FCT Trustee Limited v Meredith
[2023] NZHC 3318
•22 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-002357
[2023] NZHC 3318
UNDER the Property (Relationship) Act 1976,
the Land Transfer Act 2017, the High Court Rules and the Trusts Act 2019
BETWEEN
FCT TRUSTEE LIMITED as trustee of the FLYING CROSS TRUST
First Applicant
GLENN MICHAEL SOROKA
Second Applicant
AND
LOUISE CLARE MEREDITH
First Respondent
GLENN MICHAEL SOROKA AND
PETER RAYMOND KERR as trustees of PAKAU 1 TRUST
Second Respondents
Hearing: 15 November 2023 Appearances:
Second Applicant in person
A P Wooding for First Respondent
E C Gellert for Liquidators of Flying Cross Trust Ltd (in liq) R J Reeves for Secure Funding Ltd
Judgment:
22 November 2023
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 22 November 2023 at 12 pm Pursuant to Rule 11.5 High Court Rules
Counsel/Solicitors: McVeagh Fleming, Auckland Lowndes Jordan, Auckland Copy to: G N Soroka
Registrar/Deputy Registrar
……………………………..
FCT TRUSTEE LTD v MEREDITH [2023] NZHC 3318 [22 November 2023]
Table of Contents
Relevant background [6]
The Settlement Agreement [10]
The Tomlin Order [12]
The Freezing Order [15]
Property Law Act notices and liquidation of FCT Ltd [20]
Applications by Mr Soroka to vary the Consent Orders [25]
The Dismissal Judgment [30]
Appointment of new trustee of FCT [39]
The current application [41]
Evidence [45]
Mr Soroka’s principal affidavit [48]
Ms Meredith’s affidavit in opposition [52]
Mr Soroka’s affidavit in reply [56]
Mr McLennan’s affidavit [60]
Submissions [65]
Submissions from Mr Soroka [65]
Submissions of counsel for Ms Meredith [68]
Submissions of counsel for the Liquidators [74]
Submissions of counsel for Secure Funding [78]
Submissions of Mr Soroka in reply [80]
Discussion [83]
Should the Court allow Mr Soroka to represent FCTTee Ltd? [86]
Does the Court have the power to make the orders sought? [95]
Other issues [118]
Result and orders [120]
Costs [122]
[1] FCT Trustee Ltd (FCTTee Ltd), as trustee of the Flying Cross Trust (FCT), and Glenn Soroka seek orders varying and replacing the terms of a Tomlin Order and a Freezing Order made by consent (the Consent Orders) in proceedings over a property at 58 Old Barn Road, Papakura (the Property). The Property had been the family home of Glenn Soroka, the settlor of the FCT, his former partner, Louise Meredith, and their son. The registered proprietor of the Property is the Flying Cross Trust Ltd (in liquidation) (FCT Ltd) by virtue of it having previously been the trustee of the FCT.
[2] The orders sought include varying and replacing the Consent Orders, including the Settlement Agreement attached to the Tomlin Order, to permit, among other things:
(a)FCTTee Ltd to be registered as the legal owner of the Property;
(b)FCTTee Ltd to borrow up to $1,250,000 (plus capitalised interest and fees) to prevent a mortgagee sale of the Property (by repayment in full of all monies owed to Secure Funding Ltd, in respect of whose loan FCT Ltd was in default) and to cover the costs to complete work on the Property to prepare it for sale, and cover the living costs of Mr Soroka and his son under shared care arrangements approved by the Family Court;
(c)the inclusion of the Pakau 1 Trust (Pakau 1) as a recipient of the proceeds of sale of the Property;
(d)the repayment of a loan of $1,957,000 to Pakau 1 from the proceeds of the sale of the Property to the extent the proceeds exceed $2,200,000.
[3] The application also seeks an order directing the Registrar-General of Land to register FCTTee Ltd as proprietor on the certificate of title to the Property.
[4] The application is opposed by Ms Meredith, the liquidators of FCT Ltd and Secure Funding, all of whom were represented at the hearing on 15 November 2023.
[5] This is the second application this year to vary the terms of the Consent Orders along similar lines. The first application was dismissed by Venning J in a judgment
issued on 7 September 2023.1 Venning J also dismissed an application for the Dismissal Judgment to be recalled.2
Relevant background
[6] Mr Soroka and Ms Meredith were in a de facto relationship from 2008 until their separation in September 2018. The breakdown in their relationship has been acrimonious and has given rise to a number of court proceedings. There have been many applications before the Family Court; some of which have been appealed to this Court. Their relationship property proceeding, which Ms Meredith commenced in the Family Court in December 2020 but in which Mr Soroka did not participate until earlier this year, has yet to have a substantive hearing. It has been transferred to this Court and is awaiting a case management hearing.
[7] There have also been separate proceedings brought in this Court, including in relation to the Property, against which Mr Soroka has looked to secure finance for property transactions in which he has wished to be involved through various trusts he has established.3
[8] In 2021, Mr Soroka wished to use the Property to secure a loan to fund the acquisition of a commercial property in Italy (the Palazzo Purchase). Factors complicating the use of the Property for that purpose included the registration by Ms Meredith of a notice of claim against the title to the Property in the context of the unresolved relationship property dispute and the fact that the house on the Property did not have a Code Compliance Certificate (CCC) under the Building Act 2004 and could not obtain a CCC until certain further building work had been completed.
[9] In July 2021, Mr Soroka and FCT Ltd, purportedly as trustees for FCT, applied to this Court for the removal of Ms Meredith’s notice of claim to enable the registration of a first ranking security against the title to the Property to secure a loan to fund the settlement of the Palazzo Purchase. The application did not proceed to a formal
1 Soroka v Meredith [2023] NZHC 2510 [Dismissal Judgment].
2 Soroka v Meredith [2023] NZHC 2891.
3 In Soroka v Meredith [2019] NZHC 2723, [2019] NZFLR 508, Associate Judge Andrew directed that the notice of claim registered against the title to the Property not lapse and upheld the validity of other notices of claims registered against the titles of properties registered in Mr Soroka’s name.
hearing because the parties were able to agree on a process for practical resolution of various issues in dispute between them. That agreement was reflected in a Settlement Agreement, which was concluded on 1 August 2021, and the Consent Orders, which were made by Powell J on 3 August 2021.
The Settlement Agreement
[10] The Settlement Agreement was between Mr Soroka in his personal capacity, Ms Meredith, Mr Soroka and FCT Ltd, purportedly as trustees of the FCT, and Mr Soroka and Peter Kerr, as trustees of the Pakau Trust and the Pakau 1 Trust.
[11]Under the Settlement Agreement, it was agreed, among other things, that:
(a)Ms Meredith would withdraw her notice of claim against the Property (cl 3.1(a)).
(b)FCT would discontinue its High Court proceeding seeking the removal of the notice (cl 3.1(b)).
(c)FCT consented to the registration of a freezing order to prevent the sale of the Property and the registration of any security against the title except in accordance with the Settlement Agreement, the Freezing Order or subsequent written agreement (cl 3.2).
(d)FCT would obtain a loan of $850,000 from Capital Securities Ltd (CSL) to be secured by mortgage registered against the title to the Property (cl 3.3).
