Gong v Zhang
[2016] NZHC 705
•15 April 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2014-454-11
CIV 2014-454-28 [2016] NZHC 705
BETWEEN YAOMING GONG
Plaintiff
AND
SHIJUN ZHANG Defendant
Hearing: 11 April 2016 Counsel:
J W Maassen for Plaintiff
R Reed and A Manuson for DefendantJudgment:
15 April 2016
JUDGMENT OF BROWN J
Introduction
[1] The substantive claims in these two proceedings are set down for hearing in the High Court at Wellington for several days commencing 7 June 2016. In the first proceeding the plaintiff seeks to recover a debt allegedly owed to him by the defendant in the sum of $591,848. In the second proceeding the plaintiff seeks to recover from the defendant the sum of $164,082.58, being a half share of an amount for which they were jointly obligated and which the plaintiff claims to have paid in full.
[2] On 23 November 2015 the plaintiff applied without notice for a freezing order and an ancillary order against the defendant on the grounds that there was a significant danger that judgment in favour of the plaintiff in the proceedings would be wholly or partly unsatisfied because the defendant might abscond or because
certain of his property had allegedly been transferred to a trust.
GONG v ZHANG [2016] NZHC 705 [15 April 2016]
[3] By a Minute dated 27 November 2015 I made orders in terms of a draft freezing order and a draft ancillary order which had been submitted by the plaintiff. A new freezing order was issued by me in a Minute dated 18 December 2015. That freezing order was amended by Dobson J in a Minute dated 1 February 2016.
[4] On 4 February 2016 the defendant filed an application to set aside or in the alternative to vary the freezing and ancillary orders of 27 November 2015. On
18 February 2016 the plaintiff filed an application to strike out the defence in both proceedings on the grounds that the defendant had not complied with the original ancillary order dated 27 November 2015, the freezing order dated 18 December 2015 or the amended freezing order dated 1 February 2016. This judgment addresses those two applications.
Background
[5] The plaintiff’s original application of 23 November 2015 sought an order to freeze the property at 25D Riverglade Drive, Hamilton which was said to have a capital value of $2,060,000, albeit subject to a mortgage. An ancillary order was sought requiring the defendant to disclose a list of his assets in New Zealand.
[6] As the likely maximum amount of the applicant’s claim was in the order of
$1,000,000, I considered, given the values of assets referred to in the application, that there was a potential issue with r 32.6(2). I requested a memorandum addressing the issue together with a draft order. Ultimately the freezing order made on 27 November 2015 related only to the property at 25D Riverglade Drive, Hamilton. An ancillary order required the defendant to provide the Court with a list of all New Zealand-based assets owned by the defendant within five working days of receipt of the order. There was also a direction to disclose the net value of the property at 25D Riverglade Drive.
[7] The freezing order advised the defendant:
7.As the freezing order has been made without notice to you, it will have no effect after 11 December 2015, unless on that date it is continued or renewed. On that date you or your counsel are entitled to be heard by the court in opposition to the continuation or renewal of the order.
[8] On 7 December 2015 the defendant filed a memorandum in response to the ancillary order, stating:
2. The First Respondent/Defendant has advised that his
New Zealand-based assets are:
(a) 25D Riverglade Drive. Certificate of Title SA67D/214, Legal Description Lot 1 Deposited Plan 58290;
(b) Black 2011 Jaguar XJ FWR923;
(c) White 2012 Land Rover Range Rover HJH368;
3.The First Respondent/Defendant also advises that the capital value of 25D Riverglade Drive is $2,060,000. The current amount owed pursuant to the mortgage over this property is approximately
$1,610,409. The First Respondent therefore estimates the net value of this property as being approximately $449,591.
[9] The plaintiff ’s application was scheduled to be called again in the High Court at Wellington on 11 December 2015. On 10 December 2015 the plaintiff filed a memorandum seeking a new freezing order in respect of the following assets:
(a) 25D Riverglade Drive Certificate of Title SA67D/214, Legal
Description Lot 1 Deposited Plan 58290 (estimated net value
$450,000.00).
(b) All household chattels and furniture in the 25D Riverglade Drive property;
(c) Black 2011 Jaguar XJ FWR923;
(d) White 2012 Land Rover Range Rover HJH368; and
(e) All New Zealand Bank Accounts owned by the Defendant (whether in his sole name or in joint names) or under the Defendant’s control up to the value of $700,000.
In that memorandum the plaintiff stated that the proposed order would freeze up to, but not exceed, the maximum sum sought in the proceedings which was said to be
$1,300,000.
