VENTURE HOMES LIMITED & ORS V DOBSON AND ORS HC AK CIV 2006-404-003348 [2007] NZHC 148 (14 March 2007)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                  CIV 2006-404-003348



               BETWEEN                     VENTURE HOMES LIMITED AND
                                           JOHN TREVOR WHITTFIELD
AND
                                           JOHN LAWRENCE VAGUE
                                           Plaintiffs

      
        AND                         JOHN PETER DOBSON
                                           First Defendant

              
AND                         HARBOUR HEIGHTS LIMITED
                                           Second Defendant

               AND
                        VENTURE EAST LIMITED,
                                           FERROBUILD INDUSTRIES LIMITED
         
                                 AND GREENFIELDS VILLAGE
                                           DEVELOPMENTS LIMITED
       
                                   Third Defendants

               AND                         JOHN PETER DOBSON AND JOHN
     
                                     ROBIN HOLMES
                                           Fourth Defendants


Hearing:       14
March 2007

Counsel:       M Black for plaintiffs
               N Gedye for defendants

Judgment:      14 March 2007 at 15:40


              (ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE
                     [on applications for security for costs]




Solicitors:
   Graig Griffin Lord, 187 Mt Eden Road, Mt Eden for plaintiffs
               Holmes Dangen & Associates, PO Box 3600, Auckland
for defendante



VENTURE HOMES LIMITED & ORS V DOBSON AND ORS HC AK CIV 2006-404-003348 14 March 2007

[1]    The defendants apply
for security for costs.


[2]    The plaintiffs sue the defendants both in their capacities as liquidators
personally, and in the
name of the company in respect of which they were appointed
liquidators.


[3]    The plaintiff liquidators acknowledge that they
have a personal exposure for
costs but oppose the making of any order for security for costs. No information was
provided as to their
ability to meet any order for costs.


[4]    The principles which are applicable for the making of any order for security
for costs
require firstly, a consideration of r 60 of the High Court Rules which
provide:

       60      Power to make order for security
for costs

       (1)     Where the Court is satisfied, on the application of a defendant,--

               ...

              
(b)     That there is reason to believe that a plaintiff will be unable
                       to pay the costs of the defendant
if the plaintiff is
                       unsuccessful in the plaintiff's proceeding,--

               the Court may, if it thinks
fit in all the circumstances, order the
               giving of security for costs.

[5]    In AS McLachlan Ltd v MEL Network Ltd
 (2002) 16 PRNZ 747 the Court of
Appeal gives helpful guidance as to the approach that should be taken on
applications for security for costs. For the
purposes of this application the Court's
comments at [13], [14], [15] and [16] are particularly helpful, namely:



       [13] 
  Rule 60(1)(b) High Court Rules provides that where the Court is
               satisfied, on the application of a defendant, that
there is reason to
               believe that the plaintiff will be unable to pay costs if unsuccessful,
               "the Court
may, if it thinks fit in all the circumstances, order the
               giving of security for costs". Whether or not to order security
and, if
               so, the quantum are discretionary. They are matters for the Judge if
               he or she thinks fit in
all the circumstances. The discretion is not to
               be fettered by constructing "principles" from the facts of previous
               cases.

       [14]    While collections of authorities such as that in the judgment of
               Master Williams
in Nikau Holdings Ltd v BNZ  (1992) 5 PRNZ 430,
               can be of assistance, they cannot substitute for a careful assessment
               of the circumstances of the
particular case. It is not a matter of going
               through a checklist of so-called principles. That creates a risk that
a
               factor accorded weight in a particular case will be given
               [752]disproportionate weight, or even treated
as a requirement for
               the making or refusing of an order, in quite different circumstances.

       [15]    The rule
itself contemplates an order for security where the plaintiff
               will be unable to meet an adverse award of costs. That
must be taken
               as contemplating also that an order for substantial security may, in
               effect, prevent
the plaintiff from pursuing the claim. An order having
               that effect should be made only after careful consideration
and in a
               case in which the claim has little chance of success. Access to the
               Courts for a genuine plaintiff
is not lightly to be denied.

       [16]    Of course, the interests of defendants must also be weighed. They
               must
be protected against being drawn into unjustified litigation,
               particularly where it is over-complicated and unnecessarily
               protracted.

[6]    The competing positions in this case require a consideration of:


       a)      Whether the
imposition of an order for security for costs, assuming
               that the first aspect of the Rule is met, would prevent the
plaintiffs
               from proceeding, on the one hand, and, on the other,


       b)      Fairness to the defendants in preventing
a situation arising where the
               defendant, if successful, would have no practical recourse for costs.


