515 South Orange Grove Owners Association v Orange Grove Partners (No. 2) [1996] CKCA 2; 1 OFLR 003 (2 December 1996)

COURT OF APPEAL OF COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)

1 OFLR 003

515 SOUTH ORANGE GROVE OWNERS ASSOCIATION & OTHERS

v

ORANGE GROVE PARTNERS & OTHERS

(South Orange Grove Case (No 2))

Plaint No. 31/96

SIR DUNCAN MCMULLIN CJ, HILLYER J & MCHUGH J

HEARING - 25/26 SEPTEMBER 1996
JUDGMENT - 2 DECEMBER 1996

Trust - asset protection trust - Cook Islands international trust – time bar to action by creditors – action time barred if the trust established before the cause of action 'accrued or had arisen' – time when cause of action arose different from the time when it accrued - trust not established before the cause of action had arisen – action by creditors not time barred – s13B(4) International Trusts Act 1984 (Cook Islands)

The defendants in this action were the same as the respondents in the first South Orange Grove case (Plaint No: 208/94 in which judgment was given by the Court of Appeal of the Cook Islands on 6 November 1995), save that the fifth respondent 1 in Plaint No: 208/94 was an international trust registered pursuant to the International Trusts Act 1984 and known as the 'Victor trust'. The fifth defendant in this case was an international trust known as the 'Evangeline trust'. The first South Orange Grove case is referred to as the 'Victor case' and this action is referred to as the 'Evangeline case'.

1 The fifth respondent in that case was '25/25 1993 Investment Trust - Victor J Illig'

Both the Victor case and this action arose out of a judgment awarded on 13 April 1994 by the Superior Court of California for the County of Los Angeles in favour of the plaintiffs for US$5,753,874. That judgment was issued against the first, second and third defendants. The action arose out of the faulty construction of apartments in a condominium project known as 515 South Orange Grove.

Subsequent to obtaining judgment in the Californian Court, the plaintiffs learned that the first, second and third defendants had transferred assets to the Victor Trust. The plaintiffs then commenced the Victor case in the High Court of the Cook Islands to enforce the judgment of the Californian Court. The Victor case was commenced on 22 of December 1994. On 24 December 1994 an interim injunction was awarded, but this was set aside on 10 March 1995. The interim injunction was reinstated on 10 November 1995 in accordance with the judgment of the Court of Appeal of the Cook Islands.

In February 1996, the plaintiffs learned for the first time that a second international trust had been established – the Evangeline Trust. The Evangeline Trust had been established on 21 December 1993, and funds had been transferred to that trust in December 1993 and February 1994. The plaintiffs commenced the present proceedings – the Evangeline case – on 12 March 1996. They obtained a mareva injunction and an order that the sixth defendant (Southpac Trust International Inc) disclose to the plaintiffs the Evangeline Deed of Trust together with the value of the assets of the trust and particulars of dispositions to and from the trust. The defendants applied to strike out the action and to discharge the mareva injunction on the grounds that the proceedings were time-barred under s 13B of the International Trusts Act 1984.

In the Victor litigation, the issue was whether the plaintiffs had commenced their action within two years of the cause of action accruing. The Court of Appeal of the Cook Islands had held that the cause of action accrued on the date when judgment was ordered by the Californian Court, that is 13 April 1994. The plaintiffs in the Victor litigation had, therefore, commenced their action within two years of the cause of action accruing.

In the current litigation, the defendants argued that the plaintiffs were time-barred under s13B(4) of the International Trusts Act 1984 which provided as follows:

'(4) An international trust settled or established and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor if the settlement establishment or disposition of property took place before that creditor's cause of action against the settlor accrued or had arisen.'

The defendants argued that the establishment of the Evangeline trust and the dispositions to that trust all arose before the cause of action accrued or had arisen on 13 April 1994.

The plaintiffs accepted that the cause of action had accrued on 13 April 1994. However, they argued that the use of the separate term 'or had arisen' in s13B(4) referred to a different date.

The proceedings were removed into the Court of Appeal of the Cook Islands.

