Wellington Tenths Trust v Skiffington
[2017] NZHC 1646
•18 July 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2017-485-180 [2017] NZHC 1646
BETWEEN WELLINGTON TENTHS TRUST
Plaintiff
AND
LORRAINE JOYCE SKIFFINGTON First Defendant
AND
STRATEGIC DIRECTIONZ LIMITED Second Defendant
Hearing: 12 July 2017 Appearances:
C F J Reid for Plaintiff
J P Temm for DefendantsJudgment:
18 July 2017
JUDGMENT OF CLARK J
Pursuant to r 11.5 of the High Court Rules I direct that the delivery time of this judgment is 10:30 am on
18 July 2017
WELLINGTON TENTHS TRUST v SKIFFINGTON [2017] NZHC 1646 [18 July 2017]
Introduction
[1] This is an application by the Wellington Tenths Trust for an interim freezing order in respect of assets of the first and second defendants and Moanatahi Ltd, a limited liability company of which the first defendant is the sole director and shareholder. The freezing order is sought pending determination of the plaintiff’s application for summary judgment.
Background
[2] The Wellington Tenths Trust (which I refer to as Tenths or the Trust) is an ahu whenua trust incorporated pursuant to s 244 of the Te Ture Whenua Maori Act 1993.
[3] Ms Skiffington, the first defendant, is a former director of Pipitea Street
Developments Ltd (PSDL). Since its incorporation on 9 October 2006
Ms Skiffington has been the director and sole shareholder of the second defendant, Strategic Directionz Ltd (SDL).
[4] The plaintiff filed this proceeding on 23 March 2017. Two causes of action are pleaded, both in unjust enrichment.
(a) Under its first cause of action the plaintiff seeks judgment against the first defendant for unauthorised payments made to PSDL in the amount of $1,687,500.00, interest on the unauthorised payments and an account of profits made by the first defendant resulting from the unauthorised payments.
(b)Under its second cause of action the plaintiff seeks judgment against the first defendant for unauthorised payments made to her in the amount of $421,875.00 and to SDL in the amount of $1,380,937.50; and against the second defendant, SDL, for unauthorised payments made to SDL in the amount of $1,380,937.50. Interest on the unauthorised payments and an account of profits by both defendants are sought.
[5] The plaintiff’s claim arises out of the conviction of Sir Ngatata Love who, following a 16-day trial in August 2016, was found guilty of obtaining property by means of deception under s 240 of the Crimes Act 1961.1 On 7 October 2016
Dr Love was sentenced to two years, six months imprisonment.2 Dr Love’s appeals
against conviction and sentence were dismissed.3
Background to the criminal proceedings
[6] Dr Love was a trustee and the chair of Tenths which owns significant holdings of Maori freehold land in and about the Wellington region. The Trust administers the land for the benefit of its beneficiaries all of whom belong to Wellington and Taranaki-based iwi.
[7] The criminal proceeding related to a venture the Trust sought to undertake involving the development of land in Pipitea Street, Thorndon. In his capacities as chair and trustee Dr Love maintained a close interest in the Trust’s affairs and often dealt personally with third parties regarding property development projects. In respect of the Pipitea Street development, however, the developers had become disillusioned with the performance of Dr Love’s son, Matene,4 and Dr Love required the developers to deal with Ms Skiffington in relation to that project.
[8] Because the Pipitea Street land was a prime site for commercial development it was known by the parties from the early stages of their negotiations that a developer would pay a significant premium — between $1.5 and $3 million — to gain access to the land. As it happened, the developers offered to pay the Trust
$3 million (sometimes referred to as the ‘lease premium’) for the right to lease the
land on agreed terms. The proposed annual rental, but not the offer to pay
$3 million, was disclosed to the Trust in various written materials. In particular, at a meeting of trustees on 28 November 2006 the proposed $3 million payment was not mentioned by the chair nor was it disclosed in the Chairman’s Report which included
a summary of issues referring to the Pipitea Street development.
1 R v Love [2016] NZHC 2046.
2 R v Love [2016] NZHC 2394, (2016) 4 NZTR 26-020.
3 Love v R [2017] NZCA 265.
4 To whom the developers had paid, through his company, a fee of $150,000 for the role he played in introducing them to the Pipitea Street project.
