper records and manually boxed and stored. He said that over the two years which were analysed in detail “no significant errors or inconsistences … were identified”, noting however that “we did identify some minor costs and possible overcharging [of head office

costs] in the vicinity of $30–35,000 in each of the two years of the transactional data we reviewed”.

He expressed the opinion that the practice of costs allocation on a per head basis was “an acceptable one from a business and financial reporting perspective.” However, he noted that there would always be room for argument about whether particular costs incurred by head office would be costs the Albany Company would have elected to incur if it operated on purely standalone basis.17 He also identified $334,000 of “mostly small transactional costs … nothing of significant value” incurred by CCRE which “could have or should have been charged directly to branches rather than being allocated across all entities.” He said the Albany Company’s proportion of these costs was in the vicinity of $39,000 over the two years he investigated.

Elaborating on the proposition about the “possibility” of minor overcharging, he said:

It is highly likely that there were some undetected payments made or sums allocated in error that were not directly related to one of these branches or companies. Human error happens. We note that there was no audit of CCRE, or the CCRE support office and we have seen no evidence of any material errors or omissions that would impact on the [Albany] Company. We note that in 2016 the CCRE in-house accountant determined that the Company had been overcharged $23,755.87 and that this sum was credited back to the Company.

He confirmed that at the time of his appointment there were outstanding CCRE support office charges of $432,000. He then suggested a possible basis on which the shareholders might resolve their differences recognising that “a number of errors may have occurred and that there may have been some level of inaccurate charging through the Company over the past six years”, albeit that this was “not an admission that errors did occur.”18 He recommended that the matter be resolved by way of CCRE passing a credit on the Albany Company for the $432,000 outstanding at the time of his appointment noting that this would “in no way be an acknowledgment of inaccurate or incorrect charges during the period under review but rather a good faith proposal from Mr Cooper to Mr Rong to accept in full and final settlement of all issues that Mr Rong has raised in relation to CCRE support office costs.” He again emphasised that “everything I have found is of a minor nature and I do not believe there has been any material incorrect charging.”

For example, sponsorship costs of approximately $499,000 over the two-year period (of which Albany’s share was $58,000) and promotional and incentive costs of $366,000 (of which Albany’s share was
$43,000).
Emphasis original.

Mr Meltzer was to be renumerated at the charge out rate of $500 per hour for his work, pursuant to his mandate. In making the above suggestion, Mr Meltzer noted the significant costs that the Company had incurred in reviewing transactions over the two years in question and his belief that it would not be “cost-effective for the Company for me to continue to delve deeply into all the paperwork in storage covering the period from incorporation and commencement of trading of the Company in 2012 through to 31 March 2016 when all records started to be recorded electronically.”

I note at this point that Mr Cooper was prepared to accept Mr Meltzer’s recommendation. Mr Rong was not.

Before addressing each of the 17 specific allegations which he had been tasked to investigate by the Court’s order, Mr Meltzer noted an Inland Revenue risk review which commenced on 15 January 2019. It is common ground that this review was initiated by Mr Rong whose allegations included that Mr Cooper, his finance managers and BVO had prepared false financial reports which have “… caused serious repercussions and damages to the public interest, IRD and other shareholders”.

IRD sought copies of financial statements, fixed asset depreciation schedules, tax working papers, GST reconciliations, journals, ledgers and trial balances for each of the years 1 April 2012 to 31 March 2016. They also required access to all other records or information used to prepare the returns. Mr Meltzer noted that Grant Thornton collated all such information and passed it to IRD.

On 25 July 2019, IRD advised that they had completed their review and that it did not need to conduct a formal audit. No issues, concerns or unresolved matters were identified.

In respect of Mr Rong’s 17 separate allegations, Mr Meltzer noted the letter in which they were contained had been sent to the executives at HGL and copied to “approximately 40 sales agents and members of the Albany Company.”

I adopt each of Mr Meltzer’s headings.

Financial reports

Mr Meltzer noted Mr Rong did not agree with nor sign any of the financial statements prepared by BVO. There is no criticism of BVO’s work in his report. He noted that for each

of the years ending 31 March 2017, 2018, and 2019 the accounts had been prepared by Grant Thornton at his direction.

Banking

Mr Meltzer recorded Mr Rong’s assertion that “FastNet Business has been wrongly set up under CCRE by Mr Cooper and ASB bank managers on purpose since 2012.” He set out the inquiries which he had made of the bank noting that the mandate identified four signatories, any two of which could operate the account. He noted that the operating instructions had been signed by Mr Cooper and Mr Rong as directors, and that both had likewise signed the Director Certificate.

He concluded that based on the information available, he did not consider that ASB had acted improperly in operation of the bank accounts, indeed that they were operated in accordance with the mandate approved by both directors. He observed however that, all transactions from 2012–2017 appeared to have been authorised by individuals associated with CCRE. He noted:

There is no suggestion that these individuals have acted improperly but we do appreciate, that from Mr Rong’s position, he should have been able to exercise more control in particular where payments were being made to CCRE.

He further noted that “at all times Mr Rong had full viewing access to the Company’s bank accounts and all transactions.” He said that if Mr Rong believed that Mr Cooper had unfair or undue influence in the operation of the bank account this should have been raised and minuted at directors’ meetings.

3 Unauthorised transaction after new in-house accountant started working

Mr Rong asserted that on 21 December 2017, shortly before Albany closed for the holiday period, $31,781.58 was debited from its bank account and paid to CCRE.

Mr Meltzer confirmed that this payment related to head office costs for November 2017. He said that “[a]s support office fees had always been paid monthly by the Company to CCRE I did not see the payment of this invoice as being outside of the normal course of business.”

