De Lage Landen Limited v Reddy [2025] NZHC 554 (18 March 2025)

De Lage Landen Limited v Reddy [2025] NZHC 554 (18 March 2025) Home | Databases | WorldLII | Search | Feedback High Court of New Zealand Decisions You are here: NZLII >> Databases >> High Court of New Zealand Decisions >> 2025 >> [2025] NZHC 554 Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help De Lage Landen Limited v Reddy [2025] NZHC 554 (18 March 2025) Last Updated: 14 April 2025 IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE CIV-2024-404-3188[2025] NZHC 554 UNDER Parts 19 and 32 of the High Court Rules 2016 BETWEEN DE LAGE LANDEN LIMITED Applicant AND MADHAVA REDDY GOPI REDDY First Respondent NIKITA GOPI REDDY Second Respondent NEW LYNN PROPERTY LIMITED Third Respondent PAPAKURA PROPERTY LIMITED Fourth Respondent PUKEKOHE PROPERTY LIMITED Fifth Respondent Hearing: 5 March 2025 Appearances: S D Campbell, T P Westaway and I M M Whitticase for Applicant N H Malarao and T J Powell for Respondents Judgment: 18 March 2025 JUDGMENT OF O’GORMAN J [Application by respondents for discharge of freezing orders] This judgment was delivered by me on 18 March 2025 at 3 pm pursuant to r 11.5 of the High Court Rules 2016. Registrar/Deputy Registrar ....................................... DE LAGE LANDEN LTD v REDDY [2025] NZHC 554 [18 March 2025] [1] In a judgment issued on 11 December 2024, Edwards J granted De Lage Landen Ltd (DLL) without notice freezing orders against the first respondent, Dr Reddy, and the third to fifth respondent companies, which are wholly owned and operated by Dr Reddy.1 [2] DLL is a vendor finance company. Dr Reddy and the companies personally guaranteed hire purchase agreements between DLL and entities through which Dr Reddy ran dental practices. It is accepted that those entities defaulted on their repayment obligations to DLL. Summary judgment proceedings have been commenced in the High Court against Dr Reddy and the companies for an amount owing of $4,948,353.24 plus interest, and costs and disbursements on an indemnity basis. [3] As the freezing order was granted on a without notice basis, a return date was set for the on notice hearing of whether the freezing order should be continued. Meanwhile, the respondents have filed their own application seeking a discharge of the freezing orders. This was a hearing of those issues. Factual background [4] Between December 2017 and October 2023, DLL entered into hire purchase agreements (HPAs) with each of the dental practices. [5] By around July 2023, the practices began defaulting on their repayment obligations. [6] Between December 2023 and July 2024, DLL served notices of default on the practices and on the guarantors. [7] On 26 August 2024, DLL served notices of termination for each HPA and called up all indebtedness under them. When no payment was received by the required payment date, DLL served statutory demands on the practices. 1 De Lage Landen Ltd v Reddy [2024] NZHC 3787. [8] On 4 November 2024, DLL applied to put each of the practices into liquidation. However, on 4 December 2024, it received notice from Reynolds & Associates that it had been appointed liquidator of five of the practices. Those companies were placed into liquidation by Dr Reddy on 28 November 2024. [9] Concerned about the liquidation steps and non-payment, DLL undertook further investigations into Dr Reddy’s affairs and learned that Dr Reddy had either sold or was in the process of selling properties: (a) Dr Reddy and Ms Reddy (as registered owners) sold a property in Alfriston, Auckland on or around 3 May 2024 for a reported $2,750,000. Title passed to the new owners on 16 July 2024. This was not disclosed to DLL. (b) Dr Reddy (as registered owner) sold a property in Karaka, Auckland reportedly on or around 25 July 2024, although the sale and purchase agreement appears to be dated 20 August 2024. Settlement was and remains pending. The new purchaser lodged a caveat over the property on 4 September 2024. This, too, was not disclosed to DLL. (c) Dr Reddy and Ms Reddy (as registered owners) were attempting to sell by negotiation a property in Remuera, Auckland. (d) Dr Reddy and Ms Reddy (as registered owners) were attempting to sell a property in East Tamaki Heights, Auckland. That property was listed for sale on 15 November 2024 and was reported to be sold at auction on 12 December 2024 — that is, only eight days after DLL discovered Dr Reddy was liquidating the practices. This was not disclosed to DLL. [10] The imminent sale of the East Tamaki Heights property was particularly concerning. On 4 December 2024, DLL’s lawyers (Wynn Williams) telephoned the real estate agent marketing the property. When asked why the vendor was selling, the real estate agent replied that it was because he was “moving home”. Wynn Williams drew the inference that Dr Reddy was leaving New Zealand to return to India. [11] These comments caused Wynn Williams to contact Simon Humphries (a repossession agent, investigator and process server