Kidd v van Heeren
[2015] NZHC 2082
•31 August 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-725 [2015] NZHC 2082
BETWEEN MICHAEL DAVID KIDD
Plaintiff
AND
ALEXANDER PIETER VAN HEEREN Defendant
Hearing: 24 August 2015 Counsel:
S J Mills QC, B J O'Callahan and E J H Morrison for Plaintiff
B D Gray QC and A J Wakeman for DefendantJudgment:
31 August 2015
JUDGMENT OF FOGARTY J
This judgment was delivered by me on 31 August 2015 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: Kirkland Morrison O’Callahan Limited, Auckland
Jones Fee, Auckland
KIDD v VAN HEEREN [2015] NZHC 2082 [31 August 2015]
Introduction
[1] By judgment dated 14 April this year, the Court declared:1
[171] This Court declares that, by reason of the decision of the South Ganteng High Court of South Africa (27975/1998, 20 May 2013, Satchwell J), the defendant is issue estopped from denying the partnership and the accumulated worldwide assets of the partnership, as found by the Judge, particularly in [126] and [132] of her judgment.
[2] The South African judgment at [126] reads:2
[126] It is difficult to comprehend the joint enterprise of Kidd and Van Heeren constituting anything other than a partnership. This view is fortified when one has regard to more than the creation, movement and inter exchange of steel trading and funds. The acquisition of the worldwide assets by reason of these steel trading profits confirms the finding of a partnership.
[3] Paragraph [132] of the South African judgment reads:3
[132] I am more than satisfied that the partnership of Kidd and Van Heeren, through Genan and Prime NZ as also Tisco and Jocrow and the other entities, made acquisitions throughout the world. These include but are not limited to Prime NZ, Huka Island, Dolphin Island, Cromwell/Wellesley shares which ultimately became a substantial stash of monies, Optech, gold bars and bearer certificates, cash on hand in bank accounts. The full extent of the funds retained and the assets acquired is unknown to me.
[4] Consequent upon this declaration, this Court made a number of orders, all contained in [172] of the judgment which reads:4
[172] The following orders are made:
(a) An account is to be taken between the plaintiff and the defendant to determine the amount due to the plaintiff arising out of the plaintiff’s claim as a partner against the defendant.
(b) That any amount certified by the High Court on the basis of that account be paid.
(c) The defendant, as the principal accounting party, is required to account to the plaintiff by filing in the High Court and serving on the plaintiff within 30 days of this judgment a complete list of all assets of the partnership, not confined to
1 Kidd v van Heeren [2015] NZHC 517 at [171].
2 Kidd v van Heeren South Gauteng High Court 27973/1998, 21 May 2013 at [126].
3 At [132].
4 Kidd v van Heeren, above n 1, at [172].
the list in [132] of the South African judgment, other than any held by the plaintiff, including:
(i) a description of the entities holding the assets; (ii) a description of the assets; and
(iii) the current value of the assets.
(d) In addition, if any assets have been disposed of or otherwise he has lost control of, they should be listed with details of loss of control, advice as to the his knowledge as to who has control of those assets, a description of those assets and his estimated current value of those assets.
(e) I direct that no further work need be done by the plaintiff in the meantime until the defendant has accounted in the manner ordered by this Court, or until any further order of this Court.
(f) That the defendant pay the sum of USD25m in equivalent New Zealand dollars as at the date of payment into Court at the latest, being one calendar month from the date of this judgment, with leave to apply for an extension of time.
(g) Further in respect to order (f) within two calendar months of this judgment, and after the payment is made by the defendant into Court, the plaintiff is to submit to the Court a plan of investment and/or use of the interim payment pending completion of the final accounts.
(h) On receipt of the plaintiff’s proposal the Court will have a case management conference between the parties to timetable the process of approving or varying that proposal, enabling release of the whole or part of the funds to the plaintiff and the investment of the balance, coupled with a timetable on completion of the account.
(i) The defendant shall pay the plaintiff’s cost of this
application.
[5] This judgment resolves two interlocutory applications by the defendant and one memorandum by the plaintiff. They are:
(a) Interlocutory application by defendant dated 11 May 2015 for variation of orders in judgment of Fogarty J dated 14 April 2015.
