Blundell Concrete Limited v Hodgins
[2017] NZHC 2359
•28 September 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-1016 [2017] NZHC 2359
UNDER the Land Transfer Act 1952 IN THE MATTER OF
an application for an order pursuant to sections 145 and 145A for orders that caveat not lapse
BETWEEN
BLUNDELL CONCRETE LIMITED Applicant
AND
RICHARD HODGINS Respondent
Hearing: 20 September 2017 Appearances:
D K Clark and S L Fletcher for the Applicant
Richard Hodgins the Respondent in personJudgment:
28 September 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 28 September 2017 at 3:30pm
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Wilson McKay, Auckland, for the Applicant
Copy for:
Respondent
BLUNDELL CONCRETE LIMITED v HODGINS [2017] NZHC 2359 [28 September 2017]
[1] Blundell Concrete Ltd applies for:
[a] an order that its caveat against the title to Mr Hodgins' property at
747 Kopuku Road, Maramarua not lapse; and
[b] leave to issue a charging order before judgment against
Mr Hodgins’ property.
[2] Mr Hodgins is the registered proprietor of a 2.12 hectare property described in identifier 314201. Under its caveat 1687623.1 registered on
28 October 2016, Blundell Concrete Ltd claims a beneficial interest in the property by way of constructive trust.
[3] Mr Hodgins was, but not longer is, in a de facto relationship with Ms Georgina Haronga. She worked as office manager for Blundell Concrete between June 2014 and 5 February 2016. As part of her job she purchased stock, materials and equipment, paid wages and accounts. She had control of the company’s bank accounts. She also worked for a related company, Blundell Concrete Products Ltd. During her employment she had access to Blundell Concrete’s credit card and chequebook. While she had no authority to use it, she also had access the cashflow card of its director, Mr Craig Blundell. Blundell Concrete Ltd, Blundell Concrete Products Ltd and Mr Blundell say that during her employment she embezzled funds from them totalling $378,656.11. They also say that some of those embezzled funds were paid into accounts in the name of Mr Hodgins. They have taken a substantive proceeding (CIV-2016-404-3989) in which they sue Ms Haronga for conversion, breach of confidence, money had and received and unjust enrichment, and Mr Hodgins for knowing receipt, dishonest assistance, money had and received and unjust enrichment.
[4] The other defendants in that proceeding are Jazmin Hodgins, the infant daughter of Ms Haronga and Mr Hodgins, and Natalie Puia, another daughter of Ms Haronga. The children are sued, because the Blundell entities say that some payments were made into a joint account in the names of Mr Hodgins and
Jazmin, and other payments were made into an account in the name of Natalie
Puia.
[5] For its caveat claim, Blundell Concrete Ltd says that it has an arguable case for tracing funds stolen by Ms Haronga into payments Mr Hodgins made under his mortgage to the ASB Bank. For its application for a charging order before judgment, it says that Mr Hodgins has attempted to sell the property with the intent to defeat its claims. For his part, Mr Hodgins says that he knew nothing about Ms Haronga stealing money from her employer. He denies that any funds from Blundell Concrete Ltd funded his loan repayments, because the repayments came from his wages paid into his bank account just before each repayment was due.
[6] While he has from time to time consulted lawyers, Mr Hodgins does not have legal representation in this proceeding or in the substantive proceeding. In a minute of 20 June 2017 I encouraged Mr Hodgins to obtain legal advice. In CIV-2016-404-
398 I have made similar comments.1 Given his lack of legal experience,
Mr Hodgins did not submit on the law. Instead, he relied on some factual matters. I
have treated his opposition to Blundell Concrete’s applications as putting it to proof.
[7] While Blundell Concrete Products Ltd and Mr Blundell also say that they are victims of Ms Haronga’s thefts, only Blundell Concrete has lodged a caveat and applied for a pre-judgment charging order. I am concerned only with its applications.