(e)FCT would advance and fund the procurement of the CCC and use its urgent best endeavours to achieve that by 1 November 2021 (cl 3.5).
(f)FCT covenanted not to obtain or seek to obtain “any further borrowing whatsoever” (cl 3.4).
(g)Subject to cl 3.8, Mr Soroka, FCT and the Pakau Trusts guaranteed that the Property would realise a minimum sale value of $2,200,000 (cl 3.7).
(h)Ms Meredith must not prevent the FCT, its trustees or agents from conducting the work required “to get the Property to CCC state” to enable its sale (cl 3.8).
(i)The work to achieve the CCC was expected to cost approximately
$70,000 which would be funded from the CSL loan and applied to the works required to obtain the CCC and prepare the Property for sale (cl 3.9(a)).
(j)Quotes for the work would be subject to approval by Ms Meredith, who would not unreasonably withhold her consent for works to obtain the CCC and who would be provided with copies of all invoices (cl 3.9(b),
(c) and (d)).
(k)Subject to CSL consent and within five days of the loan drawdown, FCT would pay $100,000 to Ms Meredith as an interim distribution of funds claimed as owing to her in the Family Court proceedings. If FCT or Mr Soroka were unable to finance the payment in whole or in part, they and the Pakau Trusts would cover the shortfall within 30 days of the CSL loan drawdown (cl 3.10).
(l)Within five days of the CSL loan drawdown, FCT would pay Ms Meredith $30,000 in respect of fees incurred in relation to the dispute over the registration of Ms Meredith’s notice of claim (cl 3.11).4
(m)On sale of the Property and upon payment of real estate commission and conveyancing and other legal costs and satisfaction of any remaining indebtedness to CSL (cl 3.13):
(i)$500,000 would be paid to Mr Soroka;
4 There were further contingencies if the funding was still not provided.
(ii)$210,000 would be paid to Ms Meredith; and
(iii)Any balance was to be held on trust for the joint benefit of Ms Meredith and FCT and distributed in accordance with any decision on or settlement of their relationship property dispute.
(n)There was to be no change to the trustees of the Trusts party to the Settlement Agreement except for ill-health or other “legitimate reason” (cl 3.17).
The Tomlin Order
[12]The orders made by Powell J in the Tomlin Order were:5
1All further proceedings in this claim be stayed except for the purpose of carrying the terms of the agreement into effect (appended to this order as schedule 1).
2For the purpose of the first order, the parties have permission to apply without the need to issue fresh proceedings on one working day’s notice.
…
[13]The Settlement Agreement was appended as a schedule to the Tomlin Order.
[14] In a minute made when making the Tomlin Order, Powell J noted the difficult litigation history preceding the Order and recorded that:6
[2] In the event rather than becoming a further battle ground between the parties, [counsel for the parties], have together with the parties used this as an opportunity to not only enable Mr Soroka to use the property for the purposes sought but to come up with a blueprint for ultimately resolving all of the issues between the parties. To this end counsel have prepared a draft Tomlin order enclosing an agreement between the parties and have filed a comprehensive memorandum in support.
5 Although dated 2 August 2021, the Order was made and sealed on 3 August 2021.
6 Soroka v Meredith HC Auckland CIV-2021-404-1316, 3 August 2021 (Minute of Powell J).
The Freezing Order
[15]The Freezing Order provided that:
(a)Ms Meredith’s notice of claim against the Property “shall be removed”; and
(b)subject to the rights of CSL or any person permitted to register a mortgage against the title to the Property and further order of the Court, “this order restrains Flying Cross Trust Limited from transferring or further encumbering the Property”.
[16] In the event, CSL withdrew its loan offer. The Freezing Order was amended by consent to replace the reference to CSL with language that included any other lender agreed to by the parties.
[17] In September 2021, Secure Funding entered into a mortgage loan agreement with FCT Ltd for a loan of up to $896,000. The loan term was for six months with five, six monthly roll-overs. The loan agreement provided that interest would be charged at an annual rate of 22.55 per cent for any period after the loan fell due until repayment. It also provided that interest at a further six per cent would be charged in the event of default.
[18] Mr Soroka and Mr Kerr guaranteed the loan. Mr Soroka signed a declaration that he understood the financial risk to him if he signed the guarantee documents.
[19] A mortgage securing the loan was registered against the title to the Property in accordance with the Settlement Agreement and the Freezing Order.
Property Law Act notices and liquidation of FCT Ltd
[20] On 3 June 2022, solicitors acting for Secure Funding issued FCT Ltd a notice under s 119 of the Property Law Act 2007 (PLA) for default under the loan agreement with Secure Finance in the amount of $18,713.65 (First PLA Notice).
[21] FCT Ltd was put into liquidation on 15 July 2022 following non-payment of legal fees of $5,529.54 relating to advice provided to Mr Soroka in connection with the negotiation of the Settlement Agreement and the Consent Orders.
[22] On 15 November 2022,7 solicitors acting for Secure Funding issued FCT Ltd a further notice under s 119 of the PLA for default under the loan agreement with Secure Finance in the amount of $980,725.20 (Second PLA Notice).
[23] By letter dated 9 June 2023, solicitors acting for Secure Funding made demand of Mr Soroka for the payment by 23 June 2023 of $1,053,893.58, the amount then owing under the Loan Agreement.
[24] By notice dated 8 August 2023, Secure Funding gave notice to FCT Ltd (in liquidation) in accordance with s 122 of the PLA that it intended to exercise its power as mortgagee to sell the Property.
Applications by Mr Soroka to vary the Consent Orders
[25] On 17 August 2023, Mr Soroka, on behalf of the FCT, filed a memorandum seeking a variation of the Consent Orders to enable the urgent re-financing of the loan for the Property.
[26] Following guidance by a Duty Judge that a formal application is usually required to vary Court orders, on 28 August 2023, Mr Soroka, as settlor of the FCT, filed two interlocutory applications.
[27]The first application sought a variation to the Tomlin Order as follows:
a)A variation to the Tomlin order pursuant to clause 3.17 that a new corporate be appointed – due to [FCT Ltd] being in liquidation, and it not having a trustee due to clause 25.1 of the FCT deed;
b)That a variation to the Tomlin Order is sought to enable the refinancing of the refinancing of [sic] the property to avert an imminent mortgagee sale and;
7 The notice was dated 14 November 2022 but in a handwritten annotation was noted as being received on 15 November 2022.
c)That the order is varied to enable the additional borrowing of
$120,000 to best prepare the property for sale, as is consented to by memorandum, save for the priority amount guaranteed by the minimum price guarantee.
[28] The second application sought declarations under the Declaratory Judgments Act 1908 as follows:
a)A declaration that the appointment of a liquidator is a change of management of the corporate trustee as contemplated by clause 25.1 of the [FCT] Deed;
b)A declaration that there is no law or rule that nullifies or invalidates the effect or power of clause 25.1 of the [FCT] Deed, and;
c)A declaration that the removal of a trustee prevents that trustee from relying on any powers or discretions of the trustee, and;
d)A declaration that the effect of the cessation of trusteeship prevents the liquidator standing in the trustees shoes and therefore relying on the trustee indemnity to claim any costs “qua trustee”, and;
e)That the liquidator of the of liquidated trustee [sic] must sign the transfer of property to the new trustee or that the settlor can rely on the power of attorney as found in clause 24.11 [of the FCT Deed] to give effect to the transfer.