[9] At around this time Dr Love and Ms Skiffington had become interested in purchasing what Lang J described as a “substantial residence” on the Plimmerton foreshore. In early November 2006 Ms Skiffington organised with the bank financing arrangements under which the whole of the purchase price would be funded by means of a loan. Around 23 November 2006 PSDL was formed. PSDL was incorporated and controlled by the first defendant and her business associate
Shaan Stevens, a Wellington accountant.5
[10] Then on 22 December 2006 entities associated with the developers entered into a Services Agreement with PSDL under which the $3 million was to be paid in three instalments. In the event by 15 January 2007 the developers had paid
$1.5 million (plus GST) to PSDL pursuant to the Services Agreement.
[11] As soon as it was received PSDL transferred the sum of $1.4 million into a bank account opened in the joint names of two family trusts which Dr Love and Ms Skiffington had settled a few weeks earlier. Once received into the joint account a total sum of $1.385 million was transferred to the loan account used to purchase the Plimmerton property, in reduction of the mortgage of $1.8 million. One of Lang J’s factual findings was that Dr Love and the first defendant always intended that the lease premium the Trust was to receive would instead be diverted to PSDL.
Freezing orders: applicable principles
[12] The freezing order was formally known as a Mareva injunction. In Mareva
Compania Naviera SA v International Bulkcarriers SA Lord Denning said:6
If it appears that the debt is due and owing, and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets.
[13] The purpose of a freezing order is to prevent an actual or prospective judgment debtor dealing with its assets in such a way as to stultify a judgment. The
5 In a related case Mr Stevens pleaded guilty to charges of using a document dishonestly to obtain a pecuniary advantage by claiming tax deductions through fictitious invoices, which included counts concerning Ms Skiffington’s personal tax returns and those of Pipitea Street Developments Ltd: R v Rowley [2012] NZHC 1778 at [15]–[17] and [180]–[210]. This event was noted in the Court of Appeal judgment: Love v R, above n 3, at n 7.
6 Mareva Compania Naviera SA v International Bulkcarriers SA [1980]1 All ER 213 at 215.
freezing order aims to ensure a party who obtains judgment will not be denied recovery. It has been said that the heart of the jurisdiction is a real risk that a judgment or award may go unsatisfied.7
[14] Since repeal of the Judicature Act 1908 the “keystone”8 for the grant of freezing orders by the High Court is now located in s 12 of the Senior Courts Act
2016:9
12 Jurisdiction of High Court
The High Court has—
…
(b) the judicial jurisdiction that may be necessary to administer the laws of New Zealand; and
…
[15] The judgment of Gault J in Bank of New Zealand v Hawkins is commonly cited for its convenient summation of the legal requirements for the grant of a freezing order in New Zealand.10 An applicant for a freezing order must show:11
(a) it has a good arguable case on the substantive claim;
(b)there are assets of the defendant within the jurisdiction to which the orders can apply;
(c) there is a real risk that the defendant will dissipate or dispose of assets
so as to render itself “judgment proof”.
[16] In addition to these preconditions for the grant of a freezing order the need of a plaintiff for protection must be balanced against prejudice or hardship to the
7 Oaks Hotels & Resorts NZ Ltd v Body Corporate 358851 [2013] NZHC 2695 at [18].
8 Stephen Kós “Freezing and Seizing Orders” in Peter Blanchard (ed) Civil Remedies in
New Zealand (2nd ed, Brokers, Wellington, 2011) at 304.
9 The predecessor to s 12 was s 16 of the Judicature Act 1908.
10 Bank of New Zealand v Hawkins (1989) 1 PRNZ 454 (HC).
11 At 452.
defendant and third parties. This is most frequently articulated as a requirement to consider the overall justice of the case.12
[17] Since amendment of the High Court Rules effective from 1 February 200913 a new part 32 augments the legal preconditions for freezing orders. Of relevance to the application before me is the requirement that the applicant for a freezing order must file a signed undertaking as to damages.14
Applying the principles
A good arguable case?
[18] Ms Skiffington’s position is that the substantive summary judgment proceeding involves a significant factual dispute and the summary judgment application against her in her personal capacity is unlikely to be successful because the plaintiff does not present a strong case for liability.
