Hayat Group Limited (in liq) v New Zealand Customs HC Auckland CIV 2011-404-1652 [2011] NZHC 922 (19 August 2011)

Last Updated: 25 August 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2011-404-1652}

BETWEEN HAYAT GROUP LIMITED (IN LIQUIDATION)

Plaintiff

AND NEW ZEALAND CUSTOMS First Defendant

AND NICHIBO JAPAN TRADING CO LIMITED

Second Defendant

AND BENSON TIU T/A IBC JAPAN Third Defendant

AND A.B-C COMPLIANCE LIMITED Fourth Defendant

AND VEHICLE TESTING NEW ZEALAND LIMITED

Fifth Defendant

AND SAJAD BASSAM Sixth Defendant

Hearing: 18 August 2011

Counsel: R K Sharma for Plaintiff

C Paterson for First Defendant

No appearance by or on behalf of First, Third and Fifth Defendants

D J Clark for Fourth Defendant

A Ram for Sixth Defendant (leave to withdraw) S Bassam, in person, Sixth Defendant

Judgment: 19 August 2011

_{JUDGMENT OF HEATH J}

This judgment was delivered by me on 19 August 2011 at 4.00pm pursuant to Rule 11.5 of the High

Court Rules

_{Registrar/Deputy Registrar}

HAYAT GROUP LIMITED (IN LIQUIDATION) V NEW ZEALAND CUSTOMS HC AK CIV 2011-404-1652

19 August 2011

Introduction

[1] In reliance on s 248 of the Companies Act 1993 (the Act), Mr Patel, as liquidator of Hayat Group Ltd (in liquidation) (Hayat), seeks an order requiring that a motor vehicle (known as BMW7301, Chassis No WBAGL220 20DP38905) (the vehicle) be delivered up to him, together with all original documentation, including de-registration papers. There are two candidates for ownership of the vehicle. One

is Hayat. The other is Mr Bassam.1

[2] The Statement of Claim pleads additional causes of action, involving different parties. They are not before me. The parties agreed, at a case management conference before Associate Judge Sargisson on 15 June 2011, that an application for interim relief in respect of the vehicle could be treated as an opportunity to provide a definitive determination of ownership. Remaining issues will be remitted to an Associate Judge, for continued case management, after I rule on the ownership issue.

[3] The claim comes before the Court in an unsatisfactory way. Much of the evidence is second-hand hearsay, or worse. The primary evidence given by those involved in the acquisition of the vehicle is not supported by contemporary documents to disclose flow of funds and the like. In particular, it is concerning that the liquidator has been unable to place any documentary evidence before the Court to identify when and how funds were remitted to Singapore for the vehicle purchase to be completed. No party required deponents to be available for cross-examination. Any assessment of the evidence must be based on reliability considerations, having regard to the plausibility or otherwise of it. In those circumstances, all parties accepted that I must do the best I could, on incomplete evidence, to determine which

_{of the competing claimants was entitled to a finding of ownership in their favour.}

1 Mr Bassam’s claim merges with one by his sister, Ms Zeinab Tabar, who is not a party to this

proceeding: see para [8] below.

Preliminary issues

[4] A.B-C Compliance Ltd (A.B-C) initially claimed an interest in the car by virtue of an alleged exchange to extinguish a debt owed by Hayat to it. That claim is no longer pursued. A.B-C has lodged a proof of claim in the liquidation for the debt and has elected to participate as an unsecured creditor in the liquidation. For present purposes, A.B-C can be regarded as a stakeholder. It will be required to deliver the vehicle to the party that I find is entitled to it.

[5] There are two issues involving A.B-C, on which its counsel, Mr Clark, addressed me before being given leave to withdraw:

(a) The first concerned costs. Mr Clark submitted that although A.B-C had withdrawn its claim to the vehicle, there was another cause of action against it that was not to proceed. Questions of costs, as between Hayat and A.B-C will be reserved for future determination.2

(b) The second involved the terms of any order requiring A.B-C to deliver the vehicle to the rightful owner. Mr Clark referred me to an affidavit sworn by a director of A.B-C, Mr Ando, to which an exhibit is attached identifying compliance costs incurred of $5584.40. He submitted those costs ought to be ordered to be paid as a condition

precedent to release of the vehicle. I deal with that issue later.3

[6] Mr Bassam was joined as a sixth defendant to the proceeding at the case management conference over which Associate Judge Sargisson presided on 15 June

2011. At that time he was represented by Mr Ram. Prior to the hearing, Mr Ram sought leave to withdraw. After hearing from Mr Bassam, I granted leave. Thereafter, Mr Bassam conducted his claim to the vehicle in person.

