Wood's Limited v Van Der Sande [2012] NZHC 3221 (30 November 2012)

Last Updated: 10 December 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-000996 [2012] NZHC 3221

BETWEEN WOOD'S LIMITED Plaintiff

AND FREDERICK RYDER VERBEEK VAN DER SANDE, ANTOINETTE THERESA VERBEEK VAN DER SANDE AND TIMOTHY MILES CODDINGTON Defendants

Hearing: 23 November 2012

Counsel: P McKenrick for plaintiff

J D McBride for defendants

Judgment: 30 November 2012

_{JUDGMENT OF ASSOCIATE JUDGE ABBOTT}

This judgment was delivered by me on 30 November 2012 at 4.45pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Glaister Ennor, PO Box 63, Shortland Street, Auckland

Carter Atmore Law, PO Box 68656, Newton, Auckland

Counsel

J McBride Barrister, Dryden Chambers, PO Box 1008, Shortland Street, Auckland

WOOD'S LIMITED V VAN DER SANDE & ORS HC AK CIV 2012-404-000996 [30 November 2012]

[1] This case concerns a dispute arising out of the development of a property at

242 Great North Road, Henderson, Auckland (the property). It is before the Court on an application by the defendants for an order that the plaintiff provide security for costs.

[2] The defendants say that there is reason to believe that the plaintiff will be unable to pay the defendants’ costs if its claim is unsuccessful, as the plaintiff has no assets.

[3] The plaintiff opposes the application. It says that there is no evidential basis for the defendants’ contention that it cannot meet any award of costs against it, and also that security should not be ordered as it has a good claim and any impecuniosity arises from the defendants’ actions.

Background

[4] The plaintiff is a company incorporated in New Zealand. The plaintiff’s director, Bernard Rochford, who is an osteopath by profession, undertook property developments alongside his osteopath practice. Mr Rochford now resides in Brisbane.

[5] Mr Rochford and the first-named defendant, Frederick van der Sande, met in the early 2000s, through Mr van der Sande’s niece. Mr van der Sande is a carpenter by trade. By the time he met Mr Rochford he had worked in the construction business for many years (including project management), and had undertaken several property developments. Mr Rochford and Mr van der Sande became friends.

[6] The plaintiff purchased the property in June 2004. At that time it was a disused medical centre. The plaintiff purchased it with the intention of converting it into 18 residential apartments. It was purchased with short-term finance obtained from a finance company, Bridgecorp Finance Limited.

[7] Mr Rochford discussed his plans for the Great North Road property with Mr van der Sande. Although the parties disagree as to the circumstances which led to this, Mr Rochford and Mr van der Sande agreed orally that they would work together on the development. Although the parties differ as to many of the terms of the arrangement, they are agreed that the project was to be undertaken through the plaintiff, that Mr van der Sande would provide project management services, and that profits were to be split equally (after meeting pre-construction expenses and the costs of financing the construction).

[8] The plaintiff says that its agreement was with the defendants, who are trustees of the van der Sande Trust, which subsequently advanced money for the development. The defendants say it was an agreement both with Mr van der Sande personally and with the trust. They rely on a handwritten note that Mr van der Sande says that he made, recording the terms. Mr Rochford says he was not shown that note.

[9] The parties also disagree as to the genesis of the agreement:

(a) Mr Rochford says that Mr van der Sande did not become involved until he had the development in place, having secured a letter of intent from Housing New Zealand to lease the completed apartments and having lodged an application for resource consent. He says that Mr van der Sande was to provide his project management services without charge to reflect the work that he (Mr Rochford) had already undertaken in setting up the project.

