Ennismore Trust v Kensington Finance Limited Partnership

[2020] NZHC 1235

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-812

[2020] NZHC 1235

IN THE MATTER OF

An injunction to stop Kensington Finance Limited Partnership selling property owned by Ennismore Trust.

BETWEEN

ENNISMORE TRUST

Applicant

AND

KENSINGTON FINANCE LIMITED PARTNERSHIP

Respondent

On the papers:	At Auckland
Judgment:	4 June 2020
Reasons:	5 June 2020

REASONS FOR JUDGMENT OF POWELL J

Solicitors/Counsel:      Bharat Parshotam, Auckland

(M Macnab, Barrister 175 Queen Street, Auckland)

ENNISMORE TRUST v KENSINGTON FINANCE LIMITED PARTNERSHIP [2020] NZHC 1235 [5 June 2020]

[1]                 At approximately 12.30 pm on 4 June 2020 I declined an application for interim injunction by the applicant, Ennismore Trust (“Ennismore”). The application was received by the Court at approximately 11.30 am on 4 June 2020 with counsel for Ennismore, Ms Macnab, seeking a response by 12 noon.

[2]                 No memorandum explaining  the  basis  for  the  injunction  was  filed  by  Ms Macnab. Having considered the affidavit of Sanjay Masters (“Mr Masters”), a trustee of Ennismore, filed in support it appears that Ennismore, through its corporate trustee Arrowmasters Limited (“Arrowmasters”), had borrowed money from the respondent, Kensington Finance Limited Partnership (“Kensington”), with the borrowings secured against a number of properties owned by Arrowmasters guaranteed by Mr Masters and Arvind Shivlal Masters. Arrowmasters subsequently defaulted on the loan and this had led to the appointment of a receiver over Arrowmasters by Kensington in February 2020. In the meantime, in January 2020, Arrowmasters had purported to retire as trustee of Ennismore and was replaced by Hasmukhben Arvind Masters and Sanjay Arvind Masters.

[3]                 Notwithstanding the retirement of Arrowmasters, it appears to have remained the registered proprietor of the properties subject to the mortgage and it appears that Kensington is currently taking steps to sell the properties. In order to avert the loss of the properties Mr Masters has sought to refinance, most recently by seeking a loan with an entity or entities in the United States which are said to have loaned the sum of US $6,092,045 which is currently being transferred through a service provided by an entity called Platinum Escrow.

[4]                 Given this position, Ennismore sought an interim injunction to stop Kensington from taking any further steps to sell the properties for seven days, so as to enable the American funds to clear.

[5]                 Declining the application for interim injunction I was not satisfied that Ennismore had an arguable case noting issues with the identity of Ennismore, a lack of information with regard to the sale of various properties that Ennismore sought to prevent, and concluded that it was inherently unlikely that the funding said to have been arranged on behalf of Ennismore could be confirmed.

[6]                 Expanding on those reasons, first it is difficult to see what standing Ennismore has to bring these proceedings given it is not a legal entity. The proper applicants should have been the current trustees of Ennismore (or alternatively the guarantors), and while Mr Masters has given an undertaking as to damages, the absence of the other trustee is of concern.

[7]                 It was likewise not clear from the papers filed by Ennismore exactly how imminent the sale of all, or any of the properties, in fact is. Mr Masters indeed asserted:

The properties are due to be sold by private treaty at 2 pm on 3 June.

[8]                 This was in fact the day before the filing of the proceedings by Ennismore and if weight is to be placed on the assertion it would indicate it is already too late to prevent the sales going through. There was otherwise no indication of urgency from the papers filed, other than that Kensington’s legal counsel had advised Mr Masters that the sale process would continue unless confirmation of receipted funds was received by 12 noon on 4 June 2020.

[9]                 The final and most important reason for my conclusion related to the funds from the United States. Those funds provided the basis for the injunction being granted as unless the receipt of those funds was imminent there was no reason to grant the injunction. As legal  counsel  for  Kensington  noted  in  correspondence  with Ms Macnab, even on the face of the papers provided by Ennismore there were significant issues with regard to the bona fides of the amounts claimed by Mr Masters to have been borrowed, to the extent that I was not persuaded that such funds were in fact imminent. In particular:

(a)It was unclear who  in  fact  was  purportedly  lending  the  money.  Mr Masters simply said that lenders in the United States had passed the money through an escrow company which had forwarded the money to an account in New Zealand. The annexures to Mr Masters affidavit show approval being given by an entity called Reofunds LLC but other annexures appear to show the name of the lender as Denali Partners,

LLC, with no formal documentation providing any detail over the identity or involvement of Platinum Escrow.

(b)The identity of the borrower and its connection with Ennismore is also unclear. The letter of approval from Reofunds LLC appears to be issued to “Masters Arvind Sanjay” but elsewhere it appears that “Masters Arvind Sanjay” has signed on behalf of a company named C&E Limmer Holdings Ltd and the purported notification of the transfer of funds to Hong Kong and Shanghai Bank in New Zealand is to this company, but its relation to Ennismore is unclear.

(c)More broadly, it is beyond inherently unlikely that a bona fide lender in America would transfer in excess of US $6,000,000 to a company in New Zealand in the absence of any visible security or indeed the absence of any recognisable let alone coherent loan documentation simply upon payment of a US $1,500 fee. This apparent anomaly was attempted to be explained by Owen Stokes, a “financier consultant” for Global Pacific NZ Ltd, who provided an affidavit  for  Ennismore.  Mr Stokes tried to suggest that he is “aware that loans are done quite differently in the US as to New Zealand. Lenders get insurance and as such they do not require security”. It is difficult to know where to start with such a statement suffice to say it is difficult to accept at face value. On its own the statement lacks any commercial reality whatsoever and simply begs the question as to why any insurer would agree to provide cover in the absence of any identifiable basis for repayment, and noting that there is otherwise absolutely no documentation regarding the insurance, of the purported loan amount before the Court.

(d)Finally, no explanation was given as to why in excess of US $6,000,000 has been purportedly borrowed given the amounts owing to the respondent are significantly less.

[10]              Given these various issues, I was therefore not satisfied that Ennismore had met the threshold test to warrant the granting of the interim orders sought, and as a result the application for interim injunction was declined.

Powell J