First Credit Union Incorporated v Vaiangina
[2023] NZHC 2639
•21 September 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2131
[2023] NZHC 2639
BETWEEN FIRST CREDIT UNION INCORPORATED
Applicant
AND
ANA TATILA VAIANGINA
First Respondent
AND
SIONI PONGI VAIANGINA
Second Respondent
AND
ATUNAISA FINAU TAIALA
Third Respondent
AND
SIONE ILOA HE LOTU TALILOTU
Fourth Respondent
Hearing: On the papers Counsel:
D J Chisholm KC for Applicant
Judgment:
21 September 2023
JUDGMENT OF ANDERSON J
(Freezing Orders)
This judgment was delivered by me on 21 September 2023 at 4.15 pm pursuant to Rule 11.5 of the High Court Rules 2016.
……………………………… Registrar/Deputy Registrar
Solicitors: Anthony Harper, Auckland
FIRST CREDIT UNION INCORPORATED v VAIANGINA [2023] NZHC 2639 [21 September 2023]
Preliminary
[1] The applicant, First Credit Union Incorporated (FCU) has filed an interlocutory application without notice for freezing orders dated 19 September 2023 which has been referred to me today.
[2] The orders sought prevent the respondents from disposing of, dealing with or diminishing the value of:
(a)Certain personal bank accounts the first to third respondents hold with Westpac and Kiwibank;
(b)The first, second and fourth respondents’ property at 2/23 Sovereign Place, Glenfield, Auckland.
[3] FCU is a registered credit union that offers personal banking services such as loans, current and savings accounts and term investments to its customers.
[4] The first respondent, Ms Vaiangina, was until recently employed by FCU as a Member Solutions Consultant. The main purpose of this role was to assist members with enquiries, process requests and to provide information concerning the applicant’s products and services. In that role she had access to FCU’s core banking system and, by extension, the accounts operated by FCU for its members.
[5] The second respondent, Mr Vaiangina, is the first respondent’s husband. The third respondent, Ms Taiala, is an associate of Mr Vaiangina. The fourth respondent, Mr Talilotu, is Ms Vaiangina’s brother.
[6] Mr Talilotu is not a defendant in FCU’s substantive claim but freezing orders are sought against a property jointly owned with the first and second respondents.
Background
[7] The applicant says that between 3 January 2019 and 27 July 2023, Ms Vaiangina created loans in FCU’s banking system then disbursed these to various
member accounts. She then withdrew those amounts in cash at ATMs around Auckland, and/or directed the funds to her personal bank accounts and those of the other respondents.
[8] FCU’s substantive proceeding is for claims for money had and received, unjust enrichment, conspiracy by unlawful means and breach of confidence. Counsel says that the full quantum of losses suffered is uncertain pending further investigation however FCU considers that the respondents have unlawfully obtained funds of between $250,000 and $800,000.
[9] FCU is concerned that the sums directed to the personal bank accounts will be further disbursed and unable to be recovered. Accordingly it seeks freezing orders over the respondents’ personal bank accounts of up to and including a maximum monetary amount of $1 million. The higher figure allows for interest on the potential amount taken from FCU’s member accounts and for legal costs on the Court proceedings necessary to recover the money. The orders sought also cover the jointly owned residential property.
Legal principles
[10] A freezing order is designed to present an actual or prospective judgment debtor dealing with assets where there is a risk those assets may be dissipated. It aims to ensure that an applicant who obtains judgment will not be denied recovery. The order acts in personam against the person against who it is made and not in rem against the assets.1
[11] FCU’s memorandum sets out the legal principles relating to the granting of freezing orders, which I set out below.
1 McGechan on Procedure at HRPt 32.01
[12] This Court may make a freezing order (with or without notice) restraining a party from removing, disposing, dealing with, or diminishing the value of assets.2 The three essential requirements of a freezing order are:3
(a)There must be a good arguable case on the substantive claim:
(i)A good arguable case is established if the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence.4 The sufficiency of evidence must reflect the early stage of the proceeding.5
(ii)The applicant does not need to demonstrate that the case is strong enough to entitle it to summary judgment.6
(b)There must be assets to which the order can apply. The assets need not be specifically identified but should be described in the application with sufficient particularity to enable those who are given notice of the order to identify the assets frozen and comply with the order.7
(c)There must be a real risk that the respondent will dissipate or dispose of those assets, and that the prospective judgment will therefore be wholly or partly unsatisfied:
(i)There must be some credible and tangible evidence that the assets will dissipate or be disposed of.8
2 High Court Rules 2016, r 32.2.
3 Annik Investments Ltd (in Liq) v Edwards [2016] NZHC 462, at [100], referring to the often cited statement of principles Shaw v Narain [1992] 2 NZLR 544 (CA).