(b)Interlocutory application by defendant for orders for particular discovery against the plaintiff dated 11 May 2015.
(c) Memorandum of plaintiff seeking an order that defendant make an immediate payment of USD1.59m into Court dated 18 June 2015.
Application for variation of orders
[6] This application seeks two orders:
(a) The order at [172](f) of the judgment dated 14 April 2015 that the defendant pay the sum of USD25m (in equivalent New Zealand dollars) into Court within one calendar month of the date of the judgment be varied so that the obligation of the defendant to pay the sum of USD25m (in equivalent New Zealand dollars) into Court be deferred until such time as the defendant has that amount or any substantial assets in his direct power or control to enable him to pay that amount into Court; and
(b)That the orders at [172](a) to (e) of the judgment be varied such that the parties are asked to file affidavits every three months on the following dates:
(i) 14 August 2015;
(ii) 13 November 2015; (iii) 12 February 2016; and (iv) 12 May 2016,
identifying that steps have been taken to obtain documents relevant to the account between the plaintiff and the defendant and providing discovery of any documents which have been obtained in relation to the accumulated worldwide assets of the “partnership” which the defendant is now issue estopped from denying by reason of the findings in the decision of the South Gauteng High Court of South Africa (27975/1998, 20 May 2013, Satchwell J), and in particular the
findings in [126] and [132] of the South African judgment pursuant to
[171] of the judgment, and/or any further assets of the “partnership”.
[7] The grounds on which these orders were sought are pleaded as follows:
(a) The defendant is unable to pay the sum of USD25m (in equivalent New Zealand dollars) into Court pursuant to the order at [172](f) of the judgment;
(b)The defendant has lodged an appeal with the Court of Appeal seeking to appeal the whole of the judgment, including the order at [172](f) of the judgment;
(c) The defendant has indicated in the affidavit of Alexander Pieter van Heeren sworn 11 May 2015 and the second affidavit of Alexander Pieter van Heeren sworn 11 May 2015 that he has complied with the orders at [172](c) and (d) of the judgment insofar as he is currently able to do so but will continue to search for any relevant documents; and
(d)Fogarty J has ordered at [172](a) of the judgment that an account is to be taken between the plaintiff and the defendant to determine the amount which may be due to the plaintiff arising out of his claim as a partner against the defendant, and therefore the plaintiff and the defendant should be obliged to provide such discovery as is relevant for the purposes of this account.
Onus of proof
[8] The defendant bears the onus proof of the facts pleaded in those grounds
[9] To do this there have been two affidavits of the defendant filed, both sworn on 11 May 2015. The first affidavit responds to the requirements in [172](c) and (d). In summary, the affidavit contends that the majority of the assets subject to the issue estoppel are no longer in the power or control of the defendant. With respect to the
joint assets listed in [132] of the South African judgment (see above), Mr van Heeren said that Prime had been struck off the Register of Companies in New Zealand in September 1991, that Prime had owned a company called Optec New Zealand, a company which is still in existence, whose shares are owned by a company registered in the Netherland Antilles called Berrax NV, and appears to say that Optec/Berrax owns land next to Huka Lodge, acquired in New Zealand in 2011 for about NZD3.5m. Mr van Heeren is not a shareholder of Optec. He is one of the three directors.
[10] In respect of Huka Lodge, he deposed this lodge is owned by a company, Worldwide Leisure Limited, the current shareholders being Saraceno Holdings Limited BV which holds all but one of the shares, Mr van Heeren being one of the directors. Mr van Heeren deposed that on 3 April 2006, he had transferred his entire shareholding of 19,555 shares in Worldwide Leisure to Saraceno Holdings Limited.
[11] In respect of Dolphin Island, he said this is owned by a company called Fenton Limited which is registered in the Isle of Man. He says that his shareholding and that of his former wife were transferred to the Timbatavi Foundation in the late
1980s or 1990s. That he believes the shares held by that Foundation were subsequently transferred to the Gerda Foundation.
