Oceania Football Confederation Incorporated v Nicholas
[2020] NZHC 2937
•6 November 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-867
[2020] NZHC 2937
BETWEEN OCEANIA FOOTBALL
CONFEDERATION INCORPORATED
PlaintiffAND
TAI GRANT NICHOLAS
First Defendant
KIM HIONG (DAVID) CHUNG
Second DefendantTHREE DIMENSION CONSULTANTS LIMITED
Third DefendantContinued …
On the papers: Submissions: Memoranda dated 22, 23, 24 and 28 September2020
W Potter and J Phillips for the Plaintiff The First Defendant in Person
No Submissions for the Second through Ninth Defendants
Judgment:
6 November 2020
JUDGMENT OF HINTON J
[Costs and Enforcement of Undertaking]
This judgment was delivered by me on 6 November 2020 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors: Meredith Connell, Auckland Copies: Defendants
OCEANIA FOOTBALL CONFEDERATION INCOR v NICHOLAS [2020] NZHC 2937 [6 November 2020]
3 DIMENSION CONSULTANTS LIMITED
Fourth Defendant
GREEN TURF (NZ) LIMITED
Fifth Defendant
GM ENGINEERING 2013 LIMITED
Sixth Defendant
GM ENGINEERING 2014 LIMITED
Seventh Defendant
KENNETH WILLIAM DENTICE
Eighth Defendant
EO
Ninth Defendant
[1] Mr Nicholas, the first defendant, applied to be released from an undertaking given by him to the Oceania Football Confederation (OFC) dated 11 May 2020. On 22 September 2020, three days before the scheduled hearing of that application, he withdrew it.
[2] In response, OFC then applied for costs following Mr Nicholas’ withdrawal of his application and for an order that funds held on trust in relation to the undertaking be applied in accordance with the undertaking. As directed, Mr Nicholas filed a memorandum in response dated 28 September 2020. I now address both issues.
Background
[3] OFC alleges that Mr Nicholas, its former general secretary, and others perpetrated a significant equitable fraud against it. It makes claims against Mr Nicholas in deceit and breach of fiduciary duty.
[4] Mr Nicholas is resident in the Cook Islands. He has limited assets in New Zealand. On that basis and given the nature of the claims against him include allegations of dishonesty, on 26 April 2019 OFC obtained on an ex parte basis freezing orders against him.
[5] Subsequent to the grant of the freezing orders, Mr Nicholas obtained OFC’s consent to their removal, subject to his giving an undertaking that provided, in part, that he would:
[…] give 21 days’ notice in advance to the plaintiff of any proposed dealings in any real properties owned or controlled by me including:
(a)669 Te Atatu Road, Te Atatu Peninsula, Auckland (registered in the names of Tai Nicholas and Catherine Ngamau Ben) […]
(b)2/2 Elwood Place, Ellerslie, Auckland […]
[6] On 12 June 2020, Andrew AJ made orders by consent allowing the freezing orders to lapse upon Mr Nicholas giving that undertaking, which he had done on 10 May 2019.
[7] However, as Mr Nicholas has accepted was contrary to the undertaking, on 29 January 2020 he further encumbered both the Te Atatu and Ellerslie properties referred to in the undertaking without giving notice to OFC. Moreover, on 31 March 2020, Mr Nicholas notified OFC he and his wife (Ms Ben) intended to sell the Ellerslie property to their son, and that the funds received by him from the sale would be applied to debts, including to a third-party lender, Basecorp, who had a mortgage secured over the Te Atatu property.
[8] On 7 May 2020 OFC consented to the sale of the Ellerslie property, provided Mr Nicholas gave a further undertaking that at least $100,000 of the proceeds of sale would be applied to the Basecorp loan (the secured amount of which was $677,321.52 as at 9 April 2020). This would increase Mr Nicholas’ equity in the Te Atatu property and help satisfy his obligations to Basecorp, thereby protecting OFC’s position. On 11 May 2020, Mr Nicholas gave an undertaking that provided, in part, that he would:
With the proceeds of the sale of the property at 2/2 Elwood Place, Ellerslie, Auckland […] apply at least $100,000 of those proceeds to reduce balance of the Basecorp loan (…) that is secured over the property at 669 Te Atatu Road, Te Atatu Peninsula, Auckland.
