HULL v CHUNG [2016] NZHC 2392

HULL v CHUNG [2016] NZHC 2392 [7 October 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-002510[2016] NZHC 2392IN THE MATTER of s 55 of the Judicature Act 1908 andr 17.88 of the High Court RulesBETWEEN ARTHUR WARREN HULLApplicantAND YUK FONG CHUNGRespondentHearing: 7 October 2016Appearances: K Smith for ApplicantD Zhang for RespondentJudgment: 7 October 2016JUDGMENT OF PALMER JThis judgment is delivered by me on 7 October 2016 at 6.15 pmpursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitor:Peter C Gilbert, WellingtonJustitia Chambers, AucklandSummary[1] I decline Mr Warren Hull's application to arrest and imprison Ms Yuk Fong(Coco) Chung who is scheduled to leave New Zealand tomorrow for Hong Kong. Iam not persuaded that Mr Hull's prosecution of the High Court proceedings wouldbe materially prejudiced by Ms Chung's absence. Even if I were, I would not grant the application because Mr Hull has left it so late to make his application when he has known about the departure since at least August and he did not disclose parallel Family Court proceedings. An injunction is in place. That should provide Mr Hull with some assurance of the security of the funds in issue which he says is his main object. To additionally arrest and imprison Ms Chung the day before a long- scheduled trip to Hong Kong would be disproportionate to the interests at stake in all the circumstances.Facts[2] My account of the background facts relies on affidavit evidence filed by Mr Hull yesterday. The exigencies of time mean that Ms Chung did not have the opportunity to file evidence. Her counsel, Mr Zhang, provided submissions from the bar. This is an unsatisfactory evidential basis on which to rest my judgment but there is no alternative in the time available.Mr Hull and Ms Chung[3] Ms Chung is Chinese with a Hong Kong passport. I infer that Mr Hull is a New Zealand citizen. Mr Hull and Ms Chung were in a relationship for some seven years, since 2009. They separated in July 2016.[4] Ms Chung has a one way ticket to Hong Kong tomorrow. Mr Zhang says the trip was planned a long time ago, when the couple was still together, for Ms Chung's mother's birthday and for Ms Chung to receive some medical attention. Mr Hullwas originally to go too. Ms Chung has a one way ticket because she did not know when she would return to New Zealand. Mr Zhang understands she does intend to return. He acknowledges there is no evidential basis for that but he thought he might be able to get an affidavit to that effect today if required.Property[5] In 2014 Mr Hull and Ms Chung bought a property together at 29B Berwyn Ave, Takanini, Auckland. I am advised by both parties that David J Brown and Associates acted for Ms Chung in the purchase. Mr Zhang handed up correspondence from Mr Brown of that firm explaining the property was transferred to a trust because the Bank would not lend to Mr Hull but would lend only to Ms Chung. The trust deed is described by Mr Smith, for Mr Hull, as "unfortunate" in itslack of specificity. Ms Chung was the registered owner of the property as trustee. Mr Hull, Ms Chung and Ms Chung's daughter are the beneficiaries.[6] The property was sold around 8 July 2016. Mana Law, solicitors in Botany, Auckland, acted for Ms Chung in the sale of the property.[7] Mr Hull believes the purchase price was $675,000 and there was a mortgage of $250,000. Mr Smith is instructed that, while he is not sure, Mr Hull believes the net proceeds may be somewhere around $400,000. Mr Zhang says Ms Chung'sinstructions are that the net proceeds are some $250,000. At the end of the hearing he offered to hand up a document he says supported that on the basis it was not provided to Mr Hull. I declined to accept it on that basis.[8] Mr Hull has received payment of $50,000 for the property. Mr Zhang says Ms Chung has also loaned him $25,000. Mr Hull has not been given any documents or information in respect of the sale or in respect of the equity in the proceeds of sale held by Ms Chung.Proceedings and application[9] Yesterday, on 6 October 2016, Mr Hull filed in the High Court:(a) A Statement of Claim alleging breach of trust, breach of fiduciary duty, failure to account for profits and deceit by Ms Chung. It seeks a declaration that the proceeds of sale of the property were subject to, and held on, trust for Mr Hull as beneficiary and seeks an enquiry asto the conversion or dissipation of the proceeds as well as damages for the proceeds no longer available.(b) Without notice, an application for an order under s 55 of the Judicature Act 1908 to arrest and imprison Ms Chung as an absconding debtor.(c) Without notice, an application for an injunction preventing Ms Chung from further "dispersement" of the sales proceeds of the property without further order of the Court.