(b) On the other hand, Mr van der Sande says that Mr Rochford came to him for advice and financial assistance because he did not have the funds to pay consultants to carry out work needed for the resource consent, and could not get finance for construction without that consent. He says that he had previously suggested to Mr Rochford the pre-leasing of the completed apartments to Housing New Zealand so as to assist with obtaining finance, but that Mr Rochford had limited time to get the development under way, as the leases had “sunset

clauses” if resource and building consents were not obtained within a set period. Mr van der Sande says that he agreed that the trust would fund the pre-construction expenses (with that funding to be repaid out of the construction funding), that he would help procure construction funding (and would provide a personal guarantee), and he would manage the project for a fee of $90,000 (in place of having a head contractor). He says that he helped procure the necessary loan from Marac Finance Limited through his finance broker, First Merchant Finance, to refinance the Bridgecorp loan and finance the construction.

[10] Whatever its precise terms were, this arrangement appears to have been put in place by early 2005 as from about March 2005 until early 2006 (when the plaintiff secured construction finance from Marac), the trust or Mr van der Sande advanced money to the plaintiff which enabled it to meet pre-construction expenses and obtain a resource consent.

[11] Mr van der Sande engaged a quantity surveyor to help prepare a budget in support of the application for construction finance (there was no fixed-price head contract), and to review construction claims and certify them for draw-down. Mr van der Sande and the quantity surveyor (Mr K Parker) drew up a budget for the project of $3,240,000 which included a sum of $1,140,000 for “property acquisition”. The sum for property acquisition was to cover the cost of purchasing the property ($800,000 exclusive of GST), financed by the Bridgecorp loan, plus other costs of purchase and pre-construction expenses. The budget included provision for $90,000 for “construction management”, and $100,000 for “construction contingency”. Marac agreed to finance the development on the basis of a report on the development by Mr Parker, in February 2006, which included the budget.

[12] Mr van der Sande or the defendant trustees advanced approximately

$140,000 to the plaintiff to meet the cost of consultants required to obtain the resource consent, together with other expenses of the development. At the time of

the first draw-down of the Marac loan (6 March 2006), they received reimbursement of part of those advances ($40,000).

[13] Construction took approximately 10 months, during which time Mr van der Sande ran the project. He says that he worked virtually full-time on it (although I note that a company in which he was involved undertook some of the construction work and presumably some of his time was spent on its business as distinct from the project management). Mr van der Sande says that:

(a) He prepared the claims for draw-down of funds from Marac, which were presented to Marac through the quantity surveyor, but those claims did not include all construction costs, as it became apparent that some costs exceeded the budget. He said that he made decisions as they arose whether to include the excess under the contingency provision, or to pay it from his own or the trust’s resources (the plaintiff did not have any ability to provide any funding but his trust had an overdraft facility which was used).

(b) Partway through construction he negotiated a sale of the development, to which the plaintiff agreed. With that agreement in place Marac agreed to advance an additional sum ($300,000) to assist with cash flow to complete the project. This was used to pay Mr Rochford and Mr van der Sande $50,000 each (as an advance against anticipated profits) and the balance was used to meet cost overruns and to reimburse the trust for some of its expenses.

(c) At the conclusion of the project, Mr van der Sande worked out how to distribute the proceeds of sale. He calculated how much he and the trust had advanced to the plaintiff and what was still to be reimbursed, and what he was still owed of his management fee (a sum of

$200,000, which he now believes was “light”), and in May 2007 distributed $400,000 each to Mr Rochford and himself as profit. That left about $95,052.70 which was held back to meet any residual costs.

He says that Mr Rochford was ecstatic at this outcome, particularly given the difficulties facing the project when he first got involved.

[14] In December 2007, Mr Rochford presented Mr van der Sande with a statement prepared by his (Mr Rochford’s) accountant, claiming a further $185,762 for advances which Mr Rochford claimed had not been taken into account in Mr van der Sande’s “wash-up”. Mr van der Sande initially rejected the claim. He says it could not be reconciled with information, supporting pre-contract expenditure in the order of $30,000, given to him by Mr Rochford at the start of the project and included in the budget for the construction financing.

