Colville Developments Ltd v Colville

[2021] NZHC 2272

IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE

CIV-2021-418-000010

[2021] NZHC 2272

BETWEEN

COLVILLE DEVELOPMENTS LIMITED

Plaintiff/Applicant

AND

ADAM KEITH COLVILLE

Defendant/Respondent

Hearing:	24 August 2021
Appearances:	M S Henderson and R A Hearn for Plaintiff/Applicant D M Hughes and O J Towle for Defendant/Respondent
Judgment:	31 August 2021

JUDGMENT OF GENDALL J

This judgment was delivered by me on                  at            pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Introduction

[1]    This proceeding involves two brothers, the defendant Adam Keith Colville (Adam) and his brother Matthew Colville (Matthew) along with their company, the plaintiff Colville Developments Limited (CDL).

[2]    The present application, according to Mr Hughes, counsel for Adam, forms part of a broader, ongoing and acrimonious dispute between the brothers. Matthew and Adam, he says, have fallen out over their business, professional and personal dealings and now have a complete lack of trust in each other. There seems little dispute over this.

COLVILLE DEVELOPMENTS LTD v COLVILLE [2021] NZHC 2272 [31 August 2021]

[3]    Matthew and Adam were original directors of CDL. In general terms each brother held and continues to hold a 50 per cent interest as shareholders in the company which was set up in 2018 essentially to invest in commercial and residential properties.

[4]    In establishing CDL, the brothers over time contributed funds to the company, essentially under the guise of shareholders’ advances in a series of payments which totalled $320,025 each. No documentation was drawn up for the purposes of depositing these funds.

[5]    Some years ago, the relationship between the brothers, which also at the time involved ownership and operation of a West Coast G J Gardner building franchise through another company they owned, Housing West Coast Limited (HWC), was a reasonable one. In October 2020, however, they parted ways on the HWC business venture, Adam sold his shares in that company to Matthew and gave up his directorship. As part of this, Adam signed a restraint of trade agreement relating to HWC. Matthew believes Adam has breached this restraint of trade agreement by setting up a competing Stonewood Homes franchise. Adam denies this, however, telling Matthew that he has not set up the franchise.

[6]    In a claim separate to the present proceeding, Matthew has sued Adam alleging breach of that restraint.

[7]    Despite this clear sense of mistrust between the brothers which developed in 2020 they have remained shareholders and co-directors of CDL throughout the first half of 2021.

[8]    According to Mr Hughes, Adam says he wanted to remain involved in CDL during that time but Matthew wanted him out.

[9]    Matthew says Adam has had a string of personal issues in recent years which have coloured events. These have involved first, police charges against Adam and short times in custody in Greymouth and Christchurch over alleged domestic assaults against his partner. Secondly, Matthew says subsequent breaches of bail by Adam

eventuated.   Thirdly, Matthew claims also that Adam has a significant gambling problem.

[10]   All this, according to Matthew, culminated in Adam withdrawing $300,000 from CDL’s bank account on 21 May 2021 without authorisation from Matthew. This amount was transferred to Adam’s bank account and, despite requests from CDL and Matthew, Adam refuses to pay back the $300,000.

[11]   Adam’s position is that he withdrew the $300,000 from his shareholder’s current account on the basis that this amount represented a standard on-demand shareholder’s loan to the company and that he had let CDL’s accountant, Fergal O’Gara (Mr O’Gara), know in advance that he was going to do this. At the time he remained a director. Adam’s shareholding interest, however, was held by himself as to one share and by his family trust (of whom his mother and stepfather were then the trustees) as to 49 shares. This total of these 50 shares represented one half of the total shareholding in CDL. The other one half was and remains held by Matthew personally.

[12]   CDL in this proceeding has sought return of the $300,000 from Adam. Adam does not dispute that he took the $300,000 from CDL but maintains he was entitled to it and was properly able to do so. In reply, CDL says that Matthew and Adam each contributed their $320,025 funds to CDL on the agreed basis that such funding was to be long-term in nature and was not to be withdrawn without the other’s agreement. It follows that Adam has acted in contravention of that agreement, according to CDL. Adam says, however, that there was no such agreement and the $320,025 he contributed was always repayable to him simply upon request and without the consent of any third party.

