Rosco Ice Cream Limited v Guan

[2023] NZHC 3797

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-801

[2023] NZHC 3797

BETWEEN

ROSCO ICE CREAM LIMITED

Plaintiff

AND

DA PENG GUAN

Defendant

Hearing:	Teleconference on 19 December 2023 at 10 am
Counsel:	M R C Wolff for Applicant
Judgment:	19 December 2023

JUDGMENT OF RADICH J

[1]    The applicant seeks an urgent pre-trial charging order under r 17.4.1 of the High Court Rules 2016 and a freezing order under r 32.5 preventing the respondent from selling and/or dealing with and/or disposing and/or transferring his property at 7 Halewood Grove, Churton Park, Wellington. It seeks, in addition, a similar pre- judgment charging order and freezing order over the deposit of $63,500 paid by the respondent into the trust account of Paul Cheng & Co, Barristers and Solicitors, which is held on trust for the respondent.

[2]    It seeks for those orders to be maintained until the applicant’s summary judgment application is determined, or until further direction.

[3]    The application has been heard on an urgent basis given the nature of the risks described in this decision. The documents filed by the applicant were sent to the defendant by email yesterday and were then served on him yesterday evening, together with my minute of 18 December 2023 which is in the following terms:

ROSCO ICE CREAM LIMITED v GUAN [2023] NZHC 3797 [19 December 2023]

This application for an urgent pre-judgement charging order or freezing order is to be set down for a teleconference before me at 10 am tomorrow to consider whether or not the orders sought can be made at this stage. It should be dealt with on a Pickwick basis – counsel for the applicant should bring the proceeding, and the 10 am teleconference tomorrow, to the attention of the respondent or of counsel for the respondent and the respondent, or counsel for the respondent, may appear at that conference.

Counsel for the applicant should liaise with the registrar over connection details of the teleconference and over a means by which those details can be passed to the respondent or to counsel for the respondent in the event they wish to take part.

Background

[4]    The applicant has undertaken a property development on land at 8 William Earp Place, Tawa, in Wellington.

[5]    On 25 June 2021 and 30 June 2021, the respondent entered into two sale and purchase agreements with the applicant. Under those agreements, the respondent agreed to purchase:

(a)Lot 1 and carparks 1 and 2 at the development for $632,500 (accounting for a subsequent variation to the agreement) (Lot 1); and

(b)Lot 2 and carparks 3 and 4 at the development for $570,000.

[6]    Under the agreements, a deposit of $63,250 was to be paid for Lot 1 and a deposit of $57,000 was to be paid for Lot 2. The balance of the purchase price for both lots was to be paid on the settlement date.

[7]    The settlement date under the agreements is the fifth working day after the later of the date on which the applicant receives:

(a)a copy of the certificate of practical completion;

(b)a copy of the code compliance certificate for the lots; and

(c)notification that a search copy of the record of title for the lots is available.

[8]    The deposit for Lot 2 was paid by the respondent. The deposit for Lot 1 has not been paid by the respondent to the applicant but, instead, has been paid by the respondent into the trust account of the respondent’s lawyer, Paul Cheng & Co. Neither the respondent nor Paul Cheng & Co have complied with requests for payment of the Lot 1 deposit to the applicant.

[9]    Moreover, the respondent has failed to settle both agreements. The applicant notified the respondent on 8 November 2023 that a record of title for Lots 1 and 2 had been issued and a certificate of practical completion and code compliance certificates for Lots 1 and 2 had been obtained and that, accordingly, settlement of the agreements was due to occur on 15 November 2023.

[10]   When, on 15 November, the respondent failed to settle the purchases, the applicant served two settlement notices on the respondent.

[11]   On 16 November 2023, Paul Cheng & Co informed the applicant that the respondent was not in a position to settle and was wanting to either delay settlement or cancel the agreements.

[12]   The failure to settle is ongoing and the applicant has applied for summary judgment against the respondent, seeking an order for specific performance requiring the defendant to settle or, alternatively, damages for the applicant’s losses. That application is to be heard on 20 February 2024.

[13]   Meanwhile, the respondent has placed a residential property owned by him at 7 Halewood Grove, Churton Park, Wellington on the market. The advertisements for its sale show that the tender for sale closes at 4 pm on 18 January 2024. There is evidence that the respondent spoke to the real estate agent acting on the sale and purchase of Lots 1 and 2 and told the agent that he planned to sell the Churton Park property, so as to vest full ownership of the property in his wife and that, once that had been done, he intended to divorce his wife and “flee to China”. That conversation was recorded by the agent in a text message to the applicant immediately after the conversation took place.