[10] That same day, on 6 October 2016, Thomas J granted an interim order preventing Ms Chung from further disbursing the balance of the sale proceeds of the property without further order of the Court. She was not prepared, at that stage, to make the order for arrest. Thomas J ordered that the application and all supporting documentation including the Minute be immediately served on Ms Chung and Ms Chung's solicitor and directed that the matter be called this morning.[11] Not disclosed in the applications or Statement of Claim is the fact that Mr Hull had also previously brought proceedings about the same matter in the Family Court:(a) On 18 August 2016 Mr Hull applied to the Family Court in Auckland for orders determining the respective shares of the parties in their relationship property.(b) On the same day Mr Hull applied, without notice, for interim orders for the proceeds of sale of the property to be deposited in the Family Court under ss 23, 25 and 33 of the Relationships Property Act 1976. The grounds included that Ms Chung was a Chinese national and a flight risk.(c) That application is supported by an affidavit by Mr Hull that exhibits a letter from Mr Brown to Ms Chung of 4 August 2016 advising thatshe owes Mr Hull $181,054.23, net, in settling all issues between them including the proceeds of the Takanini property (based on Mr Hull's understanding of the sales proceeds referred to above).[12] I do not know what decisions the Family Court has yet made, if any.[13] Mr Zhang recorded that he appeared and made submissions without prejudiceto Ms Chung's protest to the High Court's jurisdiction on two bases:(a) First, contrary to Thomas J's direction, Mr Zhang says thedocumentation was not served on Ms Chung at all and it was only served by email, rather than personally, on him and his firm. That may represent a failure to comply with Thomas J's direction but Idoubt it obviates the High Court's jurisdiction to consider theapplication. Rule 17.88 provides that the application can be without notice. Effectively Mr Zhang is better placed than were he to appear on a pure Pickwick basis.(b) Second, Mr Zhang says the Family Court has exclusive jurisdiction over the relationship property claim that overlaps the substance of the underlying proceedings by virtue of s 11 of the Family Courts Act 1980. Such an argument may (or may not) succeed in relation to thesubstantive High Court proceedings. But it doesn't change the factthat there are currently High Court proceedings on foot which is a required element of the current application.Law[14] Section 55 of the Judicature Act 1908, fairly described by Mr Zhang as worded in archaic language, says:55 Power under certain circumstances to arrest defendant about to quit New Zealand(1) A person shall not be arrested upon mesne process in any civil proceedings in the High Court.(2) Where in any civil proceedings in the High Court in which, if brought before 1 October 1874 (being the date of the coming into operation of the Imprisonment for Debt Abolition Act 1874), the defendant would have been liable to arrest, the plaintiff proves at any time before final judgment, by evidence on oath to the satisfaction of a Judge of the court, that the plaintiff has good cause of action against the defendant to the amount of $100 or upwards, and that there is probable cause for believing that the defendant is about to quit New Zealand unless he is apprehended, and that the absence of the defendant from New Zealand will materially prejudice the plaintiff in the prosecution of those proceedings, such Judge may, in the prescribed manner, order such defendant to be arrested and imprisoned for a period not exceeding 6 months, unless and until he has sooner given the prescribed security, not exceeding the amount claimed in those proceedings, that he will not go out of New Zealand without the leave of the High Court.(3) Where the civil proceedings are for a penalty, or sum in the nature of a penalty, other than a penalty in respect of any contract, it shall not be necessary to prove that the absence of the defendant from New Zealand will materially prejudice the plaintiff in the prosecution of those proceedings; and the security given (instead of being that the defendant will not go out of New Zealand) shall be to the effect that any sum recovered against the defendant in those proceedings will be paid or that the defendant shall be rendered to prison.(4) All the powers conferred by this section upon a Judge may be exercised by the Registrar of the court:provided that such powers shall be exercised by the said Registrar only in the absence of the Judge from the place where the office of the court is situate at which the application for such order as aforesaid is made.[15] In Robinson v Whangarei Heads Enterprises Ltd and in Kelly v Schofield,Heath and Chilwell JJ respectively endorsed five principles from McGechan on Procedure:1(a) The Court's jurisdiction under s 55 is discretionary and has beenexercised sparingly;(b) The section is concerned with the arrest of a defendant who is absconding before judgment with the aim of frustrating theplaintiff's proceeding and the obtaining of judgment;(c) The Court will order the arrest of the defendant only where the evidence of the defendant is materially necessary for the plaintiff to prove its case. The application should, therefore, be supported by affidavits which demonstrate why the defendant's evidence isnecessary;1 Robinson v Whangarei Heads Enterprises Ltd [2013] NZHC 2246 at [24]; Kelly v SchofieldHC Auckland CP 1327-86, 10 December 1986 at 11.