HELD: the use of the words 'had arisen' in s13B(4) must have been intended to refer to a different date from that on which the cause of action 'accrued'. The cause of action 'had arisen' when notice of the existence of the cause of action was given to the settlor of the international trust. The settlor of the Evangeline Trust was notified that a cause of action had arisen on 25 October 1991. The establishment of the Evangeline trust and the dispositions of property to the Evangeline trust had, therefore, not taken place before the cause of action had arisen. Accordingly, the plaintiffs' action was not time barred.

Cases referred to

CIR v Taylor [1961] 1 NZLR 923
Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 128
Higgs (Inspector of Taxes) v Olivier [1952] 1 Ch 311
T v H [1995] 3 NZLR 37
Takaro Properties Ltd v Rolling [1978] 2 NZLR 314

Parties

PLAINTIFFS: 515 South Orange Grove Owners Association & others
DEFENDANTS: 1. Orange Grove Partners, 2. Victor Illig, 3. Evangeline Illig. 4. 25/25 Holdings LLC, 5. 25/25 1993 Investment Trust – Evangeline M Illig, 6. Southpac Trust International Inc as trustee of the 25/25 1993 Investment Trust – Evangeline Illig – & the 25/25 1993 Investment Trust – Victor J Illig, 7. 25/25 1993 Investment Trust – Victor J Illig

Counsel

PLAINTIFFS: B H Giles QC, Mrs W N Brandon
DEFENDANTS: M D O'Brien

Cur adv vult

Judgment

SIR DUNCAN McMULLIN: this proceeding is closely related to that issued by the plaintiffs in the High Court of the Cook Islands under Plaint No. 208/94. The defendants in the present proceeding (Plaint 31/96) are, with one exception, the defendants in Plaint No 208/94. That exception is the fifth defendant which in Plaint No 208/94 was '25/25 1993 Investment Trust – Victor J Illig', an international trust registered pursuant to the International Trusts Act 1984. The fifth defendant in the present proceeding (Plaint No 31/96) is '25/25 1993 Investment Trust – Evangeline M Illig', a similarly registered trust. It will be convenient to refer to Plaint No 208/94 as the 'Victor case' and to this case, Plaint No 31/96, as the 'Evangeline case'.

Both cases have their genesis in the judgment of the Superior Court of California for the County of Los Angeles entered on 13 April 1994 following the return of a jury verdict earlier on the same day in favour of the plaintiffs against the defendants in the Victor case for US$5,753,874 with interest thereon at the rate of ten per cent per annum from April 12, 1994. The plaintiffs had sued in that Court for damages for the faulty construction of some apartments in a condominium project, known as 515 South Orange Grove in Los Angeles, which they had purchased between 30 November 1988 and 16 November 1989 and for breach of warranty arising in the same sale and purchase transaction.

Following the entry of judgment in the Californian Court, the plaintiffs endeavoured to enforce their judgment only to find that the first, second and third defendants had divested themselves of the assets they had formerly owned in California. There is evidence that they did this quite deliberately for the purposes of defeating the plaintiffs' claim. Some of the assets had been transferred to international trusts set up in the Cook Islands. The plaintiffs then sued in the High Court of the Cook Islands to recover the amount of their Californian judgment. They brought their proceeding in the Victor case pursuant to Section 13B of the International Trusts Act 1984 enacted by the Cook Islands Parliament and they applied for a mareva injunction to restrain the first, fifth and sixth respondents in the Victor case from removing the administration of the trust and any property from the jurisdiction of the Cook Islands to entities elsewhere in the world, including Mexico, where the second and third respondents now live.

On 24 December 1994 the plaintiffs in the Victor action obtained an interim mareva injunction but this was set aside on 10 March 1995 on an application by the defendants. In setting aside the mareva injunction the High Court accepted the defendants' argument that the plaintiffs' cause of action arose in 1988 and 1989 when they purchased the apartments and that these dates fell outside the two year limitation period provided by the International Trusts Act. An order reinstating the mareva injunction pending the hearing of an appeal from the High Court decision was subsequently made. On 10 November 1995 this Court reinstated the mareva injunction in the Victor case.

