Kea Trust Company Ltd v Pugachev - [2015] NZHC 1960

THIS JUDGMENT HAS BEEN REDACTED TO DEAL WITH CONFIDENTIALITY CONCERNS BUT MAY BE PUBLISHED IN THIS FORM.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-1753 [2015] NZHC 1960

BETWEEN
KEA TRUST COMPANY LTD,

FINETREE COMPANY LTD, BRAMERTON COMPANY LTD, AND BLUERING COMPANY LTD Applicants

AND

SERGEI VICTOROVICH PUGACHEV, ALEXANDRA TOLSTOY AND VICTOR SERGEYOVICH PUGACHEV First Respondents

MARU LIMITED, HAPORI LTD, AROTAU LTD and MIHARO LTD Second Respondents

Hearing: 17 August 2015

Counsel:

R B Stewart QC and W J Blennerhassett for Applicants
No appearance by or on behalf of First Respondents
D A Campbell and G R Nicholson for Second Respondents

Judgment:

18 August 2015

JUDGMENT OF HEATH J

This judgment was delivered by me on 18 August 2015 at 3.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar

Solicitors:
Kensington Swan, Auckland MinterEllisonRudd Watts, Auckland Counsel:
R B Stewart QC, Auckland

KEA TRUST COMPANY LTD v PUGACHEV [2015] NZHC 1960 [18 August 2015]

The application

[1] As a result of orders made by the Chancery Division of the High Court of Justice of England and Wales (the Chancery Court) and an appellate decision of the Court of Appeal, a worldwide freezing order has been made against property said to be owned or controlled by Mr Sergei Pugachev. The property to which the orders attach include interests as a discretionary beneficiary in five New Zealand based trusts (the New Zealand Trusts).

[2] The New Zealand Trusts are known as the London Residence Trust, the Kea Three Trust, the Wiltshire Residence Trust, the Riviera Trust and the Green Trust. Before 24 July 2015, there was no dispute that the trustees were Kea Trust Company Ltd, Fine Tree Company Ltd, Bramerton Company Ltd and Bluering Company Ltd. The directors of each of those companies are two solicitors based in Auckland, Mr William Patterson and Ms Robyn Hopkins. I shall refer to those companies as the “original trustees”.

[3] On 24 July 2015, interests associated with Mr Pugachev purported to remove the original trustees and to replace them with Maru Ltd, Hapori Ltd, Arotau Ltd and Miharo Ltd, all of which were incorporated in New Zealand. The directors of those companies are Ms Dozortseva, Mr Willem Smit and an Auckland based solicitor, Mr Ben Lenihan. I shall refer to these companies as the “replacement trustees”.

[4] On 31 July 2015, the original trustees applied to this Court for directions. While taking a neutral stance, they wished to obtain a Court ruling on whether they had been validly removed, before handing over trust assets to the replacement trustees.1 Given the orders obtained in the Chancery Court, the directors of the original trustees are understandably concerned to protect their exposure to third parties. They also seek authority from this Court to withdraw funds held by the New
Zealand Trusts to meet fees and disbursements payable for professional services in relation to this proceeding, including those to be incurred as a consequence of
complying with terms of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 1960
Decision Date: 18 August 2015

CaseChat Overview and Summary

The High Court of New Zealand considered an application by Kea Trust Company Ltd and others (the original trustees) to determine whether they had been validly removed as trustees of five trusts based in New Zealand, and if so, whether they could transfer assets to the replacement trustees without breaching a worldwide freezing order. The dispute arose from a judgment against Sergei Pugachev in Russia, leading to a freezing order on his assets, including his interests in the New Zealand trusts. Pugachev allegedly executed documents to remove the original trustees and replace them with other New Zealand companies. The original trustees sought directions on these issues, as well as costs from the trust assets.

The court identified three primary issues: whether an order for costs should be made for the original trustees at that time, whether service of the application should be made on the Russian creditors, and what further orders were required to prepare the substantive application for hearing. The court held that the original trustees could be indemnified for costs incurred in complying with the worldwide freezing order, provided they disclosed the source of funds to the creditors' solicitors. The court also ordered that the Russian creditors should be served with the notice of application and given a limited time to apply to intervene. Further directions were made to prepare for the substantive hearing, including deadlines for filing disclosure documents and a hearing date of 28 September 2015.

Orders