Kasuya v Walton 18 Limited

[2024] NZHC 246

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1078

[2024] NZHC 246

BETWEEN

LIRIO YURIKO GIMENO KASUYA, KIMIKO KASUYA and THOMAS ALAN

MAIRS as trustees of the KIMIKO TRUST Plaintiff/Applicant

AND

WALTON 18 LIMITED

First Defendant/First Respondent

ALLUM TRUSTEES NO.1 LIMITED
Second Respondent

TEIK HUAT GHEE (also known as AARON GHEE)

Third Respondent

cont/…

Hearing:	20 February 2024
Counsel:	GD Simms and MK Ropati for the Plaintiff/Applicant
Judgment:	20 February 2024

ORAL JUDGMENT OF BECROFT J

[Granting without notice further freezing and ancillary orders]

Solicitors/Counsel:

Wynn Williams, Auckland DK Law Ltd, Auckland

Shortland Chambers, Auckland Bankside Chambers, Auckland

KIMIKO TRUST v WALTON 18 LTD & ORS [2024] NZHC 246 [20 February 2024]

SANCTUM PROJECTS LIMITED

Fourth Respondent

VERTU LIMITED
Fifth Respondent

AJ TRUSTEES NO.1 LIMITED
Sixth Respondent

VIDAR TRUSTEES LIMITED

Seventh Respondent

This application

[1]                 This is an urgent without notice interlocutory application, in relation to currently frozen funds, for further freezing orders, ancillary orders and necessary associated orders.

[2]                 The matter is before me at 1.30pm. Mr Simms appears for the plaintiff/applicant, the Kimiko Trust (Kimiko). I am persuaded to grant these orders in full (exclusive of costs orders) but only on an interim basis until 9am tomorrow morning.

[3]                 In the meantime, Mr Simms is to serve all the papers that he has filed in Court on counsel for the first, second and third respondents, Mr Long. I am not sure who the lawyer is for the fourth, fifth, sixth and seventh named respondents. But in the meantime Mr Long, in all the exigencies of the moment, can be served on the provisional basis that he will know who does act for those companies – if he does not have instructions to act for them. It is clear that all the four named additional respondents all have a connection with the third respondent, direct or indirect, and it is at least likely that Mr Long can obtain very prompt instructions.

History

[4]                 This matter dates back to a freezing order that was obtained without notice and granted by Wylie J on 17 August 2021. This brief oral decision should be read in conjunction with that decision. Wylie J was clear that the relevant threefold test for a freezing order had been met.

[5]                 The plaintiff was suing the defendant for allegedly faulty construction of a home in St Heliers. The plaintiff had learnt that the defendant had transferred virtually all of its assets to a related company – Allum Trustees No.1 Limited (Allum). The orders were therefore made to protect the situation and to ensure that the plaintiff would not be deprived of the fruits of any successful substantive action.

[6]                 That freezing order and the ancillary orders were twice varied to allow the sale of other property developments by Walton 18 Limited (Walton 18) and Allum, and for Allum to dispose of some of the proceeds of sale as clearly set out in associated undertakings. That which remained after the second variation of the freezing order (to allow for the settlement of the claim by the parallel plaintiff), are the funds currently in DK Law’s trust account the subject of the extant freezing order and undertakings.

[7]                 The matter came before me as a half day defended interlocutory hearing on 5 February 2024. The hearing, at the instigation of the respondents, was to “clarify” the scope of existing freezing orders, ancillary orders and related undertakings obtained by Kimiko and, if necessary, the making of further orders to allow the frozen cash assets to be used to fund the respondents’ legal costs for the defence of the substantive hearing. As a counter application, Kimiko asked for clarification of the existing ancillary orders regarding discovery and, if necessary, further ancillary orders.

