Kea Investments Limited v Wikeley Family Trustee Limited (In interim liquidation)
[2024] NZHC 1251
•20 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2086
[2024] NZHC 1251
BETWEEN KEA INVESTMENTS LIMITED
Plaintiff
AND
WIKELEY FAMILY TRUSTEE LIMITED (IN INTERIM LIQUIDATION)
First Defendant
KENNETH DAVID WIKELEY
Second DefendantERIC JOHN WATSON
Third DefendantWIKELEY INC.
Fourth DefendantUSA ASSET HOLDINGS INC
Fifth Defendant
Hearing: 2 February 2024 (and application seeking to adduce further material on 20 February 2024) Appearances:
JBM Smith KC, M Harris, J Wass and S Coupe for the Plaintiff D J Cooper KC for the Plaintiff in respect of the s 67 application No appearance by or for the interim liquidators of the First Defendant - Mr Arthur excused from attending
A F Pilditch KC and E Armstrong for the Second Defendant (instructing solicitor given leave to withdraw on 16 April 2024)
Judgment:
20 May 2024
JUDGMENT OF GAULT J
This judgment was delivered by me on 20 May 2024 at 3:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
KEA INVESTMENTS LTD v WIKELEY FAMILY TRUSTEE LTD (IN INTERIM LIQUIDATION) [2024] NZHC 1251 [20 May 2024]
[1] This judgment addresses the application by the second defendant, Mr Wikeley, to set aside this Court’s formal proof judgments dated 17 November 2023 and 5 December 2023.1
[2] The hearing of Mr Wikeley’s application was complicated by a separate application by the plaintiff, Kea Investments Ltd (Kea), for an order under s 67 of the Evidence Act 2006 that Kea is not prevented by reason of any privilege from relying on communications contained in certain WhatsApp messages because those messages were sent and received for dishonest purposes. Kea sought to rely on the messages (inter alia) as fresh evidence in its opposition to the application to set aside the formal proof judgments.
[3] Although it would ordinarily be appropriate to hear the s 67 application first (even if it was not determined before hearing the application to set aside), counsel agreed that in the unusual circumstances of this case I should hear the application to set aside first (and necessarily reserve leave in relation to admission of further evidence following determination of the s 67 application).
Procedural background
[4] The course of this proceeding is set out in previous judgments and need not be repeated in detail. In essence, Kea commenced proceedings against Wikeley Family Trustee Ltd (WFTL), Mr Wikeley and Mr Watson on 31 October 2022 and sought an urgent interim injunction restraining the defendants from taking steps to perpetuate what Kea says is a massive worldwide fraud against it. Kea claimed that the defendants have engaged in a worldwide conspiracy to defraud Kea, including by obtaining a default judgment in favour of WFTL as trustee of the Wikeley Family Trust against Kea in Kentucky, USA for US$136,290,994 (default judgment) based on a purported 2012 Coal Agreement that Kea said is a forgery.
1 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 3260 and [2023] NZHC 3532.
[5] On 4 November 2022, I made interim orders on a without notice basis pending the return date.2 My judgment addressed, among other things, jurisdiction, the appropriate forum and the requirements of comity.
[6]On 11 November 2022, the interim orders were varied and extended by consent
– the first and second defendants consented without prejudice to their protest to jurisdiction and application to discharge the orders and dismiss the proceeding.
[7] On notice, Kea applied for further interim orders and WFTL and Mr Wikeley applied to dismiss or stay the proceeding on jurisdiction and forum grounds. Mr Watson did not enter an appearance.
[8] In my judgment dated 10 March 2023 (jurisdiction judgment),3 the application to dismiss or stay the proceeding on jurisdiction or forum grounds was dismissed and the protest to jurisdiction set aside. I continued the interim orders but dismissed Kea’s application for further interim orders.
