Attorney-General v AB HC Wellington CP113/01

[2001] NZHC 424

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY CP113/01

ORDER CONTINUED PROHIBITING PUBLICATION OF DEFENDANTS’ NAMES AND ANY IDENTIFYING PARTICULARS

BETWEEN THE ATTORNEY-GENERAL
(suing on behalf of the Ministry of Health)
Plaintiff

AND AB
First Defendant

AND CD
Second Defendant

Date of Hearing: 25 May and 28 May 2001

Date of Judgment: 31 May 2001

Counsel: J.H. Black and C. Geiringer for Plaintiff
A.J. Douglass and K.P. Sullivan for First Defendant
S.L. Opai and S.M. Sharpe for Second Defendant

JUDGMENT OF DURIE J

Introduction

[1] In this case, the first and second defendants seek rescission of a Mareva injunction, freezing their assets, as ordered by me on 3 May.

[2] There are ancillary applications as follows. The Attorney-General, as plaintiff, seeks a preservation order against funds held by the second defendant. This is substantially a hedge against the prospect of rescission. Then, in case there should be doubts about the strength of the plaintiff’s case, the plaintiff applies to cross-examine on three of the affidavits of the first defendant. The plaintiff submitted that those affidavits were untruthful and that in enhancement of the plaintiff’s case, the falsity of those affidavits could be demonstrated by questioning. Although it is rare to allow interrogation in interlocutory proceedings, and is against judicial policy for the efficient dispatch of interlocutory business, it is not without precedent for this to be permitted. However, counsel agreed the rescission applications should be argued first, whereafter, the Court would be better placed to consider whether cross-examination was meet.

[3] I then directed, contrary to submissions for the defendants, that the Crown should open and have the usual right of reply. The defendants’ applications simply restored matters to how they would have been, but for the distinctive Mareva principle allowing for some injunctions without notice, and but for the practice, in the interests of wider justice, of disposal on the papers alone. Notwithstanding that, it is not then for the defendants to satisfy the Court that the injunction is wrongly maintained. The onus is still on the plaintiff to establish that the injunction was necessary, and that it remains necessary at present. The plaintiff had therefore to lead.

[4] Further on preliminary points, on 14 May Goddard J made an order against publishing the defendants’ names and identifying details in these and the substantive proceeding, largely to avoid a media trial. Accordingly they are not named in this judgment and some other names and places will be obscured. However, following the substantive hearing, or earlier if the plaintiff had some good reason to apply, that order must fall for review. This case concerns the allocation of government funds to Maori groups under devolution policies. Quite apart from the general public interest in the proper deployment of Crown funds, I understand that anything less than the most dispassionate of allocations, according to settled criteria and proper process, excites intense concerns within and between distinct Maori communities. In this case, the propriety of funding to the second defendant, was questioned at a political hui in the district with a senior Minister of the Crown present. No doubt that led to the extensive enquiries that followed or gave impetus to enquiries that were already underway. The point here is that somewhere along the line the communities should be aware of the action taken in the particular case, and more generally, of the standards of care that are required.

[5] The plaintiff contends that the first defendant, while an employee of the Health Funding Authority, and shortly before leaving that employ, arranged a substantial contract for services by the second defendant, knowing that she, her mother, and one other relative, stood to gain as a result. The plaintiff alleges fraud and breach of fiduciary duty.

[6] Although it is not pleaded, a fair inference from the evidence is that, if there was anything untoward at all, it is not only those three whom I have mentioned who stood to gain, but a wider grouping of kin, directly through salary, or indirectly as beneficiaries. I think it is this sort of thing that most rankles with other Maori kin groups or rival service providers. However the point is important for another reason. It cannot be assumed that if there was any misfeasance at all, a motive of personal gain was necessarily predominant. It gives rise to what I see as the key questions in the first defendant’s case. What did she receive, if anything, as a result of the service contract and what is the risk that she will now dissipate such assets as are in her control?

Applicable tests

[7] The test for the grant of a Mareva injunction is set out in the headnote to Bank of New Zealand v Hawkins (1989) 1 PRNZ 451, a decision of Gault J:

“(1) An applicant for a mareva injunction must show that:

(a) It has a good arguable case on its substantive claim. This threshold requirement is more onerous than that normally applied in the case of interlocutory injunctions of a serious question to be determined.

