Smart Living Limited v Connors

[2023] NZHC 3709

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-672

[2023] NZHC 3709

BETWEEN

SMART LIVING LIMITED

Plaintiff

AND

NICOLETTE LOUISE CONNORS

First Defendant

AND

NICOLETTE LOUISE CONNORS AND PRIMROSE HILL TRUSTEES LIMITED,

as trustees of the Primrose Trust Second Defendant

AND

METROPOLIS REAL ESTATE LIMITED

(in liq)

Third defendant

Counsel:	T J M Ashley for Plaintiff
Judgment:	14 December 2023
(Determined on the papers)

JUDGMENT OF OSBORNE J

[1]    The plaintiff applies without notice for freezing orders and ancillary orders against the first and second defendants.

[2]    At its simplest level, the plaintiff’s claim is that the first defendant arranged in February 2023 from the plaintiff a short-term loan of $250,000. Interest payments were not made as they became due after March 2023, and the principal of the loan and outstanding interest were not repaid when due in July 2023. Liability under the loan contract has been denied by the second defendants as trustees of the Primrose Trust — they were identified by the first defendant as the borrowers and the persons granting a

SMART LIVING LIMITED v CONNORS [2023] NZHC 3709 [14 December 2023]

mortgage over a Christchurch property (the property) as security. The property is now on the point of being sold without any suggestion that any of the outstanding money will be repaid to the plaintiff.

Freezing orders — the legal regime

[3]    The Court may make a freezing order under Pt 32 High Court Rules 2016, and in particular under r 32.2. The Court may also make an ancillary order under r 32.3.

[4]There are essentially three requirements for a freezing order:1

(a)a good arguable case on the plaintiff’s substantive claim;

(b)assets to which the order can apply; and

(c)a real risk the respondent will dissipate or dispose of those assets.

[5]    The Court, on such an application, will consider the overall justice of the case.2 The Court needs to balance the need to protect the applicant so as to ensure any judgment is not rendered barren against any prejudice or hardship to the respondent or a third party.

[6]    Pursuant to r 32.2.1, a freezing order may be made on a without notice basis. The grounds on which an application may be made without notice (under r 7.23(2)) include where requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant and where the interests of justice require the application to be determined without serving notice.

1Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR32.2.03].

2      Shaw v Narain [1992] 2 NZLR 544 (CA) at 548.

Basis of this application

[7]    The plaintiff, in support of its substantive application, has filed a statement of claim which pleads three causes of action:

(a)against the first and second defendants, for breach of the term loan contract;

(b)against the first defendant only, for deceit (in the event she deceived the plaintiff in relation to her authorisation to enter into the contract on behalf of the Primrose Trust); and

(c)against all defendants, for money had and received on the basis the monies advanced were paid into an unnamed bank account nominated by the first defendant but with the single interest repayment (made in March 2023) apparently being made by the third defendant (subsequently placed in liquidation).

[8]    The plaintiff’s interlocutory application seeking the freezing order and ancillary order is supported by the plaintiff’s signed undertaking (pursuant to r 32.2(5)) and by affidavits of Anthony Tosswill and Gray Ussher. Mr Ussher is a finance broker in Christchurch who was asked by the first defendant to arrange a loan. He was thereafter involved with her and Mr Tosswill in arranging the loan from the plaintiff. He gives evidence as to the first defendant assuring him she controlled the Primrose Trust and had authority to sign contracts on behalf of the Trust.

[9]Mr Tosswill gives evidence as to his dealings with Ms Connors.

[10]   I have carefully read the affidavit evidence, including the numerous exhibits. The property (that is, the property agreed to be mortgaged under the term loan contract) is registered in the names of the second defendants.

[11]   Solicitors acting for the Primrose Trust wrote to Mr Ussher in July 2023, following demand for repayment of the loan, and asserted the loan contract has no effect on the Primrose Trust or the property. Subsequently, through other solicitors,

the second defendants have taken steps to sell the property. A sale of the property is understood to be scheduled to occur tomorrow, 15 December 2023.