This Court's judgment in the Victor case turned principally on the construction to be given to s13B(8) of the International Trusts Act and held, contrary to the submissions of the defendants, that the proceeding was in fact brought within the time limit prescribed by s13B(8)(b). An application to the Privy Council for leave to appeal against that judgment was dismissed by the Council on 29 July 1996.

Following on the reinstatement of the mareva injunction in the Victor case the plaintiffs in that case sought and obtained an order from the High Court that the defendants provide details of all dispositions made to and by the Victor trust. In February 1996 the plaintiffs learned, for the first time, that in fact two trusts had been established under the International Trusts Act by the one trust deed, a fact which had not previously been known to them. The one trust deed established both a Victor trust an Evangeline trust.

Other matters material to both the Victor and the Evangeline trusts have since become known to the plaintiffs. A Mr P F McDonnell, a solicitor engaged by the plaintiffs' solicitors, has deposed in an affidavit sworn on 13 March 1996 and filed in support of an application for a mareva injunction in the Evangeline case that between the discharge of the mareva injunction in the Victor case and its reinstatement pending the resolution of the appeal, certain dispositions were made by both the Victor and Evangeline trusts. On 23 February 1996 a Miss L M Corvette, a legal counsel employed by Southpac Trust Limited, trustee of both the Victor and Evangeline trusts, swore an affidavit disclosing that on or about 15 March 1995 securities to the value of approximately US$510,000 were transferred at the direction of Victor Illig from an account in the name of Southpac (the sixth defendant) to an account in the name of Southpac in respect of the Evangeline trust.

The plaintiffs then brought the Evangeline case. They did so on 12 March 1996, that is within 12 months of the disposition of the US$510,000 just referred to and within two years of the plaintiffs' cause of action accruing, namely 13 April 1994. They thereby complied with s13(B)(3)(b) of the International Trusts Act. They also obtained a mareva injunction on 17 March 1996 and an order that the sixth defendant (Southpac) disclose to the plaintiffs the Evangeline Deed of Trust together with the full value of the assets of the trust with particulars of dispositions to and from the trust.

The defendants in the Evangeline case then applied to strike out that action and to discharge the mareva injunction upon the ground, inter alia, that, having regard to the provisions of the International Trusts Act, the proceedings were time barred. On 9 May 1996 the Chief Justice of the Cook Islands made an order under Section 53 of the Judicature Act 1980/81 removing these applications into the Court of Appeal.

In the Evangeline case the plaintiffs seek, inter alia, a declaration that the Evangeline trust and the Victor trust are liable to satisfy the plaintiffs' judgment in the Californian Court out of property settled by the defendants in the Cook Islands and they seek judgment against the Evangeline trust and the Victor trust for the US$5,703,379, which remains owing on the judgment entered in the Californian Court.

Reference has already been made to an affidavit sworn by Miss Corvette on 23 February 1996. In fact Miss Corvette seems to have made three affidavits. On 9 February 1996 she made an affidavit in compliance with the mareva injunction made in the Victor case. This affidavit set out the assets of the Victor trust.

On 23 February 1996 she swore the affidavit already referred to correcting information she had given in the earlier affidavit. Then on 2 May 1996 she swore an affidavit for the purposes of complying with the mareva injunction of 17 March 1996 in the Evangeline case and to discharge the mareva injunction made on the same day. Attached to her affidavit was a copy of an affidavit made by a Mr Bruce Gridley who acted as counsel for the first, second and third defendants in the Californian proceedings. Mr Gridley's affidavit said that the Evangeline trust was set up on 21 December 1993, which was the date upon which Southpac executed the trust deed constituting the Evangeline trust (Evangeline signed it on 10 December 1993), and that upon the establishment of the Evangeline trust, Evangeline Illig assigned to the trust on 10 December 1993 promissory notes for $50,000, $100,000 and $50,000 and $60,000 and on the same day transferred an interest in a partnership in Far West South Coast Limited. In addition to this Evangeline Illig made a telegraphic transfer on 7 February 1994 in the sum of $1,182,000 to an account held by Southpac with the Bank of New Zealand at Singapore. Miss Corvette also claimed that certain properties set out in the plaintiffs' statement of claim were not property which had been settled upon the Evangeline trust or transferred to it at any time.