[12] In respect of the Cromwell Wellesley shares, the proceeds of the sale of those shares took place some 25 years ago and Mr van Heeren is in the process of trying to find out information, including where the proceeds of sale of those shares may have gone. In context, it should be understood that in the South African trial there was evidence from the plaintiff’s expert, Mr Browning, that the proceeds of those shares were in the order of NZD16m. So Mr van Heeren, as a partner, found to have co- owned those shares which, as the Judge said, became a substantial stash of monies, “doesn’t know what has happened to them”.
[13] Mr van Heeren’s affidavit under the heading “order requiring an interim payment”, complements the summary of facts which I have summarised above. He says it is not possible for him to pay USD25m. He does not say he is not worth USD25m. His words are chosen carefully.
[14] I extract some samples of such careful wording:
I do not have access to sufficient funds or the ability to pay this amount.5
…
After the [Timbavati] foundation was registered, we [he and his wife] progressively transferred all our personal and business assets to this foundation, including I believe the shares in Fenton Limited and Berrax NV.6
…
Since that time all assets transferred to the Timbavati Foundation have been managed independently of me, and I have not accumulated assets in my personal name.7
A restructuring of the Timbavati Foundation took place in 2009. It is my understanding that another foundation, the Gerda Foundation, which is also registered in Liechtenstein, now controls the affairs of the Timbavati Foundation or the assets that were previously vested in it. The trustees who controlled the Timbavati Foundation at that time undertook this restructuring. Neither my former wife, Ann Marie nor I had any involvement in the settlement of the Gerda Foundation other than requesting that the trustees of the Timbavati Foundation make the settlement. I did not control this process.8
[15] He said he is not in possession of Gerda documentation, he then deposed:
I am therefore unable to confirm what assets are now vested in the Gerda
Foundation.9
…
As will I hope be apparent from the above, the vast majority of any monies or other assets which I may have held in the late 1980s/early 1990s have been transferred into the Timbavati Foundation and then the Gerda Foundation many years ago and is no longer in my control. I have requested the Gerda Foundation’s financial assistance to enable me to pay the USD25m in accordance with the order of the Court, or such other amount as the Court may require me to pay, but I have yet to receive a response, and this decision is not within my control.10
[16] He then goes on in this first affidavit to say in a second affidavit he has set out details of his personal financial circumstances and asset position and has
requested confidentiality about these. I address the issue of confidentiality for this
5 First affidavit of Alexander Pieter van Heeren, sworn 11 May 2015 at [203].
6 At [207].
7 At [208].
8 At [210].
9 At [212].
10 At [216].
affidavit in an earlier judgment, where I ordered that the file not be read by any member of the public until further order of the Court.11 This is a short affidavit of eleven paragraphs, excluding the annexures. Essentially, it sets out the balances in bank accounts in his personal name as at 11 May in various currencies but before me were reduced in dollars to approximately USD1.5m and then sets out various current liabilities. There is no explanation as to the source of these deposits. Since that
time, there is evidence that he has been meeting current liabilities and that sum has been reduced down to the order of USD700,000 to USD800,000.
[17] There has been no explanation as to how he will maintain a standard of living and meet liabilities after these funds are exhausted.
[18] Essentially, both affidavits taken together, but particularly the first, contend that all of his assets are now held by either the Timbavati Foundation or, more likely, the Gerda Foundation and are out of his control. He does not say that the total assets would not be able to meet the interim payment. He does not say that he does not know the scale of assets. For example, he says, “I am therefore unable to confirm what assets are now vested in the Gerda Foundation”.
[19] Mr Gray QC, counsel for Mr van Heeren, submitted that Mr van Heeren’s evidence was that he does not control the affairs of the Gerda Foundation and that he is not in a position to pay the USD25m based on his own personal financial position. Mr Gray submits:
The defendant accepts (as he must) that he has an ongoing obligation to continue to take steps to enable him to make payment of the interim payment into Court. Pursuant to the orders sought in the Variation Application he simply seeks further time to enable him to do so.