[13]   In May 2021, this Court granted an interim freezing order over Adam’s personal BNZ bank accounts to the extent of $300,000 to protect these funds. CDL has now sought orders extending that freezing order until determination of its claim for repayment of the $300,000 and also certainly ancillary orders with respect to Adam and BNZ.

The orders sought

[14]   It is useful to set out the particular orders sought by CDL outlined in its further application filed in this Court on 18 June 2021:

1.The applicant, Colville Developments Limited, will…apply to the Court for orders:

(a)Extending the Freezing Order granted by this Court on 24 May 2021 (Freezing Order) until the final disposition of the plaintiff’s claims against the defendant in these proceedings, or such other time as the Court directs.

(b)Ancillary orders as follows:

(i)Directing the Bank of New Zealand (Bank) to disclose to the plaintiff, by its solicitors Corcoran French:

1.The extent of funds currently frozen in the defendant’s BNZ bank accounts as a result of the above Freezing Order, and the bank account numbers and balances of such bank accounts which are wholly or partly frozen.

2.The extent to which, and circumstances in which the BNZ bank has, is or will permit the defendant to access the bank accounts that are the subject of the Freezing Order for the purpose of meeting expenses of the kind contemplated by paragraph 6 of the Freezing Order.

(ii)Directing the respondent to file and serve on the plaintiff by (5 July 2021) an affidavit setting out:

1.All bank accounts controlled by him, including bank accounts in respect of funds beneficially owned by him.

2.If the $300,000 withdrawn by him from the plaintiff’s bank account on 21 May 2021 is now not subject to the Freezing Order, full details of where those funds have gone, including details of any payments or transfers made by him from any BNZ bank account controlled by him on or after 21 May 2021, the dates and amounts of such payments, the names of the recipients of the payments and the bank account(s) into which such payments were made.

(c)Reserving leave to either party to apply to vary these orders on notice.

(d)Costs.

The law

[15]   The legal position applying to freezing orders is relatively well settled. It is outlined part at r 32 of the High Court Rules. The requirements for such an order are referred to in McGechan on Procedure at para HR32.2.03 in the following way:1

HR32.2.03 Requirements for a freezing order

Essentially there are three requirements for a freezing order: a good arguable case on the substantive claim; assets to which the order can apply; and a real risk that the respondent will dissipate or dispose of those assets. In endorsing those requirements in Shaw v Narain [1992] 2 NZLR 544 (CA) at 548, the Court of Appeal stressed the importance of preserving the flexibility of the remedy, and the need to consider the overall justice of the case, balancing the need to protect the applicant so as to ensure any judgment is not rendered barren against any prejudice or hardship to the respondent or a third party.

(1)Good arguable case

(a)A good arguable case is established if the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the application is likely to be brought:…

(b)The applicant does not, however, need to demonstrate that its case is strong enough to entitle it to summary judgment:…In Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH “The Niedersachsen” [1983] 1 WLR 1412 (CA) at 1417, Kerr LJ described the good arguable case as a “minimum...‘threshold’ for the exercise of the jurisdiction”. It is a circumstances dependent threshold. Thus, the applicant’s case must be better than one barely capable of serious argument, but need not have a greater than 50 per cent prospect of success.

(c)A freezing order will not be granted to an applicant who has no cause of action at the time of the application …

(d)Nor will a freezing order be granted on a quia timet basis (that is, where the actions are merely threatened):..

(2)It must be shown that there are assets of the respondent to which the order can apply

…

1      McGechan on Procedure, Thomson Brookers, looseleaf ed.

(3)The applicant must show a real risk of dissipation

(a)The requirement to establish a real risk of dissipation is central to the freezing order jurisdiction. Technically, it abuses the court’s process to seek a freezing order where there is no real risk: Tranquil Holdings Ltd v Hudson (1987) 2 PRNZ 551 (HC) at 552. The fact that a respondent is going to dispose of assets does not invoke the freezing order jurisdiction unless there is a real risk that a judgment in favour of the applicant will be partly or wholly unsatisfied if the freezing order is not made:…

(b)Mere assertion of belief that the respondent might dissipate its assets, unsupported by solid grounds justifying that belief, is insufficient. However, affirmative proof of likelihood of dissipation or of nefarious intent is not necessary:…

(c)The applicant must point to circumstances from which “a prudent, sensible commercial [person] can properly infer a danger of default”, a test which is “not unduly exacting”: Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801…In that case the Court inferred risk from the respondent’s partial only disclosure of its financial circumstances and narrow responses to inquiries about specific instances indicating a risk of dissipation.