[29]Ms Meredith and the liquidators of FCT Ltd opposed the applications.
The Dismissal Judgment
[30] Venning J heard the applications on 6 September 2023 and issued his judgment the following day.
[31] Venning J held that there were two principal difficulties in relation to the application to vary the terms of the Consent Orders. First, Mr Soroka was not and never had been a trustee of the FCT so was not a party to the proceeding in which the Orders were made. He was not, therefore, a party to the Orders, despite being named as a trustee of the FCT in the intituling of the application and other papers filed in the proceeding. Accordingly, there was no basis for him to apply in his personal capacity to vary the Orders.8
8 Dismissal Judgment, above n 1, at [26]–[27].
[32] Secondly and more fundamentally, the leave reserved in paragraph 2 of the Tomlin Order was expressly stated to be for the purposes of the Order in paragraph 1. The purpose of the Order in paragraph 1 was stated to be for the purpose of carrying the terms of the Settlement Agreement into effect. The variations Mr Soroka sought were of a completely different nature from the arrangements set out in the Settlement Agreement and went well beyond implementation of the Agreement. Venning J accepted the submission of Ms Wooding, counsel for Ms Meredith, that there was no jurisdiction for the Court to amend the parties’ agreement to that extent, at least on the basis of the reservation of leave.9
[33] As to the second application, Venning J set out cl 25.1 of the Trust Deed for the FCT which, Mr Soroka contended, meant that FCT Ltd ceased to be a trustee of the FCT upon the appointment of the liquidators. Venning J noted that the liquidators of FCT Ltd were prepared to accept that cl 25.1 might apply to remove FCT Ltd as a trustee and that Ms Meredith was prepared to abide the Court’s decision on that issue.10
[34] However, Venning J said there remained a number of practical issues. The Judge noted that ss 3 and 6 of the Declaratory Judgments Act confirmed that applications for declarations were to be brought by originating processes and not interlocutory applications. The Judge did not accept Mr Soroka’s suggestion that cl 3.17 of the Settlement Agreement applied and enabled the appointment of a new trustee and apprehended that the purpose behind the clause was to ensure that there would not be a change in trustee that would subvert the ability of the FCT to implement that Settlement Agreement. The Judge did not accept that, of itself, the clause supported the appointment of a completely new trustee.11
[35] Venning J accepted that, in the absence of a trustee, it might well be that Mr Soroka had power as settlor to appoint a trustee to the FCT. However, any such appointment, which had not yet occurred, did not address the downstream consequences of the change in trustee or the situation of FCT Ltd as registered owner of the Property. Until a new trustee was appointed, FCT Ltd remained the registered
9 At [29]–[32].
10 At [34]–[36].
11 At [38]–[40].
owner of the Property. The Judge also accepted that, even as a former trustee, FCT Ltd would have a right of indemnity against its costs and claims out of Trust property and noted that any new trustee would take the property subject to the rights of FCT Ltd’s liquidators, including rights of indemnity and subrogation.12
[36]Venning J then stated:
[44] For those reasons, even if Mr Soroka has the ability as settlor under the Trust Deed to appoint a new trustee that does not address the issue of FCTL’s position as bare trustee nor its rights of indemnity and subrogation in relation to its costs and creditors. That reinforces why any such applications need to be pursued in a proper form. Mr Soroka would need to issue a separate proceeding under Part 18 of the High Court Rules if he wishes to pursue the declarations sought or, alternatively, the liquidators could issue their own application for directions as liquidators. As noted, there is a further complicating issue involving the dispute about the Pakau debt.
[45] As indicated to Mr Soroka during the course of the hearing the Court is constrained in the orders it can make by the form of the applications before it and its jurisdiction. It is open for the parties to resolve issues on a practical basis and if necessary seek further orders by consent of the Court to implement such agreements but on the material before it the Court is not able to make the declarations that Mr Soroka seeks on the basis of the interlocutory applications and material currently before it.
[37]Venning J also stated:
[46] While the Court is not prepared to make a formal declaration I record that the liquidators accept (and Ms Meredith does not suggest otherwise) that the liquidation of FCTL means it is no longer a trustee of the FCT.
[38]Accordingly, Venning J dismissed both of Mr Soroka’s applications.
Appointment of new trustee of FCT
[39] By Deed dated 7 September 2023, Mr Soroka, acting as settlor of the FCT and as FCT Ltd (in liquidation) and as FCTTee Ltd, removed FCT Ltd as trustee of the FCT and appointed FCTTee Ltd as the new trustee of the FCT.
[40] In the Deed, Mr Soroka as settlor and the new trustee declared that all real and personal property then subject to the trusts in the FCT trust deed would, to the extent provided in s 116 of the Trusts Act 2019, vest in the new trustee.
12 At [41]–[44].
The current application
[41] By originating application dated 3 October 2023, but filed on 12 October 2023, FCTTee and Mr Soroka applied, initially without notice but on a Pickwick basis, to vary and replace the Consent Orders as described at [2] above. By minute dated 13 October 2023, Anderson J directed that the application should be placed in the Duty Judge List on 18 October 2023.13
[42] At the Duty Judge List on 18 October 2023, and as recorded in a minute of that date, Muir J declined an oral application by counsel for Ms Meredith for the application to be dismissed summarily on the grounds that it was outside the terms upon which leave to apply had been granted in the Tomlin Order.14 However, Muir J recorded that he had indicated to Mr Soroka that he faced considerable difficulties in endeavouring to vary, set aside or discharge a consent order.15
[43] Muir J directed that the application was to proceed on notice and that the liquidators were to be served and identified as an interested party with rights of audience. Muir J set the application down for a half day hearing on 15 November 2023 and made timetable directions for the filing of notices of opposition, evidence and submissions.16 Muir J also counselled Mr Soroka that he should pursue a refined, concentrated and minimalist argument addressing what was realistically possible in the context of the existing consent orders and that this was not an opportunity for Mr Soroka to indulge a wish list.17
[44] In the event, Mr Soroka served the application on the liquidators on 10 November 2023, three weeks after Muir J’s directions and less than a week before the hearing.
13 FCT Trustee Ltd v Meredith HC Auckland CIV-2023-404-2357, 13 October 2023 (Minute of Anderson J).
14 FCT Trustee Ltd v Meredith HC Auckland CIV-2023-404-2357, 18 October 2023 (Minute of Muir J) at [9].
15 At [8].
16 At [11].
17 At [12].
Evidence
[45] The application was supported by an affidavit of over 35 pages sworn by Mr Soroka, with 424 pages of exhibits. In reply to an affidavit from Ms Meredith, Mr Soroka filed a further affidavit of 22 pages with 105 pages of exhibits. Although the reply affidavit was filed out of time, I granted leave for the late filing on the basis that Ms Meredith could have a similar extension for the filing of her counsel’s submissions.
