FLAXPOD INVESTMENTS LIMITED v GERBES [2023] NZHC 1811

FLAXPOD INVESTMENTS LIMITED v GERBES [2023] NZHC 1811 [11 July 2023]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2023-485-386[2023] NZHC 1811IN THE MATTER OF a personal guaranteeBETWEEN FLAXPOD INVESTMENTS LIMITEDApplicantAND MARK GERBES AND KATHRYNGERBESRespondentsTeleconference: 11 July 2023Counsel: G S McCardle for the ApplicantJudgment: 11 July 2023JUDGMENT OF PALMER JSolicitorsBMS Lawyers Ltd, ParaparaumuWhat happened?[1] Flaxpod Investments Ltd (Flaxpod), the applicant, is the landlord of premisesleased by Spectrum Collision Repairs (Spectrum) which is now in liquidation. Therespondents, Mr Mark and Ms Kathryn Gerbes, are the guarantors under the deed oflease. Mr Gerbes was the sole director, and the Gerbes together were the shareholders,of Spectrum. The lease expires in March 2028.[2] Ms Katrina Sowry is the sole director of Flaxpod. She has provided an affidavitto the effect that there are current outstanding obligations of Spectrum under the leaseof $23,445.17 in rent arrears and outgoings which continue to mount monthly. Shesays that Spectrum is liable to reinstate the premises at the end of the lease at anestimated cost of $57,000. Ms Sowry's evidence is that the Gerbes have not paid thelease obligations despite demands through solicitors and have shown no willingnessto meet any obligations under the lease. She says that Ms Gerbes has told her theywould not be meeting the lease obligations for the remainder of the term and that theGerbes have commented that they would like to move to Australia.[3] Ms Sowry's evidence is that the Gerbes have an unconditional sale agreementover their main asset, at Kotuku Drive, Paraparaumu. She understands that the Gerbesintend to distribute a significant portion of the proceeds of sale to their family.Application[4] Flaxpod applies, without notice, for:(a) a caveat over the Kotuku Drive property, preventing the transfer of titleuntil the Gerbes give an undertaking to the Court to hold the proceedsof sale, after repayment of the first mortgage, on trust, pendingresolution of the proceedings in enforcing the guarantee under the deedof lease;(b) an order that the Gerbes give an undertaking to hold the proceeds ofsale, after repayment of the first mortgage, on trust pending resolutionof the proceedings in enforcing the guarantee under the deed of lease;and(c) any other orders the Court sees fit to make.[5] Flaxpod believes that applying on notice to the Gerbes could allow settlementof the sale and disposition of the proceeds before it can apply for a judgment debt,which would cause it serious prejudice and financial hardship.Orders[6] On the basis of the evidence before me, I accept that Flaxpod has genuinereason for concern over dissipation of the assets at issue if the application were to bemade on notice.[7] Flaxpod is effectively applying for an interim injunction before thecommencement of proceedings. It relies on r 7.53 of the High Court Rules 2016,which provides that such an application may not be made except in the case of urgencyand that any injunction granted before the commencement of the proceeding mustprovide for the commencement of the proceeding and may be granted on any furtherterms that the Judge thinks just. I am satisfied that there is urgency here and theapplication is properly made.[8] In considering an application for an interim injunction the Court must examinewhether there is a serious question to be tried, consider the balance of convenience forthe parties, pay particular attention to whether damages would be an adequate remedy,and assess the overall justice of the position.1 I consider the evidence provided to theCourt to date supports the existence of a serious question to be tried. I do not haveinformation about the inconvenience of the injunction sought for the respondents but,on the basis of the information provided, I consider the balance of convenience favoursthe applicant. The information I have about the respondents also suggests thatdamages is not likely to be an adequate remedy.1 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; CabcoGroup Ltd v Bartlett (2009) 6 NZELR 500 (HC) at [30].[9] Accordingly, I order an interim injunction with the effect sought. However, Iomit the language of "undertaking" which confuses the court's order with an action bythe respondents. And I make the injunction more direct in prohibiting the Gerbes fromdisbursing the proceeds, other than by repaying the first mortgage.Result[10] I order:(a) the respondents, Mr Mark and Ms Kathryn Gerbes, must not disbursethe proceeds of sale of 44 Kotuku Drive, Paraparaumu (Record of Title308927, Lot 225 Deposited Plan 376894) to any third parties, except byrepayment of the first mortgage, until resolution of the substantiveproceedings;(b) the applicants must file a statement of claim in the substantiveproceedings within five working days;(c) leave is reserved for any party to apply, on three days' notice, to varyor discharge the orders above;(d) the proceedings will be called in the Judge's Chambers List in theWellington High Court at 10 am Monday 31 July 2023 to reviewprogress. The parties should file and serve memorandum by noonThursday 27 July 2023 to update the Court; and(e) the applicants' counsel must provide this judgment, along with theCourt's formal order, to the respondents and/or their solicitors,forthwith.Palmer J