Ying v Bobby's Investment Limited
[2024] NZHC 1833
•8 July 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-092-3054 [2024] NZHC 1833
BETWEEN YEMEI YING and PETER BEEKMANS and TANIA BEEKMANS
Plaintiffs
AND
BOBBY’S INVESTMENT LIMITED
Defendant
Hearing: On the papers Appearances:
N W Woods for the Plaintiffs S Khan for the Defendant
Judgment:
8 July 2024
JUDGMENT OF MOORE J
[Application for Freezing Orders]
This judgment was delivered by me on 08 July 2024 at 12.00pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors:
Rice Craig, Papakura Fortune Manning, Auckland
YING v BOBBY’S INVESTMENT LIMITED [2024] NZHC 1833 [8 July 2024]
[1] The plaintiffs apply without notice for a freezing order over the net proceeds of the sale of 10 Old Wairoa Road, Papakura (“the Papakura Property”), a property currently owned by the defendant, Bobby’s Investment Ltd (“BIL”). They do so to preserve any judgment they might receive in their favour against BIL for breach of contract. The substantive proceeding is scheduled to commence on 10 February 2025.
[2]The plaintiffs’ application was referred to me as Duty Judge on 4 July 2024.
Background
[3] The substantive proceeding between the parties concerns an agreement for the sale and purchase of two properties, 39 and 42 Hywell Place, Manurewa (“the Agreement”) executed on or about 9 September 2021. This was when Auckland was under an Alert Level 4 Lockdown during the COVID-19 pandemic. The first plaintiff, Yemei Ying, owned the former property. The second and third plaintiffs, Peter and Tania Beekmans, owned the latter.
[4]The terms and conditions of the Agreement provided for a purchase price of
$2,400,000 (inclusive of GST) with a requirement that the plaintiffs provide BIL with vacant possession. The plaintiffs allege that BIL either surrendered or indicated its intention to surrender the requirement for vacant possession. BIL denies this.
[5] In her affidavit in support of the application, Mrs Beekman says that BIL tried to resell the properties in October 2021 using the same advertising material and design for development employed by the plaintiffs. She says that the properties were passed over at auction at $2,750,000 and that BIL did not accept the highest bid. She further says that in May 2022, BIL then contacted the plaintiffs and requested a price reduction or a “contract split” on the basis that “the market had dropped” and that BIL could not get finance for both properties together. She explains that the plaintiffs refused to lower the purchase price but agreed in principle to “split the contract” if that helped BIL’s own effort to settle as vendor.
[6] It is common ground on the pleadings that BIL refused to settle its purchase with the plaintiffs. It is also common ground that on or about 27 June 2022, the plaintiffs served on BIL a settlement notice requiring that a settlement amount of
$2,280,112.21 together with accruing interest from 23 June 2022 be paid within 12 working days.
[7] The plaintiffs say that BIL repudiated the Agreement by purporting to cancel it through their lawyers on or about 30 June 2022 and that they were in breach of contract in failing to settle.
[8] They say instead that they validly cancelled the Agreement on 14 July 2022 as a consequence of BIL’s repudiation, and because of its failure to comply with the settlement notice. As a result, they say that BIL’s deposit of $120,000 is forfeited. They claim damages and interest for BIL’s purported breach of contract.
[9] BIL says that it has an affirmative defence to the claim for breach of contract: namely, that it validly cancelled the Agreement.
[10] In essence, BIL says that the plaintiffs represented photographs of 41 Hywell Place as photographs of both properties, and that it was only on a subsequent inspection by its director and majority shareholder, Raj Kumar, on or around 7 June 2022, after the Agreement was executed that they discovered 39 Hywell Place was in a substantially worse condition.
[11] It says it was induced to enter into the Agreement due to this purported misrepresentation and seeks the recovery of the $120,000 deposit it paid the plaintiffs.
[12] Mrs Beekmans says that she received information that BIL marketed and promoted the Papakura Property for sale, and that it went to auction on 19 June 2024 but was passed in without an offer to purchase. In support she refers to a proposed Agreement for Sale and Purchase of the Papakura Property which includes a settlement date of the later of 25 September 2024, or ten working days after the issuance of six new titles.
[13] On the basis of Mrs Beekmans’ discoveries, the plaintiffs say they have brought the present application for a freezing order because they understand the Papakura
Property to be BIL’s sole asset and because its sale seems designed to defeat an inevitable judgment against it.