The significance of Miss Corvette's affidavits to the defendants' motion to strike out the plaintiffs' case in the Evangeline trust and discharge the mareva injunction is to attempt to establish the dates on which transactions were entered into in the Evangeline trust and transfers of property made to it. The Evangeline trust itself, as already stated, was established on 21 December 1993 and the assets vested in it were transferred to it between 21 December 1993 and February 1994.

In our judgment in the Victor case we held that the plaintiffs' cause of action arose in terms of s13B(8)(b) of the International Trusts Act on 14 April 1994 when the judgment was sealed in the Superior Court of Los Angeles. It would seem that the date on which the judgment was sealed was 13 April 1994 and not 14 April 1994. That date would also be the date when the cause of action arose in the Evangeline case. The present application is founded specifically on the provisions of s13B(4) of that statute which we discuss later.

It is convenient now to set out the provisions of s13B of the International Trusts Act:

'13B. Fraud - (1) Where it is proven beyond reasonable doubt by a creditor that an international trust settled or established or property disposed to an international trust-

(a) Was so settled established or disposed by or on behalf of the settlor with principal intent to defraud that creditor of the settlor; and

(b) Did at the time such settlement establishment or disposition took place render the settlor, insolvent or without property by which that creditor's claim (if successful) could have been satisfied, then such settlement establishment or disposition shall not be void or avoidable and the international trust shall be liable to satisfy the creditor's claim out of the property which but for the settlement establishment or disposition would have been available to satisfy the creditor's claim and such liability shall only be to the extent of the interest that the settlor had in the property prior to settlement establishment or disposition and any accumulation to the property (if any) subsequent thereto.

(2) In determining whether an international trust, settled or established or a disposition, has rendered the settlor insolvent or without property by which a creditor's claim (if successful) may be satisfied, regard shall be had to the fair market value of the settlor's property, (not being property of or relating to the trust) at the time immediately after the settlement establishment established or the disposition referred to in subsection (1)(b) and in the event that the fair market value of such property exceeded the value of the creditor's claim, at that time, after the settlement establishment or disposition, then the trust so settled or established or the disposition shall for the purposes of this Act be deemed not to have been so settled established or the property disposed of with intent to defraud the creditor.

(3) An international trust settled or established and a disposition to such trust shall not be fraudulent as against a creditor of a settler-

(a) if settled established or the disposition takes place after the expiration of 2 years from the date that creditor's cause of action accrued; or

(b) where settled, established or the disposition takes place before the expiration of 2 years from the date that the creditor's cause of action accrued, that creditor fails to commence such action before the expiration or 1 year from the date such settlement establishment or disposition took place.

(4) An international trust settled or established and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor if the settlement establishment or disposition of property took place before that creditor's cause of action against the settlor accrued or had arisen.

(5) A settlor shall not have imputed to him an intent to defraud a creditor, solely by reason that the settler –

(a) Has settled or established an international trust or has disposed of property to such trust within two years from the date of that creditor's cause of action accruing;

(b) Has retained, possesses or acquires any of the powers or benefits referred to in paragraphs (a) to (f) of section 13C;

(c) Is a beneficiary.

(6) Where an international trust is liable to satisfy a creditor's claim in the manner provided for in subsection (1) but is unable to do so by reason of the fact that the property has been disposed of, other than to a bona fide purchaser for value, then any such disposition shall be void.

(7) For the purpose of this section the onus of proof of the settlor's intent to defraud the creditor lies on the creditor.

