Worldwide Holidays Ltd v Wang

[2017] NZHC 815

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-000646 [2017] NZHC 815

BETWEEN

WORLDWIDE HOLIDAYS LTD

Plaintiff

AND

XIAONING WANG First Defendant

LIN HAIMENG Second Defendant

LI HEMING Third Defendant

BU JUN
Fourth Defendant

ASB BANK LTD Fifth Defendant

ANZ BANK NEW ZEALAND LTD Sixth Defendant

Hearing:	26 April 2017
Appearances:	T J G Allan and S F Powrie for Plaintiff J Nguy for First, Second and Fourth Defendants No appearance for Third, Fifth and Sixth Defendants
Judgment:	26 April 2017

ORAL JUDGMENT OF WYLIE J

Solicitors: Solicitors/counsel:

Grove Darlow & Partners, Auckland

Jesse & Associates, Auckland

WORLDWIDE HOLIDAYS LTD v WANG [2017] NZHC 815 [26 April 2017]

Introduction

[1]      On 11 April 2016, Worldwide Holidays Ltd (“Worldwide”) filed a without notice application seeking freezing and ancillary orders against the first, second, third and fourth defendants.

[2]      On 12 April 2017, the orders were granted in relation to the first defendant. Fitzgerald J, in a careful judgment, detailed the background and explained why she was declining to make orders against the second to fourth defendants.

Factual background

[3]      The background is relatively straightforward.   Worldwide is a travel and tourism company.  The first defendant, Ms Wang, worked for Worldwide.  She was the branch manager of Worldwide’s Albany office.  Worldwide alleges that Ms Wang misused its computerised booking system to effectively roll forward payments due to it, when the payment had already been made and taken by Ms Wang.  It is alleged that Ms Wang had arranged for the payments to be made into her personal bank account.    Because  the  dates  for  payments  were  rolled  forward  in  Worldwide’s records, the amounts did not show up being overdue.  It asserts that Ms Wang has obtained significant sums of money as a result of this alleged fraud.  At present it is alleged that the total amount is $1,454,250.55.

[4]      A freezing order was declined against the second defendant, Ms Haimeng, because it was not then clear whether Ms Haimeng was a natural person or whether the name Haimeng was an alias used by the first defendant.

[5]      The matter was called before me on 20 April 2017 as duty Judge.  By that stage it was apparent that Ms Haimeng was a natural person and Mr Nguy appeared on her behalf.   I issued interim freezing orders in respect of two properties to the extent of the second defendant’s interests therein, and up to a maximum value of

$1,454,250.55.   I put in place a tight timetable and directed that the matter be set down for hearing today.

Analysis

[6]      I have heard from Mr Allan on behalf of Worldwide and Mr Nguy on behalf of Ms Haimeng.  Various additional affidavits have been filed by the parties.  I will refer to those shortly.

[7]      It was common ground that there are three requirements for a freezing order. First, a plaintiff must be able to establish a good arguable case on its substantive claim.  Secondly, there must be assets to which an order can apply.  Thirdly, there must be a real risk that the respondent will dissipate or dispose of those assets.

Good arguable claim?

[8]      The statement of claim filed by Worldwide asserts, as against the second defendant, causes of action alleging knowing receipt and monies had and received. Before me today, Mr Allan argued that there is an additional cause of action open to Worldwide – namely knowing assistance.

[9]      Mr Allan briefly referred to the relevant authorities in respect of knowledge and submitted that there is a good arguable case that his client will be able to establish that Ms Haimeng wilfully and recklessly failed to make such enquiries as an honest and reasonable person would have made, when monies were transferred into her bank account by the first defendant, Ms Wang.

[10]     As a result of the affidavits filed, it transpires that over a course of three years

– 2014 to 2017 – Ms Wang transferred some $556,000 into Ms Haimeng’s account. Ms Haimeng says that this was because Ms Wang was an inveterate gambler.  Ms Haimeng says that she met Ms Wang in about November or December 2014, and that Ms Wang told her that she intended to purchase a residential property in Auckland. She said that her family had been sending her money, both for living costs and for down payments in anticipation of purchasing the property.   Ms Wang advised Ms Haimeng that the plan had been put on hold because Ms Wang considered that she could not tell her family about the large sums of money she had lost gambling at Sky City.  She says that Ms Wang told her that she had contacted a mortgage broker, and that the broker had advised her to minimise withdrawals from her account at the Sky City  Casino,  because  a  bank  would  frown  upon  such  records  when  it  was

considering whether or not to grant a loan in respect of a residential purchase.  Ms Haimeng says that Ms Wang asked her whether she could transfer monies from her bank account into Ms Haimeng’s bank account, and whether Ms Haimeng would thereafter immediately withdraw the monies and give them back to her so that they could be gambled at Sky City.  Ms Haimeng says that both she and Ms Wang had accounts with ASB and  that the transfers could be processed electronically and quickly.   She says that she agreed to this arrangement because she thought that it would assist Ms Wang to minimise records of her withdrawals at Sky City appearing on  her  own  bank  accounts,  but  at  the  same  time  give  her  access  to  funds  for gambling.

