Hitchcock v Murphy [2022] NZHC 305 (28 February 2022)

Last Updated: 6 April 2022

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2227 [2022] NZHC 305

BETWEEN	STEPHEN LESTER HITCHCOCK Plaintiff
AND	SUSAN KERRIE MURPHY Defendant

Hearing:	10 February 2022
Appearances:	Gregory Thwaite for the Plaintiff Katie Hogan for the Defendant
Judgment:	28 February 2022

JUDGMENT OF ASSOCIATE JUDGE TAYLOR

This judgment was delivered by me on 28 February 2022 at 3:30pm

pursuant to Rule 11.5 of the High Court Rules

............................... Registrar/Deputy Registrar

Solicitors:

Gregory Thwaite, Auckland, for the Plaintiff

Insight Legal Limited (Ben Lupton), Warkworth, for the Defendant

Copy for:

Katie Hogan, City Chambers, Auckland, for the Defendant

HITCHCOCK v MURPHY [2022] NZHC 305 [28 February 2022]

Introduction

• [1] The defendant in this proceeding, Ms Susan Kerrie Murphy, applies for security for costs. The plaintiff in this proceeding is Ms Murphy’s brother, Mr Stephen Lester Hitchcock.

Background

• [2] Ms Murphy owns a property in Coatesville. Mr Hitchcock resided at the property between 2003 and 2020 (apart from a period of incarceration between 2007 and 2010). From 2010, he lived in a Portacom building at the rear of the property.

• [3] In 2019, Ms Murphy took steps to subdivide and sell the rear part of the property. In response, Mr Hitchcock lodged a caveat over the property. He later applied to the High Court to sustain the caveat.

• [4] On 28 August 2020, Associate Judge Gardiner ordered that the caveat lapse. She awarded $12,229.50 in costs to Ms Murphy. Mr Hitchcock appealed that decision and filed an interlocutory application for interim relief pending determination of the appeal.

• [5] The interlocutory application failed because the caveat had already lapsed, and Mr Hitchcock subsequently abandoned his appeal.

• [6] Mr Hitchcock filed the present proceeding on 13 November 2020. He asserts a number of claims against Ms Murphy, including for subdivision and sale to Mr Hitchcock of a 2.5 acre parcel of the Coatesville property and declaration of a constructive trust in respect of that parcel. Alternatively, he seeks a judgment for debts he claims he are owed by Ms Murphy. His essential contentions are that he assisted Ms Murphy with finance, and development and maintenance of the land over a number of years. Mr Hitchcock says Ms Murphy has either failed to repay sums he loaned to her or failed to recognise his equitable interest in the property.
• [7] In December 2021, Mr Hitchcock applied to the Tenancy Tribunal to cancel an eviction notice Ms Murphy served on him. He abandoned that application on the day of its hearing, with $2,000 in costs awarded in Ms Murphy’s favour.

• [8] Despite Ms Murphy’s demands, Mr Hitchcock has paid neither of the costs awards against him.

• [9] Mr Hitchcock is said to have operated a cannabis enterprise in an underground bunker on the Coatesville property. In 2021, assets of Mr Hitchcock were forfeited after a Criminal Proceeds (Recovery) Act 2009 proceeding found he had received

$402,357.80 cash deposits with negligible declared income.

Application for security for costs

Application

• [10] Ms Murphy applies for orders that:¹

(a) the plaintiff give security for costs in the sum of $26,000;

(b) the proceeding is stayed until security for costs is given.

• [11] The grounds on which the orders are sought are:

(a) There is reason to believe the plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in his proceeding.

(b) The plaintiff has to date (and despite demand) failed to meet two costs orders made against him in favour of the defendant:

(i) $12,069.50 plus $160 ordered by Gardiner AJ on 16 December 2020.

(ii) $2,000 ordered by the Tenancy Tribunal on 12 July 2021.

(c) To the defendant’s knowledge, the plaintiff is unemployed and has no assets of a substantial or permanent nature.

