Jaques v Main [2016] NZHC 1978 (24 August 2016)

Last Updated: 9 September 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND] REGISTRY

CIV-2015-404-000619 [2016] NZHC 1978

BETWEEN	DAVID ARTHUR JAQUES Plaintiff
AND	VICTOR RAYMOND MAIN First Defendant THOMAS CLARENCE HODGSON Second Defendant

Hearing:	On the Papers
Counsel:	C T Patterson and H P Holland for the Plaintiff B L Gray for the Defendants
Judgment:	24 August 2016

_{JUDGMENT OF EDWARDS J}

This judgment was delivered by Justice Edwards on 24 August 2016 at 1.00 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Counsel: C T Patterson, Auckland

H P Holland, Auckland

B L Gray, Dunedin

Solicitors: J H West, Paraparaumu

_{Race Douglas Burke, Dunedin}

JAQUES v MAIN [2016] NZHC 1978 [24 August 2016]

Introduction

[1] Mr Jaques applies to review the decision of Associate Judge Christiansen dated 22 April 2016.¹

[2] The Associate Judge ordered Mr Jaques to provide security for costs in the sum of $30,000 and ordered 2B costs to be paid for the application. Mr Jaques says the Judge also fixed 2B costs for Mr Jaques’ previous unsuccessful summary judgment application.

[3] The review is determined on the papers at the parties’ request.

Background

[4] In March 2011, the defendants entered into a management agreement with Mr Jaques to provide services over a three year period. Pursuant to that agreement, Mr Jaques paid $60,000 to acquire a shareholding in the defendants’ company. Mr Jaques claims that he also acquired an interest in the defendants’ intellectual property, although the defendants dispute this.

[5] Shortly after the payment was made, the parties fell out and on 5 September

2011, the defendants advised Mr Jaques that they wished to terminate their business relationship. They subsequently refunded $30,000 of the $60,000 paid.

[6] On 24 September 2011, the parties entered into a settlement agreement. The terms of that settlement agreement are not entirely clear, but Mr Jaques contends that the defendants agreed to repay the balance of $30,000 and the sum of $4,600 per week from 10 April 2011 until the $30,000 was repaid.

[7] Mr Jaques commenced proceedings for breach of the settlement agreement. He claims damages comprising of two sums which total $986,800, and claims the sum of $4,600 accruing on a weekly basis from 10 April 2015 until all money is paid

_{in full.}

¹ Jaques v Main [2016] NZHC 779.

[8] The defendants accept that they entered into a settlement agreement with Mr Jaques, but they say they did so in reliance on his representation that he was legally qualified, able to easily obtain a practising certificate and a businessman. They say these representations were untrue and vitiate the terms of the settlement.

[9] In addition, the defendants plead that they tendered to Mr Jaques the sum of

$30,000 plus interest under s 87 of the Judicature Act 1908 from 24 September 2011 until 4 June 2015. Mr Jaques refused to accept this sum.

[10] Finally the defendants argue that certain clauses of the settlement agreement are penal and unenforceable.

[11] On 3 September 2015, Associate Judge Doogue dismissed Mr Jaques’ application for summary judgment.² He did so primarily on the basis that the terms of the settlement agreement provided for the repayment of a $30,000 debt and by not paying this in time the defendants were subject to very large imposts which arguably amounted to penalties. The defendants therefore had an arguable defence. Costs were reserved.

Decision

[12] The defendants subsequently applied for security for costs. They sought security in the sum of $40,000.

[13] By oral judgment dated 22 April 2016, the application for security for costs was granted and Mr Jaques was ordered to pay $30,000 into Court by 24 June 2016.

[14] The Associate Judge reviewed the background, parties’ submissions and the

evidence before him. He summarised the key considerations as follows:

[46] His claims of property interests and of income received relate to properties owned by Family Trusts and rental payments received for those. Those properties are not his. No evidence has been provided regarding Trust structure or operation. There have been promises by a trustee and also by Mr Jaques’ wife Deena that they or the Trusts will indemnify Mr Jaques should he have to pay costs.

² Jaques v Main [2015] NZHC 2123.

[47] There is insufficient evidence of the extent of equity in the Trust properties. There is a degree of equivocality regarding promises on behalf of the Trusts to indemnify Mr Jaques; i.e, it will occur should Mr Jaques require it and because it would subject to a Deed of Arrangement that the Trusts consider is reasonable.

[48] The Court has no knowledge of the Trusts’ financial positions.

[49] A lot of affidavit evidence has been exchanged about whether or not the Court could rely on Mr Jaques to fulfil his promises to pay if costs against him were awarded.