General principles on caveat applications
[8] In Holt v Anchorage Management Ltd, McMullin J stated the purpose of a caveat against dealings under the Land Transfer Act 1952:2
Once lodged, a caveat is notice to all who search the title to the land against which it is registered and to the registered proprietor of the land (to whom notice of its receipt is given pursuant to s 142) that the caveator claims the estate or interest the subject of the caveat. It is both a warning to the persons
1 Minute of 23 March 2017 at [6], minute of 23 May 2017 at [1].
2 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 113.
mentioned that the caveator asserts rights against the land and a protection of those rights. (Section 143(1) uses the phrase "protected by the caveat".) Once the caveat is lodged the Registrar is prohibited from making any entry on the register which has the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat (s 141).
[9] In caveat applications under ss 143, 145 and 145A of the Land Transfer Act, the caveator generally has the onus of showing a reasonably arguable case for the interest claimed. The interest must come within s 137(1) of the Act:
137 Caveat against dealings with land under Act
(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—
(a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or
(b) is transferring the land or estate or interest to any other person to be held in trust.
[10] A personal or contractual right is not enough. The caveator must show an entitlement to a beneficial interest in the land under the caveat.3 Something more than a potential or future interest is required.
[11] Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable it may be. For a caveat to be removed, it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset or because any such ground no longer exists. In addition, the court has a residual discretion not to uphold a caveat but that is exercised cautiously, as when the caveat could serve no useful purpose or alternative safeguards are available. That
aside, balance of convenience considerations do not apply, once a caveatable interest
3Guardian Trust and Executors Company of New Zealand, Limited v Hall [1938] NZLR 1020 (CA) at 1025; Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246 (CA).
is established. In Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd the Court of Appeal said:4
We are of the view that in the dictum in Sims v Lowe Somers and Gallen JJ were concerned with the situation which was then before the Court and were not putting their minds to a situation in which there is no practical advantage in maintaining a caveat lodged by someone who could properly claim a caveatable interest. In such circumstances the Court retains a discretion to make an order removing the caveat, though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator's interests can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.
[12] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts. As a qualification to the reasonably arguable standard, where there are allegations of fraud
or other reprehensible conduct, it is necessary to show a prima facie case.5
The allegations against Mr Hodgins
[13] Accountants for the Blundell entities have investigated the movement of funds from Blundell bank accounts into accounts in the name of Mr Hodgins. Their investigations are not complete because they have not had access to all bank statements. There are three ASB Bank accounts:
[a] 12-3031-0375570-50, a savings account in the name of
Mr Hodgins and his daughter Jazmin (the joint account);
4 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
5 Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [15], followed in Trustees Executors Ltd v Steve G Ltd [2013] NZHC 16 at [63]-[66], Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd [2013] NZHC 1297 at [78] (overturned on appeal, but not on this point: Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd [2014] NZCA 164, (2014) 15
NZCPR 227); S and S Ltd v XYZ Ltd [2016] NZHC 26 at [6]; and Virtual Spectator v Rothlander
[2016] NZHC 499 at [10].
[b] 12-3031-0604070-50, a savings account in the name of
Mr Hodgins (the savings account);
[c] 12-3031-0604070-57, a cheque account in the name of
Mr Hodgins (the cheque account).
[14] The Blundell entities say that the $186,392.39 they are suing Mr Hodgins for is made up as follows:6
[a] $41,972.50 removed from Blundell Concrete Ltd’s account and
paid into the joint account;
[b] $7,611.00 removed from Blundell Concrete Ltd’s account and paid into Mr Hodgins’ cheque account;
[c] $67,715.00 paid from Ms Haronga’s bank account;
[d] $61,755.39 removed from Mr Blundell’s personal account into the
joint account;
[e] $2,400.00 removed from Blundell Concrete Products Ltd’s account into the account in the name of Mr Hodgins and his daughter.
[15] Blundell Concrete Ltd has put in evidence redacted copies of its bank statements showing deductions from its account and bank statements of Mr Hodgins showing some of those payments credited to his accounts.
