NF Global Limited (in liquidation) v Oberto
[2024] NZHC 3116
•14 November 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-002594
[2024] NZHC 3116
BETWEEN NF GLOBAL LIMITED (IN LIQUIDATION)
First PlaintiffJOHN HOWARD ROSS FISK and CRAIG
ALEXANDER SANSON as liquidators of NF Global Limited (in liquidation) Second Plaintiffs
AND
CLAUDE SANDRO OBERTO
Defendant
Hearing: 15 August 2024 Appearances:
T Fitzgerald / A L Conti for the Plaintiffs B Henry for the Defendant
Judgment:
14 November 2024
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 14 November 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Bell Gully, Auckland Shanahans, Auckland
B Henry, Auckland
NF GLOBAL LTD v OBERTO [2024] NZHC 3116 [14 November 2024]
Introduction
[1] NF Global Ltd (in liq) (NF Global) was part of a group of companies that provides wealth management and investment services, primarily to high-net-worth individuals in Europe. NF Global’s role was to provide customers with an online payment platform through which they could deposit funds, make international payments in different currencies, and invest with other entities and funds.
[2] The High Court placed NF Global into liquidation on 23 April 2021 after the company did not repay four of its payment platform customers money they had deposited with the platform when they demanded it.1
[3] Claudio (Claude) Oberto is a director of NF Global and was its sole director from February 2017. NF Global and its liquidators allege that Mr Oberto breached various directors’ duties; specifically, his duty of care,2 the duty to not engage in reckless trading,3 the duty to act in good faith and in the best interests of the company,4 and the duty in relation to obligations.5
[4] The plaintiffs seek orders under s 301 of the Companies Act 1993 (the Act) that Mr Oberto contribute an amount equal to the shortfall between the proofs of debt customers have filed in the liquidation and NF Global’s assets (said to be NZD47,711,240.12) and/or an amount equal to loans made by NF Global to related parties.
[5] Mr Oberto has applied for summary judgment as a defendant. He claims that none of the causes of action in the plaintiffs’ statement of claim can succeed because:
(a)NF Global did not have a debtor/creditor relationship with the users of its payment platform or investment service; and
(b)the agreements which he caused NF Global to enter into
1 Arjang v NF Global Ltd [2021] NZHC 903.
2 Companies Act 1993, s 137.
3 Companies Act, s 135.
4 Companies Act, s 131.
5 Companies Act, s 136.
recording loans made to related parties are shams, and NF Global did not in fact make any such loans.
[6] Shortly before the hearing, Mr Oberto purported to file an amended application for summary judgment, seeking orders for strike-out of certain paragraphs of the statement of claim, and that some of the liquidators’ evidence filed in opposition to the application is inadmissible. I deal with these additions to the interlocutory application separately, after considering summary judgment.
Background facts
[7] NF Global was part of the Starboard Group of companies. The Group has a sophisticated corporate structure. It appears to include separate entities for the separate services that the Group provides and the jurisdictions in which they are provided.
[8] A diagram of the Group structure put in evidence by Mr Oberto shows that the parent company of the Group is Starboard Capital SA (Starboard Capital). Starboard Capital is owned by a Mario Gesue and is registered in Switzerland.
[9] Starboard Capital is the 100 per cent owner of five subsidiaries. Four of these subsidiary companies are registered in the United Kingdom (UK). The fifth is NF Global, a New Zealand registered company.
[10] One of the UK subsidiaries is NF Money Ltd (NF Money). Another is Northern Fides Ltd (Northern Fides), which is described as a holding company. Northern Fides holds 100 per cent ownership in seven trustee companies registered in the UK, Italy, New Zealand, Monaco, Switzerland, and Luxembourg. There are also two further companies part-owned by Northern Fides which provide consultancy services.
[11] As noted, NF Global’s role in the Group was to provide a payment platform service, and investment and money management services. Customers of the payment platform service deposited funds into their “NF Global account” by transferring funds to a bank account nominated by NF Global, either directly or via a Starboard Group
entity, such as NF Money. Customers would then issue instructions to NF Global in respect of their funds via the payment platform. Customers were entitled to close their accounts by providing written notice to NF Global, at which point NF Global was obliged to pay them the balance of their NF Global account, less any charges. The investment service appears to have operated in a similar way, with the intention that investments would be made on behalf of customers with other entities and funds.
[12] NF Global did not receive or hold funds from customers directly. Rather, it worked with other companies in the Group, including NF Money and Northern Fides, to provide services to customers.
[13] NF Money provided online payment (or “remittance”) services. It held a remittance licence from the UK’s Financial Conduct Authority (the FCA), which allowed it to transfer funds to European banks. NF Global appears to have used NF Money to transfer funds within Europe. The relationship between NF Global and NF Money was governed by a services agreement dated 1 May 2018. I return to this agreement later.
[14] Northern Fides’ function appears to have been to provide administrative and other support to NF Global. The relationship between NF Global and Northern Fides was recorded in two services agreements, again discussed later.
[15] In many cases, NF Money appears to have used customers’ money to purchase e-money from lpagoo LLP (lpagoo), rather than depositing funds into traditional bank accounts. Ipagoo was a limited liability partnership incorporated in the UK. It held an authorisation from the UK’s FCA pursuant to the Electronic Money Regulations 2011 (UK). This means that it was permitted to issue e-money and to provide multi-country and cross-currency payment account services.
[16] It is not disputed that Ipagoo was ultimately controlled by the same people who were associated with the Starboard Group.