[50] Much of this is historical. Its relevance for present purposes is uncertain. It is clear Mr Jaques has been a bankrupt. He has been associated with the formation of a large number of business companies, a significant proportion of which have now been struck off the Register.

[51] Adding to these factors is the Court’s assessment of Mr Jaques’

claims.

[52] Mr Jaques is self-represented. It can be assumed he cannot afford the cost of engaging a lawyer.

[53] The balance of considerations clearly favours the grant of an Order for payment of security into Court. It is apparent from the reasons provided by Judge Doogue that Mr Jaques did not even come close to succeeding with his summary judgment application.

[15] On the issue of costs, the Associate Judge said:

[54] Although indemnity costs are sought in the outcome of the summary judgment hearing, in this Court’s view 2B scale costs only should be payable. Likewise, 2B costs and disbursements are awarded on the security for costs application.

Approach on review

[16] The power to review a decision of an Associate Judge in chambers is contained in s 26P of the Judicature Act and r 2.3 of the High Court Rules.

[17] In this case the decision being reviewed followed a defended hearing and is supported by documented reasons. Accordingly the review proceeds as a rehearing.³

[18] The approach to review is essentially appellate in nature with the starting

_{point being the Associate Judge’s decision. The nature of this type of rehearing was}

³ Rule 2.3(4)(a). I do not accept Mr Jaques’ submission that there was not thoroughly reasoned

argument put to the Associate Judge.

discussed by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar in the context of an appeal by way of rehearing.⁴

[19] A court reviewing a decision will generally only overturn an exercise of a discretion if a Judge has made an error of law, has failed to take into account a relevant factor, has taken into account an irrelevant factor or is plainly wrong.⁵ As Heath J noted in Robinson v Whangarei Heads Enterprises Ltd, that aspect of a rehearing does not appear to have been affected by the Supreme Court’s decision in Austin, Nichols & Co Inc v Stichting Lodestar.⁶

Security for costs

[20] Rule 5.45 provides 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.

...

[21] Sub-rule (1)(b) provides a threshold for the granting of security for costs. If a Judge is satisfied 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 proceeding, then the

_{Judge may go on to exercise the discretion in sub-r (2).}

⁴ _{Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.}

⁵ _{May v May (1982) 1 NZFLR 165 (CA) at 169–170.}

⁶ Robinson v Whangarei Heads Enterprises Ltd [2013] NZHC 2247 at [7].

Threshold

[22] Mr Jaques challenges the Associate Judge’s assessment that the threshold under r 5.45(1)(b) had been met. Each of the grounds of challenge is addressed below.

[23] Mr Jaques submits that the only factors supporting a finding that the threshold had been reached was his bankruptcy which had ended in 2009 and a number of earlier company liquidations. I do not agree. The Associate Judge also had evidence provided by Mr Jaques himself of a statement of financial position. That statement of financial position included interests and income related to properties owned by family trusts of which he is a discretionary beneficiary. The Judge found that there was insufficient evidence of the extent of equity in the trust properties and a degree of equivocality regarding promises on behalf of the trusts to indemnify Mr Jaques. That evidence did not dispel the reasonable belief that Mr Jaques would not be able to pay costs formed on the basis of the evidence adduced. I agree with the Associate Judge’s assessment of this evidence.

[24] In relation to Mr Jaques’ bankruptcy, the Associate Judge noted that it had occurred some years ago but was nevertheless not a factor to be ignored. It provided important context to the current evidence regarding Mr Jaques’ financial position. Read in the context of the judgment as a whole, I do not consider this factor was accorded undue weight as Mr Jaques submits.

[25] Nor do I consider that the Court shifted the burden of proving an ability to pay costs to Mr Jaques. The defendants had provided enough evidence to establish a reason to believe that Mr Jaques would be unable to pay costs.⁷ Mr Jaques stated in his affidavit that he could provide the information sought about his financial position but he objected to doing so on the grounds of privacy. In that context, I agree that it was appropriate to draw an adverse inference from Mr Jaques’ refusal to supply such

_information.

⁷ New Zealand Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC)

at 212.

[26] I do not accept Mr Jaques’ submission that the Associate Judge failed to take into account the evidence of improvement in Mr Jaques’ financial position, or evidence as to his current ability to pay costs. The Associate Judge clearly focused on the most current evidence before him, rejecting much of the information as historical and of little relevance.