…

[16]   The essence of a freezing order is also referred to in McGechan on Procedure at HRPt32.01(1)(c) as follows:2

(c)       Current expanded use

The use of the order is now wider, and those applying for freezing orders do so in order to prevent an actual or prospective judgment debtor dealing with its assets where there is a risk that those assets may be dissipated within or removed from the jurisdiction. The order aims to ensure an applicant who obtains judgment will not be denied recovery. “The heart of the jurisdiction is a real risk that a judgment or award may go unsatisfied”…

The issues

[17]The issues for determination in this case, therefore, are:

(a)does CDL have a good arguable case that the $300,000 withdrawn by Adam needs to be repaid by him;

2      McGechan on Procedure, above n 1.

(b)if so, are there assets owned by Adam to which the freezing order can apply;

(c)if so, is there a real risk that Adam might dissipate his assets;

(d)if so, does the balance of convenience favour the continuation of the freezing order;

(e)if so, should the ancillary orders be made.

[18]Some additional factual material is useful.

Additional facts

[19]   So far as Adam’s withdrawal of the $300,000 from CDL on 21 May 2021 is concerned, it seems to be undisputed that on 17 May 2021, Adam contacted CDL’s accountant, Mr O’Gara, regarding his wish to withdraw money from CDL. Mr O’Gara has provided evidence to this Court by way of affidavit sworn 17 June 2021. Usefully, this affidavit sets out Mr O’Gara’s understanding of the funding of CDL by Adam and Matthew and the events surrounding Adam’s withdrawal of the $300,000 in this way:

Funding by Adam and Matthew

1.Matthew and Adam have each contributed $325,025 to CDL’s operations over time.

…

2.While the amounts contributed by each of Adam and Matthew were recorded as shareholder advances, they were not repayable on demand. Both shareholders contributed equally with the expectation they would take funds out equally. They both viewed CDL as a business to support their long term future.

3.That is also how they treated the advances made to their other companies including Housing West Coast Limited. In that business they always mutually agreed the withdrawal of shareholder funds. This would be discussed with me when finalising the annual accounts.

4.I did not have any express discussions with either Matthew or Adam about the terms of the shareholder funding to CDL, however I understood it was on the same basis as for Housing West Coast Limited. CDL was additionally a passive business which held

commercial property for investment. It did not actually trade, unlike Housing West Coast.

5.In form, the advances to CDL were effectively a shareholder loan, and in substance could be treated like equity in that they were long term funding and requiring the agreement of both of them before the overall individual amounts could be reduced.

6.CDL’s financial accounts record the shareholder advances as a current liability. That is not uncommon within the accounting profession, where the advances are not recorded in any formal term-loan document. The advances were still, however, intended to be long term funding, but technically could be called up by the shareholders at short notice (hence why they are recorded as current liabilities). Any such call up would require the agreement of both Adam and Matthew in the case of CDL. That has not happened to my knowledge.

Adam’s withdrawal of the funds

7.Adam has not been involved in the day to day management of CDL for some time. Sometime in mid May 2021 he called me and said he wanted to withdraw his shareholder funding from CDL. I told him he could not do that without Matthew’s agreement and he would need to speak to Matthew about that. He asked me if I could do that as he and Matthew have not been speaking for some time. I said I would speak to Matthew as requested.

8.On 19 May 2021 he followed up with me and asked if I had looked into his current account yet.

9.I spoke to Matthew on Thursday 20 May 2021 about Adam’s request to withdraw his funding. Matthew said he would not agree to that.

10.Adam however withdrew the $300,000 from CDL’s account on Friday 21 May 2021 before I had responded to him. He texted me on 21 May 2021 at 1:38 p.m. to tell me he had withdrawn the funding.

