Central Motor Group Limited v Elmiger

[2016] NZHC 1793

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2016-463-90 [2016] NZHC 1793

BETWEEN

CENTRAL MOTOR GROUP LIMITED

First Plaintiff

RICHARD HUGH BLAKENEY- WILLIAMS, KIM MARIE BLAKENEY- WILLIAMS AND HAMISH ROBERT GILLER as trustees of the BURMA TRUST

Second Plaintiff

DIAMOND LASER MEDISPA TAUPO LIMITED

Third Plaintiff

AND

STEPHANIE ANN ELMIGER Defendant

Hearing:	4 August 2016
Counsel:	P J Morris for Plaintiffs No appearance by, or on behalf, of Defendant
Judgment:	4 August 2016

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Stace Hammond, Hamilton

CENTRAL MOTOR GROUP LIMITED v ELMIGER [2016] NZHC 1793 [4 August 2016]

[1]      Central Motor Group Ltd (CMG) operates  a motor vehicle dealership in Taupo.  Its sole director is Mr Blakeney-Williams.  He is also one of three trustees of the Burma Trust, and the sole director of Diamond Laser Medispa Taupo Ltd, which operates  a health  spa business  also  in Taupo.   All  three of those  entities  bring proceedings against Ms Stephanie Elmiger in respect of funds that have allegedly been misappropriated or diverted for unauthorised purposes.

[2]      A freezing order is sought, on a without notice basis.   The freezing order application was filed at 4.40pm yesterday.  As I had been sitting in Court all day, I indicated that I needed time to consider the comprehensive documents that been filed.  From my initial perusal of the papers, it did not appear that it was necessary to deal with the issue urgently on  the papers.   Instead,  I convened a hearing this morning at 8.45am to determine whether interim relief in the form sought should be given.  Mr Morris has appeared for the plaintiffs this morning.  I thank him for his assistance, both in the preparation of the documents and in the submissions made today.

[3]      Ms Elmiger commenced employment with CMG on 11 March 2013, as its administration manager.   In April 2014, she became operations manager and was later promoted to general manager of the company in June 2015.  I undertaking her tasks she had full authority to operate banking accounts of CMG and also had access to accounting systems.

[4]      As a result of conversations with a sales manager, Mr Blakeney-Williams became concerned about whether a particular vehicle had been removed from the company’s stock.  So far as that vehicle was concerned, it subsequently transpired that it had been written out of the company’s assets and transferred into the name of another person with whom Ms Elmiger appears to have been associated.

[5]      As a result of those inquiries Mr Blakeney-Williams arranged for a former employee, Ms Randell, to attend at CMG’s office on 28 June 2016 when Ms Elmiger was taking one day’s leave.  Ms Randell commenced a review of the general ledger.

[6]      On 4 July 2016, Ms Elmiger’s employment was suspended, pending further investigations into the transactions of which Mr Blakeney-Williams was then aware. Other irregularities came to light.

[7]      The nature of the inquiries made and the results of them are summarised in Ms Randell’s affidavit in support of the application.  In general terms, it appears that approximately $55,000 may have been misappropriated through credit card fraud, with a further amount involving other transactions, bringing the total to $83,469.76.

[8]     Some correspondence took place with Ms Elmiger following the initial investigation by Ms Randell.  Her explanations in respect of particular, but not all transactions, was not accepted by CMG.  Her employment was terminated on 25 July

2016.   Mr Blakeney-Williams rejects any suggestion that he authorised the expenditure to be incurred.

[9]      As well as CMG, there are some concerns about misappropriations in respect of the Burma Trust and Diamond Laser Medispa.  Ms Randell addresses those issues in her affidavit.  There is a plausible narrative to suggest that Ms Elmiger used her authority to access a bank account to divert funds from the Burma Trust account to others not associated with Mr Blakeney-Willaims’ business interests.   There is a similar concern over a payment identified in respect of Diamond Laser Medispa. Those amounts are relatively minimal in the overall scheme of things.