[17] Ipagoo was placed into administration on 1 August 2019. One of the liquidators of NF Global, John Fisk, explains that the administrators of Ipagoo
undertook a reconciliation process to identify the customers to whom the e-money in the various accounts could be ascribed. During this process, the liquidators of NF Global were in contact with the administrators to try to secure for NF Global funds originating from its customers as a recovery in the liquidation. Some of the accounts listed in a schedule provided by the administrators to the liquidators of NF Global included “NF Global” in the name, but none were owned by NF Global. They were instead owned by NF Money. Mr Gesue provided a letter confirming that the funds in the Ipagoo accounts were held for NF Global and its customers, and authorising distribution of the funds to the liquidators of NF Global, rather than NF Money. Consequently, NF Global received a distribution from the administration of Ipagoo of foreign currencies to the value of approximately NZD2,931,922.
[18] Liquidators were appointed to NF Global by the High Court on 23 April 2021.6 The applicant was one of NF Global’s payment platform customers. NF Global had not made a payment directed by the customer and then refused to repay the customer’s funds because NF Global suspected that they were laundering money. The customer served a statutory demand on NF Global which it did not meet. Three other customers supported the liquidation application. In an interim decision, Associate Judge Bell found that NF Global was obliged to pay the customers the amounts they had demanded.7 When neither NF Global nor its shareholder paid the customers, NF Global was put into liquidation.8
Legal principles — summary judgment against a plaintiff
[19]Rule 12.2(2) of the High Court Rules 2016 provides:
The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[20] This contrasts with an application for summary judgment by a plaintiff, where the Court may grant summary judgment in respect of a single cause of action in the plaintiff’s statement of claim (or even part of a cause of action).9
6 Arjang v NF Global Ltd, above n 1.
7 Arjang v NF Global Ltd [2021] NZHC 395.
8 Arjang v NF Global Ltd, above n 1.
9 High Court Rules 2016, r 12.2(1).
[21] In Stephens v Barron the Court of Appeal summarised the longstanding authority on defendant summary judgment, Westpac Banking Corp v M M Kembla New Zealand Ltd,10 and confirmed that a defendant seeking summary judgment has a considerable burden to discharge:11
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
[22]As with plaintiff applications for summary judgment, this Court:12
…will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable…
[23] Summary judgment is not appropriate if the plaintiff can amend the claim in response to the defect claimed by the defendant. If there is a tenable argument available to the plaintiffs, even if not pleaded, it is proper for the Court to refuse
10 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
11 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [9] (footnotes omitted).
12 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] (citations omitted); applied in the context of an application for defendant summary judgment in Webster Farm Management Ltd v Dargaville Farms Ltd (in liq) [2020] NZHC 1477 at [35].
summary judgment if the plaintiff would otherwise be prevented from exercising its right to amend the pleading.13
The plaintiffs’ claim
[24]The plaintiffs have brought four causes of action against Mr Oberto.
Breach of s 137 duty to exercise care, diligence and skill
[25] The plaintiffs claim that Mr Oberto breached the duty which he owed to NF Global under s 137 of the Act by:
(a)causing or allowing NF Global to incur liabilities to customers in
circumstances where he did not have a reasonable basis to believe that these liabilities could be met when due;
(b)failing to ensure that NF Global had sufficient information, certainty, and control over funds deposited by customers into accounts with corresponding banks to ensure that NF Global could meet its
obligations to customers when due;
(c)failing to ensure that NF Global maintained adequate records to identify:
(i)amounts owed to each customer;
(ii)the location of funds deposited by each customer; and
(iii)investments made in respect of each customer;
(d)causing or allowing NF Global to make loans to related parties in the sum of at least GBP4,815,027.67 and EUR4,290,765.39 in
circumstances where he:
13 Dominion Constructors Ltd v A.C.N. 643927469 Pty Ltd [2023] NZHC 2425 at [95]; and Stephens v Barron, above n 11, at [9(d)].
(i)knew or ought to have known that it was not in the best interests of NF Global to make the loans;
(ii)did not have a reasonable basis to believe that the loans would be repaid when due; and
(iii)knew or ought to have known that if each of the borrowers did not repay their loans, NF Global would be unable to repay its own creditors, or a serious risk of NF Global being unable to repay its creditors would arise.
(e)causing or allowing NF Global to continue to trade in reliance on financial support from its shareholder in circumstances where he knew or ought to have known that NF Global did not have:
(i)any legally enforceable right to support from its shareholder;
(ii)any practical control over its shareholder;
(iii)sufficient financial information about its shareholder to enable it to form a reasonable belief that the shareholder would be able to provide financial support to NF Global to meet its obligations to customers; or
(iv)reasonable grounds to believe that Starboard Capital would provide the financial support necessary for NF Global to repay its debts to customers when due;
(f)failing to exercise the care, skill and diligence that a reasonable director would have in relation to the preparation of NF Global’s financial accounts, including by failing to ensure that appropriate provision was made for bad and doubtful debts arising from the
related party loans and failing to write off related party loans that were irrecoverable.
Breach of s 135 duty to not agree to, cause or allow reckless trading
[26] The plaintiffs claim that Mr Oberto breached the duty under s 135 of the Act by:
(a)entering into contracts with customers under which NF Global committed to repaying funds deposited by customers into accounts nominated by NF Global without ensuring that NF Global:
(i)retained legal or practical control over those funds;
(ii)retained the power to require those funds to be kept in segregated accounts;
(iii)retained the power to require correspondent banks or investment entities/funds to repay those funds to customers or NF Global;
(iv)received any security in respect of the accounts held with various correspondent banks or investment entities/funds;
(v)maintained adequate records to identify or recover investment service customers’ funds; and/or
(vi)had sufficient information to enable it to:
(i)identify which customer’s funds were deposited with which account with which correspondent bank or investment entity/fund; or
(ii)reconcile its record of the amount in each customer’s NF Global account with the amounts held by correspondent banks or investment entities/funds.
