WORLDCLAIM NEW ZEALAND LIMITED v SAYERS [2017] NZHC 1053

WORLDCLAIM NEW ZEALAND LIMITED v SAYERS [2017] NZHC 1053 [19 May 2017]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2017-409-000319[2017] NZHC 1053BETWEEN WORLDCLAIM NEW ZEALANDLIMITEDPlaintiffAND GUY EDWARD SAYERSFirst DefendantAND THE CLAIMS CONSULTANCYLIMITEDSecond DefendantAND G-EXCHG LIMITEDThird DefendantAND WYK LIMITEDFourth DefendantHearing: 18 May 2017 (On the papers)Appearances: R W Raymond QC and A V Foote for PlaintiffJudgment: 19 May 2017JUDGMENT OF DUNNINGHAM J[1] WorldClaim New Zealand Limited (WorldClaim NZ) is a New Zealand registered company, operating as a branch office of WorldClaim Global Claims Management (WorldClaim Global). WorldClaim Global describes itself as a public adjusting company to act on behalf of insureds to resolve claims with their insurers. In return for advancing and resolving a claim on an insured's behalf, it takes a shareof any returns it is able to achieve above what the insured has already been offered.[2] WorldClaim NZ was set up in Christchurch following the Canterbury earthquakes in 2010 and 2011. Its directors are Mr Andrew (Andy) Fusco, who is resident in the United States, and the first defendant, Mr Guy Sayers, who is also aUnited States citizen but who resides in Christchurch, and who has effectively been managing WorldClaim NZ since its establishment.[3] Because of recent events, which I will detail below, WorldClaim NZ seeks, on a without notice basis, a search order, freezing order and interim injunction against Mr Sayers, and three companies Mr Sayers has established in New Zealand. The orders are sought in order to protect and secure potential evidence, and preserve assets, for the purpose of pursuing a claim against Mr Sayers for:(a) breach of duties owed to the plaintiff; and(b) fraud.[4] These are serious allegations, and the orders sought are extensive. However, having reviewed the evidence supplied, and having regard to:(a) the undertakings and other safeguards proposed by the applicant, including the appointment of independent solicitors, to participate in the execution of the orders; and(b) the ability of the defendants to promptly seek variation or discharge of the orders.I consider it is appropriate to make the orders and I did so on the morning of 18 May 2017.[5] At the time of issuing the order I advised that a short decision, setting out my reasons for making the orders, would follow. This is that decision.Background[6] WorldClaim Global was established by Mr Fusco and is based in the United States of America. However, it has also set up offices in other countries to assist clients with insurance claims and, following the Canterbury earthquakes, it set up WorldClaim NZ on 17 March 2011.[7] On 13 September 2012, Mr Sayers, an employee of WorldClaim Global, was formally seconded to work for WorldClaim NZ, in Christchurch. The terms of that secondment were covered by an agreement. However, his remuneration and benefits under the secondment agreement were different from those which applied when he worked in the United States.[8] WorldClaim NZ's Christchurch office was busy in the years following theearthquake. At one stage, it employed up to 13 people. However, the work is now tailing off and, at present, Mr Sayer is the only remaining employee of WorldClaim Global as a secondee to WorldClaim NZ. Understandably, he has day to day management of the company and oversees files and clients. Because of the New Zealand Companies Office requirements to have one director of a New Zealand company living in New Zealand or Australia, Mr Sayers was appointed as a director of WorldClaim NZ on 19 November 2015.[9] Because WorldClaim NZ had large numbers of clients, a database was maintained on the company's computer system to record clients, commissions, fees, settlement agreements and other information relevant to WorldClaim NZ's business.However, Mr Fusco says Mr Sayers has not updated the company's database with this information since 2015, when one of the administrative staff left.[10] As a consequence of the differences between the terms of Mr Sayers'employment agreement with WorldClaim Global, and his secondment agreement to WorldClaim NZ, a dispute has arisen over Mr Sayers' entitlement to commission. While there have been exchanges between Mr Fusco and Mr Sayers over this, it has not been resolved. It culminated with Mr Sayers issuing a statutory demand, in late April 2017, in the sum of $208,071.65. That claim is disputed by WorldClaim Global and it has applied to set aside the statutory demand.[11] However, the above matters only provide context for the matters which have been discovered and which have led to the present applications.