[9] Following my jurisdiction judgment, a series of events occurred which resulted in:
(a)no statements of defence being filed and a formal proof hearing being allocated; and
(b)an application by Mr Wikeley seeking an extension of time and leave to appeal the jurisdiction judgment, and seeking interim relief (stay) pending appeal. His application was filed on 22 June 2023, after the 17 May 2023 formal proof hearing but before judgment was delivered.
[10] That series of events is set out in detail in my judgment of 31 August 2023,4 dismissing the applications for extension of time, leave to appeal and interim relief, and is repeated here for convenience:
2 Kea Investments Ltd v Wikeley Family Trustee Ltd [2022] NZHC 2881.
3 Kea Investments Ltd v Wikeley Family Trustee Ltd [2023] NZHC 466.
4 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 2407 at [10]-[29].
[10] On 17 March 2023, the solicitors for WFTL and Mr Wikeley, Wilson Harle, informed the Court that WFTL and Mr Wikeley intended to seek leave to appeal in respect of the dismissal of their application to dismiss or stay the proceeding and the setting aside of their protest to jurisdiction and that they intended to instruct new counsel. They sought that limited timetable orders be made to allow those steps to be taken.
[11]On 28 March 2023, Mr Wikeley incorporated Wikeley Inc.
[12] On 29 March 2023, I directed the defendants to file a defence by 14 April 2023 but deferred making discovery orders as sought by Kea.
[13] On 30 March 2023, Mr Wikeley as director of WFTL purported to assign the default judgment and the Coal Agreement to Wikeley Inc.
[14] On 3 April 2023, Wilson Harle filed an interlocutory application seeking an order declaring that Mr Browne had ceased to be the solicitor on the record for WFTL and Mr Wikeley, together with an (unsworn) affidavit in support.5
[15] On 4 April 2023, Wikeley Inc applied to the Kentucky Court to be substituted as plaintiff in the Kentucky proceeding on the basis of the purported assignments. That motion was filed by the Kentucky lawyers for WFTL (as trustee of the Wikeley Family Trust) and Wikeley Inc.6
[16] On 6 April 2023, Kea applied without notice to this Court for further interim orders having discovered that Mr Wikeley had taken steps purporting to divest WFTL of the default judgment and otherwise to avoid the effect of the New Zealand Court orders. I was satisfied that further interim orders should be made on a without notice basis.7 I found that it appeared likely that Mr Wikeley and WFTL had acted in breach of this Court’s earlier interim orders by assigning or purporting to assign the Coal Agreement and the very substantial default judgment.8 In the unusual circumstances, I considered it was just and equitable that WFTL be put into interim liquidation.
[17] On 11 April 2023, any application for leave to appeal the 10 March 2023 judgment was due (20 working days after judgment). No application was filed, nor was any other correspondence received.
[18] Also on 11 April 2023, Mr Wikeley incorporated USA Asset Holdings Inc in Kentucky, and the following day purported to appoint that company as the trustee of the Wikeley Family Trust and to change the law of the trust.
[19] On 12 April 2023, Kea commenced proceedings in the Supreme Court of Queensland seeking ancillary interim relief. That Court made without notice orders in support of this proceeding under s 25 of the Trans-Tasman Proceedings Act 2010 (Australia).
5 The accompanying memorandum indicated that the application and affidavit had not been served on Kea (referring to counsel’s fiduciary obligations and obligations of confidentiality) but that the plaintiff’s solicitors would be advised by email that the documents had been filed. The documents were subsequently released to the new solicitors.
6 Wikeley Inc also filed motions that it would bring upon substitution to compel discovery from Kea and an anti-suit injunction restraining Kea from continuing this proceeding.
7 These orders included adding Wikeley Inc as a defendant.
8 Minute dated 6 April 2023 at [7].
[20] On 13 April 2023, Mr Wikeley advised the interim liquidators of WFTL that he had replaced WFTL as trustee of the Wikeley Family Trust with the Kentucky company, USA Asset Holdings Inc. Mr Wikeley also stated to the interim liquidators that their appointment was an aspect of a campaign of oppression and intimidation by the directors of Kea. He called upon them to deliver up any assets or property under their control.