[27]The result was that at all relevant times, Mr Oberto:
(a)did not have reasonable grounds to believe that the correspondent banks or investment entities/funds would repay payment platform service customers or investment service customers (respectively) when required to do so; and
(b)did not have reasonable grounds to believe that NF Global would repay investment service customers when required to do so.
[28] The plaintiffs claim that Mr Oberto also breached the duty under s 135 of the Act by:
(a)making loans to various related parties in circumstances claimed to be unsatisfactory for various reasons, including that Mr Oberto agreed to NF Global making, or caused or allowed NF Global to make, these loans:
(i)without properly considering whether making the loans was in the best interests of NF Global and/or in circumstances where he knew or ought to have known that it was not in NF Global’s best interests to make the loans;
(ii)without conducting (or requesting that others conduct) any due diligence on behalf of NF Global in relation to the loans;
(iii)without conducting (or requesting that others conduct) negotiations on behalf of NF Global in relation to the terms of the loans;
(iv)without requesting that security be provided to NF Global under or in relation to the loans;
(v)without having reasonable grounds to believe that the loans would be repaid when due; and/or
(vi)in circumstances where he knew, or ought to have known, that if the borrowers did not repay the loans, NF Global would be unable to repay its own creditors, or a serious risk of this outcome would arise;
(b)agreeing to NF Global continuing, or causing or allowing NF Global to continue, to trade in reliance on financial support from its shareholder without having:
(i)any legally enforceable right to support from its shareholder;
(ii)any practical control over its shareholder;
(iii)sufficient financial information about its shareholder to enable it to form a reasonable belief that the shareholder would be able to provide financial support to NF Global to meet its obligations to customers; or
(iv)reasonable grounds to believe that Starboard Capital would provide the financial support necessary for NF Global to repay its debts to customers when due.
Breach of s 131 duty to act in good faith and in the best interests of the company
[29] The plaintiffs claim that Mr Oberto breached the duty which he owed to NF Global under s 131 of the Act by making loans to various related parties in circumstances claimed to be unsatisfactory for various reasons, including that Mr Oberto agreed to NF Global making, or caused or allowed NF Global to make, these loans:
(a)properly considering whether making the loans was in the best interests of NF Global and/or in circumstances where he knew or ought to have known that it was not in NF Global’s best interests to make the loans;
(b)without conducting (or requesting that others conduct) any due diligence on behalf of NF Global in relation to the loans;
(c)without conducting (or requesting that others conduct) negotiations on behalf of NF Global in relation to the terms of the loans;
(d)without requesting that security be provided to NF Global under or in relation to the loans;
(e)without having reasonable grounds to believe that the loans would be repaid when due; and/or
(f)in circumstances where he knew, or ought to have known, that if the borrowers did not repay the loans, NF Global would be unable to repay its own creditors (or a serious risk of this outcome would arise).
Breach of s 136 duty to not agree to obligations that cannot be performed
[30] The plaintiffs claim that Mr Oberto breached the duty which he owed under s 136 of the Act by causing or allowing NF Global to incur liabilities to customers in circumstances where it did not have a reasonable basis to believe that these liabilities could be met when due.
Mr Oberto’s application for summary judgment
[31] Mr Oberto says that the plaintiffs’ claim in relation to the payment platform and investment services cannot succeed because the customers who have made claims in the liquidation are not creditors of NF Global. He says that:
(a)all customers of the payment platform and investment services were in fact customers of UK entities in the Starboard Group, not NF Global;
(b)no customer monies were ever received by NF Global;
(c)funds deposited by customers into nominated bank accounts were held
on trust by NF Global for the benefit of the customers;
(d)the actual arrangements were between the UK entities and those customers;
(e)these arrangements, properly pleaded, are outside the New Zealand jurisdiction.
[32] In respect of the claims relating to the related party loans, Mr Oberto says that the loans were shams and NF Global did not in fact advance any funds to the related parties under the purported loans.
[33] Mr Oberto has sworn an affidavit in support of the application.14 He deposes that the transactions in question never created any financial liabilities for NF Global. He says that:
(a)customers of the payment platform service were European Union (EU)/UK domiciled customers of the Starboard Group/Northern Fides, introduced to NF Global by Franco Mignemi (a former director of NF Global), Mr Gesuè, Donato Pareto, or others;
(b)NF Global had no (non-electronic) contact with the customers;
(c)Starboard Group teams structured the products for customers, and where a New Zealand domiciled account holder was required, NF Global received instructions from the Group legal team to establish a bank account for the customer;
(d)NF Global created the bank account with a bank or with e-money provider Ipagoo, and the customer deposited the funds directly into the account or via another group entity, NF Money;
14 Affidavit of Claudio Sandro Oberto in Support of Application for Summary Judgment, sworn 16 January 2024.
(e)customers’ money was never received into NF Global’s financial statements;
(f)the bank/e-money accounts were held on trust for the customers, who could and did deposit funds into the accounts at will, and who directed via the platform where they wanted their funds dispersed.
[34]Mr Oberto expands:
14. NFG never agreed that it would take into its accounts a debt from the platform customer, it was always understood that the funds deposited into the platform account was the platform customers asset. There was never a debtor/creditor relationship between NFG and the Platform customer. The intent was always that NFG held the monies in all platform accounts as trustee.
15. The purpose of the structured transaction using the Platform was to provide the platform customer with an outside the EU/UK jurisdiction deposit account with the platform customer holding the beneficial ownership of the monies in the account.
16. The customer of the platform, subject to the laws of the financial institution’s jurisdiction, and the terms and conditions of the financial institution providing the account, was always beneficially entitled to the funds available in the account.