Head office costs

Mr Meltzer noted Mr Rong’s contention that there was no mandate to support payment of any head office costs, that he strongly objected to them and that the amount repayable was

$3,087,183.92.

Mr Meltzer’s response was that there was no adequate shareholders’ agreement entered into by the Company at the time of its incorporation and that “as a result, following the commencement of trading … the financial management administration continued in the exactly same way as when Albany operated as a branch of CCRE.”

Management fees; and

Shareholders’ advances—The Rees Trust

Mr Meltzer dealt with these two items together.

In respect of the management fees to the sum of $607,930.56, he noted Grant Thornton’s confirmation that the sum had been incorrectly coded. The sum represented undistributed profits that remained in the Albany Branch at the date of formation of the Company. The Company returned the undistributed profits as income in the 2013 tax return. The resulting tax of $170,229 was transferred from CCRE to the Albany Company. Mr Meltzer concluded “there was no financial impact on the company that resulted from this transaction.”

In respect of the shareholders’ advance of $465,322, Mr Meltzer noted Grant Thornton’s conclusion that this formed part of the adjustments to reflect the appropriate opening financial position of the Albany Company as at 30 September 2013.

In the same section Mr Meltzer dealt with Mr Rong’s allegation that the initial contribution of $40,000 which he and Ms Ma had made to set up the business had not been matched by Mr Cooper. He recorded Grant Thornton’s conclusion that the evidence did not establish this.19

Grant Thornton advised that they “consider it reasonable to conclude that Cooper & Co did contribute
$40,000, the agreed amount that was matched by Matty Ma.” Indeed, they identified a contribution of
$40,254. They further offered to meet with Mr Rong, as they had previously with Mr Byers to explain why they considered the accounting for the opening balances to be reasonable.

Rental payments to 227 Ltd overcharged $300,000.

Mr Meltzer recorded Mr Rong’s allegation that the Albany Company had been overcharged rental during its occupation of the 227 Dairy Flat Highway premises. He confirmed that, although the Albany Branch had operated from the premises prior to incorporation of the Company, there had been no assignment of the lease from CCRE to the Company, nor was a new lease signed. He noted an initial monthly rental charge of $5,972.92 plus GST but that additional space was taken from July 2012, for which rental increased to

$7,755.86 plus GST per month. He observed that there were then no rent increases until the Company relocated in June 2016. He recorded an increase in “OPEX” (operational expenditure) over the relevant period which he did not consider to be unreasonable given annual increases in costs such as insurance and rates. He noted two independent valuations that demonstrated the rent to be at market levels.

He questioned whether it was appropriate that the Company was required to pay rent after it vacated the premises in June 2016 given that it had never taken a formal assignment of the lease. He noted minutes of a meeting on 13 September 2016 at the offices of BVO, attended by Mr Byers, at which it was said that there was agreement that the Company should satisfy its obligations until the end of the lease but said that “the minutes are unsigned, and I have been unable to get any unanimity from all attendees to this part of a meeting.” He concluded that in his opinion, “CCRE should repay the sum of $45,857.25 being the rent and OPEX paid from June 2016”.

Other agents payment (conjunctional sales)

Mr Rong challenged conjunctional sales commissions of approximately $5,500,000 paid by the Albany Company to other CCRE branches, agents and other agencies.

Conjunctional sales occur in the real estate market where the selling office is not the same as the listing office. The selling office could be another CCRE branch or another Harcourts office or another real estate company entirely.

Mr Meltzer noted that sales agents working with the Albany Company also received shared commissions when they introduced a buyer to a property that they had not listed. He concluded that total commissions received by the Albany Company from CCRE were

$3,985,094.44.

He did not see any error in the relevant calculations noting that he was:

conscious that individual sales agents monitor very closely the property sales in which they had been involved whether they are the listing agent, or the selling agent and they ensure they received their commissions when they are due and payable.

Vendor paid expenses

Mr Melzer recorded Mr Rong’s allegation that the Albany Company suffered losses to the sum of $1,890,333, resulting from vendors not paying their marketing costs or, at least, full marketing costs.

He said that the disclosure of the true cost of vendor paid expenses/marketing was distorted by the inclusion of non-related vendor advertising costs in the management accounts, noting that over the relevant period $343,000 should have been correctly coded to and categorised in a separate section of the profit and loss account. He said he did not consider it cost effective to delve deeply into each of these costs but considered that a fair figure for the vendor paid expenses borne by the Company and not recovered was approximately

$1,550,000.

He noted that this shortfall arose because of discounts offered to vendors by individual agents in the Albany Company and that, although subsidising property marketing costs is an accepted industry practice, the overall level of discount appeared to be in the order of 50 per cent, whereas CCRE looked to discount by around 20 per cent on average. He suggested this indicated that the alignment of vendor marketing commitments to actual costs incurred was not being monitored or quantified and that the monitoring of losses was the responsibility of the directors with a need to take corrective action when the losses were unacceptably high.

Renovation for Albany new office—232 Dairy Flat Highway, Albany

Mr Rong alleged that there was no competitive tender for the renovation, the cost of which, including property improvements, plant and equipment, computer software and equipment, was $964,238.49.

Mr Meltzer concluded that Mr Rong’s concerns regarding the sum spent were immaterial given that the Albany Company had received the benefit of depreciation in its tax return and effectively recovered the net book value in cash which was then distributed to shareholders. He noted a further allegation by Mr Rong that the relevant contractor had undertaken work on one of Mr Cooper’s private properties and that items of plant and

equipment ordered and paid for by the Company had been used elsewhere by Mr Cooper. Mr Meltzer said that he could find no evidence to support such allegations.

Related party salaries

Mr Meltzer recorded Mr Rong’s objection to the Albany Company having paid or contributed to the salaries of Mr North (a CCRE shareholder), Mr Cooper, Mr Cooper’s daughter Madison Cooper and his step-daughter Millie Van Hest.

