Middleton v Mana Within Ltd - [2025] NZHC 543

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-002120

[2025] NZHC 543

BETWEEN PHILIP GEORGE SAUA MIDDLETON and LEARNER FOCUSED TRAINING LTD
Applicants

AND

MANA WITHIN LTD

First Respondent

DOUGLAS THOMAS LEEF
Second Respondent

BUILDRIGHT RESIDENTIAL LTD

Third Respondent

Hearing:
20 February 2025

(further information received 13 March 2025)

Appearances:

W J Revell and V H H Hansen for Applicants N P Tetzlaff for Second Respondent

Judgment:

18 March 2025

JUDGMENT OF GARDINER J

This judgment was delivered by me on 18 March 2025 at 11 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors:
Farry Law Limited, Auckland Smith and Partners, Auckland

MIDDLETON v MANA WITHIN LTD [2025] NZHC 543 [18 March 2025]

Introduction

[1] The applicants seek to restrain dealings with funds held in the bank account of the first respondent, Mana Within Ltd (MWL). MWL is owned and operated by Philip Middleton and Douglas Leef.

[2] MWL entered into an agreement (Outcome Agreement) with the Ministry of Social Development (MSD) to provide culturally tailored pastoral care and education support to Māori apprentices in the construction industry. The contract commenced on 1 November 2021 and was for an initial term of 24 months. MWL was funded from the MSD’s Māori and Trades Training Fund. MWL anticipated providing the services to 50 individuals.

[3] MWL did not deliver the services itself. Mr Middleton and Mr Leef provided the services as ‘consultants’ through their respective companies, Learner Focused Training Ltd (LFT) and Buildright Residential Ltd (BRL). The companies rendered invoices to MWL, who paid the invoices from the MSD funding. The arrangement was documented in ‘consultancy agreements’ between MWL, LFT and BRL.

[4] Eventually, the business relationship between Mr Middleton and Mr Leef soured. On 27 February 2023, Mr Leef served Mr Middleton with a default notice under the MWL shareholders agreement, alleging various breaches which included diverting funds from MWL to LFT. Attempts to resolve the dispute were unsuccessful.

[5] In August 2023, Mr Leef told MSD that MWL held approximately $1.1 million of unused funds and that the company would be liquidated due to the disagreement between himself and Mr Middleton. This caused MSD to demand that MWL repay any unspent funds and institute an audit to gain a better understanding of the expenditure incurred in delivering the programme. The audit is ongoing.

[6] On 22 September 2023, the applicants obtained an interim freezing order over around $184,000 in MWL’s accounts to which LFT claimed to be entitled.1

1 Middleton v Mana Within Limited HC Auckland CIV-2023-2120, 22 September 2023 (Minute of Walker J).

The interim order also prevented Mr Leef from speaking to MSD without Mr Middleton.

[7] The parties conferred, and Mr Leef agreed to execute undertakings to maintain the status quo while they attempted again to resolve the dispute. They were unable to do so and, on 4 December 2023, Mr Leef applied by memorandum to be released from…

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: [2025] NZHC 543
Decision Date: 18 March 2025

CaseChat Overview and Summary

The applicants, Philip George Saua Middleton and Learner Focused Training Ltd (LFT), sought to restrain dealings with funds held in the bank account of the first respondent, Mana Within Ltd (MWL), as well as to restrict communications between the second respondent, Douglas Thomas Leef, and the Ministry of Social Development (MSD). MWL, owned and operated by Middleton and Leef, entered into an agreement with MSD to provide culturally tailored pastoral care and education support to Māori apprentices in the construction industry. The applicants claim that Leef acted in bad faith, breached his fiduciary duties, and engaged in conduct that led to the termination of MWL and the diversion of MSD’s business to Leef’s own enterprises. The applicants sought freezing, preservation, or interim injunction orders in respect of MWL’s bank account and an interim injunction to restrain Leef from communicating with MSD without Middleton.

The court considered the legal principles governing freezing orders, preservation orders, and interim injunctions. Freezing orders require a good arguable case on the substantive claim, assets to which the order can apply, and a real risk of dissipation of those assets. Preservation orders require a proceeding involving property, and the property to be preserved must be the subject of the litigation. An interim injunction requires a serious question to be tried, a consideration of the balance of convenience, and the overall interests of justice.

The applicants argued that there was a real risk of dissipation of MWL’s funds, given Leef's actions and financial position. However, the court found that the applicants' claims against Leef were not sufficient to justify restraining MWL’s funds. The applicants' claims primarily targeted Leef, not MWL, and the amount sought was disproportionate to the relatively modest sum LFT sought for contractor costs. Furthermore, the applicants did not demonstrate a good arguable case for their claims against Leef, particularly regarding breaches of fiduciary duty and the non-compete clause.

The applicants also sought an interim injunction to restrain Leef from communicating with MSD without Middleton. The court found that such an injunction would be improper, as Leef must be able to communicate freely with MSD during the audit.

The court dismissed the application for freezing, preservation, or interim injunction orders and discharged the interim orders made by Walker J on 22 September 2023. The parties were invited to file submissions on costs within 15 working days. The court encouraged Middleton and Leef to resolve their dispute outside of court to avoid further costs.

Orders