[21] Also on 13 April 2023, the Kentucky lawyers for Wikeley Inc filed a reply in the Kentucky proceeding pursuing the 4 April 2023 motion for substitution.
[22] On 14 April 2023, Mr Wikeley’s statement of defence in this proceeding was due. No statement of defence was filed. That same day, Kea filed a memorandum foreshadowing the possibility of an application for judgment by formal proof if no defence was filed.
[23] On 17 April 2023, following a telephone conference, I made an order declaring that Mr Browne had ceased to be the solicitor on the record for WFTL and Mr Wikeley, on terms including that unless and until Mr Wikeley filed an alternative address for service, any further documents may be served on Mr Wikeley by email.9
[24] At that telephone conference Kea indicated that, as the deadline for statements of defence by the first to third defendants had expired without defences being filed or served, it sought to proceed by way of formal proof but intended to notify those defendants so that they had an opportunity to seek leave to file a statement of defence.10 The minute following that telephone conference was provided to Mr Wikeley that evening.
[25] On 21 April 2023, Kea’s solicitors emailed Mr Wikeley (and Mr Watson) advising that the hearing of the formal proof application had been fixed for 17 May 2023. The email expressly warned Mr Wikeley of the consequences of failing to take steps before the hearing. Mr Wikeley did not reply.
[26] On 15 May 2023, Mr Dowd received and acknowledged an email and attachment from Kea’s solicitors advising of the formal proof hearing to take place on 17 May 2023. The attachment was a copy of Kea’s submissions for the hearing.
[27] On 17 May 2023, the substantive one day hearing proceeded by way of formal proof. Judgment was reserved.
[28] On 1 June 2023, Mr Dowd filed in this proceeding a notice of change of solicitor and a memorandum recording that Mr Wikeley wished to seek a stay of the New Zealand proceedings pending the contempt hearing in Queensland and then to bring an application so that he could defend the proceeding in New Zealand that was subject to a formal proof hearing on 17 May 2023 and to file a defence and evidence and have the defence considered by the Court. That memorandum did not signal any intention to seek leave to appeal.
9 Minute dated 17 April 2023 at [4].
10 At [8], citing High Court Rules 2016, r 15.9(3). Kea also sought to abridge time for Wikeley Inc to file a statement of defence.
[29] On 22 June 2023, Mr Wikeley’s new solicitor, Mr Mullins, filed a notice of change of representation and the present application, seeking an extension of time and leave to appeal my judgment of 10 March 2023 and interim relief (stay) pending appeal, together with an affidavit from Mr Dowd. An amended interlocutory application was filed on 6 July 2023.
[11] On 28 September 2023, Mr Wikeley applied to the Court of Appeal for leave to appeal the jurisdiction judgment.
[12] On 17 November 2023, I issued my substantive formal proof judgment, granting a permanent injunction, declarations and awarding damages to Kea. In respect of the permanent injunction, I reserved leave in relation to further relief necessary to give effect to the orders.11
[13] On 5 December 2023, pursuant to the reservation of leave granted in the judgment, I made a further order.12
[14] On 8 December 2023, Mr Wikeley applied to set aside this Court’s formal proof judgments.
[15] On the same day, Mr Wikeley filed in the Court of Appeal a notice of appeal in respect of the formal proof judgments (and the jurisdiction judgment despite his earlier application for leave to appeal).
[16] On 12 January 2024, Kea applied for an order under s 67 of the Evidence Act in respect of the WhatsApp messages.
[17] Following the hearing of the application to set aside on 2 February 2024, I allocated a further hearing date for the s 67 application.13 That application was heard on 5 February 2024, and determined on 13 February 2024.14 In that judgment, I disallowed the privilege claim in respect of the WhatsApp messages but noted that,
11 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 3260 at [156](a)(v).