[14]   The applicant then put the respondent on notice of a potential claim and warned him about the consequences of taking steps to defeat creditors.

The relevant provisions

[15]   Under r 17.41 of the Rules, the Court has the power to grant a pre-judgment charging order if it is satisfied that the liable party, with intent to defeat creditors or the entitled party or both:

(a)is removing, concealing, or disposing of the liable party’s property; or

(b)is absent from or about to leave New Zealand.

[16]   Under the rule, a claimant does not need to show that there is a serious question to be tried or that they are favoured on the balance of convenience and overall justice. Instead, to obtain an order it must be clear that the party in control of the asset is about to do something that will defeat his or her claim, accompanied by an intention to act illegitimately.1

[17]   In Regal Castings Limited v Lightbody, Blanchard and Wilson JJ said that, whenever circumstances are such that the debtor must have known that in alienating property, and thereby hindering, delaying or defeating creditors’ recourse to that property, he or she was exposing them to a significantly enhanced risk of not recovering the amounts owing to them, then the debtor must be taken to have intended this consequence, even if it was not their intention to cause loss.2

[18]   I am satisfied that the requirements for the issue of a pre-judgment charging order in r 17.41 are met. There is sufficient evidence of an intention on the part of the respondent to sell or dispose of his assets to defeat the applicant’s claim. And, while not a requirement under r 17.41, I am satisfied that there is a sufficiently sound basis for the plaintiff’s underlying claim.

1      McKay v 314 Maunganui Road Limited HC Auckland CIV-2007-404-7434, 30 April 2008 at [24], see also AHS Construction Limited v Andrews [2019] NZHC 1779 at [7].

2      Regal Castings Limited v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [54].

Interim freezing orders

[19]   Under r 32.5 of the High Court Rules, the High Court may make a freezing order or an ancillary order against a judgment debtor or a prospective judgment debtor. The rule  provides  for  what  is  generally  known  as  a  Mareva  injunction.  Under r 32.5(1)(b)(i), the rule applies if an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in the court. If that requirement is satisfied, then the Court must consider whether there is a danger that the prospective judgment would be unsatisfied due to the prospective judgment debtor absconding or their assets being disposed of.

[20]   The object of an order under the rule is to prevent the dissipation of assets by an actual or prospective judgment debtor when that would have the effect or the object of denying a claimant or a judgment creditor the satisfaction of their debt.3

[21]   In determining whether to make an order under the rule, the Court is to consider whether the applicant has an arguable case on the substantive claim, whether there are assets to which the order can apply, whether there is a risk of dissipation of assets and whether the overall justice of the case, after balancing the rights of each party, favours an order being made.

[22]   A “good arguable case” under this rule is a more onerous requirement than that of an “serious question to be tried”,4 but the establishment of a prima facie case is not required.5

[23]   I am satisfied that the applicant has a good arguable case on the respondent’s failures to uphold his contractual obligations. The evidence supports the obligations and the respondent’s failures to meet them. There are clearly identified assets, evidence of a risk of dissipation and the overall justice of the case is such that the freezing order should be made before the tender for the sale of the Churton Park property closes. Moreover, there is evidence of the prospect of a transfer of the Churton Park property out of the respondent’s name. Evidence about an intention to

3      Hannay v Mount [2011] NZCA 530 at [20].

4      Property Marine Australia Pty Ltd v Condor Yachts (Bermuda) Limited (1987) 1 PRNZ 251.

5      Hannay v Mount, above n 3, at [21]–[22].

flee is such that there are grounds for the order to be made over the deposit held in the trust account of Paul Cheng & Co.

Orders

[24]   For the reasons given, I make a pre-judgment charging order under r 17.41 of the High Court Rules and a freezing order under r 32.5 of the High Court Rules preventing the respondent from selling and/or dealing with and/or disposing of and/or transferring his property at 7 Halewood Grove, Churton Park, Wellington and freezing the deposit of $63,500 paid into the trust account of Paul Cheng & Co, Barristers and Solicitors and held on trust for the respondent.

[25]   These orders are to be maintained until the applicant’s summary judgment application is determined, or until further direction of the Court.

[26]   The respondent is to give the applicant five working days’ notice if the respondent intends to apply to the Court to vary or discharge the orders granted.

[27]The applicant is entitled to its costs on this application on a 2B basis.

Radich J

Solicitors:

Morrison Kent, Wellington for Applicant