Wheelans v Du Plessis as Trustee of the Hippo Investment Trust HC Wellington CIV-2011-485-001621
[2011] NZHC 1854
•24 August 2011
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-001621
IN THE MATTER OF an interlocutory application for Interim
Injunction
BETWEEN PHILIP LAWRENCE WHEELANS First Plaintiff
ANDJOHN WILLIAM KNOX Second Plaintiff
ANDPHIL WHEELANS INVESTMENTS LIMITED
Third Plaintiff
ANDTRUCK AND TRAILER HIRE LIMITED Fourth Plaintiff
ANDANDREW DU PLESSIS AS TRUSTEE OF THE HIPPO INVESTMENT TRUST First Defendant
ANDTHE HIPPO INVESTMENT TRUST LIMITED AS TRUSTEE OF THE HIPPO Second Defendant
ANDANDREW DU PLESSIS Third Defendant
ANDNEW ZEALAND ROADING SOLUTIONS LIMITED Fourth Defendant
ANDROADING SOLUTIONS DISTRIBUTORS LIMITED Fifth Defendant
Hearing: 22 August 2011
Counsel: J Sumner and J Parry for Plaintiffs
S P Burnett and K Jamieson for Defendants
Judgment: 24 August 2011
PHILIP LAWRENCE WHEELANS V ANDREW DU PLESSIS AS TRUSTEE OF THE HIPPO INVESTMENT TRUST HC WN CIV-2011-485-001621 24 August 2011
JUDGMENT OF JOSEPH WILLIAMS J
In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 2:00pm on the 24th August 2011.
The facts so far as are known
[1] The primary defendant is Andrew Du Plessis (the defendant). Other defendants are various company or trust emanations of him. The second defendant is a trustee company whose sole director is one Carl Rohloff, an associate of the defendant. Mr Du Plessis and Mr Rohloff import a product called Soil Tac – a roading underlay. He approached the plaintiffs to join with him in establishing a venture to supply this material to road builders in New Zealand. They were approached because they have excellent contacts among road builders. On 4 March
2011 the parties executed a share purchase agreement in respect of a company called Roading Solution Distributors Ltd (RSDL). The plaintiffs agreed to pay $2 million in return for 20 per cent of the shares in RSDL. They would be purchased from various permentations of the defendant – either Trust, company or himself personally. A first tranche of $500,000 was paid on 7 March 2011. The remaining
$1.5 million was to be paid on 31 March 2011. There was no due diligence process.
[2] On 25 March 2011 the plaintiffs began to ask questions. Among other things they asked for the distribution agreement between the American suppliers (Soil Works – based in Arizona) and the local Du Plessis controlled company New Zealand Roading Solutions Ltd (NZRSL) as well as the local distribution agreement between NZRSL and the company into which the plaintiffs were investing, RSDL.
[3] The final tranche of $1.5 million was not paid on 31 March 2011 as agreed. On 19 April 2011 the defendant forwarded copies of two agreements styled a
“supply agreement” and a “supplementary agreement”. The intent was to transform the share agreement (including the $500,000 initial tranche) into a supply agreement whereby RSDL would supply the plaintiffs with the product for on-sale to customers. The overall price for the agreement would be $2 million with the first
$500,000 from the old agreement being credited, a further $1 million payable on
31 May 2011 and the final tranche of $500,000 payable on 1 June 2011. The agreement was not executed.
[4] Up to 28 April 2011 there were, it appears, further revelations and re- negotiations. This led to the plaintiffs paying another $200,000 to NZRSL. On
27 May 2011 a further $100,000 was paid to that company. According to
Mr Wheelans:
… it was agreed between the parties that we needed to re-negotiate our agreement as a result of the various non-disclosures made by the defendants and further due diligence which we had undertaken.
[5] Mr Knox said:
As a result of the material misrepresentations and the significant non- disclosure, we sought to resolve matters by re-negotiating the agreement. A second undated agreement was negotiated and prepared on or about 28 April
2011.