He noted that during the six years the Company had traded, Mr Cooper drew a total salary of $1,900,614 from CCRE, of which the Albany Company contributed approximately 14 per cent through head office costs, being approximately $266,000. He said that when Albany operated as a branch Mr Cooper was ultimately responsible for all decisions but that “things changed when the Company was incorporated” and that he needed to be aware of differences in how he acted in his role as a manager of a branch compared to that of a director of a company. He said that under s 140 of the Companies Act 1993 Mr Cooper was obliged to “disclose to Mr Rong (as fellow director), and enter in the interests register, if he had an interest in a transaction or proposed transaction with CCRE.” He said that, unless Mr Cooper could provide documentary evidence of his salary reimbursement being approved by Mr Rong, “it would be fair and reasonable for this sum to be repaid to the Company.” Mr Meltzer therefore recommended a reimbursement of $266,000.

Again, I record the position that Mr Cooper was prepared to make such reimbursement as part of a package of concessions to resolve Mr Rong’s claims but that Mr Rong declined Mr Meltzer’s proposal.

Hunting top salespersons

Mr Meltzer recorded Mr Rong’s allegation that Mr Cooper “has been hunting more than 12 salespersons including team, who have been 2-5 top earners of Albany, from Albany to his own Company CCRE”, Mr Meltzer declined to engage with the allegation.

Liquidation

Mr Rong alleged that Mr Cooper had planned to wind the Company up since 2016. Mr Meltzer said that he had not seen any evidence of attempts to do so.

Franchise fees rebates

Mr Meltzer recorded that franchise fee rebates of $71,270.90 owed to the Albany Company had been incorrectly deposited to CCRE’s account by HGL for the period [REDACTED] 2017. He expressed the view that the Albany Company was entitled to franchise fee rebates in accordance with its agreement with HGL and that, as this agreement was independent of CCRE, it did not have the right to retain such funds as a set off against outstanding head office costs. As such, Mr Meltzer opined that Mr Cooper should have arranged for the funds to be immediately paid to the Company.

Again, I record Mr Cooper’s agreement at the time that, as part of the overall settlement, CCRE was prepared to refund this sum to the Albany Company.

Conflict of interest

Mr Rong alleged BVO had a conflict of interest in that they were accountants for Mr Cooper, CCRE and the Albany Company. Mr Meltzer did not consider it to be his role or responsibility as court-appointed manager to form a view in this respect.

Non-Albany bills

Mr Rong alleged that in December 2017 the Company’s new in-house accountant (Ms Sue) found “quite a lot of things not correct regarding the bills that used to be managed by Martin Cooper and his finance manager Renee Jordaan.” That is, Mr Rong alleges that the Company was charged by CCRE for bills which it was not liable for, such as invoices from advertising or marketing suppliers.

Mr Meltzer concluded that it was “highly likely that there were some undetected payments made or sums allocated in error that were not directly related to one of these branches or companies” but that he had “seen no evidence of any material errors or omissions that would impact on the Company.”

IT problem

Mr Rong alleged that throughout 2017 “not a single inquiry ever arrived via Harcourt’s Albany website”, the implication being that inquiries had been re-routed by CCRE.

Mr Meltzer engaged an independent third-party IT support company which confirmed that there were “no irregular email rules in place that would onforward emails to another recipient” and generally that there was “no evidence” to prove this allegation.

Other allegations made by Mr Rong to Mr Meltzer after his appointment

Mr Meltzer recorded that Mr Rong and Ms Ma requested he investigate a large number of matters that were not included in the Court’s order, noting Mr Cooper’s concern about escalating cost and belief that he should only focus on those matters the Court had identified. He pointed out that some of the new matters overlapped with other issues the Court had required him to consider. Of these I note only those that featured (directly or inferentially) in the litigation.

Rent, postage and copier costs incurred at the Waitoki office

The Waitoki office is discussed below.20 Ms Sue had identified that these costs to the sum of $14,302.99 should be recovered from Ms Simone du Barnard personally, a key sales agent at the Waitoki Office, as opposed to the Albany Company.

Mr Meltzer noted that these costs had been met by the Albany office on the instruction of Mr Cooper in his capacity as a director of the Company, noting that Ms Simone du Barnard had generated total commission income of approximately $1,700,000 over the 2016–2018 period, of which the Albany Company’s share would have been approximately $500,000.

Diwali Sponsorship

Mr Rong objected to Albany’s contribution to the Diwali Festival. Mr Meltzer noted that the relevant sponsorship was taken by HGL not CCRE and that a number of HGL franchisees (including CCRE) had opposed it. However the majority of franchises supported it, and it therefore went ahead.

See below at [375]–[380].

Insurance

Mr Meltzer recorded Mr Rong’s views that the Company had been overcharged for professional indemnity insurance, that he believed it was a “lie” that Albany was covered under the CCRE policy, that the broker and Mr Cooper had colluded to “cheat” the Company, and that the broker had refused to allow a refund of the premium when the Company “lost the Harcourts franchise” on 31 August 2018, which Mr Rong described as a “fraud”.

Mr Meltzer noted the broker’s confirmation that no refund was payable on the premium because the policy needed to run to the end of the financial year, at which point it was placed on run-off cover for a period of three years at no additional cost. He said that if the policy has been cancelled then there would have been no such run-off cover. Mr Meltzer concluded that it was in the best interests of the Company that the run-off cover be maintained.

In respect of allegations that CCRE had taken “$99,751.61 from 2012 to 2018 in respect of professional insurance premiums over the relevant period”. He concluded, “Mr Rong does not understand the accounting records that he has provided to us in support of his assertion. These records clearly show that each sales consultant was charged their own portion of the premium and this would have been collected from them. Therefore, there is no cost to the Company.”

