Street and Cook Construction Company Ltd v Cambridge Terraces Ltd

[2022] NZHC 1932

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-000313

[2022] NZHC 1932

UNDER

Part 32 of the High Court Rules 2016

IN THE MATTER

of an application for a freezing order

BETWEEN

STREET AND COOK CONSTRUCTION COMPANY LTD

Applicant

AND

CAMBRIDGE TERRACES LTD

First Respondent

AND

BBH HOLDINGS LTD

Second Respondent

AND

DONALD GRANT MCKINNON

Third Respondent

Hearing:	On the papers
Counsel:	G M Brodie for the applicant
Judgment:	5 August 2022

JUDGMENT OF DOOGUE J

This judgment was delivered by me on 5 August 2022 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

STREET AND COOK CONSTRUCTION COMPANY LTD v CAMBRIDGE TERRACES LTD [2022] NZHC 1932 [5 August 2022]

[1]                 I have had referred to me as Duty Judge this morning an originating application for freezing orders.

[2]                 The applicant company seeks a freezing order against the assets of the first and second respondents, specifically two properties at Cambridge Terrace, Christchurch described in the certificates of title annexed to the affidavit of John Street sworn in support of the application.

[3]                 The applicant also seeks a freezing order against the third respondent, who is the sole director of the first and second respondents and the sole shareholder in the second respondent.

[4]                 The applicant company has obtained a determination in its favour from the Building Disputes Tribunal for an amount of $565,571.87. It has received a payment of $80,029.37, leaving a balance due in the sum of $485,542.50 including costs and interest.

[5]                 The determination is registerable in the District Court as a judgment pursuant to ss 58 and 59 of the Construction Contracts Act 2007. The determination may be enforced by the issue of a statutory demand under s 289 of the Companies Act 1993.

[6]The first respondent does not have a counterclaim judgment.

[7]                 The applicant company is very concerned that the first respondent is, or may be, divesting itself of assets which would otherwise be available to satisfy the judgment.

[8]                 The first respondent is a limited liability company. The third respondent is the sole director of that company. The second respondent is a limited liability company in which the third respondent is the sole shareholder and director.

[9]                 The notice of adjudication was served on 31 May 2022. It included a claim for a charging order over two of the apartments in the complex which the applicant had constructed. Those titles were registered in the name of the first respondent. On the

day after the notice of adjudication was served, the first respondent transferred title to the second respondent and that transfer was registered that day.

[10]             The applicant company has since learnt that these two apartments are to be sold to a third party. The applicant company is very concerned that through this process the first respondent will divest itself of assets which might otherwise have been available to satisfy the determination which the applicant company has obtained.

[11]             Under r 19.2(y) of the High Court Rules 2016, an application for a freezing order may be made without notice. Where no proceeding has been commenced an application for a freezing order is properly made by originating application (see        r 32.2(4)).

[12]             In this case, the applicant seeks  an order to  remain in force until at  least    30 September 2022 to provide the applicant a proper opportunity to obtain an order for the liquidation of the first respondent and the appointment of a liquidator.

[13]             I am satisfied that the requirements for making a freezing order are met by the applicant in this case, as:

(a)the applicant has a good arguable case against the respondents;

(b)there are assets of the respondents to which the order can apply; and

(c)there is evidence of a real risk of dissipation.

Orders and directions

[14]A freezing order shall issue in the terms set out at [17].

[15]             Under r 32.3(2), the Court may order a party to provide information relating to assets relevant to the freezing order. I direct the respondents to provide an affidavit of their assets and liabilities and to account for the transfer of the apartments at Cambridge Terrace, Christchurch to the second respondent. The affidavit shall be filed

and served within seven days of service of the originating application on the respondents.

[16]             Under r 32.8, any freezing order should provide on what terms the respondent may apply to set aside or vary the order. In this case, I direct that the respondents may apply on seven working days’ notice for any such application.

