Reveal NZ Limited (in liquidation) v Inthayung
[2022] NZHC 712
•8 April 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2405
[2022] NZHC 712
BETWEEN REVEAL NZ LIMITED (IN LIQUIDATION)
Plaintiff
AND
INTHAYUNG
Defendant
Hearing: 6 April 2022 Appearances:
K Paterson for the plaintiff
A Kenwright for the defendant
Judgment:
8 April 2022
JUDGMENT OF ROBINSON J
This judgment was delivered by me on 8 April 2022 at 3.00pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors/counsel:
Buddle Findlay Shanahans Law
A Kenwright, Barrister, Auckland
REVEAL NZ LIMITED v INTHAYUNG [2022] NZHC 712 [8 April 2022]
Introduction
[1] The plaintiff applies pursuant to rule 7.55 of the High Court Rules 2016 for preservation orders in respect of two motor vehicles: a 2017 Mercedes-Benz C20 (LHK265) (Mercedes); and a 2007 Porsche 991 (GSP566) (Porsche) (together, the Vehicles).
[2] In the substantive proceeding the plaintiff claims to be the legal and beneficial owner of the Vehicles and seeks, amongst other things, an order that the defendant surrender them. The defendant denies the plaintiff’s claim. She claims to be the legal and beneficial owner of the Porsche, and the beneficial owner of the Mercedes which she says is held on trust for her by the trustees of the DW Corrick Trust (Trust).
[3] Pending determination of that substantive dispute the plaintiff applies for orders that:
(a)the defendant surrenders the Vehicles and their keys to the plaintiff;
(b)the plaintiff is to hold the Vehicles and not dispose of them pending further order of the Court; and
(c)leave be reserved for the parties to seek further orders relating to the Vehicles.
(Application)
[4] The defendant opposes the application. In written and oral submissions counsel for the defendant, Ms Kenwright, says that the defendant does not object to the granting of an order preserving the Vehicles per se, but does object to the terms of the orders the plaintiff seeks. Ms Kenwright submits it would be appropriate for the Court to grant preservation orders, but on terms that the defendant, rather than the plaintiff, hold the Vehicles pending further order of the Court.
[5] The plaintiff initially made the application without notice. Toogood J declined to proceed on that basis in light of an email to the Court from the defendant’s counsel
advising that the application was opposed. However, Toogood J required the defendant to provide an undertaking to the Court by 22 December 2021. In accordance with that direction the defendant has filed an undertaking on the following terms:
1. I hereby undertake to the Court that the following vehicles will be preserved and that I will not take any step that is likely to compromise any interest in the vehicles pending a further order of the Court.
(a) 2017 Mercedes-Benz C20 (LHK265); and
(b) 2007 Porsche 991 (GSP566).
[6] The defendant says that there are no good grounds for the Court to grant the plaintiff’s application, particularly given the terms of her undertaking.
Background
The parties
[7] The plaintiff, together with its parent company (Reveal International Limited) and another related company, were placed into liquidation by shareholders’ resolutions on 15 November 2021. Lynda Smart and Paul Valsic were appointed liquidators. The shareholders of Reveal International Limited are Heimsath Alexander Trustee Limited and Lex Trustee Company Limited as trustees of the Trust.
[8] David Wayne Corrick was the sole director of the plaintiff and its parent. Unfortunately Mr Corrick passed away on 9 November 2021, shortly before those companies were placed into liquidation. The defendant is Mr Corrick’s widow.
The Vehicles
[9] In her supporting affidavit Ms Smart sets out the evidence upon which the plaintiff relies to establish an ownership interest in the Vehicles.
[10]In relation to the Mercedes, this evidence includes:
(a)An invoice dated 1 May 2018 recording the sale of the Mercedes by Ingham Motor Holdings Limited (trading as Mercedes-Benz Auckland) to the plaintiff.
(b)A Business Credit Agreement dated 1 May 2018 between Mercedes- Benz Financial Services Limited (MBFSL) as lender, the plaintiff as borrower and Mr Corrick as guarantor. Pursuant to that agreement MBFSL provided credit to the plaintiff to enable it to buy the Mercedes, and Mr Corrick guaranteed the plaintiff’s obligations to MBFSL.
(c)A PPSR Motor Vehicle Search showing the registration on 3 May 2018 of a financing statement in relation to MBFSL’s security interest in the Mercedes. This records the plaintiff as the debtor.
[11]In relation to the Porsche Ms Smart’s evidence includes:
(a)A Vehicle Offer and Sale Agreement dated 25 October 2013 between Continental Cars (Porsche) as vendor and the plaintiff as purchaser.
(b)An unsigned asset financing agreement dated 30 October 2013 between BNZ as lender, the plaintiff as borrower and Mr Corrick as guarantor. Pursuant to that agreement BNZ agreed to lend the plaintiff money to by the Porsche, and Mr Corrick guaranteed the plaintiff’s obligations to BNZ.
(c)Email correspondence from BNZ to Continental Cars dated 31 October 2013 recording that it had paid the amount of the purchase price to Continental Cars on behalf of the plaintiff.
