If it were a movie the title might be: “Rosebud 2 – the edifice collapses further.
The case of Rosebud Corporate Trustee Limited v Bublitz focused on whether the trust for which Rosebud Corporate Trustee Limited (Rosebud) acted was a sham. As a result of the court finding the trust to be a sham an agreement that Rosebud Trust purported to sue on, could not be considered as the Trust was a sham and thus never existed. Accordingly, the trustee could not sue to protect the Trust’s rights. The proceedings had to fail. See Sham Trust – a Rose by any other Name.
However, that has not been the end of the matter. While the trust might be a sham, Rosebud continues to exist. Well for a bit. It is now in liquidation , which brings us to the current proceedings. Hunter Capital Limited (in liquidation) (Hunter), a party related to a transaction to which the alleged Rosebud Trust was a party had made advances to Rosebud. Hunter’s liquidators wanted to claw those advances back on the basis that Rosebud was paid ahead of legitimate creditors. There was no evidence before the Court Rosebud was able to satisfy the Court that it had acted in good faith, did not have reasonable grounds for not having suspected that Hunter was insolvent, and had given value.
In fact the Court noted the liquidator’s analysis that the ultimate effect is that Mr Nielsen (for whose benefit the trust was settled) used the group companies to take investors’ funds (including money passed through Hunter) to transfer them to Rosebud for the use of his wife, Ms Sirene Nielsen.
What steps Rosebud will now take to recover the funds from Ms Nielsen remains to be seen.
- Grant and Khov v Rosebud Corporate Trustee Limited  NZHC 2789
- Rosebud Corporate Trustee Limited v Bublitz  NZHC 2018