(b) There are assets of the defendant within the jurisdiction to which the orders can apply. Providing the plaintiff adduces evidence of some assets, if the defendant is not forthcoming by way of disclosure of his assets in New Zealand, the Court may infer that this requirement is met.

(c) There is a real risk that the defendant will dissipate or dipose of assets so as to render himself ‘judgment proof’. Mere assertion of belief that the defendant might dissipate his assets, unsupported by solid grounds justifying that belief, is insufficient. On the other hand, affirmative proof of likelihood of dissipation or of nefarious intent, is not necessary.”

[8] In addition to the above criteria, Gault J noted at page 52;

“Finally, against the need to protect the plaintiff so as to ensure any judgment is not rendered barren, there must be balanced any prejudice or hardship to the defendant and to third parties. Generally this is a requirement that consideration must be given to the requirement for overall justice in the circumstances.”

[9] Gault J’s analysis and the headnote cited above were expressly affirmed by the Court of Appeal in Shaw v Narain [1992] 2 NZLR 544. See also Cull, H and Kos, S (New Zealand Law Society Seminar Injunctions and Other Emergency Relief, 2000).

[10] In Euro-National Corporation Limited v Petricevic Financial Services Limited [1989] 2 PRNZ 351 Robertson J said at page 354;

“The correct procedure on an application to rescind an order made ex parte is to approach the matter de novo and to determine whether the plaintiff has sufficient grounds to justify the orders, see Carter Holt Holdings Limited v Fletcher Holdings Limited [1980] 2 NZLR 80, 84.”

I had already shown my support for that view in determining the order of speaking.

The case

[11] On 9 November 2000, the first defendant, purportedly acting for the Health Funding Authority, signed a contract for Maori health advocacy services for the sum of $1.2 million to be paid over three years. That contract was with the defendant’s mother and a more distant relative on behalf of a company subsequently formed as the second defendant. They executed the contract on 13 November.

[12] Also on 13 November the first defendant tendered her resignation from the Health Funding Authority. She finished work on 8 December. At that time, the State’s arrangements for health services were under review, employment tenure was uncertain and many of the Authority’s employees were leaving.

[13] On 11 December the first defendant joined a Maori consultancy company in her home district, as a full-time director. The second defendant subsequently arranged a consultancy agreement with that company and has paid the company to date, some $45,000.00 in consultancy fees. The first defendant’s salary with the consultancy company, as given by her, is $110,600.00 per annum, which represents her only substantial income. Her previous salary, with the Health Funding Authority, was $102,000.00 per annum.

[14] Meanwhile, the second defendant had been incorporated on 30 November with the first defendant’s mother, and two others, as directors and equal shareholders. The first defendant replaced one of those “others” as director, on 13 December and took a transfer of his shares.

[15] Pursuant to the November contract, the Crown paid $300,000.00 to the second defendant, paying $224,999.99 on 31 January 2001 and the balance in two payments in February and March 2001. However, on 17 April the Ministry of Health informed the second defendant that it was reviewing the validity of the contract and suspended payments meantime. By then, the second defendant employed some 11 staff and serviced some 160 enrolled clients.

[16] Those matters are not disputed in any material particular. A dispute arises over the conclusions that the Ministry of Health now draws, and the evidence that the Ministry relies on.

[17] The plaintiff contends that the first defendant perpetrated a fraud on the Health Funding Authority and breached a fiduciary duty owed to the Authority as her principal and employer. The plaintiff contends that the second defendant was privy to this fraud, and that a director, the first defendant’s mother, had colluded in it. When the injunction was first sought, the plaintiff relied upon constructive trust to sheet home the plaintiff’s claim for injunctive relief against the second defendant. A subsequent amended statement of claim asserts as well that the contract is illegal and void for fraud.

[18] When the matter was first before me the plaintiff relied upon evidence to say:

• The first defendant had no authority to complete the contract without senior approval and no such approval was given.

• The contract was entered into in breach of the first defendant’s authority, knowing that the contract would not be authorised by the Health Funding Authority (HFA).