[15] Mr Rochford continued to press the claim. Mr van der Sande says that he reviewed his calculations, noticed that he had not accounted to Mr Rochford for the

$30,000 or so of expenses which had been included in the construction budget, identified some further undisbursed profit, and decided he would meet Mr Rochford’s further claim “despite ... misgivings as to its legitimacy”. He agreed to pay Mr Rochford a further $100,000. Those payments were made in instalments between April 2009 and August 2009. Mr van der Sande contends that this was in full and final settlement of all amounts he or the trust owed to the plaintiff or to Mr Rochford. Mr Rochford disputes this.

The plaintiff ’s claim

[16] The plaintiff claims that the defendants are liable for damages for breach of the agreement causing the following losses:

(a) Materials and labour which it says have been charged to the project but were not supplied: $332,698.

(b) The project management fee deducted by Mr van der Sande: $90,000.

(c) Pre-construction expenses incurred by Mr Rochford that were not brought to account: half of his claim of $185,762.

(d) The overpayment to the defendants in the final distribution: half of the

$200,000 paid to Mr van der Sande/the defendants.

(e) A share of the funds retained for residual expenses that have been used by Mr van der Sande for personal expenditure: half of

$68,557.40.

(f) Pre-construction expenses incurred by Mr Rochford but paid out to

Mr van der Sande: half of $27,816.70.

Legal principles

[17] The Court’s power to order a party to provide security for costs lies in r 5.45 of the High Court Rules. The parts of that rule relevant to the present application are:

5.45 Order for security of costs

(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—

(a) that a plaintiff—

(i) is resident out of New Zealand; or

(ii) is a corporation incorporated outside New Zealand;

or

(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or

(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.

(2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.

(3) An order under subclause (2)—

(a) requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—

(i) by paying that sum into court; or

(ii) by giving, to the satisfaction of the Judge or the

Registrar, security for that sum; and

(b) may stay the proceeding until the sum is paid or the security given....

[18] An application for security will usually require consideration of the following:[1]

(a) Where a plaintiff is resident in New Zealand, whether the applicant has satisfied the Court that there is reason to believe that the plaintiff will be unable to pay the applicant’s costs if the plaintiff is unsuccessful (known as the threshold test).

(b) How the Court should exercise its discretion whether or not to award security.

(c) If security is to be ordered, what amount it should be.

(d) Whether the proceeding should be stayed until security is given.

[19] These general principles are encapsulated in the often quoted statement of the

Court of Appeal in A S McLachlan Ltd v MEL Network Ltd[2]:

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.

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 disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.

Has the threshold test been met?

[20] In their application the trustees appear to advance two grounds of entitlement: first, the plaintiff is owned and controlled by Mr Rochford who resides out of New Zealand; and secondly, there is reason to believe the plaintiff will be unable to pay as it has no assets. Counsel for the defendants advanced their application in the hearing solely on the grounds that there is reason to believe it will be unable to pay.

[21] In his notice of opposition the plaintiff challenged this aspect of the application on two grounds. The first is that Mr Rochford is also sole director and shareholder of another New Zealand company, Stryder Ltd, which owns real property in New Zealand. The second is that the trustees have given no evidence as to the plaintiff’s financial position.

[22] In the hearing, counsel for the defendants said that there was evidence before the Court from which the Court could infer that the plaintiff had no assets (the evidence that it had been unable to meet all the pre-construction expenses, hence the approach to Mr van der Sande, and the need for Mr van der Sande or the defendants to inject further funding over the course of the construction) but principally they rely on an alleged concession in the evidence of Mr Rochford that an order would have the effect of preventing it from pursuing its claim. In his affidavit of 10 August

2012, Mr Rochford deposed:

Wood’s Limited here is the plaintiff and if security was ordered against it, I consider it would have the effect of preventing it from pursuing its claim. It is the defendant’s actions which causes Wood’s to be in such a position.