Purchase of rent roll by CCRE

Mr Rong alleged that Mr Cooper moved the property management business away from the Albany Company without his knowledge or agreement.

Mr Meltzer recorded Mr Cooper’s advice that CCRE had made the purchase because Ms Ma wanted to either close the business down or sell it and that Mr Cooper had offered to return the business to the Albany Company if that is what Mr Rong wished. Mr Meltzer noted that the sale price of $659,873 was agreed to by Mr Rong with the result that the allegation was “moot”.

Supplier account designations

Mr Rong expressed concern that many supplier accounts were not in the name of the Company but rather CCRE and that the Company had been subsidising CCRE. He gave as an example the Vocus Communications bill for internet and phone services of approximately

$1,000 per month, which Mr Rong thought suggested the Company might be subsidising other

branches. Mr Meltzer did not consider that a charge at this level would be unreasonable for an office with approximately 44 staff but accepted that the Company should vet its own supplier arrangements where possible.

Mr Meltzer’s evidence in this Court

Mr Meltzer noted that his earlier report had included opinions and he confirmed he had read the Code of Conduct for Expert Witnesses and agreed to abide by it. He noted that after delivery of his report he had received correspondence from both Mr Cooper’s solicitors and the plaintiffs’ solicitors and that he had not revisited the conclusions in his report in the wake of receiving the parties’ responses.

Mr Meltzer was cross-examined first by Mr Burt for the plaintiffs. He noted that over the six years that the Albany Company had traded, its profit was on average 14.4 per cent of revenue whereas for the other branches and companies within CCRE it was approximately 10 per cent. He reiterated that its share of head office costs averaged 14.1 per cent.

I then asked the following question and received the following response: 21

Q: And do I infer that, looking at all of those comparators, that your view was that there was nothing disproportionate going on in respect of Albany’s overall contribution?

A: Correct. My conclusion was that Albany benefited hugely from being part of the Cooper and Co Group.

When challenged by Mr Burt that the Albany Company’s profitability was “simply a reflection of the fact that per head Albany is making more money than the other agencies” his response was that this was “Correct, yes … and paying less on average in the head office costs than the other entities, yes.” Later he agreed to the proposition it was paying “its proportional share of costs based on headcount but making more money as a result”.

Mr Meltzer confirmed that what Mr Rong had suggested to him and what Mr Byers had conveyed to him on behalf of Mr Rong was that the whole sum of Albany’s head office costs incurred from the Company’s inception should be reimbursed to the Company. He said that Mr Byers acknowledged and recognised but was not able to convince Mr Rong that if head office costs had not been charged, the Albany Company would have had to incur a level of costs itself.

The response here was repeated under cross-examination by Ms Robertson KC.

He acknowledged that there were possibly five or six different methodologies for allocating costs and that he was not saying the headcount approach was the best or even the most appropriate methodology “But just to satisfy myself that it was within a tolerable range I looked at one other form of analysis which was … based on revenue. Which would have been another very simple way of determining monthly allocations to head office costs”.

Under cross-examination from Ms Robertson KC, Mr Meltzer confirmed that Mr Cooper had agreed to “stand aside” from his offer of $683,000 for the fitout if Mr Rong and Ms Ma were prepared to pay the same amount, effectively therefore giving them a right of first refusal.

He noted that, in economic terms, Mr Rong and Ms Ma received $841,500 for their half share of the Company’s assets, assuming a value of around $500,000 for the property management business, albeit that it had no value outside Ms Ma’s management and ownership.

He agreed that in assessing whether a particular head office cost was fixed or variable, greater engagement from a particular branch would equate to a greater requirement for support. A clear example being, that the more residential sales transactions a branch generated, the more time the head office finance team would spend working on transactions for that branch.

He agreed with the proposition that if a branch was generating 18.6 per cent of revenue but paying 14.1 per cent of shared costs, they were “certainly not paying any more than their share of support”. He further agreed that just because a cost is fixed that did not mean to say that headcount was an inappropriate method of allocating the cost to individual branches and businesses. He confirmed my understanding of his evidence that there was nothing inherently unreasonable about allocating head office costs by reference to revenue and that it was not an “outlier in terms of available alternatives”. Of the available alternatives he said he did not find one that would have given a better result to Albany than the headcount methodology.22

In relation to the $23,000 correction that was made in the 2016 year, he conceded it would not be appropriate to describe it as an error if simply made as a concession on

22Acknowledging, as Mr Meltzer would have to, that the only comparator that he seems to have investigated in detail was the Albany Company’s percentage of total Group revenue against percentage contribution to Group costs.

Mr Cooper’s part to “buy peace”.23 He confirmed that where his report referred to the identification of “some minor costs and possible overcharging in the vicinity of $30,000– 35,000 per year”, he had not “definitively identified” costs that made up any “specific sum”.24 He confirmed that he had unrestricted access to all CCRE and BVO documents and working papers in the course of his inquiries.

Finally, he confirmed that his office was now holding only minimal funds on behalf of the Albany Company and that there were outstanding costs for his services and those of his legal counsel in excess of $100,000.25

First cause of action

Introduction

The preamble to this cause of action records it as a claim by Ms Ma only against Mr Cooper personally. This claim relates primarily to the period before the Company was incorporated. That is, the period before and during its operation as the Branch.

The claim is identified as one of “breach of fiduciary duty”. The third amended statement of claim (3ASOC) states it to be “alternative to [the] first cause of action”, a legacy description inadvertently carried over from the second amended statement of claim (2ASOC), in which the first cause of action alleged that Mr Cooper held the Branch “on trust” for Ms Ma. This is relevant to characterisation of the breach of fiduciary duty claim for Limitation Act 1950 purposes.