[46] Two days before the hearing, Mr Soroka filed a further affidavit with further exhibits, which Mr Soroka said completed an exhibit to his first affidavit and provided other relevant evidence. In total, the further exhibits comprised over 2000 pages. Leave was not granted to the filing of this further evidence. It is apparent that much of the material in the affidavits is historic; some of it dating back to 2014 and 2015. To the extent the material may be relevant, Mr Soroka had ample opportunity to provide it with his application or in accordance with the timetable directions made by Muir J.
[47] Ms Meredith filed an affidavit of 15 pages with 35 pages of exhibits in opposition to the application. Mr Iain McLennan, one of the liquidators appointed for FCT Ltd also filed an affidavit in opposition to the application.
Mr Soroka’s principal affidavit
[48] For reasons that will be apparent below, much of the material in Mr Soroka’s affidavits is not directly relevant to the decisions I make on the application. However, given the terms in which Mr Soroka advanced the case for the applicants – namely, that his livelihood would be at an end if the applications were not granted – I summarise the gist of Mr Soroka’s evidence as it bears on the Consent Orders and the Settlement Agreement that Mr Soroka seeks to vary and replace.18
18 I do not summarise the material in the affidavit concerning the dispute between Mr Soroka and Ms Meredith over the care of their child which I consider to be irrelevant and inappropriate.
[49]The essence of Mr Soroka’s principal affidavit is that:
(a)he is financially destitute;
(b)a mortgagee sale of the Property is imminent;
(c)Ms Meredith has refused to consent to a loan from another lender unless she is paid $310,000;
(d)the Settlement Agreement and the Consent Orders were negotiated under extreme stress caused by intentional delays and duress;
(e)that duress arose from Ms Meredith’s Notice of Claim and, more generally Ms Meredith’s unwillingness to expedite matters when Mr Soroka was being pressed to complete the Palazzo Purchase; and
(f)works to enable obtaining a CCC and to prepare the Property for sale were delayed by Ms Meredith’s delay in agreeing to the Settlement Agreement and by a High Court decision concerning a development involving the Pakau Trust and by the difficulty of finding suitable builders.
[50]The affidavit also asserts that:
(a)Ms Meredith had previously been willing for the Property to be sold for
$2,200,000 (in 2019);
(b)the Settlement Agreement was in error in not providing for repayment of a loan from the Pakau Trust, which had advanced $1,957,000 to enable the purchase;
(c)Ms Meredith had a previous history of not releasing funds in order to cause Mr Soroka financial harm; and
(d)Ms Meredith had further delayed work to enable obtaining a CCC and to prepare the Property for sale by refusing to agree to labour only contracts for the work and by refusing to approve payments of invoices for the work.
[51] The affidavit expresses Mr Soroka’s frustration at having to obtain Ms Meredith’s consent to the work he is capable of managing as he sees fit. However, Mr Soroka was able to stave off a first attempt at a mortgagee sale in December 2022 and had obtained a time extension to enable works to obtain a CCC to be completed.19 He had secured Ms Meredith’s agreement to the release of the remaining funds of
$44,265.97 that had been set aside in a solicitor’s trust fund. But he had been unable to secure the agreement of Ms Meredith or the liquidators of FCT Ltd to his borrowing a further $100,000 to improve the Property before sale, which Mr Soroka had been advised, would yield a capital gain of $500,000 or more when the Property is sold. Even so, a CCC had been obtained on 27 June 2023 and significant landscaping work undertaken, which had increased the value of the Property. Proposed extra works – concrete driveways and new carpets – would enable another significant increase in the sale price but Ms Meredith has not supported that work, “despite it being plainly apparent that capital gain is desperately needed to repay debt”.
Ms Meredith’s affidavit in opposition
[52] Ms Meredith says she agreed to the arrangements in the Settlement Agreement on the strength of a promise by Mr Soroka to repay the loan to CSL, later Secure Funding, within six months by either completing the development envisaged by the Palazzo Purchase or selling the Property. Neither has happened. Nor has she received the payments of $100,000 and $210,000 provided for in the Settlement Agreement. Ms Meredith says that, as envisaged in the Settlement Agreement, it was expected that no more than $70,000 would be spent in competing the works necessary to obtain a CCC.
[53] Ms Meredith says that, in accordance with the arrangements in the Settlement Agreement, she was to approve all invoices and quotes for work on the Property,
19 The extension was to 28 Feb 2023. (Exhibit VV)
following which funds would be released from the amount held in a solicitor’s trust account. Ms Meredith says she objected to requests for approval for payments of personal expenses of Mr Soroka, such as his dental bills and legal fees. She had also become concerned that some invoices had been for services that had been described vaguely and that other invoices had been for work performed by “flatmates” of Mr Soroka. Ms Meredith says that, although she authorised payments of some of the invoices, because of a concern that some of the invoices were not legitimate, she had then taken the position that she would only approve invoices from legitimate third- party providers for work that was necessary to obtain the CCC. This was to ensure that the funds were used only for CCC-related work. Ms Meredith says that, after the FCT Ltd had been put into liquidation, she had been able to agree with the liquidators a process for managing the release of the remainder of the funds. The CCC had been obtained just as the funds had run out.
[54] Ms Meredith says that, as set out in a consent order of the Family Court dated 20 May 2023, she had agreed to further borrowing of $100,000 for further work. However, that loan had fallen through, although she had not been informed of that fact until 7 July 2023. Ms Meredith says she is opposed to the variations that Ms Soroka seeks to the Settlement Agreement but is not opposed to coming to an agreement under which further funding would be obtained, provided her interests in the Property are protected. Ms Meredith says her position has been conveyed to Mr Soroka in correspondence between lawyers over the past three months.
[55] Ms Meredith disputes many of the allegations made by Mr Soroka in his affidavit. For present purposes it is sufficient to note that Ms Meredith says:
(a)The delays in completing the works needed for the CCC were caused by Mr Soroka and not herself.
(b)Her willingness in 2019 to sell the Property for $2,200,000 related to the circumstances of that time and has no bearing on the value of the Property now.
(c)The exclusion of the Pakau 1 Trust from the distribution of funds provided for in the Settlement Agreement was not a mistake. There is a dispute over the alleged loan. That dispute is part of the wider relationship property dispute that has yet to be resolved.
(d)Some of the information put forward by Mr Soroka about past events is partial, misleading, inaccurate and irrelevant.
(e)The current application is another example of the many meritless proceedings that Mr Soroka has brought to Court which have caused Ms Meredith considerable distress and in respect of which Mr Soroka has yet to pay a number of costs awards in Ms Meredith’s favour.
