The sons of pioneering immigrant vintner Nikola Nobilo are embroiled in legal action over the family inheritance, with one accusing the other of losing it all.
This post was originally published 23 October 2018
A bitter battle over money has caused a deep rift in one of west Auckland’s original Croatian wine-making families, leaving two brothers slugging it out in court.
Relations between the sons of Nobilo wine business founder Nikola Nobilo lie in tatters as one sues the other over $4.5 million of family trust assets and the latest Nobilo wine venture languishes in receivership.
Eldest son Steve claims his middle brother Nick has lost everything their immigrant parents worked for. He has no idea where the money is and doubts there’s much left to claim, but is pursuing legal action on principle. Their youngest brother Mark shares his feelings, Steve says.
“What Nick did was absolutely scandalous and hurtful to two brothers, myself and Mark,” he says. “[I am] gutted, and disappointed in him.”
Nick, who was awarded an Order of New Zealand Merit (ONZM) in 2015, had sole control of the family trust after his parents’ death. He has told the High Court that he carried out their wishes at all times, which were that he benefit from their assets and that the family retain an interest in the Kiwi wine industry. He always kept his brothers informed of how the money was being spent, he claims.
That latest venture, a Gisborne boutique winery he established called Vinoptima Estate, went into receivership two months ago owing at least $6 million.
Alongside the familial anguish, experts say the convoluted Nobilo feud also highlights the fault lines in New Zealand’s 60-year-old trust laws, currently the subject of a government overhaul.
Nikola Nobilo and his wife Zuva escaped war-torn Europe in the late 1930s and settled in Huapai, west Auckland, where they bought a property because the old farmhouse had a flushing toilet.
They planted their first grapes in 1943 and initially made fortified wines to suit the unsophisticated Kiwi tastes of the times. But Nobilo Vintners would go on to lead the way in producing higher quality wines from classic grape varieties, forming the basis of today’s successful New Zealand wine industry. In 1995 Nikola was awarded an OBE for services to the viticulture industry.
His sons worked with him in the family business at times, until it was sold to BRL Hardy in 2000 and merged into Constellation Brands in 2003. Meanwhile Nick founded a Gisborne vineyard specialising in premium gewurztraminer wine. He called the estate Vinoptima, meaning ‘best wines’ in Latin.
The Nikola Nobilo Trust was set up by Nikola in 2001, six years before he died. His three sons are the primary beneficiaries, while his nine grandchildren and other family members are discretionary beneficiaries.
In October 2013, at the age of 93, Zuva stepped down as a trustee. Steve and his family say by this stage she was almost blind, and they question her ability to make the decision.
The other trustees were Nick and BBW Trustees Ltd (BBW), a company operated by the family’s accountants. Four months after Zuva stepped down both BBW and Nick also removed themselves, and a trustee company, Nobilo Trustee Ltd, was appointed as the only trustee. Nick Nobilo is the sole director and shareholder of Nobilo Trustee Ltd.
When Zuva died in 2015 assets held by the trust included the large family home that Nikola had built in the 1970s in Huapai’s Station Road, shares in Vinoptima Estate, loans to family members, and land on the Nobilos’ home island of Korcula in Croatia.
It had been agreed that following the death of both parents the power to appoint and remove trustees would transfer to Nick.
The High Court has been told that when Nobilo Trustee Ltd was appointed the terms of the trust were also changed, allowing the trustees to “exercise… discretion in favour of a beneficiary who is also a trustee or a director of a sole company trustee”. Nick has told the court that this needs to be seen in the context of the full trust deed.
Meanwhile on 28 August 2014, a clause saying that if a company is the sole trustee it must have at least two directors was removed. The very next day the trustee company took out a $1.37 million mortgage on the family home in Station Road.
Steve has told the court that by this time Nick’s winery, Vinoptima Estate, was technically insolvent, a claim Nick denies.
The mortgaging of Station Road continued. Over the next year the trustee company took out three more mortgages and extended the first one to $1.8 million. When Zuva died in August 2015, Steve and the rest of the family were flabbergasted to discover there were $2.32 million worth of mortgages on the property.
“Three weeks after Baba [Grandmother] passed away Nick called a meeting with Steve and Mark and said, ‘we’re unable to service the debt on the house and it will have to be sold’,” his son, Steve junior, says.
Almost immediately Station Road was put on the market. By this stage the area had been rezoned as a Special Housing Area, allowing for significant intensification, and the two-acre property with its conifers and vines was snapped up. The trust got $3.15 million for the home.
Steve senior says the only mortgage they knew about was one taken out for his benefit. His family trust had been loaned $480,000 secured against Station Road, he says. But the brothers are in bitter dispute over the original amount and interest costs – by the time the home was sold in early 2016 that amount had ballooned to $901,000, with Nick claiming Steve had borrowed on top of the initial capital and that he had helped service the loan.
The arrangement was all very vague, Steve and his wife Val say. “It was never discussed, that we had to pay it off or anything,” Val says.