(d) The section is not intended to give any right to a plaintiff to arrest the defendant merely because the absence of the defendant would render it difficult or impossible for the plaintiff to obtain the fruits of its judgment if the defendant left New Zealand;(e) The entry of judgment against the defendant operates as a discharge or annulment of an order for arrest previously obtained against it under this section (citing Felton v Callis [1968] 3 All ER 673;Lawson, Swain & Walker Ltd v Montefiore [1919] NZLR 666;Hunter v Sullivan (1911) 14 GLR 293).[16] Heath J also cited with approval, as do I, the following passage from ProfessorSutton's text on creditor's remedies:2Statutory conditions must be strictly complied with. For example, s 55 states that there must be a cause of action for the recovery of money, so that an action designed to compel the defendant to pay money to a third party is not within in. No arrest can therefore be ordered under the section. The third condition is especially important, since it shows that the purpose of the section is not to assist a creditor in recovering a debt, but to assist him in proving his claim. In many cases he will be able to establish his case without the assistance of the defendant's evidence, and the section then has noapplication. It is therefore necessary, in applications under the section, to demonstrate the way in which the attendance of the defendant is important tothe plaintiff's case. It is not enough generally to state that this is so and the Judge will examine such assertions very carefully. Moreover any order made under the section ceases to operate as soon as the plaintiff obtains judgment since the need for such an order has ended and any security the defendant has given for his attendance is immediately refundable to him.[17] Discerning the general purpose of s 55 is not straightforward. Its text suggests the purpose is to prevent prejudice to current High Court proceedings from a defendant leaving New Zealand. That is consistent with Professor Sutton'sobservation and principles (b), (c) and (d) cited above. However, the reference to provision of a surety as a remedy is more relevant to enforcement of such proceedings if successful. The pending reform of the provision, currently in the form of cl 392 of the Judicature Modernisation Bill, places more stress on the problem being a defendant being about to leave New Zealand with the intention of evading payment of the amount claimed, similar to the equivalent current provision in s 109 of the District Courts Act 1957.32 RJ Sutton The Law of Creditors' Remedies in New Zealand (Butterworths Wellington 1978) at 18-19.3 Poppellwell v Ramadan [2012] NZHC 2650 (per Katz J).[18] In any case, and subject to further consideration below, the essential elements of s 55 are currently that:(a) There are civil proceedings in the High Court.(b) The plaintiff has a good cause of action.(c) There is probable cause for believing the defendant is about to quit New Zealand unless apprehended.(d) The absence of the defendant from New Zealand will materially prejudice the plaintiff in the prosecution of those proceedings.[19] If those elements are established I have a discretion as to whether to order arrest and imprisonment.Application of law to the facts here[20] First, there are civil proceedings on foot in the High Court, albeit they were only filed yesterday and there is an extant protest to the Court's jurisdiction to hearthem.[21] Second, on the limited information available to me, I am satisfied that Mr Hull has an arguable case. It is not clear he will succeed. Mr Zhang has averted to counterarguments which will need to be traversed at trial. But, there is a good cause of action in the sense that it appears seriously arguable.[22] Third, here, prima facie it seems there is probable cause for believing Ms Chung is about to quit New Zealand unless apprehended. However, Mr Zhang argues that what is required is that the defendant is "absconding before judgmentwith the aim of frustrating the plaintiff's proceeding" according to principle (b) ofthe five principles cited above. Mr Zhang submits that "absconding" involves an element of escape. He says there is no evidence of that. Ms Chung's trip to HongKong has been long planned for legitimate reasons and she intends to return.Mr Zhang says that Ms Chung has no intention of frustrating Mr Hull's case. Rathershe has instructed Mr Zhang to oppose it, which he is doing.