[16] For this decision, only the $41,972.50 paid into the joint account and the
$7,611.00 paid into Mr Hodgins’ cheque account are in issue. For [c] above,
while Blundell Concrete Ltd has shown that there were payments from
Ms Haronga’s own bank account (38-9016-0799241-00), that are marked
6 These do not add up to $186,392.39, but the point does not matter for this decision.
“Pay Richy” in her bank statements, destination bank statements are not available. It accepts that at this stage it cannot show that Mr Hodgins received those payments. Blundell Concrete Ltd cannot claim for money taken from Mr Blundell’s own account, [d] above, or from the account of Blundell Concrete Products Ltd, [e]. Accordingly, the total sums in issue for this decision are
$49,583.50. Blundell Concrete Ltd has shown an arguable case for payments of those amounts from its bank accounts into the joint account and Mr Hodgins’ own bank accounts. There is no suggestion that Mr Hodgins had any entitlement to receive payments from Blundell Concrete Ltd. It is also arguable for Blundell Concrete Ltd that Ms Haronga arranged for those payments without any authority given by Blundell Concrete Ltd. She had control of the Blundell bank accounts. Mr Hodgins did not submit that she did not make the payments.
[17] I note one aspect relevant to tracing arguments that will come up later. Sums totalling $7,611.00 from Blundell Concrete were paid into Mr Hodgins’ bank account between 12 and 15 January 2016. Before the first of the payments was made, the account was in overdraft. After the last payment, the account went into overdraft again. Mr Hodgins’ next mortgage repayments were made later, when the account was in credit again and before any payments by Blundell Concrete Ltd were received.
[18] For the payments into the joint account, Blundell Concrete Ltd says that payments beginning on 13 April 2015 and ending on 14 December 2015 totalling
$41,972.50 were made without its authority. The destination bank account was the joint account 12-3031-0375570-050. It has, however, put in evidence copies of bank statements of the joint account only for the months of September and December 2015. The payments received by Blundell Concrete Ltd shown in those bank accounts total $12,472.80. Blundell Concrete Ltd has also shown that for those months, after payments from it were deposited into the joint account, there were transfers to Mr Hodgins’ savings and cheque accounts.
[19] Mr Hodgins works for Fonterra. He says that he has had the same job for over 13 years. He arranges his budget so that there is no need to check his accounts constantly. His wages of around $2,000 per fortnight go in every
second Tuesday night, and his mortgage repayments, car repayments and insurances totalling about $1,700.00 come out every Thursday. That leaves him round $300.00 a fortnight for petrol and work lunches. Ms Haronga’s earnings covered the remainder of the household expenses such as power, groceries and day care. He and Ms Haronga each had a bank debit card. His had number 2201 and hers 2738. He allowed her to operate his accounts so that she could pay bills. He was not aware that she was stealing money from the Blundell entities until he put his property on the market and found that Blundell Concrete Ltd had lodged a caveat against the title.
[20] In support of his case, Mr Hodgins can point to transactions on the bank statements consistent with his defence. Transactions involving his card 2201 appear to involve day-to-day living purchases, whereas transactions on card 2738 are generally for larger round sums. Mr Hodgins identifies some of these as payments to online gambling sites.
[21] There is support for his defence in this dictum of Gibbs CJ in National
Commercial Banking Corporation of Australia Ltd v Batty:7
Where, because of the action of a servant or agent acting outside the scope of his authority, or for that matter because of the action of a complete stranger, money has been paid into the account of the defendant, who has technically received it, although he is quite unaware of that fact, and the money is then misappropriated, still without the knowledge or intervention of the defendant, there seems to be no reason in justice or equity why the defendant should be answerable for the money simply because theoretically he had the means of knowing that the money was in the account. In principle, in those circumstances, the defendant ought not to be liable unless, before the money was misappropriated, he knew or ought to have known that he had possession or control of it. In other words, where the defendant has not had the benefit of the money, has not played any part in disposing of it, and was ignorant of the fact that it was theoretically under his control, he should not be liable in the absence of fault on his part.