(8) For the purpose of this section–

(a) the date of the cause of action accruing shall be, the date of that act or omission which shall be relied upon to either partly or wholly establish the cause of action. And if there is more than one act or the omission shall be a continuing one, the date of the first act or the date that the omission shall have first occurred, as the case may be, shall be the date that the cause of action shall have accrued.

(b) in the case of an action upon a judgment, the date of the cause of action accruing shall be, the date of that act or omission or where there is more than one act or the omission shall be a continuing one, the date of the first act or the date that the omission shall have first occurred, as the case may be, which gave rise to the judgment itself.

(9) The provisions of this section shall apply to all proceedings by every creditor alleging fraud against a settlor of an international trust, or against any person who shall settle property upon, or dispose of property to, or establish an international trust on behalf of that settlor, to the exclusion of any other remedy, principle or rule of law whether provided by statute or founded in equity or common law.

(10) In this section the terns 'creditor' includes any person who alleges a cause of action.'

As mentioned, the argument in the Victor case turned on the interpretation of s13B(8). The written submissions of counsel presented in that case were directed to that sub-section but sub-section (4) was mentioned orally and as a backstop to the main argument of counsel who then appeared for the defendants.

But in the Evangeline case s13B(4) has become the focus of the argument. Mr O'Brien did not seek to re-argue the defendants' contention in the Victor case that the cause of action upon which the plaintiffs sued had arisen in 1988 and 1989 and consequently was out of time on that ground. He accepted, at least for the purposes of the argument, this Court's decision in the Victor case that the cause of action arose on 13 April 1994. He confined his argument solely to s13B(4).

In essence, Mr O'Brien's argument is that all the dispositions of property to the Evangeline trust were made between 21 December 1993 and February 1994, that is before the plaintiffs' cause of action had arisen and, for that reason, those transactions are deemed to be not fraudulent and cannot be attacked under s13B. Mr O'Brien submitted that, given the plain meaning of the words ‘accrued or had arisen', used in s13B(4), only settlements and dispositions that took place after the jury verdict could be outside the 'not fraudulent' deeming provisions and therefore susceptible to the provisions of s13B(1). It follows from Mr O'Brien's argument that, if the Evangeline trust was established before 13 April 1994, the establishment is deemed not fraudulent as against the plaintiffs, and that, on the meaning we gave to Section 13B(8)(b) in the Victor case, only settlements and dispositions that took place after the jury verdict will be outside the 'not fraudulent' deeming provisions of s13B(4).

In developing his submissions Mr O'Brien contended that the words 'accrued' and 'arisen' were used interchangeably in s13B(4) and so a cause of action can be said to accrue when it arises or arise when it accrues. In support of his contention he referred to two revenue cases - Higgs (Inspector of Taxes) v Olivier [1952] 1 Ch 311; and CIR v Taylor [1961] 1 NZLR 923; and a case decided under the Limitation Act 1950 - T v H [1995] 3 NZLR 37.

If Mr O'Brien's submission is projected to its logical conclusion then under s13B a settlement or disposition is deemed to be not fraudulent if it took place two years or more after the cause of action accrued (ss3(a)), or took place before the creditor's cause of action arose at all (ss4).

On this submission, any settlement or disposition is free from attack as fraudulent if it was made before 13 April 1994 (in which case the cause of action expired before it was ever born (s13B(4)) OR after 13 April 1996 (s13B(3)(a)) OR, if between 13 April 1994 and 13 April 1996, the creditor does not commence an action within one year from the date of such settlement or disposition.

This analysis of the relevant provisions, particularly ss4, which would effectively bar the cause of action before it arose, demonstrates the absurdities which could follow from the suggested construction and would indicate that there may be another, and preferable, construction to place on ss4.

While noting the cases cited by Mr O'Brien, we think that there is a danger in seeking to import the construction given to a word or phrase in one statutory enactment into another. A statute must be looked at as a whole before its particular provisions can be interpreted and applied to a given factual situation.