[12] Ms Nicole Crabtree, the office manager for the New York office of WorldClaim Global, has provided affidavit evidence about Mr Sayer's operation ofWorldClaim NZ. This information has generated concerns that Mr Sayer has not accounted to WorldClaim NZ for all clients, and therefore commissions he has earned, and has also engaged in other, unauthorised, business activities for which he has not accounted for commissions earned. Specifically, he has advised clients to invest their insurance proceeds in Arena Capital Limited, trading as Blackfort EX (Arena Capital). The company turned out to be operating a Ponzi scheme and it was placed into liquidation on 24 July 2015.[13] Ms Crabtree explains that she had sought information from Mr Sayers regarding all outstanding claims and projections as these were not available on the WorldClaim NZ database which was reviewable from the Head Office. Furthermore, when information was requested, Mr Sayer did not respond. She explains that she"started looking into his email on a whim based on the lack of communication wehad from Guy since he declined the phone conference that Andy set up".[14] She noticed an email from someone called Brett O'Connor that mentionedpayment arrangements. That led to inspecting a sequence of deleted emails on Mr Sayers' company email account which said that the client had received funds and would need to get WorldClaim NZ's details to send on the fee. She then located theinvoice and email sent to this client, although the O'Connor claim had never beenlisted by Mr Sayers as a WorldClaim NZ matter. She then noted that the invoice itself had substituted an account number for payment which was not that of WorldClaim NZ. Mr Fusco confirms that the bank account number at the bottom ofthe invoice is Mr Sayers' personal Westpac account number. He knows this because it was an account to which WorldClaim Global had previously paid funds forreimbursement of Mr Sayers' personal expenses.[15] Ms Crabtree also explains that, while her access to documents is limited, she has found evidence of one further client that Mr Sayers signed up on 10 March 2017, but which has not been disclosed to WorldClaim.[16] In addition to this, Ms Crabtree's review of Mr Sayers' deleted and sentemails found evidence that he had used his company email account to carry on business with, and for, another business, Arena Capital. This was business he wasnot authorised to undertake for WorldClaim NZ, although he appeared to be using his work email and work footer for this correspondence.[17] From the emails which were able to be reviewed, and where screenshots have been taken and provided to the Court, there is evidence that Mr Sayers encouraged WorldClaim NZ clients who had come into funds, to make investments in Arena Capital. Furthermore, at least one of these emails shows that Mr Sayers received a commission from Arena Capital which he directed to be paid to his personal BNZ account.[18] For completeness, Mr Fusco explained that on discovering the O'Connorinvoice he spoke with Mr Graham Odams, who had been appointed as an intermediary to resolve the dispute over commissions, and advised Mr Odams about it. Mr Odams suggested that Mr Sayer be written to requesting repayment. Within an hour of that conversation, WorldClaim NZ's accountant, Mr Nigel Lundy, received an email from Mr Sayers, apparently arranging for GST to be paid on the amount received from the O'Connors. Mr Fusco says that Mr Sayers did not disclose to Mr Lundy where the funds had come from or the basis on which theywere paid. Mr Fusco's belief is that Mr Sayers was advised by Mr Odams of theO'Connor invoice being found and was trying to "legitimise" his payment once itwas clear that it had been discovered.[19] Other relevant events have also caused the plaintiff concern. For example, on 8 May 2017, Mr Sayers incorporated a new company called The Claims ConsultancyLimited. The company's business is described in its certificate of incorporation as"claims assessment". Mr Fusco's concern is that, in 2017, such a company wouldnot pick up any new clients, and he therefore considers that Mr Sayer may be intending to transfer WorldClaim NZ clients to the new company, or clients he has been accumulating outside of WorldClaim NZ, in order to commence business on his own account.[20] Mr Fusco is also aware that Mr Sayers took steps on 12 April 2017 to open a new account with the ANZ bank in WorldClaim NZ's name, without authorisation.The claims[21] In these circumstances, the plaintiff says there is a very strong case that funds have been withheld from it by the first defendant, Mr Sayer. As the first defendant is a director of the plaintiff, he owes duties to it and would be liable for breach of those duties if he has been diverting funds which rightfully belong to the plaintiff, for his own benefit. It would also be fraud. The plaintiff has provided a draft statement of claim setting out the intended claims against the first defendant.