ANZ National Bank Limited v Jubilee Management Limited (in liquidation) [2013] NZHC 1681 (3 July 2013)

Last Updated: 16 September 2013

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2012-454-693 [2013] NZHC 1681

BETWEEN ANZ NATIONAL BANK LIMITED Applicant

AND JUBILEE MANAGEMENT LIMITED (IN LIQUIDATION)

First Claimant

BOON KEE SIA FOX, GRAHAM JAMES FOX and QA MEDIA PRODUCTIONS LIMITED Second Claimants

LYN MAREE CAREY Third Claimant

JOHN HAMISH FREEBAIRN and BARRY WILLIAM JOHN ROCHE Fourth Claimant

Hearing: 1 July 2013

Counsel: R J Gordon for Applicant

D I Sheppard for First, Third and Fourth Claimants

G J Fox in person for Second Claimants

B K Sia-Fox in person

Judgment: 3 July 2013

Reissued: 3 September 2013

_{RESERVED JUDGMENT OF MACKENZIE J}

This is a recalled judgment (see recall judgment of 3 September). The original judgment was issued on 3 July 2013. The only changes to the judgment are in [6], and [16](a) and (b).

Solicitors: Minter Ellison Rudd Watts, Wellington, for Applicant

Fitzherbert Rowe, Palmerston North, for First, Third and Fourth Claimants

_{Copies to: G J Fox and B K Sia-Fox}

ANZ NATIONAL BANK LTD v JUBILEE MANAGEMENT LTD (IN LIQUIDATION) [2013] NZHC 1681 [3 July 2013]

[1] This is an interpleader application under r 4.58 of the High Court Rules brought by ANZ National Bank Limited (ANZ). It seeks orders as to the disposal of surplus funds following mortgagee sales.

[2] Mr Fox and Ms Sia-Fox were married, but separated in November 2007. Their relationship was a business one as well as a domestic one. Among other interests, they owned a company, Jubilee Management Limited (Jubilee) and were the settlors of a family trust, the Grace Jubilee Family Trust (the Trust). The trustee of the Trust was a company called QA Media Productions Limited (QA), the directors of which were Mr Fox and Ms Sia-Fox.

[3] ANZ advanced finance by way of a number of loan and current account facilities to Jubilee, the Trust and a related company QA Homes Limited. By a Deed of Cross-Guarantee dated 27 April 2006, Jubilee, the Trust, Ms Sia-Fox, QA Homes and another associated company QA Joinery Limited each cross-guaranteed all obligations of each other owed to the Bank. As security for the advances, and the guarantees, the Bank held registered first mortgages over the following properties:

(a) 150 Rangiuru Road, Otaki, owned by Jubilee; (b) 75B Atkinson Avenue, Otaki, owned by Jubilee; (c) 7 Dunstan Street, Otaki, owned by the Trust; and (d) 64 Toi Street, Otaki, owned by the Trust.

[4] Following their separation in November 2007, the business relationship between Mr Fox and Ms Sia-Fox also broke down. There were defaults in payments due to the Bank. Jubilee was placed in liquidation. There was (and is) litigation involving various entities. Ms Sia-Fox was bankrupted, on the petition of the liquidators of Jubilee, on the ground of non-payment of a bankruptcy notice issued in respect of some costs orders made against Ms Sia-Fox in the litigation. That bankruptcy was annulled by a judgment of Gendall AJ (as he then was) delivered on

7 December 2012. The order for annulment was to lie in Court and not be released

until such time as the Official Assignee’s costs, disbursements and expenses in administering the bankruptcy had been paid in full. Those costs, disbursements and expenses were quantified in a subsequent judgment delivered on 7 February 2013. Payment has not been made. Ms Sia-Fox has filed an appeal to the Court of Appeal against the condition as to payment of the Official Assignee’s costs and expenses.

[5] ANZ sold the four properties at mortgagee sale. There was a surplus after the indebtedness to ANZ was met. ANZ brought an interpleader application to determine who was entitled to the surplus funds. It nominated four possible claimants:

(a) Jubilee

(b) The Trust

(c) The liquidator of Jubilee

(d) The solicitors for the liquidator. The liquidator had granted a mortgage in favour of the solicitors over the two properties of which Jubilee was the registered proprietor, set out in [3] above.