[10]     The jurisdiction to make a freezing order stems from r 32.2 of the High Court Rules.  The Court of Appeal, in Shaw v Narain,1  endorsing observations made in a decision of the High Court in Bank of New Zealand v Hawkins,2  identified three tests:

(a)       It must be shown that the plaintiffs have a good arguable case on a substantive claim,

(b)      There must be assets of the defendant within the jurisdiction,

1      Shaw v Narain [1992] 2 NZLR 544 (CA) at 548.

2      Bank of New Zealand v Hawkins (1989) 1 PRNZ 451 (HC).

(c)       There must be a real risk of dissipation or disposition of assets so as to

render the defendant “judgment proof”.

[11]     I am satisfied from the affidavit evidence that there is a good arguable case that Ms Elmiger has misappropriated a significant amount of money from accounts under her direct control and in respect of which she had no authority from her employer.  I am also satisfied that she has assets in New Zealand, most notably in the form of a property in Taupo.

[12]     Evidence from Mr Blakeney-Williams satisfies me that there is a risk of dissipation of her assets.   The property that Ms Elmiger owns at Sunset Street in Taupo is currently on the market with Harcourts’ Real Estate.  It is scheduled to be auctioned on 28 August 2016, unless sold prior to that date.  The property is subject to a mortgage in favour of the Bank of New Zealand.

[13]     The form of order sought by Mr Morris includes a prohibition on any funds in the bank account of Ms Elmiger with the Bank of New Zealand, or any other banking institution, as well as other assets held in her personal name.  There is no knowledge at this stage of the amounts that might be involved or the nature of assets, other than the house property.

[14]     In my view, as long as the present application is relisted before the Court promptly, the three plaintiffs will be protected adequately by an order restraining disposition of the house property pending further order of the Court and a direction that Ms Elmiger file and serve an affidavit setting out all assets and liabilities that she has by the time the proceeding next comes before the Court.

[15]     In my view, that is enough relief to deal with the current concerns.  Whether any further relief should be granted can be dealt with on an on-notice basis.

[16]     For those reasons, I make the following orders:

(a)       Ms Elmiger and her agents are restrained from taking any step to sell or encumber or otherwise dispose of her interest in the house property

situated at 27A Sunset  Street, Taupo  pending further order of the Court.  The property is a cross lease fee simple title as a half share in Lot 20 Deposited Plan South Auckland 2688, being Flat 2 Deposited Plan South Auckland 44551 and having the identifier SA38B/767, South Auckland Registry.

For the avoidance of doubt, I make it clear that Harcourts is bound by that order as an agent of Ms Elmiger.

(b)In addition to Ms Elmiger, the order shall be served on Harcourts and the Bank of New Zealand.

(c)       Ms Elmiger shall file and serve an affidavit setting out her assets and liabilities.  That affidavit shall be filed at 9am on Monday 8 August

2016 and served either before or at the same time.  She must disclose any changes in assets between the time she is served with the order and the time it is sworn.

[17]     The proceeding is listed for review at 9am on 8 August 2016 before me.  At that time, I will hear from counsel for Ms Elmiger as to what further orders should be made or whether there are any grounds to vary or rescind the current order.

[18]     The remaining parts of the without notice application for a freezing order and the application for non-party discovery against the Bank of New Zealand are adjourned for consideration on 8 August 2016 at 9am.  The Bank of New Zealand will be heard at that time, if it wishes to instruct counsel for that purpose.

[19]     I record that an undertaking as to damages has been given by Mr Blakeney- Williams on behalf of each of the three plaintiffs.  I accept the undertaking on the express basis that Mr Blakeney-Williams has authority to bind each of the three plaintiffs to that undertaking on a joint and several basis.

[20]     For the avoidance of doubt, copies of all papers filed in respect of the present application, together with the sealed order of the Court and a copy of these reasons

for judgment, shall be served on Ms Elmiger,  Harcourts and the Bank of New

Zealand.

[21]     All questions of costs are reserved.

P R Heath J