A new development …

[8]                 Those applications were heard in full. Before my draft decision could be finalised and issued, counsel for the respondents indicated that a further development meant that a judgment was not now required and the respondents’ application for clarification of the freezing order was withdrawn. That further development is that it has now become clear that Allum has been served with a statutory demand by the Inland Revenue Department for $1,134,724.43 in relation to allegedly unpaid GST.

[9]                 While instructions are still being taken on this issue, Mr Long advises that there does not appear to be any basis on which to dispute the demand. Mr Long made clear he had only become aware of this development very recently. He explains that it appears that some allowance was made for GST payments in calculating the net proceeds of sale in June 2022. That cash which was left after the specified deductions in the undertakings, now comprise the frozen funds. The funds are held per the undertakings.

[10]              Mr Long advises that the GST was not paid in full by Allum. I must say I am unsure if that means that the correct GST was calculated but was not paid in full; or, that the GST referred to in the undertaking (of $1,690,434.78) was paid in full, but further GST obligations, not known at the time, have now arisen.

Discussion

[11]              Mr Simms for the plaintiff/applicant is very concerned that it is a legitimate interpretation of Mr Long’s memorandum that the money earmarked for the GST was released by Duncan King Law Limited to Allum which then failed to pay it to the Inland Revenue Department. He also believes that Allum must have known about the problems with GST, as a statutory demand would be the last step in the process, and the respondents should surely have disclosed this before now.

[12]              Mr Simms surmises, perhaps not unreasonably in my view, that the money released to Allum for GST may have gone to another party rather than to the Inland Revenue Department. Those possible other parties about which Mr Simms surmises are the fourth, fifth, sixth and seventh respondents.

[13]              He is most concerned that those four respondents, together with the third respondent, may still have all or some of the money that was released to Allum and then possibly passed on to one or other of them by Allum. If that is the case, he wants those funds frozen until the situation is clear. In other words, put more bluntly, the funds earmarked for GST and released to Allum may, in fact, have been passed on to all or some of the third to seventh respondents. If that is the case, Mr Simms wants those funds frozen.

[14]              In all the circumstances outlined by Mr Simms at short notice, I am sufficiently concerned by the possibility that what he outlines is correct, to accede to his application for without notice interim orders as he has sought. The conventional three- part test for a freezing order is met. In any case, this is really no more than a legitimate extension of current orders.

[15]              I certainly bear in mind that Mr Long was significantly concerned that the original freezing order, itself, was obtained without notice. He reiterated those concerns to the Court on 5 February 2024 when the matter was before me. Nevertheless, like Wylie J, I make these interim orders without notice.

[16]              I need to say that during the 5 February hearing I did not take a wholly positive view of the third respondent as the sole director of the first two respondent companies. I believe he was less than transparent in his affidavit evidence and has been less than transparent throughout. To a degree, at least, he has provided “bare minimum” information to the Court. And there is the overwhelming inference that the transfer of Walton 18’s assets to Allum was for the sole purpose of defeating any successful claim against Walton 18 by the plaintiff/applicant and a parallel plaintiff.

[17]              For all those reasons, even anticipating Mr Long’s strenuous objections, I am prepared to grant the interim orders as sought in full, but only until 9am tomorrow morning when both parties can be available to address me either by telephone or in person in Court, whichever they both agree is more appropriate.

[18]              In my view, there are simply too many risks that money already the subject of a freezing order might be dissipated or that money has been illegitimately used by Allum for other than the purposes generally specified in the undertakings.

[19]I did raise with Mr Simms whether the orders that he sought in terms of 1(a) to

(d) of his application really took the matter any further than what is already provided for. However, I am persuaded, given the past issues in this matter (which I have set out) that the first, second and third respondents would not be at all prejudiced by the orders that he seeks. In one sense, they do no more than make crystal clear that which the extant freezing orders and undertakings are designed to achieve – at least in terms of 1(a) and (b) in his application. 1(c) and (d) that he seeks, and which I grant, are also self-explanatory. The remaining orders will likely cause no prejudice as they are interim and only “overnight”.

Conclusion

[20]I so order.

Becroft J