[23] Counsel for the plaintiff sought to argue that this was insufficient to satisfy the threshold test as it was no more than an expression of opinion. I do not accept that argument. It is a statement by the sole director of the plaintiff, in direct terms (“it would have the effect”).

[24] Counsel for the plaintiff also referred in written submissions to Mr Rochford’s evidence that, through his other company, he held a property in New Zealand which would be available to the plaintiff to meet an adverse costs order. I do not regard that as helping the plaintiff ’s case. There is no undertaking to do so

either by that company or by Mr Rochford. I also note that although Mr Rochford has said in his affidavit that he was getting details of the debt on the properties owned by that other company so that he could confirm the equity in them, he has not done so.

[25] I find this sufficient to establish reason to believe that the plaintiff would be unable to meet an award of costs. I turn now to consider how to exercise the Court’s discretion.

How is the Court to exercise its discretion?

[26] The defendants say that this is exactly the kind of case where the Court ought to grant security: they are being pursued by an impecunious company, selectively funded by Mr Rochford as its shareholder. They say that this gives the plaintiff an unfair advantage as Mr Rochford knows that he cannot be called on to meet an adverse costs order.

[27] The plaintiff answers this principally by saying that the merits are strongly in its favour. Counsel referred to the fact that the defendants (or Mr van der Sande personally and the defendants) received $340,000 more from the project than the plaintiff did, and in addition Mr van der Sande personally used some $68,557.40 of the $95,052.70 held back for project expenses for his personal use. He submitted that that provides a strong basis not to order any security, but if security is to be ordered then it is a basis for limiting it substantially.

[28] In addition it raises two other factors:

Merits

[29] Counsel for the plaintiff submitted that there are three aspects of the claim where the merits are strongly in favour of the plaintiff:

(a) The claim for a half share of $68,557.40 of the $95,052.70 retained at time of the distribution in May 2007, which the plaintiff says was

clearly used for Mr van der Sande’s personal expenditure rather than project expenses. Counsel are referred to evidence drawn from the plaintiff’s bank statements of the expenditure in question (it is not in dispute that Mr van der Sande was operating that account). Some of the items (cafe and food purchases and regular cash withdrawals) were clearly personal in nature, and three cheques totalling a little over $10,000 could be traced to invoices that on their face were for another development.

(b) The claim for pre-construction expenses incurred by Mr Rochford paid to the defendants out of the last drawdown from Marac (on 17

November 2006). Counsel pointed to the pre-construction expenditure paid in the last drawdown of the construction finance, that had clearly been incurred by Mr Rochford, yet had not been paid out to him or to the plaintiff.

(c) The balance of pre-construction expenses incurred by Mr Rochford and presented to Mr van der Sande in late 2006/early 2008. Counsel referred to the analysis done by the plaintiff’s accountant in December

2007, and the support invoices showing clearly that this was pre- construction expenditure. He also referred to Mr Rochford’s evidence (albeit disputed by Mr van der Sande) that he had raised this expenditure with Mr van der Sande and had been told not to include it in the budget, but they would deal with this at the conclusion of the project.

[30] Counsel submitted that the defendants had failed to address these merits, all of which had good documentary support.

[31] Counsel for the plaintiff accepted that the Court was unable to reach any view

at this time on the plaintiff’s other claims, but submitted in relation to them:

(a) The claim in respect of materials and labour charged to, but not used on, the project was based on a comparison of a statement of total

construction costs prepared by Mr van der Sande as against construction costs submitted to and certified by Mr Parker, for drawdowns from Marac. Although Mr van der Sande has explained this by saying that the difference was cost overruns met by his and the trust’s separate funding, the plaintiff contends that this aspect of the claim cannot be determined until the defendants produce invoices for all goods and materials supplied to the development site (Mr van der Sande’s statement has only been supported by handwritten schedules).