[7] Mr Sharma, for the liquidator of Hayat, sought to rely on the voidable transaction provisions of ss 292 and 294 of the Act, as an alternative to the claim for

2 _{See para [28] below.}

3 See para [24] below.

ownership. I declined to hear argument on that issue, for two reasons. First, the procedure mandated by those provisions has not been followed. Second, the liquidator had expressly disavowed that form of relief, before Judge Sargisson. At the conference before her, counsel for the liquidator advised the Court “that the company has chosen not to go down the s 292 path”. The issue of ownership is before the Court for determination and Mr Bassam had responded to arguments based on actual ownership of the vehicle. It is now too late for the liquidator to attempt to rely on another other statutory regime that he had previously elected not to pursue.

[8] Mr Sharma took issue with the absence of Ms Tabar as a defendant, given that Mr Bassam appeared to be making his claim for ownership on her behalf. I pointed out that the liquidator ought to have joined Ms Tabar as a defendant, as he was on notice that she was a candidate for ownership. It is not helpful, at this late stage, for procedural points of this type to be taken by a liquidator seeking to determine true ownership of an asset. After I raised this issue, counsel offered no objection to determination of the ownership issue, without reference to Ms Tabar. For the purposes of this judgment, unless the context requires otherwise, I refer to Mr Bassam as the person claiming ownership, knowing that he is supported by his sister.

The ownership issue

[9] Hayat carried on business importing second-hand cars into New Zealand, primarily from Japan and Singapore. It was placed into liquidation on

7 January 2011. At that time the vehicle was in the possession of A.B-C. That company ensured that imported vehicles were compliant with New Zealand safety requirements. The evidence is not altogether clear on how the vehicle came to be in A.B-C’s custody.

[10] The vehicle was imported from Singapore, through a company called Prestige Auto Export Pte Ltd (the Singaporean company). The evidence suggests that it was ordered by Hayat, but is equivocal as to whether that was done as a principal or as an agent for Mr Bassam, or his sister.

[11] Primary evidence on the contractual arrangements relevant to acquisition of the vehicle was given by affidavit from Mr Omar Chaudhry, the director of Hayat, and Mr Bassam. Evidence was also given by Mr Patel, as liquidator of Hayat, but he had no involvement in the relevant arrangements. Nor does his evidence cast much light on the financial arrangements made among Hayat, its supplier and Mr Bassam.

[12] Mr Chaudhry explains the way in which Hayat imported second-hand vehicles. Mr Chaudhry deposes that a customer would often particularise a vehicle that he or she wanted and Hayat would secure it for them from suppliers overseas. The vehicle would be transported to New Zealand, on the basis that Hayat met vehicle freight and Customs costs.

[13] Mr Chaudhry’s version of what occurred when the vehicle was imported may be summarised as follows:

(a) Mr Chaudhry and Mr Bassam first met in December 2009. At that time Hayat was requested to acquire a 735 BMW 2004. Mr Chaudhry states that he ordered the vehicle and, subsequently, Mr Bassam paid and took delivery of it. Between April and December 2010

Mr Bassam or other members of his family acquired other vehicles on a similar basis.

(b) In October 2010, Mr Bassam, “using his sister’s name (Zeinab Tabar) ordered” the vehicle. Mr Chaudhry says that Hayat paid the purchase price to the Singaporean company. The vehicle arrived in New Zealand in late October 2010. Mr Bassam told Mr Chaudhry that he was “short of funds” and was not even able to meet freight and Custom charges at that time. Mr Chaudhry’s evidence is that the vehicle remained “in bond” with Customs for some two months.

(c) In December 2010 Mr Bassam (or his sister) paid freight and Customs charges, including those incurred by McCullough Ltd, the shipping and Customs agent.

(d) Mr Chaudhry arranged for the vehicle to be delivered to A.B-C.

