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High Court of New Zealand Decisions |
Last Updated: 24 May 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2017-404-003060
[2018] NZHC 947 |
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BETWEEN
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TRIDENT TRUST COMPANY (NZ) LIMITED
Applicant
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AND
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LEOPOLDO EDUARDO CASTILLO BOZO
Respondent
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CIV-2018-404-000304
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BETWEEN
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GILDA MARIA CALVO DE CASTILLO
Applicant
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AND
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TRIDENT TRUST COMPANY (NZ) LIMITED
First Respondent
MARIALE HOLDINGS LIMITED
Second Respondent
LEOPOLDO EDUARDO CASTILLO BOZO
Third Respondent
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Hearing:
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3 May 2018
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Counsel:
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SCDA Gollin and AE Simkiss for Applicant GHJ Brant for Respondent
RC Knight and TA Chubb for Trident Trust
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Judgment:
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4 May 2018
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JUDGMENT OF DOWNS J
This judgment was delivered by me on Friday, 4 May 2018 at 11.30 am
pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
TRIDENT TRUST COMPANY (NZ) LTD v BOZO [2018] NZHC 947 [4 May 2018]
[1] At the end of yesterday’s hearing, I granted a freezing order.1 I said I would release my judgment by 5pm today. It follows.
Judgment
[2] Mrs Gilda Castillo and Mr Leopoldo Castillo are wife and husband. On 13 November 2017 Mrs Castillo filed a divorce petition in the Florida Circuit Court. On 14 November 2017, that Court made broad orders preventing Mr Castillo from disposing of property. Two days later, Mr Castillo transferred US$6.5 million to a New Zealand-based trust.2 Trident Trust Company (NZ) Ltd, or Trident, is its trustee. On 30 November 2017, Mr Castillo directed Trident to transfer all but $50,000 of the
$6.5 million to Panama. Mr Castillo later purported to revoke the Trust. Trident refused to send the money abroad, citing, unsurprisingly, the Florida restraining orders.
[3] Mrs Castillo seeks a freezing order or interim injunction over the money. Trident seeks directions pursuant to s 66 of the Trustee Act 1956. Mr Castillo opposes both applications, which were helpfully joined by agreement.
Additional background
[4] Extensive background is undesirable as the Florida proceeding is young. But some additional context is necessary.
[5] Mrs Castillo is a citizen of the United States of America. She grew up in Venezuela. Mrs and Mr Castillo met there in 1987. They married two years later. The couple initially had little money. However, Mr Castillo’s insurance-based business ventures brought them considerable wealth. The couple bought homes in Venezuela; Florida; an apartment in New York City; planes, yachts and expensive cars. They travelled regularly. Their children attended private schools. Mrs Castillo records, “we were massively wealthy”. That assessment is likely correct. A forensic accountant
1 In terms of para 1(a)–(d) of the application.
2 The Chuni Azul Trust (the trust).
has examined Mr Castillo’s “complex” financial affairs. He considers Mr Castillo’s net wealth was at least US$150 million.3
[6] In 2011, Mr Castillo’s United States’ visa was revoked. Mrs Castillo continued to live in Florida, as did the five children. The relationship was not without other difficulties, or at least alleged other difficulties. Mrs Castillo says Mr Castillo had and continues to maintain mistresses and illegitimate children. She also says Mr Castillo was controlling and abusive.
[7] Mrs Castillo says Mr Castillo has cut off her maintenance; stopped paying expenses in relation to the Florida home; and sold more than US$66 million of assets. Other assets were for sale when Mrs Castillo obtained the Florida restraining orders: the New York City apartment; a Gulf Stream G450 jet; and a home in Palm Beach, Florida.
[8] Florida law presupposes equal sharing of matrimonial property. So too Venezuela’s Civil Code. The latter considers it irrelevant in whose names the assets are held, including whether by a company.
[9] As to the trust, Mr Castillo settled it on 1 December 2015. The primary beneficiaries are Mr Castillo, Mrs Castillo and their children. The trust deed provides Mr Castillo may revoke the trust. It had no assets until the $6.5 million arrived on 16 November 2017.
[10] Mrs Castillo has sworn three affidavits in this Court; Mr Castillo none.
