Devoy v Goldex International Services Ltd [2013] NZHC 103 (7 February 2013)

High Court of New Zealand

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Devoy v Goldex International Services Ltd [2013] NZHC 103 (7 February 2013)

Last Updated: 20 February 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-001313 [2013] NZHC 103

BETWEEN ELI DEVOY First Plaintiff

AND AKIKO ITO Second Plaintiff

AND ALIREZI NOROUZY Third Plaintiff

AND DANA OMIDVAR Fourth Plaintiff

AND HASSAN AREFI Fifth Plaintiff

AND SACHITO SHIOZAWA Sixth Plaintiff

AND ZOHREH AZIMI Seventh Plaintiff

AND GOLDEX INTERNATIONAL SERVICES LIMITED

First Defendant

AND HAJI ABD RAHMAN AWG HAJI DAMIT

Second Defendant

AND DEMIN SERGEY VLADIMIROVICH Third Defendant

Hearing: On the papers

Counsel: M W Ryan for Plaintiffs

Judgment: 7 February 2013

_{JUDGMENT OF COURTNEY J}

DEVOY & ORS V GOLDEX INTERNATIONAL SERVICES LTD & ORS HC AK CIV-2012-404-001313 [7

February 2013]

[1] The plaintiffs have sued the defendants alleging financial loss through investments made by them in reliance on misrepresentations by the second defendant, Haji Damit. It is alleged that Mr Damit made the representations on behalf of himself, the first defendant, Goldex International Services Limited, and the third defendant, Demin Sergey Vladimirovich. In July 2012 the plaintiffs obtained judgment by way of formal proof against Goldex and Mr Damit. At that stage, Mr Vladimirovich, who lives in Russia, had not been served.

[2] In December 2012, with Mr Vladimirovich still not served, the plaintiffs applied for a freezing order against him on a without notice basis seeking to freeze funds held by an unrelated company, Velocity Trading Limited, on Mr Vladimirovich’s behalf. Katz J refused that application on the basis that there was insufficient evidence on which to find that there existed a good arguable case against him that would justify such an order. The plaintiffs now apply afresh, with further evidence put before the Court in an affidavit by one of them, Hassan Arefi. An undertaking as to damages has also been filed.

[3] Under r 32.2 of the High Court Rules the Court may make a freezing order restraining the disposition of assets either within or outside New Zealand. The settled requirements for a freezing order are:[1]

(a) There is a good arguable case against the defendant;

(b) Assets exist either inside or outside the jurisdiction to which the order can apply;

(c) There is a risk that the assets will be dissipated;

_{(d) The plaintiffs provide an undertaking of the damages.}

[4] In the Statement of Claim it is alleged that Mr Damit made various representations to the effect that he, Goldex and Mr Vladimirovich were specialist investment traders in the international gold market, that the plaintiffs would benefit from substantial returns if they invested their money with the defendants and that they would be guaranteed against any loss. The plaintiffs claim that they invested money with Goldex in November 2011 in reliance on those representations but subsequently suffered substantial losses. Although Mr Vladimirovich had not been served with the proceedings there had been correspondence with him about the plaintiffs’ claims; Russian lawyers wrote on his behalf denying that he had ever been an investment adviser or involved in gold market trading and had not authorised anyone to conduct negotiations, enter into conduct into contracts or provide services for investing in international gold markets.

[5] In his affidavit Mr Arefi has produced a copy of a document in Russian with a translation which shows it to be a power of attorney by Demin Sergey Vladimirovich dated 24 June 2011, effective for one year, authorising Mr Damit:

To be my representative in all institutions and organisations in any country, including all credit institutions, banks, in all branches, with the right of opening to my name in any banks of any bills, including in foreigh currency, to conclude bank contracts, to place money on the accounts opened to my name money, for which I authorise to sign and submit the applications on my behalf, to receive and file all the necessary certificates and documents, to sign for me and do all the actions associated with this request.

[6] Mr Arefi also gave evidence of dealings between him and Mr Damit said to be taken in accordance with the power of attorney. In particular, he deposed that Mr Damit opened a margin trading account at Velocity Trading Limited in the name of Sergey Demin (a shortened version of Mr Vladimirovich’s full name). The margin trading account opening form has been produced. The contact details include an email address of [e-mail] which Mr Arefi maintains is Mr Vladimirovich’s email address.

