Taylor v Bank of New Zealand HC Auckland CIV-2011-404-001842 [2011] NZHC 1123 (9 September 2011)

Last Updated: 18 October 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-001842}

BETWEEN WARREN WILLIAM DENIS TAYLOR Plaintiff

AND BANK OF NEW ZEALAND Respondent

Hearing: 8 September 2011

Appearances: Plaintiff in Person

DT Broadmore for Respondent

Judgment: 9 September 2011 at 2:00 PM

JUDGMENT OF VENNING J ON SECURITY FOR COSTS

This judgment was delivered by me on 9 September 2011 at 2.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Buddle Findlay, PO Box 2694, Wellington

Copy to: Mr W W D Taylor, 24Walker Street, Waihi 3610

TAYLOR V BANK OF NEW ZEALAND HC AK CIV-2011-404-001842 9 September 2011

[1] Mr Taylor, as trustee of the Moresby Family Trust, (the Trust) sues the Bank of New Zealand (the Bank). The Trust says the Bank breached an agreement to advance funds to it and that the Trust has suffered loss as a consequence.

[2] The Bank denies there was any such agreement to advance funds. It has filed an application for summary judgment and/or strike-out and also this application for security for costs.

[3] An Associate Judge directed that this application for security for costs be heard first.

Principles

[4] The principles to apply on an application for security for costs are well settled. In A S McLachlan v MEL Network Ltd[1] the Court of Appeal confirmed that whether to order security or not and the quantum of security are both discretionary decisions. The discretion is not to be fettered by constructing principles from the facts of previous cases.

The issues

[5] The following issues arise on the application:

(a) Is there reason to believe the Trust will be unable to pay the Bank’s

costs if the Trust is unsuccessful in its proceeding?

(b) If so, is it just in all of the circumstances for security to be ordered?

And;

_{(c) If so what is the appropriate quantum?}

[6] As the argument developed before the Court it became clear that there was really no debate about the threshold issue. In reply Mr Taylor said that if the Trust’s claim against the Bank is unsuccessful and the Bank moves to sell its properties the Trust will have no money at all.

[7] That seems a realistic assessment of the position. The Trust owns the following properties:

72A Moresby Avenue, Waihi;

15 Wrigley Street, Waihi;

24A Walker Street, Waihi;

24B Walker Street, Waihi; and

22 Walker Street, Waihi.

The Bank holds securities over all properties except for 22 Walker Street.

[8] Ms Sherwill, manager of the Bank’s loan management team, deposes that as at 10 May 2011 the Trust was indebted to the Bank in the sum of $917,676.96 (including interest arrears).

[9] The Bank has obtained valuations of the properties owned by the Trust as at July 2011, including the property at 22 Walker Street. The total market value of the secured properties is $960,000.00. The total value of the secured properties in the event of a forced sale is $673,000.00. Twenty-two Walker Street has a market value of $310,000.00 and a forced sale valuation of $232,500.00.

[10] Twenty-two Walker Street is, however, subject to a mortgage registered to a Mr Bravo and others. The Trust, through Mr Taylor, has declined to respond to the Bank’s request for information about the Trust’s indebtedness in relation to that

property, but the mortgage documentation relating to it records that, as at December

2007 the principal sum secured by the mortgage was increased to $232,000.00. On a forced sale valuation there would be no equity in that property.

[11] Given that interest continues to accrue on the Trust’s borrowings, the costs of sale, and Mr Taylor’s frank admission to the Court of the Trust’s financial situation, the Court is satisfied as to the threshold issue. The plaintiff Trust will be unable to pay the costs of the Bank if the Trust is unsuccessful in the proceeding.

Discretion – should there be an award for security?

[12] The decision whether to order security is discretionary. As the Court of Appeal noted in the A S McLachlan case the rule contemplates the plaintiff will be unable to meet an adverse award of costs and that an order for substantial security may effectively prevent the plaintiff from pursuing the claim. An order having that effect should only be made after careful consideration and in a case where the claim has little chance of success. On the other hand, defendants must be protected against being drawn into unjustified litigation.

[13] The merits of the case are a relevant consideration although at an interlocutory stage such as this the merits can only be considered as a matter of impression.

[14] Mr Taylor made it clear during his submissions that from the Trust’s point of view there was an ongoing relationship with the Bank, particularly through Mr Barclay as reflected in the seven loans made by the Bank to the Trust from July 2006 through to June 2008.

[15] Mr Taylor was adamant that at a meeting in or about June 2008 Mr Barclay had agreed to advance $189,000 to the Trust to enable it to repurchase 72A Moresby Road, Waihi and had also given conditional approval to an advance of $259,000.00 to be secured over 22 Walker Street, Waihi to enable the re-development of the Trust’s properties. However, matters changed after Mr Barclay was transferred.