(d) Assets of his have recently been forfeited to the State under the Criminal Proceeds Recovery Act 2009.

¹ Defendant’s application for security for costs dated 27 August 2021 at [1].

(e) While the plaintiff claims the defendant owes him a debt, the quantum and terms of such debt remain undetermined. The plaintiff’s amended statement of claim raises such as live issues in this proceeding.

(f) It is foreseeable that a costs order in the sum of at least $26,051 will be made against the plaintiff in favour of the defendant in this proceeding (10.9 x $2390).

(i) Commencement of proceeding by defendant (2 days);

(ii) Pleading in response to amended pleading (0.6);

(iii) CMC preparation (0.4 x 3);

(iv) CMC appearances (0.2 x 3);

(v) Discovery and inspection (2.5 and 1.5 – reduced to 1 day given likely extent of discovery);

(vi) Interlocutory applications (not factored in given lack of certainty);

(vii) Affidavits for substantive hearing (2);

(viii) Preparation for substantive hearing (2);

(ix) Appearance at substantive hearing (1);

(x) Appearance by second counsel (0.5).

(g) The plaintiff has not responded to the defendant’s request that he pay

$26,000 into the High Court as security for costs and agree to a stay of proceeding until security is given.

(h) On 13 August 2021 the plaintiff filed a significantly amended statement of claim which introduces a number of new causes of actions. Preparation of an amended statement of defence will involve a lot of work and expense for the defendant.

(i) The numerous proceedings brought against her by the plaintiff to date² have caused and continue to cause the defendant serious distress (in terms of health and finances).

² In addition to this proceeding: A High Court application that his caveat not lapse (the plaintiff was unsuccessful), an appeal against outcome of that application (abandoned by the plaintiff), an application in the course of criminal sentencing to reside at defendant’s property on home detention (the plaintiff was unsuccessful), a Tenancy Tribunal proceeding (the plaintiff was unsuccessful), an application to withdraw notice of abandonment of appeal (yet to be determined by the Court of Appeal).

Ms Murphy’s affidavit in support sworn 4 February 2022

• [12] In an affidavit dated 4 February 2022, Ms Murphy deposes that Mr Hitchcock has commenced numerous unsuccessful proceedings against her.³

• [13] Ms Murphy says the factual background is that between 2003 and 2020, Mr Hitchcock lived rent-free at her Coatesville property. He lived in a Portacom on the rear part of the property and began cultivating cannabis in an underground bunker he had built. When, in 2019, Ms Murphy eventually took steps to subdivide and sell that part of her property, Mr Hitchcock lodged a caveat over it.⁴

• [14] Ms Murphy deposes that nearly a year later, Land Information New Zealand issued a notice to lapse the caveat. In response, Mr Hitchcock applied to the High Court to sustain his caveat. Shortly afterward, Mr Hitchcock was arrested for cannabis cultivation.⁵

• [15] In August 2020, Associate Judge Gardiner heard Mr Hitchcock’s caveat application. Ms Murphy says the Judge made credibility findings against Mr Hitchcock and awarded her $12,229.50 in costs. Ms Murphy says Mr Hitchcock, despite demand, has not paid those costs.⁶

• [16] Next, Ms Murphy deposes that Mr Hitchcock filed a subsequent appeal against, and interlocutory application for interim relief in respect of, Associate Judge Gardiner’s decision. Mr Hitchcock’s interlocutory application was unsuccessful, and his appeal was abandoned. On 13 November 2020, he filed the present High Court proceeding.⁷

• [17] Ms Murphy deposes that Mr Hitchcock, on 7 December 2020, applied to the Tenancy Tribunal to cancel an eviction notice she had served on him. He later

³ Affidavit of Susan Kerrie Murphy in support of application for security for costs dated 4 February 2022 at [2].

⁴ At [3(a)–(c)].

⁵ At [3(d)–(f)].

⁶ At [3(h)–(i)].