17. NFG did not have to agree to the platform customer adding further funds into the account. There was no requirement for NFG to agree, it was the platform customer's account. The only role NFG had was when the customer wanted to utilise the funds it has in the platform account it would via the platform portal issue instructions which were received by the NF Global team the next morning in New Zealand, who would then advise the finance team and compliance team in London who would review the client instructions and if satisfied instruct the finance team to conduct the transaction desired, the finance team (and often Mr. Mignemi himself) would instruct NFG who would simply send the financial institution concerned the instructed transaction. NFG would be paid a fee for this action on the account.
18. The platform does not contain funds of the company it holds the bank account attached to the platform and operates the same as the customer requires. The customer deposits funds in the account at will and instructs the platform operator to disperse the funds as per the customers desires. The individual platform “balances” are simply a mirror ledger of the actual bank accounts in the banks. No funds are held on the platform. My notes taken whilst in London on my second visit confirm the modus operandi (Note: Client funds received against/into their accounts are in trust with a European bank and not held on the NF G balance sheet, thus eliminating contagion risk with NF G).
(some emphasis added)
[35]In relation to the loans, Mr Oberto says:
42. …these “loans” did not create any NFG creditors, the plaintiffs are attempting to allege these “loans” had an underlying financial substance which is not correct. NFG never had capital to lend; there are no underlying cashflows for NFG and there are no deposits into NFG by creditors as apart of these loans.
43. These transactions at the time do not impact the creditors of NFG, and have no financial risk as they are (I now understand from recent legal advice and hindsight analysis) effectively a sham facade used in a transaction in the UK/EU jurisdiction such transaction constructed by the Northern Fides/ Starboard group teams in the UK with a customer of theirs no doubt domiciled in the UK/EU hence the need to prepare a “loan” document purported to be from a NZ domiciled company.
44. These transactions at the time I signed them, were to the best of my belief lawful signed off by the legal, transaction, finance and compliance teams. Teams who I trusted.
[36] There is scant documentation to support Mr Oberto’s affidavit evidence. His affidavit has four exhibits. The first is the diagram of the Starboard Group structure, described earlier. The second is a bundle of handwritten notes which appear to be from Mr Oberto’s diary. The third is a copy of notes from Mr Oberto’s visit to London to undertake “due diligence” in February 2019.
[37] The fourth is a document containing some NF Global terms and conditions dated 12 June 2020. In his affidavit, Mr Oberto refers to cl 2.2, which says:
The Company is the provider of E-Money products which allow the User to send, receive, and make electronic payments, to transfer E-Money, in accordance with the Terms and Conditions of this Agreement. The E-Money shall be stored in the User’s Account and shall be accessible through the User’s E-Wallet and shall be denominated in Euro and/or GBP (or any other currency as applicable from time to time)
[38] There are two affidavits that parties affiliated with NF Global have filed in support of Mr Oberto’s application. The first is an affidavit from the NF Global Senior Operations Manager between 2013 and 2021, Michelle Phillips. There are no documents provided with this affidavit.
[39] The second is an affidavit from Maurizio Delfino, who performed AML compliance for NF Global on secondment from the Starboard Group from August 2017 to December 2017 and February to May 2018. There are no documents provided with this affidavit either.
The plaintiffs’ response
[40] The plaintiffs say that Mr Oberto’s position regarding the payment platform and investment service customers is inconsistent with NF Global’s records and contemporaneous documents, previous decisions of this Court, and Mr Oberto’s previous sworn evidence and statements to third parties/the liquidators.
[41] The plaintiffs say that Mr Oberto’s argument is also inconsistent with the position taken by creditors who have filed proofs of debt in the liquidation; and how Mr Oberto has previously described the relationship in correspondence after Ipagoo was placed into administration.
[42] They say that even if the Starboard Group/Northern Fides played the role described by Mr Oberto, it does not necessarily follow that the customers in question are not customers of NF Global. They say that the customers being customers of NF Global is contemplated by, and consistent with, the services agreements between NF Global and NF Money.
[43] The plaintiffs accept that NF Global’s customers did not deposit money with NF Global directly. Rather, the customers deposited funds with a Starboard Group entity such as NF Money, or directly with a correspondent bank or e-money service such as Ipagoo. The plaintiffs say that this was symptomatic of a broader weakness in NF Global’s business. NF Global assumed responsibility to repay its customers on demand, but it did not maintain any meaningful ability to meet that obligation.
[44] Mr Fisk deposes that the records of NF Global, NF Money, and Ipagoo all appear to show that it was NF Money that was in control of the investment of customer funds to other companies in the Group. Mr Oberto's evidence appears to be that Northern Fides was in control of these investments. The plaintiffs say that whichever company had that control, it was not NF Global. The result, they say, is that NF Global
had the responsibility to repay customer funds but did not have any direct contractual relationship with correspondent banks, any ability to require that customers’ funds were kept in segregated accounts, any ability to compel repayment, or any other legal or practical control over the funds deposited.
[45] The plaintiffs contend that the suggestion that there is no debtor/creditor relationship is inconsistent with the position taken by the creditors who advanced claims against NF Global in this Court, and the interim decision of Associate Judge Bell who described the applicant and supporting customers as creditors of NF Global.15
[46] The plaintiffs say that Mr Oberto’s claim that no debtor/creditor relationship existed is also inconsistent with the terms and conditions of NF Global identified by the liquidators, and NF Global’s annual financial statements (which Mr Oberto has admitted are correct at para 90 of his statement of defence filed in these proceedings). These financial statements show:
(a)a current liability of NZD29,357,848 in respect of “Client Funds” in 2018; and
(b)a current liability of NZD11,012,793 in respect of “Client Funds” in 2019.