[22] Mr Hodgins may be able to argue that while he authorised Ms Haronga to operate his accounts to pay bills, he did not authorise her to pay misappropriated funds into or out of accounts in his name. He may also be able to argue that
simply having the means to find out whether unauthorised payments were made
7 National Commercial Banking Corporation of Australia Ltd v Batty [1986] HCA 21, (1986) 168 CLR 251 at 268.
into his account is not sufficient fault to make him liable.8 Those matters are, however, for trial.
[23] At this stage, Blundell Concrete Ltd has established an arguable case for liability for the causes of action in money had and received and knowing receipt. Mr Hodgins’ defences are a matter for trial. On the other hand, Blundell Concrete Ltd’s claim for dishonest assistance requires proof of dishonesty.9 At this stage there is not enough evidence to suggest a real case for actual dishonesty by Mr Hodgins.
[24] A claim for personal liability for receiving embezzled funds is not enough to give a caveatable interest in Mr Hodgins’ Maramarua property.10 Blundell Concrete Ltd’s case is that it can trace the funds taken from its account into payments from Mr Hodgins’ cheque account to repay the mortgage on his house. That is the basis for its constructive trust claim.
[25] I accept that an equitable interest may arise where misappropriated funds belonging to Blundell Concrete Ltd have been used to make payments under Mr Hodgins’ mortgage to the ASB Bank. Mr Clark responsibly cited The Fish Man Ltd (in liq) v Hadfield where Fogarty J rejected a claim for a constructive trust where the funds taken from a company had been used towards payment of a director’s mortgage debt.11 He held that tracing was available only to follow funds into assets acquired with misappropriated funds. With great respect to Fogarty J, it does not appear that any submission was made that equity would
recognise an interest in property arising from subrogation as a way of preventing unjust enrichment.
[26] Since the decision of the House of Lords in Banque Financière de la Cité v Parc (Battersea) Ltd, it has been routine to note the distinction between
8 See Heperu Pty Ltd v Belle [2009] NSWCA 252 (2009) 76 NSWLR 230 at [72]-[80].
9 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC) at 389.
10 See New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA) where the caveator could not show an arguable case for embezzled funds giving an interest in property.
11 The Fish Man Ltd (in liq) v Hadfield [2016] NZHC 1750.
subrogation arising under contract and subrogation as an equitable remedy to reverse or prevent unjust enrichment. Lord Hoffmann noted:12
But I think it should be recognised that one is here concerned with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff’s expense; secondly, whether such enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for denying a remedy.
[27] In Boscawen v Bajwa, Millett LJ showed that subrogation is a restitutionary remedy directed at one particular form of enrichment that is based on general principles that apply in other cases of enrichment:13
If the plaintiff succeeds in tracing his property, whether in its original or in some changed form, into the hands of the defendant, and overcomes any defences which are put forward on the defendant’s behalf, he is entitled to a remedy. The remedy will be fashioned to the circumstances. The plaintiff will generally be entitled to a personal remedy; if he seeks a proprietary remedy he must usually prove that the property to which he lays claim is still in the ownership of the defendant. If he succeeds in doing this the Court will treat the defendant as holding the property on a constructive trust for the plaintiff and will order the defendant to transfer it in specie to the plaintiff. But this is only one of the proprietary remedies which are available to a court of equity. If the plaintiff’s money has been applied by the defendant, for example, not in the acquisition of a landed property but in its improvement, then the court may treat the land as charged with the payment to the plaintiff of a sum representing the amount by which the value of the defendant’s land has been enhanced by the use of the plaintiff’s money. And if the plaintiff’s money has been used to discharge a mortgage on the defendant’s land, then the court may achieve a similar result by treating the land as subject to a charge by way of subrogation in favour of the plaintiff.
[28] The subrogation remedy does not mean that the successful plaintiff actually acquires the creditor’s interest in a property. Instead he obtains a new and independent equitable charge which replicates the creditor’s old interest. Lord Hoffmann explained in Banque Financière de la Cité:14
When judges say that the charge is "kept alive" for the benefit of the plaintiff, what they mean is that his legal relations with a defendant who would otherwise be unjustly enriched are regulated as if the benefit of the charge had been assigned to him.
