Jones v Goertzen

[2020] NZHC 176

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-000203

[2020] NZHC 176

IN THE MATTER

of the receivership of CORE INFRASTRUCTURE LIMITED

(In Receivership)

BETWEEN

KIERAN MICHAEL JONES and THOMAS

LEE RODEWALD as receivers of CORE INFRASTRUCTURE LIMITED (In

Receivership) Plaintiffs

AND

UNKNOWN DEFENDANTS being the Account Holders of those accounts held with the Bank of New Zealand referred to in paragraph 4 of the Statement of Claim

First Defendants

JASON GOERTZEN

Second Defendant

Hearing:	On the papers
Counsel:	R B Hucker/ N A Muir for the Plaintiffs No appearance on behalf of the Defendants
Judgment:	14 February 2020

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Friday, 14 February 2020 at 3:45 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Hucker Associates, Auckland

[1]    The plaintiffs apply without notice for a freezing order over funds held in two nominated bank accounts in the name of unknown defendants into which payments due to Core Infrastructure Limited (In receivership) (the company) for work undertaken in connection with the Transmission Gully motorway project in Wellington have been paid.

[2]    The application is supported by an affidavit of one of the two receivers of the company, Kieran Michael Jones, and an undertaking as to damages, signed by the second receiver, Thomas Lee Rodewald.

Factual background

[3]    The plaintiffs were appointed receivers of the company on 20 January 2020. The first defendants are the unknown defendants. The second defendant was at all material times the sole director and shareholder of the company. The company had a contract with the joint venture building the Transmission Gully motorway in Wellington to supply it with quarry rock for incorporation in the motorway.

[4]    Upon their appointment, the plaintiffs obtained copies of invoices that had been raised by the company for the quarry rock supplied to the Transmission Gully motorway project that specified an account number into which payments for the quarry rock had been made. The account into which the payments had been made and which was the account into which payments were directed to be made on the face of the invoices is not an account of the company. Some funds appear to have subsequently been transferred to another account again not in the name of the company.

[5]    The plaintiffs requested details of the accounts into which payments have been made, but the Bank of New Zealand has declined to provide any details of the account holders without their consent, which the bank has been unable to obtain. The plaintiffs’ enquiries made of the company’s accountant and the second defendant’s former wife disclose that the accounts may be held in the name of the second defendant’s step-daughters or the second defendant personally.

[6]    The plaintiffs acknowledge that not all of the funds paid into the accounts would be recoverable by them to the extent that payments have been made to bona

fide company creditors from those funds. However, based on internal ledger records held by the company’s accountant, of funds totalling $3,541,290.03 plus GST, which have been deposited into one of the accounts by the joint venture building the Transmission Gully motorway, $687,166.81 would appear to have been used for non- company expenditure.

[7]    Despite numerous requests, the second defendant has refused to confirm the identity of the account holders. It is also feared that the second defendant may decide to leave the country and transfer any remaining funds off shore out of the reach of the receivers and creditors of the company. On 28 January 2020, the second defendant emailed Mr Rodewald:

Whatever it takes because if you can not settle out something going to put in hands of liquidator on Monday and I’m on a plane on Tuesday to Canada CA back home.

Should the application proceed without notice?

[8]    I am of the view that it is proper that the application proceed on a without notice basis. In light of his non-cooperation to date, if the second defendant was served with the application it may well prompt him to try and remove whatever funds may remain in the accounts.

Legal principles

[9]    Rule 32.2 of the High Court Rules describes the Courts’ jurisdiction to make freezing orders. Essentially, there are three requirements – a good arguable case on the substantive claim, assets to which the order can apply and a real risk that the respondent will dissipate or dispose of those assets.

[10]   As to a good arguable case, it is not necessary to establish a prima facie case, but the applicant must show that the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the application is likely to be brought. I am of the view that the affidavit of Mr Jones establishes that the company is entitled to receipt of all funds paid under the contract to supply quarry rock to the Transmission Gully motorway project. The funds have, however, been received not by the company, but by unknown defendants.

There is therefore on the face of it a good claim that they are liable to repay the funds received as money had and received and/or pursuant to a remedial constructive trust given that the account holders have no interest in the funds.

[11]   As to the second requirement, which is assets in the jurisdiction to which the order can apply, the application has identified two bank accounts in respect of which the freezing order can apply.

[12]   Finally, I consider that there is a real risk of dissipation of any funds which may remain in the accounts. The analysis undertaken by the plaintiffs of internal ledger records held by the company’s accountant suggests that a substantial portion of the funds received into the bank accounts appears to have been used for non-company expenditure. From his dealings to date with the plaintiffs, I accept there is a risk that the second defendant may seek to withdraw any remaining funds. There is also a suggestion that he may return to Canada from whence he came. He has threatened to do so in an email to the plaintiffs.

Balance of convenience/overall justice

[13]   Having regard to all the foregoing, overall justice favours the freezing order being granted.

Undertaking as to damages

[14]I have noted that the plaintiffs have provided an undertaking as to damages.

Result

[15]   There are a range of authorities that allow the addition of unknown defendants to a proceeding. The causes of action against the unknown defendants are based on the action of money had and received and the imposition of a remedial constructive trust given that the account holders have no interest in the funds.

[16]I therefore make the following orders:

(a)A freezing order in respect of all funds held in (or which in the future are deposited into) two bank accounts held by the Bank of New Zealand, the account numbers of which are specified in paragraph 4 of the Statement of Claim.

(b)The first and second defendants are restrained from removing any of the assets listed in paragraph (a) above or from disposing of, dealing with, or diminishing the value of, those assets.

(c)The costs of and incidental to this application are reserved.

[17]   The application is to be called in the Duty Judge list at 10.00 am on Thursday, 27 February 2020. As the freezing order has been made without notice to the defendants, it will have no effect after 27 February 2020 unless on that date it is continued or renewed. On that date, the defendants are entitled to be heard by the Court in opposition to the continuation or renewal of the order.

[18]   The defendants have leave to apply to discharge or vary the order on three working days’ notice.

Woolford J