at Consumer Credit Management Ltd) on 5 December 2024 and advise they had some concerns about Dr Reddy’s whereabouts. Mr Humphries did the following: (a) He spoke with Dr Reddy by telephone on 6 December 2024. Dr Reddy said: (i) he and Ms Reddy were in India because his mother was having surgery; (ii) he intended to return to New Zealand in late January 2025; (iii) he placed the practices into liquidation because if he did not do it then DLL would; and (iv) he was open to reaching some form of agreement with DLL. (b) He called the real estate agent on 9 December 2024. Mr Humphries’ evidence is that the real estate agent said the owners were moving overseas permanently and intended to return to the South Island for approximately two to three weeks before permanently leaving the country in around mid-January 2025.2 [12] On 9 December 2024, DLL filed its summary judgment application. That has a first call on 18 March 2025. This was admissible for the purposes of the without notice application under the Evidence Act 2006, s 20 and the High Court Rules 2016, r 7.30. In this hearing, Dr Reddy has given evidence as a witness about what he told the real estate agent. [13] On 10 December 2024, DLL filed a without notice application for freezing orders against the respondents. That application was prepared under urgency given the impending auction of the East Tamaki Heights property. On the information available to DLL, it believed that Dr Reddy was: (a) personally liable for nearly $5 million to DLL; (b) liquidating the practices; (c) selling residential properties; (d) in India by his own admission; and (e) intending to permanently leave New Zealand. Respondents’ submissions [14] The respondents submit that the freezing orders should be discharged in their entirety on the grounds that: (a) non-disclosure of relevant information caused the Court to grant the freezing orders based on an incomplete or inaccurate understanding of the circumstances; and (b) the freezing orders cannot be maintained in light of the respondents’ actual and current circumstances. [15] On the question of non-disclosure, the respondents say the disclosed information was inaccurate or misleading in the following respects: (a) Correspondence was not disclosed that demonstrated Dr Reddy was communicating with DLL and trying to seek a resolution, including with the assistance of his accountant. Contrary to this, DLL alleges that he “did not respond”. In fact, Dr Reddy did respond to requests for further information regarding his financial position, so non-disclosure of these communications was material to the required assessment for granting the freezing orders on a without notice basis. (b) DLL did not provide the Court with an accurate picture of how many properties are owned by the respondents, thereby diminishing the extent of his connections to New Zealand and giving a skewed impression of abscondment or dissipation of assets. (c) The allegation that companies had been placed into liquidation “for the admitted purpose of defeating liabilities to DLL” was incorrect. (d) He was temporarily in India to care for his sick mother and had not returned to India because of his debts to DLL. (e) There was no factual basis for the allegation that equity released from the sale of properties might be moved to India. [16] Assessing matters on a de novo basis, the respondents submit that the freezing orders are not justified. The respondents submit there is no risk of Dr and Ms Reddy absconding. Dr Reddy has given direct evidence in his affidavit that this is not his intention as follows: (a) Dr Reddy has been in New Zealand for 20 years and considers it his home. He has no intention of leaving New Zealand permanently or relocating to India. (b) Dr Reddy’s presence in India was required while his sick mother underwent surgery. Dr Reddy’s mother suffered from medical issues and needed her son’s presence and assistance as she went through a life-saving surgical procedure. (c) Dr Reddy returned to New Zealand on 6 February 2025 once Dr Reddy’s mother’s condition had improved and his family duties were complete. Ms Reddy is also back in New Zealand. (d) Dr Reddy’s daughter is studying (and living) in India, but his son and his remaining business interests (four dental practices) are in New Zealand. [17] When Dr Reddy and his family moved out of the East Tamaki Heights property, they moved to another family home in Karaka.3 The respondents say that the comments by the real estate agent have been misunderstood and mischaracterised. At most, the real estate agent would have said that Dr Reddy was “moving home”, which is a reference to Dr Reddy moving home to a house in Karaka, not India. The inference drawn by DLL’s lawyers that “home” for Dr Reddy was India was simply incorrect. [18] The respondents submit that steps taken by Dr Reddy to place companies into liquidation were appropriate and resulted from downturns in profitability because of reduced public expenditure on dental