[12]   Time does not permit the delivery of a judgment that extensively reviews the evidence. I confirm that in the conclusions that follow, the entirety of the evidence has been taken into account. By its nature, the present application is determined without the defendants having the opportunity to provide any other relevant evidence. The defendants will be entitled to apply to the Court, under r 7.49 High Court Rules, to vary or rescind the orders made below if they consider the orders wrong, and to file their evidence accordingly.

Discussion

Good arguable case

[13]   I am satisfied the plaintiff has established a good arguable case that each of its causes of action is tenable. Mr Ussher’s evidence complements that of Mr Tosswill in relation to representations made by Ms Connors and dealings of the Primrose Trust.3

Known assets

[14]   The application for a freezing order focuses particularly on the proceeds of sale of the property but also on the first and second defendants’ more general assets to the extent they do not exceed $400,000 in aggregate value. There is sufficient particularity in that to enable persons receiving notice of the orders to identify the frozen assets and comply with the orders.

Real risk of dissipation

[15]   Mr Ussher and Mr Tosswill have received, over time, signed statements of the first defendant that indicate a substantial reduction in net assets in the course of 2023. There is also evidence suggesting the first defendant may have a lavish lifestyle. In

3After this judgment had been prepared, the Court received a supplementary memorandum from Mr Ashley. In it, counsel explained that very recent enquiries indicated the bank account which received the advanced monies was that of the third defendant. If that information is able to be verified it may affect the liability under the cause of action for money had and received, but it does not affect the issues to be determined on the remaining causes of action.

May 2023, the first defendant reported to a journalist that she was looking at buying a second home in France, where she usually spends time each year. The prospects of a significant dissipation of assets are real.

Overall justice

[16]I am satisfied that the proposed orders fairly balance the interests of the parties

— the defendants will be able to apply for rescission or variation of the orders if they consider them to be inappropriate.

Ancillary order

[17]   The ancillary order sought by the plaintiff would have the defendants file and serve affidavit evidence relating to the existence and other details of bank accounts and other assets. I am satisfied those orders are necessary to ensure the freezing order is effective and properly policed.

Third defendant in liquidation

[18]   Mr Ashley has properly disclosed that the third defendant has been put into liquidation. In order to proceed against the third defendant, the plaintiff accordingly requires either the consent of the liquidator or the leave of this Court, pursuant to     s 248(1)(c) Companies Act 1993. This requirement has been overlooked in the documentation filed for the plaintiff. That oversight should not stand in the way of what I am satisfied are otherwise appropriate orders. I will accordingly be granting leave to the plaintiff to commence the substantive proceeding to enable it to obtain the orders applied for, but with a requirement for either the liquidator’s consent or an application for leave to be filed.

Order

[19]   I grant leave to the plaintiff to commence this proceeding with a claim included against the third defendant.

[20]   I direct the plaintiff by 16 February 2024 (unless it discontinues the claim as against the third defendant) to file and serve either a consent of the liquidator of the

third defendant to the claim proceeding against the third defendant or an application for leave to bring the claim against the third defendant.

[21]   There is an order in terms of the draft freezing order filed on 13 December 2023 (Schedule “A” to this judgment).

[22]   The costs and disbursements of the interlocutory application dated 13 December 2023 are reserved.

Osborne J

Solicitors:
Pidgeon Judd, Auckland

Copy to: T J M Ashley, Auckland

SCHEDULE A

AND

AND

NICOLETTE LOUISE CONNORS and PRIMROSE HILL TRUSTEES LIMITED a duly

incorporated company having its registered office at BDO Auckland, Level 4, 4 Graham St, Auckland as Trustees of the Primrose Trust

Second Defendant / Second Respondent

METROPOLIS REAL ESTATE LIMITED (in liq) a

duly registered company having its registered office at Level 5, 79 Cashel St, Christchurch

Third Defendant

2

Freezing Order

To the first respondent NICOLETTE LOUISE CONNORS and

To the second respondents, NICOLETTE LOUISE CONNORS and PRIMROSE HILL TRUSTEES LIMITED AS TRUSTEES OF THE PRIMROSE TRUST (YRUSTEES)

The app4canthasagood arguab!ecaseon accruedcau5esofaston that are justiciable in this Court.

2.     The Court has considered the applicant’s application for a freezing order, and has heard counsel for Smart Living Ltd in support.