• The contract would not have been authorised by the HFA because it offended established strategies and policies. These:

(a) limited new contracts to existing successful providers. The second defendant was not an existing provider and had no track record of success.

(b) excluded those offering advocacy services only. The second defendant provided only advocacy services.

(c) breached HFA policy that limits any contract to one year. This was for three.

(d) required “sensible internal control practices”. This contract did not conform.

• The first defendant would have known of those strategies and policies due to her employment ranking and experience.

• The contract would not have been approved for the further reason that the sum involved was grossly disproportionate to the services to be provided, as evidenced by tables showing the range and norm.

• HFA maintained a clear policy directive to avoid conflicts of interest. Due to her relationship with the persons involved, and her marae affiliations, the first defendant had a conflict of interest, which, contrary to the policy, she did not disclose.

• The first defendant must be taken to have entered into the contract with the intention of deriving personal gain. In particular:

(a) she must be presumed to have known, at the time she signed the contract, that she would become a director and shareholder of the second defendant.

(b) she must be presumed to have intended, at the time she signed the contract, that she would be engaged with the consultancy company which would provide consultancy services to the second defendant.

• Contrary to clear lines of authority, the first defendant did not submit the proposed contract to superiors for approval, and it was not in fact authorised by superiors. The plaintiff’s evidence was that key persons in the Authority did not know of it.

[19] Central to the defence of both defendants, as now indicated in affidavits to support rescission, is that the contract was no rushed affair, as suggested by the facts as stated in affidavits for the plaintiff. All was done fair, it was contended, and was arranged in the preceding June. This involved open consultations, careful planning under the auspices of a local Marae committee, and the submission of a proposal to the Authority. As a consequence, a letter of offer, dated 7 July, was received. This set out the contract’s basic terms. The defendants stress that the offer was not signed by the first defendant but by one, X, an officer of the Authority.

[20] The offer, it is deposed, was accepted by the first defendant’s mother, and one other, on 10 and 12 July respectively. The formal contract followed later. However, all services for which payment has been made date from early July. The first (and larger) payment covered setting up costs. All payments were approved by the Authority which was obliged to follow monitoring procedures.

[21] Perversely for the defendants, this added more grist to the plaintiff’s mill and explains the plaintiff’s desire to cross-examine certain of the second defendant’s deponents. The plaintiff filed further affidavits and submitted as follows:

• The so-called consultation and subsequent “proposal” is explicable by reference to a programme from another division of the Authority, on personal health, which mooted the possibility of a contract with the marae in question.

• There is no reality to the so-called “proposal” which is comparatively brief and is clearly directed not to advancing health services, but providing the Authority with background information on the work of the local marae. No budget, as is normally required for a proposal, was appended. The proposal was inadequate to support an offer from the Authority for a $1.2 million contract over three years, or to support an offer for anything at all.

• The second defendant’s affidavit shows that the “proposal” must have been drafted within a week after the matter had been referred to a committee of the marae. The proposal is said to have been sent to the Authority’s vetting team. The plaintiff’s evidence is against that possibility. There is no record of its receipt. Three persons of the vetting team deposed that they never saw it and would not have recommended it if they had. It was not seen by the manager of that team, who would have had to “sign it off”. Higher level approval would then have been required but there is no record of a request for such approval or that any approval was given. In a letter, the admissibility of which was challenged, the senior manager expressed no knowledge of it.

• The alleged offer of 17 July is evidence of fraud and deceit:

(a) it assumes a response can be made with a very large offer, within a week, at most, from when the proposal is likely to have been received, assuming it was sent;

(b) the offer was addressed to the first defendant’s mother as secretary of the defendant company when that company had still to be formed, and when the proposal had not mentioned that the first defendant’s mother would be the company’s secretary;

(c) X, who signed the offer of 7 July on behalf of the Authority, was a junior officer who would be unable to send such a letter without superior instructions;

(d) more importantly, evidence of forensic computer examinations is that the letter of 7 July was in fact created by the first defendant on 6 November 2000, or by someone using her password and entering her name;

(e) X had also gone to work with the consultancy company that provides advice to the second defendant. X now works with the first defendant. The plaintiff is now considering proceedings against X;

(f) the first defendant’s mother, and one other, both of whom were promoters of the second defendant company, both annotated on the letter of offer, bearing date 7 July 2000, that it was received by them on 10 July and 12 July respectively. They have probably also sworn to that effect though the affidavits are carefully worded. This is submitted to provide clear evidence of their complicity in fraud and deceit.