[23] This involves a question about whether and how the interpretation of the text of s 55 is coloured by its purpose. Mr Zhang's argument resonates better with the text of s 109 of the District Courts Act and the clause of the Bill referred to above. In the (very) limited time I have had available today (as duty judge) for reflection, I consider the better view of the current s 55 is Professor Sutton's: "the purpose of the section is not to assist a creditor in recovering a debt, but to assist him in proving his claim".Whether there is an element of escape might be relevant to whether a creditor can be assisted in proving his or her claim. But the key question in s 55 is whether the absence of the debtor makes a difference to that, as stated in the text and as is the subject of the next question.[24] Fourth, will the absence of Ms Chung from New Zealand materially prejudice the plaintiff in the prosecution of those proceedings? Mr Zhang says it will not because Ms Chung does not have the relevant documentation, which is held by her lawyers. The first part of this claim may have been rather undercut by Mr Zhang'soffer at the end of the hearing to hand up to me documentation relating to the netproceeds of sale, but because I didn't accept the documentation I can't judge that. In relation to the second part of the claim there seems little reason to doubt that MsChung's lawyers have relevant documentation. Mr Zhang says the relevant documentation as to sale price, the mortgage amount and net proceeds can be acquired through third party discovery. I agree that, in these circumstances, MsChung's presence in New Zealand is not essential to the conduct of the proceedings.[25] Mr Zhang also submits there is an essential conflict between the High Court proceedings, based on the trust, and the relationship property proceedings in the Family Court. Mr Zhang says:(a) The net proceeds of the property sale are around $250,000 which would entitle Mr Hull to around $80,000 under the trust if it were split three ways. He has already received $50,000 and has a $25,000 loan from Ms Chung.(b) Mr Hull is arguing in the Family Court that the trust is invalid and should be overturned.(c) Mr Hull's prospects may be better under the relationship propertyproceedings since he is one of two parties there rather than one of three beneficiaries of the trust.(d) Ms Chung may take the position that Mr Hull made almost no financial contribution to the de facto relationship and that there were disproportionate contributions under the Property (Relationships) Act 1976.[26] Overall, Mr Zhang submits the application is an abuse of process because it has been made so late, two days before Ms Chung's departure which Mr Hull hasknown about since at least August 2016. He says Ms Chung would be prejudiced if her first class tickets are non-refundable as well as by the prospect of missing hermother's birthday celebration in Hong Kong and having her other arrangementdisrupted.[27] On Mr Hull's behalf, Mr Smith acknowledged that the arrest and imprisonment of Ms Chung to prevent her leaving New Zealand is a "possibly a bitdraconian". Mr Smith stated that Mr Hull's primary concern is that the funds remainin New Zealand and if he can be satisfied of that, on the basis of disclosure with integrity, he would be delighted if she went to China.[28] I consider that a number of the essential grounds for the exercise of s 55 have been made out. But I am not satisfied that the absence of Ms Chung from New Zealand would materially prejudice Mr Hull in the prosecution of the High Court proceedings. As Mr Zhang says, those proceedings should be allowed to take theircourse. Ms Chung's solicitors are capable of defending the proceedings and have been instructed to do so. The information required can be obtained from othersources if they are not obtainable from Ms Chung's current solicitors. Ms Chung'sabsence from New Zealand need not impede that. The conflict with the Family Court proceedings is likely to be a more significant impediment.[29] Even if I were persuaded that Mr Hull's prosecution of the High Courtproceedings would be materially prejudiced by Ms Chung's absence, I would still not order Ms Chung's arrest and imprisonment. Such a course of action would represent a severe intrusion on her rights and liberties. Mr Hull has made his application very late. And he did not disclose the existence of the Family Court proceedings in his without notice applications yesterday. These aspects of the proceedings do not provide confidence that the arrest and imprisonment application would necessarily prove justified if considered with the benefit of a better evidential foundation than existed today.[30] The injunction granted by Thomas J is still in place. That provides Mr Hull with some assurance of the security of the funds in issue which he says is his main object. To additionally arrest and imprison Ms Chung the day before a long scheduled trip to Hong Kong would be disproportionate to the interests at stake in all the circumstances.Result[31] I decline the application and award costs against Mr Hull. If there is dispute about costs the parties have leave to file and serve submissions within 15 working days of the date of this judgment.Palmer J