[6] This meant that by 27 May 2011 the plaintiffs had paid $800,000 to the defendant or his interests. They allege that the agreement on 28 April 2011 (there is no written document bearing that date) the parties had returned to the structure of the original agreement but re-negotiated price.
[7] On around 9 June 2011 the plaintiffs say they finally obtained a copy of the supply agreement between Soil Works and NZRSL. It was for a much shorter period than they had expected – 15 months plus an option of 15 more months. So the position of NZRSL and RSDL (the New Zealand chain of supply) was a good deal less secure than the plaintiffs had thought. Notwithstanding this and other concerns expressed by the plaintiffs they paid a further $200,000 to NZRSL. This, it is said, was on the basis that in return for the overall sum of $1 million, they would take
50 per cent of RSDL. Mr Wheelans said as follows:
While my concerns remained and I was uncomfortable with our exposure, I agreed to the amended terms and arranged payment in the form of a cheque numbered 27984 made out to NZRSL for the additional $200,000. I made this payment because I felt that the product was a good product and our position would be protected, or better protected, with an equal shareholding and thereafter an equal say in RSDL. While I felt this was the best business decision available at the time, I did not release Mr Du Plessis or Mr Rohloff from their conduct or representations which placed Mr Knox and myself in this difficult and unwanted position. However, I now realise that I was wrong.
[8] After this payment was made, the parties fell into conflict. The plaintiffs say that Mr Du Plessis indicated he wished to terminate the contract and return the
$1 million. It has not been returned. The current position, according to the plaintiffs, is that Mr Du Plessis will not take their calls but he still has their money.
[9] The plaintiffs argue that they were induced to enter into this contract by misrepresentations from the defendant and his partner/employee Mr Rohloff, as to a number of high profile investors seeking to invest in this business and as to a number of customers already locked into agreements with RSDL.
[10] The plaintiffs say that the following representations were made by
Mr Du Plessis:
(a) that a company called Hiway Stabilisers had indicated a demand for
52 containers a year of the product (approximately $14.3 million gross profit per annum);
(b) Fulton Hogan had indicated a demand for six containers;
(c) mining and quarry interests had indicated a demand of 12 containers per annum;
(d)the following clients had been approached and were interested in negotiating agreements:
(i) South Wairarapa District Council; (ii) New Zealand Army;
(iii) Kaitaia Council – by this I assume is meant the Far North
District Council;
(iv) Wellington Regional Council; and
(e) Roading New Zealand representing the bulk of civil contracting companies in New Zealand had advised that it would recommend soil tac as a best practice product.
[11] As to investors, it was alleged that the following representations were made:
(a) that a Hawke’s Bay consortium headed by Infracom NZ Ltd were considering paying $6 million for a 20 per cent shareholding in NZRSL and RSDL;
(b) a Waikato Forestry Group involving Mark McCarthy of McCarthy
Transport Ltd was intending to invest;
(c) Sir Robert Jones had offered to invest $60 million in the venture.
[12] The plaintiffs said that Mr Du Plessis and Mr Rohloff indicated the plaintiffs were preferred investors because of their connections in the industry.
[13] They also say, had they known about the limited tenure of the NZRSL supply agreement, they would never have committed.
[14] The plaintiffs now seek interim freezing and preservation of property orders. The freezing orders relate to bank accounts in the name of each of the defendants. The property preservation orders relate to a cache of Soil Tac product currently, the plaintiffs say, located in New Zealand and purchased with their funds.
[15] There was no real opportunity for the defendants to put in evidence. At this stage all I have is blanket denials in respect of the misrepresentation allegation. The defendants say the first agreement is the only agreement that is operative and the plaintiffs have breached it.
[16] Rule 32.5 requires that the applicant prove:
(1) there is a good arguable case against the defendants; and
(2)there is a danger that a future judgment may be wholly or partly unsatisfied because the defendant may abscond or the defendant’s assets may be disposed of, dealt with or diminished in value.