Mrs Castillo’s application for a freezing order
[11] The High Court may make a freezing order in relation to a cause of action in a Court abroad—the “other Court”—in certain circumstances. The person applying for the freezing order must have a good arguable case in relation to the cause of action; and the action must be justiciable in the other Court.4
3 In 2017.
4 High Court Rules 2016, r 32.5(1).
[12] There must be:5
(a) Sufficient prospect:
(i) The other Court will give judgment in favour of the applicant.
(ii) That judgment will be registered in, or enforced by, the High Court.
(b) A real link between the subject matter of the freezing order and the territorial jurisdiction of the High Court.
(c) No inconsistency between the freezing order and interim relief of the other Court.
[13] There must also be a danger the prospective judgment will be unsatisfied because assets of the defendant will be removed from New Zealand or disposed of.6
Issues
[14] Mr Castillo contests [11] and both limbs of [12](a), primarily in relation to jurisdiction. An applicant for a freezing order must also give an undertaking as to damages. Mrs Castillo has done so, but Mr Castillo argues there is reason to believe she could not pay them.
Justiciability and jurisdiction
[15] Mr Castillo contests the jurisdiction of the Florida Circuit Court. He submits because of this, it is not clear that Court has jurisdiction, so that there is no “other Court”. It is useful to reproduce much of r 32.5 of the High Court Rules 2016:
32.5 Order against judgment debtor or prospective judgment debtor or third party
(1) This rule applies if—
5 Rule 32.5(3).
6 Rule 32.5(4).
(a) judgment has been given in favour of an applicant by—
(i) the court; or
(ii) in the case of a judgment to which subclause (2) applies, another court; or
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in—
(i) the court; or
(ii) in the case of a cause of action to which subclause (3) applies, another court.
(2) This subclause applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(3) This subclause applies to a cause of action if—
(a) there is sufficient prospect that the other court will give judgment in favour of the applicant; and
(b) there is a sufficient prospect that the judgment will be registered in or enforced by the court; and
(c) there is a real connecting link between the subject matter of the order sought and the territorial jurisdiction of the New Zealand court; and
(d) the order sought would not be inconsistent with interim relief granted by the other court.
(4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because—
(a) the judgment debtor, prospective judgment debtor, or another person might abscond; or
(b) the assets of the judgment debtor, prospective judgment debtor, or another person might be—
(i) removed from New Zealand or from a place inside or outside New Zealand; or
(ii) disposed of, dealt with, or diminished in value (whether the assets are in or outside New Zealand).
[16] On this argument, an applicant must establish the “other Court” has jurisdiction over the prospective cause of action for it be justiciable in the other Court. Or, in Mr Castillo’s submission:
... there can be no good arguable case on an accrued or prospective cause of action when it is not known which court has jurisdiction, for a cause of action, it is submitted, can only be considered in the context of which court has jurisdiction to deal with that cause of action. Mrs Castillo may have a remedy in some court given the circumstances of the marriage, however that alone is insufficient to comply with r 32.5. Jurisdiction has to bite in a court before r 32.5 can apply.
For this reason ... it follows that:
(i) There can be no sufficient prospect that the other court will give judgment (based on a cause of action) in favour of Mrs Castillo because it is not known which court has jurisdiction and what cause of action is being considered.
(ii) There can be no sufficient prospect that the judgment will be registered in or enforced by the High Court because it is not known which court will enter a judgment to inform that analysis .
(iii) The order sought (namely the freezing order) would be inconsistent with the interim relief granted by the Florida court, if in due course it is determined that the Florida court did not have jurisdiction.
[17] I disagree for three reasons.
[18] First, justiciability is a familiar legal concept. And one typically regarded as distinct from jurisdiction. For example, in judicial review, the Courts ask first whether there is jurisdiction for review, and then whether the claim is of a kind that is justiciable—meaning one it should hear.7 The distinction is crisply captured by Professor Joseph:8
Justiciability and jurisdiction are distinct concepts. Jurisdiction identifies the Court’s power to intervene ... while justiciability identifies the appropriateness to intervene.