12 Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 (HL) at 234.
13 Boscawen v Bajwa [1996] 1 WLR 328 (CA) at 334-335.
14 Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 (HL) at 236.
[29] The equitable charge arises on the discharge of the secured creditor’s
debt, independently of any court order. So Millett LJ said in Boscawen v Bajwa:15
Nor, in my judgment, is there any justification for the proposition that the Abbey National's right to be subrogated to the Halifax's charge did not arise until the court made the necessary order. The order merely satisfied a pre- existing equity. The Abbey National's equity arose from the conduct of the parties. It arose at the very moment that the Halifax's charge was discharged, in whole or in part, with the Abbey National's money. It arose because, having regard to the circumstances in which the Halifax's charge was discharged, it would have been unconscionable for Mr Bajwa to assert that it had been discharged for his benefit. At law, Mr. Bajwa became the owner of an unencumbered freehold interest in the property; but he never did, even for an instant, in equity.
Because the charge arises immediately as a matter of equity, rather than only on a court order, it is a property interest that may be protected by caveat under s 137 of the Land Transfer Act. Courts have recognised that subrogation claims may be made where misappropriated funds or funds paid out without authority are
applied to pay off secured debts.16
[30] There is a drafting point. Strictly the interest arising under subrogation as described above is an equitable charge rather than a constructive trust, as claimed in the caveat. Given the liberal approach to loosely-drafted caveats, as seen in the Court of Appeal’s decision in Zhong v Wang, I would not rule against the caveat in this case because of this misnomer.17 Mr Hodgins has not been prejudiced. He has understood that Blundell Concrete is claiming an interest in the Maramarua property because it alleges that its money funded his loan repayments. If I were to rule against Blundell Concrete on the drafting point, I would give leave for a second caveat under s 148 of the Land Transfer Act.18
[31] The ASB Bank had a mortgage registered against the Maramarua property
securing three loans. Blundell Concrete has put in evidence parts of Mr Hodgins’
bank statements showing reductions in principal over the relevant period of
15 Boscawen v Bajwa [1996] 1 WLR 328 (CA) at 432.
16 Scotlife Homes Loans (No 2) v Melinek (1999) 78 P & CR 389 (EWCA), Gertsch v Atsas [1999] NSWSC 898; Primlake Ltd (in liq) v Matthews Associates [2006] EWHC 1227 (Ch); and
National Australia Bank Ltd v Rusu [2001] NSWSC 32.
17 Zhong v Wang (2006) 7 NZCPR 488 (CA).
18 For examples of s 148 used to cure drafting errors, see Ball v Fawcett [1997] 1 NZLR 743 (HC);
Cube Building Solutions Ltd v Kingloch Holdings Ltd HC Christchurch, CIV-2009-409-935,
15 October 2010; and Sunrise 9 Trustees Ltd v North Shore Aero Club Inc [2017] NZHC 1794.
Ms Haronga’s misappropriations between May 2015 and the beginning of February 2016. A page from a bank statement of August 2015 shows that the total amount secured by the mortgage was $344,171.62. Another statement of March 2016 shows total borrowings of $341,039.41, a reduction of principal of
$3,132.21. Mr Clark advised that the total payments of interest and principal up to 5 February 2016 amounted to $19,256.48.
[32] For those payments to be enrichment of Mr Hodgins at the expense of Blundell Concrete Ltd, it has to be able to follow the funds from its bank account to the ASB Bank. At this stage, there is not a clear enough documentary trail to say conclusively that money Ms Haronga stole from Blundell Concrete Ltd was used to pay the mortgage on Mr Hodgins’ house. That is primarily because Blundell Concrete Ltd has not yet obtained enough bank statements to show the flow of funds. In the substantive proceeding, Mr Hodgins has not made discovery. He was required to file and serve an affidavit of documents by
11 August 2017. I directed him to include bank statements in that affidavit.19
I could hardly rule against Blundell Concrete Ltd on this aspect when
Mr Hodgins has not provided documents which it requires to prove its case.