(d)Various invoices between Continental Cars and the plaintiff in relation to the Porsche.
[12]In relation to both Vehicles Ms Smart’s evidence also includes:
(a)Extracts from the plaintiff’s financial statement as at 31 March 2020. In particular, the plaintiff’s Fixed Asset Schedule which lists both Vehicles as assets belonging to the plaintiff.
(b)Email correspondence from the plaintiff’s accountant to Mr Corrick concerning Fringe Benefit Tax obligations that may arise if the Vehicles (amongst others) are available for private use by employees “including [Mr Corrick] and [the defendant] as associated parties”.
(c)An insurance policy schedule showing that the Vehicles are insured in the plaintiff’s name and a broker’s invoice to the plaintiff dated 6 September 2021 in respect of the premia. Ms Smart confirms the liquidators have continued that insurance post-liquidation.
[13] On the other hand, the defendant says that Mr Corrick purchased both Vehicles for her personal use. She says the legal owner of the Mercedes is the Trust of which she is a beneficiary. Ms Kenwright submitted, albeit without evidence, that upon the passing of Mr Corrick his property passed to Trust, including his interest in Mercedes. It is not clear how Mr Corrick personally is said to have had an interest in the Mercedes.
[14] The defendant says she is the legal and beneficial owner of the Porsche. She says Mr Corrick purchased it for her, and it was never owned by the plaintiff. She relies on an invoice from Waka Kotahi showing that she is the “registered owner” of the Vehicle. However, in her reply affidavit Ms Smart points to the following extract from Waka Kotahi’s website, which makes clear that registration of a vehicle in a person’s name does not mean that person owns the vehicle:
What it means to be the registered person
The registered person is the person responsible for the vehicle, but this isn’t the same thing as the legal owner. The Motor Vehicle Register doesn’t record legal ownership. (Original emphasis)
[15] It is not for the Court at this stage to determine who owns the Vehicles. That is for another day. However, I note that as matters stand the defendant has not provided any documentary evidence in support of her assertions of ownership, and that those assertions are quite contrary to the contemporaneous evidence provided by the plaintiff. The defendant may well have had the personal use of the Vehicles, and
understood Mr Corrick purchased them for that purpose, but that will not be determinative of the ownership dispute.
Storage
[16] In her affidavit of 23 March 2022 the defendant says that the Porsche is currently stored securely in her garage. She says the Mercedes is being held by a car dealer, Richard Glasson. It is not clear from the evidence before me why the Mercedes is in Mr Glasson’s possession; for how long he has held it; or the terms upon which he holds it.
[17] A search of the Personal Properties Securities Register (PPSR) carried out by the liquidators on 29 March 2022 revealed that on 4 March 2022, Modena 2000 Limited (Modena) registered a financing statement in respect of a security interest it claims over the Mercedes. Unusually, the financing statement records Modena as both the debtor and the secured party.
[18] Companies Office records show that Mr Glasson owns all the shares in Modena and is one of its two directors. Modena’s registered office, also its address for service, is at the offices of Paul Jackson & Associates Limited, Chartered Accountants. Email correspondence provided in evidence shows that Mr Jackson has been assisting the defendant in her dealings with the liquidators.
[19] In her affidavit of 23 March 2022, the defendant made no mention of any new security interest over the Mercedes, nor the recent registration of the financing statement. In oral submissions Mr Kenwright explained that the defendant was unaware of these recent dealings and not involved in them. That is as the Court would expect given the terms of the defendant’s undertaking. Having made enquiries Ms Kenwright is instructed that Modena has acquired a debt secured over the Mercedes that was previously owed to another entity. However, there is presently no evidence to that effect. MBFSL’s financing statement remains registered on the PPSR.
Legal Principles
[20] The authors of McGechan on Procedure explain the purpose of rule 7.55 as follows:
The purpose of r 7.55 is to facilitate the interlocutory preservation of “property” or of “a fund” involved in the litigation itself, or evidence relating to the litigation, so that claims are not rendered nugatory prior to the substantive hearing. The rule is not intended to provide a means of attachment of the unrelated worth of the defendant’s concern: Rapid Metal Developments (NZ) Limited v Rusher (1987) 2 PRNZ 85 (HC). In that case, McGechan J remarked that any such sweeping jurisdiction would effectively overtake the carefully controlled jurisdiction of the Court in relation to charging orders before judgment under r 17.41 and in relation to freezing orders. The rule is not intended to amount to a means for hopeful litigants to ensure defendants remain judgment worthy.
This approach to the rule was approved by the Court of Appeal in Investors Protection Co Limited v Ray Courtney Architects Limited (1993) 7 PRNZ 1 (CA).