[11]     Ms Haimeng has annexed copies of her ASB account to the affidavit she has filed.   It records a very large number of transactions where Ms Wang has paid monies into Ms Haimeng’s bank account, and Ms Haimeng has then withdrawn the monies on her Sky City account and seemingly given them to Ms Wang to gamble. On some rare occasions, there does not appear to be a correlation between a deposit by Ms Wang and a withdrawal by Ms Haimeng.   Ms Haimeng says that this was because she would frequently have cash or casino chips on her, and that rather than withdraw additional funds from her account, she would hand over the extra cash she had on hand or the casino chips to Ms Wang.   Ms Haimeng accepts that over the three  year period  a total  sum  of $556,000 was  transferred  between  Ms Wang’s account and her account.

[12]     Ms Haimeng also explains that on two occasions monies associated with Worldwide were paid into her account.  She says that on one occasion Ms Wang told her that she had a customer who had cancelled her travel ticket but not claimed the resulting refund.   Ms Wang said that Worldwide had a limited time within which refunds could be claimed and she told Ms Haimeng that she was unable to get hold of the customer.  Ms Haimeng said that Ms Wang asked her if she could transfer the money into Ms Haimeng’s account, so that if the customer did come back, she would be able to refund the monies to the customer.  Ms Haimeng says that she agreed to this arrangement, and that subsequently she withdrew the money – in part in cash, and in part by way of direct bank credit, and repaid it to Ms Wang.  She also says that on another occasion Ms Wang told her that another customer of hers needed to

purchase an urgent ticket, but that the customer did not have an account with the bank used by Worldwide, ASB, but only with ANZ.  Ms Haimeng says that she also had an account with ANZ and that Ms Wang asked for her help and had the customer transfer $2,295 into Ms Haimeng’s bank account.  She said that she withdrew $2,200 from her account and gave it to Ms Wang, and that she gave her the balance in cash when they met at Sky City Casino shortly thereafter.

[13]     Ms  Haimeng  denies  any  knowledge  of  the  alleged  fraudulent  actions attributed to Ms Wang and says she was unaware of them until these proceedings were served on her.  She accepts that she did not take any steps to verify where the funds were coming from, and asserts that this was because it had nothing to do with her.

[14]     I accept that there are circumstances which indicate that Ms Haimeng should have been on inquiry.  Although this matter is at a very early stage, it seems clear from the affidavits already filed that Ms Haimeng had known Ms Wang for only a very short period before the transactions commenced.  It seems that she knew that Ms Wang worked for a travel agency and it can be inferred that she would have known that Ms Wang had a relatively limited salary.  Ms Haimeng knew from the outset that an element of deception was involved, at least to the extent of hiding from Ms Wang’s bank the withdrawals for gambling which were likely to have been of concern to the bank.  Ms Haimeng would also have known that there were a very large number of transactions over a relatively short period, totalling some $556,000.

[15]     I am satisfied that the allegations made in the statement of claim are capable of tenable argument and that on the face of it, there is a good arguable case, either in respect of monies had and received, or in respect of knowing receipt, or knowing assistance.

Assets within the jurisdiction

[16]     Clearly there are assets within the jurisdiction to which the order can apply, namely a residential property situated at Da Vinci Place, Massey, Waitakere, and secondly a unit known as Unit 5N in Newmarket.  The certificates of title disclose that both the residential property and the unit are owned by Ms Haimeng and her mother.  There is no suggestion that the mother is involved in any way at all in what

has occurred and clearly any freezing order can only be in respect of Ms Haimeng’s

interest in the properties.

[17]     The position is complicated however because Ms Haimeng has asserted that both properties are held by her and her mother on trust.  The trust documents are not before the Court.

Real risk of dissipation?

[18]     The third element causes rather more difficulty.