[33] Tracing Blundell Concrete Ltd’s funds will not be straightforward. The joint account and Mr Hodgins’ own personal accounts had mixed funds. Mr Hodgins contributed to them as well as Blundell Concrete. The ability to trace may turn in part on Mr Hodgins’ knowledge.20 If he knew his accounts held Blundell funds, he may be held to have dissipated his own money before he spent Blundell funds, so that Blundell Concrete may be able to claim that its money went towards loan repayments. It may be otherwise if Mr Hodgins was innocent. And if the cheque account went into overdraft at relevant times, some loan
repayments may be immune from a tracing claim, as may be the case with the payments in January 2016 in [17] above.21 The tracing claim will also have to
deal with Mr Hodgins’ case that he arranged his budget so that his wages were
19 My minute of 23 May 2017 at paras [4] and [6] in the 398 proceeding .
20 See Andrew Butler and others Equity and Trusts in New Zealand (2nd ed Thomson Reuters, Wellington 2009) at 35.3.3 and 35.3.5.
21 Re Registered Securities Ltd [1991] 1 NZLR 545 (CA) at 554.
paid into the account two days before the mortgage payments were due and ensured that his wages paid the loans.
[34] Those are matters for trial. At this stage, on the limited information available, I cannot say that Blundell Concrete Ltd’s tracing claim is doomed, although it does seem to be very modest, no more than $19,256.48. Because Blundell Concrete Ltd has an arguable claim to trace its funds into mortgage repayments made by Mr Hodgins, an arguable equitable charge arises by way of subrogation. A caveatable interest is established to that extent only.
The application for a pre-judgment charging order
[35] Under r 17.40 of the High Court Rules, a charging order charges the estate right or interest of the liable party in the property with payment of the amount for which the liable party may obtain or has obtained judgment. Rule 7.41 says:
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.
Jurisdiction
[36] There is a jurisdiction question whether an associate judge can give leave under r 17.41. As a matter of practice, the Registrar tends not to put applications under r 17.41 before associate judges. This application has come before me only because it was included as an alternative to the application to sustain the caveat, a
matter in an associate judge’s court jurisdiction.22 An application for a charging
order is decided on its own merits, independently of the caveat application. It is
22 Senior Courts Act 2016, s 20(1)(e).
therefore not within an associate judge’s ancillary powers under s 21 of the
Senior Courts Act 2016.
[37] An application under r 17.41 is an interlocutory application under Part 7 subpart 2 of the High Court Rules and is heard in chambers.23 An associate judge has the jurisdiction and powers of a judge in chambers.24 That is subject to the qualification that an associate judge does not have jurisdiction and powers over matters specified in s 22(4) of the Senior Courts Act. That section says:
22Rules conferring on Associate Judges specified jurisdiction and powers of High Court Judge in chambers
(1) Rules made under section 148 and rules made under any other Act in the manner provided in that section may confer on an Associate Judge the jurisdiction and powers of a High Court Judge in chambers specified in the rules.
(2) The rules may specify limitations and restrictions on the jurisdiction and powers.
(3) The rules may contain any provisions that may be necessary to enable the proper exercise by Associate Judges of the jurisdiction and powers so conferred.
(4) Despite subsection (1), no rules may be made that confer on Associate Judges jurisdiction and power in relation to any of the following:
(a) a criminal proceeding other than an uncontested application for bail or an application to set aside a witness summons:
(b) an application for a writ of habeas corpus:
(c) a proceeding for the issue or renewal of a writ of sequestration:
(d) a proceeding under the Care of Children Act 2004: (e) an action in rem under the Admiralty Act 1973:
(f) an application to review, or appeal against, the exercise, or the refusal to exercise, by a Registrar or a Deputy Registrar of any jurisdiction or power conferred on a Registrar or
Deputy Registrar by this Act or any other enactment:
23 High Court Rules, r 7.34.
24 Senior Courts Act 2016, s 22; High Court Rules, r 2.1(1).
(g) an application for a search order or an interlocutory or a permanent injunction:
(h) an application for review or other relief under the Judicial
Review Procedure Act 2016:
(i) a proceeding for a writ or an order in the nature of mandamus, prohibition, or certiorari, or for a declaration or an injunction:
(j) a proceeding to remove a person from public office:
(k) a proceeding to try the right of a person to hold public office.