Mr Bassam had not paid Hayat the purchase price for the vehicle. Therefore, having paid for the vehicle, it remained the property of Hayat.

[14] Mr Bassam’s version of events is materially different. He deposes that:

(a) Earlier in 2010 Mr Bassam had arranged for a Mercedes motor vehicle to be acquired for his sister, Ms Tabar. The vehicle was priced at $20,500. Mr Bassam was asked to co-ordinate payment with Hayat. He made a part payment of $1633.60 to the Singaporean company, while in that country. Mr Bassam says that he arranged for the balance to be paid to Mr Chaudhry by his company, Star Coffee Ltd, on 20 May 2010. He believes that Mr Chaudhry used those funds to pay the Singaporean company.

(b) There was a delay in delivery of the Mercedes. Mr Bassam asked for reimbursement of the money he had paid to Mr Chaudhry but Mr Chaudhry said he did not have the money to repay. Mr Bassam then approached the Singaporean company. It too declined to reimburse the purchase price but did agree to provide a replacement car.

(c) A bill of lading from Worldgreen Shipping Ltd shows Ms Zeinab Tabar as consignee. McCullough Ltd acted as shipping and Customs agent for the Singaporean company. A letter sent by McCullough Ltd to Mr Bassam, dated 8 February 2011, confirms that the vehicle was delivered to A.B-C by McCullough Ltd, on the instructions of Mr Bassam. It also confirms that Ms Tabar was invoiced for and paid freight costs incurred by McCullough Ltd.

(d) Mr Bassam says that he met the costs incurred by McCullough Ltd

which issued an “Import Certificate” to Ms Tabar on 10 November

2010. He says he delivered the car to A.B-C to ensure the vehicle was

roadworthy in New Zealand in December, having been introduced to that company by Mr Chaudhry.

[15] In response to Mr Bassam’s evidence, Mr Chaudhry accepted that a sum of

$20,500 was paid by Mr Bassam for the Mercedes vehicle and that it was passed on to the Singaporean company. Nevertheless, he disputes Mr Bassam’s contention that this money was used to purchase the vehicle. Rather, Mr Chaudhry’s evidence was that two other vehicles were provided as immediate replacements for the Mercedes: a Nissan Skyline 250 GT and a Honda Civic 2004. Mr Bassam disputes that version of events.

[16] A degree of complication arises out of correspondence generated after Hayat was placed in liquidation on 7 January 2011. For example:

(a) On 13 January 2011, the Singaporean company wrote a “To whom it may concern” letter to verify that “we sent our [vehicle] to Mr Sajad Bassam Tabar, sister Ms Zeinab Tabar”, on 5 October 2010. The letter went on to say that Mr Bassam and Ms Tabar were the “rightful owner of this vehicle”.

(b) On 17 January 2011, after Mr Bassam had made a complaint of theft to the police in relation to the vehicle, Mr Patel, as liquidator, wrote to an officer at the Auckland Central police station confirming that “Hayat Group Ltd (in liquidation) has no interest in this motor vehicle as it has been clearly imported by Mr Bassam”.

(c) On 23 February 2011, the Singaporean company wrote another “To whom it may concern” letter confirming that the vehicle had been “purchased by Hayat on behalf of Mr Bassam and is paid in full by them”. No money was said to be owing on the vehicle.

(d) On 3 June 2011, at the request of Mr Patel, the Singaporean company

again wrote a “To whom it may concern” letter in which it was

clarified that the initial letter of 13 January 2011 was written “on the assumption that Mr Bassam had paid for the vehicle to Hayat”.

[17] Mr Chaudhry referred to an exhibit to his first affidavit in which Mr Bassam allegedly texted Mr Chaudhry asking him to contact “Bilal” (the name used by Muhammed Bilal Mirza, the author of the letters from the Singaporean company) so that someone could change the wording in the letter so he could get the car back. No date is given for receipt of the text message but there is evidence that a message to that effect was forwarded by email by Mr Chaudhry to Mr Patel on 14 February

2011. As it is the second letter of 23 February 2011 that is more favourable to Hayat’s interests, it is surprising that Mr Bassam might have tried to get the wording changed when the first letter of 13 January 2011 made it clear that he was the owner of the vehicle.4

[18] I record that no submissions were made to me on the applicability or otherwise of default rules contained in either the Sale of Goods Act 1908 or the Sale of Goods (United Nations Convention) Act 1994. I have not considered whether those statutes assist. Rather, as contemplated by the parties, I consider whether it is more likely than not that either Hayat or Mr Bassam is the owner of the vehicle.