The cause of action pleads that the Branch was a partnership or a joint venture, with Ms Ma and Mr Cooper being fiduciaries in relation to each other and owing obligations to:

(a)act in good faith;

23Referencing Mr Cooper’s evidence that although he considered Mr North provided particular services to the Albany Company, he was content that his fees be apportioned on a pure headcount basis.
24 After reviewing the position overnight Mr Meltzer confirmed through counsel that the working papers he used to arrive at the possible $30,000–35,000 figure were no longer available and likewise the working papers for his conclusion that over the two years investigated in detail there were $334,000 in small transactional costs which should have been charged directly to branches or companies rather than being allocated across entities (the Albany Company’s proportion being in the vicinity of $39,000 over two years—or approximately $120,000 over six years).
25In a memorandum filed after trial counsel for Ms Meltzer confirmed that outstanding fees and expenses were $133,088.17 and that the Company’s other creditors comprised CCRE (on account of head office costs) - $432,000 and Prestige Print (on account of advertising costs) - $71,101. Mr Meltzer is yet to determine the validity of the Prestige Print invoice.

(b)to manage the business competently;

(c)to avoid unauthorised personal profit or benefit from a relationship; and

(d)to avoid conflict between Mr Cooper’s personal interests and the interests of Ms Ma.

The claim includes a “catch-all” allegation that Mr Cooper breached his fiduciary duties by engaging in all of the conduct identified in the previous 18 pages of the 3ASOC. These pages include multiple allegations which relate not to the Branch but to the subsequently incorporated Company. They also include other allegations, such as alleged inequality of initial contribution to the Branch, which are not reflected in the prayer for relief with which the first cause of action concludes. The pleaded position is in that respect somewhat confusing.

The prayer follows [4.4] of the amended claim. This identifies the losses said to flow from the breach of fiduciary duty as:

(a)Rent and operating expenses $249,792.16.

(b)Salaries, including amounts paid to relatives and employees of Cooper & Co, being at least $361,267.20.

(c)Head office costs, being at least $373,722.

(d)Phone system costs, being at least $40,261.

(e)Phone bills, being at least $79,315.36.

Each of these are assessed below in regard to limitation, and underlying merits.

The prayer seeks half of these combined amounts, being $552,178.86.

Ms Ma’s submission

Mr Burt makes limited submissions in relation to this pre-incorporation period.26 He says that it is the unavoidable conclusion that between 2008–2012, CCRE held the assets of the business for the benefit of Mr Cooper and Ms Ma and that a fiduciary relationship existed which had, at its core, a requirement not to act in conflict with the interests of the beneficiaries and not to benefit from the fiduciary relationship.

Contrary to the pleading, the submission therefore appears to be that CCRE, and not Mr Cooper personally, breached fiduciary duties owed to both parties. Mr Burt acknowledges, however, that because there is an almost complete absence of documentation relating to the 2008–2012 period, “justiciability of the issues [is] extremely difficult.” He says that is particularly so in respect of head office costs, the salaries paid to people who were allegedly not working for the business and the cost of the use of the phone system, but that there was evidence about Mr Cooper’s salary. Mr Burt says that because “he was in a position of a fiduciary”,27 he ought not to have profited from that position and should pay 50 per cent of the sum received to Ms Ma.

The difficulty with this submission is that it is contrary to Ms Ma’s evidence, already highlighted, that it was legitimate of Mr Cooper to charge one-sixth of his salary to the enterprise when it was a branch, but not when it was a company.

Mr Cooper’s response

Mr Cooper accepts that he owed a duty to act in good faith and to avoid unauthorised personal profit or benefit from transactions. He also accepts that there was a duty to:

(a)report regularly to Ms Ma and prepare appropriate accounts;28 and

(b)account to Ms Ma for 50 per cent of the profit of the joint venture subject to deductions for expenses and an allowance for Mr Cooper’s time and skill in managing the joint venture.29

Nine of 272 paragraphs in his written closing.
Reverting to the position pleaded. Emphasis added.
Referencing Lam v Mo [2017] NZHC 997, [2018] NZCCLR 2 at [175].
Referencing Chirnside v Fay [2006] NZSC 68, [2007] NZLR 433 at [17] per Elias CJ, [54] per Gault J and [140]–[146] per Tipping J; and Lam v Mo, above n 28, at [179].

He does not accept that there was any fiduciary duty to manage the business competently while denying any want of competence on his part. He does not accept that there was an obligation to avoid a conflict either in respect of his interest in the ownership of 227 Ltd or his role as Managing Director and shareholder of CCRE because he says those matters were fully disclosed.

He pleads an affirmative defence by way of limitation.

Limitation

Apart from any other difficulties which the first cause of action faces, there are, in my view, insuperable limitation issues. Because the relevant period runs from 2008–2012, both the Limitation Act 1950 (1950 Act) and Limitation Act 2010 (2010 Act) are potentially engaged.

Section 21(2) of the 1950 Act provided a six-year limitation period in respect of claims for breach of trust, commencing on the date on which the right of action accrued. A breach of fiduciary duty claim will be barred by analogy when the claim parallels a statute barred claim so closely that it would be inequitable to allow the statutory bar to be circumvented by the fiduciary claim.30 If there is a factual concurrence in the sense the different causes of action are simply different ways of putting the same factual complaint and there are no policy or other reasons militating against it, the case for an analogous bar is likely to have been made out.31

I accept that in the case of Mr Corin there is unlikely to have been any direct discussion of his intentions either with Mr Cooney or Mr Cooper. He worked in a junior role in Mr Lamb’s team. He saw Mr Lamb as a good agent and had asked if he could join him. He

followed Mr Lamb to the Browns Bay office. He acknowledged that all of his conversations were “really with [Mr Lamb]”. But if I am required to look at this through the lens of unfair prejudice it can hardly have been a surprise that Mr Corin would follow Mr Lamb (who had himself made his intentions clear to Mr Cooney). Mr Cooney could have been under no illusions that Mr Corin was likely to follow his mentor.