[38] An application for a pre-judgment charging order does not come within s 22(4). In particular, it does not come under s 22(4)(g). It is not a search order and it is not an application for an injunction. Whereas an injunction (whether interlocutory or permanent) compels or restrains action by a person, a charging order imposes a charge against an interest in property. Accordingly an associate judge has jurisdiction to make orders under r 17.41 of the High Court Rules. In
McKay v 314 Maunganui Road Ltd,25 it appears to have been accepted that an
associate judge had jurisdiction under r 567 of the former High Court Rules, the predecessor to r 17.41. In this respect the limits on rules for associate judges’ chambers jurisdiction under the Judicature Act 1908 and the Senior Courts Act
2016 are the same, despite drafting differences.26
Merits of the application for pre-judgment charging order
[39] In McKay v 314 Maunganui Road Ltd, Keane J said of the rule:27
[24] … Once an action is begun it enables a party, usually the plaintiff, to secure from disposal any property in issue before the merits are gone into and any judgment given. To obtain the benefit of the rule, a claimant need not show a serious question to be tried or that he or she is favoured by the balance of convenience and justice overall, but must satisfy a test that is equally stringent.
[25] To obtain an order the claimant must show, obviously enough, that the party who controls the asset is about to do something that will
25 McKay v 314 Maunganui Road Ltd HC Auckland, CIV-2007-404-7434, 30 April 2008.
26 The relevant provision under the Judicature Act is s 26J(3) and (4) (repealed).
27 McKay v 314 Maunganui Road Ltd HC Auckland, CIV-2007-404-7434, 30 April 2008 at [24].
defeat his or her claim. But that this will be the effect is not enough. Not every such disposal qualifies. The one who has the property must be proved to have a particular intent. Not just an intent to dispose of the property but an ‘intent to defeat’ the claim and to do so by ‘making away’ with the property. In short an intent to act illegitimately.28
[40] In Hammond Land Holdings Ltd v Elders Pastoral Ltd the Court of Appeal made the point that a pre-judgment charging order cannot be made simply to secure a fund to satisfy a judgment.29 That however appears to be Blundell Concrete Ltd’s purpose in seeking the charging order. Mr Blundell deposes:
Instead he appears determined to remove the caveat (I understand that he wishes to sell his property) which would seriously impede the ability for the plaintiffs to trace and return funds. It is for this reason that I am seeking a charging order in respect of all funds which have been misappropriated from the bank accounts of either the Applicant, Blundell Concrete Products Ltd and myself personally. This is especially so if it is not accepted that the applicant has a caveatable interest against the respondent’s property.
Blundell Concrete Ltd relied on Mr Hodgins listing his property for sale to prove its case under r 17.41.
[41] In his submissions, Mr Hodgins explained that the Maramarua property has a rating value of about $645,000. He has debts of about $490,000 including a
$400,000 debt to a bank secured by mortgage. He works at Fonterra’s Takanini plant. It is inconvenient for him to travel from Maramarua to work every day. He tried to sell the property so as to clear his liabilities. He lives with his brother in Clevedon. He has been in stable employment throughout.
[42] I have dealt with Mr Hodgins in two face-to-face case management conferences in CIV-2015-404-398 as well as in this proceeding. He comes across as guileless. His interests are not aligned with Ms Haronga.
[43] Blundell Concrete Ltd has not satisfied me that Mr Hodgins put his
Maramarua property on the market with intent to defeat the Blundell entities or to
28 Authorities cited included Foodstuffs (Auckland) Ltd v Brown HC Auckland, M1117/998,
17 August 1998; Hieber v Commissioner of Inland Revenue [2000] 3 NZLR 718 (HC);
Commissioner of Inland Revenue v Skudder HC Auckland, CIV-2006-404-5287, 11 October
2007; Jawa Decorators Ltd v Brancikova HC Auckland CIV-2003-404-757, 23 February 2004;and Hammond Land Holdings Ltd v Elders Pastoral Ltd (1989) 2 PRNZ 232 (CA).
