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High Court of New Zealand Decisions |
Last Updated: 20 July 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1958 [2015] NZHC 1488
IN THE MATTER
|
of an application for summary judgment
under High Court Rule 12.4
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BETWEEN
|
ALLAN ROY MCCOLLUM, NANCY MARGARET MCCOLLUM AND TERENCE NEIL WALKER
Plaintiffs
|
AND
|
DAVID JOHN THOMPSON AND JOSEPHINE RUTH MACBETH Defendants/Counterclaim
Plaintiffs
|
Hearing:
|
30 June 2015
|
Counsel:
|
LAB Kemp for plaintiffs
WT Nabney for defendants/counterclaim plaintiffs
|
Judgment:
|
30 June 2015
|
(ORAL) JUDGMENT OF FAIRE
J
Solicitors: Kemp Lawyers, Auckland
Lyon O’Neale Arnold, Tauranga
McCollum v Thompson [2015] NZHC 1488 [30 June 2015]
Contents
Introduction
............................................................................................................[1]
The application
and its opposition
.........................................................................[2] The
background facts
.............................................................................................[3]
The pleadings
.........................................................................................................[7]
Trial
issues............................................................................................................[15]
The court’s
approach to security for costs applications
.......................................[17] Analysis
................................................................................................................[20]
Decision................................................................................................................[21]
Costs
.....................................................................................................................[22]
Remaining
matters
...............................................................................................[23]
Introduction
[1] The plaintiffs sue the defendants for the balance allegedly
due under a general security agreement dated 4 July
2011. The defendants have
filed a statement of defence which denies that any sum is due and owing and
pleads a defence of set- off.
In addition, the defendants sue the plaintiffs
by way of counterclaim in conversion.
The application and its opposition
[2] The plaintiffs apply for security for costs in respect of the counterclaim. The defendants oppose that application. They submit that the same evidence that will be presented in answer to the plaintiffs’ claim will be advanced in support of the counterclaim. They submit that if any stay were to be ordered in respect of the
counterclaim, it would not change the issues in dispute between the parties
because of the defence of set-off that has been pleaded.
The background facts
[3] The plaintiffs are the secured parties under a general security
agreement dated 4 July 2011. The defendants are the debtor
party to that
general security agreement.
[4] That plaintiffs say that the balance allegedly due under the
general security agreement is $116,423 plus interest and costs.
[5] The general security agreement provided for repayment by 4 July
2012. On
4 February 2013, the plaintiffs made demand for $270,056.03. The demand was
not met.
[6] The plaintiffs appointed a receiver pursuant to s 8 of the
Receiverships Act
1993 following the defendants’ default under the agreement. The
receiver uplifted stock and allegedly sold the stock to the
plaintiffs in part
satisfaction of the defendants’ debt. The receiver then issued notices
to the defendants, the last of
which claimed $116,423.
The pleadings
[7] The statement of claim pleads the entry into the general security
agreement, a breach, the appointment of the receiver and
the issue of notices of
demand for the shortfall after seizure and sale of stock.
[8] The statement of defence denies that any sum is due. In addition, it pleads a defence of set-off. It pleads that the receivers, as agents of the plaintiffs, were in breach of their obligations under the general security agreement when selling stock that had been seized subject to the general security agreement, and that they failed to:
[9] The statement of defence further pleads that the receivers failed
to obtain fair value for the stock by transferring possession
of the stock to
the plaintiffs without first ascertaining:
[10] There has been no reply by the plaintiffs to the affirmative
allegations in the statement of defence and, in particular,
the defence of
set-off.
[11] Rule 5.62 of the High Court Rules provide:
5.62 Duty to file and serve reply
If a statement of defence asserts an affirmative defence or contains any
positive allegation affecting any other party, the plaintiff
or that other party
must, within 10 working days after the day on which that statement of defence is
served, file a reply and serve
it on the party serving the statement of
defence.
[12] Rule 5.63 of the High Court Rules provide:
5.63 Contents of reply
(1) A reply must be limited to answering the affirmative defence or
positive allegation and otherwise must comply with the
rules governing
statements of defence so far as they are applicable.
(2) An affirmative defence or positive allegation in a statement of
defence that is not denied is treated as being admitted.
[13] The plaintiffs’ omission will, in due course, have to be
remedied. That problem, by itself however, does not specifically
deal with the
outstanding issues on this application.
[14] In respect of the counterclaim, the defendants repeat the matters
raised in the set-off defence and plead that the plaintiffs
have converted the
stock which was seized and which was not covered by the general security
agreement.
Trial issues
[15] An analysis of the pleadings reveals that the set-off defence and the
counterclaim raise substantially the same trial issues,
namely:
a) Identification of the livestock seized;
d) A valuation of the livestock seized.
[16] It would seem that these issues remain whether or not the
counterclaim proceeds because of the matters that are
pleaded by way of set-off
defence.
The court’s approach to security for costs
applications
[17] The application is made in reliance on r 5.45 of the High Court Rules. The relevant parts of that rule for the purposes of this application are as follows:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge 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.
(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] In McLachlan v MEL Network Ltd helpful guidance is
given as to the approach that should be taken on applications for
security for costs.1 For the purposes of this application the
Court’s comments at [13] – [16] are particularly helpful:
[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
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.
[19] The reference in the Court of Appeal decision to r 60(1)(b) is a
reference to the predecessor of the current rule that I have
set
out.
Analysis
[20] The threshold test required for the purposes of the rule is met in this case. The defendant counterclaim plaintiffs are not in a position to pay costs. That, however, does not end the matter. It is necessary to look at the overall discretion. What is apparent from the issues that will require resolution at trial is that the principal matters that are raised by way of defence, are raised as well in the counterclaim. Security for costs is not appropriate if the counterclaim is, in effect,
the defence to the plaintiffs’ claim.2 Accordingly, I
conclude that security for costs
should not be ordered in this case.
Decision
[21] The plaintiffs’ application for security for costs is
declined.
Costs
[22] I order that the plaintiffs pay the defendants’ costs based on
Category 2
Band B together with disbursements as fixed by the Registrar.
Remaining matters
[23] The minute of Gilbert J, dated 28 May 2015, appears to cover all matters required preparatory to this matter proceeding to trial on 28 September 2015.
Accordingly, no order in relation to these matters is
made.
JA Faire J
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