Commissioner obtains Mareva injunction

Summary

The Commissioner obtained a Mareva Injunction against the plaintiffs in a judicial review, and against third parties. He also obtained a Court-directed solicitor's undertaking. The Court also critiqued the recent Vinelight decision in regards to the Commissioner's statutory powers and the Court process.

Facts

The Commissioner is endeavouring to recover a sum of $3 million from a number of different legal entities and persons including the plaintiffs in this proceeding. All of these persons are united by being members of the Hampton family, or being trusts or corporate entities formed by the Hampton family. The most important person within these proceedings is Mr David John Hampton.

The sum of $3 million has accumulated over a number of years, which has built up through various defaults, whether as to paying GST or other payments and accumulating penalties.

This application was to seek Mareva Injunctions against the plaintiffs, their directors and officers, employees, agents, family members or otherwise to restrain them from disposing or encumbering or otherwise dealing with in any way their money or other assets, whether in their own names or not and whether solely or jointly up to a value of $3 million. This includes orders against the following non-parties:

• the parents of DJ Hampton in respect to a property which was originally owned by their son and then transferred to his parents recently, and
• DJ Hampton's sister, Mrs Susan Stikkelman, who owns the business known as Chesterfield Preschools Ltd which, again, was owned by Mr Hampton but was transferred to Mrs Stikkelman.

Ancillary orders were sought for all parties and non-parties to disclose, by affidavit, the whereabouts of their assets.

There is a substantial history of the family members moving assets into different vehicles within the family, which raises the risk of the assets being disposed or dissipated. The sale of property by DJ Hampton to his parents and his sister (a transfer that is questionable, and the Court accepted could turn out to be a sham) are of particular interest.

The plaintiffs said that real property was held by DJ Hampton as trustee in the Anolbe Family Trust, then transferred to his parents partly due to his father's ill health and a wish for his parents to be settled in the property, which they had lived in prior to an attempt to sell the property on the open market, by auction, which did not proceed.

The Crown was seeking charging orders under r 567 HCR, over a number of real estate properties under the control of the plaintiffs. The plaintiffs argued that this was an abuse of the Court process as there is another statutory remedy available to the defendant under section 157 of the Tax Administration Act 1994.

Decision

Based on the lack of documentary evidence the Judge felt that there was a real issue around whether the represented advances that may have been made by Mr Hampton's parents to him for his family and may not, on strict analysis, be advances made for the benefit of the beneficiaries of the Anolbe Family Trust. It raised a question as to whether the real property was transferred to his parents to give them peace of mind, given the stressful situation they are in due to the grave illness of his father. On this, the Judge said he was not satisfied that this was an ordinary inter-family transaction.

The Commissioner was successful in his application for a Mareva Injunction against Mr Hampton, his parents and sister based on the pattern of behaviour shown by Mr Hampton and his family and entities. The Judge felt that there was no real risk of the plaintiffs acting dishonestly in a personal sense but would be capable of entering into ingenious transactions, no doubt believing that they were within the law and therefore it being legitimate, but also have the consequence of making it difficult for the Commissioner to enforce tax liabilities and collect tax.

A Mareva Injunction was not ordered against Ms Sisson (Mr Hampton's former wife and a member of his trading partnerships) as she is a barrister and solicitor in practice and therefore an officer of the Court. In that case, Justice Fogarty sought a personal undertaking by her as to the aspect of the conduct of her practice which involved these parties.

It was argued that application for the Mareva Injunction appeared to rely on the defendant's notices or investigations under section 17 of the Tax Administration Act 1994 and this was an abuse of the use of section 17 and of the Court process. Section 17 is a mechanism of obtaining and producing for inspection:

..... any books or documents which the Commissioner of Inland Revenue considers necessary or relevant for any purpose relating to the administration and enforcement of any of the Inland Revenue Acts

(Emphasis added)

The plaintiffs submitted that use of the section 17 information in civil proceedings was an abuse of process regardless of whether it was for the Judicial Review or the Mareva order. In a recent decision, (Vinelight Nominees Ltd v The Commissioner of Inland Revenue (High Court) Auckland CIV-2005-404-2774, 14 July 2005) Justice Simon France held:

[52] Section 17 is broad in its wording but its use after proceedings have been commenced must be consistent with s27(3) of the New Zealand Bill of Rights Act 1990.

Justice Fogarty considered Vinelight but came to a different conclusion to hold that, in this case, the Commissioner was correct in using section 17, or inferentially have section 17 as a backstop, in order to obtain the information it had gathered to support the application for a Mareva Injunction. A detailed discussion of the principles applied by Justice Fogarty is found at paragraph 26 to 46 of the judgment.

The Commissioner was unsuccessful in obtaining a charging order due to the evidence presented to the Court, had not, by fact, satisfied the test to issue a charging order. The language of r 567 is emphatic in saying that such an order shall be granted only on "proof that the opposite party with intent to defeat is making away with property." The Judge was not satisfied that this was the only remedy available to the Commissioner to secure payments. The Commissioner was reserved leave to reapply if he could assemble a stronger case on the facts.