Applicable principles
[14] Rule 32.2 of the High Court Rules 2016 provides that the Court may make a freezing order on or without notice to a respondent. It is well-established that while the inquiry is ultimately what the overall justice of the case demands, there are three broad requirements for the making of such an order:
(a)a good arguable case on the substantive claim;
(b)assets to which the order can apply; and
(c)a real risk that the defendant (or respondent to the application) will dissipate or dispose of those assets.
Should a freezing order be granted?
[15] The first two requirements for the grant of a freezing order are easily met. As Mr Wood for the plaintiff submits, the plaintiffs’ case is simple. It is plainly capable of tenable argument and, having reviewed the affidavit of Mrs Beekmans filed in support of the application, supported by sufficient evidence. Furthermore, there are plainly assets to which the freezing order can apply: the net proceeds of the sale of the Papakura Property.
[16] The main question for me to determine is whether the plaintiffs have shown a real risk that BIL will dissipate the net proceeds of its sale of the Papakura Property. The plaintiffs must point to circumstances from which a prudent, commercial person can properly infer a danger of default.1 Mr Woods submits that the plaintiffs have for seven reasons.
[17] First, Mr Woods submits that BIL has not denied in its briefs of evidence that it failed to settle its purchase with the plaintiffs due to financial strain. Nor, Mr Woods
1 Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801 (HC) at [122].
emphasises, has Mr Kumar denied that he sought to renegotiate the Agreement with a later settlement date and at a lower price due to BIL’s inability to settle its resale of the properties. Given this, he submits it is reasonable to infer that BIL admits to financial strain.
[18] Secondly, Mr Woods submits that the timing of the sale of the Papakura property is telling, given it closely follows the receipt of the plaintiffs’ evidence. As the date of the substantive hearing is closely approaching, he says it is reasonable to infer that the sale of the property is in response to the case served.
[19] Thirdly, Mr Woods submits that the sale of the property is out of the ordinary, given BIL is a property development company. Having not yet completed its development of the property, Mr Woods submits that the sale of the property is only explicable as a precursor to dissipation.
[20] Fourthly, Mr Woods submits that BIL lacks any genuine defence. He says that Mr Kumar’s brief of evidence is sparse and that BIL’s defence gives the strong impression that it simply seeks to delay the resolution of the substantive proceedings while possibly disposing of its assets.
[21] Fifthly, Mr Woods submits that Mr Kumar is financially sophisticated and adept at using corporate vehicles. He says that this suggests that he could dissipate any net sale proceeds with ease, thereby bolstering the risk of dissipation.
[22] Sixthly, Mr Woods submits that the Papakura property’s sale and auction indicates a clear intention to liquidate the asset. Given the proposed settlement date and the fact that the proposed sale of the Papakura Property includes the approved resource consent plan for a six-lot subdivision, he submits that BIL clearly intends to liquate its asset.
[23] Finally, Mr Woods submits that while the Court has yet to determine the plaintiffs’ substantive claims, BIL has broken its promises to the plaintiffs and acted dishonourably. He submits that in this context, the plaintiffs have reasonable grounds
to doubt that the net sale proceeds would be preserved for the best interest of BIL’s creditors, rather than dissipated in the best interests of its owner.
[24] While some, if not all, of the reasons Mr Woods advances would be insufficient in themselves to reach this threshold, I am satisfied that the totality of the reasons advanced show a real risk of dissipation.
[25] Mr Kumar is, by his own admission, a businessman focused on property investment and development. It is clear on the evidence before me that he is also well versed with corporate vehicles. Furthermore, on the information before me, I have no reason to doubt that the Papakura Property is BIL’s sole asset. Thus, while the sale of that property might be capable of innocent explanation, the overall context permits the inference that the sale is intended to dissipate any funds that might be paid to the plaintiffs if their substantive claim against BIL is successful.
[26] Importantly in this case, the plaintiffs do not seek to prevent BIL’s sale of the Papakura Property but merely to ensure that any net sale proceeds are retained by it. In those circumstances, I consider any prejudice to BIL to be limited. BIL itself cannot seriously argue that it would be prejudiced by a requirement to retain the proceeds of the sale of its main asset.
[27] Even so, I accept that this is not a case where the evidence supports the strong inference that Mr Kumar might attempt to abscond with the net sale proceeds. It is much more finely balanced. For that reason and bearing in mind that the freezing order is sought without notice, I reserve leave for BIL to file a memorandum offering alternative means by which the plaintiffs can be confident that BIL will be good for any judgment awarded against it in the event that the plaintiffs are successful in its substantive proceedings.
Result
[28] The plaintiffs’ application for a freezing order against BIL dated 2 July 2024 is granted, subject to the reservation of leave as explained at [27].
[29]Orders accordingly.
Moore J
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