[19] Second, an absolutist approach to jurisdiction sits awkwardly with a regime that is forward-looking and remedial, and which seeks to ensure an action with
7 See, for example, Curtis v Minister of Defence [2002] NZCA 47; [2002] 2 NZLR 744 (CA) at [27].
sufficient prospect of success—here or elsewhere, commenced or otherwise—is not thwarted through asset concealment or dissipation.
[20] Third, on Mr Castillo’s interpretation, a defendant could simply protest the jurisdiction of the other Court and without more, have a complete defence to a freezing order application. Arguments about jurisdiction necessarily take time. Meanwhile assets, especially money, could disappear at the click of a mouse. This interpretation would traduce r 32.5.
[21] In my view, it is sufficient for an applicant in this context to show the cause of action would be justiciable in the other Court if that Court had jurisdiction over the action, and there is sufficient prospect that Court has jurisdiction over the action.
[22] Mr Castillo submits this conclusion could be “embarrassing” for the High Court, as it may conclude the other Court has jurisdiction only to then learn that Court has reached the contrary view. The submission is misconceived. In an application of this nature, the High Court is not required to determine the other Court has jurisdiction. Plainly, that is a matter for—and only for—the other Court. Rather, the High Court is required to consider whether there is sufficient prospect the other Court has jurisdiction (as a component of the broader “sufficient prospect” inquiry).
[23] In summary, the regime requires prognostication with a view to asset preservation pending enforcement of a judgment; not adjudicative determination the other Court has jurisdiction.
Sufficient prospect the Florida Circuit Court will give judgment for Mrs Castillo?
[24] I consider this test met.
[25] The evidence reveals the Florida Circuit Court has subject matter jurisdiction over dissolution of marriage and matrimonial property. Consequently, the dispute between Mrs and Mr Castillo is there justiciable.9
[26] Mr Castillo has been served as required by Florida law. Plainly, Mr Castillo knows of the proceeding; indeed, he contests that Court’s jurisdiction. And, Mr Castillo sought an adjournment of this hearing because of settlement discussions in relation to the Florida proceeding.10
[27] Mrs Castillo has a good arguable case in relation to her cause of action. As observed, Florida law presupposes equal sharing of matrimonial property. So too Venezuela’s Civil Code. She and Mr Castillo have been married for a long time. They had little money until Mr Castillo’s business ventures flourished. Mrs Castillo is, on the available evidence, entitled to an equal share of that success.
[28] Mr Castillo invites attention to a prenuptial agreement. It excludes shares in the fruits of 13 Venezuelan companies; an apartment in Caracas; and some cars. However, Mrs Castillo was only 25 at the time of the agreement. And pregnant. Mrs Castillo says the agreement was made without independent advice and relevant disclosure. As observed above, she alleges Mr Castillo was controlling and abusive. There is expert evidence the agreement may be a nullity under Florida law. In any event, Mrs Castillo says the identified companies were not the source of the couple’s wealth. The correctness of these points cannot yet be known, and is obviously for the Florida Circuit Court. But the present constellation favours Mrs Castillo by an appreciable margin.
[29] Florida Courts have “long-arm” jurisdiction when an individual, either personally or through an agent, commits specified acts in Florida. Under Florida Statute 48.193(1)(a)(1), a “specified act” includes operating, conducting, engaging in or carrying on business in Florida, resulting in a pecuniary benefit. Under this statute, it is irrelevant the defendant was not in Florida. There is evidence Mr Castillo conducted profitable real estate investment businesses in Florida from October 2006, under the umbrella title of “Castle Investors”. Mr Castillo initially operated the businesses from Venezuela. However, there is also evidence Mr Castillo lived in Florida (and worked at the Castle Investors offices in Miami) from the middle of 2010.
[30] Under Florida Statute 48.193(1)(a)(5), a court has jurisdiction over married parties “maintaining a matrimonial domicile in [Florida] at the time of the commencement of the action”. A “matrimonial domicile” is defined as the location where the couple last lived together as husband and wife, actually or constructively. There is evidence Mr and Mrs Castillo and their children moved from Venezuela to Florida until Mr Castillo’s visa was revoked in February 2011.
Sufficient prospect a Florida judgment will be registered in, or enforced by, the High Court?