4 Hannay v Mount [2011] NZCA 530, at [22].
5 Dotcom v Twentieth Century Fox Film Corp [2014] NZCA 509, at [18].
6 Wilsons (NZ) Portland Cement Ltd v Gatx-Fuller Australasia Pty Ltd [1985] 2 NZLR 11, at 21- 22.
7 J R A McGechan and Others McGechan on Procedure (online ed, Thomson Reuters, at [HR32.2.03(2)].
8 Property Marine Australia Pty Ltd v Condor Yachts (Bermuda) Ltd (1987) 1 PRNZ 251, at 255.
(ii)Circumstances must exist from which a "prudent, sensible commercial [person], can properly infer a danger of default."9
(iii)Evidence of fraud committed by respondents goes a considerable way to establishing there is a risk of dissipation of those respondents' assets.10
(iv)Those transactions that occur in the ordinary course of business will not qualify as dissipation of assets, and the purpose of a freezing order is not to prevent a respondent from carrying on business in the ordinary way.11
[13]An undertaking as to damages is required.
[14] In addition to these preconditions for the grant of a freezing order the applicant’s need for protection must be balanced against prejudice or hardship to the defendant and third parties. This is most frequently articulated as a requirement to consider the overall justice of the case.12
[15] A freezing order sought without notice must fully and frankly disclose to the Court all material facts including any possible defences known to the applicant, and any information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages.13
9 Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801 (HC), at [122], citing
Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645, at 671.
10 THL (2005) v JDR Ltd [2022] NZHC 3627 at [30]; J Stephen Kos (ed) Remedies - A to Z of New Zealand Law (online ed, Thomson Reuters) at [51.7.1]; Solarzero Ltd v Thakkar [2023] NZHC 1946.
11 Derby & Co Ltd v Weldon (No.3 and No.4) [1990] 1 Ch. 65, 76.
12 Wellington Tenths Trust v Skiffington [2017] NZHC 1646 at [16]; Bank of New Zealand v Hawkins
(1989) 1 PRNZ 454 (HC) at 452.
High Court Rules 2016, r 32.2(3).
Decision
Good arguable case
[16] I have considered the terms of the application, draft orders and accompanying memorandum, together with the affidavits filed.
[17] The affidavit evidence of Mr Simon Scott, Ms Ana Braunias and Mr John Findlay filed with the application outlines FCU’s initial suspicions and subsequent results of investigations into the conduct alleged. On their face the affidavits disclose a well-founded case for establishing the conduct referred to at [7] above. The evidence includes tracking of transfers of funds to the various bank accounts that are the subject of the application.
[18] I am satisfied on the material before me that there is at least a good arguable case that FCU will succeed at trial on one or more of the causes of action pleaded based on the facts alleged. In particular, I am satisfied there is at least a good arguable case:
(a)For money had and received for recovery of funds entrusted to an agent, Ms Vaiangina (relying on Napier v Torbay Holdings Ltd [2016] NZCA 608) plus based on receipt of these by the second and third respondents. A claim in “unjust enrichment” may potentially not independently add to this cause of action.
(b)For breach by Ms Vaiangina of the obligations of confidentiality in her employment relationship by using sensitive commercial information relating to the affairs and business of FCU and its members (such as access to FCU’s core banking system, account processes and member accounts) to create unauthorised loans and transfer and withdrawal of funds for her personal use and bank account plus to bank accounts of the second and third respondents (through which there is also a good arguable case against them under this head).
(c)Based on a potential conspiracy by unlawful means, in light of the alleged fraudulent conduct at issue and the involvement of the second and third respondents.
Real risk of dissipation
[19] There is alleged serous fraudulent conduct at the foundation of FCU’s claim, supported by the affidavits filed. Following her peremptory resignation on 27 July 2023, the first respondent has avoided attempts to be contacted. I am satisfied that there is a real risk of dissipation of the funds in the first to third respondents’ accounts justifying a freezing order being made. These are circumstances from which a “prudent, sensible, commercial [person] can properly infer a danger of default.”14
[20] I deal with the real property separately and the position of the fourth defendant, below.
Fourth respondent / real property owned by first, second and fourth respondents
[21] The fourth respondent, Mr Talilotu, is Ms Vaiangina’s brother, and is not a defendant in FCU’s substantive claim. As noted above, freezing orders are sought restraining the Mr and Ms Vaiangina and Mr Talilotu from dealing with a leasehold residential property they jointly own. I am advised that FCU is not aware who has beneficial ownership of the property. Nor is it aware of any pending transactions affecting this property.