[6] The funds are presently held in Court. The fund was paid into Court and ANZ has been removed as a party to the litigation. The claimants have agreed among themselves upon their entitlement to the surplus funds and seek consent orders for the payment of the funds which total some $111,000 plus interest.

[7] Ms Sia-Fox, who was not a party to the litigation, has filed an affidavit opposing the making of the orders sought. Because of that, I required that the scheduled hearing of the application should proceed. I heard from Mr Sheppard on behalf of the first, third and fourth claimants, from Mr Fox representing the Trust and from Ms Sia-Fox.

[8] The sole issue to be determined on this application is the disposition of the funds currently held in Court. The wider disputes between the parties, and the other litigation, are relevant only to the extent that they may bear on that issue.

[9] The legal entitlement to the funds is clear. Any surplus arising from the properties owned by Jubilee, which were subject to the second mortgage to the fourth claimants, must be paid to the fourth claimants pursuant to the security of their registered mortgage. Any surplus arising from the sale of the Trust’s property must be paid to the trustees of the Trust.

[10] Ms Sia-Fox asserts that some actions by the liquidator in the liquidation have been unreasonable, and that the liquidator’s expenses are not fair and reasonable. They are not issues which can properly be raised in this proceeding. The party entitled to the funds, so far as Jubilee’s interests are concerned, are the solicitors instructed by the liquidator. They hold a registered mortgage. That registered mortgage must be given effect. Accordingly, the entitlement of the fourth claimants, as second mortgagees of the properties formerly owned by Jubilee, is clear and must be given effect to.

[11] So far as the Trust is concerned, the funds must be paid to the trustee. The trustee appointed by the Trust Deed, is QA. The directors were, as I have noted, Mr Fox and Ms Sia-Fox. Following Ms Sia-Fox’s bankruptcy, the Registrar of companies required that the company take steps to have her removed from office. That was done and the sole director of the company is now Mr Fox.

[12] Apparently, QA was at one stage struck off the register and later restored. The details of that are not in evidence before me. Ms Sia-Fox asserts that, when the company was removed, she and Mr Fox (being the parties with the power of appointment and removal of trustees) removed the company as a trustee and appointed themselves as trustees. Mr Fox denies that. Ms Sia-Fox has not produced any evidence to substantiate her assertion to that effect. In those circumstances, the Court must proceed on the basis that the trustee is QA. It follows that Mr Fox, as the sole director of that company, is able to make decisions on behalf of the trustee.

[13] The apportionment of the sale proceeds needs to take into account the interconnected nature of the financing arrangements by ANZ, and of the cross-guarantees. The legal entitlements of the parties, viewed in isolation, would be as I have described them. The parties entitled on that basis have agreed on the

apportionment. It is not necessary for the Court to examine the basis upon which they have resolved any disputes as to apportionment having regard to the interconnected arrangements and the cross-guarantees.

[14] The terms of the settlement which have been agreed by the four named claimants are set out in para 9 of the joint memorandum dated 28 June 2013 in these terms:

(a) the proportion of the funds which represent the net sale proceeds from the properties owned by Jubilee Management Limited (in liquidation) is 90.1 per cent;

(b) the proportion of the funds that represent the net sale proceeds from the properties owned by the Grace Jubilee Family Trust is

9.9 per cent; and

(c) that the Bank’s legal costs for conducting the mortgagee sales and bringing these proceedings be shared evenly between the second claimants and the fourth claimants. This is because the Bank was required to conduct two sales for Jubilee Management Limited (in liquidation) owned properties and two sales for Trust owned properties.

[15] For these reasons, I conclude that the orders as sought by the parties in the joint memorandum should be made. Ms Sia-Fox has not made out any entitlement to be heard in respect of the disposal of the funds. She has not made out any entitlement to participate in, or to prevent, that distribution. She is no longer a director of QA, the trustee of the second claimant Trust.

[16] For these reasons there will be orders by consent of the first, second, third and fourth claimants in the following terms:

(a) The second claimants receive from the funds $5,868.95 plus

9.9 per cent of the interest that has accrued while the funds have been held by the Court.

(b) The fourth claimants receive from the funds $105,794.13 plus

90.1 per cent of the interest that has accrued while the funds have been held by the Court.

“A D MacKenzie J”