[10] On the same day Mr K I Bond, who was then counsel for the defendant, filed a detailed memorandum which acknowledged the inadvertent failure to include bank accounts in the first defendant’s list of New Zealand-based assets. Mr Bond explained that, because the defendant travelled internationally on business and
because there were significant language difficulties with instructions being obtained almost exclusively via an interpreter, it had not been possible to respond properly within the timeframes required by the interim freezing order. It was stated that, while the defendant opposed the imposition of a freezing order, he was resigned to the fact that a freezing order would likely be continued for a period.
[11] After detailing the defendant’s denial of various allegations made by the plaintiff in support of the application for a freezing order and responding to the request for the new freezing order, the memorandum stated:
21.In the circumstances and notwithstanding the matters set out in paragraphs 12 to 17 above, the first respondent does not oppose the continuation of the existing freezing order on an interim basis. However, he asks that the matter be adjourned for a week to allow him time to properly brief his solicitors and respond to the substance of the application including deciding whether to oppose the freezing order or the proposed expansion of it now sought by the plaintiff.
22.It is submitted that given the approaching holiday period during which the Courts and many law firms will be closed and the serious impingement on the first respondent’s rights resulting from the imposition of a freezing order, it is just that the first respondent be given an opportunity to properly respond and for the extent of the freezing order to be clarified.
23.Counsel respectfully suggests that the current freezing order be continued on an interim basis and that a telephone conference be scheduled for Friday, 18 December 2015 to address the continuation of the freezing order and the plaintiff’s application to vary and expand the scope of it and any opposition to that by the first respondent.
[12] On 11 December 2015 Collins J gave directions that the freezing order made on 27 November was extended until 18 December 2015 and that a telephone conference would be held at 10.00 am on that day.
[13] On 14 December a memorandum was filed advising of a change of representation and address for service for the defendant. On the same day Ms Reed of Prestige Lawyers Limited filed a memorandum advising that counsel had not had sufficient time to review the full file and take full instructions from the defendant who was not then in New Zealand. The defendant requested a variation of the timetable, which had been made by Associate Judge Smith on 16 November 2015,
including extending the time for the service of the defendant’s briefs of evidence
from 23 December 2015 to 23 January 2016.
[14] The plaintiff responded with a memorandum that noted that the defendant’s briefs of evidence were to have been served on 23 September 2015. However, as a result of various delays, a new timetable had been made on 16 November 2015 allowing the defendant until 23 December 2015 to serve his briefs. It was said however that the Associate Judge had made it clear that the amended timetable should not be delayed further except where exceptional circumstances presented.
[15] Reasonably detailed memoranda were then exchanged during the period 15 to
17 December 2015. The plaintiff’s memorandum of 16 December 2015 stated that the plaintiff sought the following directions at the telephone conference to be held on
18 December 2015:
(a) The current freezing order is extended until 22 December 2015;
(b) A new ancillary order is granted on 18 December 2015 on the below terms:
(i) That the Defendant provide a full list of all New Zealand bank accounts and savings deposits that are in the name of the Defendant or under the Defendant’s control (whether in his sole name or in joint names) which are currently open or have been closed since the beginning of these proceedings on 14 February 2014 including the mortgage account and any account receiving rent from the lease of 25D Riverglade Drive;
(ii) That the Defendant provide the history of all bank accounts, whether open or closed identified under 4(a), from
14 February 2014 to present; and
(iii) That the Defendant has until 21 December 2015 to comply with the ancillary order.
(c) A new freezing order is granted on 22 December 2015 once the above ancillary order has been complied with in respect of the following assets and/or any other assets that may be disclosed in accordance with the ancillary order:
(i) 25D Riverglade Drive Certificate of Title SA67D/214, Legal
Description Lot 1 Deposited Plan 58290 (estimated net value
$450,000.00).
(ii) All household chattels and furniture in the 25D Riverglade
Drive property;
(iii) Black 2011 Jaguar XJ FWR923;
(iv) White 2012 Land Rover Range Rover HJH368; and
(v) All New Zealand Bank Accounts owned by the Defendant or under the Defendant’s control (whether in his sole name or in joint names) up to the value of $700,000.
[16] The defendant’s memorandum of 17 December 2015 concluded in this way:
17.Counsel therefore seeks for the current freezing order to continue until 26 February 2016 and for the Defendant to be provided an opportunity to file a notice of opposition to the Without Notice Application. The hearing in February 2016 is to also determine whether a new freezing order and ancillary order as sought should be granted.