Mr Soroka’s affidavit in reply
[56] In his reply affidavit, Mr Soroka advises the Court on where matters stand in proceedings concerning the Pakau Trust, and of steps he is taking regarding a possible appeal of an unfavourable decision of the Court of Appeal to the Supreme Court.20 These include paying a retainer of $30,000 for a King’s Counsel to file an application for leave to appeal and submissions in support. Mr Soroka also informs the Court that Secure Funding has filed proceedings against FCT Ltd (in liquidation) seeking summary judgment for the debt owed by FCT Ltd.21
[57] Mr Soroka says that, in the light of these developments, he has made an open offer to Ms Meredith with a proposal to resolve these proceedings. Mr Soroka exhibits a copy of the email to Ms Meredith’s counsel with the offer. Mr Soroka says that if Ms Meredith does not agree with this compromise, the trustee of the FCT (FCTTee Ltd) has agreed to sell the Property to the settlor of the FCT (Mr Soroka) for
$2,360,000 so that, as an unconditional purchaser, he can borrow the $160,000 needed to complete the works and repay Pakau 1 Trust an immediate interim payment of
20 Soroka v Waikato District Council [2023] NZCA 510.
21 Secure Funding Ltd v Flying Cross Trust Ltd HC Auckland CIV-2023-404-2404. Secure Funding seeks judgment in the sum of $1,152,283.07 plus interest at the default rate of 28.55 per cent on arrears from 3 October 2023 to the date of payment and an order for possession of the Property. Mr Kerr and Mr Soroka are named as second and third defendants.
$30,000 required to instruct King’s Counsel to seek leave to appeal to the Supreme Court.
[58] Mr Soroka outlines his understanding of the legal position of the liquidators of FCT Ltd and says they do not need to enter the fray and advance arguments about their position.
[59] Mr Soroka also sets out at some length his responses to Ms Meredith’s affidavit. The gist of those responses is that Mr Soroka says he has no funds to support himself and holds Ms Meredith responsible for preventing him from earning his livelihood as a property developer, as he had successfully done for the past 20 years, and which, as Ms Meredith had previously accepted, was the occupation best suited to his skill set.
Mr McLennan’s affidavit
[60] Mr McLennan says the liquidators do not object to the Property being refinanced, including the transfer of title to a new registered proprietor, as long as proper protections are put in place to reflect existing court orders and ensure that there is no prejudice to the rights of impacted parties, including the creditors of FCT Ltd and the liquidators’ entitlement to recover costs and fees. In the absence of such measures, they oppose such steps.
[61] Mr McLennan says that, as far as he is aware, the assets of FCT Ltd are the equity in the Property and a loan to Mr Soroka or a related entity that may be for
$900,000 when FCT Ltd on-lent money to assist Mr Soroka or related parties with the Palazzo Purchase. Mr McLennan says the position regarding that on-loan is unclear. It is undocumented so the terms of the loan and applicable interest rate need to be established, and its position in terms of s 310 of the Companies Act 1993 regarding mutual credit and set-off will need to be determined.
[62] Mr McLennan says he is aware Secure Funding has issued summary judgment proceedings against FCT Ltd and guarantors seeking orders for possession of the Property and judgments for the amounts owed. Mr McLennan says he has been told that Secure Funding wishes to secure exclusive possession of the Property before
exercising its rights of sale so a mortgagee sale is not imminent. Mr McLennan records that the liquidators have received unsecured creditor claims totalling
$1,971,598.48 including a claim of $1,957,000 from the Pakau 1 Trust. Mr McLennan notes that there is a dispute over the Pakau 1 debt but says that, if it is held to be owed by FCT Ltd, FCT Ltd’s liabilities are of the order of $3,383,798, bearing in mind that interest costs on the debt to Secure Finance continue to increase.22
[63] Mr McLennan says that FCT’s assets may or may not cover this amount after realisation costs and after any new lending. Mr McLennan says that remains the case even if FCT Ltd’s liabilities to Pakau 1 Trust are reduced by $750,000, as Mr Soroka says should be the case, to $2,628,798.
[64] Mr McLennan says he has taken note of Mr Soroka’s proposal that the Property be sold back to FCT’s settlor if Ms Meredith does not agree to Mr Soroka’s proposed compromise. He notes that Mr Soroka does not explain how the interests of FCT Ltd’s secured and unsecured creditors would be protected should such a step be taken, if that is possible. Mr McLennan says the liquidators do not agree to the proposal.
Submissions
Submissions from Mr Soroka
[65] Even allowing for the fact that Mr Soroka is self-represented and has no legal training, Mr Soroka’s written submissions contain thoroughly inappropriate allegations against Ms Meredith and her legal advisers, whom he accuses of duplicity and conduct designed to cause him financial and psychological damage. The evidence Mr Soroka has adduced falls well short of establishing a basis for such serious allegations, particularly against Ms Meredith’s professional legal advisers. I record the fact of those submissions principally for their relevance to the submissions of counsel for the liquidators that the Court should order that, as a corporate entity,
22 Mr McLennan’s calculation includes liquidators’ fees and costs to date. It also includes payment to Ms Meredith of $210,000 in accordance with the Settlement Agreement, on the assumption that Ms Meredith has been paid $130,000 in accordance with the Settlement Agreement. As noted at [52], Ms Meredith’s evidence is that she has not received the initial payment of $100,000.
FCTTee Ltd must be represented by counsel in accordance with the rule in Re G J Mannix.23
[66]Mr Soroka’s principal relevant submissions are that:
(a)The Court has the power to vary the Tomlin Order and the Freezing Order in the manner proposed because it is in the interests of justice that it do so and because he was under duress when he agreed to the terms of the Settlement Agreement. In this regard, Mr Soroka refers to a decision of the High Court of Australia, Thorne v Kennedy¸ where two financial agreements between partners were held to have been vitiated by duress, undue influence and unconscionable conduct.24
(b)The power to vary the Tomlin Order includes the power to change the trustee of the FCT as provided for in cl 3.17 of the Settlement Agreement.
(c)There is nothing in the Consent Orders or the Settlement Agreement to prevent FCTTee, as trustee of the FCT, from selling the Property to Mr Soroka, as has already been agreed by FCTTee Ltd.
(d)FCT Ltd, as bare trustee of the FCT, had no right or power to deal with the Property or to prevent the registration of FCTTee Ltd as the proprietor of the Property, or to prevent FCTTee Ltd from transferring the Property to Mr Soroka.
[67] In relation to the first of those submissions, Mr Soroka says he knows best how to preserve and maximise the value of the Property, that Ms Meredith and her advisers have no knowledge or experience of property development and that, if the variations he seeks are not granted, his life will effectively be over. He says he had been coerced into agreeing to the Settlement Agreement because he was under huge pressure to settle the Palazzo Purchase and because of litigation concerning the Pakau trusts.
23 Re G J Mannix [1984] 1 NZLR 309 (CA) at 310-314.
24 Thorne v Kennedy [2017] HCA 49, (2017) 263 CLR 85.
Submissions of counsel for Ms Meredith
[68] On the substance of the application, Ms Wooding says Ms Meredith’s position is that the orders sought by Mr Soroka bear on the determination of the relationship property dispute between Ms Meredith and Mr Soroka and that it is not appropriate that the Court make orders that may predetermine those issues. Ms Wooding says whether the FCT is a legitimate trust and the alleged loan from the Pakau 1 Trust are issues in the relationship property dispute.
[69] Ms Wooding says Ms Meredith does not consent to the transfer of the Property to FCTTee Ltd, notwithstanding Mr Soroka’s appointment of that company as trustee of the FCT. Ms Wooding says Ms Meredith has been keen to avoid a mortgagee sale of the Property but considers that Mr Soroka has moved the goal posts by seeking to use the refinancing as an opportunity to predetermine the substantive relationship property dispute, in particular the alleged Pakau 1 Trust debt.