[16] Mr Taylor said that it was only after he had presented the balance sheet and information to the Bank that the replacement bank officer declined to proceed with the advances.

[17] The Bank did subsequently make an advance of $189,000.00 in November

2009 to enable the purchase of the 72A Moresby Road, Waihi property, but Mr

Taylor said that was too late.

[18] Mr Broadmore submitted that Mr Barclay’s evidence would be that no such agreement was made committing the Bank to advance moneys to the Trust. Any offer by the Bank to advance moneys to the Trust would have been made in the usual way by formal written loan offer. Mr Broadmore referred to a number of written loan offers as evidence of the Bank’s practice and the parties dealing to support that submission.

[19] As discussed with Mr Taylor, the Trust’s claim against the Bank is a difficult one. Apart from the factual dispute between Mr Taylor’s and Mr Barclay’s evidence, the previous practice of the Bank as shown by the documentation and the Bank’s general practice counts against the case the Trust seeks to make.

[20] Next, the loan in relation to the Moresby Avenue property was ultimately advanced. Further, even on the Trust’s case, the loan in relation to the $259,000.00 advance was conditional. It was for the Bank to be satisfied as to the conditions. There are no particulars pleaded of the conditions other than provision of a balance sheet. It must have been open for the Bank to reject the information provided on the balance sheet.

[21] There is also force in Mr Broadmore’s submission that there is insufficient certainty to support the argument there was a binding and enforceable contract to make the advances.

[22] The alternative cause of action under the Fair Trading Act 1986 is also difficult. Again, as Mr Broadmore correctly submitted, the non performance of a

promise does not of itself amount to misleading or deceptive conduct for the purposes of the Act.

[23] In short, even without considering the difficulties of proof of damage and loss the Trust faces substantial hurdles with its claim against the Bank.

[24] The next consideration is whether the Bank’s conduct has caused the plaintiff’s impecuniosity. The poor financial position of the plaintiff is primarily due to the fall in property values in Waihi reflected in the decrease in value between the valuations obtained by Mr Taylor in 2009 and the valuations obtained by the Bank in

2011.

[25] The last consideration is that, although the Trust alleges a breach by the Bank in late 2008, these proceedings were not issued until 2011 after a number of the loans had matured and the Bank had issued letters of demand. The clear inference is that the proceedings were issued to forestall the Bank pursuing recovery of the moneys outstanding under the existing advances.

[26] I am satisfied that it is appropriate to make an order for security in this case.

Quantum

[27] The last issue is quantum. Mr Broadmore has calculated scale costs on a 2B basis for all interlocutory steps and for a two day hearing would total $32,336.00. He initially submitted that a figure in that sum would be appropriate but accepted that often the order ultimately directed by the Court was discounted from that scale calculation.

[28] Included in the sum that Mr Broadmore calculates as the scale costs are allowances for preparing and filing this application for security and for the separate application for summary judgment and strike-out together with time associated with preparation and hearing of the applications and sealing judgments.

[29] I do not consider the costs associated with the interlocutory applications should be included. The costs on this application will simply be ordered and will be payable as is the usual rule in interlocutory applications.

[30] As discussed with Mr Broadmore I consider the application for summary judgment and/or strike-out should have been heard at the same time as this application. It would have been a much more efficient way for the matter to be dealt with both from the Court’s point of view and in terms of costs to the parties. With the costs associated with the interlocutory applications deducted, the balance of costs for all other steps in the proceeding, including a two day hearing, would be

$26,696.00.

[31] The Court must provide a realistic sum of security as a contribution towards the costs the Bank will incur, but also the figure should not be unreasonable from the Trust’s point of view. Bearing in mind the above considerations, the appropriate order in my judgment is $17,500.00.

Result

[32] The plaintiff is to provide security for costs in the sum of $17,500.00 by paying that sum to the Registrar of this Court. The sum is to be paid to the Registrar by Friday 7 October 2011. In the event it is not paid I reserve the right of the Bank to seek a stay or dismissal of the proceeding.

[33] In the event security is paid the file is to be referred to the Registrar for the allocation of the Bank’s application for summary judgment/strike-out (half day to be allocated).

Costs

[34] The Bank is entitled to costs on this application. I fix costs on this application on a 2B basis, together with the disbursements as fixed by the Registrar.

Venning J

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[1] A S McLachlan v MEL Network Ltd [2002] NZCA 215; (2002) 16 PRNZ 747 (CA).