[17] I convened a telephone conference on 18 December 2015 which was the last formal sitting day of the year. After hearing at reasonable length from counsel for the parties, I proposed the course recorded in my Minute at para [2] below, which was acceptable to both counsel:
[1] A telephone conference was held this morning to address two matters:
(a) the plaintiff’s application for freezing orders which was
extended until today by Collins J on 11 December 2015;
(b) the defendant’s request for an extension of the timetable for the service of briefs and other pre-trial steps recorded in the Minute of Associate Judge Smith of 16 November 2015.
[2] After hearing from counsel I indicated that I was prepared to grant to the defendant the indulgence of an extension of the timetable sought by the defendant provided that the plaintiff’s interests in the proceeding were protected by an extension of the freezing order both as to duration and as to assets with a net value of $1 million. Counsel for both parties indicated that that course was acceptable.
[18] After recording the terms of the amended timetable the Minute continued:
[4] I make an order extending the freezing order until a date of hearing to be advised by the Court in respect of the following assets of the defendant:
(a) 25D Riverglade Drive, Certificate of Title SA67D/214, Legal Description Lot 1 Deposited Plan 58290 (estimated net value $450,000.00).
(b) All household chattels and furniture in the 25D Riverglade
Drive property.
(c) Black 2011 Jaguar XJ registration No. FWR923.
(d) White 2012 Land Rover Range Rover registration No.
HJH368.
(e) New Zealand Bank Accounts owned by the defendant or under the defendant’s control (whether in his sole name or in joint names) up to the value of $400,000.
[5] Ms Manuson is to advise the Court and the plaintiff’s counsel within five working days of the name(s) and number(s) of the bank account(s) containing the amount of not less than $400,000.
[6] In the event that there is non-compliance with any of these orders,
leave is reserved to apply to the Court on five working days’ notice.
[19] On 23 December 2015 counsel for the defendant filed a memorandum which listed all the New Zealand bank accounts in the defendant’s name or control and stated:
4.The Defendant therefore has an accumulative amount of $40,018.90 across all New Zealand bank accounts that are in his name or control. The amount excludes the monies in the accounts listed at
3(j)–(l) above to which the Defendant currently does not have access.
The defendant consented to the freezing of those accounts pending the hearing of the application after the New Year period.
[20] Subsequently an affidavit of Mr Zhang dated 21 January 2016 was filed in which Mr Zhang referred to the direction in para [5] of my Minute of
18 December 2015 and to his lawyer’s memorandum of 23 December 2015 and stated:1
[12] Besides the bank accounts identified in my lawyer’s memorandum dated 23 December 2015, and the above properties, I do not have any other assets of significant value in New Zealand. I did not move any assets overseas to defeat Dr Gong’s claims.
1 The affidavit in English was sworn by the defendant, its contents having been explained to him in Chinese and he having had the opportunity to review a Chinese translation.
[21] The defendant’s non-compliance with para [5] of my Minute of
18 December 2015 prompted the plaintiff to file a memorandum dated
11 January 2016 in which the plaintiff sought a further ancillary order which included the requirement that the defendant identify sufficient overseas assets to satisfy the amount directed to be frozen, which overseas assets would then be included in an amended freezing order.
[22] The defendant’s counsel filed a memorandum dated 21 January 2016 stating that despite their best efforts the defendant’s solicitors were not in a position to serve the defendant’s brief of evidence or the notice requiring admissibility issues by
23 January 2016. A further extension of two weeks to file the defendant’s evidence was sought. That request for an extension was strongly resisted by the plaintiff in his counsel’s memorandum also dated 21 January 2016.
[23] The various memoranda and other documents were considered by Dobson J
who issued a Minute on 1 February 2016 amending the order made on
18 December 2015. That Minute relevantly stated:
[1] I have considered all the documents filed since the minute of Brown J on 18 December 2015, in particular the request on behalf of the defendant for an extension of timetabling matters dated
21 January 2016, and the memoranda for the plaintiff dated 21 and
28 January 2016.
[2] There are two causes for concern. First, non-compliance with the previous extension to the timetable that was agreed to by present counsel for the defendant, and is by now materially in default. Secondly, the defendant’s failure to identify New Zealand bank accounts holding not less than $400,000, further exciting the plaintiff’s concern that the defendant has been removing assets from the jurisdiction.
[3] As to timetabling, the additional extent of work required in preparing affidavits caused by the need for translation must have been known to counsel for the defendant before accepting that the previous extensions were sufficient. There are grounds for concern suggested on behalf of the plaintiff that in this and other respects the defendant is dragging his feet to delay the proceedings being ready for trial.
[4] Counsel for the plaintiff suggests that any further extension such as is now requested ought only to be granted on “unless order” terms, so that further non-compliance would automatically trigger a striking out of the defendant’s statement of defence.