In any event, Mr Corin’s commissions over the period relevant in terms of pt 5 of the Policies and Procedures document were $65,000 only. The claim, had it been available, would therefore have been no more than $15,000 of which Mr Rong and Ms Ma’s potential entitlement was $7,500 only. Had such a claim been available I would also have been required to consider operation of the doctrine of laches.132 Mr Lamb and Mr Corin moved to the Browns Bay branch at the end of 2016. The claim was not brought until 2021. Mr Cooney, a critical witness, died in 2023. The Albany Company’s assistant manager, Mr Wallace, died in 2017. Both could (and I believe would) have given evidence that they were fully aware of Mr Corin’s departure before the date on which he physically left.

I am not therefore persuaded that any award of compensation is appropriate under this head.

Profits from redirection of Company inquiries

The plaintiffs allege that Mr Cooper or CCRE controlled the Albany Company’s telephone numbers, website and email address, and that they redirected inquiries to their detriment.

The website was administered by Graphic Detail and the relevant email address was “[email protected]”. The email’s server was hosted at Intellium. Mr Meltzer instructed an independent IT expert, Base2, to investigate Mr Rong’s allegations in relation to redirection. It concluded that there was no evidence to prove any of the accusations and that there were no irregular email rules in place that resulted in forwarding of emails to another recipient.

Mr Han, who gave evidence for the plaintiffs on this issue confirmed that he was not aware of the Base2 investigation. When Ms Ma liaised with Graphic Detail about her concern

132 The doctrine of laches is an equitable defence that captures those situations where delay, coupled with prejudice to the defendant, makes it inequitable to disturb the status quo. See Andrew S Butler and James Every-Palmer “Equitable Defences” in Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 1039 at 1059–1064.

that no phone inquiries were being transferred from the Albany Company’s website, Graphic Detail confirmed it was a coding error that impacted all offices, not just the Albany Company.

Mr Meltzer also investigated the plaintiff’s allegation that telephone calls were being diverted. He made inquiries of the two companies who supplied telecommunication services to CCRE and the Albany Company, Telco Solutions Ltd and Vocus Communications Ltd. Both companies confirmed that they had not received any requests to divert calls and their records supported this. Mr Han was likewise unaware of Mr Meltzer’s investigations in respect of this issue.

The plaintiffs do not on the balance of probabilities establish that there was a redirection of inquiries from the Albany Company to any other CCRE related entity.

Loss of the franchise agreement

As indicated, the plaintiffs’ claim in this respect was not pursued in counsel’s closing submissions. However, nor was it formally abandoned. I therefore address it briefly.

The claim is against Mr Cooper and is for a sum of at least $6,000,000. The plaintiffs allege that Mr Cooper’s actions “caused” the loss of the franchise agreement. Part 3 of the 3ASOC consists of all the various allegations of mismanagement of the Albany Company by Mr Cooper, otherwise discussed in this judgment. How specifically his actions are said to have resulted in loss of the franchise is not particularised.

Nor do the plaintiffs explain how the loss of the franchise agreement can be attributed to Mr Cooper when it was HGL that awarded the franchise to CCRE following invitations to both shareholder groups to acquire the franchise.

As previously discussed, Mr Sumich gave evidence for the plaintiffs valuing the Albany Company franchise at $6,000,000. I consider that evidence unreliable for the reasons identified by Ms Robertson. I summarise these below:

(a)He did not state the purposes of valuation.

(b)There was no specific valuation date. He seemed to say it was 2016, 2017 or 2018.

(c)He averaged three different valuation methodologies. Mr Bassett rejected this as an appropriate valuation approach. He said that the correct approach was to assess the best methodology for the business and to use that. I accept Mr Bassett’s evidence.

(d)One of the methodologies Mr Sumich adopted before undertaking his averaging exercise was the asset valuation method. I accept Mr Bassett’s evidence that such a method is inappropriate for a company in which the assets cannot generate income on their own.

(e)Mr Sumich took no account of the fact that the franchise agreement, central to the business, expired on 31 August 2018. He assessed the average value of the Albany Company at $5,854,786 on 31 March 2018, five months before the franchise agreement, essential to the business, expired. Without a franchise agreement the business had no value. Renewal or reallocation of the franchise was a matter in HGL’s discretion.

(f)He did not explain the basis of the “earnings multiplier” to calculate profit, which he applied to his calculations.

(g)He accepted that his assessment valued the property management business and real estate sales business of the Albany Company as one entity. Mr Bassett’s evidence was that a higher capitalisation rate is normally applied for the property management division of a real estate business. I accept that evidence.

(h)He took no account of the fact that Mr Meltzer sold the property management business to Ms Ma and Mr Rong for $1.

(i)Although he accepted there were differences between historical profits and future maintainable earnings, he maintained the position that for the purposes of his valuation future maintainable earnings could be defined by historical profit.

(j)The report contains no statement of the key assumptions in which the valuation conclusion was based as required by cl 49(h) of AES-2, the standard of independent business valuations published by the Institute of Chartered Accountants of New Zealand.

I accept Mr Bassett’s evidence that the shortcomings in Mr Sumich’s valuation rendered it almost meaningless.133 In evidence Mr Meltzer agreed that there was no goodwill attributable to the Albany Company as at the day of his appointment, which coincided with expiration of the previous franchise agreement. I accept this to be a correct assessment.

This head of claim therefore fails.