12 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 3532 at [7].
13 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) HC Auckland CIV-2022-404- 2086, 2 February 2024 (Minute) at [1](c).
14 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2024] NZHC 163.
for Kea to adduce the messages in relation to Mr Wikeley’s application to set aside, Kea would require leave on fresh evidence grounds. I made timetable orders.
[18] On 20 February 2024, Kea sought leave to adduce the WhatsApp messages, and evidence of a further court filing in Kentucky by Wikeley Inc which Kea says is further evidence of Mr Wikeley’s refusal to obey court orders, as further evidence on the application to set aside, together with an affidavit in support.
[19] Mr Wikeley did not file a notice of opposition to the application to adduce further evidence by the due date. In response to his counsel’s advice that they were awaiting instructions, I indicated on 8 March 2024 that unless it was received by 11 March 2024 I would proceed to determine the issue of leave on the papers already filed, likely in my judgment on the application to set aside.15 On 11 March 2024, Mr Wikeley’s counsel advised that they were still awaiting instructions. In the event, no opposition was filed.
[20] On 13 March 2024, Mr Wikeley’s instructing solicitor applied for an order declaring that he had ceased to be solicitor on the record for Mr Wikeley. No opposition to that application was filed, and I made orders as sought on 16 April 2024.
[21] On 14 March 2024, the Court of Appeal declined Mr Wikeley’s application for leave to appeal the jurisdiction judgment.16
Applications to set aside formal proof judgments – applicable principles
[22] It was common ground that a formal proof judgment may be set aside if it appears to the Court that there has been, or may have been, a miscarriage of justice.17 The test is whether it is just in all the circumstances to set aside the judgment.18
15 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) HC Auckland CIV-2022-404- 2086, 8 March 2024 (Minute) at [3].
16 Wikeley v Kea Investments Ltd [2024] NZCA 58.
17 High Court Rules 2016, r 15.10.
18 Russell v Cox [1983] NZLR 654 (CA) at 659.
Although the Court has a broad discretion, in cases where the judgment was regularly obtained the Court looks to three considerations:19
(a)whether the defendant has a substantial ground of defence;
(b)whether the defendant’s delay (failure to appear) is reasonably explained; and
(c)whether the plaintiff would suffer irreparable injury if the judgment is set aside.
[23] An affidavit as to the merits of the proposed defence should be filed, unless it is an arguable defence on a question of law that is already revealed by the statement of claim.20
Further evidence
[24] As indicated, Kea’s application to adduce the WhatsApp messages and Court filing in Kentucky as further evidence on the application to set aside was not opposed.
[25] The conventional requirements for admitting further evidence (after a hearing or determination) are that it must be fresh, it must be credible and it must be cogent. Evidence is not regarded as fresh if it could with reasonable diligence have been produced at the trial.21
[26] The WhatsApp messages are fresh. They only came into Kea’s possession following disclosure to WFTL’s interim liquidators by order of the United States Bankruptcy Court and subsequent use by the interim liquidators in an application in the United States District Court dated 30 October 2023. As a result of that application, the messages became publicly available on the United States District Court’s Public Access to Court Electronic Records (PACER) website and came to the attention of
19 Russell v Cox [1983] NZLR 654 (CA) at 659.
20 Wing v Leeder [1961] NZLR 30 at 34.
21 Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 192; affirmed in Aotearoa International Ltd v Paper Reclaim Ltd [2006] NZSC 59, [2007] 2 NZLR 1 at [6], n 1.
Kea’s US counsel. This was well after the formal proof hearing. Even when raised, privilege was claimed.