[47] As to the loan agreements, the plaintiffs say that Mr Oberto’s current position (that the loan agreements were a sham and did not create any liabilities) is inconsistent with the signed loan documents the liquidators have identified, and, even if true, could still mean that Mr Oberto breached his duties to the company. Mr Fisk deposes that the records the liquidators have identified show some flow of funds between NF Global and the Starboard Group, but they have not yet been able to identify whether or how these transfers relate to the documented loans. The plaintiffs say that, absent any explanation for these transfers, they could suggest a further breach of duty by Mr Oberto.
15 Arjang v NF Global Ltd, above n 7.
[48] Finally, the plaintiffs say that even if what Mr Oberto says is correct, they could readily amend their claim to refer instead to breaches of duties that would have arisen if NF Global was a mere trustee of customer funds, rather than a debtor.
Assessment
[49] Mr Oberto has the onus of proving, on the balance of probabilities, that none of the plaintiffs’ causes of action can succeed.16 It is necessary for him to put up evidence which provides a complete answer to the plaintiffs’ claim. It is not necessary for the plaintiffs to put up evidence at all, but if Mr Oberto supplies evidence to satisfy the Court that the claim cannot succeed, the plaintiffs must respond with credible evidence of their own.
[50] I find that Mr Oberto has not proven that none of the plaintiffs’ causes of action can succeed. Fundamentally, he has not put up evidence that proves, on the balance of probabilities, that NF Global did not owe payment platform/investment service customers legal obligations in relation to the funds held in the accounts, and that the arrangements in relation to the funds were solely between the customers and UK entities.
[51] First, Mr Oberto has not proven that the customers were not customers of NF Global and were only customers of Northern Fides/the Starboard Group. In fact, the only contemporaneous record Mr Oberto puts up contradicts this proposition. These are the NF Global terms and conditions he attaches to his affidavit and quotes from. The terms and conditions, dated June 2020, state that:
(a)NF Global (referred to as “the Company” or “NFG”) is authorised by the Financial Markets Authority to provide the following financial services: “keeping, investing, administering or managing money, securities or investment portfolios on behalf of other persons; operating a money or value transfer service; issuing and managing payments; foreign currency transactions”.
16 Westpac Banking Corp v M M Kembla New Zealand Ltd, above n 10, at [61].
(b)NF Global may provide the services directly or indirectly through third- party providers duly authorised in the relevant jurisdictions.
(c)The customer is “the User” said to want to enter into an agreement with NF Global for the provision of e-money services.
(d)The “Relationship” is “the ongoing business relationship established between a User and NFG under this Agreement once the User has successfully completed the on-boarding process”.
(e)“The Relationship with the User is held with the Company in New Zealand”. To establish the Relationship with NF Global the User must have the power to enter into a binding contract.
(f)The “NFG Platform” is NF Global’s online payments platform through which the internet allows the customer to access the e-money accounts and provide instructions through the dashboard.
(g)“The Company is the provider of [e-money] products which allow the User to send, receive, and make electronic payments, to transfer [e- money], in accordance with the Terms and Conditions of this Agreement. The [e-Money] shall be stored in the User’s Account and shall be accessible through the User’s E-wallet and shall be denominated in Euro/or GBP (or any other currency as applicable from time to time)”.
(h)The User authorises NF Global to debit their account to effect payments to third parties, and to communicate directly with third parties on the User’s behalf. In addition to the e-money account, the User may transfer to their E-wallet payments received from third parties, current accounts or credit cards owned by the User.
(i)Users must use the service according to the laws of New Zealand.
(j)NF Global is responsible for ensuring the integrity and security of the information and data relating to the service and making available records of transactions performed by the account.
(k)The User can redeem any unused funds by sending a written request to NF Global, who will transfer the money to the bank account specified by the user in Euro and/or GBP or any other applicable currency.17
[52] The liquidators have located three versions of terms and conditions relating to the payment platform and investment services. One version also appears to concern an e-money account, while the other concerns money remittance and asset management services.
[53] While it is unclear at this stage which terms and conditions applied to which customers, these terms and conditions are consistent with there being a customer relationship between NF Global and the customers of the payment platform service and/or investment service.
[54] Mr Henry submitted that the terms and conditions are shadow documents, designed to avoid UK/EU regulations by portraying that the relevant relationship is based outside the UK/EU, in New Zealand. He interpolated that Mr Oberto thought the terms and conditions were valid at the time, but he now knows that there was an overarching agreement between customers and the UK entities that sets out the true arrangements concerning the customers’ money. Mr Henry says that Mr Oberto has not ever seen these overarching agreements.
[55] This is the foundation for Mr Oberto’s application for summary judgment: that the actual legal arrangements are between the customers and the UK entities; and that the liquidators have not pleaded, and cannot plead, a reformulated claim reflecting these arrangements, as they are outside the jurisdiction of the New Zealand courts.
[56] The problem is that Mr Oberto has not put up evidence to prove this proposition, and the onus is on him to do so. There is no evidence to support Mr
17 NF Global Terms & Conditions, dated 12 June 2020, cl 1.17.
Henry’s submission that the terms and conditions are shadow documents that do not reflect the actual legal arrangements with customers and have no legal effect. Mr Oberto does not say that in his affidavit. In fact, he quotes from the terms and conditions and attaches them to his affidavit.
[57] Mr Oberto has not put up any evidence to prove that the actual legal arrangements were between the customers and the UK entities. The closest he gets is a statement in his affidavit that “Northern Fides was the principal in all agreements with NFG and was the principal in any relationship and agreements with the customer”.18 However, he does not describe what these relationships and arrangements were. Furthermore, as noted, this statement is contradicted by the NF Global terms and conditions with customers, the legitimacy of which Mr Oberto appears to confirm.