[70] Ms Wooding submits that, as a matter of law, the Court has no jurisdiction to vary the 2021 Consent Orders in the terms sought in the application. The scope for leave to apply in the Tomlin Order is limited to enforcement of the Settlement Agreement and does not permit its substantive variation. More specifically, Ms Wooding submits that the power to vary the Tomlin Order does not extend to varying the Settlement Agreement. Ms Wooding refers to the decision of the High Court of England and Wales in Community Care East v Durham County Council.25
[71] Ms Wooding says Ms Soroka’s claim that he was under duress when he agreed to the terms of 2021 Consent Orders does not bear scrutiny. Mr Soroka and the Trusts were represented by legal counsel when the terms of the Settlement Agreement were negotiated. The Agreement was negotiated to enable Mr Soroka to settle the Palazzo Purchase. Mr Soroka was the principal beneficiary under the Settlement Agreement under which he had access to and the use of $850,000 under the loan from Secure Funding. Apart from the payment of $30,000 for her legal fees, Ms Meredith has had nothing from the Agreement.
25 Community Care East v Durham County Council [2010] EWHC 959, [2012] 1 WLR 338.
[72] Ms Wooding says that Ms Meredith does not accept that, just because Mr Soroka has not had full control over the disputed relationship property and trust assets, that he has therefore been unable to earn an income. Ms Wooding notes that Ms Soroka has also had the use of significant funds since 2021 and has other assets that he could realise if he chose, such as his yacht.
[73] Ms Wooding reiterates that Ms Meredith accepts that the Property will realise a higher sale price if sold by private sale in a finished condition rather than by way of mortgagee sale and says Ms Meredith remains willing to discuss the terms of a further refinancing of the Property but that it must be on terms agreed by the parties involved and not imposed by the Court.
Submissions of counsel for the Liquidators
[74] Ms Gellert, counsel for the liquidators, submits, as a preliminary question, that the Court should require FCTTee Ltd, as a corporate entity, to be represented by counsel in accordance with the Mannix rule.26 While Mr Soroka has made much of the fact that he is a litigant in person, in reality, the principal applicant is a company and so should be represented by counsel. Ms Gellert submits that, even if the Court allows Mr Soroka to continue to speak on behalf of FCTTee Ltd and himself in the current application, the Court should direct that, in any future steps in the proceedings, FCTTee Ltd is represented by counsel.
[75] Ms Gellert says that because Mr Soroka delayed serving the proceedings on the liquidators, the liquidators have not had sufficient opportunity to consider the issues in the application fully. The issues raised in the application directly impact FCT Ltd, its creditors and the liquidators. FCT Ltd was and remains the registered proprietor of the Property. FCT Ltd has debts it incurred while trustee of the FCT and for which it remains liable. The Property is the main and likely only realisable asset of FCT Ltd. FCT Ltd is entitled to have its creditors paid, either by exercising rights over the property or through an indemnity if there is a transfer of ownership. The Application does not satisfactorily address those issues.
26 Re G J Mannix, above n 23.
[76] Ms Gellert says that FCT Ltd takes no issue with the appointment of FCTTee as trustee of the FCT. However, the sale solution proposed by Mr Soroka takes no account of the reality that FCT Ltd remains liable for the debts it incurred on FCT’s behalf while trustee of the FCT.
[77] For these reasons, Ms Gellert says the application is premature. A mortgagee sale is not imminent. The liquidators consider that the prudent course would be to let the liquidation process play out. That said, the liquidators are not opposed to negotiating a resolution outside of the Court processes, provided the interests of its creditors and the costs and fees of the liquidators are secured.
Submissions of counsel for Secure Funding
[78] Ms Reeves, counsel for Secure Funding, confirms that Secure Funding has filed summary judgment proceedings seeking payment of the debt incurred by FCT Ltd and possession of the Property. Ms Reeves advises that Secure Funding’s application is to be heard on 12 December 2023.
[79] Ms Reeves says Secure Funding opposes the application by FCTTee Ltd and Mr Soroka because it does not deal adequately with the payment of the debt it is due. Ms Reeves confirms, however, that Secure Funding would not oppose a negotiated resolution of its claim provided the debt is repaid and its costs are met.
Submissions of Mr Soroka in reply
[80] In reply, Mr Soroka says that it is essential that FCTTee is recognised as the trustee of the FCT and that title to the Property is transferred to FCTTee Ltd, as provided for in cl 3.17 of the Settlement Agreement. Mr Soroka says he has been advised by prominent insolvency practitioners that, as bare trustee in possession of the Property, FCT Ltd has no right to deal with the property and no ability to prevent transfer of title of the Property to FCTTee Ltd.
[81] Mr Soroka reiterates that he is without means of supporting himself and dismisses the suggestion that he could sell his yacht or other assets. He says he has tried to sell the yacht but there has been no interest.
[82] In response to the Court’s question as to why Mr Soroka would not take up the opportunity to negotiate a resolution with the other interested parties as each of the other counsel has offered, Mr Soroka says that those parties did not understand property issues and would insist on terms that are destructive of value and unacceptable to him.
Discussion
[83] I begin with the procedural issue raised by Ms Gellert regarding Mr Soroka’s ability to appear for FCTTee Ltd.
[84] Given that no objection was taken to Mr Soroka’s appearing for the applicants at the application heard by Venning J or when Muir J set down the current application for hearing, I did not consider it appropriate to order that Mr Soroka not make submissions at the hearing on 15 November 2023. However, the point raised by Ms Gellert is important and well-taken.
[85] The current application was filed in the names of FCTTee Ltd, as trustee for the FCT, and Mr Soroka personally. The application seeks orders varying the Consent Orders. As Venning J noted, Mr Soroka is not and has never been a trustee of the FCT and there was no basis for him to apply in his personal capacity to vary the Consent Orders. That continues to be the case. It follows that, leaving aside any question over the validity of FCTTee Ltd’s appointment as trustee for the FCT, only FCTTee Ltd can apply for the orders sought. The question that arises, therefore, is whether Mr Soroka should be permitted to represent FCTTee Ltd.
Should the Court allow Mr Soroka to represent FCTTee Ltd?
[86] FCTTee is a company. It is well established, on the basis of the Mannix rule, that companies have no right to be represented in court except by legal counsel. However, as Cooke J observed, the Court maintains a residual discretion to allow unqualified advocates to appear before it, as a reserve or occasional expedient
primarily for use in emergency situations or where it would be unduly technical or burdensome to insist on counsel.27
[87]In Keemati Ltd v MR Civil Ltd,28 Associate Judge Lester said:
[6]Relevant considerations in the exercise of the Court’s discretion to allow non-lawyers to appear on a company’s behalf include:
(i)the nature of the litigation;
(ii)the complexities of the case;
(iii)the extent of the dispute;
(iv)the point at which audience is sought;
(v)the importance of an understanding of the law and a dispassionate consideration of the circumstances;
(vi)that the preliminary and interlocutory stages are important to the determination of litigation and the filing of a compliant statement of claim assists in this process; and
(vii)the need for professional objectivity.
