ANZ National Bank Limited v Jubilee Management Limited (in liquidation) [2014] NZHC 1562 (4 July 2014)

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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:	On the papers
Counsel:	D I Sheppard for First, Third and Fourth Claimants G J Fox in person for Second Claimants B K Sia-Fox in person
_Judgment:	_{4 July 2014}

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

ANZ NATIONAL BANK LIMITED v JUBILEE MANAGEMENT LIMITED (IN LIQUIDATION) [2014] NZHC 1562 [4 July 2014]

[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 Media), 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 named QA Homes Limited (QA Homes). 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 (QA Joinery) each cross-guaranteed all obligations of each other owed to the ANZ. As security for the advances, and the guarantees, ANZ 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 ANZ. Jubilee was placed in liquidation. There was (and is) litigation involving various entities.

[5] ANZ sold the four properties at mortgagee sales. 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:

(d) the solicitors for the liquidator, to whom the liquidator had granted a mortgage over the two properties of which Jubilee was the registered proprietor.

[6] The funds are presently held in Court, and ANZ has been removed as a party to the litigation. The claimants had agreed among themselves upon their entitlement to the surplus funds and sought consent orders for the payment of the funds which total some $111,000 plus interest. By a judgment delivered on 3 July 2013, I made consent orders for the payment out of the funds presently held in Court which were

paid in by ANZ in its interpleader proceeding.¹At the request of the parties, the

amounts specified in those orders were later amended. I recalled my judgment and reissued it on 3 September 2013, with amended figures.

[7] As I recorded in a minute issued on 13 November 2013, Ms Sia-Fox subsequently filed a memorandum containing information as to the identity of the trustees of the second claimant.²At the time the apportionment of the funds in Court was agreed between the parties, and when the consent orders were made on

3 July 2013, the person purporting to represent the trustee of the Trust was Mr Fox, in his capacity as the sole director of QA Media, the trustee named in the Trust deed. The information provided by Ms Sia-Fox indicated that QA Media was not the trustee at the relevant time. Because of that, the orders that I had made could not properly be made by consent. Accordingly, by the minute of 13 November 2013, I

¹_{ANZ National Bank Limited v Jubilee Management Limited
(in liquidation) [2013] NZHC 1681.}

²ANZ National Bank Limited v Jubilee Management Limited (in liquidation) HC Palmerston

[8] It is necessary for the Court to determine the entitlement of the parties to the funds held in Court. I directed that a further hearing be held. This took place on

3 April 2014. At the end of that hearing, I advised that I required two further matters to be attended to before I could deliver judgment. I described those matters in a subsequent minute issued on 9 May 2014.³One of those was a memorandum from counsel for the first, third and fourth claimants setting out the net proceeds of the various sales, and the way the proceeds had been applied by ANZ. That further information has now been provided. It enables me to fix the apportionment of the funds between the Jubilee claimants and the Trust.

[9] The legal entitlement to the funds is clear. The properties owned by Jubilee were subject to a second mortgage to the fourth claimants. They are the solicitors instructed by the third claimant, the liquidator. Jubilee, through the liquidator, granted a mortgage to secure the legal costs incurred. Any surplus from the sales of the Jubilee properties 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. The issue is how much of the surplus belongs to the each of those interests.

[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 decided in this interpleader 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.

[11] The terms of the settlement which had been agreed by the four named claimants and which formed the basis of the original consent order made by my judgment of 3 July 2013 were set out in paragraph 9 of the joint memorandum dated

³ANZ National Bank Limited v Jubilee Management Limited (in liquidation) HC Palmerston

(a) the proportion of the funds representing the net sale proceeds from the properties owned by Jubilee is 90.1 per cent;

(b) the proportion of the funds representing the net sale proceeds from the properties owned by the Trust is 9.9 per cent; and

(c) that ANZ’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 ANZ was required to conduct two sales for Jubilee-owned properties and two sales for Trustowned properties.

[12] The essence of my present task is to assess whether that apportionment is correct. The apportionment of the sale proceeds needs to take into account the interconnected nature of the financing arrangements by ANZ, and the cross-guarantees. As I have noted, I requested information from counsel for the first, third and fourth claimants, to establish that those percentage entitlements are correct. That information was supplied by counsel’s memorandum dated

23 May 2014. That sets out the net proceeds of the mortgagee sales of the four properties, the way in which these proceeds were applied by the mortgagee in satisfaction of the debts owed to it, and the way the mortgagee’s legal costs and other deductions were apportioned across the four properties.