[22] I have not attempted to cover every item of evidence. I should mention however that the plaintiff’s affidavits contain more material corroborative of the plaintiff’s assertions, given to support the original application, and also in rejoinder.

[23] Similarly it would be as tedious as it would be unnecessary to review every aspect of the defendants’ extensive rebuttal, in affidavits, and at the hearing. For two days I was taken through each item of evidence, by counsel for each the plaintiff and the two defendants, in which matters of considerable detail were debated at length. That may be appropriate for the substantive hearing but at this interlocutory stage, I can give no kinder complexion to the defendants’ submissions than to say that some details may remain debatable but they do not seriously detract from the strength of the plaintiff’s case.

The first defendant

[24] At the hearing, the main points for the first defendant, as I see them, were:

• The first defendant is seriously oppressed by the plaintiff’s facility to compile evidence to support a particular point of view, from evidence almost entirely in the plaintiff’s control, and compiled over some months with substantial, supporting resources.

• In developing a particular view, the plaintiff has been selective in building up a case and has not disclosed all matters as it was obliged to do.

• The first defendant is unaware of who approved the contract or the divisional budget from which the contract was funded, and the plaintiff has still not disclosed the budgetary source from which the payments in fact paid, were made. Such information is vital to determining who, in the various divisions of the Health Funding Authority, may have given approval.

• The first defendant’s workplan shows that the contract in question was before the Authority and that the first defendant merely processed it.

• The first defendant was responsible for processing over 200 contracts over June to November 2000.

• The plaintiff’s own evidence suggests that the personal health division was also involved in promoting work in the area of this contract, and which is outside the division where the first defendant was working. Funding, and approval, may have come from that source.

• The Authority’s policies were not set in concrete but were in a state of flux and other comparable contracts were in fact let at the relevant time. A table of contracts was referred to.

• More particularly the contract is identical with another arranged at the relevant time - which I will refer to as the “[R] contract”. The plaintiff did not disclose the existence of this contract.

• The plaintiff’s evidence lacks probative value and much is inadmissible.

• The first defendant has co-operated with the plaintiff’s enquiries.

• The plaintiff misled the first defendant to believe she was not under investigation.

[25] Clearly, the first defendant has been stressed to answer serious allegations, at comparatively short notice and with limited resources (constrained further by the Mareva injunction). However, most of the matters that were raised are more appropriately to be reviewed after the interrogatories and discovery are complete. At this stage all I am able to consider is whether there is a good case to argue. On the evidence currently available, all I can conclude is that the first defendant has insufficient material to seriously challenge the case that the plaintiff has presented.

[26] Some particular matters deserve mention. The contention that the plaintiff has omitted to supply material or call evidence of which this Court ought to have been made aware, must be taken most seriously. While that in itself may provide grounds for rescission of the injunction (see Automatic Parking Coupons Ltd v Time Ticket International (1996) 10 PRNZ 538, at 540 and Brinks MAT Ltd v Elcombe [1988] 3 All ER 188, 192), in this case the contention challenges the integrity of an enquiry, by officers of the Crown, in which Ministers of the Crown have expressed particular interest. I do not find, on the evidence currently available, that information was knowingly and wrongly withheld.

[27] For example, I was referred to the [R] contract. This was said to be on all fours with this contract, that it was approved by the Authority, and that it shows how the current contract was unexceptional. I find that the [R] contract was in fact disclosed from the time that this matter was first before me. I am now informed from the Bar, and I think appropriately, that the Crown will allege that the [R] contract was also let by the first defendant, shortly before leaving her employ, and utilising a back-dated letter of offer in much the same way as is alleged here. The plaintiff’s enquiries are continuing.

[28] The defendants also referred to the plaintiff’s failure to call X, to depose to the crucial letter of 7 July. That is hardly surprising. She works with the first defendant and is herself the subject of the plaintiff’s investigations. It would be more profitable to ask why she did not complete an affidavit for the defendants.

[29] The evidence as it stands also supports the view that funding, and approvals, was not from the personal health division.