[19] On behalf of Ms Skiffington Mr Temm submitted that Dr Love’s convictions do not provide an evidential basis on which liability for fraud can be established against Ms Skiffington for the purposes of a summary judgment claim. Dr Love’s obligations as chair of a board of trustees included fiduciary duties to those trustees whereas Ms Skiffington owed no such duty to the Trust. To argue that Dr Love’s convictions provide an evidential basis for liability of Ms Skiffington is wrong in principle and in law, Mr Temm submitted.
[20] I have considered Ms Skiffington’s evidence provided in an affidavit in opposition to the summary judgment and interim freezing order applications. The affidavit was sworn on 5 July 2017. Ms Skiffington highlighted in her evidence that all the work undertaken for Tenths between 2006 and 2010 was never undertaken by her personally but at all times through companies which she incorporated. She was not paid consultancy fees in her personal capacity. As well, Tenths received extensive benefit from the work which Ms Skiffington says she undertook on its
behalf. She was never paid directly from Tenths and the money she was paid was
12 See for example Bank of New Zealand v Hawkins, above n 10, at 452.
13 Judicature (High Court Rules) Amendment Act 2008, s 2.
14 High Court Rules 2016, 32.2(5).
from the developers as, Ms Skiffington deposed, this reflected the policy of Tenths that it would not pay consultancy fees.
[21] It is apparent from the affidavit sworn on 5 July 2017 and also from an earlier affidavit15 that Ms Skiffington intends to vigorously resist summary judgment. In considering the application for a freezing order I am not required to express a firm view on the summary judgment application. Indeed, it would be inappropriate for me to do so. The applicant for a freezing order does not have to demonstrate that its case is strong enough to entitle it to summary judgment.16 A good arguable case is established if the allegations in the statement of claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the application for a freezing order is brought.17
[22] For the following reasons I am satisfied that the plaintiff has met this first threshold in respect of its first cause of action.
[23] First, following a “detailed analysis of all the material evidence”18 Lang J determined that Dr Love and Ms Skiffington always intended the $3 million payment would be used to reduce the mortgage on the Plimmerton property and would be diverted to PSDL for that purpose.19 Lang J found that:20
[t]he manner in which events occurred between November 2006 and January 2007 suggested strongly that Dr Love and Ms Skiffington devised a plan or strategy designed to divert for their own benefit funds that would otherwise be payable to the Tenths.
[24] Secondly, in its judgment dismissing Dr Love’s appeal against conviction the
Court of Appeal described Lang J’s narrative of the relevant events and the
documents upon which the charge was based as:21
15 Affidavit of Lorraine Skiffington in opposition to an application for sale orders for 12 Moana Road, Plimmerton (CIV-2014-485-282) sworn 28 June 2017, relied upon by Ms Skiffington in this proceeding also.
16 Wilsons (NZ) Portland Cement Ltd v Gatx-Fuller Australasia Pty Ltd [1985] 2 NZLR 11 (HC)
at 22.
17 Dotcom v Twentieth Century Fox Film Corp [2014] NZCA 509, (2014) 22 PRNZ 479 at [18] and
[31]; Hannay v Mount [2011] NZCA 530 at [20]–[22].
18 Love v R, above n 3, at [25].
19 R v Love, above n 1, at [99] and [107].
20 At [129].
21 Love v R, above n 3, at [25].
reflect[ing] the strength of the Crown’s case. … The circumstances gave rise to a clear inference that Dr Love and Ms Skiffington were guilty of an elaborate deception, primarily of the Trust but also the developers.
[25] I note also that, in his appeal, Dr Love did not challenge Lang J’s factual
findings.22
[26] Mr Temm highlighted paragraphs [40]–[41] of the sentencing remarks of Lang J to the effect that Ms Skiffington was not a trustee, did not deal with Dr Love’s fellow trustees and did not tell them of the developer’s proposal. I take Mr Temm’s point but it does not overcome the fact that the matters upon which the plaintiff relies amount to a good arguable case. The good arguable case is grounded in the High Court’s verdict which was not, in any respect, impeached on appeal. Of relevance to this proceeding are the Court of Appeal’s criticisms of Ms Skiffington’s involvement in the elaborate deception of the Trust and her “apparently fraudulent
influence” on Dr Love.23
[27] The position with regard to the second cause of action is not as immediately obvious. Nothing arises on the face of either Lang J’s Reasons for Verdict or the Court of Appeal’s judgment to support the claim that, along with PSDL, SDL was a front used by the first defendant to receive the lease premium unlawfully diverted from the plaintiff.