services given increased costs of living. The explanation for those companies being placed into liquidation is corroborated by the liquidators’ reports about why the companies were placed into liquidation. This did not defeat DLL’s unsecured claims. [19] To the extent that Dr Reddy has sold or listed properties for sale, the respondents submit that it is for the dual purpose of paying down debt to Dr Reddy’s creditors (such as, but not limited to, DLL) and “injecting liquidity into Dr Reddy’s remaining dental practices so that they might remain viable and able to produce income”. These comments relate to four dental practices still operated by Dr Reddy, not the dental practices owned by companies that have gone into liquidation. [20] The respondents say the following in their submissions: The two properties that have been sold to date ... were sold to retire mortgages, inject the aforementioned liquidity and cover day-to-day living expenses. The remaining six properties are owned or controlled by the respondents. None of the equity is leaving New Zealand. Some of DLL’s submissions on this issue are nothing more than mere speculation. 3 As stated at [9](b)] above, this property has been sold but settlement has not yet occurred. [21] The respondents rely on the well-settled principle that ordinary living expenses, related legal expenses and transactions in the ordinary course of business do not constitute a dissipation of assets. Although the respondents have not provided full information about their asset and liability position, DLL does have information about who the various creditors are and registered priority amounts in any mortgages over land. In respect of those matters, the respondents say in their submissions: There is also evidence from Dr Reddy, on oath, that he has significant financial liabilities. He has also explained how he has got himself into the cashflow problem that he has. Dr Reddy has chosen not to disclose every possible detail about this to DLL, as there is no obligation on Dr Reddy to do so. Given the widespread damage caused by DLL’s correspondence, issued to an unknow[n] number of third parties after obtaining freezing orders, such reluctance is understandable. [22] Finally, the respondents say that the existing freezing orders have caused considerable hardship, directly leading to staff members’ pay being delayed, essential business payments being missed, and insurances lapsing. Furthermore, mortgagees that were previously working collaboratively with Dr Reddy are now reconsidering their options, adding to more pressure from creditors. A significant complaint is that the existing freezing orders are preventing Dr Reddy’s ability to liquidate assets and generate cash funds to meet his liabilities to creditors. Overall, the respondents say that damage to date has been significant reputationally, financially and emotionally. Legal principles Grounds for freezing orders [23] The general principles for the grant of freezing orders are well settled. There must be:4 (a) a good arguable case on the applicant’s substantive claim; (b) assets of the respondents to which the orders can apply; Bank of New Zealand v Hawkins [1989] NZHC 198; [1989] 1 PRNZ 451 (HC), subsequently approved by the Court of Appeal in Shaw v Narain [1992] NZCA 474; [1992] 2 NZLR 544 (CA) at 548. (c) a real risk the respondents will dissipate or dispose of those assets to defeat any judgment. [24] Finally, it must be in the interests of overall justice that the orders be granted. The Court weighs the interests of justice so as to strike a balance between the need to protect the applicant, and to avoid undue prejudice or hardship to the respondents or any third parties. [25] More specifically, r 32.5(4) of the High Court Rules 2016 provides: 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). [26] Under limb (a), a freezing order may be granted if there is “a danger” that a prospective judgment will be unsatisfied because the prospective judgment debtor “might abscond”. [27] Under limb (b), an applicant needs to point to circumstances from which a prudent, sensible commercial person can infer a danger of default.5 Mere suspicion is insufficient — there must be a “real risk”.6 The Court is not required to accept the defendant’s evidence uncritically, and an adverse inference may arise from failure to disclose financial information.7 5 Gold Star Invest Ltd v V [2019] NZHC 3504 at [62]. 6 He v Chen [2017] NZHC 1933 at [13]–[14]. 