[22] In the meantime, the plaintiff seeks to preserve evidence and to ensure funds are not dissipated, to protect its ability to enforce any judgment in its favour. Mr Sayer is, to the best of Mr Fusco's knowledge, a US citizen. He does not knowwhether Mr Sayer is also a New Zealand citizen. He understands Mr Sayer has recently married a woman, believed to be originally from South Africa. Mr Sayer has no other known connections to New Zealand. His assets other than the bank accounts identified in the application are unknown, and no real property has been identified as being in his name in New Zealand.[23] The second defendant is a company in respect of which Mr Sayers is the sole director and shareholder. It was incorporated in May 2017. As already explained, based on the information lodged with the Companies Office, this company looks to be set up to act and conduct business in the same way as WorldClaim NZ.[24] The third defendant is the company which Mr Sayers used to invoice WorldClaim Global for his commissions. Orders are sought in relation to it as it is not known what use, if any, Mr Sayers made of the company and whether it has been used for the diversion of funds, which are properly those of the plaintiff.[25] The fourth defendant is a company which was incorporated in 2013. It appears to have been used for investments with Arena Capital, the company which was placed into liquidation in 2015 and which was revealed to be a Ponzi scheme. It is evident from the emails which have been seen by representatives of the plaintiff that Mr Sayers was receiving payment of commission from the investment of funds received by WorldClaim NZ clients from this company.[26] In summary, as the plaintiff explains, the extent of each of the second to fourth defendants' involvement in the alleged deception to the plaintiff is currently not known. However, the plaintiff seeks to freeze assets connected with all these companies which are associated with the first defendant, so it can identify what assets are held in each account and where funds might have come from.Freezing order sought[27] The plaintiff seeks a freezing order in relation to all bank accounts related to the defendants. These accounts have been either identified by account number, or by association with the named defendants. The proposed order also extends to funds held to the credit of any of the defendants which are held by the solicitors acting for the defendants.[28] The orders are sought because there is a "genuine concern that funds may be transferred out of the New Zealand jurisdiction", particularly as Mr Sayers has noties to New Zealand, nor are there any other apparent assets held by Mr Sayers in New Zealand. The plaintiff's concern is that if the funds are spent or moved, there is unlikely to be recovery.Search order sought[29] The search order is sought to preserve evidence that the plaintiff considers may otherwise be lost or destroyed. The affidavit evidence explains the plaintiff'sconcerns that the first defendant has operated outside the WorldClaim NZ IT systems, and evidence will most likely be held on individual devices in the possession of the first defendant. The plaintiff has been limited in its ability to access information from its IT systems because, for example, if it attempted to restore deleted emails that would bring the files back into Mr Sayers' inbox andwould alert him to the fact this information was being reviewed.[30] Given the significant distrust between the parties because of the commission dispute, and given the nature of the claims now being made, I consider the plaintiff'sconcerns that information may be stored on private devices or attempted to be removed from the company's devices are reasonably founded.Interim injunction sought[31] The plaintiff also seeks various interim injunctive relief which is designed to support and facilitate the search orders and freezing orders. The terms of the interim injunction require the defendants to deliver up to the plaintiff's solicitor, mobilephones, computers, computer hard drives or other data storage devices used by any of the defendants, and restrain them from deleting, copying, destroying or otherwise altering or interfering with any of the information on any of the hardware or stored on behalf of the defendants on any server or cloud storage device.[32] The interim relief also seeks to restrain the first defendant from leaving the jurisdiction of the Court, and requires him to deliver up every passport issued to him. Finally, he is required to disclose all bank or other accounts held in the defendants'names and various wide ranging orders regarding other income and transfers of property during the period he was director of the company.