[5] I am not prepared to deal with the extension on that default basis without hearing from counsel for the defendant as to the circumstances of any further non-compliance. However, the extensions I now grant are on the basis that the defendant is on notice that the Court will receive an application and, depending on circumstances, is likely to grant an application striking out the defence if further non-compliance occurs and it is not thoroughly justified.
…
[7] As to the defendant’s failure to comply with the current orders requiring the identification of New Zealand bank accounts holding not less than $400,000, again the non-compliance provides grounds for concern that the defendant is seeking to keep assets hidden to frustrate the plaintiff executing any judgment he may become entitled to. Given the circumstances justifying the orders previously made, this non-compliance is taken seriously by the Court.
[8] The previous orders in this regard are accordingly amended as follows:
(a) the defendant is to comply with the direction to provide an amount of not less than $400,000 in cash assets that can be secured by 5 pm on 4 February 2016; or
(b) the defendant is by 5 pm on 5 February 2016 to:
(i) provide a full list of all New Zealand bank accounts and savings deposits that are in the name of the defendant or under the defendant’s control (whether in his sole name or in joint names) which are currently open or have been closed since the beginning of these proceedings on
14 February 2014, including the mortgage account, business account or any account receiving rent from
the lease of 25D Riverglade Drive;
(ii) provide the history of all bank accounts, whether open or closed, identified under (i) above from
14 February 2014 to the present;
(iii) identify sufficient overseas assets to satisfy the amount directed to be frozen which will then be included in an amended freezing order.
The defendant’s applications
[24] The applications to discharge and, in the alternative, to vary the freezing and ancillary orders of 27 November 2015 were made in reliance on rr 32.7 and 32.8 and both invoked the same grounds:
a.The Defendant lives in New Zealand and has not removed any assets from New Zealand for the purposes of defeating any judgment in favour of the plaintiff.
b.There is no evidence of risk that the Defendant will abscond or remove assets from New Zealand for the purposes of defeating any judgment in favour of the plaintiff.
c.The Freezing and ancillary orders were made without notice to the defendant on 27 November 2015. The Defendant has since complied with the Orders.
d.Pursuant to the Freezing order, the defendant was to be given an opportunity to be heard on 11 December 2015. This hearing did not eventuate. At an urgently convened Teleconference on
18 December 2015 interim directions were made for the purposes of dealing with matters over the approaching Christmas and New Year break.
e.In memorandums (sic) filed on and after 11 December 2015, the plaintiff sought further ancillary directions for the Defendant to disclose all New Zealand bank statements and historical information from 14 February 2014 to date. The information sought had no relevance to the freezing order made or any prospective freezing order.
f. At the Teleconference on 18 December 2015, directions were made that the freezing was to be extended until a hearing date to be advised by the Court in respect of the following assets:
i. 25D Riverglade Drive;
ii. All household chattels and furniture at 25D Riverglade
Drive;
iii. Black 2011 Jaguar XJ registration number FWR923;
iv. White 2012 Land Rover registration number HJH368;
v. New (sic) New Zealand bank accounts in the defendant’s name or control up to the value of $400,000.00, on the basis that his newly instructed lawyers would be given timetabling extension as sought in order to obtain proper instructions.
g. In making those directions at paragraph (f) above, the issue of the expansive nature of the ancillary directions sought by the plaintiff was discussed and it was submitted that it would not be necessary to disclose all bank accounts, if the defendant could disclose some bank accounts which added to $400,000.00. However, it was made clear that steps had not been taken to ascertain the balance of money in the all New Zealand bank accounts in the defendant’s name or control.
h.Having ascertained the amounts in each of the bank accounts in the name and control of the defendant, the defendant accumulatively had approximately $40,000.00. The defendant thus disclosed all details of his New Zealand accounts, in his name or in his control.
i. In further transgression of the defendant’s right to be heard, on
1 February 2016, Dobson J directed further ancillary orders and expansion of the freezing order. The ancillary order adopted the
extensive and irrelevant information sought by the plaintiff by way of memorandum. Dobson J further directed that the defendant is to
identify overseas assets to be subject to the freezing up to the value of $40,000.00 (sic), which had not been sought by the plaintiff and for which the plaintiff has not given relevant undertakings.
j. The directions made subsequent to the initial freezing and ancillary orders do not comply with the High Court Rules or the mandatory terms of the Freezing order.
k. On further grounds as set out in the supporting affidavit of the
Defendant.