[21] There is no dispute as to the relevant principles. An applicant for an order under r 7.55 need not meet the threshold required for an interim injunction but must establish that there is a “proper basis for the making of an order”.1 In particular:
(a)There must be “property” or a “fund”, the right to which is in question. If the appropriate remedy in the substantive proceeding is not a proprietary one, an order under r 7.55 will not be appropriate.2
(b)There must be a good reason for the order.3
(c)Where the order sought relates to property the applicant must demonstrate a claim to an interest in that property, although not necessarily extending to ownership.4
(d)The risk of dissipation or destruction will be an important matter to take into account.5
1 Helicarr Helicopters Limited v Watts (1992) 6 PRNZ 61 at 65.
2 Investors Protection Co Limited v Ray Courtney Architects Limited (1993) 7 PRNZ 1.
3 Proco Holdings Limited v Thompson unreported, 3 February 1989, HC Auckland CP 2850/88 per Gault J, cited in Helicarr Helicopters Limited.
4 Helicarr Helicopters Limited v Watts.
5 Lewis v Poultry Processors (Holdings) Limited (1988) 3 PRNZ 167 at 173 (HC).
Discussion
[22] The Vehicles are obviously property and both parties claim an interest in them. The key issue in dispute in the present application is whether there is a proper reason and/or good grounds to grant the preservation order. The risk of dissipation or destruction is relevant to that assessment.
[23] Ms Kenwright submits there is no good reason to grant orders on the terms the plaintiff seeks. She says the Vehicles are safely secure where they are, and that they will remain safely secured until the proceeding is determined. In the meantime her undertaking to the Court will remain. As such, there is no risk of dissipation or destruction to the Vehicles.
[24] Ms Kenwright goes further. She submits that the Vehicles will be at greater risk of being sold (and therefore dissipated) if preservation orders are made on terms requiring possession of the Vehicles to be delivered to the plaintiff. She submits it has always been the liquidators’ intention to sell the Vehicles at short notice once they have obtained possession. She says that if the plaintiff genuinely intended to preserve the Vehicles then it would not be applying for leave to be reserved for the parties to come back to the Court for further orders. Ms Kenwright also suggested that the liquidators would necessarily incur storage costs that would ultimately reduce any distribution to the shareholder Trust of which the defendant is a beneficiary.
[25] I do not agree. I accept Mrs Paterson’s submission that there are proper reasons and good grounds to make the preservation orders sought. In particular:
(a)The defendant’s undertaking is that she will not take steps likely to compromise any interest in the Vehicles. However, that undertaking is not given by third parties and does not bind third parties. That limitation applies particularly to the Mercedes which is presently being held by Mr Glasson. As noted there is no evidence as to precisely where, how, why or on what terms Mr Glasson is holding the Mercedes.
(b)The recent registration of the (unusual) financing statement on the PPSR raises concerns. There may be good reasons for that registration,
but the lack of any evidence to explain these dealings and the defendant’s explanation through counsel that she was unaware of them demonstrates the limits of the defendant’s undertaking. This adds weight to the plaintiff’s application.
(c)The insurance policies for the Vehicles are held by the plaintiff. The plaintiff continues to pay the premiums. There are various conditions attached to those policies, including as to who may drive it and how it must be stored. However, the plaintiff has no way of knowing whether those conditions are being met.
(d)It is unclear whether or not the Vehicles are currently being driven.
(e)It is unclear precisely how the Vehicles are being stored or (in the case of the Mercedes) on what terms.
[26] I do not share the defendant’s concerns that there is a risk the plaintiff will sell the Vehicles if the application is granted. That would breach the express terms of the orders and be in contempt of Court. The plaintiff is presently in the hands of its liquidators. Ms Smart has said in evidence (and the liquidators have advised through counsel) that the plaintiff will hold the Vehicles and keep them insured pending further order of the Court. The liquidators will be well aware of the plaintiff’s obligations, as well as their own, including to the Court.
[27] Finally, the liquidators have advised through counsel that they are able to arrange for the Vehicles to be stored safely and securely without cost.
[28] For these reasons I am satisfied in all the circumstances that it is appropriate to make the orders sought. There is no prejudice to the defendant in doing so.
Result
[29]The application is granted. I order that:
(a)The defendant is to surrender up the Mercedes and the Porsche and each of their keys to the plaintiff (via its liquidators or its solicitors).
(b)The plaintiff is to hold the Vehicles and not dispose of them pending further order of the Court.
(c)Leave is reserved for either party to seek further orders relating to the Vehicles.
Costs
[30] Having succeeded with its application the plaintiff is entitled to costs. If the parties agree I would order that costs be reserved pending determination of the substantive proceeding. Otherwise, the plaintiff should file a memorandum of not more than 5 pages within 10 working days and the defendant within a further 5 working days. I will deal with any costs issue on the papers. I can indicate my preliminary view is that costs should be calculated on a 2B basis.
Next steps
[31] During the hearing, counsel agreed to confer with a view to filing a Joint Memorandum proposing timetable orders to progress matters. Any Joint Memorandum (or, failing agreement, a memorandum from each party) is to be filed by 5.00pm on Wednesday 13 April 2022.
[32] The Registry will convene a teleconference on Thursday, 14 April 2022. If the parties can reach agreement on appropriate terms this can be vacated.
Robinson J
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