Mr Giles, whose submission was supported by Mrs Brandon, submitted that:

(i) Section 13B(4) has no application to the present case as there was in fact a disposition made on 13 March 1995 which was after, and not before 13 April 1994, when the cause of action accrued;

(ii) That there is no inconsistency between s13B(8) and s13B(4) and, in fact, the provisions of s13B all sit together quite comfortably;

(iii) That s13B(4) addresses the intention of the settlor when the settlor establishes the trust or disposes of property to it;

(iv) That s13B(4) allows for both the possibilities provided for in s13B(8) and deliberately addresses two quite separate events, namely:

(a) the date at which a creditor's cause of action against the settlor accrues;

(b) the time at which a creditor's cause of action against the settlor has arisen.

Mr Giles made a second submission. It was that, whatever view we took of s13(4), the Court should not make an order striking out the Evangeline case and, with it, the mareva injunction. He based this submission on the well established principle that the jurisdiction to strike out proceedings without enquiring into their merits should be used sparingly. For cases supporting this principle see General Steel Industries inc v Commissioner for Railways (NSW) (1964) 112 CLR 128; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641. It has been held that on such an application the Court should assume in favour of the plaintiffs that all the assertions in the statement of claim are correct. Takaro Properties Ltd v Rolling [1978] 2 NZLR 314.

In the light of this principle this Court could not possibly strike these proceedings out nor discharge the mareva injunction. As Mr Giles said, in the affidavits earlier referred to there have been admissions of significant movements of money out of the trust and thus out of reach of the plaintiff during the period between the discharge of the mareva injunction in the Victors case and its reinstatement. It is important that the mareva injunction remain in place to preserve the status quo pending the determination of the plaintiff’s claims. Moreover, when the merits of the various transactions we refer to in the next paragraph are enquired into on a substantive hearing other matters relevant to the plaintiff’s claim may be discovered. It is proper that the plaintiffs should be allowed to explore other allegations of dealings made in their claim.

If the present application to strike out were successful the plaintiffs as judgment creditors would have no recourse to the High Court for an enquiry although it seems apparent from the record in the case that there may well have been dispositions made by the defendants which, on the wording of s13B, do not exclude an inquiry into fraud.

In an affidavit sworn on 2 May 1996, Ms Corvette refers to a number of transactions made after 13 April 1994. There is, for example, the disposition of US$510,000 made between the two trusts on 15 March 1995. There may well be others including the setting up of a separate deposit amount on 29 March 1996 comprising payments received for the period 8 December 1995 and 9 February 1996; payments of US$25,000 made on or about 23 January 1996; a transfer of sums totalling US$1,193,675 between 17 May 1994 and 29 August 1994 from the Evangeline trust; a distribution of approximately US$910,000 to a beneficiary of the Evangeline trust on or about 21 December 1994; the transfer on or about 21 December 1994 of $5,000 from the Evangeline trust from an account in the name of the sixth defendant as trustee for the Victor trust; the transfer to an account in the name of the sixth defendant as trustee for the Evangeline trust of $14,985 on or about 26 August 1995. There are also transactions involving the movement of funds into and from the Bank of New Zealand account of the Evangeline trust.

Dispositions made after 13 April 1994 may fall outside the provisions of s13B(4) and may or may not be fraudulent. Some may fall within the provisions of s13B(3)(b), such as the disposition of US$510,000 made on 15 March 1995. This disposition, and possibly others, may not be exempt as non-fraudulent transactions and consequently would be open for further inquiry. The plaintiffs are entitled to this. The defendants will still be able to answer any allegations of fraud by producing evidence at the substantive hearing where the various transactions and their import, and others which may emerge from the evidence, can be analysed much more closely than could be the case on the hearing of the present application.

While adherence to these general principles would be enough to dispose of the present applications in favour of the plaintiffs, we think that we should indicate our tentative views on the construction of s13B(4) to which the whole of Mr Q'Brien's, and most of Mr Giles' submissions, were directed. We think that Mr Giles may well be right in his approach to s13B as a whole. When the individual sub-sections are analysed the overall purpose of s13B becomes apparent. Section 13B(1) enables a creditor to have recourse to assets in an international trust to satisfy his claim where it is proved to the requisite standard that the trust was established or property transferred to it with the 'principal intent to defraud' the creditor.