[28] Mr Temm’s argument was that all payments had their genesis in a Consultancy Agreement with Strategic Directionz. Ms Skiffington was not a party to that agreement. Nor is Tenths a party to that agreement.
[29] As to the unjust enrichment claim Ms Skiffington will say she gave value. I
was invited to have regard to a letter to the then Acting Chair of Tenths dated
15 August 2012 which sets out the work Ms Skiffington undertook. In short
Mr Temm submitted there is no evidential basis that SDL is a front and the point will be contested in the summary judgment hearing.
22 At [25].
23 At [81].
[30] I have decided, notwithstanding Mr Temm’s detailed submissions on Ms Skiffington’s behalf, that the plaintiff has met the threshold requirement of a tenable argument. An applicant for a freezing order must be able to demonstrate that its substantive case is capable of serious argument but it does not need to demonstrate a greater than 50 per cent prospect of success.24 As well, of course, there should be sufficient evidence to demonstrate that the proposed claim is capable of tenable argument.
[31] Mr Morris Te Whiti Love, the current chair and a trustee of Tenths, provided an affidavit in support of the application for summary judgment. He deposes to a request for reparation made on behalf of Tenths. On 29 November 2016 Mr Love wrote to Ms Skiffington referring to Lang J’s Reasons for Verdict and Sentencing Remarks and requesting reparation for the unauthorised payments she had received. The letter states:
As well as benefiting from payments totalling $1,500,000.00 (plus GST of
$187,500.00) made by entities associated with Pipitea Street Limited, as Trustee for Pipitea Street Trust (Developer) to Pipitea Street Developments Limited, we are aware that you received further payments totalling
$1,540,000.00 (plus GST of $192,500.00) from the Developer and Pipitea
JV through your company Strategic Directionz Limited.
[32] A schedule detailing the payments was enclosed with the letter. Mr Love’s evidence is that the amounts referred to in that schedule had been updated as a consequence of affidavit evidence filed by the Commissioner of Police in separate proceedings against Dr Love and Ms Skiffington relating to restraining orders obtained against the Plimmerton property. As a result of that evidence the payment amounts referred to in the schedule to the letter have been updated and are attached to the statement of claim.
[33] As at the date of this hearing Ms Skiffington had provided no substantive
response to the plaintiff’s request for reparation notwithstanding that receipt of the
request has been acknowledged by her counsel, Mr Temm.
24 See McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [32.2.03(1)(b)] and the cases cited therein.
[34] Mr Temm, over Mr Reid’s strong objection, took me to documents which he said supported Ms Skiffington’s claims that no money was paid to her directly. Mr Reid objected to the admissibility of such evidence. Relying on s 47 of the Evidence Act 2006 Mr Reid submitted that, unless Ms Skiffington could demonstrate that there were exceptional circumstances, the evidence she proposed to offer was inadmissible; and even if the Court were satisfied that exceptional circumstances existed the evidence was inherently unreliable.
[35] I have not found it necessary to resolve the admissibility point. Ms Skiffington has not had the opportunity to produce evidence because she was declared medically unfit to stand trial and the charges have been permanently stayed against her. Ms Skiffington now attempts to rely on evidence tending, as I understand it, to discredit the High Court’s findings in relation to her involvement in the deception of Tenths. It will be for the Judge hearing the summary judgment application to decide whether she is able to do so.
[36] For the purpose of this application I have had regard to the evidence that is properly before me. The evidence includes the High Court’s verdict, the Sentencing Remarks and the Court of Appeal’s judgment as well as Mr Te Whiti Love’s affidavit evidence and the exhibited letter seeking reparation.