[13] The net sale proceeds⁴of the properties owned by the first claimant, Jubilee were as follows:

[14] The net sale proceeds of the properties owned by the Trust were as follows:

[16] Although there were guarantees to ANZ which rendered both the Trust and Jubilee liable for the whole of the indebtedness to ANZ, the amounts owing to ANZ were deducted from the sale proceeds in such a way that the debt for which Jubilee was the principal debtor was deducted from the two properties it owned and the debt for which the Trust was the principal debtor was deducted from the two properties it owned.

[17] The net proceeds from the sale of the Jubilee owned properties were applied to the debts owed to the mortgagee by Jubilee as follows:

(a)	Rangiuru Rd	$844,931.83 -$22,020.99 (repayment of Jubilee a/c: 01-050-0225360-00)
		-$502,609.21 (repayment of Jubilee a/c: 01-050-0225360-91) -$239,497.44 (repayment of Jubilee a/c: 01-050-0225360-95)

[18] The proceeds from the sale of the Trust owned properties were applied to the debts owed to the mortgagee by the Trust as follows:

[19] The total of the net sale proceeds from the sale of the four properties, after the debts owed to the mortgagee were repaid, was $249,965.49. The portion which came from net sale proceeds from the properties owned by Jubilee was $226,498.19 or 91 per cent (in round figures). The portion which came from net sale proceeds from the properties owned by the Trust was $23,467.30 or nine per cent (in round figures).

[20] The mortgagee made further deductions from the proceeds of sale in respect of its costs and further items. Those deductions were not apportioned between Jubilee and the Trust. Those deductions were as follows:

$107,279.60 (repayment of debt owed by QA Homes Limited, which was also secured by the properties)

[21] Mr Sheppard for the first, third and fourth claimants now submits that it is appropriate to apportion those additional costs by using the percentage entitlements of Jubilee and the Trust to the net funds after deduction of the sums owing under the mortgage. The practical effect of that apportionment is that 91 per cent of the costs will be borne by Jubilee and nine per cent of the costs by the Trust.

[22] It may be arguable whether that is the apportionment which would follow if an attempt was made to allocate the additional costs to Jubilee and the Trust respectively. There is however no basis upon which that apportionment could be accurately made and the apportionment proposed is a practical outcome. Because it means that Jubilee (which proposes that apportionment) is bearing 91 per cent of the costs, the Trust could have no reasonable basis for arguing that the apportionment is unfavourable to the Trust.

[23] The first, third and fourth claimants are the only parties with a claim to the Jubilee share of the proceeds. As I have said, the fourth claimant as second mortgagee appears to be the party entitled. There is however no contest between the claimants to the Jubilee share, and I need not address that. I consider that the appropriate course is to direct that 91 per cent of the sum held in Court is to be disbursed to the solicitors for the first, third and fourth claimants. Those claimants are agreed, among themselves, that the fourth claimant is entitled to receive that sum. That follows the legal entitlement as I have described it.

[24] I do not in this judgment specify the exact amount to be paid. The amount paid into Court will have changed from that advised at the hearing, because of interest in the meantime and possibly other additions or deductions. The figure to be paid to the solicitors for the first, third and fourth claimants is 91 per cent of the amount held at the date payment is made.

[25] The remaining funds, nine per cent of the total, belong to the Trust. I make an order to that effect. However, I make no order for payment of that amount. Payment will have to be made to the current trustees of the Trust. I do not have sufficient evidence of who they are. The second matter raised in my minute of

9 May 2014, to which I have referred, has not been satisfied. I confirmed the advice given at the hearing on 3 April 2014 that I require an authority to be given to the registrar to make payment into a nominated bank account, with that authority to be signed by both Mr Fox and Ms Sia-Fox. That has not been received. In view of the dispute between Mr Fox and Ms Sia-Fox as to who are properly the trustees, I cannot make an order for payment to the Trust at this stage. The funds are to remain in Court until such an authority is lodged, or until the identities of the trustees who are entitled to receive payment are established. I reserve leave to the second claimants to apply for further directions in this regard.

High Court of New Zealand Decisions

ANZ National Bank Limited v Jubilee Management Limited (in liquidation) [2014] NZHC 1562 (4 July 2014)