Result

[17]An order shall issue in the following terms:

FREEZING ORDER

To the first respondent CAMBRIDGE TERRACES LIMITED, a duly incorporated company having its registered office at 5 Rifleman Lane, Redcliffs, Christchurch

And

To the second respondent BBH HOLDINGS LIMITED, a duly incorporated company having its registered office at 5 Rifleman Lane, Redcliffs, Christchurch

And

To the third respondent DONALD GRANT MCKINNON, 5 Rifleman Lane, Redcliffs, Christchurch, company director

1.The applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in the District Court.

2.The Court has considered the applicant’s application for a freezing order, and has heard Mr G M Brodie, counsel, in support.

3.The Court is satisfied, having regard to all the circumstances disclosed by affidavit evidence filed in support of the application, that there is a danger that

judgment in favour of the applicant will be wholly or partly unsatisfied, because:

In the case of the first respondent,

1.The first respondent is indebted to the applicant in the sum of $485,542.50. The applicant company has obtained a determination in its favour from the Building Disputes Tribunal, for an amount of $465,571.87. It has received a payment of $80,029.37 leaving a balance due in the sum of $485,542.50 including costs and interest.

2.The applicant has a good arguable case on an accrued cause of action that is justiciable in the District Court.

3.There is sufficient prospect that the District Court will give judgment in favour of the applicant.

4.There is a sufficient prospect that the judgment will be registered in or enforced by the District Court.

5.The Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or a prospective judgment will be wholly or partly unsatisfied because the assets of the judgment debtor, prospective judgment debtor, or another person might be:

(a)removed from New Zealand or from a place inside or outside New Zealand; or

(b)disposed of, dealt with, or diminished in value (whether the assets are in or outside New Zealand).

In the case of the second and third respondents,

6.The Court is satisfied, having regard to all the circumstances that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:

(a)the second respondent and the third respondent hold or are using, or have exercised or are exercising, a power of disposition over assets (including claims and expectancies) of the first respondent prospective judgment debtor; or

(b)the second respondent and the third respondent are in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the first respondent; or

(c)a process in the court is or may ultimately be available to the applicant, as a result of a judgment or prospective judgment, under which the second respondent may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.

7.This freezing order is made in respect of the following assets:

(a)Units 1 and 4, 243 Cambridge Terrace, Christchurch the legal descriptions thereof being:

(i)Principal Unit 1 Deposited Plan 561296 and half share of Accessory Unit 19-20 Deposited Plan 561296, identifier 1030395, Canterbury Registry; and

(ii)Principal Unit 4 Deposited Plan 561296 and half share of Accessory Unit 19-20 Deposited Plan 561296, identifier 1030398, Canterbury Registry (the apartments).

(b)Any money or other securities or assets held by the first respondent which represent wholly or in part the proceeds of the sale, disposition or transfer of the apartments whether to the second respondent or to any other person.

(c)Any money due and owing to the first respondent by the second respondent relating to the transfer of the apartments to the second respondent.

(d)Any money or other securities due and owing to the second respondent by any third party purchaser of either of the apartments.

(e)Any cash or other securities held beneficially by the first respondent.

8.Subject to paragraph 9, this order restrains you from removing any of the assets listed in paragraph 7 from New Zealand, or from disposing of, or dealing with, or diminishing the value of, those assets, whether they are in or outside New Zealand.

10.This freezing order does not prohibit you 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)disposing of assets, or making payments, in the ordinary course of your business, including business expenses incurred in good faith.

11.As the freezing order has been made without notice to you, it will have no effect after 30 September 2022 unless on that date it is continued or renewed. 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 notice of not less than seven days’ notice under r 32.8.

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

14.The first respondent and the second respondent shall each file in this court within three days of being served with the orders herein an affidavit which fully accounts for the proceeds of the sale, transfer or other disposition of the apartments numbered 1 and 4, 243 Cambridge Terrace, Christchurch.

14.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.

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

(c)what it reasonably believes to be the third 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

(d)any orders of the courts of that country, provided that reasonable notice of any application for such an order is given to the applicant’s solicitors.

Doogue J

Solicitors:

B M Saegers, Christchurch CC:

G M Brodie, Christchurch

The respondents