[20] Part of the context of that submission is that Mr van Heeren has written to the trustees of the Gerda Foundation formally advising them of the litigation and the terms of the Court order. But what the submission of Mr Gray does not reflect is that the Gerda Foundation has replied advising essentially that they are not empowered to
provide any of this information, inferentially, let alone release any funds, because of
11 Kidd v van Heeren [2015] NZHC 1270.
the third party character behind the request of Mr van Heeren. I infer that the third party be this Court. The letter says, inter alia:
Amsterdam, July 3, 2015
Re: Request for information
Dear Sir,
We confirm receipt of your letters dated May 6 and May 20, 2015.
We understand that your client is a party to legal proceedings in New Zealand. We also understand that you are writing us in relation to the perceived beneficiary status of your client to the Gerda Foundation and that your client’s request for information is related to that perceived status.
It is clear that the Gerda Foundation is not a party to any proceedings related to your client nor that there is any intention to become a party to any proceedings in this respect. It is for this reason that we cannot assist you in your request for information. Apart from the aforementioned, we are also not at liberty to provide any information to third parties and the Foundation bylaws in combination with our fiduciary duties as Trustees do not allow us to disclose any information to third parties related to the Foundation and/or its beneficiaries.
I trust you will understand our position and kindly request you to direct any further correspondence to our legal counsel Dr Helmut Schwarzler. The contact details of Dr Schwarzler are as follows:
Schwarzler Rechtsanwaite
P O Box 730 Feldkircherstrasse 15,
9494 SCHAAN Furstendom Lichtenstein
I trust we have adequately informed you. Yours sincerely
For Gerda Trust
Dr C Lamprecht Peter van Langeveld
The response of the plaintiff
[21] Mr Mills QC submitted that the effect of the correspondence between the Dutch lawyers, for the defendant, and the Gerda Foundation is that the Foundation will not provide any of the information sought in the letter nor assist with the release of any funds to the defendant, even though the Dutch lawyers’ correspondence accepts the defendant is a beneficiary of the Foundation. The correspondence appears to reflect that Mr van Heeren believes that the Gerda Foundation has
sufficient assets under its control to enable him to comply with the interim order payment. Mr Mills notes that Mr van Heeren has not explained where his substantial bank balances come from, given that he has no other assets apparently.
[22] Mr Mills submits that:
With no identified source of income and no other acknowledged way in which the defendant can credibly say that more time will assist him to comply with the Court order, the practical effect of what is being sought is an indefinite stay pending the outcome of his appeal.
[23] Indeed, that is close to the submission of Mr Gray:
The defendant submits that until such time as [his appeal to the Court of Appeal] is determined or the defendant has exhausted his rights of appeal, it would be premature for the order for the interim payment into Court to be enforce. Such an order would render the appeal nugatory.
[24] The appeal is expected to be heard in June 2016.
[25] Mr Mills submits that it would appear from the defendant’s own affidavit that at the time he transferred all his personal and business assets to the Timbavati Foundation, he regarded those assets as his own and he is now telling the Court that these assets and the further accumulation from their investment are now held by the Gerda Foundation, over which he has no control.
[26] The affidavits of the defendant disclose the constitution of the Timbavati
Foundation but not the Gerda Foundation.
[27] Allied to the submission that effectively the defendant is seeking a permanent stay, Mr Mills submitted that this application is an abuse of the Court process. That this alleged inability to pay should have been aired during the course of the five-day hearing prior to the judgment during which the Court was examining the merit of there being an interim order. That would be the occasion to say: “I have no assets. I cannot make an interim payment”.
[28] Counsel for the plaintiff then went on to examine the careful choice of
language by the defendant in his affidavits as not having funds under his “direct
power or control”. Counsel for the plaintiff challenged this proposition starting with Worldwide Leisure Limited. This company is the registered proprietor of the Huka Lodge and land and owns and operates both the Huka Lodge business in New Zealand and the Dolphin Island business in Fiji.
[29] In 2005 Mr van Heeren was the sole shareholder of Worldwide Leisure save for a single share held by his solicitor. In that year an application was made to the Overseas Investment Office (OIO) for the defendant to transfer his shares to a Dutch company, Saraceno, (referred to above). The application was granted by the OIO on the basis that:
The applicant (Saraceno) will hold the shares as bare trustee for Mr van
Heeren.