[27] The WhatsApp messages are relevant to the issue of whether Mr Wikeley’s delay has been reasonably explained. They are credible and cogent, indicating that after Mr Wikeley indicated an intention to appeal the jurisdiction judgment in March 2023, he deliberately attempted to flout the Court’s interim orders by shifting ownership of the Kentucky default judgment out of New Zealand, and sought to delay the New Zealand proceeding by stalling to get new lawyers up to speed. The messages also indicate his instructions to Mr Dowd recorded in the affidavit filed on 22 June 2023 were incorrect.
[28] Kea also seeks to admit a filing made by Wikeley Inc (now represented by new counsel) in the United States District Court in Kentucky dated 14 February 2024. In that filing, Wikeley Inc seeks an order dismissing the liquidators’ application to set aside the assignment of the Kentucky default judgment and Coal Agreement. That filing contends, among other things, that the action before the District Court “cannot be maintained in its present status as Mr Wikeley, as the Settlor and key beneficiary of WFT, is an indispensable party to this action”. Kea submits that, by causing or permitting that filing in the District Court, Mr Wikeley has again breached his obligation to withdraw from pursuing any steps to enforce or otherwise rely on the Coal Agreement, and to cause his privy Wikeley Inc to do likewise, as required by this Court’s judgment of 17 November 2023 at [156](a)(iii)-(iv). Kea says this conduct counts against Mr Wikeley’s application to set aside the formal poof judgments as it demonstrates that Mr Wikeley remains committed to pursuing enforcement of the Kentucky default judgment instead of complying with this Court’s orders, and that his set-aside application is designed to delay and stymie the New Zealand proceeding not because of any genuine desire to participate in the New Zealand proceeding on the merits.
[29] This Court filing is fresh and credible evidence. It is also cogent, since a further apparent breach of this Court’s orders is relevant to whether it is in the interests of justice to set aside the formal proof judgments.
[30]I admit the further evidence.
Mr Wikeley’s submissions
Substantial ground of defence
[31] Mr Pilditch KC, for Mr Wikeley, submitted that Mr Wikeley has a substantial ground of defence. The primary ground raised was that the Court was not the appropriate forum to determine the claims and ought not to have done so. The other grounds were that the Court ought not to have made global anti-enforcement injunctions given the principles of comity (addressed explicitly in the three interlocutory judgments);22 there was insufficient evidence of Mr Wikeley’s conspiracy with Mr Watson; the Court erred in awarding legal costs as damages; and the Court was functus officio in respect of the 5 December 2023 judgment (despite the reservation of leave in the main formal proof judgment dated 17 November 2023).23 It was not disputed that at least that main formal proof judgment was regularly obtained.
[32] Mr Wikeley filed no evidence in support of these grounds of defence (or otherwise). Mr Pilditch said this was on the basis of Mr Wikeley’s right to silence given the contempt proceedings in Queensland. This was earlier addressed in my 31 August 2023 judgment.24
[33] Mr Pilditch initially submitted that I should defer determination of the application to set aside until after the appeals (the application for leave appeal and the substantive appeal), or at least defer to the Court of Appeal on the issues that overlap with the appeals. While the written submissions for Mr Wikeley set out the grounds of challenge, Mr Pilditch did not seek to persuade me to revisit my own findings that were more properly the subject of appeal (except that in relation to comity, he suggested I might set aside the international component of the orders and have a submissions only hearing on comity).
22 References summarised in the 31 August 2023 judgment: Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 2407 at [71].
23 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 3260 at [156](a)(v).
24 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 2407 at [31] and [38].
[34] Kea opposed deferring determination of the application to set aside until after the appeals, to avoid further delay. It submitted that this Court has already determined that it should assume jurisdiction and rejected arguments as to the appropriate forum, and ruled that Kea’s claims are made out on the evidence and as a matter of law. Kea submitted that those determinations are res judicata in this court, and Mr Wikeley cannot use the present application as an excuse to relitigate them. He is challenging them in the Court of Appeal.
