Body Corporate 81012 v Memelink

[2022] NZHC 1312

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-419 [2022] NZHC 1312

BETWEEN

BODY CORPORATE 81012, BODY CORPORATE 68792 and BODY CORPORATE 378945

Plaintiffs

AND

HARRY MEMELINK and

CISCA JOHNETTE FORSTER AS TRUSTEES OF THE LINK TRUST (NO.1)

Defendant

CIV-2020-485-462

BETWEEN

THE OFFICIAL ASSIGNEE IN THE BANKRUPTCY OF HARRY MEMEMLINK ESTATE 889243

First Plaintiff

THE OFFICIAL ASSIGNEE IN THE BANKRUPTCY OF HARRY MEMELINK ESTATE 895147

Second Plaintiff

AND

HARRY MEMELINK,

CISCA JOHNETTE FORSTER and ROY WILLIAM BASSETT-BURR AS

TRUSTEES OF THE LINK TRUST (NO.1)

Defendant

CIV-2020-485-374

BETWEEN

LYNX TRUSTEES LIMITED (IN LIQ)
Plaintiff

AND

HARRY MEMELINK

First Defendant

BODY CORPORATE 81012 & ORS v MEMELINK & ANOR (NO.2) [2022] NZHC 1312 [3 June 2022]

CISCA JOHNETTE FORSTER and ROY BASSETT-BURR AS TRUSTEES OF THE LINK TRUST (NO.1)

Second Defendants

Teleconference:

3 June 2022

Counsel:

A S Olney for Plaintiffs in CIV-2021-485-419

P Chisnall and C Jolliffe for Plaintiffs in CIV-2020-485-462 G A Neil for Plaintiff in CIV-2020-485-374

D G Livingston for Defendants in all proceedings

Judgment:

3 June 2022

JUDGMENT (NO. 2) OF CHURCHMAN J

[1]                  In a decision dated 31 May 2022 in this matter,1 I reserved leave for the plaintiffs to apply for any further directions required to implement any aspect of the decision.

[2]                  The plaintiffs have applied pursuant to that leave. One of the plaintiffs has also applied for the correction of typographical and other errors in the decision.

Order appointing receivers

[3]                  The plaintiffs in CIV-2021-485-419 had applied to the Court, acting in its inherent jurisdiction, to appoint receivers of the Link Trust (No.1). The application was either supported or not opposed by the plaintiffs in the two other proceedings, although the plaintiffs in CIV-2020-485-374 and CIV-2020-485-462 proposed the appointment of different individuals as receivers to those proposed by the plaintiffs in CIV-2021-485-419.

[4]                  The Court appointed Mr Shephard and Ms Kellow as receivers. They were the proposed receivers nominated by the plaintiffs in CIV-2021-485-419 and favoured by counsel for the defendants in all proceedings.

1      Body Corporate 81012 & Ors v Memelink & Ors [2022] NZHC 1244.

[5]                  Counsel for the plaintiffs in CIV-2020-485-374 was initially concerned that there was duplication or ambiguity in the description of the powers of the receivers. However, shortly after raising this issue, counsel for the plaintiffs in all three proceedings filed a joint memorandum addressing what was said to be the issues of duplication. A copy of a proposed order appointing receivers was filed along with the memorandum for the Court to approve for sealing. A copy of that draft order is attached to this judgment.

[6]                  At the teleconference on 3 June, no party objected to the sealing of the order appointing receivers. Accordingly, I hereby approve the draft for sealing.

[7]                  Mr Livingston raised a query as to whether it was intended that the role of the receivers was limited just to matters referred to in [19] of the Court’s decision, or whether the receivers effectively replaced the trustees. Just as receivers appointed in respect of a company effectively replace the directors of that company for the duration of the receivership, the effect of the appointment of receivers to a trust is that they effectively replace the trustees.

[8]The draft order specifically records that the receivers:

Are empowered to exercise in respect of the trust the powers conferred upon liquidators pursuant to ss 261 and 267 inclusive and ss 273 to 274 inclusive of the Companies Act 1993 as if:

(A)the trust were a company in litigation;

(B)the settlor and the trustees of the trust were directors of a company; and

(C)the beneficiaries of the trust were the shareholders of a company in liquidation.

[9]                  Where a receiver is appointed by a Court under s 138 of the Trusts Act 2019, as opposed to being appointed pursuant to the Court’s inherent jurisdiction, s 138(5) makes it clear that where a receiver is appointed in relation to a trust, the trustees of the trust cannot exercise any power given to the receiver for the duration of the receivership.

[10]              The order appointing receivers,2 in [1(f)] makes it clear that the receivers are authorised to do any act or thing that the trustees of the trust might do. A number of specific tasks are then identified.

[11]              Mr Livingston accepted that the effect of the order was that, for the duration of the receivership, the receivers effectively replaced the trustees.

[12]              The duration of the receivership will be determined by the time taken to procure payment of the outstanding Body Corporate levies and costs orders and the facilitation of a process by which future levies will be paid in a timely way. The terms of the order appointing a receiver clearly anticipate that the receivership might take some time as it will involve the selling or otherwise realising of sufficient trust property to recover not only the outstanding levies and costs but all costs of the receivership, and all of the proven creditor claims that are indemnified and charged against the assets of the trust, as well as accounting to the Inland Revenue Department in relation to the tax obligations of the trust.

[13]              The principles that the receiver is to apply in determining priorities are articulated in [1](i) to (o).

[14]              Beyond approving the draft order, no further directions are required in relation to the appointment of receivers.

Recall

[15]              Counsel for the plaintiff in CIV-2020-485-462 applied under r 11.9 of the High Court Rules 2016 to correct three errors:

(a)that the Court had misunderstood that all they had wanted in respect of the third cause of action in their proceedings was leave to apply for a summary judgment rather than summary judgment itself; and

2      Attached to this decision.

(b)to correct typographical errors in relation to two dates referred to in the decision.

[16]              In relation to the summary judgment question, I had granted leave for the plaintiff to proceed by way of summary judgment on its third cause of action in an oral minute dated 4 April 2022.3

[17]              It was not clear to me from the plaintiff’s submissions that all they wanted in respect of the third cause of action was the grant of leave to proceed by way of summary judgment in respect of this cause of action.

[18]              However, given the information provided by counsel, and the fact that there is no opposition by counsel for any party, it is appropriate that [163]-[166], both inclusive of the 31 May 2022 decision, be deleted and replaced with the following paragraph:

Beyond the granting of leave to proceed by way of summary judgment, the plaintiff does not seek any further order in respect of the third cause of action.

[19]              In respect of the other two typographical errors, the date 2 March 2022 referred to at the end of [136] is changed to 2 March 2021, and the date 1 May 2022 in [138] is changed to 1 April 2022.

[20]The substantive judgment will be reissued with these three corrections.

Churchman J

Solicitors:

Meredith Connell, Auckland for Plaintiff in CIV-2020-485-374 Steve Hill Law, Lower Hutt for Plaintiff in CIV-2021-485-419 Anthony Harper, Christchurch for Plaintiff in CIV-2020-485-462

Livingston & Livingston, Wellington for Defendants in all proceedings

Counsel:

A S Olney for CIV-2021-485-419

P Chisnall for CIV-2020-485-462

3      CIV-2020-485-462, Official Assignee v Memelink & Forster, Oral Minute of Churchman J, 4 April 2022.