Malik v Syed
[2022] NZHC 136
•9 February 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-58
[2022] NZHC 136
BETWEEN AMIR FAZAL MALIK
Plaintiff
AND
ZAINULABIDIN SYED
First Defendant
TRANSNATIONAL LIMITED
Second DefendantPACIFIC MOTEL LIMITED
Third DefendantSHAH FAMILY LIMITED
Fourth Defendant
Appearances: Mr A F Malik, Plaintiff in person Judgment
(On the papers):
9 February 2022
JUDGMENT OF ROBINSON J
This judgment was delivered by me on 9 February 2022 at 4.30pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Party: The Plaintiff
MALIK v SYED [2022] NZHC 136 [9 February 2022]
Introduction
[1]The plaintiff applies without notice for orders freezing:
(a)The property at 21 Park Avenue, Ōtāhuhu, Auckland which is presently owned by the second defendant; and
(b)All or any bank accounts related to the four defendants.
[2] In support of his application the plaintiff has filed: an affidavit with three bundles of exhibits; an undertaking as to damages; and a statement of claim setting out his substantive allegations.
[3] I convened a teleconference with Mr Malik on 9 February 2022. At the end of the teleconference I explained to Mr Malik why I did not consider it appropriate to grant the orders he seeks. I set out briefly below my reasons for that decision. As I explained to Mr Malik, this is not to dismiss his substantive claim or to conclude that it necessarily will be dismissed. Those are matters for another day. But in the meantime I am not prepared to grant the freezing orders Mr Malik has sought without notice.
Substantive claim
[4] The plaintiff alleges that on 26 May 2009 he went to Melbourne at the first defendant’s invitation (and expense) in order for them to consider business opportunities. The plaintiff alleges that at some stage during this visit he and the first defendant entered into an oral contract pursuant to which:
(a)The plaintiff and the first defendant agreed to establish educational and property development businesses in New Zealand and Australia;
(b)The first defendant would arrange loans for these businesses;
(c)The plaintiff would contribute his time, energy and support to the businesses;
(d)The plaintiff could use business accounts for his own basic necessities and otherwise run the companies at a minimal expense;
(e)The plaintiff and first defendant would share equally the profit and losses generated by the businesses.
[5] The plaintiff says that between 2009 and 2016 he and his family lived rent free in properties owned by companies related to the defendants. He says that during this time he took minimal drawings, sufficient only to cover his basic living expenses, but otherwise did not receive any wages or salary from either the first defendant or any of the companies that they were operating.
[6] The plaintiff alleges that the contractual relationship between him and the first defendant ended on 28 January 2016. He alleges that in breach of that oral contract the first defendant has failed to account to the plaintiff for 50 per cent of the profits generated by the various companies they were running jointly between 2009 and 2016. The plaintiff calculates these total profits to be approximately $20,000,000. He sues the first defendant for breach of contract and seeks $10,000,000 damages.
[7]As against the second, third and fourth defendants’ the plaintiff alleges that:
“The plaintiff strongly believes the first defendant created and use[d] second, third and fourth defendant companies to hide his asset[s] and businesses in New Zealand.”
[8] The plaintiff does not plead any cause of action against the second, third or fourth defendants. He merely alleges that the first defendant carried out his business through the second, third and fourth defendants for a range of nefarious reasons and to avoid the plaintiff’s claim against him. Nevertheless, he seeks a substantive remedy against the second, third and fourth defendants in the same terms as the orders he seeks in the Application, namely: a freezing order in respect of 21 Park Avenue, Ōtāhuhu, Auckland; and a freezing order over all or any of the defendants’ bank accounts.
Relevant legal principles
[9]Part 32 of the High Court Rules applies. In particular, Rule 32.2 provides that:
32.2 Freezing Order
(1) The court may make an order (a freezing order), on or without notice to a respondent in accordance with this Part.
(2) A freezing order may restrain a respondent from removing any assets located in or outside New Zealand or from disposing of, dealing with, or diminishing the value of, those assets.
(3) An applicant for a freezing order without notice to a respondent must fully and frankly disclose to the court all material facts, including—
(a)any possible defences known to the applicant; and
(b)information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages.
(4) An application for a freezing order must be made by interlocutory application under Part 7 or originating application under Part 19, which Parts apply subject to this Part.
(5) An applicant for a freezing order must file a signed undertaking that the applicant will comply with any order for the payment of damages to compensate the respondent for any damage sustained in consequence of the freezing order.
[10] It is well established that there are three essential requirements for a freezing order: a good arguable case on the substantive claims; assets to which the order can apply; and a real risk that the respondent(s) will dissipate or dispose of those assets.1 Ultimately, the Court needs to consider the overall justice of the case balancing the need to ensure the applicant is not deprived of the benefit of any judgment with the need to protect the respondent against any prejudice or hardship.
