Kasuya v Walton 18 Limited

[2021] NZHC 2158

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-001078

[2021] NZHC 2158

BETWEEN

LIRIO YURIKO GIMENSO KASUYA, KIMIKO KASUYA and THOMAS ALAN

MAIRS as trustees of the KIMIKO TRUST First Applicants

CHUN-CHIEN HSU
Second Applicant

AND

WALTON 18 LIMITED

First Respondent

ALLUM TRUSTEES NO. 1 LIMITED

Second Respondent

Hearing:	On the papers
Judgment:	17 August 2021

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie On 17 August 2021 at 4.30pm

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Shine Lawyers NZ Ltd, Auckland

KASUYA v WALTON 18 LIMITED [2021] NZHC 2158 [17 August 2021]

[1]    The applicants have filed an interlocutory application without notice seeking freezing and ancillary orders against the first respondent, Walton 18 Ltd (“Walton 18”), and the second respondent, Allum Trustees No. 1 Ltd (“Allum”).

[2]The background to this matter is relatively straightforward.

[3]    The first applicants are the trustees of the Kimiko Trust (“the Trust”). They own a property situated at 2 Graceville Lane, St Heliers. The second applicant, Mr Hsu, owns a property situated at 11 Graceville Lane. Both the Trust and Mr Hsu purchased their respective properties from Walton 18. It had built residential housing on both properties.

[4]    The applicants have each filed substantive proceedings against Walton 18 and Auckland Council. Each asserts that there are significant defects in the homes that they bought from Walton 18 and that the costs of repairing the defects are significant

– in the case of the Trust, approximately $600,000, and in the case of Mr Hsu, approximately $325,000.

[5]    The applicants allege in their interlocutory application that Walton 18 has engaged in behaviour designed to prejudice their claims by disposing of its assets to Allum. According to the applicants, both Walton 18 and Allum have the same director and the same ultimate shareholder.

[6]    I have read the papers filed. I am satisfied that the grounds for a freezing order and for ancillary orders have been made out.

[7]    First, the applicants have an arguable case that Walton 18 Ltd breached warranties it gave in relation to the houses. They also have an arguable case against Walton 18 for negligence in constructing the houses.

[8]    I am also satisfied that the applicants have a good case against Allum. The evidence suggests that Walton 18 has transferred assets to Alum. If the applicants are successful in their claims against Walton 18, there are at least two processes available, which will permit them to look to Allum to satisfy their judgments. The applicants

might well have a claim against Allum under Part 6 of the Property Law Act 2007. Further, the Court could be asked to set aside any transactions whereby Walton 18 disposed of its assets to Allum under the voidable transaction provisions contained in the Companies Act.

[9]    It is well established that there is jurisdiction for the Court to grant freezing orders against assets held by or on behalf of third parties, or assets held in trust in appropriate cases. Rules 32.4 and 3.25 expressly provide for the making of a freezing order or an ancillary order against a third party.

[10]   The applicants have disclosed such defences as they believe may be available to Walton 18. Those defences have been taken from the statements of defence Walton 18 has filed in relation to the substantive proceedings. Walton 18 denies the Trust’s claim, and alleges that the defects alleged are minor and can be easily remedied. In relation to Mr Hsu’s claim, its defence is a simple denial.

[11]   The second requirement to be met for a freezing order is that there are assets to which the order can apply. On the information currently available to the applicants, assets which were previously in Walton 18’s name have now been transferred to Allum.

[12]   The third requirement an applicant for a freezing order must get over is to establish that there is real risk of dissipation. An applicant must point to circumstances from which a prudent, sensible commercial person could properly infer a danger of default. The test is not unduly exacting.

[13]   Before Mr Hsu filed his proceedings, Walton 18 was the registered proprietor of four additional properties – two in Graceville Lane and two in Towai Street. After the claims were filed and after settlement negotiations were unsuccessful, Walton 18 transferred the properties to Allum. The sole director of Walton 18 is a Mr  Ghee.  Mr Ghee is also the sole director of Allum. It appears from Mr Hsu’s affidavit filed in support of the application that Mr Chee is a director of 65 New Zealand registered companies. He has previously been a director of a number of failed construction companies which have been placed into liquidation. I accept that there is a reasonable

inference to be drawn from these circumstances and from the transfer of the properties to Allum, that Walton 18 may be seeking to minimise its liabilities to prospective creditors. The timeline which counsel have referred to also supports this inference.

[14]I am satisfied that it is appropriate to grant a freezing order.

[15]   I am also satisfied that it is appropriate to make ancillary disclosure orders under r 32.3. The orders are necessary to elicit information as to assets relevant to the freezing order. Until orders are made requiring the respondents to list their assets, the applicants have little or no information about the assets held by each, and whether there are any other third parties holding assets on their behalf. Ancillary disclosure orders will also evidence the suitability of the freezing orders made and the legitimacy of the assets transfer.

[16]   An undertaking as to damages has been signed by both applicants. I have discussed the position with their counsel, Mr Williams. He advises me that he has made enquiries and that on his instructions, both applicants are able to meet any likely damages award, although acknowledging that prospective damages are difficult to assess. Mr Williams has agreed to use his best endeavours to obtain further affidavits from each of the applicants setting out what asserts each has available to meet their respective undertakings.

[17]   Relevantly, I note that Walton 18 and Allum will not be prevented from continuing to develop the properties that have been transferred by the orders I am making. They will simply be required to preserve the proceeds of sale to meet any judgments in the two sets of proceedings.

[18]   The without notice application is granted and the draft orders filed by the applicant are approved.

Wylie J