7 Millionaire Makers International Ltd v Portman Project Ltd [2021] NZHC 1610 at [64]–[65]. [28] There are limitations placed on the jurisdiction set out in r 32.6(2) and (3): 32.6 Form and further terms of freezing order ... (2) If the likely maximum amount of the applicant’s claim is known, the value of the assets covered by the freezing order must not exceed that amount together with interest on that amount and costs. (3) The freezing order must not prohibit the respondent from dealing with the assets covered by the order for the purpose of — (a) paying ordinary living expenses; or (b) paying legal expenses related to the freezing order; or (c) disposing of assets, or making payments, in the ordinary course of the respondent’s business, including business expenses incurred in good faith. [29] Reflecting those limitations, it is well established that payments in the ordinary course of business, and of validly owed and liquidated debts by a respondent, will not be regarded as dissipation of assets.8 [30] A freezing order acts in personam against a defendant or a third party who has control of a defendant’s assets and does not create any proprietary interest in the assets frozen.9 Therefore, it does not defeat any existing third party legal or equitable interests in the property. Furthermore, the freezing order jurisdiction is not designed to sort out arguments as to priority between creditors,10 nor is the jurisdiction designed to provide a plaintiff with pre-judgment security,11 or to allow one creditor relief from what is perceived to be the preferment of another creditor.12 See Settlers Honey Ltd v First Honey NZ Ltd [2021] NZHC 1086 at [25]–[26], where Campbell J found that other types of payments were held to create a risk of dissipation. Primary Services NZ Ltd v Fonagy [2019] NZHC 3050, [2020] NZAR 416 at [30]; and Dodssuweit v Olivier [2018] NZHC 2394, [2018] NZAR 1489 at [19]–[20].10 Fortune Mile International Ltd v Judge [2014] NZHC 3146 at [29]. 11 Harper v Love [2022] NZHC 2256 at [19(b)]; Millionaire Makers International Ltd v Portman Project Ltd, above n 7, at [61]; and Whitmarsh v A’mon Corp Ltd [1988] NZHC 261; (1988) 2 PRNZ 576 (HC). See also Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH & Co KG [1983] 1 WLR 1412 (QB & CA) at 1419; and Derby & Co Ltd v Weldon (Nos 3 & 4) [1989] 2 WLR 412 (CA) at 419. 12 Fortune Mile International Ltd v Judge, above n 10, at [34], referencing Whitmarsh v A’mon Corp Ltd, above n 11, at 582; and Oaks Hotels & Resorts NZ Ltd v Body Corporate 358851 [2013] NZHC 2695 at [20]. Effect of non-disclosure [31] High Court Rule 32.2(3) provides: An applicant for a freezing order without notice to a respondent must fully and frankly disclose to the court all material facts, including— (a) any possible defences known to the applicant; and (b) information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages. [32] The effect of non-disclosure in an application for a freezing order was recently considered by the Court of Appeal in Rae v Commissioner of Police.13 After reviewing the authorities, it set out the following principles: (a) The discharge principle is potentially engaged when an applicant fails to comply with its disclosure obligations.14 (b) Whether the discharge principle is exercised depends on the circumstances of each case, including:15 (i) Whether the applicant acted in good faith. (ii) The significance of the missing information. For example, the Court might find that the missing information was relevant but immaterial as the freezing order would have been made even if the information was disclosed. (iii) The interests protected and promoted by the duty of candour. (iv) The public interest. 13 Rae v Commissioner of Police [2023] NZCA 4, [2023] NZAR 17. 14 At [46]. 15 At [47]. Application to facts Good arguable case [33] DLL has filed an application for summary judgment for the amounts owed to it under the HPAs. The evidence in support of that application is relied on for establishing a good arguable case. [34] It was not seriously contended before me that there was any defence to that claim, although the precise quantum is not necessarily admitted. Dr Reddy concedes that a significant amount is owed to DLL in the vicinity of what has been claimed. Therefore, I accept that DLL has a good arguable case for its unsecured claim of approximately $5 million or more. Assets to which the orders can apply [35] It is common ground that there are assets to which the orders can apply. The sealed orders identify real property listed in cl 4(a). Subject to the specified exceptions, they also restrain Dr Reddy and the third to fifth respondents from dealing with the following categories of property owned by each: (a) all bank accounts; (b) all securities, shares, dividends and equities; (c) all vehicles, machinery and equipment; and (d) all other real and personal property. [36] The orders contain specific provisions designed to enable the respondents to continue with existing sale processes for the identified properties, continue paying debts in the ordinary course of business, and satisfying any other creditor claims that are superior to DLL’s unsecured claim. [37] Despite those carve-outs, the respondents complain that the orders have had the effect of preventing payments in the ordinary course of business and inhibiting bona fide steps to realise assets to satisfy creditor claims. I return to this issue under balance of convenience factors. Risk of dissipation [38] Edwards J was satisfied