Mogilin v Jo

[2013] NZHC 1345

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-404-001584 [2013] NZHC 1345

BETWEEN  ANATOLY MOGILIN First Plaintiff

MARFA (MASHA) MOGILIN Second Plaintiff

ANDNAM GEUN JO First Defendant

MARTINA JHO Second Defendant

Hearing:                   17 May 2013

Appearances:           E Orlov for the Plaintiffs

M Wallace for the Defendants

Judgment:                7 June 2013

INTERIM JUDGMENT OF FOGARTY J

Introduction

[1]      The plaintiffs have applied for extension of a current freezing order, ancillary discovery needed to enhance the freezing order, and contempt.  This application is made on the eve of the trial.  The trial date has not been fixed, but is likely to be in the next couple of months.

[2]      The  application  has  been  brought  about  by  the  discovery  that  the  first defendant has been deported from New Zealand, contrary to the first defendant’s expectation,  contained  in  his  affidavits,  that  he  was  committed  to  staying  in New Zealand.  His wife, the second defendant, is still in New Zealand.  One of the applications is for an order restraining her from leaving the country.  The plaintiff

accepts that the Court has no jurisdiction to do that.

MOGILIN & Anor v JO & Anor [2013] NZHC 1345 [7 June 2013]

[3]      The application for contempt is against the first defendant, and is related to filing an affidavit saying he was committed to staying in New Zealand but, it is alleged, failing to disclose that he was under a threat of deportation, as he had a limited Visa which was not capable of being renewed from within New Zealand, according to the plaintiff.  The contempt argument is further developed by a refusal of the first defendant to waive privilege over his dealings with his employment lawyer, not his counsel in this case who is Mr Wallace.

[4]      The application for ancillary discovery was designed to elicit information which would enable an extension of the freezing orders. The only freezing order that has been made so far has been to caveat a property in Springs Road on the outskirts of Christchurch, which was conveyed by the plaintiffs to the first and second defendants.

[5]      Essentially the plaintiffs want the first and second defendants to disclose their bank accounts, and the transactions that are passing between them, to enable freezing orders to be made against those accounts.

The core theories of the case for the plaintiffs and defendants

[6]      The plaintiffs and defendants have executed a joint venture agreement.  They have also executed an agreement for sale and purchase.  There is a dispute about the timing of these documents.

[7]      There is common ground that the plaintiffs were being pursued by the Commissioner of Inland Revenue, and were at risk of enforcement action against the Commissioner of Inland Revenue which might attach to their various investments in New Zealand.   They took advice from a solicitor, and were introduced to the defendants.  They entered into both the joint venture and the agreement for sale and purchase as part of a plan to remove their New Zealand assets offshore.

[8]      The plaintiffs’ theory of the case is that the documents that they exercised are only part of this general plan of moving assets offshore, and that the defendants had assumed other obligations not recorded in the contracts, in particular to borrow

against the Springs Road assets, and then the borrowing back to the plaintiffs to enable them to maintain their lifestyle.

[9]      The defendants’ theory of the case appears to be (the statement of defence is in the traditional opaque form) that the plaintiffs had deliberately entered into an agreement for sale and purchase, selling their real estate in New Zealand to the defendants, and taking in return a share of certain patents owned by the defendants. In short, they exchanged real estate in New Zealand for intellectual property offshore in Asia.  Accordingly, on the defendants’ theory, they have always been able to deal with the assets they acquired by the agreement for sale and purchase without any continuing obligation back in respect of the proceeds of those assets to the plaintiffs. It is in this context that they have resisted any freezing orders preventing them from the normal course of dealing with their private assets.

[10]     Heath J, in a decision dated 26 August 2011, did allow the Springs Road property to be caveated.  A measure which was intended to give some security to the plaintiffs.  However, that property had already been borrowed against, and it is not clear to what extent there is any equity in it.

[11]     In an earlier decision dated 13 March 2013, I refused to make any further freezing orders.  This was on the grounds that there had been no material change in circumstances, and the parties had not appealed the decision of Heath J.

[12]     I am satisfied now that there has been a change in circumstance with the deportation of the first defendant.  That deportation coupled with a comparison with his affidavit made, when it is more probable than not that he was under threat of deportation, casts doubt on his credibility, and also removes an underpinning plank of Heath  J’s  judgment,  which  proceeded  on  the basis  that  the  first  and  second defendants were not flight risks.

[13]     For these reasons, I have advised counsel that I am minded to make such further orders as are practicable in these circumstances, keeping in mind that we are on the eve of trial.

[14]     As noted, the plaintiffs want disclosure of all bank account numbers, both here in New Zealand and overseas.   It is not appropriate for this Court to claim jurisdiction, or commence a tracing regime offshore, prior to judgment.  Second, it is likely that if any funds are intended to be transferred offshore, but that happened long ago.

[15]     The Court will make some interim orders to ascertain the present facts as to assets in New Zealand.

(a)      The respondents are to disclose all bank accounts in their name, or under their control, in New Zealand, disclosing whether they are cheque or term deposit accounts, or any other category, and disclosing the current balances.

(b)      The  respondents  are  to  disclose  the  whereabouts  of  the  yacht

“Volente”, whether it is registered, and in whose name it is registered.

[16]     Since the hearing on 17 May 2013, the defendants have filed a statement of defence dated 28 May 2013, which is in response to the amended statement of claim dated 24 May 2013.

[17]     In  these  circumstances,  the  Court  will  not  make  any  further  order  for discovery, at this stage, on the assumption that counsel will be discussing the need for further discovery in the light of fresh pleadings, and only bring any unresolved issues back to the Court. They can be resolved by telephone conference.

[18]     The  defendants  have  advised  that  they  will  be  calling  Mr  Withers  as  a witness.  He is a former employee of my firm, when I was a partner.  I recuse myself from the trial.

Solicitors:

Stewart & Associates, Alexandra

Patient & Williams, Christchurch

Equity Law Barristers Limited, Auckland