The Global Financial Crisis caused the abrupt drop in value of a Taupo property at the centre of an estate wrangle involving a lawyer, accountant and regular NBR rich lister, a court has heard.
Rob Latton, lawyer for accountant Philip Monk and the New Zealand Guardian Trust, said the GFC, which crippled businesses and property owners around the world from 2008, saw the property of Christian and Molly Burgess drop in value by $1.7 million over a seven-month period.
The value of the property is one of several key issues in the estate dispute.
Taupo man Warwick Burgess claims the property was left to disrepair and then sold to Tauranga man and former Fonterra director Colin Armer under value. Burgess claims if money had been poured into the property during the 1980s, it could have been reinvested and the property eventually sold for as much as $15m.
Latton told Justice Paul Heath during day three of the civil proceedings in the High Court at Hamilton today that after a valuation in 2008, the property was valued at $6.2m.
"The GFC was getting into full steam by this stage ... in September 2008, was when [US finance company] Lehman Brothers failed."
Another valuation carried out in May 2009 showed the property, which held blocks of native trees, had a "precipitous" drop in value to $4.5m.
Latton said Burgess could have bought the property and was involved in all the proceedings but in the end, he kept asking for extensions of time to get finance. Given the volatile finance climate, the executors of the trust wanted surety of the sale and sold the property to Armer Farms.
Through his lawyer, Damian Chesterman, Burgess has also questioned the closeness of the relationship between Armer and now-deceased trustee Tony Western, claiming they were in constant contact immediately after Burgess' mother's death until the property was sold in 2009. It's claimed Armer was privy to conversations held by the trustees.
A $30,000 payment from Armer Farms [N.I] Ltd to Western's contracting company Westex Ltd, just six weeks after the farm sale is also being questioned. However, Chesterman said there was no suggestion it was dishonest.
Also at the centre of the case is Rotorua lawyer Alisdair Morrison and his firm O'Sullivan Clemens who acted for Burgess' parents Molly and Christian.
Chesterman said Morrison knew about the sale and purchase agreement but failed to disclose it to his client or his mother, despite being asked to, breaching his duty as a trustee.
Latton addressed several key issues raised by Burgess, including the trustee's alleged failure to inform Burgess that his father, Christian Burgess, signed over the property to their family company CTE Burgess prior to his death in 1980.
He submitted that issue had already been settled after an earlier Family Protection Act proceeding.
That led him to dismiss Chesterman's assertion that the alleged non-disclosure of the family property sale was "key to the outcome of this case".
Latton said proof of the sale - which was being labelled as a "deliberate concealed fraud" by the plaintiff - was sent to Warwick Burgess' lawyer in 1983.
"As far as I'm concerned and as far as the law is concerned, that must be it.
"There's an assertion of a cover-up, but even on the facts we have heard today that can't be right ... on the sale and purchase agreement it just couldn't be the case that a delay of that confirmation to Burgess' solicitor is anything other than non-concealed."
As for why the property was sold, the estate was faced with a $125,000 estate duty bill from the Inland Revenue Department - and there was no cash.
The only way to get the money was to raise it somehow or start selling assets - so it was sold to the family's company, CTE Burgess Ltd.
Latton said NZ Guardian Trust and Monk did try to suggest improvements on the property, but they couldn't access funds to make any alterations if they wanted to.
He dismissed the allegation of dishonest intention and that money could have been a motive.
"Mr Monk hasn't received any money at all for his work. NZ Guardian Trust received its normal fees and are not significant at all ... There's nothing to show that there's been a dishonest intention. And that is a serious deficiency in this case."
Beginning his opening address, Adam Ross QC, lawyer for Morrison and his law firm, said it disputed most of Burgess' case.
"And even if [claims were true], he has an obligation to keep confidences for his client unless authorised to."
Ross said Morrison's clients were Christian and Molly Burgess, not Warwick Burgess.
They would also fight the claim that Warwick Burgess was meant to inherit the family property, as had his father and grandfather.
"That was never the case, not ever in this 40- or 50-year saga, has that been the case."
The trial was set down for six weeks. However, after consultation with counsel Justice Heath pushed it out to 11 weeks, with closing statements likely in the first week of December.