that there was a real risk that Dr Reddy and the guarantor companies will dissipate or dispose of assets, and that the prospective judgment will be wholly or partially unsatisfied. That risk was assessed to arise out of the following:16 (a) Dr Reddy and Ms Reddy have already left the country and were, at that time, in India. Despite Dr Reddy’s stated intention to return, there is evidence which suggests that he and Ms Reddy either have left or are preparing to leave permanently. Dr Reddy and Ms Reddy appear to have strong familial connections to India. (b) Dr Reddy has already taken steps to liquidate five of his dental practices. The evidence before her was that he admitted the reason for doing so is to avoid DLL seeking liquidation orders. (c) Dr Reddy and Ms Reddy have already sold at least two residential properties. A third property was due to be auctioned the following day. This evidences an intention to dispose of assets, and an ability to do so. (d) Dr Reddy and Ms Reddy are in the process of attempting to sell two further residential properties. [39] Edwards J inferred the same risk of dissipation arising in relation to any assets owned by the guarantor companies, given that the companies are wholly owned and controlled by Dr Reddy. Furthermore, she found a strong inference that Dr Reddy and 16 De Lage Landen Ltd v Reddy, above n 1, at [18]. Ms Reddy were in the process of severing their ties to New Zealand with a view to leaving the jurisdiction permanently and avoiding liability to DLL. [40] The respondents submit that those conclusions were wrong because of issues of non-disclosure and, in any event, are wrong on an analysis of the evidence now available to the Court in this application. [41] The alleged non-disclosure by DLL relates to the following assertions made in affidavits filed by Ms Taylor, litigation specialist for DLL: (a) An assertion that DLL wrote to Dr Reddy on 10 July 2024 in respect of the amounts owing and sought further information as to his financial position, but that “Dr Reddy did not respond”. (b) An assertion that “DLL is not aware of any assets owned by [the guarantor companies]”. [42] In fact, Dr Reddy had corresponded further with DLL in emails between 16 July 2024 and 27 September 2024, both directly and through his accountant. [43] In that correspondence, Dr Reddy tried to reach a resolution in the form of a payment plan for his liabilities to DLL. He advised that he had been trying very hard to sell properties, but several offers had fallen over, sales responses had been very bad, and they were receiving offers at 40–50 per cent below the market value. On 30 August 2024, he concluded: Business side of things are still very slow, we have completely restructured our business, improvement is expected in coming months, however will resume the payments from September. [44] On 9 September 2024, the accountant emailed a representative of DLL, following up on an earlier conversation. He stated that “we are very keen to resolve this situation of overdue debts by putting forward a proposal to clear overdue off first and continue the repayment plan as agreed”. A number of reasons were put forward for the respondents’ inability to pay overdue debts including cash flow issues, a downturn in the New Zealand economy, high inflation, and a downturn in patients. The payment plan proposed monthly instalments totalling $30,000 for arrears of approximately $900,000. The respondents (via Dr Reddy and his accountant) corresponded further with DLL and increased the amounts offered for their repayment plan proposal. However, by 17 September 2024, the offer was still less than 25 per cent of the current arrears outstanding, which DLL rejected because it “doesn’t even come close” to an appropriate settlement offer. DLL repeatedly sought financial information and asked for a “complete proposal” to clear all arrears. [45] On 26 September 2024, Dr Reddy provided some financial information. That consisted of: (a) bank statements confirming the debt owed on particular properties; (b) previous valuations as support for expected sale values; and (c) agency agreements for the sales process. [46] What was supplied did not provide all of the information sought in DLL’s letter of 10 July 2024, which requested account statements for all mortgage, trading accounts, current accounts and working capital facilities with 12 listed entities and any others, and required a warranty that he had provided DLL with all accounts and that none of the information provided was incomplete or misleading in any respect. [47] DLL responded in an email dated 2 October 2024 rejecting the payment proposals as inadequate, stating the following: So with that now covered off, it is clearly inappropriate for you to offer, or expect DLL to accept your repayment proposal. We have gone well past that point with you. At this time the only arrangement or proposal DLL would be prepared to accept is full arrears ($1,073,770) being paid immediately, with the