[58] Mr Henry relies heavily on the evidence of Mr Oberto, Mr Delfino, and Ms Phillips as to how NF Global’s services worked in practice, including the fact that customers were introduced by UK entities, that the Group structured the products for customers, that NF Global was never in contact with customers (presumably meaning other than through the payment platform), and that NF Global only actioned customer instructions once approved by the Group. Yet the fact that customers were introduced by UK entities in the Group and that the Group structured the products does not preclude the customers becoming customers of NF Global when they signed up to NF Global’s payment platform or investment service. Nor does the fact that NF Global received instructions from customers via the platform, or that they required Group approval before actioning instructions from customers.
[59] The proposition that payment platform/investment services customers were not customers of NF Global is also inconsistent with the services agreements between NF Global, NF Money and Northern Fides, put in evidence by Mr Fisk.
[60] The services agreements between NF Global and Northern Fides are dated 13 January 2016 and 18 January 2018. These agreements describe NF Global as
18 Affidavit of Claudio Sandro Oberto in Support of Application for Summary Judgment, above n 14, at [61].
providing financial services to its customers, including keeping, investing, administering, or managing money, securities, or investment portfolios; operating a money or value transfer service; and issuing and managing means of payment. Northern Fides agreed to provide NF Global with services including collecting documents to support due diligence processes, book-keeping services, relationship management with banks and other specified entities, and (pursuant to the latter agreement) legal drafting and contract review services. The 2018 agreement was signed by Mr Oberto.
[61] Mr Fisk has also put in evidence a service agreement between NF Global and NF Money dated 1 May 2018, again signed by Mr Oberto. NF Global appears to have used NF Money, which held a remittance licence from the UK’s FCA, to transfer funds to European banks. Under the NF Money services agreement, NF Money was to provide services to NF Global, “whether directly or through its Affiliates or third-party providers”, including:
(a)new clients email exchange with information regarding account opening with NF Global;
(b)providing onboarding activities;
(c)International bank account number (IBAN) creation for new clients and account activation in NF Global's platform;
(d)sending IBAN/bank details and credentials to a client once the account is opened;
(e)customer support to NF Global’s clients;
(f)instructing payments on behalf of NF Global’s clients;
(g)updating client accounts in NF Global’s platform when new deposits are received;
(h)book-keeping of NF Global’s financial transactions;
(i)maintaining financial records;
(j)managing bank accounts on behalf of NF Global, including communication with bank management and advice on the method and type of banking system to implement.
[62] The proposition that payment platform/investment service customers were not customers of NF Global is also inconsistent with how Mr Oberto has previously described the relationship. Mr Fisk has put in evidence a copy of a letter dated 9 October 2019 from Mr Oberto, as a director of NF Global, to NF Money. Mr Oberto says:
SUBJECT: Confirmation Status of Accounts
Further to our recent discussions in connection with the Service Agreement between NF Money Ltd and NF Global Limited dated 1st May 2019, we hereby reiterate and confirm that you are currently holding NF Global Limited’s funds in your dedicated accounts, by way of third party bank accounts, for and on our behalf. For the avoidance of doubt, you do not hold our or our client funds.
[63] Similarly, Mr Fisk has put in evidence a copy of a letter from Mr Oberto, as a director of NF Global, dated 13 December 2019 addressed “To Whom it May Concern”. The electronic version of this letter was named “NFG template letter for clients.pdf”. In the letter, Mr Oberto describes the relationship between NF Global and Eleonora Sport Ltd, one of its customers. Mr Oberto says:
This letter is to clarify the relationship between NF Money Ltd ("NF Money"), NF Global Limited ("NF Global") and Eleonora sport Limited.
NF Global is a financial service provider registered in New Zealand with the FMA and NF Money is regulated in the United Kingdom by the FCA to provide money remittance services. These two regulated entities are both part of the same group structure and they are both held by the same holding company, Starboard Capital SA.
NF Global has an agreement in place with NF Money for the provision of services and utilises the payment infrastructure of NF Money.
Under this arrangement, NF Money facilitates the payments for Eleonora Sport Limited which is a client of NF Global.
(emphasis added)
[64] Mr Oberto’s position that the customers were not customers of NF Global also contradicts his affidavit evidence filed in statutory demand proceedings involving a customer (LD Drago Met srl). In an affidavit sworn on 14 September 2020 Mr Oberto said:
9NF Global operates a payment platform used predominantly by the customers of an English wealth management company called Northern Fides, which caters to small professional services firms and family wealth offices. Excerpts from the Northern Fides and NF Global websites are annexed as Exhibit CO-04.
10NF Global owns and operates this platform, and provides the back- office services to support the transactions that take place on this platform. It also provides some back-office support to the New- Zealand based trustee company operated by Northern Fides.
11Most of Northern Fides’ customer funds are invested in illiquid assets, either directly or through trust structures administered by Northern Fides. But, the platform that NF Global runs allows customers to operate a number of accounts in different currencies and transfer money between currencies and counterparties. The platform allows customers to transfer money more quickly and cheaply than if they were to use the services of retail banks.
12Northern Fides clients who open a transactional facility with NF Global are then also NF Global clients. Customer obligations attach, with NF Global also owing independent obligations to them. In more recent times, NF Global has taken on a small number of customers of its own, who do not have their assets managed by Northern Fides, and just use the payment services.
13NF Global currently has a client base of approximately 145 high-net- worth individuals and 260 companies.
14In September 2018, NF Global was bought by Starboard Capital, a large venture-capital firm. Starboard Capital is registered in Switzerland, and has its head office in London’s financial district. NF Global can call on Starboard Capital’s resources, not only financially, but also in terms of expertise, particularly in relation to legal and compliance issues.