[30] Following the grant of the OIO consent, the defendant’s 9,999 shares in Worldwide Leisure were transferred to Saraceno, the one share being held by the defendant’s solicitor, and both that solicitor and the defendant were directors of Worldwide Leisure Limited and still are. It is submitted that in order to remain compliant with the OIO consent, Saraceno must still hold the shares in Worldwide Leisure Limited as a bare trustee for Mr van Heeren.
[31] At the time of the transfer in 2005, the value of the Worldwide Leisure
Limited shares were stated in the OIO application to be NZD16.875m.
[32] Given these facts, it was submitted by Mr Mills that Mr van Heeren must be giving the words “direct power or control” a very refined meaning, independent of his ability to make things happen, such as realising assets or raising funds. There is independent financial information indicating that Worldwide Leisure Limited is itself one of a number of “commonly controlled entities” which include Fenton Limited, Optec and Prime Pacific. The letter from Gerda saying they would not assist is signed by Mr van Langeveld, with another signatory. Mr van Langeveld is a co- director with Mr van Heeren in relation to the collection of assets known as the Caprivi collection assets which include Huka Lodge and Grand Provence Estate. In short, it was submitted Mr van Langeveld that is a very close business associate of Mr van Heeren.
Analysis
[33] Mr Gray accepted that the onus was on his client to satisfy the Court that he was unable at the present time to comply with the Court’s order to make an interim payment. That onus is to be resolved on the balance of probabilities.
[34] This Court has considerable accumulated experience with the way in which assets of the wealthy are held and controlled. The choice of the concept of control in the judgment of this Court in para [172] reflects the history already before the Court of these two men using a variety of entities to hold assets and to trade. They did not have a history of holding assets in their own names. Rather, they had a history of having entities internationally, including in very small foreign jurisdictions which have legal systems encouraging and facilitating the domicile of assets in a way which protects them from being the subject of scrutiny and attachment by other jurisdictions. The Netherlands Antilles, the Isle of Man and Liechtenstein, all fall within this category.
[35] Therefore this Court, being informed that a wealthy person has transferred assets to a trust or a foundation does not draw the inference that the wealthy person is giving his property away but, rather, draws the opposite: that he is seeking protection from any attachment of it. So the information in the affidavits from Mr van Heeren that he and his wife transferred progressively all of their assets to the Timbavati Foundation is an indication of seeking to make those assets more secure, rather than giving them away. These are real world presumptions which I have applied when scrutinising the evidence from Mr van Heeren that has lost control of his assets.
[36] In addition to the arguments received from counsel for the plaintiff, I noticed myself that there appears to be an inconsistency in the Timbavati Foundation. The first affidavit of Mr van Heeren exhibits the memorandum and formation of the Timbavati Foundation. This is a foundation formed in the state of Liechtenstein. It records that the Foundation has an independent legal personality, that its object is “to preserve, secure and increase the estate, to pay for and secure an adequate standard
of living and education of the beneficiaries as well to support them in a general
way”. It identifies the “Foundation Board” and says:
The sole and supreme authority of the Foundation is the Foundation Board
which consists of one to five members …
[37] Having said that though, however, it talks of the Advisory Board “whose purpose is to give any support or supporting advice to the Foundation Board”. Then, under the heading “Benefits from the Foundation”, it says:
1 The foundation or Board appoints the beneficiaries in accordance with the instructions, which the Foundation Board receives from the Advisory Board.
That rather seems to quality the proposition that the Foundation Board is the sole and supreme authority.
[38] Mr van Heeren has not disclosed who are the members of the Foundation
Board or of the Advisory Board.
[39] We do not know whether when Mr van Heeren says he “suggested” to the Timbavati Foundation that the assets be transferred to the Gerda Foundation, whether he was doing so as the Advisory Board. So that that would be an instruction that the Foundation Board received from the Advisory Board.
[40] It is arguable that by this mechanism or by some other mechanism possibly held in another document not disclosed, Mr van Heeren knew that his “suggestion” of transfer of assets would be effective.
