Pacific Premier Bank v Asiatrust New Zealand Limited

[2018] NZHC 1762

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001379

[2018] NZHC 1762

BETWEEN

PACIFIC PREMIER BANK

Plaintiff

AND

ASIATRUST NEW ZEALAND LIMITED

First Defendant

ASIACITI TRUST NEW ZEALAND LIMITED
Second Defendant

SONIA JOELEN DALRYMPLE aka SONIA CORTEZ

Third Defendant

CYNTHIA DALRYMPLE aka CINDY DALRYMPLE

Fourth Defendant

On the papers:
Counsel:	R J Hooker for Plaintiff
Judgment:	17 July 2018

JUDGMENT OF CHURCHMAN J

Introduction

[1]        By statement of claim dated 10 July 2018, the plaintiff seeks a declaration that the defendants hold certain funds as a constructive trustee for the plaintiff. It seeks directions that the first defendant remits certain monies to it in California.

[2]        The pleadings also contain a cause of action asserting that the first defendant had acted with “dishonest assistance to defeat the interests of the plaintiff” in relation

PACIFIC PREMIER BANK v ASIATRUST NEW ZEALAND LIMITED & ORS [2018] NZHC 1762 [17 July 2018]

to certain funds that have been transferred to it and seeks damages in the sum of USD2.5 million. These are very serious allegations and will need to be properly established in due course.

The California judgment

[3]        These proceedings had their origins in a commercial transaction that occurred in California in 2007. The fourth defendant (Cindy Dalrymple) sold  a business to  Mr Jay Cho for USD2.2 million. Gilmore Bank, the predecessor of the plaintiff, funded Mr Cho’s purchase of the business.

[4]        Within six months of the sale, the business revenues dropped precipitously, it laid off all its workers and closed. Mr Cho commenced arbitration proceedings against Ms Dalrymple for misrepresentation and other causes of action.

[5]        On 14 June 2010, Mr Cho obtained a final arbitration award in the sum of USD3,28,341.50. This judgment is registered in the Superior Court of the State of California (Orange County) and became a judgment of that Court. Gilmore Bank subsequently acquired all the plaintiff’s rights in respect of that judgment.

[6]        On 3 December 2012, the Superior Court of the State of California (Orange County) issued an injunction freezing the fourth defendants’ assets including funds held or controlled by the first and second defendants.

[7]        On 10 July 2018, the plaintiff filed in this Court a without notice application for a freezing order under HCR 38.2 or, alternatively, an injunction.

[8]        The application was accompanied by an undertaking as to damages. A statement of claim and application for summary judgment were filed the same day.

[9]        On 11 July 2018, Duffy J declined to make the freezing order/injunction sought on the grounds that the material then filed was insufficient to establish the existence of a legal basis for the Court to make the orders sought. In response to that direction, the plaintiff filed a detailed memorandum dated 13 July 2018.

Jurisdiction

[10]      HCR 32.2 authorises the Court to make a freezing order on, or without, notice to a respondent. A freezing order may restrain a respondent from removing any assets located in or outside New Zealand, or from the disposing of, dealing with, or diminishing the value of, those assets.

[11]      When a freezing order is applied for without notice to a respondent, the applicant must fully and frankly disclose to the Court all material facts including any possible defences and information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages.

[12]      The source of the jurisdiction in HCR32.2 is s 12 of the Senior Courts Act 2016 which declares that the High Court shall have:

… all judicial jurisdiction which may be necessary to administer the laws of New Zealand.

[13]      What is necessary to be established in order to obtain a freezing order without notice was recently considered by Fitzgerald J in Worldwide Holidays Ltd v Wang.1

[14]      The Court confirmed that a good arguable case on the underlying claim is required; that there must be a risk of dissipation or diminishment in value of the assets. If a defendant has a history of behaving fraudulently that will support a conclusion that there is a risk of the defendant dissipating their assets. There must also be evidence that there are assets within the jurisdiction of this Court to which orders can attach.

[15]      In the present case, the plaintiff obtained its judgment in the Superior Court of California (Orange County). A judgment obtained in the United States cannot be enforced under the Reciprocal Enforcement of Judgments Act 1934 because the judgment was neither obtained in a Commonwealth country, nor obtained in a country which has been gazetted for the purposes of the Reciprocal Enforcement of Judgment Act 1934.

1      Worldwide Holidays Ltd v Wang (also known as “Widelia Wang” or “Ning” (No 2)) [2017] NZHC 738.

[16]      However, foreign judgments are enforceable under the common law provided certain requirements are met. The Court of Appeal recently addressed the requirements of such a cause of action in Eilenberg v Gutierrez.2 It noted that three prerequisites to the High Court exercising its jurisdiction to enforce a foreign judgment are:

(a)the foreign court must have had jurisdiction to give judgment;

(b)the judgment must be for a definite sum of money; and

(c)the judgment must be final and conclusive.

[17]There are three settled exceptions to these rules where:

(a)the judgment was obtained by fraud;

(b)enforcement of the judgment will be contrary to public policy; and

(c)the proceedings in which the judgment was obtained was contrary to natural justice.

Analysis

[18]      In Chen v Lin, the Court of Appeal emphasised enforceability as a starting point and said:3

Private international law favours the enforceability of foreign judgments from other civilised nations. Those judgments are recognised and enforced based on the principle of comity, which controls analysis of both the substantive law of the jurisdiction in which the judgment was obtained, and the merits of a judgment. The substantive rights of the parties are governed by the law of the foreign country granting the judgment, whereas procedural matters are governed exclusively by the law of the enforcing jurisdiction.

2      Eilenberg v Gutierrez [2017] NZCA 270.

3      Chen v Lin [2016] NZAR 606 at [18].

[19]      The Court of Appeal of the State of California,4 in a detailed and reasoned judgment, determined that the Superior Court of the State of California had jurisdiction in relation to the first defendant (Asiatrust New Zealand Ltd). The Court of Appeal overturned the original decision of the Superior Court which had declined jurisdiction.

[20]      On the basis of the reasoning in the Court of Appeal of the State of California judgment, I am satisfied that the Superior Court had jurisdiction. For the purposes of this application, I accept that the State of California is a “civilised nation” and that comity favours the enforceability of a decision of its Superior Court.

[21]The judgment is in respect of a sum of money that is able to be ascertained.

[22]      The judgment is a final judgment and the words “final amended judgment” appear on the face of the Court’s decision. None of the three exceptions that would militate against the enforcement of the judgment apply.

[23]      On the basis of the evidence set out in the affidavits filed in support of the application, I am satisfied that there are assets under the control of the first defendant in New Zealand. I am also satisfied that there is an arguable case that property was removed from California to New Zealand with intent to deprive the plaintiff of obtaining satisfaction of its judgment. I am also satisfied that there is an arguable case that the first defendant holds property as a constructive trustee for the plaintiff.

[24]      In terms of the risk of dissipation, I am satisfied that the portion of the funds held in a bank account could be transferred, including out of the jurisdiction of    New Zealand.

Conclusion

[25]      Accordingly, the basis for the issue of a freezing order is established, and I make one in the terms set out in the application dated 10 July 2018.

4      Gilmore Bank et al  v  Asiatrust  New  Zealand  Ltd  CA  SC  Fourth  Appellate  District Division 3G 048053 (Super. Ct. No. 30-2011-00452056).

[26]Such order is to subsist until further direction of this Court.

Churchman J

Solicitors:

Vallant Hooker & Partners, Auckland for Plaintiff