(b) The difference between the parties over Mr van der Sande’s entitlement to the project management fee of $90,000 (the plaintiff saying that there was no fee payable and that those services were offset by Mr Rochford’s work in setting up the project) cannot be resolved on this application.

[32] Counsel for the defendants submitted that it was not possible to reach a view in this application, even on the merits of the allegedly strong claims. He noted that these events had taken place six to seven years ago, and said that the claims had all emerged late. He said that although Mr van der Sande had been managing the project, it had always been open to the plaintiff to take issue with any payments (it had access to the bank statements), and all drawdowns were made by the plaintiff and went through its account (none of the money went directly from Marac to Mr van der Sande or the defendant).

[33] Turning to the specific matters of dispute that were said to provide a good claim, counsel submitted:

(a) The defendants acknowledge that some of the payments made out of the retained sum of $95,052.70 were unquestionably personal expenditure, but of the $68,557.40 being challenged, Mr van der Sande or the defendants would be entitled to half, and the plaintiff’s share has been taken into account in the final payment made.

(b) As to the claim in respect of pre-construction expenditure incurred by Mr Rochford but paid out to Mr van der Sande, Mr van der Sande had acknowledged, after he reviewed the accounts, that Mr Rochford had not been reimbursed, and had allowed for that in the subsequent (final) payment.

(c) In relation to pre-construction expenses allegedly incurred by Mr Rochford but not included in the construction budget, counsel noted that there was a direct conflict over Mr Rochford’s evidence that Mr van der Sande had told him to hold these expenses back, and noted that there was a substantial sum ($340,000) allowed in the budget for such expenses (the budget sum was $1,140,000, of which the purchase price was only $800,000), and certain of the items in the claim for

$185,762.66 presented by Mr Rochford after the final distribution, such as the deposit, would clearly have come under the allowance for the purchase price rather than being separate pre-construction expenses. Counsel argued that the plaintiff never provided a clear reconciliation of this claim, and ultimately it too had been picked up in the final distribution.

[34] Counsel argued that the merits were also clouded by what he referred to as “the evolving nature of the allegations”: he noted that the plaintiff had first made a demand on Mr van der Sande personally, alleging that he had charged the plaintiff for materials and labour incurred on other projects, that he had claimed an entitlement to a further $185,762.66 for pre-construction expenses (without making allowance for the final payment of $100,000), and had advanced a claim for a further

$119,690.07 for a project management fee for himself together with items such as lost income and flights. The defendants referred those claims to the finance broker who had arranged the Marac loan (First Merchant Finance) which answered them by pointing out that actual construction costs were higher than the amount certified to Marac by Mr Parker, that Mr van der Sande had paid the additional $100,000 which effectively covered any unmet claim for the pre-construction expenses, and that there was no apparent basis for the new claims for expenses that Mr Rochford had advanced (including a project management fee for himself). The plaintiff then

changed its position when it filed its statement of claim (although still not making any concessions for the $100,000 paid in 2009), and has since further amended its claim to allege that its agreement was not with Mr van der Sande but rather was with the defendants (after receiving a copy of the handwritten note that Mr van der Sande said he had made of the agreement).

[35] It is not possible on this application to draw “a bright line” between the

various claims, as the plaintiff invites the Court to do.

[36] It is clear from the evidence that the plaintiff was content to put Mr van der Sande in charge of the project, and that as a result of his efforts the project made a significant profit. Mr van der Sande is candid in saying that he took a relatively robust approach to the accounting for expenses and profit at the end of the project rather than a very precise reconciliation. He says that this worked to his disadvantage because he failed to take the defendants’ full expenses into account. The plaintiff and Mr Rochford contend otherwise. Whether the figures will ultimately reveal that some of the costs have not been properly taken into account, or that Mr van der Sande or the defendants have received more than their 50 percent share of profits (including in their receipts any sum drawn by Mr van der Sande from the plaintiff’s bank account for personal expenditure) cannot be determined one way or the other at this stage.