Retained profits

The plaintiffs claim against CCRE nonoperating income of at least $607,931.

This is the undistributed profits that remained in the Branch at the date of formation of the Albany Company. Mr Meltzer and Grant Thornton both confirmed that the Albany Company returned the undistributed Branch profits as income in its 2013 tax return. The resulting tax of $170,229 was transferred from CCRE to the Albany Company, and the profits were ultimately distributed to the Company’s shareholders as dividends. Mr Meltzer confirmed that there was no financial impact on the Albany Company resulting from this transaction. The plaintiffs do not establish any contrary position.

This head of claim therefore fails.

Purchase of the Silk rent roll

CCRE purchased the Silk rent roll in 2010 for the Albany Branch. Income from the rent roll was attributed to the Branch and then to the Albany Company from the date of purchase. In an email dated 19 November 2010 CCRE’s then finance manager, Ms Barrington noted the “good lift in rental income due to the purchase of the Silk rent roll”. The Branch’s monthly income expenditure income statements for the 2011 year showed annual property management income totalling $344,836. When the Albany Company was incorporated it purchased the rent roll from CCRE at CCRE’s cost price and continued to operate it, recording the income.

Mr Rong’s brief of evidence records “I had knowledge of and/or consented to the rent roll being purchased”. I accept for present purposes that he intended to say that he had no knowledge of the acquisition but that cannot be correct given the ongoing attribution of income to the Albany Company. He also said that he did “not have any knowledge of the rent

Mr Bassett said “entirely meaningless”.

roll benefiting or providing value to the Cooper & Co Albany.” The evidence is to the contrary. Indeed as I have already pointed out, the acquisition by CCRE of the rent roll and immediate attribution of income to what was at that stage the Branch indicates a generally benign attitude by Mr Cooper to ensuring the Branch’s, and latterly, the Albany Company’s success.

The plaintiffs do not establish unfair prejudice in this respect.

Expenses incurred in 2017, 2018 and 2019

The plaintiffs claim that Mr Cooper caused CCRE to charge the Albany Company various expenses in 2017, 2018 and 2019 which the Company was not obliged to pay. They also say that there are further amounts to be quantified for the years 2013–2017. The amounts specified are:

(a) 2017: $1,273.93 to Fuji Xerox.

(b) 2018: $99,069.21 to Intellium.

(c) 2018: $9,292.36 to Nova Energy.

(d)2018: $211.99 to Elizabeth Michael Uniforms.

(e)2018: $235.75 to Angel Cleaning.

(f)2019: $50,402.64 to Urban Garden Ltd.

In her evidence Ms Jordaan examined each of the referenced expenses, concluding that she was confident that, with the exception of the Angel Cleaning account in the amount of $235.75, these were each expenses for services provided to the Albany Company and recharged through CCRE. In respect of the Angel Cleaning account, she deposed that this related to “the move out cleaning cost for the 227 Dairy Flat Highway tenant”. She said that this was incorrectly allocated to the Albany Company instead of to 227 Ltd. However, the amount was not in fact recharged to the Albany Company.

I have previously indicated my confidence in the evidence given by Ms Jordaan who I found to be precise, clear and reliable. The plaintiffs do not satisfy me that any s 174 claim arises in respect of the accounts.

I note the amount referred to in the statement of claim for payments to Urban Garden Ltd does not relate exclusively to the 2019 year as claimed. The contract for the provision of hire and maintenance of indoor plant displays was entered into on 10 June 2016 for a 3-year period at a rate of $1,320 plus GST per month. The sum referred to therefore references plant hire charges over the duration of the contract.

Property management business payments

The plaintiffs claim the sum of at least $185,998.92 which they say is owed by CCRE to the Albany Company for property management fees billed during the period October 2012– September 2014. For the reasons previously explained, I consider there to be a limitation defence to this claim. Limitation aside however, the claim is not in my view established.

Ms Jordaan explained how CCRE tracked and paid the income generated by the Albany Company’s property management business. CCRE’s trust account was used to manage landlord and tenant funds including receipting rental income and paying expenses in respect of the managed property. Income was paid from CCRE’s trust account to CCRE’s trading account at month’s end and the Albany Company then invoiced CCRE for the amount payable to it. Income payable to the Albany Company could be tracked through CCRE’s residential property management system.

The plaintiffs claim that despite Xero accounts showing payment of four invoices, the Albany Company’s bank account did not receive the relevant sums, being:

(a) October 2012: $57,714.67;

(b) August 2013: $48,394.24;

(d) September 2014: $40,000.

Ms Jordaan deposes that $39,890.01, relating to the July 2014 invoice, was credited to the Albany Company’s savings bank account on 6 August 2014, which sum included various management, maintenance, leasing and inspection fees. I have no reason to doubt this evidence. She further deposed that payment in the amount of $39,955.07 relating to the September 2014 invoice was made to the Albany Company’s trading account on 4 September

2014. She said that she believes the difference between this sum and the $40,000 referred to in the statement of claim resulted from “the actual income amount being rounded.”

In relation to the invoices dated October 2012 and August 2013, Ms Jordaan’s evidence was that these were set off against money owed to CCRE for recharges and head office costs. Mr Burt concedes that the legitimacy of this set-off depends on my assessment of the appropriateness of the relevant CCRE charges. For the reasons previously explained, I consider there to have been no unfair prejudice in relation to those charges.

This aspect of the claim therefore fails.

Waitoki lease and copying costs

The plaintiffs claim a sum being at least $19,415 for the rent of premises at Waitoki ($17,500.04) and photocopying costs incurred at the Waitoki premises ($1,914.96).