[7] Mr Arefi has produced an email from Mr Damit dated 28 June 2011 requesting Mr Arefi to open an account with Velocity on Mr Vladimirovich :

Please find the attachment file for Demin Sergey Vladimirovich, Russia to open Forex ac in Velocity for USD200K. I would be grateful if you could open for him online ac on behalf, the payment will be sent [sic] on this Thursday directly from Russia to New Zealand under velocity nominated account.

[8] Mr Arefi has deposed that this email followed an unsuccessful attempt by him and Mr Damit to open bank accounts at the ANZ. Their attempts to do so were unsuccessful because the ANZ required Mr Vladimirovich to be present in person rather than accept the power of attorney.

[9] The next piece of evidence was that, according to Mr Arefi, he and Mr Damit kept in touch by email regarding aspects of their business dealings including in relation to Goldex and that Mr Damit copied these emails to Mr Vladimirovich using the email address [e-mail]. These include the following emails from Mr

_{Damit, copie}d to [e-mail]:

29 June 2011 “My partner in Russia confirm to increase his deposit to 300K

and waiting for his account to be opened in Velocity asap, herewith I attached

_{the signed form for your attention ...}

On 4 July 2011 “due to urgent matters the current account for Russian partner

_{should be ready today ...}

On 6 July 2011 “I have received the confirmation from Russian partner that

they received the letter from regina ANZ Bank already. The transfer for both

150K has been done already yesterday to Velocity total 300K and the copies swift transfer will be sent to you also once I got the copy from him. The New

_{Zealand Goldex is officially launched ...”}

[10] Mr Arefi also deposed that he spoke with Mr Vladimirovich on the phone more than 15 times, mainly to discuss business ventures and finding new investers. The last calls that took place, however, related to his concerns over missing money.

[11] Finally, Mr Arefi has deposed to the incorporation on 15 July 2011 of Steel

Way NZ Limited, a limited liability company, with its registered office in Auckland.

He deposed that this company was to be used as an investment vehicle by himself, Mr Damit and Mr Vladimirovich. Mr Arefi and Mr Damit were directors of the company and Mr Vladimirovich was shown as holding 50 per cent of the shares in it.

[12] The significance of this evidence is that, contrary to the statements made by Mr Vladimirovich’s lawyers, there is reason to think (based on the documents now produced by Mr Arefi) that Mr Damit did have authority to make representations on behalf of Mr Vladimirovich, open bank accounts and generally deal with matters on his behalf in New Zealand. Coupled with the fact that Mr Damit did not resist the allegations against him made by the plaintiffs I conclude that there is a good arguable case that the allegations the plaintiffs made in their Statement of Claim will be proven.

Assets and risk of dissipation

[13] There is evidence that approximately NZ$430,000 is held by Velocity

Trading Ltd in an account for Mr Vladimirovich. However, there is an email dated

11 October 2012 produced by Mr Arefi indicating that that money is at risk of being moved. The email, from Greg Morgan, the managing director of Velocity Trading Ltd, advises that:

Regarding the Sergey account –

We will be moving all accounts trading on GAIN NT4, at the latest on October 26 to GTL, if clients agree to the terms and conditions of GTL. If clients do not wish to move to GTL then all positions will be closed with Velocity and money returned to the nominated account. I will therefore have to ask Sergey what he wants to do – close his positions or transfer to GTL.

If I don’t hear from him I will have to close his positions (that will realise the loss in the account – balance will be approx 430+ after close I estimate).

I will then keep the money in NZ until I am instructed to send it somewhere

...

I spoke to your lawyer yesterday and I said I’m happy to help but there is only so much I can do without a court order or some kind of document sent to me/Velocity ...

[14] It is relevant to note at this point that Mr Arefi has also provided copies of correspondence with the Ministry of Foreign Affairs and Trade indicating

confirmation that Mr Vladimirovich was served with the proceedings on or around

29 January 2013. I consider that the service of the proceedings together with the likelihood that Velocity will have requested instructions regarding disbursement of the money makes the risk of dissipation a significant one.

Result

[15] I am satisfied that grounds are made out for a freezing order in the terms sought at paragraph 1 of the application dated 31 January 2013. I make that order

_accordingly.

P Courtney J

This judgment was delivered by Justice Courtney on 7 February 2013 at 4.30 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date...............................

Solicitors: Brookfields Lawyers, P O Box 240, Auckland

Fax: [phone]

Counsel: M Ryan, P O Box 941, Auckland 1140

Fax: [phone] – [e-mail]

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[1] Gatex-Fuller Australasia Pty Ltd v Wilsons NZ (Portland Cement) Ltd [1985] 2 NZLR 11 at 21.