[19] The most troubling aspect of this case is the absence of evidence showing the flow of funds through which the vehicle was purchased. It is clear that the Singaporean company received payment for the vehicle but its correspondence does not identify when and how the moneys were received. In dealing with the identity of the person paying the purchase price, there is a continuing reference in the later correspondence to Hayat acting on behalf of Mr Bassam. There is nothing reliable in the correspondence from the Singaporean company on which I can place weight for ownership purposes.

[20] Although Mr Patel has deposed that the landlord locked the premises from which Hayat operated, on termination of the lease, there is no explanation of why he could not later obtain access to the premises or, alternatively, seek records from a

_{bank or other financial institution that Hayat used to make payment to the}

4 See para [16](a) above.

Singaporean company for this vehicle. Also, it should have been relatively straightforward to obtain some form of documentary evidence to demonstrate what happened to the funds paid by Mr Bassam to Hayat in relation to the Mercedes vehicle. The absence of evidence of that type tells against Hayat’s claim to ownership.

[21] On the other hand, despite discrepancies in the evidence about the circumstances in which the vehicle came to be in the possession of A.B-C (incapable of resolution in the absence of cross-examination) the evidence overall suggests that Mr Bassam’s explanation is more likely to be correct. I say that on the basis of the relatively informal way in which Mr Chaudhry appears to have done business and the absence of expected documentary evidence that could rebut what Mr Bassam has said.

[22] Although it was suggested that Mr Bassam had elected to be treated as a creditor in the liquidation (by filing a proof of claim), I do not consider that step was unequivocal. At all times, he sought to pursue his ownership claim. That is the difference between his and A.B-C’s respective positions.5

[23] In my view, having regard to his explanation of the way in which events unfolded,6 I consider it is more likely than not that Mr Bassam is the owner of the vehicle. I shall make a formal declaration to that effect.

Result

[24] On the first cause of action in the Statement of Claim (seeking delivery of the vehicle to the liquidator) I make the following orders:

_{(a) I declare that the vehicle is owned by Mr Bassam.}

5 _{As to A.B-C, see para [4] above.}

6 See para [14] above.

(b) A.B-C shall deliver the vehicle to Mr Bassam, subject to reasonable costs incurred by A.B-C in relation to its compliance services being paid by Mr Bassam.

(c) A.B-C shall deliver to Mr Bassam all original documentation, including de-registration papers, required for the vehicle to be registered and used in New Zealand.

(d) In the event that there is any dispute over the costs incurred by A.B-C, the vehicle shall be released immediately on payment into Court of a sum of $5000.

[25] If payment into Court were made, an Associate Judge could rule on the amount to be paid to A.B-C. Both parties should be aware, however, that a costs order is likely to be made against an unsuccessful party. Resolution of this issue by agreement is encouraged.

[26] Hayat shall pay to Mr Bassam costs on a 2B basis, together with reasonable disbursements, in relation to steps taken up to (but not including) the filing of the solicitors’ application for leave to withdraw.

[27] The proceeding is remitted to an Associate Judge for a case management conference to be held in respect of remaining issues raised by the Statement of Claim. That will include the allocation of a hearing date for an application for security for costs made by New Zealand Customs.

[28] As questions of costs as between A.B-C and Hayat involve a cause of action other than the one with which I have determined, those costs shall be decided by an Associate Judge, on receipt of memoranda. Any memorandum from A.B-C shall be

filed and served on or before 26 August 2011. Any memorandum from Hayat shall

_{be filed and served on or before 12 September 2011.}

_{P R Heath J}

Delivered at 4.00pm on 19 August 2011

Solicitors:

Shean Singh, PO Box 10018, Mt Eden, Auckland

Meredith Connell, PO Box 2213, Auckland

Wilson McKay, PO Box 28-347, Remuera, Auckland Amicus Lawyers, PO Box 68-559, Newton, Auckland Duncan Cotterill, PO Box 10-379, Wellington