[41] Certainly, this Court is aware that structures set up to hold significant assets, of multi-million value, do not normally depend on the good faith of the stewards or trustees handling the assets. Rather, that ultimately transferors retain control, hidden though it may be. A modern instance of this is the power reserved in a structure examined by the Privy Council in the case of Tasarruf Mevduati Sigorta Fonu v
Merrill Lynch Bank and Trust (co) Cayman) Ltd12 recently applied by the New
Zealand Court of Appeal in Clayton.13
12 Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust (co) Cayman) Ltd [2011]
[42] It is possible that when swearing his two affidavits, Mr van Heeren considered that he was able to depose that assets were no longer in his [direct] power or control consistent with him having ultimate and effective control by one of these mechanisms. On this basis he possibly drew the distinction in [210] of his first affidavit (cited above) between requesting that the trustees of the Timbatavi Foundation settle the assets previously vested in it upon the Gerda Foundation and controlling this process. He therefore considered he could distinguish these Foundation managed assets, and assert that he had not accumulated assets in his personal name.
[43] It was not and could not be suggested that para [172] of the judgment containing the orders intended them to be confined to accumulated assets held in the personal name of Mr van Heeren. Submissions of abuse of the Court’s processes are very serious. If accepted they can result in the Court accessing other powers. In the course of the argument I was left unsure as to whether Mr van Heeren was deliberately obstructing disclosure of assets under his control or, rather, knowing and disclosing of the function of the Timbavati Foundation and the Gerda Foundation, and the Worldwide Leisure Limited’s shareholding etc, felt able to swear that the partnership assets listed, and carefully listed by Satchwell J in her para [132] were not under his control so that he was unable to make a payment of USD25m.
[44] In the course of the hearing, I entertained the possibility of an adjournment of the hearing of these applications to enable Mr van Heeren to consider his position and file a further affidavit. I apprehended that Mr Gray was agreeable to that. Mr Mills was not. It is a step that I am not prepared to take without agreement of the parties, because each party is entitled to rely upon the application of the High Court Rules and the pleadings and, having undertaken the expenses inherent in all of that, including waiting for and obtaining a hearing, to get a judgment.
[45] Mr Mills did advise that should this judgment be in his client’s favour, the
next step might be to call on Mr van Heeren to appear before the Court and be examined.
UKPC 17, [2012] 1 WLR 1721.
13 Clayton v Clayton [2015] NZCA 30, [2015] 3 NZLR 293.
Conclusion on first application
[46] The defendant has not made out the merit of an application for variation of the orders. On the contrary, his two affidavits are quite unsatisfactory and not significantly persuasive.
[47] Accordingly, the first application, that the obligation of the defendant to pay the USD25m into Court be deferred, is dismissed.
Second application
[48] The second application14 seeks amendment of orders at para [172](a) to (e) of the judgment such that the parties are asked to file affidavits every three months identifying what steps had been taken to obtain documents relevant to the account between the plaintiff and the defendant.
[49] This is an order contrary to order [172](e):
(e) I direct that no further work need be done by the plaintiff in the meantime until the defendant has accounted in the manner ordered by this Court, or until any further order of this Court.
[50] The application seeks to take advantage of the last clause of that order.
[51] The submissions in support of this application recognised at the outset that the taking of accounts between partners is a mutual exercise.
[52] It is the defendant’s argument that his affidavits have demonstrated that he has taken all reasonable steps that he can take to date to account to the Court for the assets of the partnership, insofar as he is currently able to do so. He relies on the long period of time, the proposition that partnership is not defined, raises questions as to what the governing law is, disputes that it could possibly be New Zealand law,
and relies on not being able to advise the present assets and their value.
14 At [6](b) above.
[53] The defendant then goes on to argue that without further discovery from the plaintiff, the defendant is hindered in complying with his own obligations as part of the accounting exercise.
[54] The perspective of the defendant is summed up in this submission: 15
In reality, the accounting process between the plaintiff and the defendant could and probably will take many months to complete as it is a complicated process and relates to the steel trading activities and other business activities of the parties during the period 1975 – 1991. It also concerns a number of entities, the majority of which ceased trading, were struck off or removed from the register, or were placed in liquidation in the years immediately following the dissolution of the parties’ business relationship in 1991.