29 Hammond Land Holdings Ltd v Elders Pastoral Ltd (1989) 2 PRNZ 232 (CA) at 234.
defeat his creditors generally. It has not shown that I cannot accept Mr Hodgins’ explanation for selling the property – to clear his debts. In these circumstances, the grounds for making a charging order before judgment have not been made out. The application for leave to issue a charging order is accordingly dismissed.
Outcome
[44] The application to sustain the caveat is successful, but I note that the maximum amount of Blundell Concrete Ltd’s subrogation claim is $19,256.48, being the amounts of the loan repayments made by Mr Hodgins during the relevant period of Ms Haronga’s embezzlements. While Blundell Concrete Ltd has an arguable case that some of the money stolen by Ms Haronga funded those loan payments, I stress that at present the case for Blundell Concrete Ltd’s claim is only circumstantial and that Mr Hodgins appears to have arguable defences.
[45] Whether Blundell Concrete Ltd will be able to prove its subrogation claim for all the payments made up to February 2016 will require a careful examination of the bank statements showing the flow of funds from Blundell Concrete Ltd through Mr Hodgins’ accounts to the ASB Bank. For that, complete bank statements will be required. Blundell Concrete Ltd has obtained some bank statements. In the substantive proceeding, Mr Hodgins was required to disclose all his bank statements. So far, he has not done so. At the hearing, Mr Clark indicated that the plaintiffs in proceeding 398 may apply for non-party discovery from the ASB Bank. On non-party discovery applications, applicants typically pay the costs of the non-party making discovery. That will be an extra cost incurred by the Blundell plaintiffs that they would not have incurred if Mr Hodgins had made discovery properly at the outset.
[46] I believe that Mr Hodgins’ failure to make discovery properly is because of his inexperience in the procedures of this court and his lack of representation. He should understand that not having a lawyer not only places him at a disadvantage but is also creating difficulties for the Blundell plaintiffs. There may be costs consequences for not making discovery properly. As before, I strongly encourage him to obtain legal representation.
[47] At present, Blundell Concrete Ltd’s caveat stops Mr Hodgins selling his Maramarua property. It is, however, open to the court to remove the caveat in its discretion if Blundell Concrete Ltd can be otherwise secured. As the maximum amount of Blundell Concrete Ltd’s subrogation claim is $19,256.48, Blundell Concrete Ltd can have no complaint about the sale of the property so long as the amount of its claim (plus a reasonable allowance for interest) is secured. That would be an appropriate exercise of the discretion under Pacific Homes Ltd
(in rec) v Consolidated Joineries Ltd.30 I encourage Mr Hodgins to get legal
advice if he wants to sell the property with the caveat removed and part of the proceeds held by a stakeholder in substitution.
[48] It is a standard requirement on caveat decisions to require the caveator to take a substantive proceeding with due diligence to establish the interest claimed in the caveat. The Blundells’ proceeding is well advanced. A hearing date has been fixed. The statement of claim does not however seek any relief in respect of the Maramarua property. That will need to be added.
[49] I make these orders:
[a] Caveat 1687623.1 registered against the land in identifier 314201 shall not lapse pending further order of the court, but leave is reserved to apply for the caveat to be removed if the property is to be sold and an amount to cover Blundell Concrete Ltd’s subrogation claim is otherwise secured pending the final hearing of CIV-2016-404-398.
[b] In CIV-2016-404-398 the statement of claim is to be amended to include a claim for the equitable interest in the Maramarua property claimed in the caveat.
[c] The application for a charging order before judgment is dismissed.
30 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).
[d] Mr Hodgins is to pay Blundell Concrete Ltd costs on the caveat application. If the parties cannot agree costs, memoranda may be filed and I will decide costs on the papers.
[e] Leave is reserved to apply for further directions.
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Associate Judge R M Bell
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