Willburn Furniture Restorations Ltd (in liquidation) v Gledhill

[2016] NZHC 99

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-000580 [2016] NZHC 99

BETWEEN

WILLBURN FURNITURE

RESTORATIONS LTD (IN LIQUIDATION)

First Plaintiff

AND

COLIN DAVID OWENS AND GRANT STEPHEN JARROLD

Second Plaintiffs

AND

MATTHEW LAWRENCE GLEDHILL First Defendant

AND

CAMERON MATTHEW GLEDHILL Second Defendant

Hearing:	5 February 2016 (On the papers)
Appearances:	K C Francis for Plaintiffs
Judgment:	5 February 2016

JUDGMENT OF DUNNINGHAM J

[1]      On 4 February 2016, I heard an application by way of formal proof hearing, for orders against the first and second defendants for:

(a)       repayment of funds owed to the first plaintiff (the company);

(b)compensation from the defendants for dispositions of property made by the company to the defendants to defeat the interests of creditors of the company; and

(c)       in the alternative, damages for breaches of directors’ duties against the

first defendant.

WILLBURN FURNITURE RESTORATIONS LTD (IN LIQUIDATION) v COLIN DAVID OWENS AND GRANT STEPHEN JARROLD [2016] NZHC 99 [5 February 2016]

[2]      Since that hearing the plaintiffs have become aware that a significant asset of the first defendant, a launch called the “Calanthe”, has been listed for sale on the website    They assert the sale of the vessel is significant for two reasons:

(a)      the plaintiffs’ case is that significant sums of money belonging to the company were used by the first defendant to fund the purchase and expenses of the vessel;

(b)it appears the vessel may be the only major asset owned by the first defendant in order to satisfy any judgment against him.

[3]      The plaintiffs say the sale of the vessel would significantly prejudice the plaintiffs as creditors of the first defendant and risk rendering any judgment in their favour nugatory.  Specifically, the plaintiffs rely on the first defendant’s pattern of disposing of, or dissipating company assets to the prejudice of the company’s creditors, as was detailed in the plaintiffs’ submission and evidence for the formal proof hearing.

[4]      They now apply for a freezing order under Part 32 of the High Court Rules to prevent the disposal of, dealing with or diminishing in value of the assets owned by the first defendant, Mr Matthew Gledhill, in the underlying proceeding.

[5]      As set out in counsel’s submissions there are three essential requirements for

a freezing order:1

(a)       a good arguable case on the substantive claims; (b)     assets to which the order can apply; and

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

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

[6]      Having heard the plaintiffs’ case on 4 February 2016, I am satisfied that the plaintiffs have a very strong case on the merits.

[7]      I am also satisfied that there is an asset, being the vessel Calanthe situated in

Havelock in the Marlborough Sounds, which can be the subject of a freezing order.

[8]      Finally, I am satisfied based on the further affidavit of Colin David Owens, sworn on 5 February 2016, that the vessel Calanthe has been advertised for sale and is at imminent risk of disposal.  More importantly, given the first defendant’s pattern of disposing of company assets and then dissipating the proceeds to the prejudice of creditors as explained in the formal proof hearing, I accept there is a real risk that a judgment in favour of the plaintiffs may be rendered nugatory if the freezing order is not made.

[9]      An undertaking as to damages has been supplied by the company.  While the plaintiffs acknowledged that the company is in liquidation and insolvent, they submit that special circumstances apply to qualify such an undertaking as appropriate and sufficient.  They rely on Auckland Steel Fixers Ltd (in liq) v Watson, where the Court

of Appeal accepted the undertaking of an insolvent company where:2

the applicant’s financial position and impecuniosity has been caused, at least on the information currently before the Court, by the actions of Mr Watson against whom the proceedings have been issued … .3

[10]     I am satisfied that this is an equivalent situation and in those circumstances the undertaking by the company is appropriate and sufficient.

[11]     Accordingly, I make the following order:

(a)      a freezing order is to be issued in accordance with the draft order accompanying the plaintiffs’ interlocutory application but with the following amendments;

(i)       paragraph 7 is to be deleted;

2      Auckland Steel Fixers Ltd (in liq) v Watson [2015] NZCA 274.

3 At [20].

(ii)paragraph 8 (which is to be renumbered as paragraph 7) is to provide for a notice period of three working days which the defendants must give to the applicants of any interlocutory application to discharge or vary the order;

(iii)the balance of paragraphs 9 to 12 are to be renumbered as paragraphs 8 to 11.

Solicitors:

Meredith Connell, Wellington