Waitoki is a small settlement approximately six kilometres south-east of Kaukapakapa. It was not located within the franchise area of the Albany Company. Mr Cooper’s evidence was that he was approached by an agent working in HGL Helensville office who wished to move to the Albany Company. She indicated that she had other alternatives with another multi-branch network, Tandem. She was a high performing agent who, as events have transpired, continues to work with CCRE. In her discussions about a possible move to the Albany Company she asked Mr Cooper whether the Albany Company would be prepared to assume the lease of premises that she used in Waitoki. The rental was relatively nominal at approximately $125 per week. Mr Cooper made inquiries of HGL (given the fact that the office was outside the Albany Company’s franchise area). There was no opposition. It was agreed that the agent would move to the Albany Company on this basis.

Thereafter the Waitoki premises were used periodically by up to five agents engaged by the Albany Company. Ms Ma accepted in evidence that all were “good earners” for the Company.134 Although support staff for the relevant agents were all located at the premises of the Albany Company, the evidence suggests that the Waitoki office was conveniently used by various agents from time to time, particularly when, as Ms Ma said, it was necessary “to work night-time if need contracts”. The office had photocopying facilities which were regularly used.

Producing income of approximately $830,000 during the period that the Waitoki office was retained.

The matter was investigated by Mr Meltzer who concluded that the costs “were to be met as a cost to the Albany office on the instruction of Mr Cooper acting in his capacity as director of the Company.”

I am not persuaded that any unfair prejudice resulted to the Albany Company from Mr Cooper’s decision, as managing director to meet the costs and outgoings associated with the Waitoki premises. The decision was clearly made in good faith to secure a larger advantage for the Albany Company. I accept that after many years in the business Mr Cooper had developed a reasonably intuitive feel for what was necessary to secure a high-performing agent who had other alternatives available to her, and that the level of expenditure was commensurate with the advantage the Albany Company secured from agents whose needs were conveniently provided for. Mr Cooper’s agreement was, in my view, within the broad range of discretion which could be expected of a managing director in his circumstances and no unfair prejudice is demonstrated.

This aspect of the claim therefore fails.

The counterclaim

In its prayer for relief, CCRE claims for head office services provided and not paid for the period from 1 January 2018 to cessation of the business, to the sum of $360,729.10. This sum comprises the $432,000 of unpaid invoices from the Company to CCRE, minus the

$71,270.90 that the defendant seeks to equitably set off. For the reasons outlined above, I have not allowed that set off.135 As such, I consider the sum sought by CCRE to be the total

$432,000.136

The claim is somewhat academic given that the Albany Company is now insolvent and that any sum payable to it pursuant to this judgment will likely be absorbed in outstanding costs to Mr Meltzer and his solicitors.

Although I have declined the plaintiffs’ s 174 claim related to head office costs on the basis that they do not establish that the Albany Company was unfairly prejudiced by the head office arrangements which were in place, I accept, that on the approach I have adopted (that

135 See above at [316]–[327].

136This figure is seemingly derived from Mr Meltzer’s report. I have not been directed to the primary material from which that figure has been derived. However, while the plaintiffs have denied that they are required to pay this sum, they have not denied that this is the outstanding sum by which the Company has been invoiced. For that reason, I am satisfied that this sum represents the outstanding head office costs owed by the Company to CCRE.

the existence of a contract is not decisive either way in terms of the availability of a s 174 claim), the fact that I have denied relief to the plaintiffs does not automatically sound in success on the counter-claim.

Nevertheless, I am satisfied that the counterclaim is made out and I award judgment in favour of CCRE to the sum of $432,000.137 For the reasons indicated, I accept that there was a contract implied by conduct for the provision of head office services and the sums charged were broadly reasonable for the services provided.138 Had I not reached that conclusion, I would have allowed the counter-claim by reference to quantum meruit principles.

Result

I give judgment for the plaintiffs against CCRE in the amount of $71,270.90 together with interest from 1 September 2018 and with a direction that the judgment be paid to Cooper & Co Real Estate Albany Ltd. I otherwise dismiss the plaintiffs’ claims.

I give judgment against Cooper & Co Real Estate Albany Ltd and in favour of CCRE in the amount of $432,000 together with interest calculated from 1 January 2019.

Costs

I anticipate that as a result of the proposals advanced by Mr Meltzer for settlement of the plaintiffs’ claims, Mr Cooper and CCRE’s acceptance of the substance of those proposals and Mr Rong and Ms Ma’s rejection of the same, there is the potential for disagreement in relation to costs.

I invite counsel to confer at first instance. In the absence of agreement I invite submissions on the following timetable:

(a)Submissions of Mr Cooper, CCRE and Cooper & Co Real Estate Albany Ltd: 31 March 2025.

(b)Submissions of the plaintiffs: 23 April 2025.

I appreciate this sum exceeds the amount specifically claimed in the prayer for relief. However, pursuant to r 5.31(2) of the High Court Rules 2016, while the relief claimed must be stated specifically, this Court may, if it thinks just, grant any other relief to which the claimant is entitled. I exercise that discretion in these circumstances.

138 See above at [249].

(c)Submissions of Mr Cooper, CCRE and Cooper & Co Real Estate Albany Ltd in reply: 7 May 2025.

In each case submissions are to be no more than 8 pages together with any necessary schedules. On receipt of submissions I will assess whether a short oral hearing is required or whether I consider the matter can be disposed of on the papers.

Muir J

Solicitors:

Wilson Harle, Auckland Solar Legal, Auckland

Anthony Harper, Auckland

Hearing:	12–16 and 19–23 February 2024, 21–25 October, 29 and 31 October 2024
Appearances:	B J Burt, K D Puddle and X Zhu for the Plaintiff S L Robertson KC, S F Pearson and G W Easton for Defendants R Idoine for the Third Party
Judgment:	12 March 2025
Reissued:	20 March 2025 in redacted and unredated versions