expectation of you continuing to meet the monthly commitment of $171,963. Please desist in making any proposal other than clearance of full arrears, as all communication short of satisfying our requirements already outlined will be disregarded from this point on. [48] DLL accepts that these further documents should have been disclosed for the without notice application, subject to without prejudice privilege issues. Failing to do so was an oversight, without any intention to mislead the Court. The error arose from internal miscommunications within DLL; its solicitors Wynn Williams were unaware of the further correspondence. [49] The statement that DLL was not aware of any assets owned by the guarantor companies was also inaccurate, given that the 10 July 2024 letter (included in the evidence for the without notice application) referred to some other specific properties not addressed by the affidavits or expressly mentioned in the draft orders. However, the orders assume that the guarantor companies may have had other real and personal property — indeed that was the purpose of including them as respondents subject to the freezing order. [50] I now consider the impact of that further information on the assessment: (a) I accept that the non-disclosure was unintentional and there was no bad faith on the part of DLL or its solicitors. In the circumstances, I consider the effect of non-disclosure should reflect the significance of the missing information. (b) The missing information was relevant, but my assessment is that the freezing order would have been made even if the information had been disclosed. The information provides an even clearer picture that Dr Reddy was unable to pay his debts. The payment proposals and supporting information that he was willing to provide to DLL gave no confidence that this was only a short-term cash flow issue. Although Dr Reddy had not stopped communicating following the 10 July 2024 letter, what was communicated provides a strong basis for believing that DLL’s prospective judgment will be wholly or partially unsatisfied. (c) In the evidence for this hearing, the respondents have identified some real property owned by the guarantor companies. I do not consider that this materially changes the analysis of the risk of dissipation and the risk that the prospective judgment will be wholly or partially unsatisfied. This is because the various payment plans offered by Dr Reddy never proposed full repayment of the arrears, let alone the principal amounts now owing. The registered mortgages have very large priority amounts, and there is a paucity of information about what loans are secured by cross-collateralisation. Dr Reddy has chosen not to provide any evidence about the respondents’ overall financial position and the extent to which assets are available to pay unsecured creditors after meeting all secured liabilities. While Dr Reddy is entitled to withhold information, it does give rise to an adverse inference in the circumstances. The entire basis of a freezing order assumes that there will be surplus assets after payment of secured liabilities. It addresses a concern that those residual assets will be dissipated or disposed of without satisfying the prospective judgment. On the evidence I have reviewed, that risk is clearly established. [51] The without notice application for freezing orders relied on both limbs of r 32.5(4). I accept that, at the time of its without notice application, DLL had a proper basis for its concern that Dr Reddy and Ms Reddy might be preparing to abscond to India, despite his stated intention to return (which was expressly noted by Edwards J in her judgment). [52] I accept that the risk of absconding is now lower, given that Dr Reddy and Ms Reddy have returned to New Zealand and Dr Reddy has sworn that their intention is to remain living in this country despite their steps to liquidate assets. I acknowledge that there are some valid residual concerns that those intentions might change, given Dr Reddy’s strong connections with India and the health of his mother living there. Ultimately, the intended country of residence for Dr Reddy is relevant only to the extent that this might be connected with dissipating assets in a way that would improperly avoid liability to DLL. I consider that those issues are now better analysed under limb (b) as a risk of removal or dissipation of assets. [53] The allegation of the companies being placed into liquidation “for the admitted purpose of defeating liabilities to DLL” was incorrect. However, Edwards J noted the position accurately: Dr Reddy had taken steps to liquidate five other dental practices to avoid DLL seeking liquidation orders. There is nothing inappropriate about liquidating a company when it is insolvent and unable to pay its debts as they fall due. Nevertheless, this was (and remains) an important part of the factual context in which Dr Reddy and the respondent companies appear to be under severe financial pressure due to (among