[27] Mr Jaques also says the Associate Judge was wrong not to take into account the discretionary beneficiary status of Mr Jaques in relation to his family trusts. I do not accept that submission. Regard was had to the position under the trusts, and the promises given by the trustees and Mr Jaques’ wife on behalf of Mr Jaques. The Associate Judge was not persuaded of that evidence and I do not consider he can be faulted in that assessment.

[28] Mr Jaques also submits that any impecuniosity was caused by the defendants and that the Associate Judge should have taken this into account. I do not consider that submission advances Mr Jaques’ case. It is inconsistent with his primary submission that he is not impecunious. In any respect there is a lack of evidential link between the defendants’ actions and any impecuniosity in my view. The Associate Judge did not err in not taking that factor into account.

[29] Finally, Mr Jaques refers to new evidence. First, he refers to the payment to his solicitor of the sum of $38,700 including the security for costs ordered should he be unsuccessful in the review. Second, he says he is no longer self-represented, which was another factor the Court had taken into account in finding the threshold met.

[30] Rule 2.3(4)(b) allows a Judge to receive further evidence if the Judge thinks it is in the interests of justice. Whilst I accept that it is in the interests of justice to admit this new evidence, I do not consider it advances Mr Jaques’ case. Whilst payment of over $30,000 into his solicitor’s trust account evidences an ability to access those funds, it provides no assurance that those funds will be available should an adverse costs award be made against him. It provides little probative evidence of financial worth in my view.

[31] Similarly, I consider the retainer of a barrister to be of little moment. A barrister was only retained for the purposes of preparing submissions in support of the review. Although Mr Jaques appears to have a solicitor on board, I do not consider this alters the balance of the various factors discussed above which provide reason to believe Mr Jaques will be unable to meet an award of costs.

[32] I am not therefore persuaded that the Associate Judge’s decision was wrong, that it rested on unsupportable findings of fact or that there was a wrong application of legal principle in determining that the threshold for security for costs had been met.

Discretion

[33] Mr Jaques further challenges the Associate Judge’s exercise of his discretion

to order security for costs.

[34] To succeed in this aspect of the application for review, Mr Jaques must reach a higher threshold and show that the decision was wrong in principle or plainly wrong before the Court will intervene.⁸

[35] Mr Jaques submits that the Judge took into account the strength of the case at the threshold stage rather than the discretionary stage. Mr Jaques also says that the Associate Judge did not give due weight to the fact that he had a proper foundation for a claim of at least $30,000 in fixing the quantum of security. Finally, Mr Jaques says the amount fixed is excessive when compared to the amounts fixed in other cases.

[36] Although it is not entirely clear from the judgment, I nevertheless consider it most likely that the Judge took into account the strength of the case at the

_{discretionary stage of the enquiry rather than the threshold stage.}

⁸ Pipeline Enterprises Ltd v Rockgas Ltd [2014] NZHC 2915 at [9].

[37] The fact that Mr Jaques may have a proper foundation for the $30,000 claim must be seen in context. There has been an open settlement offer for payment of that sum plus interest at the Judicature Act rate. That will sound in costs.

[38] Finally, as was made clear in McLachlan v MEL Network Ltd the quantum of security is what the Court thinks fit in all the circumstances and the Court’s discretion is not to be fettered by constructing principles from the facts of previous cases.⁹

[39] I am therefore not satisfied that the exercise of the Associate Judge’s

discretion in this case was plainly wrong.

[40] The application for review of the Associate Judge’s decision in relation to security for costs is accordingly declined.

Costs

[41] Mr Jaques submits that the Associate Judge erred in awarding costs on the summary judgment application. Those costs had previously been reserved by Associate Judge Doogue who heard and dismissed the application for summary judgment.

[42] Whilst it is not entirely clear, I do not consider the Associate Judge made any order of costs in relation to the summary judgment application. Nor did he fix the costs of that application. Read in context, I consider the Associate Judge was considering the likely costs which might be awarded on the summary judgment application for the purposes of fixing the quantum of security. Whilst he expressed his view on the likely outcome, he did not ultimately determine that issue.

[43] Accordingly, the question of costs on the summary judgment application remains reserved as per Associate Judge Doogue’s judgment. The costs of the summary judgment application are to be assessed following the determination of the

_{substantive proceeding. This part of the application must also fail.}

⁹ McLachlan v MEL Network Ltd [2002] NZCA 215; (2002) 16 PRNZ 747 (CA) at [13] and [27].

Result

[44] The application for review of the Associate Judge’s decision is declined.

[45] Costs follow the event. Mr Jaques shall pay 2B costs plus disbursements to the respondents on the application for review.

Edwards J