[25] At the outset of her oral argument at the hearing Ms Reed indicated that the defendant proposed to take a pragmatic approach and was only seeking an order for variation. However I was reluctant to leave the discharge application unresolved. In the course of discussion following the lunch adjournment Ms Reed revised her position, considering that it was more appropriate to pursue both the discharge and variation orders.
The nature of the hearing
[26] The first application for a freezing order was made without notice and hence it was to cease to have effect after 11 December 2015 unless continued or renewed.2
In a memorandum dated 10 December 2015 the plaintiff sought a new freezing order.3 That memorandum concluded as follows:
[6] The Defendant has been given notice of the interlocutory application dated 23 November 2015 and has a chance to be heard on
11 December 2015 in accordance with rule 32.7(2). The Defendant also has the ability to challenge the freezing order by interlocutory application.
[27] However no hearing was held on 11 December 2015 and the application was adjourned to 18 December 2015. On that day there was a hearing by telephone conference at which I heard submissions from counsel, albeit in a somewhat constrained timeframe. The parties’ aspirations concerning the outcome of the teleconference had been recorded in their memoranda filed a short time prior.4
[28] Consequently, although an agreed way forward was identified at the
18 December 2015 telephone conference, I do not consider that that conference provided to the defendant the hearing envisaged by r 32.7(2). Rule 32.7 states:
32.7 Duration of freezing order
(1) A freezing order made without notice to the respondent must state that it is limited to a particular date, which should be as early as practicable after the freezing order is made.
(2) The respondent must be informed that on that date the respondent will have an opportunity to be heard by the court.
(3) On the date referred to in subclause (1) the applicant has the onus of satisfying the court that the freezing order should be continued or renewed.
[29] Nor in my view did the consideration by Dobson J on 1 February 2016 on the papers provide the opportunity for a r 32.7(2) hearing. Consequently I approach the defendant’s application for orders discharging or varying the freezing and ancillary orders as the consideration envisaged by r 32.7(2) where the plaintiff has the onus of satisfying the court that the freezing order should be continued or renewed.
Relevant principles
[30] There are three primary requirements for a freezing order: (a) a good arguable case on the substantive claim;
(b) assets to which the order can apply;
(c) a real risk that the defendant will dissipate or dispose of those assets.
4 See [15] and [16] above.
[31] A good arguable case is established if the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence.5 The applicant does not need to demonstrate that its case is strong enough to entitle it to summary judgment. It is a circumstance dependent threshold.
[32] The third requirement to establish a real risk of dissipation is central to the freezing order jurisdiction. The fact that a defendant is going to dispose of assets does not invoke the freezing order jurisdiction unless there is a real risk that a judgment in favour of the applicant will be partly or wholly unsatisfied if the freezing order is not made. The applicant must point to circumstances from which a prudent, sensible commercial person can properly infer a danger of default, a test
which is not unduly exacting.6
Discussion
[33] The amended statement of claim in CIV-2014-453-11 (the first proceeding) recites the fact of payments by the plaintiff to Skycity for the benefit of the defendant, which payments are alleged to be loans to the defendant. Various documents are detailed in the pleading as evidencing the fact of the loans. The defendant acknowledges the fact of the payments but contends that the payments were the plaintiff ’s contribution to a joint gambling fund for the benefit of both the plaintiff and the defendant to which the defendant also contributed.
[34] The amended statement of claim in CIV-2014-454-28 (the second proceeding) alleges the entry into a written agreement dated 17 June 2013 by the plaintiff and the defendant with Messrs R Robertson and S Dickie, one effect of which was that the plaintiff and the defendant would jointly be liable to pay one half of the costs incurred by S Dickie in undertaking experimental testing of kiwifruit. The claim also pleads that Mr Dickie issued an invoice to the plaintiff and the defendant in the sum of $328,165.15.
[35] The defendant admits the fact of the agreement, the payment obligation and the invoice but raises a variety of matters by way of defence to the claim that he is obliged to pay half the amount of the invoice. Mr Maassen pointed to an affidavit of the defendant filed in opposition to a summary judgment application in which the defendant admitted signing the agreement but raised what appeared to be a non est factum defence.
[36] Although Ms Reed spent some time reviewing the schedules to the pleading in the first proceeding and the bank statements of the company NZCHI International Exporting Ltd, from whose account the amounts were taken to pay the invoice the subject of the second proceeding, I am satisfied from my perusal of the pleadings that there is a good arguable case that the defendant is indebted to the plaintiff in the amounts alleged in both the proceedings.