[20]   So far as Adam’s removal as a director of CDL is concerned, on 14 June 2021 a shareholders’ resolution was passed resolving that Adam would be removed as a director. As I have noted, the total shareholding interest of Adam and his family in CDL was held then and remains now as to 49 per cent by his family trust and as to one per cent by himself personally. The trustees of his family trust, noted at the time as his mother and his stepfather, voted in favour of the shareholder resolution for his removal as a director of the company. Soon after that, presumably as the settlor of the family trust, Adam removed his mother and stepfather as trustees of that trust.

[21]   Finally, Matthew refers to certain other matters which occurred in June and July 2021 which he contends have relevance here. Their strict relevance is not entirely

clear at this point but simply for completeness, I note now the following matters advanced by Matthew which he suggests likely involved Adam:

(a)on 15/16 June 2021, the offices of G J Gardner in Greymouth were attacked overnight;

(b)later in June 2021, a G J Gardner utility vehicle had a rock thrown through its windscreen; and

(c)on 31 July 2021, Matthew says Adam chased him in his vehicle, ramming it at least twice.

[22]   Shortly will I turn to consider the issues for determination in this case which I outline at para [17] above. But first, as a preliminary matter, an evidence admissibility issue was raised at the outset by Mr Hughes. This is represented by a complaint from Adam that reply evidence provided by CDL is not strictly in reply, is not relevant and is prejudicial. In my view, there is little in these objections and this Court is concerned to ensure all relevant evidence is before it. I reject the contention that this reply evidence is objectionable and should be declared inadmissible.

[23] Having addressed that preliminary matter I now return to consider the issues here I note at [17] above.

Does CDL have a good arguable case that the $300,000 must be repaid

[24]   CDL’s pleaded case in this proceeding is that all the funding provided to CDL by Matthew and Adam was intended by all to be long term funding which required the approval of both Matthew and Adam prior to any of it being repaid.

[25]   As I note above, a good arguable case is established if the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the present application is brought.3

3      Dotcom v Twentieth Century Fox Film Corporation [2014] NZCA 509 at [18] and [31]; Hannay v Mount [2011] NZCA 530 at [20] – [22].

[26]   Although clearly this is an early stage in the present substantive proceeding between these parties, according to Matthew, CDL’s case at trial will be that he and Adam had express agreement on two matters:

(a)the shareholder funding they were investing was long term in nature and they did not anticipate having to withdraw it; and

(b)both of them would have to agree to any withdrawals if any withdraw requests were made.

[27]   This is disputed by Adam. He claims none of this is supported by documentary evidence and that the existence of any “express” contract between he and Matthew to this effect is simply lacking. Adam maintains there is no good arguable case for him to return the funds on the present facts before the Court. He contends that any understanding simply on Matthew’s part that such an agreement existed is not of itself enough here.

[28]   At this point, Adam has not filed a statement of defence. Affidavit evidence from Adam filed in the Court simply denies there was any such agreement regarding the CDL funding. He queries the existence of such a “plan”, and refers to the absence of any documentary evidence for these suggested arrangements.

[29]   Although before me Mr Henderson for Matthew indicated that CDL intends to provide more evidence at trial on this point from further witnesses regarding their recollections as to the numerous discussions, actions and agreements between Adam and Matthew, he points now to the evidence of Matthew, Mr O’Gara (noted at para

[19] above) and the brother’s step-father Robert Thorn (Mr Thorn) on this aspect.

[30]   So far as Mr O’Gara’s evidence is concerned, the unequivocal comments in his 17 June 2021 affidavit as to his understanding of the shareholder funding arrangements for CDL is that they simply mirror those which prevailed for the brothers’ other company, HWC, and his advice to Adam that he would need to get Matthew’s consent to his request to withdraw funds, are useful here. The fact that Adam saw the need to contact Mr O’Gara about a possible withdrawal of funds from CDL goes some way to

supporting the argument that he accepted the need for this to occur under the loan basis agreement reached between the brothers.