[37] Lang J took the view that Dr Love and Ms Skiffington devised a strategy to divert to their own benefit, funds payable to Tenths. This amounted to an intention to deceive and was dishonest.25
[38] Lang J said a further hallmark of dishonesty was concealment and he found that both Dr Love and Ms Skiffington appeared “to have been at pains to ensure the proposal that the funds [to] be paid to PSDL was kept secret”.26
[39] The Court of Appeal accepted the evidence gave rise to a clear inference that
Dr Love and Ms Skiffington were guilty of an elaborate deception of the Trust.27
25 R v Love, above n 1, at [129] and [143].
26 At [131].
27 Love v R, above n 3, at [25].
[40] It is contended that the payments to SDL were bona fide and that Ms Skiffington did nothing in her personal capacity pursuant to the Consultancy Agreement with SDL. It is neither possible nor necessary for these contentions to be proved in the context of this application for a freezing order.
[41] I have before me the decisions of the High Court and the judgment of the Court of Appeal tending to confirm Ms Skiffington’s role in the deception of the Trust. Against the backdrop of those findings I then consider the request for reparation of payments paid to SDL from which Ms Skiffington is said to have benefitted and the fact that to this day Ms Skiffington has not replied. It is open to me to infer from this material that the plaintiff’s second cause of action raises a tenable argument. I accept that the evidence is not as compelling as the evidential support for the first cause of action but I am also conscious of the fact that the
sufficiency of the evidence frequently reflects the early stage of the proceedings.28
Assets within jurisdiction?
[42] The assets have been described in the application with sufficient particularity to enable the defendants to comply with any order made. There was no contest between the parties about this point.
Real risk of dissipation?
[43] This, as Mr Temm put it, is the real battleground. There is no basis for suggesting that the assets are being dissipated or disposed of in any way and the overall interests of justice do not warrant the grant of an interim freezing order. That is particularly the case when the summary judgment application is set down to be heard on 19 July 2017, a week after this hearing.
[44] As to the suggestion that Ms Skiffington is motivated by her medical condition to dissipate her assets Mr Temm pointed out that Ms Skiffington has had her condition for several years yet there has been no change in her financial arrangements. Ms Skiffington has offered to make up the interest payments owing to
Westpac at any time providing there can be some dispute resolution enabling her to
28 Dotcom v Twentieth Century Fox Film, above n 17, at [31].
understand how the arrears have grown. In any event the arrears relate to the Plimmerton property and there is no suggestion that that asset is dissipating. Mr Temm’s point was that as the property is secured by a restraining order the plaintiff has the security of the net equity in the property.
[45] Mr Reid’s response was that the explanation for there being no change in Ms Skiffington’s financial arrangements is contained in her affidavit evidence regarding the relationship property interest with her former partner, Mr Jones. Together they purchased residential properties over a lengthy period, acquiring some thirty to forty properties in all. Ms Skiffington deposed that the reason property titles had not changed despite the relationship ending in 2007 was due to the relationship property agreement entered into at that time. Mr Reid emphasised that the effect of the agreement and the various financial arrangements entered into was the explanation for there being stability with regard to Ms Skiffington’s property interests.
[46] Mr Reid submitted that for all Ms Skiffington’s arguments the fact is that no payments have been made to the Westpac Bank even in respect of the interest that Ms Skiffington accepts she is liable to pay. The Plimmerton property is tenanted. Ms Skiffington is collecting rent yet not only has there been no payment to Westpac since March 201729 there has been no response to the request which the plaintiff made on 29 November 2016 for reparation.
[47] The requirement to establish a real risk of dissipation is central to the freezing order jurisdiction. It may be an abuse of the Court’s processes to seek a freezing order where there is no such real risk.30
[48] It is not necessary that the plaintiff provides proof of the likelihood of dissipation or of any such intent. But I accept the applicable test in the context of
this application is that there should be circumstances from which “a prudent, sensible
29 Angelene Smylie, of Westpac New Zealand Ltd swore an affidavit in an earlier proceeding
seeking an order for the sale of the Plimmerton property. Ms Smylie’s evidence was that, as at
19 June 2017, the amounts Ms Skiffington owed to Westpac were in arrears by $92,685.80 in addition to accrued interest and legal costs. The last amounts paid were on 3 March 2017.