[37] If the plaintiff establishes its claim (made in early 2008) for pre-construction expenses of $185,782.66 (which appears to include the $30,000 or so of expenses included in the construction budget), it may be that the $100,000 paid to him in 2009 was insufficient. If so, there is a real prospect that Mr van der Sande or the defendants will have to account for a share of so much of the retained funds of

$95,052.70 as will be established to have been used by Mr van der Sande on personal expenses.

[38] Although I accept that there is documentary support for the plaintiff ’s view that he has incurred significant pre-construction expenses, it is impossible to assess the extent to which he has been reimbursed for some (or even all) of those expenses. Similarly, it is not possible to determine whether the clearly personal expenditure has

been taken into account in the overall figures (and here I note that Mr van der Sande was entitled to operate the bank account and there is no pleading that he was wrong to use the account in this way – the pleading is simply that this expenditure has not been allowed for before calculating the profit shares).

[39] The other claims do not change the overall assessment. The claim for overcharge of materials and labour is little more than conjecture at this stage (it may be clarified by further discovery), and is strongly disputed. It is unlikely to be successful without some documentary evidence emerging. The claim for Mr van der Sande’s project management fee runs counter to Mr van der Sande’s allegedly contemporary note, where again there is a dispute to be resolved. Then, even if the plaintiff establishes an entitlement to a further distribution, it will still have to overcome the defendants’ affirmative defence of an accord and satisfaction where there will again be a dispute to be resolved.

[40] Taking the claims in isolation, the plaintiff appears to have a reasonable case for its three best claims, but as I have just indicated, it is difficult to assess how this will translate into the overall outcome.

[41] One further factor to address is the defendants’ criticism of the plaintiff’s claim, that it has shifted to a new ground each time a defence emerges. I do not consider this a significant factor in the assessment of merits. I do not find it surprising, in the relatively informal circumstances in which the arrangement is reached, that there might have been some confusion as to the parties to the agreement, and this no doubt underlay the wide claim initially filed. I note that the recent amendment is largely a consequence of an admission by the defendants that they were parties to the agreement. However, the issue over parties does not alter the essential issue which is whether the plaintiff has received all to which it was entitled.

[42] In summary, I do not accept that the merits are strongly determinative of the matter, one way or the other.

[43] In addition, in its notice of opposition the plaintiff contended that any impecuniosity of the plaintiff arose from the defendants’ actions. Counsel did not press this point in the hearing, wisely in my view, given that the plaintiff received

$550,000 either in reimbursement of expenses or as a share of the profits. However, in his written submissions, counsel noted the defendants’ argument that the fact that a corporate plaintiff is without means and unable to continue with a meritorious claim is not an impediment to an order unless its shareholders were also without means, and submitted that there was no evidence that Mr Rochford was in that position, referring to Mr Rochford’s denial that he was suffering financial difficulty.

[44] As I understand the argument, this point relates to the plaintiff’s contention that it will be unable to continue the proceeding if security is ordered. I accept the defendants’ argument that it is for the plaintiff to show that Mr Rochford, as sole shareholder of the plaintiff,3 is unable to help the plaintiff to fund the proceeding. It has not done so. To the contrary, the plaintiff’s case is that Mr Rochford is not in any financial difficulty.

Balancing of interests

[45] The Court must balance the competing interests: the plaintiff ’s interest in having its claim heard, and the defendants’ interest in being protected against being drawn into expensive litigation without being able to recover costs even if successful in defending it. Weighing these factors, I consider that the Court ought to exercise its discretion to award security. I accept that the defendants should have some protection against the costs of defending this proceeding, given the likely difficulty

_{of recovery any award. I turn now to consider quantum.}

3 See Bell Wholesale Co Pty Ltd v Gates Export Corp (1984) 54 ALR 176 at 179 – 180 (FC); followed in Churchill Group Holdings Ltd v Aral Property Holdings Ltd CA283/05, 31 May 2006.