[31]   And, so far as Mr Thorn’s evidence is concerned, in his reply affidavit to the Court dated 2 August 2021, he deposes:

4.On  many  occasions,  Matthew, Adam  and I  had verbal  discussion about CDL’s business and Matthew and Adam’s intentions with and for it. I have previous experience in commercial property investment, so they ran operational ideas past me, and sought my input and thoughts on ideas they had for CDL’s property investment. In all my discussions with them, it was clear and agreed between them that CDL was to be a long term retirement savings vehicle. The discussions included it being self-funding, without requiring further significant monetary injections from them.

…

8.It was obvious from the way that Matthew and Adam talked that they intended their shareholder financial contributions to CDL to be kept in CDL, and they both would need to agree jointly about any change to that. There was no discussion, that I am aware of, about either of them withdrawing money that they had advanced or otherwise (such as remuneration) from CDL in the short term. They both viewed CDL as being a self funding passive investment vehicle.

9.Adam has also suggested at paragraph 24 that he was forced out of CDL by Matthew, and that Matthew’s evidence about Adam’s recent personal issues is wrong, neither of these statements by Adam is correct.

[32]   The only evidence Adam has placed before the Court denying there was any shareholder’s agreement that funds could only be taken out equally or with the consent of all parties represented the statements in his affidavit to this effect. And on this, Adam expressed his motive and reason for the withdrawal at [31] of 12 July 2021 affidavit as:

…I felt that removing the $300,000 was the only way I could start the ball rolling in terms of breaking up CDL, so that my brother and I can move on with our professional lives.

He provided no supporting independent evidence from any third party to substantiate his position in any way.

[33]   Notwithstanding this, Mr Hughes for Adam endeavoured to argument too that the Court of Appeal decision in United Homes (1988) Ltd v Workman 4is on all fours with the present case and entirely assists Adam’s position here. I disagree. The decision in that case was quite different as I see it. The United Homes case was a statutory demand case and although it did involve a withdrawal of shareholders’ loans, there was no independent evidence provided of the loan arrangement such as the evidence before me of Mr O’Gara and Mr Thorn as to the particular arrangement.

[34]   Both Mr O’Gara and Mr Thorn, as independent witnesses here, provided what I see as clear evidence in support of CDL’s position on this aspect. That is clearly different to the situation which prevailed in the United Homes case and, in particular, limited of shareholders’ arrangements which was available in that case.

[35]   Resolving conflicts in evidence is always difficult at an early interlocutory stage of any proceedings but, in my view, there is sufficient evidence from CDL before me, including scarcely contradicted evidence from Mr O’Gara and Mr Thorn, to show a good arguable case for return of the $300,000 taken by Adam from the company. In my view, there was a fairly arguable basis consistent with commercial common sense to support an agreement between Matthew and Adam from the outset not to withdraw shareholders’ loan funds without the consent of the other.

[36]   I find that this first issue for determination as to whether CDL has a good arguable case that the $300,000 withdrawn by Adam needs to be repaid by him has been met by CDL here.

Are there assets owned by Adam to which the freezing order can apply?

[37]   There is no serious argument here regarding this particular issue. CDL has provided evidence of Adam’s BNZ bank account. This part of the test is clearly met.

4      United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA).

Is there a real risk that Adam might dissipate his assets?

[38]   This Court may make a freezing order or an ancillary order against Adam as a prospective judgment debtor in terms of r 32.5(4) of the High Court Rules if it is satisfied:

…having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because—

…

(b)the assets of the judgment debtor, prospective judgment debtor, or another person might be—

…

(ii)disposed of, dealt with, or diminished in value (whether the assets are in or outside New Zealand).

[39]   From the authorities it is clear that affirmative proof of nefarious intent is not necessary.5 It is clear that proof of such intent will rarely be available in most cases. What is needed, however, is that the applicant must point to circumstances from which “a prudent sensible commercial (person) can properly infer a danger of default”. This too has been seen as a test which is “not unduly exacting”.6

[40]   What is also clear from the authorities is that the Court may in appropriate circumstances take an adverse view of a defendant who does not advise his true financial position when confronted with a freezing order application.7 On this aspect, the text Equity & Trusts in New Zealand notes that:8

English courts have also been prepared to draw inferences against the defendant from the defendant’s failure to rebut, or to rebut adequately, inferences as to dissipation as raised by the plaintiff in his affidavit evidence.

