Gilbert v Working on Water Limited
[2012] NZHC 1988
•8 August 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-4512 [2012] NZHC 1988
BETWEEN JOHN MICHAEL GILBERT OF C AND C STRATEGIC LIMITED IN HIS CAPACITY AS RECEIVER OF JB CONTRACTORS LIMITED (IN RECEIVERSHIP AND IN
LIQUIDATION) Plaintiff
ANDWORKING ON WATER LIMITED First Defendant
ANDPAUL CHRISTOPHER BALEMI Second Defendant
ANDMARK NICHOLAS BALEMI Third Defendant
ANDGEORGINA ELIZABETH EDWARDS Fourth Defendant
ANDKIWIBANK LIMITED Non-Party
Hearing: 8 August 2012
Counsel: PJ Morris for Plaintiff (Receiver)
HL Thompson for Plaintiff (Liquidator) given leave to withdraw
No appearance for Defendants
No appearance for Non Party
Judgment: 8 August 2012
ORAL JUDGMENT OF RODNEY HANSEN J
Solicitors: Stace Hammond, P O Box 19-101, Hamilton for Plaintiff
(Email: [email protected] )
Copy to: HL Thompson, McMahon Butterworth Thompson, P O Box 106073, Auckland 1143 (Email: [email protected] )
JOHN MICHAEL GILBERT OF C AND C STRATEGIC LIMITED IN HIS CAPACITY AS RECEIVER OF JB CONTRACTORS LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) V WORKING ON WATER LIMITED HC AK CIV-2012-404-4512 [8 August 2012]
Introduction
[1] The plaintiff (JB Contractors) made a without notice application for a freezing order over the bank account of the first defendant (Working on Water). The application came before Priestley J on 4 August. He directed that the application proceed on notice. The application and supporting documents have since been served on the defendants and the non-party (Kiwibank).
[2] JB Contractors was placed in receivership on 26 July and in liquidation on
2 August. This proceeding is brought by the receiver. Mr Thompson appeared on instructions from the liquidator to support the application. He did not seek to be further heard and I gave him leave to withdraw.
Factual background
[3] The application is supported by an affidavit by a forensic accountant retained by the receiver, Mr Terrence Hillson. Relying on information provided by an employee of JB Contractors, he has ascertained that steel plates acquired by the company in June 2012 were sold by the second and third defendants (who are directors of JB Contractors) and the proceeds of sale paid to Working on Water, a company in which they are beneficially interested and of which the fourth defendant is the sole director.
[4] The plates were bought on 14 June 2012 by JB Contractors from Transfield Services Limited for $340,000 plus GST of $51,000. Part of the purchase price has been paid. The balance of $174,409 is payable on 9 August.
[5] On the same date (14 June), through it appears the instrumentality of the second and third defendants, some but not all of the steel plates were on-sold by Working on Water to Hire Pool Limited for a total of $255,000 plus GST payable in two instalments of $170,000 plus GST and $85,000 plus GST. According to the invoice from Working on Water to Hire Pool the first instalment of $170,000 plus GST was paid on 3 July. The invoice stipulates that the purchase price is to be paid
to the Kiwibank account of Working on Water (No. 38-9010-0630680-00). The second instalment was due to be paid on 2 August.
[6] In conversation with the employee of JB Contractors, the third defendant has confirmed the sale of the steel plates and advised of his intention to dispose of the remaining plates.
[7] The receiver of JB Contractors seeks a freezing order, under r 32.2 of the High Court Rules, over the bank account of Working on Water to prevent the monies paid by Hire Pool for the steel plates being dissipated.
Good arguable case
[8] It is necessary first for the applicant to establish a good arguable case.[1] The evidence is compelling and supported by documents which clearly show that the steel plates bought by JB Contractors were sold by Working on Water and the proceeds of sale apparently paid to that company. There is clearly a good arguable case that there has been conversion of JB Contractors’ property, unjust enrichment by Working on Water and breaches of fiduciary duty by the second, third and fourth defendants.
[1] Gatx-Fuller Australasia Pty Ltd v Wilsons (NZ) Portland Cement Ltd [1985] 2 NZLR 11.
[9] The evidence points strongly to the first instalment payable by Hire Pool having been paid to the bank account of Working on Water with the likelihood that the instalment payable on 2 August has found its way into that bank account.
Risk of dissipation
[10] The applicant is also required to establish that there is a risk that the assets may be dissipated if the order is not made. For the purpose of determining risk, the Court is required to adopt the mindset of a prudent or sensible commercial person.[2]
Affirmative proof of the likelihood of dissipation is not required.
[2] Ibid at [22].
[11] On the face of it, the actions of the defendants present as a blatant attempt to divert the proceeds of sale of property owned by JB Contractors for their own benefit. There is no other apparent explanation for what they have done. I am left in no doubt that in the circumstances disclosed by the evidence there is a real and present risk of dissipation of the sale proceeds if orders are not made.
[12] An undertaking as to damages has been provided by the receiver.
[13] I am accordingly satisfied that there are proper grounds for the making of an order generally in terms of the draft order filed. Accordingly, I make an order in terms of the draft order, modified as follows:
[a] The applicant has a good arguable case on an accrued or prospective cause of action that is justifiable in the Court.
[b] The Court has considered the applicant’s application for a freezing order and has heard Mr Morris in support.
[c] The Court is satisfied, having regard to all the circumstances disclosed by affidavit evidence filed in support of the application, that there is a danger that judgment in favour of the applicant will be wholly or partly unsatisfied because the assets of the first defendant might be disposed of, dealt with or diminished in value.
[d] This freezing order is made in respect of the following assets:
[i] The bank account in the name of working on Water Limited at Kiwibank having the account number 38-9010-0630680-00 and any other accounts open in the name of Working on Water Limited.
[e] Subject to paragraph [g], this order restrains the first defendant from removing the asset listed in paragraph [d] from New Zealand or from disposing of, deal with or diminishing the value of that asset.
[f] That ancillary orders be made:
[i] Requiring the first defendant to provide discovery of bank statements for the first defendant covering the period from
1 July 2012 to the current date;
[ii] Requiring the fourth defendant to disclose by way of affidavit the full nature, extent and value of the first defendant’s assets by no later than 13 August 2012.
[g] This order is served upon Kiwibank when it is brought to the attention of Tim Bennett (0272 715 666) by telephoning him to inform him of the order and emailing it to him at [email protected].
[h] Costs reserved.
[i] The first defendant may apply to the Court by interlocutory application to discharge or vary the order. If application is made, the plaintiff must be given notice of not less than seven days.
[j] An undertaking as to damages given by the applicant is attached.
[k] In addition to the freezing order, the first defendant must disclose by way of affidavit the full nature, extent and value of its assets by no later than 13 August 2012.
[l] This order does not affect anyone outside New Zealand until it is declared enforceable by a Court in the relevant country (in which case it affects a person only to the extent that it has been declared enforceable), unless the person is:
[i] A person to whom this order is addressed, or an officer of that person, or an agent appointed by power of attorney of that person; or
[ii] A person who:
1. Has been given written notice of this order at that person’s
residence or place of business within New Zealand; and
2. Is able to prevent acts or omissions outside the jurisdiction of this Court that constitute, or assist, a breach of this order.
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