[37] The contention that the defendant was intending to abscond from New Zealand leaving the plaintiff without recourse was based on two matters which were referred to in the grounds of the original freezing order application:
(c) The first sign that the First Respondent intended to abscond was when the abovementioned title SA67D/214 was transferred into an assumed trust. The property was previously registered in the names of Shijun Zhang (the Defendant in the proceedings) and Jian Hua Hou (the Defendant’s wife) and was transferred to them as trustees of an undisclosed trust on 22 December 2014. The property is the place of residence of the First Respondent when in New Zealand. It is at 25D Riverglade Drive, Tamahere, Hamilton.
(d) The Applicant believes the transfer of 25D Riverglade Drive has been performed in order to defraud the Applicant as creditor of the First Respondent and that the property may be further transferred out of the trust.
(e) The Applicant’s concerns were cemented when, at 4:23pm on
5 August 2015, the First Respondent phoned the Applicant’s wife Tianshu Dong from China. During the phone conversation the First Respondent said that the Applicant would not be able recover even if the judgment is in his favour.
[38] Those assertions were supported by affidavits of both the plaintiff and his wife, the latter affidavit exhibiting a photograph of a mobile telephone showing the details of the number of the caller and the duration of the call. In my view the information provided was collectively sufficient to warrant the issue of a freezing order.
[39] Since my consideration of the original application there has been a wealth of evidence filed concerning those two issues. The defendant denies that he has moved assets overseas since the commencement of the proceedings. He denies having made the telephone call to the plaintiff’s wife. In an affidavit dated 21 March 2016 he stated:
3. As stated at paragraph 18 of my previous affidavit dated
4 February 2016, I did not make the phone call to the plaintiff’s wife
on 5 August 2015. My lawyers have asked Howie Yin to independently call the number to confirm this. He found out that the number belonged to Manguo International Hotel, in Guangzhou (“the Hotel”).
4. I called the Hotel myself, dialling +86 20 8168 7777, on
27 February 2016 and asked them to verify whether they had any records of me staying at the Hotel on 5 August 2015. They said they had no records of me staying there on 5 August 2015, and I asked them to provide a letter confirming this. Annexed and marked “B” is a copy of the letter from the Hotel in Chinese. Annexed and marked “C” is the translation of that letter.
[40] That assertion generated a response from the plaintiff in an affidavit dated
1 April 2016 asserting that phone calls could readily be made from the hotel and exhibiting a screen shot in Chinese from the hotel’s website which advertised that international phone calls can be made from the hotel. A further response of the defendant in an affidavit dated 6 April 2016 contended that the website which the plaintiff had found was a fake. Suffice to say that the competing contentions made cannot be resolved at this stage of the proceeding on affidavit evidence alone.
[41] So far as concerns the transfer into trust of the Riverglade Drive property, the defendant has deposed:
17.I acknowledge that on 22 December 2014 my wife and I transferred the Riverglade House into a trust. However, I did not do this to defeat the plaintiff’s claims. I did so on advice from my
conveyancing lawyers, who do not act in these proceedings – I needed a loan to cover my business operational expenses and my conveyancing lawyer told me that the best way to structure that is to put the Riverglade House into a trust. The plaintiff says that I have done this transfer to defraud him but that is incorrect – I did not transfer it to the trust to try to defraud him.
Again, it is not possible to resolve the different contentions on the present application without the benefit of cross-examination.
[42] However the plaintiff refers to still further material which he contends points to his perspective of events being the correct one. In particular he refers to the translated transcript of a taped telephone conversation between the plaintiff and the defendant on 25 February 2014. That transcript is referred to in para [2](d)(viii) of the amended statement of claim in the first proceeding. Relevant to the present issue it records the defendant as having made the following statements:
Now that you are suing me and have no intention of sorting things out privately, I am regarding this as you having declared war against me. What I would like to say here is that in my defence, I may have to hurt you, and in case that happens, I am apologising to you now in advance.
…
Frankly speaking, I did have a few options to try to sort out this matter. All these options were based on the ground that I admit that I borrowed the money from you and I acknowledge the debt.
However, you have declared war against me. Although I do not understand the law, I understand the principle. I believe that you want to get the money back through legal procedures, but I can tell you that there will be more than a 95% chance that you will not be able get any money back at all.
I also have got other ways to deal with this, and I can tell you again, if I hurt you in my defence, I can only apologise now in advance.
…
You are right. Regarding the loan, I would never deny it in a discussion between you and me. However, if this matter is to be dealt with in court, it will be a different story, as the same matter can have different outcomes when dealt with in different processes/channels.