[30] Notwithstanding strong submissions as to the admissibility of certain evidence, I am satisfied that such evidence as was challenged, was properly before the Court. The proviso to rule 252 is necessary in this instance.

[31] I mention two further responses from the plaintiff:

• The plaintiff argues that the first defendant’s workplan, which conflicts with the plaintiff’s records, is a newly created document.

• From the Bar, that the plaintiff has had difficulties in locating the proper budget stream for this contract, and has had to make special arrangements to provide for payments made so far.

[32] Again, however, this was an interlocutory proceeding. I am concerned only with whether the plaintiff has a good arguable case for an injunction. To require full proof of everything at this stage, would unduly restrict the prospect of injunctive relief in cases where injunctive relief is plainly required. Although Mareva applicants have a higher threshold to meet than those seeking ordinary injunctions, it is still less than the substantive trial standard.

[33] Counsel canvassed the constituent elements of each cause of action that the plaintiff would need to prove. While the merits of the claim in law, as well as fact, must be considered, there was no substantial divergence between the parties on the law, that, in the final analysis, proved to be material. The primary focus was clearly on the factual evidence. I therefore see no need to review the law, save to mention an additional contention for the first defendant. The conflict of interest allegation was submitted to be more suited to the Employment Court so that I should decline jurisdiction. The conflict of interest matter is integral to the torts alleged by the plaintiff. An overview of the whole is required, in my view, and the Employment Court’s jurisdiction in tort is constrained - Attorney-General v Benge [1997] 1 ERNZ 109 (CA) and Conference of the Methodist Church of New Zealand v Gray [1996] 2 NZLR 554 (CA). The Employment Relations Act 2000 has not changed this.

[34] I have no hesitation in finding that the plaintiff has a good arguable case against the first defendant. No need exists to consider whether the case is better than good, unless the balance of convenience so requires. That is considered later.

The second defendant

[35] In addition to points already covered, the second defendant argued that the Health Funding Authority, or the Ministry that replaced it, affirmed the contract after the first defendant had left, and any claimed loss could not be attributed to any alleged action on the part of the first defendant, or to any suggestion of prior collusion between the first and second defendants. Once set up and operative, the second defendant dealt openly with the Ministry. The second defendant provided a valuable service. The Ministry, upon receipt of all necessary reports and due monitoring of the same, must be taken to have been so satisfied with the result that it duly paid out. No loss accrued to the Ministry, it was argued, for it simply paid for services provided and which it had thereby approved.

[36] This assumes that payment for services rendered can be divorced from the contract that obliged the Authority to pay in the first instance. Surely, it cannot be so divorced unless the Authority was fully advised of the alleged fraud before payments were made. Were the contract the result of fraud then it would be illegal and void. No contract could be deemed to have been affirmed, as I see it, or no new contract could be said to have arisen, by the act of payment, if the Authority laboured under a mistaken impression, that approval had been given to the contract in the proper way. (see s 6(2)(b) Contractual Mistakes Act 1977).

[37] The position appears to be that the claim in respect of the second defendant rests mainly on evidence:

• That the first defendant knowingly and wrongfully executed the contract with the second defendant; and

• That the founding directors of the second defendant knew and actively participated in that role or passively acquiesced; or

• That fraud can be imputed to the second defendant in that at least one of its directors, the first defendant, was aware of the alleged fraud at the time that payments were made.

[38] As to the second point, crucial annotations on the letter of offer, purporting to show the date of receipt, may be seen as evidence of complicity by two of the second defendant’s founding directors. Alternatively, those annotations may be seen as no more than later inventions to shield the first defendant from the allegations against her. Whatever may be decided by the Court that hears the matter, the plaintiff has still the third argument up her sleeve. The plaintiff’s argument on that point seems sound, and sufficient to allow for the doctrine of ‘knowing receipt’. I am satisfied that the plaintiff has a good case to argue in respect of the second defendant.

Assets, risk and overall justice

[39] Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA), at 142, on general interlocutory injunctions, considered a broad view of the overall justice of the case is most desired. The principle applies equally to Mareva injunctions in my view, even although not all the tests are the same (and see Gault J in Hawkins at p 52, as cited above at para 8). The matter that has most troubled me in this case, is whether there is a real risk of asset dissipation on the first defendant’s part. To address that, I find it helpful to look at questions of assets, risk and the balance of convenience in the round, unsevered to component parts, for in the end, in the interests of overall justice, a balancing is required.

