WH v YL
[2021] NZHC 2968
•3 November 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-000600
[2021] NZHC 2968
BETWEEN WH
First Applicant
APPLICANT COMPANY
Second ApplicantAND
YL
First Respondent
RESPONDENT COMPANY
Second Respondent
Counsel: N L Walker and C F Butters for Applicants Judgment:
3 November 2021
JUDGMENT OF EATON J
Dealt with on the papers
NOTE: This judgment has been anonymised for publication.
[1] The applicants have filed an interlocutory application without notice seeking freezing and ancillary orders against the first respondent YL and the second respondent, the respondent company.
[2] I have read the papers including the extensive memorandum filed in support of the application, the affidavit of the first applicant WH and the draft orders sought. I convened a brief telephone conference with Mr Walker for the applicants.
WH v YL [2021] NZHC 2968 [3 November 2021]
[3] The applicants have filed a substantive proceeding against YL and the respondent company seeking, inter alia, the return of the USD 151 million together with profits, interests and costs relying on the following causes of action:
(a)undue influence;
(b)breach of fiduciary duty;
(c)knowing receipt; and
(d)the tort of deceit.
[4] The application for freezing orders is made under pt 32 of the High Court Rules. The applicants must satisfy three essential requirements: Firstly, that the applicants have a good arguable case on their substantive claim. Secondly, that there are assets of the respondents outside of New Zealand to which the orders can apply. Thirdly, that there is a real risk that the respondents might remove, dispose of, deal with or diminish the value of their assets so as to render them judgment-proof.
Good arguable case
[5] The general background to this matter is that WH is married to, but separated from, YL. WH, through her company, the second applicant, invested USD 151 million in the respondent company, a company controlled by YL. YL is said to have significant experience in international finance.
[6] Essentially, WH and the applicant company claim that USD 151 million was paid on the advice and encouragement of YL for 20 per cent of the shares (non-voting) in the respondent company when the respondent company had no other known assets apart from the applicants’ investments.
[7] WH alleges that YL has acted improperly as an advisor to WH. He is said to have manipulated structures that have significantly diluted the applicant’s equity interest in the respondent company. It is alleged that YL has refused to provide even the most basic financial information about the respondent company and has asserted
that the proceeds were “in his company, that the proceeds were controlled by him and that return of the proceeds was a matter for his personal discretion”.
[8] I am satisfied that the evidence establishes a good arguable case against both respondents. The first requirement is established.
Assets outside of New Zealand to which the orders can apply
[9] A freezing order may cover assets outside the jurisdiction. Although presently the applicants are not able to identify with any particularity the assets to be frozen, the evidence permits the inference that the respondents do hold assets to which the order can apply.
[10] This Court has power to make a freezing order enforceable in New Zealand against the party resident in New Zealand in respect of overseas assets. There is, therefore, no issue in the granting of a freezing order against YL with respect to overseas-based assets.
[11]The Court of Appeal in Commerce Commission v Viagogo AG1 confirmed that:
[i]nterim relief may be granted against an overseas defendant before service of the proceedings, and before any protest has been determined, in order to improve the prospect of the Court being able to do justice between the parties after a determination of the merits at trial.
[12] I accept that this Court has jurisdiction on an interim basis to make a freezing order against the respondent company who is not within jurisdiction. I agree with counsel for the applicant that the efficacy of a freezing order would be significantly undermined if a jurisdictional challenge required determination prior to a determination of the freezing order. The second requirement is established.
Real risk of dissipation
[13] An applicant for a freezing order must point to circumstances from which a prudent, sensible commercial person could properly infer a danger of default.
1 Commerce Commission v Viagogo AG [2019] NZCA 472 at [7].
[14] The nature of the relationship between WH and YL and the evidence of his refusal to make appropriate disclosures of financial information in relation to the respondent company, coupled with the evidence of YL’s assertions of control over the disputed funds, does establish a risk of dissipation. The third requirement is established.
Ancillary orders
[15] The applicants seek ancillary disclosure orders under r 32.3 of the High Court Rules. In my view those orders are necessary to elicit information as to assets relevant to the freezing order. Presently, the applicants have little or no information about the assets held by the respondents or whether there may be third parties holding such assets.
Undertaking as to damages
[16] The applicants have signed an undertaking as to damages. I am satisfied the applicants have the assets to meet that undertaking.
Conclusion
[17] Ultimately, I am satisfied, having regard to all the circumstances, that there is a danger a prospective judgment will be wholly or partially unsatisfied because the assets of the prospective judgment debtor might be disposed or diminished in value.
[18] I grant the interlocutory application for ex parte freezing and ancillary orders in the terms set out in the draft orders filed by the applicant with one exception: proposed draft order 9 is amended to read “one working day”. Mr Walker indicated agreement to that amendment.
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Eaton J
Solicitors:
Russell McVeagh Wellington Copy to Respondents
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