Primary Services New Zealand Ltd v Fonagy

[2019] NZHC 1869

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-404

[2019] NZHC 1869

BETWEEN

PRIMARY SERVICES NEW ZEALAND LIMITED

Applicant

AND

ANDREW MICHAEL FONAGY

First Respondent

ORA TRUSTEES LIMITED

Second Respondent

Teleconference:

1 August 2019

Counsel:

JL Bates for Applicant

A L Harlowe for First Respondent

Judgment:

2 August 2019

JUDGMENT OF CHURCHMAN J

[1]    On 26 July 2019, the applicant filed a statement of claim in the High Court seeking  judgment  against  a  company  known  as   Colombo   Projects   Limited, Mr Fonagy, the respondent in these proceedings, and John Richmond Paynter. The proceedings sought judgment against Mr Fonagy for a principal sum of $850,000 plus interest and costs.

[2]    The proceedings related to a loan agreement which Mr Fonagy and Mr Paynter had guaranteed and in respect of which the first defendant had defaulted.

[3]    In addition to those proceedings, the applicant, the same day, applied for a freezing order. That application was supported by an affidavit of Mr D G R Short, a director of Primary Services New Zealand Limited. An undertaking as to damages

PRIMARY SERVICES NEW ZEALAND LIMITED v FONAGY & ANOR [2019] NZHC 1869 [2 August 2019]

was also filed. The application for the freezing order was filed on a without notice basis.

[4]    The subject of the freezing order was Mr Fonagy’s shareholding in a company known as Fontur Trustee Limited, and the proceeds of sale to which Mr Fonagy might become entitled following the sale or transfer of his shareholding in Fontur, including any proceeds to which the first respondent may become entitled following the sale of assets of two companies: 22 O’Shannessey Limited and Ponsonby 235 Limited which were said to be owned by Fontur.

[5]    The application for a freezing order also sought an order restraining the first and second respondents from removing from New Zealand, disposing of, dealing with or diminishing the value of the proceeds to which Mr Fonagy may, or had become entitled, following the sale of properties owned by 22 O’Shannessey Limited and Ponsonby 235 Limited.

[6]    The matter came before Dunningham J on 26 July 2019. She issued a minute on 26 July indicating that she was satisfied that there was a good arguable case against the named defendants in the primary proceedings, but unclear as to why the Court should issue a freezing order in respect of assets which were not directly owned by Mr Fonagy, where it was not obvious that the applicant would have recourse to them in any event, if it obtained judgment in its favour. She directed a telephone conference with the Duty Judge to clarify this issue.

[7]That teleconference was held yesterday 1 August 2019.

[8]    Mr A L Harlowe, whose client had been served on a Pickwick basis, appeared for Mr Fonagy. Mr Nick Williams had earlier emailed the Court indicating that he had instructions to appear on a Pickwick basis at the teleconference expressly reserving the position of Ora Trustees Limited, a Cook Island-based trustee company, on issues of jurisdiction and service. Unfortunately, as a result of administrative difficulties, Mr Williams was unable to be connected to the teleconference. However, from his email to the Court, it is clear that his client opposed the application and would be likely to raise disputed issues of fact.

[9]    During the course of the teleconference, Mr Harlowe also indicated his client’s opposition to the application and submitted that key facts were missing from the material put before the Court. He submitted that the transfer to Ora Trustees Limited was merely a transfer from one trustee owner to another.

[10]   When the Court enquired as to whether Mr Harlowe had any instructions in respect of an undertaking that Mr Fonagy might give in respect of the present application, he indicated he did not have any such instructions.

[11]   During the course of the teleconference, Mr Bates indicated that a recent enquiry by a staff member of his as to the proposed sale of the O’Shannessey Street property, had indicated that the sale was not imminent as no concluded contract had been reached and the purchaser was still in negotiation with 22 O’Shannessey Limited.

[12]   The preliminary view expressed by Dunningham J that there appears to be a good arguable case against Mr Fonagy in relation to the primary proceedings is correct.

[13]   The evidence set out in the affidavit of Mr Short also indicates that it is seriously arguable that Mr Fonagy is engaged in the process of attempting to dispose of assets and/or put them beyond the reach of the New Zealand Courts in an attempt to avoid liability under his guarantee on the loan from Primary Services New Zealand Limited to Colombo Projects Limited.

[14]   If that strategy were to succeed, then the applicant/plaintiff would be irrevocably harmed, and this therefore is an appropriate case for a freezing order.

[15]   However, such a freezing order can only be interim. Although Mr Harlowe was able to participate in the teleconference, that is no substitute for participation after proper service and the opportunity to take full instructions. The same comments apply to Mr Williams in respect of Ora Trustees Limited.

[16]   Given Mr Bates’ concession that the urgency had gone out of the application against the second respondent as a result of the fact that the properties owned by

22 O’Shannessey Limited and Ponsonby 235 Limited had not yet sold, it is not appropriate that an interim order be made against Ora Trustees Limited. Such an application needs to be properly argued after it has been served and counsel has had an opportunity to obtain instructions.

[17]   There are also difficulties in relation to making an order in respect of the assets of a company whose shareholding Mr Fonagy may own. The ownership of shares is not the same as ownership of the assets of the company. However, the proposed wording in [4] of the draft freezing order sought against the first respondent specifically only relates to Mr Fonagy’s shareholding in Fontur Trustee Limited, and to such proceeds of sale that he may become entitled to following the sale or transfer of Fontur’s shareholdings to the second respondent. Such sums would clearly be an asset of Mr Fonagy’s and not the asset of the company. At this stage, there is no evidence as to the quantum of any such amounts, or indeed any certainty that such amounts will ever exist.

[18]   Accordingly, I grant a freezing order against the first respondent in terms of the draft order filed by the applicant with the following additional directions:

(a)the freezing order against the first respondent is an interim one and will last until further order of the Court; and

(b)the first respondent may move on notice to set the interim order aside.

[19]   I decline to make a freezing order against the second respondent and direct the substantive proceedings and the seizure order be served on the second respondent without delay.

[20]   I further direct that this matter be set down for a first case management conference as soon as possible after 14 days have elapsed between service on both the first and second respondents of these proceedings.

[21]Costs are reserved.

Churchman J

Solicitors:

Brown & Bates, Napier for Applicant

Anderson Creagh Lai Ltd, Auckland for First Respondent Meredith Connell, Auckland for Second Respondentm