[43] It appears that the defendant does not deny that a telephone conversation with the plaintiff took place on 25 February 2014. However an extract from his brief of evidence of 4 February 2016, which was included without challenge in the plaintiff’s bundle of documents, stated:
66. I was upset and continued trying to call [the plaintiff]. On
25 February 2014, I called [the plaintiff] about 6 times before he finally answered my call. I understand that this was the call that had
been recorded by [the plaintiff], which I did not know I was being
recorded the time. We were both upset, but I tried to make the situation better by saying that, if there was anything owed between us, we can settle it. This was in no way an acknowledgement of money debt between us. The Chinese language I used reflected this. I am currently seeking an expert to clarify the translation provided by [the plaintiff] and to put the above conversation into the Beijing culture perspective. However, I am unable to provide the brief of evidence of the expert by the time of filing my brief of evidence.
[44] While the evidence concerning the transfer of the property into a trust is now shown to be equivocal, the alleged telephone call to the plaintiff’s wife together with the content of the transcript of the acknowledged telephone conversation between the plaintiff and the defendant on 25 February 2014 satisfies me that there is a real risk of dissipation of the defendant’s assets. Consequently I consider that the continuation of the freezing order is justified and indeed required.
[45] So far as the terms of the freezing order are concerned, I first observe that in a memorandum of 3 February 2016 counsel for the defendant acknowledged that the defendant was agreeable to the original order of 27 November 2015 remaining in force until the proceedings were resolved. The same memorandum stated that the defendant had given instructions that he would be amenable to having all New Zealand bank accounts in his name or control frozen until he could be given an opportunity to be heard and provided that would mean that his counsel would be given more time to take instructions.
[46] That memorandum further stated with reference to the course of events at the
18 December 2015 telephone conference:
9.As the further ancillary order sought by the plaintiff was unreasonably burdensome and was equivalent to auditing the Defendant’s finances for the past 2 years, counsel raised whether the defendant had to disclose all New Zealand bank accounts in his name and historical information about the accounts, or whether it would be sufficient if the defendant could nominate bank accounts up to the value of $400,000.00. Brown J directed that it would be sufficient to nominate bank accounts up to the value of $400,000.00. Counsel made it clear that steps had not been taken to ascertain the amounts in these bank accounts and it was understood that, if
$400,000.00 was the sum that could be met across some of the bank
accounts of the defendant, then not all bank accounts needed to be disclosed.
[47] I consider that the freezing order which I proposed on 18 December 2015 and to which both counsel agreed, albeit it appears that in the case of counsel for the defendant it was only intended to be on an interim basis, continues to be a reasonable order in the circumstances.
[48] The order of Dobson J was intended to provide the defendant with an alternative mode of complying with my direction, namely by identifying assets outside the jurisdiction. As such, the object of the amendment was not to disadvantage the defendant but to ameliorate the position by permitting assets outside New Zealand to be included for the purposes of securing the sum of
$400,000.
[49] The order of Dobson J was attacked by the defendant as failing to comply with the High Court Rules. I understood Ms Reed to advance two complaints. First, it was submitted that there was no formal application made but only the request contained in the memorandum of counsel for the plaintiff dated 11 January 2016.7
Secondly, it was said that there was no undertaking as to damages provided in respect of the extension to my order to include overseas assets.
[50] I do not consider that those criticisms have merit. In my view the request for a variation of the order by way of a memorandum was appropriate, particularly during the vacation period. Secondly, I consider that the original undertaking as to damages dated 23 November 2015 would have been construed as applying to any extension to the order.
[51] However in the course of argument Mr Maassen advised, in response to my inquiry, that the plaintiff would provide an amended undertaking as to damages to explicitly cover an order which related to the defendant’s assets outside
New Zealand.
7 At [21] above.
[52] On the condition that such an amended undertaking as damages is filed, I make a freezing order in respect of the following New Zealand assets of the defendant:
(a) 25D Riverglade Drive, Certificate of Title SA67D/214, Legal
Description Lot 1 Deposited Plan 58290 (estimated net value
$450,000.00).
(b)All household chattels and furniture in the 25D Riverglade Drive property.
(c) Black 2011 Jaguar XJ registration No. FWR923.
(d) White 2012 Land Rover Range Rover registration No. HJH368.
[53] I further direct that by 9 May 2016, which is 15 working days from the date of this judgment, the defendant is to file an affidavit containing specific details of his New Zealand and overseas assets to the value of NZ$400,000 which will then be included in the freezing order made above.
Application to strike out defences
[54] Although the defendant filed an application to set aside the freezing order8 no application was made to stay the freezing order. However in a memorandum dated
3 February 2016 filed with the application9 the following direction was sought:
15. Counsel respectfully seeks that the Direction of Dobson J dated
1 February 2016 be stayed until the Defendant has been given an opportunity to be heard on his Application to rescind the order and the above submissions.