15NF Global itself cannot make payments to European bank accounts. Financial services in Europe, and in the United Kingdom, are highly regulated. In order to allow customers to make payments within Europe, NF Global has a service agreement with a related company, NF Money, which is the holder of the appropriate remittance licence issued by its regulator, the United Kingdom’s Financial Conduct Authority (FCA). Where required for a particular transaction, NF Money operates as NF Global’s remittance agent under this service agreement. The service agreement covers a number of other possible services NF Money can provide and is annexed as Exhibit CO-05.
16NF Global provides its payment services through correspondent banking relationships. With customer knowledge and at their direction, customer money is held in a segregated account with FCA- licenced or FCA-approved correspondent banks. For hedging and mitigation reasons, we use and have used a number of correspondent banks, including Barclays (UK), Santander (UK), Bank Sistema (Italy) and EMoney (Malta).
(emphasis added)
[65] Mr Oberto attached a copy of NF Global’s terms and conditions to this affidavit, stating that “These are the terms on which a customer uses the NF Global platform”.
[66] Second, Mr Oberto has not proven that NF Global did not owe customers obligations in relation to the funds held in their corresponding bank accounts/e-money accounts, including an obligation to repay the funds to customers when requested. As noted, cl 1.17 of the 12 June 2020 terms and conditions provides that an NF Global customer can redeem any unused funds in their NF Global account by sending a written request to NF Global, which will transfer the money to the customer’s specified bank account. The same clause appears in the copy of the terms and conditions annexed to Mr Oberto’s affidavit filed in the previous statutory demand proceedings. The liquidators maintain that these terms and conditions indicate that NF Global was and is indebted to the customers for the funds held in the corresponding accounts. Mr Oberto’s evidence is that NF Global held the funds as trustee for UK entity customers, who remained beneficial owners of the funds.19
[67] The nature of the legal relationship between NF Global and the payment platform and investment service customers is unclear at this stage. For present purposes, the point is that Mr Oberto has not proven that NF Global did not owe customers legal obligations in relation to their funds deposited with corresponding banks/e-money services via the platform; and specifically, an obligation to repay customers their funds held in the accounts when they demanded it.
19 Affidavit of Claudio Sandro Oberto in Support of Application for Summary Judgment, above n 14, at [13(h)], [14]–[16], [24] and [33].
[68] Third, Mr Oberto has not proven that none of the plaintiffs’ causes of action can succeed even if the customers are not creditors of NF Global. Some of the causes of action may not succeed — namely, the alleged breach of s 135 (trading in a manner that is likely to create substantial risk of serious loss to creditors). However, Mr Oberto has not established that the alleged breaches of duty under the first cause of action (s 137 duty of care), the third cause of action (s 131 duty to act in good faith and in the best interests of the company) and the fourth cause of action (s 136 duty not to incur obligations without reasonable grounds for believing that the obligation can be performed) are dependent on the customers of the payment platform service being creditors of the company.
[69] If Mr Oberto caused NF Global to become bare trustee of the funds deposited by customers into accounts with corresponding banks/Ipagoo, he had duties to ensure that NF Global could fulfil its duties as trustee. If, as pleaded, Mr Oberto failed to ensure that NF Global had sufficient information, certainty, and control over the funds deposited into the corresponding bank/e-money accounts to ensure that NF Global could meet its duties as bare trustee, including its duty to repay the funds to the beneficial owners when requested, Mr Oberto could conceivably have breached his duties as director. A director of a trustee company owes the usual duties, including a duty of care under s 137, and a duty under s 136 not to cause the company to incur obligations it cannot perform.20 The statement of claim may require some amendment, but conceivably these causes of action could succeed even on the alternative analysis asserted by Mr Oberto.
[70] Fourth, Mr Oberto has not proven that he did not breach his duties as director of NF Global. In his affidavit, Mr Oberto describes the “due diligence” he conducted on those who were responsible for supporting NF Global. This affidavit evidence does not meet the required threshold of proving that Mr Oberto discharged his duty to exercise reasonable care, skill, and diligence, or that he met any other directors’ duties that might be held to apply. The adequacy of Mr Oberto’s due diligence is at issue given that NF Global is seemingly unable to access customers’ funds and appears not to have had any control or oversight over the funds over the period during which they
20 I was not addressed on whether an “obligation” under s 136 of the Act can include an obligation owed by a bare trustee company to pay the trust funds to beneficiaries on demand.
were allegedly held on trust. Whether due diligence was all that was required, or whether the due diligence Mr Oberto undertook was adequate, are issues unsuited for determination on a summary basis.
[71] Fifth, Mr Oberto has not proven that the claims relating to the loans cannot succeed. His affidavit evidence is that the loans were shams designed to deceive UK and European regulators and that NF Global did not in fact advance any funds under these purported loans. This explanation, given for the first time according to Mr Fisk, gives rise to a factual conflict with the contemporaneous loan documents that he signed. This issue of fact cannot be determined without cross-examination. That will include cross-examination on NF Global’s financial statements, which do show a substantial intra-Group accounts receivable.21 It will also involve questions about the flow of funds that the liquidators have identified from NF Global to the Group.22 The evidence discloses an arguable case at the least, and the inconsistency between the contemporaneous documents and Mr Oberto’s evidence requires ventilation at trial.
[72] Sixth, Mr Oberto has not established that an order for compensation under s 301(1)(b) of the Act is not available if the customers are not creditors of NF Global. The claim for compensation in the amount of “the shortfall” between the claims made by customers and NF Global’s assets is not sustainable if the customers are not in fact creditors and are instead beneficial owners of the funds. However, Mr Oberto has not shown that the alternate claim to compensation in another amount cannot succeed if Mr Oberto is found to have breached his duties as a director causing NF Global loss, such as liability to the customers for breach of its trustee duties.