[41]   In the present case, there is nothing before me to indicate what assets Adam holds. Adam has failed to provide any evidence of his financial position.

5      Bank of New Zealand v Hawkins [1989] 1 PRNZ 451.

6      Raukuara Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801.

7      Bank of New Zealand v Hawkins, above n 5 at 453.

8      “Mareva Injunctions” in Andrew Butler (Ed) Equity & Trusts in New Zealand, 2nd ed, Thomson Reuters, Wellington, 2009 at 814.

[42]   CDL too, according to Mr Henderson, maintains its concern that any judgment against Adam will not be met if the freezing order is lifted because of the massive fallout which has occurred between these brothers and also because of what are said to be personal issues and irrational behaviour recently exhibited by Adam outlined as follows:

(a)Recurring problems it is said Adam has had with the police involving, at its most serious, arrest and charges against a domestic partner of strangulation and drug (cannabis) possession also involving two breaches of bail by Adam on a number of occasions resulting in his re- arrest.

(b)Recently, on 31 July 2021, Matthew says Adam rammed his car.

(c)Adam, it is claimed, has a serious gambling problem to the extent, Matthew says, he drew down on HWC company funds to meet gambling commitments which then had to be coded as drawings as he was unable to repay the amounts concerned to HWC.

(d)Alleged mental health problems.

(e)Serious concerns about Adam expressed by his own mother and stepfather sufficient that as shareholders at the time in CDL they had him removed as a director of that company.

[43]   By way of similar concern, G J Gardner in the recent past has required Adam to step down as a director of HWC.

[44]   Circumstances relating to Adam’s withdrawal of $300,000 it is said infer an apparent urgent need for cash on his part. In the evidence of Mr O’Gara, which Adam accepts, he was told by Mr O’Gara he would need to speak to Matthew for his consent before  he  could  withdraw  his  loan  funds  from  CDL.    But, Adam  then  took the

$300,000 from CDL unilaterally before Mr O’Gara got back to him. A further concern

regarding this it is said is the fact that only eight months earlier Adam had received from Matthew over $750,000 on the sale of his shareholding in HWC.

[45]   According to CDL, all of this points to someone who has “gone off the rails” and who is liable to spend, dissipate or gamble away assets and in particular the

$300,000 which sum represents liquid cash funds easily spent.

[46]   Finally, CDL raises a concern that with Adam’s recent alleged involvement in another building company the funds in question may be used to further those business interests, interests which are said to be in breach of his restraint of trade undertaking.

[47]   I repeat that this is a relatively early stage of this proceeding between CDL and Adam. Notwithstanding this, there is enough by way of evidence before me, and the circumstances I outline above are such, that a prudent, sensible, commercial person can infer a danger of default.9 I am satisfied CDL has met the onus upon it to show that there is a real risk here that Adam might dissipate his assets such that this part of the test is also met.

Does the balance of convenience favour the continuation of the freezing order?

[48]   This is the last step in determining whether the present interim freezing order should be extended. This involves the usual weighing of respective prejudices against the risk that a judgment obtained against Adam may be rendered futile.

[49]   In his affidavit evidence before the Court, Adam has not advanced any compelling reason to show that the freezing order is causing him any hardship or that its continuation might do so. As I have outlined above, notably he has not put before the Court any evidence as to his own financial position nor satisfied the Court that he would be able to meet any judgment obtained against him.

[50]   I am satisfied too that the terms of the freezing order would properly allow for Adam’s BNZ bank account funds to be accessed, if necessary, for the purpose of meeting ordinary living expenses including legal costs if such expenses and costs

9      Gold Star Invest Ltd v V [2019] NZHC 3504.

cannot be met from unfrozen funds. The freezing order is limited in monetary amount to this $300,000.

[51]   There is no suggestion from Adam also that he is insolvent, so this is not a case where the freezing order is being used to improve CDL’s standing amongst Adam’s other creditors or for general security purposes. I am satisfied it is simply an attempt to ensure the protection of the $300,000 that CDL maintains was wrongly taken from its bank account.

[52]   Finally, CDL has provided an undertaking as to damages if it was called on to meet an adverse damages award here. This is something Adam is able to rely upon.