30 Tranquil Holdings Ltd v Hudson (1987) 2 PRNZ 551 (HC) at 552.
commercial [person] can properly infer a danger of default”.31 In Raukura Moana Fisheries the Court said the test is “not unduly exacting”. While the plaintiff has not, and is not required to, produce proof of the likelihood that a successful judgment will prove barren because of dissipation of assets I am satisfied that the plaintiff has demonstrated that a danger exists. This is all that is required.
Where does the overall justice lie?
[49] In looking at the overall justice of the case I have paid particular attention to Ms Skiffington’s affidavit evidence. Ms Skiffington does not assert hardship as a result of freezing orders being made. Rather, Ms Skiffington’s strong objection is grounded in her belief in the strength of her opposition to the summary judgment application.
[50] In terms of the properties sought to be restrained Ms Skiffington points to her former partner’s interest in them as owner of a half share in each. Further, the Martinborough property owned by Moanatahi Ltd, she says, is completely unconnected in any way to the proceedings.
[51] The plaintiff has met the threshold for the grant of a freezing order and Ms Skiffington’s affidavit evidence presents no compelling basis for refusing the application. Looking at the matter overall:
(a) The summary judgment hearing is imminent.
(b)Tenths has filed an undertaking that it will comply with any order for the payment of damages to compensate the defendants and the third party, Moanatahi Ltd, for any damage sustained in consequence of the interim freezing order.
(c) As to Mr Jones’ interest in the properties which are owned jointly
with Ms Skiffington the authorities establish that an interest in relationship property may be the subject of freezing orders.32 Further
31 Raukura Moana Fisheries Ltd v The Ship “Irina Zharkikh” [2001] 2 NZLR 801 (HC) at [122].
32 Anderson Ltd v Glen (1989) 5 FRNZ 229.
Tenths has no interest in interfering with the property rights of Mr Jones. The order is directed to the interests of the first defendant only.
(d)The application for the freezing order specifically recognises that the first and second defendants, as well as Moanatahi Ltd and Mr Jones may continue to deal with the assets covered by the order for the purpose of paying ordinary living expenses and legal expenses relating to the freezing order and may dispose of assets or make payments in the ordinary course of business including business expenses incurred in good faith.
(e) The terms of the freezing order will reserve to the first and second defendants, Moanatahi Ltd and Mr Jones leave to apply to the Court to discharge or vary the freezing order on 48 hours notice to Tenths.
[52] Balancing all that has been said on behalf of the defendants against the first defendant’s failure to arrange payment of even part of the mortgage arrears due to Westpac, the defendant’s failure to respond to Tenths’ request for a written undertaking, and the apparent strength of the plaintiff’s claim, Tenths has demonstrated that the overall interests of justice favour the grant of an interim freezing order. As Mr Reid submitted the overall interests of justice do not favour the defendants in circumstances where there is a tenable argument they have engaged in fraudulent activities that have caused serious loss to the plaintiff, its beneficiaries, and the wider Maori community in Wellington and Taranaki.
Final matters
[53] It emerged at the hearing that two further applications were before the Court:
(a) an application for judgment by default against the first and second defendants in relation to the second cause of action; and
(b)an application by the second defendant to file a statement of defence out of time.
[54] Those applications were not heard. Counsel agreed it was more appropriate that they be heard at the same time as the summary judgment application.
[55] For completeness I record that at the hearing, by consent, the following oral amendments were made to the application for an interim freezing order dated
16 June 2017:
(a) Paragraph 1(a) of the application is amended by adding the word
“final” before “determination”.
(b)“Mr Jones” is added to the list of parties in paragraphs 1(c) and 1(d) so that he is not prevented from dealing with assets covered by the order for the purposes set out in paragraph 1(c)(i)–(iii) and he may apply to discharge or vary the freezing order on 48 hours notice.
Result
[56] The plaintiff’s application for an interim freezing order pending the final
determination of the plaintiff’s summary judgment application is granted.
[57] The plaintiff has succeeded in its application and is entitled to costs which I
award on a 2B basis.
Karen Clark J
Solicitors:
Gibson Sheat, Wellington for Plaintiff
Jonathan Temm, Rotorua for Defendants
3