Alternative/additional orders sought
[73] In an amended application for summary judgment filed on 1 August 2024 shortly before the hearing, Mr Oberto sought, in the alternative to summary judgment, orders striking out paras 80, 85–87, 92, 94, 95, 99, 102 and 103 of the statement of
21 For example, the Special Purpose Financial Report for the Year Ended 31 March 2019 shows “Accounts Receivable” of NZD26,576,231 as a current asset in 2018, and a current asset in respect of “Orwell Union UK (Clients)” of NZD11,012,793 in 2019. The amounts are different in different years. This Special Purpose Financial Report also shows “Loan – Northern Fides Ltd” of NZD756,038 as a current liability in 2019.
22 Affidavit of John Howard Ross Fisk in opposition to application by defendant for summary judgment, sworn 13 March 2024, at [74].
claim. These paragraphs primarily plead the various duties Mr Oberto is said to have owed, and how he is said to have breached those duties.
[74]The grounds for these alternate orders appear to be that:
The statement of claim fails to analyse and plead the actual arrangement between the putative creditors and Northern Fides (UK) or Starboard (UK) who gave financial advice. The structure of the Group was a series of interrelated agreements that must be read and interpreted together to identify the true obligations of NF Global Limited; before applying sections 137, 135, 131, and 136 of the Companies Act to the Defendant.
[75] I understand the submission to be that the identified paragraphs do not disclose a reasonably arguable cause of action and must be struck out because the liquidators have not pleaded the actual legal structure and are unable to because the relationships between the customers and the UK entities, and the documents recording them, are outside this Court’s jurisdiction.
[76] The application is misconceived because it relies on facts that have not been proved — namely, that there were relevant contractual or other arrangements beyond those pleaded in the statement of claim, between customers and the UK entities. An application to strike out all or part of a pleading proceeds on the assumption that the facts pleaded in the statement of claim are true.23
[77] Mr Oberto also seeks an order declaring that certain paragraphs of Mr Fisk’s affidavit are inadmissible under s 50 of the Evidence Act 2006. In these paragraphs, Mr Fisk describes the judgment of the English Court of Appeal concerning the Ipagoo administration;24 and three judgments of this Court concerning NF Global, including the interim liquidation judgment described earlier.25 The liquidators rely on the Associate Judge’s findings in the High Court judgments to say that the issue of whether the customers are creditors of NF Global is res judicata.
[78] I have reservations about the liquidators’ position that the issue of whether the customers are creditors of NF Global is res judicata. The Associate Judge did describe
23 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
24 Re Ipagoo LLP (in administration) [2022] EWCA Civ 302, [2022] Bus LR 311.
25 NF Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196; Arjang v NF Global Ltd, above n 7; and Arjang v NF Global Ltd, above n 1.
the customers as “creditors”, but the alternative argument that the relationship was one of beneficiary and trustee, with the contractual arrangements residing elsewhere, does not appear to have been squarely before the Associate Judge. Moreover, NF Global did not oppose the applications on this ground; rather, it argued that it was entitled to refuse to pay or repay the funds as instructed by customers because of concerns over money laundering and the like.
[79] Having said that, it has not been necessary for me to refer to the contested aspects of the judgments to determine Mr Oberto’s application for summary judgment. I have approached the application on the merits and found that Mr Oberto has not proven that the claim cannot succeed. Therefore, it is unnecessary for me reach a decision on the admissibility of these judgments, or res judicata, and I prefer to leave that question to the trial judge should the judgments be relevant to the issues for trial.
Result
[80]Mr Oberto’s application for summary judgment is dismissed.
[81] Mr Oberto’s application to strike out paragraphs 80, 85– 87, 92, 94, 95, 99, 102 and 103 of the statement of claim is dismissed.
Costs
[82] The general approach following a plaintiff’s unsuccessful summary judgment application will typically be to reserve costs rather than make them costs in the proceedings.26 However, there is no settled practice in respect of costs following unsuccessful defendants’ summary judgment applications.27 Each case will turn on its own facts.28
26 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) at 406–407.
27 Miah v National Mutual Life Association of Australasia Ltd [2016] NZCA 590, [2017] 2 NZLR 241 at [61], n 39.
28 See Schmidt v Registrar-General of Land [2015] NZHC 2438, (2015) 22 PRNZ 794 (costs reserved); EBS v CAS [2014] NZHC 2929 (costs reserved); Miah v National Mutual Life Association of Australasia Ltd, above n 27 (costs fixed but not payable); Suharnan v Brookfields, [2013] NZHC 586, (2013) 22 PRNZ 790 (costs awarded to plaintiff where the unsuccessful strike- out and summary judgment applications covered essentially the same ground); and Judge v Dempsey [2014] NZHC 2864 (costs awarded to plaintiff in respect of unsuccessful defendant’s summary judgment application).
[83] In this case, weighing in favour of an order for costs against the defendant is my view that it should have been apparent that the application would be unsuccessful because the evidence filed patently did not prove Mr Oberto’s case.
[84] On the other hand, Mr Oberto’s challenge to the liquidators’ characterisation of the relationship between customers and NF Global as creditor/debtor has been useful in terms of clarifying the issues, potentially leading to the liquidators amending their statement of claim. Balancing these considerations, I tend towards reserving costs for later determination. However, if the liquidators wish to seek costs, they may file submissions of not more than four pages within 15 working days. Mr Oberto may respond within a further ten working days.
Associate Judge Gardiner
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