The first defendant

[40] Because matters appear to be finely balanced, I first acknowledge the strength of the plaintiff’s case. As matters stand, it is no less than compelling. Having said that, I equally acknowledge that the plaintiff has had time to conduct a preceding enquiry. I intend no inference as to the instant case, but the collation of evidence to support suspicion may deflect the mind from the significance of other evidence. In this case, material is relevant on policies and practices and the extent of their observance in practice. The supporting material on that topic alone would appear to be voluminous and not easy for the first defendant to collate. The first defendant is entitled to more amply prepare before anything too positive is said.

[41] Acknowledging the strength of the plaintiff’s case does not itself advance matters much, however, unless it can be said that a strong case of guile and deceit in one instance, gives rise to a presumption that more guile and deceit can be expected. I will come back to that. For now I look to what the first defendant has gained as a result of her allegedly nefarious activity.

[42] First, there is no hidden treasure chest stuffed with the plaintiff’s belongings. This is not that type of case. Nor is there any illicit manipulation of computers to transfer funds to a fictitious account in her control. It is not that type of case either. The first defendant clearly gained, but to keep proper perspective, what she gained, for personal advantage, was continuing employment, when her previous employment may have been at risk. The difference is that her salary was substantially increased as a result, but there is nothing to suggest that her employment contract had elements of favouritism. And for that salary she provided a service. It is irrelevant at this point that that service is not that which the plaintiff may have wanted. I am only concerned with the risk that may be said to arise from the first defendant’s past demeanour, as that demeanour is currently perceived.

[43] She also may be seen to have sought a benefit for her kin group. If that were so, such action would be entirely inexcusable, and no doubt, rival descent groups and service providers would agree. But I am only concerned with the risk that may be seen to arise from past demeanour. Her level of personal gain is not commensurate with the alleged level of deceit.

[44] Turning to her financial circumstances, it is apparent that the larder, while not bare, is also not entirely full. Nothing suggests the covert accumulation of assets at the plaintiff’s expense.

[45] The first defendant is the sole income earner, her husband caring for their two young children. They attend what one might call “good” schools, at least for the purposes of this case. Her income is solely from the consultancy company where she works and returns $1,447.00 per week in hand. She owns two homes. One is in the city, the other was her parents’ home in her tribal area. Her combined equity in both is $84,000.00. She has $14,600.00 in the bank. The whole of her income is required for outgoings. She has a letter from her employer’s solicitor which suggests she is about to lose her job. With that and looming legal fees she envisages the need to live off capital for a while, and contemplates the sale of the city property. To the extent that it may be relevant, I add that she has deposed to a current and projected hardship under the injunction’s heavy hand.

[46] The ready cash and prospective sale present a risk for the plaintiff, in the sense that this gives access to ready cash, but the question I have to ask is whether there is a real risk of asset dissipation in order to defeat judgment. Of course there must be a risk of asset loss, but I am unconvinced that the risk of asset dissipation for the purpose I have said, is proportionate to the evidence of past deceit.

[47] That raises the question of whether, as a matter of law, fraud in itself is enough to justify a Mareva injunction. The position has been taken in England that it is open for a Court to so conclude, but the key word is that it is ‘open’, not ‘obligatory’. In Norwich Union Fire Insurance Society Limited v Eden & Others (Unreported Court of Appeal (Civil Division) (UK), 25 January 1996), Phillips LJ observed:

“It seems to me that when the court considers whether there is a good arguable case it is at that stage that it considers whether the likelihood of a judgment in favour of the plaintiff is sufficient to justify the grant of Mareva relief. If it is so satisfied, the question then arises:- if such a judgment is given, what is the risk that there will be no assets there to satisfy it? If the judgment in question being considered is a judgment in which allegations of fraud are made, then it seems to me that it is open to the court to conclude from that fact alone that there is sufficient risk of dissipation of assets to justify the grant of relief.” [emphasis added]

A similar observation was made by the English Court of Appeal in Cheltenham and Gloucester Building Society v Ricketts & Ors [1993] 4 All ER 276 at 290.

