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”