[31] If the Florida Circuit Court finds in Mrs Castillo’s favour, that judgment would not have direct effect here. To enforce it, Mrs Castillo would need to establish the jurisdiction of the Florida Circuit Court is recognised by New Zealand law. This can happen in different ways.11 One is when the defendant has submitted to the jurisdiction of the other Court.
[32] Mr Castillo contends this criterion cannot be established as he is actively contesting the jurisdiction of the Florida Circuit Court. However, Mrs Castillo submits the material question is whether there is sufficient prospect Mr Castillo will submit to the jurisdiction of that Court. I agree. The rule is forward-looking.12
[33] I agree also there is sufficient prospect this will happen. Expert evidence reveals:
(a) If Mr Castillo does not engage with the Florida proceeding, default judgment could be entered against him for hundreds of millions of dollars. Once a default judgment is entered, broad discovery in aid of execution is permitted throughout all states of the United States of America.
(b) Broad discovery orders could require those with knowledge of Mr Castillo’s assets, including Mr Castillo himself, to submit to
11 Von Wyl v Engeler [1998] 3 NZLR 416 (CA) at 420–421.
repeated deposition and document production until the judgment debt is paid.
(c) Failure to pay a default judgment could attract serious consequence: Mr Castillo’s ability to conduct business in the United States would likely be hampered by the identification and sale of his assets to satisfy the judgment debt.
[34] None of this is farfetched. And, there is evidence Mr Castillo has previously submitted to the jurisdiction of Florida Courts. This addresses Mr Castillo’s submission it would be speculative to find this criterion established.
Undertaking as to damages
[35] Mr Pines, Mr Castillo’s Florida lawyer, has filed an affidavit. Mr Pines notes Mrs Castillo has changed her Florida lawyers. Mr Pines believes this is because Mrs Castillo has not paid the first set of lawyers’ fees, and cannot do so. Mrs Castillo accepts she has changed lawyers, but denies she has not paid them.
[36] The only direct evidence on this issue is from Mrs Castillo. I accept it.
[37] In any event, the point lacks force for two other reasons. First, likelihood of damage to Mr Castillo presents as remote. An order will constrain use of money, not more. Mr Castillo is likely to have other funds at his disposal.13 Second, an undertaking in relation to damages is not required if “special circumstances” exist. The Court of Appeal has held these arise when “the applicant’s financial position and impecuniosity has been caused, at least on the information currently before the Court, by the actions of [the defendant]”.14
[38] This principle is engaged. Mrs Castillo says Mr Castillo has starved her of funds and sought to dispose of their assets. Her evidence is uncontradicted. As observed, Mr Castillo has not sworn an affidavit in New Zealand.
13 Mr Pines referred to “instructions” the $6.5 million is required for a construction project in Panama. This evidence is inadmissible for proof of truth of content. Mr Castillo may not testify through his lawyer.
14 Auckland Steel Fixers Ltd v Watson [2015] NZCA 274 at [20].
[39] All other limbs for a freezing order are satisfied. Mr Castillo did not contend otherwise.
Interim injunction and Trident’s application for directions
[40] Mrs Castillo sought an interim injunction as an alternative only to a freezing order. Consequently, this aspect falls away. Trident’s application for directions under s 66 of the Trustee Act also falls away. The real dispute lies between Mrs and Mr Castillo, and the $6.5 million is now frozen.
[41] For completeness, Trident cannot be criticised for seeking this Court’s direction. It was in an invidious position. Mr Castillo directed it to deal inconsistently with seemingly global orders of the Florida Circuit Court. Trident considered to do so might have compromised the position of the other beneficiaries to the trust, and perhaps been unlawful. Had it done so, the money would now be gone.
Orders
[42] I confirm yesterday’s freezing order.15 Trident’s application is dismissed, it having been overtaken by events.
Costs
[43] Agreement is encouraged in relation to costs. My preliminary view is that costs should lie where they fall between Trident and Mr Castillo. If memoranda are necessary, then:
(a) Mrs Castillo is to file and serve her memorandum by Friday, 11 May 2018;
(b) Trident its by Friday, 18 May 2018;
(c) Mr Castillo his by Friday, 25 May 2018.
[44] I thank counsel for their helpful submissions.
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Solicitors/Counsel:
Minter Ellison Rudd Watts, Auckland. TGT Legal, Auckland.
Stace Hammond, Hamilton.
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