Section 13B(2) provides that where the fair market value of the settlor's property (not being property of or relating to the trust) exceeds the value of the creditor's claim, then the settlement of the trust or the disposition of property to it shall be deemed not to have been settled or disposed of with intent to defraud the creditor.

Section 13B(3) is a deeming provision. It relates only to 'accrued' causes of action. The word 'accrued' is used both in subparagraphs (a) and (b) of the sub-section. Thus s13B(3) deems any settlement or transaction, even though it might otherwise be fraudulent, not to be such if it takes place later than two years from the accrual of the cause of action. Therefore, under s 13B(3) dispositions after 13 April 1996 could not be held to be fraudulent under s13B(1). Section 13B(3)(b) relates to a settlement or disposition occurring during the period of two years after the accrual of the cause of action, that is, between 13 April 1994 and 13 April 1996 but in that case a creditor must institute proceedings within a year of the disposition taking place. Against the background of the present case, if a disposition takes place between 13 April 1994 and 13 April 1996 (which is the case with the US$510,000 transferred to the Evangeline trust on 15 March 1995) proceedings must be brought by 15 March 1996, (which they were).

Section 13B(4) contains a new element in its use of the word 'arisen' following the word 'accrued'. The question is whether those responsible for the legislation used the word 'arisen' as having the same meaning as 'accrued'. It would be strange if they did when 'accrued' would have been sufficient to express their purpose. Some other meaning must be given to the word 'arisen' to give purpose to its use in the sub-section.

It is only reasonable to expect that a creditor should have some knowledge of a fraudulent disposition before a limitation provision begins to run against him. Parliament could be expected to give a creditor the opportunity to enquire into and question dispositions made by a settlor after the settlor had notice of the creditor's claim. As recorded in our earlier judgment in the Victor case, on 25 October 1991 a letter was written on behalf of the plaintiffs to the first respondent seeking redress for the faulty construction of the apartments and on 23 April 1992 they issued proceedings in the Superior Court of California. As now seems to be admitted, from December 1993 onwards the first, second and third defendants took steps to dispose of property which would otherwise have been available to satisfy the judgment which plaintiffs obtained on 13 April 1994.

Viewed in this way s13B(4) left it open to a creditor to open up transactions of this kind for scrutiny under s13B(1). As was put to us by Mr Giles, without the words 'or had arisen' and the interpretation we have placed upon them, the protection for creditors afforded by sub-section 8(b) would be rendered nugatory. A debtor could, upon being sued, deliberately delay entry of judgment by whatever means possible while moving assets out of the jurisdiction with the intention of ultimately defeating the judgment creditor. He could then contend, as do the present defendants, that although the s13B(3) time limit might be met, all would be lost for the plaintiff creditor because he had lost all rights before the cause of action on the judgment had arisen.

In our view the words 'accrued or had arisen' set up two periods. The word 'accrued' refers to 13 April 1994 and the words 'or had arisen' refer to a prior date upon which notice of the existence of the cause of action was given to the settlor.

For the above reasons we incline to the view that the plaintiffs' submission that s13B(4) is to be construed in its ordinary sense as providing alternative dates before which a settlor must have settled or established a trust or made dispositions if seeking the exemptive protection of the section is a correct interpretation. That date is not just 13 April 1994 being the date of the accrued cause of action. The words 'or had arisen' could establish a much earlier date and the settlor would have to prove dispositions occurred prior to that earlier date.

The present action should proceed to a hearing where evidence of specific transactions and the settlement of the trust can be enquired into in more detail and to provide a factual basis for findings of the Court. Then s13B can be examined against the background of individual dealings.

For the reasons given the application to strike out the proceedings and to discharge the mareva injunction is refused. Plaintiffs are entitled to costs on the hearing of the application. A memorandum should be supplied to the Court as to the amount claimed.

Solicitors
PLAINTIFFS: Clarkes, Rarotonga
DEFENDANTS: Timothy Arnold, Rarotonga