[22] However, FCU is concerned that the respondents will not have sufficient assets to satisfy any judgment given the indications they have as to the potential amount of misappropriated funds. Therefore, they wish to freeze any ability of the first, second and fourth respondents to dispose of this property (or at least to the extent the first and second respondents have a beneficial interest in it).
[23] Again, given the fraudulent behaviour that is alleged, and the evidence provided of this, I am prepared to infer a real risk of dissipation, including because of the close family connection between the respondents. I regard the context of the claim
14 Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [20021] 2 NZLR 801.
as providing a solid ground for justifying belief in a real risk of the respondents proceeding to deal with the property once they become aware of freezing orders, absent orders including this property. My decision to include the real property should not be seen as using the orders as a vehicle for providing security as that is not the purpose of freezing orders.
[24] On whether to make an order against Mr Talilotu, the fourth respondent, Counsel referred me to Westpac Banking Corp v Gill (No 1).15 In terms of the key proposition (a) in the Masri case cited in that case, the question whether to grant a freezing order over a third party’s assets turns on whether there is good reason to believe that assets prima facie owned by that party are in truth owned by the defendant/s. The context for freezing orders against third parties is generally when a third party holds assets of the prospective judgment debtor or has a power of disposition over them.
[25] There is no particular reason to believe that the property is wholly owned beneficially by the first and second respondents as opposed to simply a situation of joint ownership with the fourth respondent. I accept there is a real risk of disposition against the context of the allegations of fraudulent conduct. Because of the family relationship between the co-owners there may be a greater readiness for the parties to co-operate in dealing with the property.
[26] In my view, the respondent is properly joined to the application as a person affected by the orders to be made, but I decline to make the order against him. Rather, the order is against his co-owners, acting in personam on them, preventing them from dealing with the property they jointly own with Mr Talilotu.16 As a person named as respondent and served with the orders, he would be in contempt for any act deliberately frustrating the purpose for which the orders are made.17 I observe that while counsel’s memorandum suggests that the applicant is seeking orders against Mr Talilotu, the draft orders I was provided with are cast against only the first-third respondents in any event.
15 Westpac Banking Corp v Gill (No 1) (1987) 2 PRNZ 52
16 Cf Powernet Limited v Arthur [2022] NZHC 395 at [11]
17 Sim’s Court Practice at HCRPart 32.1
Assets to which application applies
[27]These are sufficiently identified in the application.
Application justified without notice
[28] The fraudulent conduct context supports that there is sufficient potential prejudice to FCU if the application is not made without notice.
Undertaking as to damages
[29]An undertaking as to damages has been provided.
Balance of convenience/interests of justice
[30] I am satisfied in all the circumstances above and on the papers before me that the balance of convenience favours the making of freezing orders.
[31] The applicant has explained the delay in making the application, pointing to the time it has taken to investigate the matters the subject of the pleading following first being alerted in July 2023.
[32] The usual carve out for ordinary expenses enables the first-third respondents to access funds for those needs.
[33] While the orders with respect to the residential property also affect a third party to the claim, Mr Talilotu, there is not understood to be any pending dealing with it in the immediate future. The justified concern of the applicant as regards dissipation of assets to meet the claim at this stage favours including this property in the order for the interim at least.
[34] The without notice orders will be of limited duration and can be reassessed on an on-notice basis in due course. Accordingly, I consider the overall justice of the case and the balancing of interests favours the applicant. The position with respect to the property can be assessed more fully once the respondents have the opportunity to be heard, including as to the status of the bank accounts.
Orders
[35]I make orders in terms of the draft freezing orders but such that:
(a)In terms of HCR 32.7 I direct that the order be limited to expire at 5 pm on Thursday, 28 September 2023.
(b)In terms of HCR 32.8 I direct that any application by a respondent to discharge or vary the freezing order is to be made on not less than 48 hours’ notice.
(c)The dates in the above sub-paragraphs are to be included at paragraphs 6 and 7 of the draft orders respectively.
(d)The certificate of title details of the property are to be included in the orders ie that it is the property in NA128A/207, Flat 2 Deposited Plan 199353.
(e)The orders are to reflect my conclusions at [25] and [26] above.
[36]I further direct that the orders be served on all respondents promptly.
[37] The matter will be listed in the duty judge list on Thursday, 28 September 2023 at 10 am.
Anderson J
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