[88] In Jayashree Ltd v Commissioner of Inland Revenue, Gordon J added to that list whether the application is made in an emergency situation.29
[89] None of those considerations counts in favour of the Court exercising its discretion to allow Mr Soroka to represent FCTTee Ltd. Two of those considerations count very strongly against the exercise of that discretion: the need for professional objectivity and the importance of an understanding of the law and a dispassionate consideration of the circumstances. It is plain from Mr Soroka’s written and oral submissions that he is unable to bring the requisite professional objectivity or able to apply a dispassionate consideration of the circumstances. It is evident that he approaches the issues from a very personal perspective and principally in the context of his on-going relationship property dispute with Ms Meredith and the impact that the dispute has on his freedom to conduct his affairs as he sees fit. He has accused not only Ms Meredith but also her professional advisers of conduct that is both
27 Re G J Mannix, above n 23, at 314.
28 Keemati Ltd v MR Civil Ltd [2021] NZHC 538.
29 Jayashree Ltd v Commissioner of Inland Revenue [2023] NZHC 2723, at [18].
unprofessional and possibly illegal. As I have already held, Mr Soroka’s evidence falls well short of establishing a basis for such serious allegations.
[90] In addition, the issues are procedurally and legally complex and Mr Soroka evidently struggles to understand their import or significance, despite his calling in aid advice he says he has received from senior law practitioners.
[91] Despite the terms in which the application is made and the tone of Mr Soroka’s affidavits and submissions, this is not an emergency situation. Because of Mr Soroka’s actions or inaction, FCT Ltd has been in default in its loan obligations to Secure Funding since June last year. As an experienced property developer, Mr Soroka must have known for well over a year that it was likely that Secure Funding would take steps to enforce the loan agreement if he did not make good the default. Even now, it appears that the risk of mortgagee sale is not imminent even, if it is a likely eventual result of the summary judgment proceedings.
[92] For all these reasons, I do not consider this is one of those rare situations where the Court should permit a non-legally qualified person to represent a company. Mr Soroka’s principal argument in favour of such permission being granted is that he does not have the funds to retain lawyers. That submission carries little weight in the context of the property transactions in which Mr Soroka has been engaged and further illustrates why permission should not be granted.
[93] Mr Soroka has chosen to use a variety of trusts, with corporate trustees, to conduct his personal and business interests. Presumably he has done so for the financial and legal benefits that such structures offer. That is his right. However, if he chooses to use these structures, he has to accept the consequences that follow. One is that any corporate trustee who appears on behalf of the trust must ordinarily be represented by legal counsel. The fact that Mr Soroka may be personally strapped for cash is of little relevance.
[94] For these reasons, I am satisfied that, from this point onwards, FCTTee Ltd may only be represented in this proceeding by qualified legal counsel.
Does the Court have the power to make the orders sought?
[95] The principal question for the Court is whether it can or should grant the orders sought in the application.
[96] In the Dismissal Judgment, Venning J held that leave to apply to vary the Tomlin Order was limited to the terms of the Order itself. Paragraph 2 of the Tomlin Order gave leave to apply “without the need to issue fresh proceedings”. It does not follow, however, that the Court can or should vary the Consent Orders and, in particular, the Settlement Agreement just because FCTTee Ltd has filed a new proceeding in bringing the current application.
[97]First, as the Court of Appeal said in Butcher v Finnigan:30
This Court views an application to set aside a consent order with considerable caution. It will only be prepared to disturb such an order if the interests of justice require it, and only if a good ground or grounds is established.
[98] Secondly, in reality, the application is not to vary the Tomlin Order but to vary the Settlement Agreement scheduled to the Order.
[99] The effect of the Tomlin Order was to stay the proceeding that Mr Soroka (in error) and FCT Ltd had brought to remove the Notice of Claim that Ms Meredith had lodged against the title to the Property. The current application does not seek to change that aspect of the Tomlin Order at all.
[100] While the Settlement Agreement was referred to and appended as a schedule to the Tomlin Order, the Agreement itself predated the Order and was not an order of the Court. It is a contract between the parties. For that reason, the question is not whether the Court has the power to vary the Tomlin Order, which was made by consent, but whether it has the power to vary the terms of the Settlement Agreement.
30 Butcher v Finnigan [2012] NZCA 250 at [6].
[101]As Ramsey J said in Community Care East:31
… the schedule to a Tomlin Order sets out an agreement which has been made between the parties as to the terms on which the proceedings have been settled. In general once the parties have entered into an agreement the ability to set aside or vary that agreement depends on there being a remedy in relation to that contract. Otherwise the court is only concerned with the meaning of the agreement in the schedule and this depends on normal principles.
[102] The Settlement Agreement was made in the context of the relationship property dispute between Mr Soroka and Ms Meredith. In its own terms, however, it is a commercial agreement involving not only Mr Soroka and Ms Meredith but three of the trusts by which Mr Soroka has pursued his business and personal interests. It has the form of a commercial agreement with recitals, definitions and an “entire agreement” clause. The commercial purpose of the Settlement Agreement is apparent from Recital D which records the wish of FCT Ltd to borrow against the Property for the purpose of funding a commercial development in Italy.
[103] As Lord Steyn said in the House of Lords in Sirius International Insurance Company (Publ) v FAI General Insurance Ltd, a decision involving the interpretation of a commercial agreement scheduled to a Tomlin Order:32
[18] The settlement contained in the Tomlin order must be construed as a commercial instrument. The aim of the inquiry is not to probe the real intentions of the parties but to ascertain the contextual meaning of the relevant contractual language. The inquiry is objective: the question is what a reasonable person, circumstanced as the actual parties were, would have understood the parties to have meant by the use of specific language. The answer to that question is to be gathered from the text under consideration and its relevant contextual scene.
[104] It follows that the Settlement Agreement must be interpreted in its own terms and in accordance with the usual principles of contractual interpretation. It also follows that the Court has no power to vary or set aside the terms of the Settlement Agreement except in the circumstances provided for in legislation (e.g. the Property (Relationships) Act 1976, the Fair Trading Act 1986 and the Contracts and Commercial Law Act 2017,) or in accordance with principles of common law and equity.
31 Community Care East v Durham County Council, above n 25, at [24].
32 Sirius International Insurance Company (Publ) v FAI General Insurance Ltd [2004] UKHL 54; [2004] 1 WLR 3251.
[105] Mr Soroka has not argued that the Fair Trading Act, the Contracts and Commercial Law Act or any other statute has any application. It is also apparent that the Settlement Agreement is not an agreement contracting out of the Property (Relationships) Act. For that reason, s 21J of that Act, under which the Court may set aside a contracting-out agreement if satisfied that giving effect to the agreement would cause serious injustice, has no application or relevance. For the same reason, Thorne v Kennedy, the decision of the High Court of Australia to which Mr Soroka referred and which concerned the validity of pre-nuptial and post-nuptial agreements, has no relevance, even leaving aside the fact that the circumstances of that case were far removed from the circumstances of Mr Soroka and Ms Meredith.
[106] It follows that the application must be considered in accordance with the principles of common law and equity. In this regard, the application faces considerable procedural and legal difficulties.