[33] In addition to the applications for a search order, freezing order and interim injunction, I have to consider the appropriateness of dealing with the application without notice.[34] For the reasons I set out below, I have determined that it is appropriate to make orders on the terms sought by the plaintiff.Search order – conclusions[35] The general principles in determining whether a search order should be made were first put forward by Ormrod LJ in Anton Piller KG v Manufacturing Processes Ltd,1 and accepted in New Zealand in Busby v Thorn EMI Video Programmes Ltd.2[36] These principles have now been set out in r 33.3 of the High Court Rules and, applied to this case, are:1 Anton Piller KG v Manufacturing Processes Ltd [1976] 1 All ER 779 (CA) at 784.2 Busby v Thorn EMI Video Programmes Ltd [1984] 1 NZLR 461 (CA).(a) the plaintiff has a strong prima facie case on an accrued cause of action against the defendant;(b) the potential or actual loss or damage to the plaintiff will be serious if the orders are not granted;(c) there is sufficient evidence that the defendant possesses the material that the plaintiff is seeking; and(d) there is sufficient evidence that there is a real possibility that the defendant may destroy the material in question, or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the Court.[37] I am satisfied, based on the factual evidence set out above and explained in more detail in the supporting affidavits of Ms Crabtree and Mr Fusco, that a cause of action against Mr Sayer has accrued, and is of sufficient strength to justify this relatively intrusive remedy. While the evidence gleaned from a search of emails on the WorldClaim NZ IT system is limited, it does, at least prima facie, provide strongevidence for the plaintiff's claims.[38] In terms of whether there is potential or actual serious loss or damage, at present the evidence only points to the loss of approximately $82,000, but that, in itself, is not an inconsequential sum. However, the risk that other diversion of profits has occurred is real. There is also evidence of potential loss or damage to:(a) the reputation of WorldClaim NZ, given the association with the failed Arena Capital company, and(b) the possibility that Mr Sayers is setting up in competition to WorldClaim NZ and will take its clients.All of these matters are, in my view, serious enough to warrant the granting of a search order.[39] I am satisfied that the affidavit evidence supplied provides a sufficient basis for believing the first defendant possesses the material sought.[40] Finally, I am satisfied that there is a real possibility that the material will be removed or caused to be unavailable. There is evidence to support a concern that Mr Sayer will seek to delete or otherwise remove incriminating evidence. This has already occurred. He has failed to maintain records on the WorldClaim NZ database, and there is evidence that he has deleted emails of offending transactions. Even without this, I consider the threshold set out Busby v Thorn EMI, is met in that thereis "enough evidence to show that the plaintiff has reasonable grounds for fearing that evidence will go".3[41] I also record that it is relevant to my decision that the plaintiff has incorporated a number of protections for the defendants in the terms of the order. They have appointed independent solicitors who have provided written undertakings,including "to ensure that members of the search party act in conformity with the order and that the order is executed in a courteous and orderly manner and in amanner which will minimise disruption to the defendants". Furthermore, thesesolicitors are required to prepare a report to the Court about the search. I have determined that report should be provided within 20 working days of the search being completed and, in a further 20 working days, the parties will be given an opportunity to be heard on that report and to be heard on the appropriate ancillary orders which may flow from the outcome of the search. Finally, the orders include reserving leave to the defendants to move to vary or discharge the order or any partof it by giving the plaintiff's solicitors 24 hours notice.[42] These, in my view, provide sufficient safeguards that it is appropriate to grantthe orders sought on the plaintiff's without notice application.3 At 467.Freezing order – conclusions[43] The freezing order was first sanctioned in Mareva Compania Naviera SA v International Bulkcarriers SA ("The Mareva"),4 when Lord Denning MR said:5If it appears that the debt is due and owing, and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets.[44] The general principles in determining whether a freezing order should be made were set out by Gault J in Bank of New Zealand v Hawkins.6[45] These principles have now been set out in Part 32 of the High Court Rules 2016 as:(a) the plaintiff has a good arguable case against the defendant;(b) the defendant has assets to which the orders can apply;(c) there is a danger that, unless the defendant is restrained, a judgment will be wholly or partially unsatisfied because the defendant might abscond, or the assets of the defendant might be removed from New Zealand or from a place inside or outside New Zealand or otherwise disposed of, dealt with, or diminished in value; and(d) the overall justice of the matter.[46] The requirement for a good arguable case for a freezing order to be made against the first defendant has been expressed in different ways.[47] In Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG("The Niedersachsen"), Mustill J, considering the level of proof commented that:74 Mareva Compania Naviera SA v International Bulkcarriers SA ("The Mareva") [1980] 1 All ER (CA) 213.5 At [25].6 Bank of New Zealand v Hawkins (1989) 1 PRNZ 451 (HC).7 Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG ("The Niedersachsen")[1983] 1 WLR 1412 (CA) at 1418.I consider the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success.[48] For the same reasons as I consider there is a strong prima facie case against the first defendant sufficient to support the search order, I consider there is a good arguable case to support the freezing order. The evidence strongly suggests that the funds have been diverted by the first defendant in breach of his obligations to the plaintiff and where those funds have ended up is not known. Similarly, the evidence suggests that the first defendant has been running a referral scheme by which he received commissions for referrals to the purported investment funds of Arena Capital, which, again, strongly supports the plaintiff's claim that various obligations have been breached by the first defendant.[49] In terms of whether there are assets to which the orders can apply, it is clear that money held in bank accounts is such an asset, and there is sufficient evidence to suggest money which the plaintiff claims has been transferred to or held in one or more of the bank accounts sought to be frozen.8[50] In terms of there being a danger that unless the first defendant is restrained, a judgment be wholly or partially unsatisfied because the defendant might abscond or remove assets from New Zealand or otherwise dispose of or deal with or diminish them in value, I consider the nature of the claim itself supports the plaintiff's beliefthat the first defendant is at risk of dealing with the assets. The allegations centre on evidence which suggests the first defendant is capable of dissipating assets that are rightfully the property of the plaintiff. In this case, there is the added concern that the first defendant has no particular ties to New Zealand. He is from the United States, his wife is from South Africa, and there was no evidence that he owns property or other fixed assets in New Zealand. I consider there is a sufficient risk of him dealing with assets that this requirement is met.[51] Finally, in terms of the overall justice, I consider it is appropriate to make the order. Again, I take account of the fact that the orders are made subject to the8 Rasu Maritima SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1978] 1 QB 644 (CA).defendants' ability to apply on 24 hours notice to vary or discharge the order. If thefirst defendant can demonstrate that, it would be unfair to tie up these assets in thecurrent form, or that the plaintiff's concerns can be met through other protections,then there is flexibility to alter the terms of the freezing order to reflect those circumstances.Interim injunction - conclusions[52] Finally, I consider the injunctive relief that is sought to support the efficacy of the search orders and the freezing orders. Given my stated views on the seriousness of the question to be tried and the need for the search and freezing orders, I consider the balance of convenience favours at least interim protection and assistance for theplaintiff so that it can pursue its claim. Again, I consider that the defendants' abilityto seek amendments to the orders is a sufficient safeguard against them being unjust.[53] I also note that the plaintiff has provided an undertaking to damages as is required, and this too, supports the relief being granted. Taking these factors into account I consider the overall justice points to the granting of an interim injunction on the terms sought.Result[54] Accordingly, I have made orders on the terms sought, but with the inclusion of timeframes in which the independent solicitors are to provide their search report and for the Court to convene a hearing (should that be necessary), to consider issues arising out of the report and the interlocutory orders required.Solicitors:R W Raymond QC, ChristchurchDuncan Cotterill, Christchurch