[35] I do not consider that I should defer determining the application to set aside until the appeal has been determined. Insofar as issues are appropriately raised on an application to set aside, they are likely better determined before an appeal.25 However, I do not consider that it is appropriate – at least in the absence of new evidence – for me to revisit Mr Wikeley’s forum challenge or substantive grounds on this application to set aside. As Mr Smith KC submitted for Kea, I am in effect being asked to reverse my decision without any new evidence. This is not a case where a governing statute or authority has not been addressed or the Court has been misled. The forum argument was addressed at an inter partes interlocutory hearing where Mr Wikeley was represented by counsel. As Mr Smith submitted, r 15.10 does not provide any basis for reconsidering the dismissal of an interlocutory application made following a fully argued inter partes hearing. Further, the jurisdiction judgment was also the subject of applications for leave to appeal (before me and then the Court of Appeal). As the Court of Appeal indicated in its recent judgment declining leave to appeal, Mr Wikeley addresses the forum argument in his substantive appeal. The other grounds, at least in the absence of new evidence, are also appeal points rather than matters that I could or should revisit on an application to set aside.
Delay
[36] As indicated, Mr Wikeley filed no evidence. Mr Pilditch submitted that the question of whether Mr Wikeley’s delay (failure to appear) was reasonably explained was slightly different from the delay issue addressed in my judgment of 31 August 2023 dismissing the applications for extension of time/leave to appeal, but he acknowledged it was substantially the same question and factual matrix. He did not
25 Bank of Scotland v Pereira [2011] EWCA Civ 241, [2011] 1 WLR 2391.
seek to persuade me to revisit my findings, nor that Mr Wikeley could satisfactorily explain his delay. Further, as the Court of Appeal said in its judgment of 14 March 2024 on the application for leave to appeal the jurisdiction judgment, Mr Wikeley knew about the formal proof hearing but delayed his application for leave to appeal until after it had taken place. He was on notice that Kea sought to proceed by formal proof and was warned of the consequences of failing to act before the formal proof hearing. The application to the High Court for an extension of time and leave to appeal was not made until one month after the formal proof hearing, over two months late.
[37] In the absence of new evidence explaining the delay, I consider Mr Wikeley’s failure to appear in the proceeding has not been reasonably explained. Indeed, the WhatsApp messages show that he indicated an intention to appeal but then deliberately attempted to flout the Court’s interim orders. This also counts against setting aside the formal proof judgments.
Irreparable injury
[38] I have already accepted in the 31 August 2023 judgment that Kea has suffered prejudice particularly in the form of cost in relation to the formal proof hearing, which would not have proceeded pending a possible appeal, and in terms of delay.26 Setting aside the formal proof judgments would require Kea to reinstitute its application for interim relief in New Zealand and Australia, the appeal would fall away and the proceeding would need to continue to trial at significant further cost. Although Mr Pilditch suggested that he would not oppose reinstituting interim orders, in the absence of consideration of the grounds of defence raised, and any security or confidence that interim orders would be complied with, I accept there would be irreparable injury to Kea if the formal proof judgments were set aside.
Conclusion
[39] For these reasons, I conclude that it would not be just in all the circumstances to set aside the formal proof judgments.
26 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2023] NZHC 2407 at [53].
Result
[40]The application to set aside the formal proof judgments is dismissed.
[41] Kea is entitled to costs. In the absence of agreement, memoranda (not exceeding four pages) may be filed within 20 working days, and I will determine costs on the papers.
Gault J
Solicitors / Counsel:
Mr JBM Smith KC and Mr JLW Wass, Barristers, Wellington Mr M C Harris, Barrister, Auckland
Mr M C Smith and Mr S Coupe (plaintiff’s instructing solicitor), Gilbert Walker, Auckland Mr M D Arthur and Mr J Marcetic, Chapman Tripp, Auckland
Mr A F Pilditch KC, Barrister, Auckland Copy to:
Mr T Mullins and Ms E Armstrong, LeeSalmonLong, Auckland
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