[55] In the course of oral argument, Mr Gray sought to examine further the Genan transactions.
[56] In submissions in opposition to this, counsel for the plaintiff argued that by this variation, the defendant is seeking to convert the obligation to account into an obligation to simply report at four-monthly intervals on the progress he is making with obtaining information. Furthermore, he is seeking to relitigate matters that are the subject of issue estoppel. In this regard, he cites from the defendant’s memorandum at para 6.3 which says:
… [The] defendant’s case is that all the income which was earned by the entities through which the plaintiff and defendant conducted their steel trading and other business activities were distributed to the parties. Both parties were at all times aware of all transactions and the profitability, and the parties drew income and took distributions of profits regularly.
Analysis
[57] Mr van Heeren is seeking to reopen an argument he lost in South Africa:16
[154] Mr van Heeren had every opportunity at the South African trial to argue that the profits from the steel trades had been fully distributed between he and Mr Kidd and these other assets belonged to him alone. Had he done that and proved that, the indemnity agreement would have been seen in a completely different factual matrix.
15 Counsel for defendant’s submissions at [6.22].
16 Kidd v van Heeren, above n 1 at [154].
[58] The orders made in the judgment at [172] have to be read against the principal declaration of issue estoppel contained in [171]. In turn, that requires accepting an issue estoppels as to the matters set out at [132] of the judgment of Satchwell J. In that regard, the critical sentence is the second sentence of [132]. Paragraphs [84] to [95] of the judgment examine the relevance of the Genan agreement. As [86] records, at the hearing before me, prior to the judgment, the defendant was contending that the consequences of the sale of Mr van Heeren of all his shares in Genan should be tried in New Zealand. Satchwell J found that the Genan agreement was not proven. She did not go so far as to say the agreement was a fraud, as Mr Kidd had been contending. Plainly, her non-proven conclusion as to the Genan agreement did not, in her mind, qualify in any way whatsoever the second sentence in [132] of her judgment. This conclusion is inevitable as the preceding sentence refers to Genan as a “conduit”.
[59] I am satisfied that what the defendant is seeking to do is conduct an accounting which begins earlier than 1991, in the 80s, designed to contend that a substantial part, if not all of the steel trading profits, were distributed at that time in order to undermine the issue estoppel that the assets of Prime New Zealand, Huka Lodge, Dolphin Island, Cromwell Wellesley shares, Optec, the gold bars etc are assets of the partnership. In this regard, this application seeks to exploit the qualifications appearing in orders [172](c) and (e):
(c) The defendant, as the principal accounting party,…
(e) No further work need be done by the plaintiff in the meantime.
[60] When ordering the account to be taken between the plaintiff and the defendant in the judgment, I was making orders consequential to the declaration in [171] of issue estoppel. Issue estoppel functions by stopping a party relitigating an issue in a later proceedings. The issues that the defendant wants to litigate in the context of the taking of account include the Genan issues which were litigated in front of Satchwell J who received the evidence from Mr Browing, which evidence was cross-examined. In the context where it was open for the defendant to give evidence himself and, through his counsel, call his expert, Mr Greyling. But the defendant chose not to give evidence.
[61] I am functus officio as to the declaration and orders that I have made. But it should be apparent from the context that it was my judgment that the accounting should start with the defendant filing within 30 days a complete list of all the assets of the partnership not confined to the list in [132] of the South African judgment. As to the assets, the estoppel is confined to those as found by the Judge and if those assets have been disposed or transmuted into other assets, of course an accounting would follow to include those. That is the purpose of subpara (d).
[62] I regard this application as a direct attack on order [172](e), an argument that can be mounted in the Court of Appeal but not before me. The last clause in order (e) cannot be used as a tail that can wag the dog.
[63] Order [172](e) reflects the view that the most sensible thing to start with is to examine what are the current accumulated worldwide assets within the definition found by the Satchwell J in [132] of her judgment. Order [172](c) and (d) anticipates that those assets may now be held by different entities, have different values, have been used to acquire other assets and so on.