[9] As I return to briefly, the sale of the Ellerslie property has since duly proceeded. The sale settled on 10 July 2020.
[10] In the interim, on 29 June 2020, Mr Nicholas contacted OFC’s solicitors stating he had suffered a material deterioration in his financial position as a result of the COVID-19 pandemic and had “no alternative but to apply to the Court seeking an order to be relieved” of the 11 May 2020 undertaking. He also said the likely balance from the sale of the Ellerslie property once other creditors’ claims were first satisfied would be $93,495.08, so less than the amount required to satisfy the 11 May 2020 undertaking. He filed a memorandum in the nature of an informal interlocutory application to that effect on 30 June 2020.
[11] The application for release from the undertaking was called before Gordon J. By Minute dated 6 July 2020, she noted the $93,495 sum was arrived at only by Mr Nicholas’ prioritising payment of other debts not secured over the Ellerslie property, which he had no legitimate claim to do. Accordingly, she ordered that Mr Nicholas
either comply with the undertaking or place $100,000 on trust until his application could be determined.
[12] As a consequence, $100,000 has been held in the trust account of Mr Aaron Kashyap, the solicitor who acted for Mr Nicholas on the sale of the Ellerslie property, since the sale settled on 10 July 2020.
[13] By Minute dated 5 August 2020, as Duty Judge I made timetabling directions and set down the hearing of Mr Nicholas’ (informal) application to be released from his 11 May 2020 undertaking, for half a day on 25 September 2020. The directions included that Mr Nicholas was to file a formal interlocutory application, which he did within time on 18 August 2020.
[14] As already noted, by memorandum dated 22 September 2020, Mr Nicholas advised he wished to withdraw his application, saying that on 18 September 2020 he had received an email from OFC’s solicitors stating:
Dear Mr Nicholas,
Your email below has been passed on to us.
If you would like to have a without prejudice discussion about acompromise, then OFC has instructed us to do so on its behalf. Please let us know when would suit for a call.
[15] This, Mr Nicholas has now clarified by his memorandum of 28 September 2020, was in response to an email he sent directly to OFC on 15 September 2020. In that email, Mr Nicholas asked OFC to agree to release at least $50,000 to allow him to service debts and cover living expenses.
[16] On 22 September 2020, Mr Nicholas spoke with OFC’s solicitors. According to his memorandum of that date, he:
[…] left the conference call with the understanding that:
(a)Solicitors for the Plaintiff needed at least a week to seek instructions on the discussions that took place to reach a compromise.
(b)That there would be an agreement that the hearing set down for Friday 25 September would be adjourned by mutual consent to give time the solicitors for the Plaintiff [sic] to get instructions from their client.
[17] It was on that basis, Mr Nicholas advised in his memorandum of 22 September 2020, that he had initially contacted the Registrar earlier that day to seek an adjournment. Later on 22 September 2020, he says, he was told OFC had not consented to such an adjournment. He then applied to withdraw his application on the basis, that he had been delayed in preparing for the hearing on 25 September 2020 by these discussions, could not prepare for the hearing in time himself, could not afford to retain counsel, and could not obtain the plaintiff’s consent. He also submits that each party should have to bear their own costs in respect of the interlocutory application.
[18] By reply memorandum dated 24 September 2020, counsel for OFC, Mr Potter, said he had never had instructions to agree to the adjournment of Mr Nicholas’ application, and noted any misunderstanding could have arisen only on the afternoon of 22 September 2020, when OFC’s solicitors had spoken with Mr Nicholas. Accordingly, Mr Potter submitted, there was no basis for Mr Nicholas to say OFC’s conduct had disadvantaged him in preparing for the hearing.
[19] Mr Potter requested I order that the $100,000 held on trust by Mr Kashyap be released and applied to the Basecorp loan, and that I order costs in OFC’s favour following Mr Nicholas’ withdrawal of his interlocutory application.
[20] By Minute dated 24 September 2020, I noted Mr Nicholas’ application as having been withdrawn. I said there should be an order for costs, but directed that Mr Nicholas was to have three days to comment as to quantum. I also allowed Mr Nicholas three days to comment on OFC’s application for the funds held on trust to be released and applied to the Basecorp loan.