[11] A good arguable case is established if the allegations in the proposed claim are capable of tenable argument and sufficiently supported by adequate evidence.2 The Court will take into account the early stage in which the application is brought. In order to establish a “good arguable case” an applicant does not have to demonstrate a greater than 50% prospect of success. However, a freezing order will not be granted where there is no cause of action at the time of the application.3
[12] Before the Court will grant a freezing order, it must also be satisfied that there is a real risk that the respondents will dissipate the assets to which the freezing order
1 Shaw v Narain [1992] 2 NZLR 544 (CA) at 548.
2 Dotcom v Twentieth Century Fox Film Corp [2014] NZCA 509, at [18] citing Hannay v Mount
[2011] NZCA 530, at [20]-[22].
3 Euro-National Corporation Limited v NZI Bank Limited (1991) 4 PRNZ 365 (HC) at 370.
would relate. It is not sufficient for the applicant merely to assert a belief that the respondents’ might dissipate their assets. The applicant must provide evidence to justify that belief, although affirmative proof of the likelihood of dissipation is unnecessary.4
[13] Significantly, when applying for a freezing order the applicant has a duty to fully and frankly disclose all material facts.5 Material facts include any possible defences known to the applicant, and any information casting doubt on the applicant’s ability to discharge any obligation created by the undertaking as to damages. When I asked Mr Malik about this he accepted that the first defendant would probably deny there was a contract. He also acknowledged that quantum would likely be in issue.
Analysis
[14] I do not consider it is appropriate to grant the freezing orders the applicant seeks.
[15] As noted above, the plaintiff’s essential claim is that the defendant is in breach of an oral contract by failing to share $20,000,000 of profit equally with the plaintiff between May 2009 and January 2016. Although the evidence set out in the plaintiff’s affidavit shows that he was working with the first defendant for at least some of this time, that evidence in my view is insufficient to demonstrate a good arguable case for an oral contract on the terms alleged.
[16] Nor is there evidence to suggest that the plaintiff and first defendant’s joint business activities generated $20,000,000 of profit between May 2009 and January 2016. Regardless of the precise terms upon which the plaintiff and the first defendant might have carried out those joint business activities I would expect some financial records and relevant correspondence to be available to the plaintiff to show that the joint enterprise was as profitable as he alleges.
[17]The plaintiff referred me specifically to documents he says show that some
$4,000,000 was transferred from Australian accounts to New Zealand accounts
4 Bank of New Zealand v Hawkins (1989) 1 PRNZ 451 (HC) at 454.
5 High Court Rules, r 32.2(3).
between 2010 and 2014. However, I do not consider this is sufficient to demonstrate a good arguable case that the parties entered into the contract alleged, or that the first defendant has breached contractual obligations to the plaintiff with the result that he is liable to him for $10,000,000.
[18] As for the second, third and fourth defendants, as noted above the plaintiff does not allege any cause of action against any of them. The plaintiff’s only allegation is that the first defendant has used the second, third and fourth defendant as vehicles to carry out his business. He points to various shareholdings and directorships which might show that various companies are somehow interconnected. However, no case is pleaded at all, let alone a good arguable case.
[19] In terms of the assets the plaintiff seeks to freeze, there does not appear to be any risk that the property in Ōtāhuhu will be dissipated. I also note the plaintiff says he has previously endeavoured unsuccessfully to sustain a caveat over that property. In any event, as the plaintiff has quite rightly pointed out, the property in Ōtāhuhu is owned by the second defendant not the first defendant. The plaintiff criticises the circumstances in which the second defendant became the registered proprietor of that properly, but as matters stand the plaintiff does not assert any cause of action against the second defendant.
[20] I also decline to grant the freezing orders in respect of the bank accounts. I do not consider that the evidence is sufficiently strong to demonstrate a good arguable case against the first defendant and no cause of action is alleged against the second, third and/or fourth defendants. Nor is there any evidence of or about those bank accounts. In those circumstances the interests of justice clearly do not permit the freezing of their bank accounts.
Result
[21] The plaintiff’s application for freezing orders is declined. As I explained to the plaintiff, if he wishes to pursue his claim against the first defendant he needs now to serve him with the proceedings. The plaintiff said he was unsure how to arrange service. He had mentioned to me that he is presently involved in proceedings against
the first defendant in the High Court in Dunedin in which the first defendant is legally represented. I suggested to the plaintiff that if he wished to serve the first defendant with these proceedings he might ask the first defendant’s solicitor if she or he would be instructed to accept service. I also encouraged the plaintiff to seek his own legal advice.
Robinson J