ASI Global Investments Inc v Al Yousef
[2020] NZHC 1984
•7 August 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2020-404-1173
[2020] NZHC 1984
UNDER Rule 7.81 of the High Court Rules 2016 IN THE MATTER
of proceedings in the Cantonal Court of Zug, Switzerland, reference number A3 2020 28
BETWEEN
ASI GLOBAL INVESTMENTS INC
Applicant
AND
ABBAS IBRAHIM YOUSEF AL YOUSEF
Respondent
Hearing: On the papers Counsel:
B O’Callahan for the Applicant
Judgment:
7 August 2020
JUDGMENT OF DUFFY J
This judgment is delivered by me on 7 August 2020 at 11 am pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Counsel/Solicitors:
B O’Callahan, Barrister, Auckland K3 Legal Limited, Auckland
ASI GLOBAL INVESTMENTS INC v ABBAS IBRAHIM YOUSEF AL YOUSEF [2020] NZHC 1984 [7
August 2020]
Background
[1] The applicant, ASI Global Investments Inc, relies on r 7.81 of the High Court Rules 2016 to bring a stand-alone interlocutory application for a pre-judgment order over a forestry block in Northland owned by the respondent. The application is to support a civil proceeding commenced in the Cantonal Court (Kantonsgericht) of Zug, Switzerland, proceeding reference number A3 2020 283, in which the applicant is the claimant and the respondent is the defendant (the overseas proceeding). Under r 7.81(2) the application is to be treated as if the overseas proceeding for which support is sought had been commenced in this court.
[2] The respondent is an Emirati national living in Dubai. The applicant is a company registered in the British Virgin Islands. It is controlled by the respondent’s family. His son and daughter are the directors and their mother, the respondent’s wife, is a sole shareholder. They too are Emirati nationals living in Dubai.
[3] In the overseas proceeding the applicant claims that the respondent is indebted to it for the balance of advances made to him over the period 2009 to 2011. The advances totalled USD 40,498,318.28. Substantial amounts have been repaid by way of asset transfers under three settlement agreements dated 12 October 2016, 13 October 2016 and 22 November 2016 leaving a balance of USD 11,837,193.16. This amount is claimed in the overseas proceeding.
[4] The applicant informs this Court that there is some doubt about the effective transfer of one of the assets under the third settlement agreement. If this asset has not been validly assigned to the applicant then the respondent’s indebtedness to the applicant will increase by USD 12,986,817.56.
[5] The claim in the overseas proceeding was commenced in Zug in accordance with an exclusive jurisdiction clause contained in the third settlement agreement. A claim in this court can be brought only once judgment is obtained in Switzerland. It would then be a claim in debt arising from the Swiss judgment.
[6] The pre-judgment charging order is sought in relation to the forestry block owned by the respondent on Oue-Rawene Road, Rawene, Northland being Lots 9, 10,
11, DP 170443 in three certificates of title; Unique Identifiers NA103D/876, NA103D/877 and NA103D/878 North Auckland Land Registration District (the Rawene property). The total area of the Rawene property, across the three lots, is approximately 99 ha and it is understood to be substantially planted with mature radiata pine trees that are suitable for immediate harvest. The Rawene property has an approximate land value of $800,000 to $1,000,000 plus GST.
Relevant Law
[7] The express provision in the High Court Rules for issuing charging orders before judgment is provided in r 17.41 which is as follows:
17.41 Leave to issue charging order
Leave to issue a charging order before judgment may be granted only on proof that the liable party with intent to defeat either his or her creditors or the entitled party or both —
(a)is removing, concealing or disposing of the liable party’s property; or
(b)is absent from or about to leave New Zealand.
[8] The applicant recognises that absence from New Zealand without more is not enough to obtain a pre-judgment charging order. An intention to defeat creditors is required. The applicant submits that in Regal Castings Limited v Lightbody, the concept of an intention to defeat creditors was explained by the Supreme Court to include hindering or delaying enforcement of a judgment.1 Intention is distinct from purpose or motive and can be inferred from acts which have the effect of defeating creditors.2
Whenever the circumstances are such that the debtor must have known that in alienating property, and thereby hindering, delaying or defeating creditors recourse to that property, he or she was exposing them to a significantly enhanced risk of not recovering the amounts owing to them, then the debtor must be taken to have intended this consequence, even if it was not actually the debtor’s wish to cause them loss. We respectfully agree with the opinion of Goudron J in Cannane (DM) v J Cannane Pty Limited (In Liq) that an intent to defraud:
1 Regal Castings Limited v Lightbody [2008] NZSC 87; [2009] 2 NZLR 433 at, [2], [5], [13].
2 Above at, [54],
“… involves a notion of detrimentally affecting or risking the property of others, their rights or interests in property or an opportunity or advantage which the law accords them with respect to property.”
