Dead man’s estate suffers setback in steel fight
The estate of a now-deceased South Africabased steel trader has had a setback in a quarter-century long legal battle with his New Zealand-based business partner.
Michael David Kidd, who died in February, began his legal action against Alexander Pieter van Heeren in 1996, seeking compensation after van Heeren defrauded him of profits from their steel trading partnership between 1975 and 1991.
‘‘Unknown to Mr Kidd, Mr van Heeren had defrauded him of substantial partnership proceeds and intermixed these with his own assets,’’ said Justice Stephen Kos in a Court of Appeal ruling released yesterday.
Kidd won a significant legal victory in 2015, with the High Court in Auckland ordering van Heeren to pay the sum of US$25 million (about NZ$35m) into the court’s keeping by mid-May.
But Kidd’s estate has failed to persuade the Court of Appeal to reverse an earlier High Court decision not to release the money to it, so it could pay off a ‘‘ruinous’’ litigation loan Kidd took out to pay for the lengthy legal battle.
The ruling said it took van Heeren ‘‘almost six years’’ to make the payment ordered in 2015, with the money being handed over 14 days before Kidd died.
Gathering the money involved the sale of the luxury Huka Lodge. ‘‘His [Kidd’s] estate is now struggling to meet the costs of the litigation. It has a ruinous arrangement with a litigation funder.’’
The ruling said Kidd’s estate wanted the money to ‘‘get the funder off its back’’ and to bankroll its legal fight in Liechtenstein against ‘‘foundations’’ said to have been set up for van Heeren into which partnership assets had been put.
If it did not get the money, the Liechtenstein proceedings would be struck out by the courts there, the court was told.
But the ruling said the Court of Appeal lacked evidence about the likely way ahead for the Liechtenstein proceedings.
The litigation funder was LCM Operations, which was seeking payment of US$17,256,091, Justice Kos recorded.
Having earlier failed to persuade the High Court to release the money, Kidd’s estate appealed but Justice Kos declined to reverse the High Court’s decision.
The final amount van Heeren was liable to pay Kidd’s estate had not been determined, the ruling said.
There was too great a risk that money paid out by the court could not be recovered, if the final amount was lower, Justice Kos ruled.
Kidd’s estate’s entitlement was potentially as low as US$2.5m. If the US$25m was handed over, and a smaller judgment was made against van Heeren, almost all of the money would have gone to the litigation funder. The judge said he had a great deal of sympathy for Kidd’s estate because van Heeren had defrauded Kidd over a lengthy period. ‘‘Then, far from expressing contrition and making amends, he [van Heeren] did the opposite. He has wriggled and twisted at every turn to resist liability being sheeted home to him, or in accounting for his wrongdoing,’’ Justice Kos said.
‘‘His arguments that he lacked funds were further falsehoods; what he had done was to put his funds, a significant proportion of which had been obtained by his frauds against Mr Kidd, in places from which extraction was difficult.
‘‘His campaign of resistance, in the face of a conclusive finding of liability, appears to have driven a once wealthy business partner to the economic brink.’’
And, the judge said: ‘‘The predicament Mr Kidd’s estate finds itself in, particularly the extravagant indebtedness to LCM, seems to be a direct product of Mr van Heeren’s default in making payment in May 2015, as he was ordered.’’
‘‘No stay of that order was ever obtained,’’ said Justice Kos.
‘‘As events transpired, he simply defied it. For that defiance, there must be serious consequences.’’ But, the judge said: ‘‘We are not however persuaded that the wrong done to Mr Kidd is fixed by perpetrating a second wrong against Mr van Heeren, no matter that it might seem entirely equitable to do so.’’
He did not order Kidd’s estate to pay van Heeren’s costs. ‘‘Ordinarily Mr van Heeren would be entitled to costs. In the circumstances of this appeal, given his prior non-compliance with orders of the court, we do not consider that an appropriate course. There will be no order for costs.’’
Justice Kos noted that at an earlier hearing it was alleged that both Kidd and van Heeren had ‘‘engaged in United Nations-sanction-breaking trading’’.