[46] The defendants seek security in the sum of $30,000, based on a calculation of scale costs in the order of $41,000. The plaintiff contends that scale costs will be in the order of $35,000, but that a reasonable award having regard to merits would be

50 percent. It also says that this should be discounted because at least part of the trial time will be spent addressing the defendants’ affirmative defence. The affirmative defence arises out of the claim. I see no reason to discount on this basis.

[47] Weighing the respective arguments, I consider that an order for $25,000 is reasonable in the circumstances.

[48] Counsel for the plaintiff submitted that if an order was to be made, it should be staged, with part paid now to cover costs up to time of exchange of briefs of evidence, and the balance paid when the defendants’ briefs are due (scheduled for 1

February 2013).

[49] This point is interlinked with the question of whether a stay should be ordered (I will come back to that shortly). Trial is due to commence on 11 March

2013. The defendants are entitled to know where they stand before committing to costs of preparation. There is no evidence from the plaintiff to show how it will be able to manage payments under a staged basis rather than in one sum. Given the proximity to trial, I consider that the security should be provided in one sum.

Should the proceeding be stayed?

[50] The defendants seek a stay pending payment of security. The plaintiff acknowledges that that is the convention. However, I am aware that there is an outstanding application for discovery still to be addressed (coming up for a chambers hearing) and given the proximity to trial I consider that the proceeding should continue, at least to the point of that hearing to try to resolve that application. As discussed at the hearing, I propose to deal with this by allowing the plaintiff time to pay, but with the proceeding to be stayed if the security is not given by that date.

[51] The defendants have also raised an issue over costs, following abandonment of a claim by Mr Rochford as distinct from the present plaintiff, Wood’s Ltd, against Mr van der Sande personally as well as the defendants as trustees. Mr van der Sande and the trustees seek costs following that discontinuance (according to scale), and ask that the proceeding be stayed until those costs are paid. Costs sought are $3,980, together with a filing fee of $108.80.

[52] The plaintiff (and presumably Mr Rochford) accept that scale 2B costs are payable pending discontinuance, but say that this does not provide a basis of staying the plaintiff’s claim, as it is a different party.

[53] I accept that Mr van der Sande and the defendant trustees are entitled to costs on that discontinuance: Mr Rochford no longer brings a claim in his own right and the allegation of a partnership or joint venture with him, which was central to the previous claim and for breach of fiduciary duty and exemplary damages, has been abandoned. In addition the causes of action against the defendants for knowing receipt and unjust enrichment had been abandoned (although I note the plaintiff’s position is that this is a result of an admission by the defendants that they were party to the agreement). As the plaintiff and Mr Rochford do not challenge the quantum being sought, the only issue is whether the claim should be stayed. In this respect I accept the plaintiff ’s argument that the plaintiff is a discrete party. I do not accept that its claim should be stayed.

Decision

[54] For the reasons I have given I find that there is reason to believe that the plaintiff will be unable to meet the defendants’ costs if it is unsuccessful in this proceeding, and that an order for security for those costs ought to be made. I fix security in the sum of $25,000. I direct that that security be provided in terms of r

5.45(3)(a)(ii) by 19 December 2012, and that the proceeding be stayed from that date if the security is not given.

[55] Although there has been some mixed success on this application, overall the defendants have been successful. They are entitled to costs on this application on a

2B basis together with disbursements as fixed by the Registrar.

[56] I also award costs to Mr van der Sande and the defendants against Mr

Rochford in respect of the discontinued claim by Mr Rochford, in the sum of

_{$3,980.00, together with disbursements of $108.80.}

Associate Judge Abbott

---

[1] _{Busch v Zion Wildlife Gardens Ltd (in rec & liq) [2012] NZHC 17.}

[2] A S McLachlan Ltd v MEL Network Ltd [2002] NZCA 215; (2002) 16 PRNZ 747 (CA) at [13] and [14].