(footnotes omitted)
The applicant’s position
[9] Here, the applicant contends, first that the respondent has a history of squandering family assets and they have provided affidavit evidence which attests to such conduct.
[10] Second, the respondent is resisting the applicant’s steps in Switzerland to stop such conduct. Assets have been seized in Switzerland. This is also set out in the affidavits in support of the application.
[11] Third, the steps taken by the respondent in Switzerland are not confined to opposing the orders the applicant seeks through the legitimate processes of the Swiss courts. Instead the respondent has purported to write on the letterhead of the applicant purporting to request, on behalf of the applicant, that the orders be rescinded and includes a false share certificate, false share register and false trustee information. Again, this is set out in the affidavits supporting the application.
[12] Fourth, the respondent has unpaid accounts in different jurisdictions. This is set out in the supporting affidavits.
[13] Fifth, the respondent is delaying seizure procedures in Liechtenstein. The respondent is not assisting in relation to the recovery of a debt from a creditor.
[14] Sixth, the New Zealand property appears to be one of the few assets left in the respondent’s name.
[15] The applicant contends that the respondent’s actions in purporting to write on the applicant’s letterhead and to produce a false version of the respondent’s share register are dishonest acts. The applicant contends that if the respondent wanted to
challenge the transfer of the respondent’s shares to the respondent’s wife he ought to have done so by legal process.3
[16] It seems the respondent has also taken no steps to challenge the actions of the applicant or the family members supporting the applicant in the home country of Dubai. Instead, he has made criminal complaints against the members of his family who support the applicant, and these criminal complaints have been rejected by competent authorities.
[17] The applicant submits that the totality of the evidence it has placed before the court supports the view that the respondent is determined to keep any remaining assets away from the applicant and that he will take whatever steps are necessary to do so. The applicant contends, therefore, that it is a reasonable inference that because the respondent is absent from New Zealand he would not abide by a freezing order and the applicant would have no means of monitoring compliance with a freezing order, other than after the fact.
[18] Against the above circumstances, the applicant submits that it can be inferred from the circumstances that the respondent’s absence from New Zealand involves an intent to defeat creditors. The applicant argues that as explained in Regal Castings intent is distinct from motive or purpose. Here, it is not said that the motive or purpose for the respondent being absent from New Zealand is to defeat his creditors. The applicant presumes that the respondent lives in Dubai because that is his home and has a residence in Switzerland because he has business interests there and finds it agreeable. However, the applicant contends that if the respondent were to use his absence from New Zealand to defeat his creditors, which is something that he can be taken to know or understand, then the requisite intent to engage r 17.41can be inferred.
[19] The applicant refers to a decision of this court AHS Construction Ltd v Andrews where Gordon J accepted that Queensland residents selling their only New Zealand property without making provision for payment of the debt claimed by the New
3 As the respondent was squandering family assets, in 2011 he signed a power of attorney identifying the applicant as the attorney so that it could restructure the family assets, including by transferring a number of the respondent’s shares in the applicant company to the respondent’s wife.
Zealand based plaintiff, would defeat, hinder and delay payment of the debt.4 Accordingly, the Judge inferred the necessary intent under r 17.41 and granted the pre- judgment charging order that was sought in that case.
[20] In the present case, the applicant accepts there is no specific evidence of steps taken to liquidate or encumber the New Zealand property. Nor is there specific evidence that the respondent is using his absence from New Zealand to defeat the applicant or other creditors. At most, there is an expression of concern on the part of the applicant that, were the applicant to use his absence in that way it would have the effect of defeating his creditors, including the applicant, should it secure a judgment against the respondent. The applicant fears it is likely that the applicant would never know of such steps if they were taken. Much of the value of the property is in the cutting rights. The applicant argues that advertising of those cutting rights cannot be presumed and the respondent’s absence from New Zealand can, in the current circumstances and in light of his recent behaviour, give rise to the inference that there is an intention to defeat creditors by his being absent from New Zealand.
Discussion
[21] Here, the ability of the applicant to obtain a pre-judgment charging order hinges on whether it can satisfy the Court that the respondent with intent to defeat his creditors or the entitled party or both, is absent from New Zealand. The applicant has not drawn my attention to any evidence in support of its application which would show that the respondent has ever resided in New Zealand. My attention has not been drawn to any evidence which would show the respondent has visited New Zealand, and if he had when this was. Nor is there evidence the respondent is using his absence from New Zealand to defeat the interests of the applicant or other creditors.