[7]    These
two competing positions, in this case, can be addressed as to the first
aspect of the test in r 60 by my considering security on
two specific bases. Whether
or not the threshold test provided by r 60, that is reason to believe an inability to pay
costs, is met
in this case is not clear to me from the papers that have been filed. But
the situation could easily be clarified by the plaintiff
liquidators disclosing their
assets, or disclosing evidence, of their ability to meet an award of costs up to the
amount sought by
the defendants of approximately $85,000 and by giving an
assurance that the assets which would support that position being not dissipated
pending the determination of this proceeding. If that position is not satisfactorily
reached, then a second position would apply,
namely, the giving of security to the
satisfaction of the Registrar.

[8]    It is appropriate, however, that I briefly refer to
the position in relation to
quantum. Mr Gedye gave a helpful assessment of the likely costs which were based
on the extent of preparatory
work required for the case, which he said justified a
Band C classification and a three-week trial with two counsel. Even if I were
to
apply a calculation in accordance with the Third Schedule it seems to me that some
63 days would have to be allowed and, based
on the current rate prescribed in
Schedule 2 of $1,600 per day, that provides a figure of likely costs of just over
$100,000. That
indicates, in broad terms, to me that what the defendants sought in
this application by way of security for costs is in the right
area.


[9]    Counsel have very helpfully filed submissions in support and opposition
which I have carefully read. The hearing commenced.
A discussion took place with
counsel as to the appropriate approach and counsel invited me at the conclusion of
that discussion to
deliver an oral judgment without my having the benefit of further
oral submissions.     It is anticipated that a practical solution
will be arrived at;
probably along the lines of the first alternative that I will set out in the orders that I
shall make. The advantage
of that is that it is less intrusive in terms of effect on the
parties whilst at the same time protects generally the concerns which were expressed
by the
Court of Appeal in the judgment to which I have made reference.


[10]   Accordingly, I order as follows:


       a)      The plaintiff
liquidators shall provide evidence of their ability to meet
               an award of costs up to $85,000 to counsel for the defendants
on or
               before 28 March 2007 together with their undertaking that the assets
               referred to in that statement
will not be dissipated prior to the
               conclusion of this proceeding;


       b)      In the event that the disclosure
of assets and the undertaking is not
               given, the plaintiffs are ordered to pay security for costs in the sum of
  
            $85,000 to the satisfaction of the Registrar by 18 April 2007 failing
               which this proceeding shall be stayed
pending payment of that
               security for costs.

[11]     In making these orders I reserve leave to the plaintiffs to
apply for an order
extending the time for payment of a part of the security for costs, should this second
possibility be the appropriate
course to follow. In so reserving leave I recognise that
payment of security for costs on a staged basis may be appropriate. If so,
the
position will be reviewed following completion of interlocutory matters and when
the parties are ready to exchange briefs so
that an accurate estimate of trial time is
known. At this stage, the allowance for preparation for trial time and trial time
appear
to be the most substantial allowances that need to be covered in respect of
costs.


Costs


[12]     I reserve costs in relation
to the application. I indicate that an application for
costs in relation to the application for security for costs can be looked
at, at the next
case management conference for this proceeding.            I am adopting that position
because the likely result
very much depends upon which option in terms of the
orders I have made is adopted by the plaintiffs.


Case management directions


[13]     There is an outstanding application by the defendants for particulars which is
part of the application for security for
costs. That application is adjourned to the
chambers list at 10am on 4 May 2007. The purpose of the adjournment is to give the
plaintiffs
an opportunity of responding to the request and to determine whether it is
necessary, following that response, to allocate a fixture.
        In the event that the
application is opposed an amended notice of opposition and affidavits in opposition
(if any) in accordance
with rr 244 and 245 of the High Court Rules shall be filed and
served no later than 20 April 2007 and any affidavit in reply shall
be filed and served
no later than 1 May 2007.


[14]     Mr Black has also signalled the possibility of an application for further
and
better discovery. It is important that if that matter is to be pursued, the application be
filed and served without undue delay.
Accordingly, I direct that any such application

shall be filed and served by 4 April 2007 and shall have as its date of hearing
the
chambers list at 10am on 4 May 2007.       Notice of opposition and affidavits in
opposition shall be filed and served in accordance
with rr 244 and 245 of the High
Court Rules by 20 April 2007 and reply affidavits shall be filed and served by 1 May
2007.



  
                                                       _____________________

                                                  
                        JA Faire
                                                                    Associate Judge