[53]   In conclusion, I find the balance of convenience in this case does favour the continuation of the freezing order.

Ancillary orders

[54]Rule 32.3 of the High Court Rules in part:

32.3Ancillary order

(1)The court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order if the court considers it just.

(2)Without limiting the generality of subclause (1), an ancillary order may be made for any of the following purposes:

(a)eliciting information relating to assets relevant to the freezing order or prospective freezing order:

(b)determining whether the freezing order should be made:

(c)appointing a receiver of the assets that are the subject of the freezing order.

…

[55]This power under r 32.3 is a broad one.

[56]   In this case the ancillary orders sought are against both Adam and his bank, BNZ as follows:

(a)As against BNZ, CDL seeks orders requiring the BNZ to disclose material relating to those matters outlined at para [14]1(b)(i) noted above.

(b)As against Adam, CDL seeks orders directing him to disclose by affidavit those matters outlined above at para [14]1(b)(ii).

[57]   On these matters CDL maintains the ancillary orders sought against the BNZ are necessary as the Bank has clearly advised in response to requests otherwise that it would not provide details of the amounts currently frozen in Adam’s account(s) but it has confirmed it would comply with any ancillary order made by the Court to that effect.

[58]   In essence here, CDL wants to know whether the $300,000 is currently frozen by the BNZ and, if not, where the money may have gone to. The purpose of this is to ensure the effectiveness of the freezing order and so it can be properly policed. If the funds in question are frozen in his BNZ account, then CDL contends Adam has not deposed as to any particular prejudice arising from disclosure of that. If the funds are not so frozen, then a further freezing order to trace and locate the funds may be necessary and appropriate. Either way, the ancillary orders sought both against the BNZ and against Adam, I am satisfied, assist the freezing order itself, improve the clarity on its effectiveness and, therefore, assist issues which arise between these parties.

[59]   Overall, I find too that the ancillary orders sought are common and relatively orthodox in nature and clear grounds exist here for the making of these orders.

[60]The ancillary orders sought will follow:

Result

[61]   For all the reasons I have outlined above, the application by CDL before me succeeds.

[62]Orders are now made as follows:

(a)Extending the freezing order granted by this Court on 24 May 2021 (the freezing order) until the final disposition of CDL’s claims against Adam in these proceedings.

(b)Ancillary orders are made as follows:

(i)Directing the Bank of New Zealand (bank) to disclose to the plaintiff CDL, by its solicitors Corcoran French:

1.       The extent of funds currently frozen in the defendant Adam’s BNZ bank accounts as a result of the above freezing order, and the bank account numbers and balances of such bank accounts which are wholly or partly frozen.

2.       The extent to which, and circumstances in which the BNZ bank has, is, or will permit the defendant Adam to access the bank accounts that are the subject of the freezing order for the purpose of meeting expenses of the kind contemplated by paragraph 6 of the freezing order.

(ii)Directing the defendant Adam to file and serve on the plaintiff CDL by 7 September 2021 an affidavit setting out:

1.       All bank accounts controlled by him including bank accounts in respect of funds beneficially owned by him.

2.       If the $300,000 withdrawn by him from the plaintiff Adam’s bank account on 21 May 2021 is now not subject to the freezing order, full details of where those funds have gone, including details of any payments or transfers made by him from any BNZ or other bank account controlled by him on or after 21 May 2021, the dates and amounts of such payments, names of the recipients of the payments and the

bank account number(s) into which such payments were made.

(c)Reserving leave to either party to apply to vary these orders on notice.

Costs

[63]   CDL has succeeded entirely in its application here against Adam and is entitled to an award of costs. No submissions were advanced before me on this issue of costs, nor on the earlier costs issues related to CDL’s withdrawn summary judgment application in this general proceeding reserved on 10 August 2021.

[64]   Counsel are urged to liaise with a view to resolving the issue of costs and quantum between them but in the absence of agreement being reached, counsel may file (sequentially) submissions on costs (five pages maximum) which are to be referred to me and I will decide the issue of costs and quantum based upon the memoranda filed and all other material before the Court.

...................................................

Gendall J

Solicitors:

Corcoran French, Christchurch Anthony Harper, Auckland