[107] First, while the Court may in the interests of justice permit any proceeding not mentioned in rr 19.2 to 19.4 of the High Court Rules to be commenced by originating application,33 such applications are ill-suited to the determination of substantive rights involving the application of common law doctrines.34 Accordingly, given that in substance, the application is to set aside and vary the Settlement Agreement for reasons of duress, it should have been brought in accordance with the normal rules applicable to civil proceedings and not by way of originating application.
[108] Secondly and more substantively, the evidence Mr Soroka has put forward in his affidavits, even on his own account of events, falls well short of establishing that:
(a)Mr Soroka and FCT Ltd were subject to illegitimate pressure; and
(b)such illegitimate pressure compelled them to enter into the Settlement Agreement.
33 High Court Rules 2016, r 19.5.
34 Matthew Casey and others Sim’s Court Practice (looseleaf ed, LexisNexis) at [HCR19.5.4].
Those two elements, illegitimate pressure and compulsion to enter into the agreement, are the two fundamental elements of duress.35
[109] I accept that Mr Soroka and his associated entities were under commercial pressure to fund the settlement of the Palazzo Purchase. However, for commercial pressure to amount to duress, Mr Soroka would have to establish that he and FCT Ltd entered into the Settlement Agreement against their will, that they had no alternative courses open to them and that they had been confronted by coercive acts by the party exerting the pressure.36
[110] The evidence does not come close to establishing that because of illegitimate pressure exerted by Ms Meredith, Mr Soroka and FCT Ltd had no option but to enter into the Settlement Agreement.
[111] The pressure exerted by Ms Meredith was to register and maintain a notice of claim again the title to the Property. Ms Meredith’s right to register the notice of claim was upheld by this Court.37 The pressure caused by that Court-sanctioned step cannot be illegitimate, even if it was commercially inconvenient for Mr Soroka. In addition, it must be the case that Mr Soroka and FCT Ltd had other options – such as not proceeding with the Palazzo Purchase. The fact they were advised by solicitors over the six days of negotiations that led to the Settlement Agreement also counts strongly against any inference of duress. So too does the fact that, as recorded by Powell J when he made the Consent Orders, counsel for Mr Soroka and Ms Meredith had submitted a comprehensive memorandum in support of the Orders.
[112] Thirdly, even if the Court accepted that the Settlement Agreement had been made under duress, duress only renders the contract voidable at the discretion of the coerced party unless it is affirmed.38 That remedy does not extend to re-writing the
35 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (HL) at 400. See also McIntyre v Nemesis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 at [20].
36 Pao On v Lau You Long [1980] AC 614 (PC) at 636.
37 Soroka v Meredith, above n 3.38 McIntyre v Nemesis DBK Ltd, above n 35, at [19], citing Pao On v Lau You Long, above n 39, at 634 and North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705.
Agreement to impose on the other parties a new set of arrangements to which they have not agreed – which would be the effect of the orders sought in the application.
[113] For all these reasons, I am satisfied that the Court does not have the power to make the orders sought in the application. In particular, the Court does not have the power to substantially re-write the terms of the Settlement Agreement.
[114] For completeness, I note that, even if I had concluded that the Court had the power to make the orders, I would have declined to do so. On the basis of the evidence, I do not consider that the interests of justice require the Settlement Agreement to be re-written as proposed.
[115] It is plain from cl 3.9 of the Settlement Agreement that it was envisaged that FCT Ltd would spend approximately $70,000 on the works required to obtain the CCC and prepare the Property for sale. Despite Mr Soroka’s complaints about Ms Meredith’s non-approval of invoices, $70,000 was spent on that work. The CCC was obtained. There is nothing to prevent the Property from being sold in its current state.
[116] If Mr Soroka wants to spend more money on preparing the Property for sale, he is at liberty to do so, provided he can obtain the requisite funding and the agreement of affected parties. The fact he wants to spend more money on the project, however, is not a reason for re-writing the Settlement Agreement in the face of opposition of other parties to the Agreement and parties with legal and financial interests in the Property. That is particularly so when:
(a)FCT Ltd, the registered proprietor of the Property, is in default for a substantial sum because of Mr Soroka’s actions or inaction when FCT Ltd was the trustee of the FCT; and
(b)The amendments would substantially prejudice Ms Meredith, who has yet to receive the $100,000 she was to have received within 30 days of the loan draw down under cl 3.10 of the Settlement Agreement, and whose right to receive the payments provided for in cl 3.13 upon sale
of the Property would be substantially compromised by prioritising repayment of the alleged loan to the Pakau 1 Trust.
[117] I understand Mr Soroka’s concern to avoid a mortgagee sale. As was made clear at the hearing, Mr Soroka can still avoid that result. However, it will require him to cooperate and reach agreement with the other parties on terms all can accept. He cannot use the Court to try to impose on Ms Meredith, the liquidators or Secure Funding outcomes that are unacceptable to them and which they consider to be prejudicial to their interests.
Other issues
[118] I acknowledge that there are issues to be resolved such as when and on what terms the title to the Property is transferred from FCT Ltd to FCTTee Ltd, assuming no challenge is made to the appointment of FCTTee Ltd as the trustee of the FCT. I agree, however, that those issues are more appropriately addressed in the context of the liquidation of FCT Ltd and should not be pre-empted by variations to the Settlement Agreement.
[119] Since Mr Soroka asserted in argument that there was nothing in the Consent Orders or the Settlement Agreement to prevent FCTTee Ltd from selling the Property, I record that, until further order of the Court, the terms of the Freezing Order remain in full effect. That is, FCT Ltd, as the current registered proprietor, is restrained from transferring or further encumbering the Property unless the Court directs otherwise or the Freezing Order is removed.
Result and orders
[120] For all these reasons, I dismiss the application to vary the Consent Orders and the Settlement Agreement.
[121] I also order that, if there are any further steps in this proceeding other than in relation to costs as set out below, FCTTee Ltd may only be represented by qualified legal counsel.
Costs
[122] Ms Meredith and the liquidators are entitled to costs. I make no order with respect to the costs of Secure Funding, which was not required to be served under the directions made by Muir J.
[123] Ordinarily, I would award costs of this hearing on a 2B basis. However, Ms Wooding has submitted that, if Mr Soroka is unsuccessful, costs should be awarded on an indemnity basis because the basis for Mr Soroka’s application (that a refinancing was necessary to avoid a mortgagee sale) changed in the course of the proceeding and he used the hearing as an opportunity to try and obtain his distribution wish list, despite the clear warning from Muir J not to do so.
[124] Mr Soroka did not respond to that submission. I do not consider it appropriate to order increased or indemnity costs unless he has had a further opportunity to do so. In addition, on the basis of Ms Wooding’s submission, I am not persuaded that the pursuit of the current application constitutes “exceptionally bad behaviour” or “flagrant misconduct” as discussed by the Court of Appeal in Bradbury v Westpac Banking Corporation.39 However, that submission was made without regard to this judgment.
[125] If Ms Meredith or the liquidators wish to seek an order for increased or indemnity costs, they may file and serve memoranda of no more than five pages by 15 December 2023.
[126] Any reply by Mr Soroka is not to exceed six pages and is to be filed and served by 18 January 2024.
G J van Bohemen J
39 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [28].
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