The High Court has also been told that Nick’s family trust owes the main trust $1.5 million in loans. Nick disputes the amount as well as his brother’s claims that the loans never attracted any interest.
Vinoptima Estate is the Nikola Nobilo Trust’s other main investment. Companies Office records show the trustee, Nobilo Trustee Ltd, owns 67% of the company’s shares. Other shareholders include two Māori trusts, Tuaropaki Kaitiaki of the central North Island and Wi Pere Investments of Gisborne.
Vinoptima is a 10ha vineyard and winery in Ormond, near Gisborne, specialising in gewurztraminer. It is “the passion of one man, pioneering New Zealand winemaker Nick Nobilo”, its website says. “Vanity project” would be a more accurate description, Steve’s family claim.
The company was placed in receivership on August 20. In their first report receivers BDO say the winery owes around $15.2 million, including $12 million to secured creditors, and over $3 million to unsecured creditors. Its assets total $9.2 million. This includes an estimated $2.2 million in wine and $5 million owed to it by a “related party”. The receivers say they are “reviewing the veracity” of the transactions underlying this amount. The winery is currently up for sale, and the report puts the value of the land, buildings, plant and equipment at a shade under $2 million.
The winery’s key market was intended to be China. “The wine produced has received critical acclaim, but sales have been slow particularly as the previous distributor into China stopped operations despite having entered into a multi-year distribution agreement with Vinoptima,” the receivers say in their report. Poor sales meant trading losses, and the company was “reliant on shareholder support to fund ongoing trading”.
A deal with a new Chinese agent was negotiated in June, but there was a lack of confirmed orders. With significant funding needed to produce the current vintage and no confirmed sales orders, the decision was made to call in the receivers, the report says.
Steve and his family say following Zuva’s death they tried to negotiate with Nick and sort out the trust, but the only winners out of that process were their lawyers and accountants. As sole director and shareholder of the sole trustee, Nick had deliberately kept them in the dark, they say. In early 2014 Steve was suffering from severe ill health and asked if he could have some help from the family trust. Nick said no. “At this stage he had the opportunity to say ‘this is what I’ve done’,” Steve junior says. “If someone manoeuvres themselves into the position my uncle did, then it’s open slather.”
By June 2016 family relations had hit rock bottom and Steve senior launched legal action. He alleges Nick and the trustee company breached their duties to act fairly and impartially to all the beneficiaries of the trust, and to not personally profit from their position. He has asked the court to order all the funds be returned to the trust, and to appoint Public Trust as the trustee.
For his part Nick has told the court he always kept his brothers informed, and sought appropriate legal and accounting advice before investments were made and the Trust Deed changed.
In September 2017 the brothers agreed to settle but no money has ever been forthcoming. So, the battle continues.
New Zealanders love trusts, says Juliet Moses, a specialist in the field at TGT Legal. Experts generally agree that this country has more trusts per capita than anywhere else in the world.
However our law is old and convoluted, and it’s difficult for the average person setting up a trust to really understand things like trustees’ duties and beneficiaries’ rights. “Trustees do have duties, for example, they have to avoid putting themselves in a position of a conflict of interest,” she says.
Appointing a trustee company as the sole trustee as was the case with the Nikola Nobilo Trust is legal, but it’s not best practice, Moses says.
“It would be something we would counsel our clients against. Having one person in control of a trust, there’s not the same accountability and rigours around governance than there might be if there’s more than one trustee.”
At the moment New Zealand trust law is evolving rapidly, she says. The Trusts Bill overhauling the existing 1950s legislation is making its way through parliament, and one of its aims is to provide more protections for the average Kiwi setting up a trust.
The courts are also starting to look at trusts through a “substance over form” lens, Moses says.
The warring sides of the Nobilo dynasty are set to head back to the High Court next year. Interestingly in the legal documents Nick denies relations between himself and his brothers have deteriorated.
Steve believes his parents Nikola and Zuva would be “turning in their grave” at how things have ended up. He’s also deeply saddened that the land he grew up on will soon be peppered with other people’s houses.
Val Nobilo says in European families it is the eldest son who’s supposed to be the special one, but Zuva and Nikola spoiled Nick.
“Mum [Zuva] said this to me once, that Nick has never forgiven Steve for being born first. There was always that feeling of challenging for that position, if you like.”
The one compliment Steve pays his brother is that he is a very good winemaker. But, he adds: “I wonder if Nick will be there when the wrecking ball goes through Mum and Dad’s house.”
Footnote
Subsequent to the publication of this story and two weeks after The Spinoff’s request for an interview, Nick Nobilo sent the following response:
“I totally reject the allegation that my handling of family trust matters was scandalous. I also reject any criticism of Mrs Nobilo Senior.
“It is also worthy of note that Steve Nobilo worked in another business for 12 years before joining the family wine business.
“It is regrettable that Vinoptima has gone into receivership and that the family may lose its investments in that company as a result. That, however is the risk of business which at the end of the day will have to be accepted by my brothers and their families.”
Additional reporting by Nicky Pellegrino.