Conclusion
[64] In my view it is plain that while the issue estoppel remains in place, Mr van Heeren has to accept that his argument of distribution of profits between the two men as they were achieved was not accepted by Satchwell J in her judgment after a long trial in which, at the end of the day, the defendant chose not to give evidence. That argument is inconsistent with her findings in [132]. This application fails.
The plaintiff ’s application that the defendant make an immediate payment of
USD1.59m into Court
[65] This application is made in reliance on the defendant’s second affidavit of
11 May in which he disclosed seven bank accounts with a total credit expressed at current exchange rates, equivalent to USD1,591,547.27. It is submitted the only ground to advance non-compliance is that the defendant does not have sufficient assets under his direct power or control to pay USD25m.
[66] Since that application has been filed, as I have recorded earlier, a substantial amount of that sum has been expended. Indeed, the plaintiff argues that, at current rate of expenditure, the total sum will be expended.
[67] As a result, this application was not pursued, the plaintiff ’s counsel
submitting:
With the significantly diminished sum now involved, the plaintiff’s position is that any further consideration of a payment of all or part of this reduced amount is only required if the Court grants the defendant’s application to extend time for the payment of USD25m ordered.
Conclusion
[68] In this judgment I have not altered at all the judgment of this Court dated
14 April finding issue estoppel. None of the orders are varied or postponed.
[69] I have not made a finding that Mr van Heeren is deliberately refusing to comply with the orders made. This is because I allow for the possibility that he has taken a narrow, very narrow, reading of the orders made in [172] of the judgment and, in particular, has read the term “control” to be confined to meaning direct control or immediate control and as not including the ability to control indirectly or remotely the assets and proceeds of the assets found by Satchwell J to be assets of the partnership in [132] of her judgment.
[70] But I have found that Mr van Heeren’s affidavits to date, on the probabilities, do not fully inform the Court as to the current whereabouts of that partnership wealth, let alone its value and certainly do not displace in any way the reasoning in the judgment in [150] - [155]:
[150] The Judge records Mr Browning’s overall assessments in her
judgment at [90](k):
The overall worldwide group financial assessment as at 17 January
1991 was calculated at between US$48,892,947 and US$55,585,026 and the overall worldwide group financial assessment based on assets forming part of the Kidd/Van Heeren business association as at 17 January 1991 was calculated at between US$47,263,501 and US$511,812,643.
[151] Materially, in [95] the Judge refers to Mr Greyling, the accountant retained by Mr van Heeren, who was to be called as an expert witness:
… I am also mindful that Browning was taken through his response to the report of another accountant, Greyling, who was to be called as an expert witness by Van Heeren and who sat in court throughout the evidence of Browning. The only real difference between Browning and Greyling (as discussed by Browning in evidence) was that Browning’s investigation and opinion was more extensive as was the brief which he was required to undertake.
[152] Obviously, the scale of these partnership assets provided the motivation for Mr van Heeren to instruct his solicitors to draw the wide indemnity and for the deliberate misrepresentations he made to get it executed, as the trial judge noted, in [165].
[153] There is no doubt that it was a judgment call by Mr van Heeren and his advisers that neither he nor Mr Greyling gave evidence, made at Mr van Heeren’s risk.
[154] Mr van Heeren had every opportunity at the South African trial to argue that the profits from the steel trades had been fully distributed between he and Mr Kidd and these other assets belonged to him alone. Had he done that and proved that, the indemnity agreement would have been seen in a completely different factual matrix.
[155] For these reasons, in my view, my judgment as to whether Mr Kidd “would” or “is likely”, putting either test on the balance of probabilities, recover USD25m has to be based on the issue estoppel that I have found and the difficulty of displacing a presumption of 50/50 sharing.
Costs
[71] There is an outstanding issue of costs, the hearing of which will be concluded in September. In respect of these applications and this judgment, there is a further order for costs against the defendant in favour of the plaintiff. If the parties cannot agree costs, I will receive submissions, the submissions being limited to 15 pages each and circulated in advance.
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