3.     The Court is satisfied, having regard to all the circumstances disclosed by affida¥it e¥idence filed in support of the application, that there is a danger that judgment in fa¥our of the applicant will be wholly or partly unsatisfied, because your assets might be—

a.   disposed of, dealt with, or diminished in ¥alue (whether the assets are in or outside New Zealand);

b.   removed from New Zealand or from a place inside or outside New Zealand.

4.     This freezing order is made in respect of all assets, real or personal, that you own or have a beneficial interest in, and all bank accounts controlled by you, and their balances.

5.     NICOLETTE CONNORS and THE TRUSTEES are ordered to file (separate or joint) affidavit evidence and serve the same on the plaintiff within 10 working days of service of this order, disclosing the existence, nature, ¥alue and whereabouts of your assets, including, but not limited to:

a.   particulars of all bank accounts and other accounts held in New Zealand and/or overseas;

b.   originals or copies of all bank statements in your names since 20 January 2023;

c.   particulars of all other assets either real or personal in which you ha¥e a beneficial or legal interest, and all assets o¥er which you have power of disposition or control.

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6.      Subject to paragraph 7, ANZ Bank New Zealand Limited, ASB Bank Limited, Bank of New Zealand Limited, Kiwibank Limited, the HongkDng and Shanghai Bank Corporation Limited, Westpac New Zealand Limited, and any other bank or financial institution are required to disclose within five working days of service of this order all bank account statements, files, and information held by them in any way relating to:

a.    NICOLETTE LOUISE CONNORS;

b.    PRIMROSE HILL TRUSTEES LIMITED.

7,The applicant must pay the reasonable costs and disbursements of the banks and financial institutions in providing the information set out at para 6 above.

8.Subject to paragraph 9, this order restrains NICOLETTE CONNORS and THE TRUSTEES from:

i.     disposing or causing to be disposed or otherwise charging or dealing in any manner whatsoever with, or diminishing the value of your assets, whether beneficially held or otherwise; or

ii, removing your assets from New Zealand.

9.    This freezing order does not prohibit NICOLETTE CONNORS and THE TRUSYEES from dealing with the assets covered by the order for the purpose of—

a.    paying ordinary living expenses; or

b.    paying legal expenses related to the freezing order; or

C. paying secured creditors whose security ranks above the applicant’s claim; or

d.    dealing with real or personal property for the purpose of realising creditors' registered mortgages and/or registered security interests, provided that, subject to subparagraphs (a)-(c) above, any net proceeds of sale of such real or personal property are subject to this order; or

e.   paying any costs reasonably incurred in relation to (d).;

4

or to the extent that the aggregate net unencumbered value of the assets exceeds $400,000.

10.As the freezing order has been made without notice to you, it will have no effect after 18 January 2024, unless on that date it is continued or renewed.

11.The matter is to be placed in the list for call on the next available date, to be advised by the Registrar, and the matter is to be timetabled for a hearing of the freezing order application. On that date you or your counsel are entitled to be heard by the court in opposition to the continuation or renewal of the order.

12.You may apply to the court by interlocutory application to discharge or vary the order. If you apply, you must give the applicant 2 working days' notice.

13.This order does not affect anyone outside New Zealand until it is declared enforceable by a court in the relevant country, (in which case it affects a person only to the extent that it has been declared enforceable) unless the person is—

a. a person to whom this order is addressed, or an officer of that person, or an agent appointed by power of attorney of that person; or

b, a person who—

i, has been given written notice of this order at that person’s residence or place of business within New Zealand; and

ii. is able to prevent acts or omissions outside the jurisdiction of this Court that constitute, or assist, a breach of this order.

14.This order does not prevent, in respect of assets located outside New Zealand, any third party from complying with—

a.     what it reasonably believes to be the fhird party’s obligations, contractual or otherwise, under the laws of the country in which those assets are situated or under the proper law of any contract between the third party and the respondent; and

b.     any orders of tha courts of that country, provided that reasonable notice of any aoplication for such an order ia given to the applicant’s solicitors.

15.     An undertaking as to damages given by the applicant is attached.

16.     Costs are reserved.

Date:December 2023

(Registrar / Judge of the High Court)