[22] The applicant has put before me information from which I can infer that the respondent has taken steps overseas which evidence an intent to defeat creditors and entitled persons, including the applicant. However, the information before me does not satisfy me that the applicant is someone whose absence from New Zealand can be
4 AHS Construction Ltd v Andrews [2019] NZHC 1779.
linked to an intent on his part to defeat the applicant or any other creditor or entitled person.
[23] An affidavit by one Patrik Odermatt, an attorney of Zug, Switzerland who acts for the applicant, states inter alia, that in relation to seizure orders that were obtained in the Swiss jurisdiction, because the respondent is a foreign Emirati national there is a presumption that there is objective endangerment, which means that it is presumed that there is a risk that assets will be dissipated and become inaccessible for enforcement of a Swiss decision. It seems, therefore, that this presumption supports the existence of seizure orders made in the Swiss jurisdiction.
[24] The difficulty with a pre-judgment charging order under r 17.41 is the absence from New Zealand must be tied to the intent to defeat creditors or an entitled party or both. It is clear to me that the respondent is absent from New Zealand, but I cannot link that absence with an intent on his part to defeat creditors. Absent evidence of the respondent having a connection with New Zealand and choosing to be absent from New Zealand at a time when the applicant seeks to pursue its claim against him, I find there is nothing to link his absence with the requisite interest in r 17.41.
[25] In Regal Castings Limited the intent to defraud was inferred from the conveyance of a house when at the time of the transfer of the property the defendant, Mr Lightbody, was personally responsible for debts owed by his jewellery business. The effect of the transfer of this property, which he and his wife owned, into a family trust meant it was not available subsequently to meet the creditors of those debts. The creditors did not know of the transfer of the house. The effect of the transfer of the property to the trust effectively stripped Mr Lightbody of assets to which his creditors could look for payment.
[26] As was made clear in Regal Castings Limited, the question of intent to defraud is fact-specific and it must be determined at the time of alienation, although the intended prejudice may be to future creditors rather than creditors existing at the date of alienation.5
5 Regal Castings Limited v Lightbody [2008] NZSC 87; [2009] 2 NZLR 433 at [5].
[27] To like effect is the judgment of Gordon J in AHS Construction Ltd.6 There it was the overseas based respondents’ actions in selling their only New Zealand property at a time when they were filing claims for payment of the claimed debt that supported the making of a charging order.
[28] In both Regal Castings Limited and AHS Construciton Ltd, the alienation of the respective property occurred at a time when the respective respondents were cognisant of the effect of such alienation on their creditors. Their decision to alienate their properties could be linked to the intent to defeat creditors.
[29] I do not accept that I can simply infer from the respondent’s absence simpliciter from New Zealand that he is therefore absent with intent to defeat the applicant or any other creditors or entitled parties. There is nothing here to suggest he could be aware his absence from New Zealand would therefore hinder, delay or defeat the applicant in pursuing its claim against him. Before I can draw the necessary linkage between the respondent’s absence from New Zealand and his intent in terms of r 17.41, I would need to be informed of the respondent’s movements to and from New Zealand and how they may be connected with the acquisition of the subject land as well as any potential alienation of this land. It must necessarily be the case in these days of global transactions that persons who reside overseas buy land in New Zealand as an investment either without visiting or residing in the country or in circumstances where they may visit the country once for the purpose of the acquisition and not return again. In such circumstances I do not consider it can readily be inferred that they remain absent from New Zealand because they intend to defeat creditors or entitled parties who might otherwise seek to attach their New Zealand based assets. In this regard the fact-specific nature of the inquiry into whether there is intent to defraud creditors, coupled with the language of r 17.41, places a party seeking to obtain a pre-judgment charging order to stop the dissipation of a foreign based respondent’s New Zealand based assets in a different position from the presumption the Swiss jurisdiction imposes, as described by the applicant’s attorney Mr Odermatt.
6 AHS Construction Ltd v Andrews [2019] NZHC 1779.
[30] For this reason alone, the present without notice application for a pre-judgment charging order is dismissed.
[31] If the applicant can return to court with more specific evidence which would enable the linkage between the respondent’s absence from New Zealand and any intent to defraud his creditors or entitled parties to be made, the matter can be reconsidered.
Result
[32]The application is dismissed.
Duffy J