other things) some of his dental practices failing. [54] If continuing to trade, it is entirely appropriate for Dr Reddy and his companies to continue meeting their liabilities to creditors in the ordinary course of business. It may also be legitimate to liquidate assets to meet liabilities to secured creditors. The risk of dissipation arises with what Dr Reddy and his companies might be doing with any residual funds from these realisations. As counsel for Dr Reddy submits, he has used some of those residual funds to inject liquidity into his remaining dental practices.17 On 30 August 2024 Dr Reddy said “[we have] completely restructured our business”.18 Evidently these payments were neither ordinary course, nor to meet liquidated debts owed by that particular entity. [55] The respondents are in an active phase of realising assets. If there is a situation of insolvency (which the evidence indicates), then the net proceeds should be managed through appropriate insolvency procedures. Given Dr Reddy’s decision not to provide any detail about the separate or overall asset and liability position of himself and the guarantor companies, or how realisations are being applied, I accept that DLL’s concerns about dissipation are more than mere speculation. In the absence of proper information, there is a very clear risk that DLL’s prospective judgment will be wholly or partly unsatisfied because assets of the respondents are being disposed of, dealt with and diminished in value. [56] DLL is not seeking to achieve (and cannot achieve) a secured position by these orders, nor defeat the legitimate position of any other creditors. Any such issues have already been provided for in the terms of the draft order or can be accommodated by 17 See [19] above. 18 See [43] above. a variation if necessary. In this case, the evidence indicates a situation of insolvency without seeking to address those matters by appropriate insolvency procedures. In the circumstances, I accept that a freezing order is appropriate at the present time, to protect the legitimate entitlements of the prospective judgment creditor along with all other unsecured creditors. Balance of convenience [57] The respondents assert that the freezing orders have caused damage reputationally, financially and emotionally. They also say that the orders have prevented payments in the ordinary course of business and realisation of assets to satisfy mortgage and other obligations. [58] I do not accept that these factors undermine the reasons for continuing a freezing order. The orders do not purport to prevent payments in the ordinary course of business. If any such issues did arise, then the appropriate course was (and remains) to address this with the banks concerned by pointing out the ordinary course of business exception, or by seeking further orders from the Court to ensure that those ordinary course of business payments may be made. [59] Likewise, if the respondents need a variation to enable a sell-down of assets to pay secured creditors and meet other creditor obligations, then this would usually be achieved by consent (if legitimate, then it will be non-contentious). As demonstrated by cl 4(c) of the existing orders, it is quite common to allow market sale steps to proceed, on the basis that the freezing order allows payments necessary to discharge any securities for settlement, then attaches to the net proceeds. [60] In terms of the alleged reputational, financial and emotional impacts (noting that companies cannot suffer emotional damage), my assessment is that these problems arise from Dr Reddy’s significant financial liabilities and cash flow problems, rather than proper steps taken by DLL as a substantial creditor to protect its legal entitlements. [61] Overall, in my view any adverse impact on secured creditors, staff members and other creditors and third parties can appropriately be accommodated within the existing orders, or by seeking a suitable variation. These are not matters that undermine the basis for granting and continuing the freezing orders. Result [62] I make orders continuing the existing freezing orders until further order of the Court. [63] I dismiss the respondents’ application seeking a discharge of the freezing orders. [64] The applicant is entitled to costs. If the parties cannot agree, then the applicant may file a memorandum within 10 working days, and the respondents may file their memorandum 10 working days later. I will then determine costs on the papers. [65] Meanwhile, I ask Registry to schedule this matter in the next suitable Duty Judge list, to make timetable orders for progressing the outstanding application for ancillary orders dated 20 December 2024 (amended 31 January 2025) and for any variations that might be sought (as envisaged in [58] and [59] above). O’Gorman J Solicitors/Counsel: Wynn Williams, Auckland N H Malarao, Auckland Parker Law, Auckland NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.nzlii.org/nz/cases/NZHC/2025/554.html