[55] Having filed those documents it appears that the defendant took no steps whatever to comply with the order of Dobson J of 1 February 2016.
[56] On 18 February 2016 the plaintiff filed an application for an order to strike out the defences in the proceedings and to seal judgment in the plaintiff’s favour on the grounds of the defendant’s non-compliance. In the application the plaintiff stated that the defendant had no justification for not complying with the Court’s directions, particularly where the freezing order and ancillary order terms had been agreed to by the defendant on 18 December 2015.
[57] Relying on r 7.48, the plaintiff cited Butler v Li10 where Giles J observed:
I have recently issued judgments and/or have made orders in directions conferences designed to make it clear to the profession that the days of the profession deciding when and if they will comply with procedural orders made by this Court have come to an end. Court orders are orders of the Court which counsel and parties are expected to comply with. Failure to comply is, in short, a contempt. The whole purpose of procedural orders and directions conferences is to ensure that both litigants, plaintiffs and defendants, receive prompt compliance with interlocutory entitlements so that the real merits of the case can proceed. Rules 277 and 437(7) are designed to deal with any deliberate default. The remedy is either judgment in the case of a defaulting defendant, or dismissal in the case of a defaulting plaintiff. Where procedural orders are made by consent there is a particular need for compliance.
[58] The defendant filed a detailed noticed of opposition dated 2 March 2016 in which it was contended that his non-compliance was not in wilful default of the orders and that he must be given a chance to be heard and have his application to strike out the freezing orders determined before his defence is struck out for any alleged non-compliance. The defendant also filed a substantial affidavit of his former solicitor, Mr Bond, explaining the circumstances which have given rise to the delays in complying with the timetable of steps to trial.
[59] Notwithstanding that the order of 18 December 2015 was made by consent, the fact is that that order was not capable of compliance because it transpired that the defendant did not have in his New Zealand bank accounts funds of the agreed amount. Indeed he had only a little more than 10 per cent of that sum.11 The amended order of Dobson J had the purpose of providing an alternative way in which the defendant could provide security for the amount agreed on
18 December 2015.
10 Butler v Li (1997) 12 PRNZ 23 (HC) at 25.
[60] In my view there was plain non-compliance with the amended order of Dobson J which was not excused merely by the filing of the application to discharge the freezing order. It was not appropriate for the defendant to simply take no steps to comply with that order on the basis that an application had been filed to discharge it. Indeed it was foolhardy to proceed in that way having regard to the observations of
Dobson J at paras [5] and [7] of his Minute.12
[61] However I propose to afford the defendant a further indulgence in that I refrain from granting at this time the order which the plaintiff seeks striking out the defences in the two proceedings. Nevertheless and for the avoidance of doubt I record that I expect the defendant to comply with the orders made in this judgment.
[62] At an earlier point in time13 the plaintiff invited the Court to give consideration to the making of an unless order. At the hearing Mr Maassen advised that, having taken instructions in the lunch break, he did not press at that time for an order striking out the defences. However he advised that his instructions were to consent to an unless order if there was still further non-compliance by the defendant after a period of 10 working days or 14 days.
[63] Having regard to the duration of the non-compliance by the defendant I consider that an unless order is now justified. However, instead of the timeframe proposed by the plaintiff, the defendant will have the 15 working day period provided in the confirmed freezing order within which to respond to the Court’s direction before the unless order takes effect.
Disposition
[64] The defendant’s application for an order discharging the freezing order is declined. The plaintiff having satisfied me that the circumstances warrant the making of a freezing order, the freezing order will continue in respect of the following items:
(a) 25D Riverglade Drive, Certificate of Title SA67D/214, Legal
Description Lot 1 Deposited Plan 58290 (estimated net value
$450,000.00).
(b)All household chattels and furniture in the 25D Riverglade Drive property.
(c) Black 2011 Jaguar XJ registration No. FWR923.
(d) White 2012 Land Rover Range Rover registration No. HJH368.
[65] Within 15 working days from the date of this judgment (namely by
9 May 2016) the defendant is to file an affidavit containing specific details of his New Zealand and overseas assets to the value of NZ$400,000 which will then be included in the freezing order.
[66] The plaintiff is to file an amended undertaking as to damages which explicitly
covers the order insofar as it extends to the defendant’s overseas assets.
[67] The plaintiff’s application for an order striking out the defences is declined. However an order is made that if the defendant fails to comply with the freezing order in [64] and direction in [65] within 15 working days from the date of this judgment the defences in both the first and second proceedings will be struck out.
[68] The plaintiff has been successful on both applications and is entitled to costs on each on a 2B basis.
Brown J
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