Developer wins $500k dispute
A Wellington property developer has won the right to claim back half a million dollars from the accounts of a law firm representing the manager of Jetts Fitness New Zealand.
The High Court at Wellington has ruled Mike McCombie, as director of LMLW (Let’s Make Life Wonderful) Ltd, is owed $500,000 from NZ Fitness Impact Holdings, after a dispute over a debt repayment agreement.
The money was held in the trust account of law firm Armstrong Murray, which had refused to release it, claiming it was not due to the developer under the terms of the agreement.
McCombie’s developments include the new Ministry of Health head office in Molesworth St.
Between August 2011 and March 2014, LMLW loaned more than $3 million, as well as share capital, to help establish 15 Jetts Gym franchises, the High Court decision said.
When part of the loan was repaid, LMLW relinquished ownership in eight of the 15 gyms, while continuing to hold 70 per cent in the remaining seven.
By October 2014, there was an outstanding debt to LMLW of $2.31m plus interest, guaranteed personally by Claire Attard, who managed the gyms.
When the debt was not repaid in full by December 2016, LMLW took action.
A sale of the companies was arranged, with the proceeds paid to LMLW to cover the debt.
However, by agreement, $500,000 was retained in Attard’s lawyer’s trust account.
The money would be released to Attard if LMLW accepted more shares in the Impact Fitness Group, as a means of obtaining tax losses.
If that did not occur, it was agreed LMLW would receive the money.
McCombie engaged an accountant at PwC to assess whether his other companies could access tax losses of the Impact Fitness Group.
The accountants concluded that while he could access the losses, because his tax position for the year showed ’’little or no taxable profit … you have no ability to benefit’’ from the losses.
As a result, LMLW demanded repayment of the $500,000.
However, Attard’s lawyer, Armstrong Murray, refused to pay it as it did not believe LMLW acted reasonably in demanding the money.
Justice Thomas said LMLW was not obliged to accept the shares, it only had to consider them.
She ruled there was no defence to the claim and awarded summary judgment to LMLW.