Flaxpod Investments Limited v Gerbes

[2023] NZHC 1811

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-386

[2023] NZHC 1811

IN THE MATTER OF

a personal guarantee

BETWEEN

FLAXPOD INVESTMENTS LIMITED

Applicant

AND

MARK GERBES AND KATHRYN GERBES

Respondents

Teleconference:	11 July 2023
Counsel:	G S McCardle for the Applicant
Judgment:	11 July 2023

JUDGMENT OF PALMER J

Solicitors

BMS Lawyers Ltd, Paraparaumu

FLAXPOD INVESTMENTS LIMITED v GERBES [2023] NZHC 1811 [11 July 2023]

What happened?

[1]                  Flaxpod Investments Ltd (Flaxpod), the applicant, is the landlord of premises leased by Spectrum Collision Repairs (Spectrum) which is now in liquidation. The respondents, Mr Mark and Ms Kathryn Gerbes, are the guarantors under the deed of lease. Mr Gerbes was the sole director, and the Gerbes together were the shareholders, of Spectrum. The lease expires in March 2028.

[2]                  Ms Katrina Sowry is the sole director of Flaxpod. She has provided an affidavit to the effect that there are current outstanding obligations of Spectrum under the lease of $23,445.17 in rent arrears and outgoings which continue to mount monthly. She says that Spectrum is liable to reinstate the premises at the end of the lease at an estimated cost of $57,000. Ms Sowry’s evidence is that the Gerbes have not paid the lease obligations despite demands through solicitors and have shown no willingness to meet any obligations under the lease. She says that Ms Gerbes has told her they would not be meeting the lease obligations for the remainder of the term and that the Gerbes have commented that they would like to move to Australia.

[3]                  Ms Sowry’s evidence is that the Gerbes have an unconditional sale agreement over their main asset, at Kotuku Drive, Paraparaumu. She understands that the Gerbes intend to distribute a significant portion of the proceeds of sale to their family.

Application

[4]Flaxpod applies, without notice, for:

(a)a caveat over the Kotuku Drive property, preventing the transfer of title until the Gerbes give an undertaking to the Court to hold the proceeds of sale, after repayment of the first mortgage, on trust, pending resolution of the proceedings in enforcing the guarantee under the deed of lease;

(b)an order that the Gerbes give an undertaking to hold the proceeds of sale, after repayment of the first mortgage, on trust pending resolution

of the proceedings in enforcing the guarantee under the deed of lease; and

(c)any other orders the Court sees fit to make.

[5]                  Flaxpod believes that applying on notice to the Gerbes could allow settlement of the sale and disposition of the proceeds before it can apply for a judgment debt, which would cause it serious prejudice and financial hardship.

Orders

[6]                  On the basis of the evidence before me, I accept that Flaxpod has genuine reason for concern over dissipation of the assets at issue if the application were to be made on notice.

[7]                  Flaxpod is effectively applying for an interim injunction before the commencement of proceedings. It relies on r 7.53 of the High Court Rules 2016, which provides that such an application may not be made except in the case of urgency and that any injunction granted before the commencement of the proceeding must provide for the commencement of the proceeding and may be granted on any further terms that the Judge thinks just. I am satisfied that there is urgency here and the application is properly made.

[8]                  In considering an application for an interim injunction the Court must examine whether there is a serious question to be tried, consider the balance of convenience for the parties, pay particular attention to whether damages would be an adequate remedy, and assess the overall justice of the position.1 I consider the evidence provided to the Court to date supports the existence of a serious question to be tried. I do not have information about the inconvenience of the injunction sought for the respondents but, on the basis of the information provided, I consider the balance of convenience favours the applicant. The information I have about the respondents also suggests that damages is not likely to be an adequate remedy.

1      NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; Cabco Group Ltd v Bartlett (2009) 6 NZELR 500 (HC) at [30].

[9]                  Accordingly, I order an interim injunction with the effect sought. However, I omit the language of “undertaking” which confuses the court’s order with an action by the respondents. And I make the injunction more direct in prohibiting the Gerbes from disbursing the proceeds, other than by repaying the first mortgage.

Result

[10]I order:

(a)the respondents, Mr Mark and Ms Kathryn Gerbes, must not disburse the proceeds of sale of 44 Kotuku Drive, Paraparaumu (Record of Title 308927, Lot 225 Deposited Plan 376894) to any third parties, except by repayment of the first mortgage, until resolution of the substantive proceedings;

(b)the applicants must file a statement of claim in the substantive proceedings within five working days;

(c)leave is reserved for any party to apply, on three days’ notice, to vary or discharge the orders above;

(d)the proceedings will be called in the Judge’s Chambers List in the Wellington High Court at 10 am Monday 31 July 2023 to review progress. The parties should file and serve memorandum by noon Thursday 27 July 2023 to update the Court; and

(e)the applicants’ counsel must provide this judgment, along with the Court’s formal order, to the respondents and/or their solicitors, forthwith.

Palmer J