Mr Nicholas’ latest memorandum
[21]Mr Nicholas replied to my Minute on 28 September 2020.
[22] In summary, besides exhibiting his email to OFC of 15 September 2020, which he had not previously produced, he reiterates the statements made in his earlier memorandum of 22 September 2020 as set out above. He states that any order that the funds held on trust be applied to the Basecorp loan would be premature while a
compromise with OFC remains possible. So far as he is concerned, OFC’s solicitors are yet to communicate their instructions to him regarding the possibility of compromise. He suggests that, if OFC is now unprepared to compromise, “one has to question the motives” of OFC’s solicitors in earlier suggesting a compromise. For these same reasons, he reiterates his submission that costs should lie where they fall.
Discussion
Costs
[23] As Mr Potter noted in his memorandum of 24 September 2020, any misunderstanding on Mr Nicholas’ part as to the possibility of a compromise with OFC, and of OFC’s agreeing to an adjournment of his application, would have arisen only on the afternoon of 22 September, and would have been rectified on 24 September with OFC’s next memorandum. If, as Mr Nicholas appears to have said is the case, he stopped preparing for the hearing on 25 September because he felt OFC would compromise, then on the face of it that was unjustified on his part. I do not consider on the material before me that his failure to prepare for the hearing, and consequential need to abandon the application can be laid at OFC’s feet.
[24] As is usual then, Mr Nicholas should pay OFC’s costs on and incidental to his interlocutory application following his withdrawal of that application.1 These are
$7,519, as identified in Mr Potter’s memorandum of 24 September 2020.
Fund held on trust
[25] His application for relief having been withdrawn, Mr Nicholas has not in his latest memorandum provided any good reason why this Court should not enforce his undertaking of 11 May 2020, as OFC seeks I do, by ordering that the $100,000 held on trust by Mr Kashyap be released and applied to the Basecorp loan. This is also in accordance with Gordon J’s orders in her minute of 6 August 2020.
1 High Court Rules 2016, r 15.23, as applied to interlocutory applications in, for example, MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [9].
[26] Even if Mr Nicholas’ application for relief had proceeded, as Mr Potter correctly noted in his written submissions filed on 23 September 2020, Mr Nicholas would have been required to show a clear and significant change in his circumstances such that, having regard to the circumstances of both parties, it would be unjust to hold him to the undertaking.2 It would have been insufficient for him, in doing so, to point to consequences of the undertaking being enforced that were foreseeable at the time he gave it.3
[27] I broadly agree with Mr Potter that Mr Nicholas had not pointed to any such circumstances in his application. As Mr Potter notes, when Mr Nicholas gave his undertaking on 11 May 2020, the economic impact of the COVID-19 pandemic was clear, and so also its prospective impact on Mr Nicholas’ financial position and ability to service his debt obligations would have been foreseeable. Also, I agree with Mr Potter that OFC was induced to consent to Mr Nicholas’ sale of the Ellerslie property by his giving an undertaking to effectively transfer his equity in that property to the Te Atatu property by applying the $100,000 to the Basecorp loan. It would be clearly unjust to not hold Mr Nicholas to his undertaking to reduce the indebtedness over the Te Atatu property, as it would effectively leave OFC with no recourse against the Ellerslie property and defeat the freezing order.
[28] There is no question but that the Court has inherent jurisdiction to enforce an undertaking in these circumstances.4
Result and Orders
[29] I order that Mr Nicholas is to pay OFC’s costs on and incidental to his interlocutory application dated 18 August 2020 and withdrawal of it on 22 September 2020, on a 2B basis together with disbursements, namely a total amount of $7,519.
[30] I order that the $100,000 held on trust by Mr Kashyap is to be applied in reduction of the Basecorp loan secured over the Te Atatu property. I have used the
2 Commerce Commission v Air New Zealand Ltd HC Auckland CIV-2008-404-8352, 3 November 2011.
3 Jones v Sky City Auckland Ltd HC Auckland CP299/AS01 31 August 2001 at [13].
4 See, for an example of a case in which the existence of this inherent jurisdiction has been recognised, Body Corporate 341188 v Kelly [2016] NZHC 2230.
language in the undertaking. If more specific language is required, Mr Potter is to identify that when OFC presents orders for sealing.
Hinton J
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