[48] In Ontario Inc v Bauman (2000) 190 DLR (4th) 491, the defendant was claimed to have falsified the plaintiff’s records to make improper claims for goods and services tax input credits. However there was no evidence that the defendant had benefited personally. The Superior Court of Ontario set aside the order freezing assets. Despite an admission of facts that would amount to tax evasion, the evidence did not show that the defendant was the kind of person who was likely to remove his assets in order to defeat or hinder the execution of judgment. The Court held, at p 503:

“[W]here no allegedly fraudulent disposition has occurred and it is sought to restrain the defendant from disposing of assets, the requirements for a Mareva order must be satisfied even where the plaintiff’s cause of action is based on fraud.”

[49] In this case the first defendant received some benefit. The position I take, is that it is open to impose an injunction based on fraud alone, where that points to a fraudulent disposition, but the Court should still enquire, to the extent that it can, as to the defendants’ actual disposition and whether the defendant is likely to dispose of assets to defeat or hinder judgment. I add that I am grateful to the plaintiff’s counsel for referring those cases to me, even although, as counsel appreciated, the Ontario case in particular does not assist the plaintiff’s position.

[50] To reach some conclusion on the overall justice, in the end I must weigh the risks to the plaintiff if the injunction is rescinded, with the damage or hardship to the defendant if it is not. The sense I have of the evidence is that the hardship on the first defendant would be out of all proportion to the risk to the plaintiff. Some asset loss there will be. The first defendant must hold her family together in now stressful circumstances. She must also prepare her case and quite plainly in my view, it would be wrong to deny her the opportunity to do so by constraining her access to funds. But I do not think that the risk of dissipation for the purpose of defeating judgment, is either a real risk in the sense of it being likely, or is one that should be countenanced when weighed with its deleterious effects.

[51] The decision is that the first defendant’s application for review is upheld. The injunction in respect of the first defendant will be rescinded with effect from two weeks’ from today, or such further time as may be necessary to dispose of any intervening appeal that is filed.

The second defendant

[52] The first defendant has now resigned from the second, but a risk remains, in my view, independently of any prospect that current directors may misappropriate funds. Monies are said to be owing, which the second defendant may be inclined to pay, but which the plaintiff may properly challenge. I refer mainly to the marae committee and will come back to that.

[53] When the risk is weighed with hardship, there are several interest groups to consider. I discount the hardship to the second defendant itself. It suffers the prospect of winding-up but if the plaintiff’s case is established, then its business was complete in any event. Whatever the terms of its constitution may be, the second defendant came into existence for no other purpose than that of effectuating the putative contract with the Authority, and the Ministry of Health has been its sole funding source. If the plaintiff’s case is not established, damages provide an adequate remedy.

[54] As I indicated at the commencement of proceedings, my primary concern was the prospective hardship to third parties - clients and staff in particular. I am now satisfied that the Ministry is pursuing alternative arrangements for clients. I also observe, from the affidavit of relevant assets, that staff have in fact now been paid for wages outstanding to 7 May. However, payment was made through the marae committee, for a total of $7,133.88, the committee filling the breach that the Mareva injunction caused.

[55] That introduces another third party - the marae committee. In addition to the salary advance, the committee loaned the second defendant $855.00 for renovations to marae premises that the second defendant leases. However, the second defendant’s statement of financial accounts show that the second defendant spent $32,215.00 to that end. Hardship to the marae committee is not self-evident. On the face of things it has done very well but I am not fully apprised of the facts, not least, the propriety of the lease terms or the nature of the improvements made.

[56] Looking to hardship overall, and balancing that with the prospective loss to the plaintiff if the injunction is not maintained, I am satisfied that the injunction must stay, but on terms as below.

[57] The decision is, that the second defendant’s application for review is dismissed, but with leave to the parties, or the marae committee, if it wishes to be joined, to apply further.

Costs

[58] Ordinarily, under present rules, costs follow the event, even on interlocutory matters, in this case, to the benefit of the first defendant and to the detriment of the second. Category 2 band A would apply. In this case however, the facts have still so much to be resolved, that costs are reserved, to be finally disposed of in the substantive hearing.