[19]     It  is  incumbent  on  Worldwide  to  establish  that  there  is  a  real  risk  of dissipation.  That requirement is central to the freezing order jurisdiction.  The fact that a respondent is going to dispose of assets does not invoke the freezing order jurisdiction unless there is a real risk that a judgment in favour of the applicant will be partly or wholly unsatisfied if the freezing order is not made.  A bald assertion of belief that a respondent might dissipate assets, unsupported by solid grounds justifying that belief, is insufficient.  However, affirmative proof of the likelihood of dissipation or of nefarious intent is not necessary. An applicant must be able to point to circumstances from which a prudent, sensible, commercial person could properly infer a danger of default.   The Courts have suggested that that test is not unduly exacting.

[20]     Here Mr Allan points to four matters.

[21]     First, he says that immediately after the freezing order papers were served on Ms Haimeng, she withdrew monies from her bank account.  However, it is now clear that the amount withdrawn was relatively modest - $900.   It is also clear from looking at Ms Haimeng’s account that the balance in her account has frequently oscillated from relatively large sums to very small sums.   That is the historical pattern which is clear from the bank accounts which have been exhibited.  I do not consider that the fact that Ms Haimeng withdrew $900 from her bank account after the papers were served on her, of itself, evidences a real risk of dissipation.   Ms Haimeng has explained the withdrawal by asserting that it was for household expenditure. That seems to me to be a not unreasonable explanation.

[22]     Secondly, Mr Allan asserts that Ms Haimeng continued to market the unit at Newmarket after the interim freezing orders were made by me on 20 April 2017. Worldwide engaged a private investigator who contacted Ms Haimeng.  Ms Haimeng confirmed that the property was for sale.  I do not think that any weight can be put on this matter.  Ms Haimeng’s affidavit establishes that the property has been on the market since 2013 and that it has been advertised by real estate agents on the internet since that date.  Further, Mr Allan confirmed, when the matter was before me on 20

April last, that his client would not object to a sale of the property as long as the net proceeds  were  secured  in  its  favour.    In  these  circumstances,  the  fact  that  Ms Haimeng was prepared to continue with the sale does not of itself evidence a real risk of dissipation.

[23]     Next, Mr Allan put it to me that Ms Haimeng has a history of gambling.  Ms Haimeng in her affidavit frankly accepts that she gambles at Sky City and that she is a member of its VIP club.  Neither Mr Allan nor I have undertaken an exhaustive examination of her bank account.   However, it does seem at first glance that the amounts she has gambled over the years have been relatively modest.  Again, I do not consider that the fact that Ms Haimeng is fond of gambling of itself establishes a real risk of dissipation.

[24]     Finally, Mr Allan put it to me that the circumstances are very much out of the ordinary,  given  the  amounts  involved,  and  the  number  of  transactions.    I have accepted that these matters raise a good arguable case capable of tenable argument. There is, however, nothing to suggest that any attempt has been made to sell the residential property at Da Vinci Place.  Unit 5N at Newmarket has been for sale for some years.  Even if the unit is sold, and Ms Haimeng has some personal interest in the proceeds of sale – which may not be the case if the property is owned by a trust – there is nothing to establish that there is a real risk that such judgment as may ultimately be given in favour of Worldwide will be partly or wholly unsatisfied if a freezing order is not made.

[25]     Accordingly, I decline to grant Worldwide a freezing order in respect of the two residential properties registered in Ms Haimeng’s name and her mother’s names. The interim orders made by me are discharged.

Costs

[26]     I canvassed the issue of costs with counsel.  Mr Nguy sought costs on a 2B basis.  Mr Allan did not oppose costs being calculated on a 2B basis but he resisted a costs order being made at this stage.

[27]     I am satisfied that it is appropriate to make an order.  The rules require that costs generally be dealt with in the context of interlocutory applications as they take place and are disposed of.   Accordingly, I order costs against Worldwide and in favour of Ms Haimeng on a 2B basis.  I anticipate that counsel will be able to agree the same, but if there is any dispute it is to be referred to the Registrar.

Addendum

[28]     There is one matter outstanding in regard to Ms Wang.  In my oral judgment of 20 April 2017, I extended the time within which she was required to surrender her passport.   She had deposed that her passport was with Immigration New Zealand. She anticipated that it would be available and could be surrendered by 5.00pm today.

[29]     I have received a further affidavit from Ms Wang.  She has still not received her passport from Immigration New Zealand.  She has contacted the case officer who has told her that Immigration New Zealand is still in the process of finalising the transfer of her visa to her new passport.  Ms Wang is unable to confirm when she is likely to receive her passport.

[30]     In the circumstances, and by consent, I extend time within which the passport is to be surrendered until 5.00pm on 10 May 2017.  I reserve leave to the parties to

come back if there is any difficulty in this regard.

Wylie J