[17] Bank of New Zealand v Hawkins contains a useful statement of the principles relating to Mareva orders (as they then were).[1] In relation to the requirement that there be a risk of dissipation of assets, Gault J said:[2]
Mr Craddock relied upon the judgment of Barker J in the Property Marine Australia Pty case, already cited, to support his submission that a mere assertion of belief that the defendant will dissipate the assets is insufficient and that there must be solid grounds given justifying that belief. That clearly is correct. If a plaintiff were able to restrain a defendant from dealing with his assets prior to judgment, merely on a statement of belief that those assets might be dissipated, injunctions would be granted in almost all cases. The nature of the Mareva injunction jurisdiction has to be borne in mind. While it is no longer confined to foreigners or to the risk of removal of assets beyond the jurisdiction, it must be reserved for those cases where the plaintiff can demonstrate a real risk that the defendant will dissipate or dispose of assets so as to render himself “judgment proof”.
[1] Bank of New Zealand v Hawkins (1989) 1 PRNZ 451 (HC).
[2] At 454.
[18] I also note that the requirement is not simply a risk of dissipation of assets – it must be such that there is a danger that the judgment or prospective judgment will as a result be wholly or partly unsatisfied.
Arguability
[19] The affidavits from the plaintiffs suggest that they took an undisciplined, even unsophisticated approach to the agreements they entered into with Mr Du Plessis. Even after there was sufficient evidence to demonstrate the need for
caution in committing further to the relationship, further commitments were
nonetheless made. For example the plaintiffs knew that the supply agreement between NZRSL and Soil Works was only for 15 months with one option to renew yet they still committed. The primary defendant, Mr Burnett said on instructions, denies any misrepresentation about the identity of investors or customers. The plaintiffs filed an affidavit from Mark James McCarthy confirming that he had had no contact with Mr Du Plessis. Mr Sumner advised that similar evidence from Sir Robert Jones will be adduced at trial. There must nonetheless be real questions as to:
(a) whether the representations were made; and
(b)even if they were, whether, after four contractual iterations, there is any causation.
[20] That said, the plaintiffs do not have to establish a winning case, just a good arguable case. I am prepared to accept that it is at least properly arguable that if such representations were made (and remember there is no evidence to the contrary at this stage), the plaintiffs could have relied upon them and they might have founded causes of action in misrepresentation, deceit, breach of contract and unjust enrichment.
Removal, disposal or diminution
[21] The plaintiffs’ evidence in support of this heading is that Mr Du Plessis does not return their calls, and had earlier indicated to them that NZRSL and RSDL are undercapitalised and financially stressed. They fear that he has taken flight or will, as a result of his current difficulties, dissipate their money.
[22] By a narrow margin I am prepared to accept that there is a danger that a prospective judgment will be wholly or partly unsatisfied because the $1 million purchase price will have either been transferred to Soil Works and beyond their reach or diminished in value as a result of the defendants’ financially stressed circumstances.
[23] The plaintiffs say that if their investment has been expended on purchasing Soil Tac product, that product, or prior shipments of Soil Tac are being stored in part at the farm of the defendants’ associate in Whitemans Valley with the remainder of it on the wharf at Wellington Harbour with Toll Holdings Ltd. I am, by a similar margin, satisfied that such orders will be necessary because there is a risk that this property will be dissipated as a result of the financial stress currently affecting NZRSL and RSDL.
Orders
[24] There will be orders in terms of the draft filed by the plaintiffs accordingly. I
note however that the draft provides that the freezing order is to lapse on
28 September. This appears to be a mistake. The order will remain until further order of this court. Leave is reserved to apply to discharge or vary either order on
48 hours notice (not three days as in the draft).
Directions
[25] In light of the orders I have made, the trial should take place on a priority
basis. I direct that this matter be placed into the Chambers’ List on 5 September
2011 for timetabling and scheduling. The parties are directed to file memoranda on timetabling and scheduling requirements for that call.
[26] Costs are reserved.
Williams J
Solicitors:
Ford Sumner Lawyers, Wellington
Stephen Paul Burnett, Waikanae
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