⁷ At [3(j)–(l)].

abandoned that application, with $2,000 in costs awarded to Ms Murphy. She says Mr Hitchcock, despite demand, has not paid those costs.⁸

• [18] On 10 December 2020, Mr Hitchcock was sentenced to home detention at a residential address in Kaitāia. Ms Murphy deposes that nearly two weeks later, Mr Hitchcock filed a further appeal against Associate Judge Gardiner’s decision, without reference to his previously filed and abandoned appeal.⁹

• [19] Ms Murphy deposes that in February 2021 Mr Hitchcock was cross-examined in proceedings under the Criminal Proceeds (Recovery) Act. He was found to have received $402.357.80 in cash deposits despite having declared no or negligible income. The presiding judge, Whata J, found Mr Hitchcock to be untruthful, lacking in credibility and an unconvincing witness.¹⁰

• [20] Ms Murphy says that, to her knowledge, Mr Hitchcock is unemployed and has no substantial assets. Any assets he once had have been forfeited to the state under the Criminal Proceeds (Recovery) Act.¹¹

• [21] Ms Murphy deposes that the quantum and terms of the debt Mr Hitchcock claims she owes him are undetermined. Further, she says Mr Hitchcock has not responded to her request of 4 August 2021 that he pay $26,000 into court as security for costs and agree to a stay of the proceeding until that security is given.¹²

• [22] Ms Murphy then says Mr Hitchcock filed a significantly amended statement of claim on 13 August 2021, introducing a number of new causes of action. She says preparing an amended statement of defence will involve a lot of work and cause her significant expense.¹³

• [23] Finally, Ms Murphy deposes that Mr Hitchcock’s numerous proceedings have caused her serious distress in terms of her health and finances. She considers his

⁸ At [3(m)].

⁹ At [3(o)].

¹⁰ At [3(p)], citing Commissioner of Police v Bateman [2021] NZHC 338 at [11]–[13].

¹¹ At [5].

¹² At [7].

¹³ At [8].

ongoing litigation against her is not genuine, but rather motivated by spite. She believes he will not meet her costs in defending the claim in the event her defence is successful.¹⁴

Second amended notice of opposition to application for security for costs

• [24] In his notice of opposition to Ms Murphy’s application, Mr Hitchcock states:¹⁵

1. Plaintiff as Respondent intends to oppose the Notice for order for security for costs dated 27 August 2021.

2. Respondent opposes all orders sought.

3. The grounds on which the orders are opposed are as follows:

• 3.1 Applicant has produced no evidence in support of the Application as required by High Court Rule 7.20, nor has she identified evidence in other cases or matters of judicial notice, and thus the Application cannot succeed.

• 3.2 An order made on the grounds of Respondent’s property status would be precluded by the principle of the Rule of Law, whether that principle is established by statute, by Equity or Common Law, or by international law.

• 3.3 In any event, the Court cannot be satisfied that there is a reason to believe that the Respondent will not be able to pay costs, for the reasons as follows:

(a) Given the strength of the Respondent’s claim, as acknowledged by Applicant in her affidavit in the High Court in the caveat proceeding there is no reason to believe that Respondent will be without funds on and as from the date of judgement.

(b) Respondent’s present financial condition arises from the conduct of the Applicant:

(i) in not complying with an agreement in respect to subdivision of the land; and/or

(ii) in failing to pay funds due by her to Respondent; and/or

(iii) in obtaining from Respondent the sum of at least

$65,000 in 2017 for the purpose of subdivision, but neither using it for that purpose nor returning it to Respondent.

¹⁴ At [9]–[11].

¹⁵ Second amended notice of opposition to application for security for costs dated 8 September 2021.

(c) Being subject to home detention, to Applicant’s knowledge, Respondent is unable to work; but Respondent has substantial assets, being the claim in the land as set forth in this action, and/or the claim to loans to Applicant well in excess of the amount claimed by way of Applicant’s likely costs, being in the region of $500,000, for which Applicant has acknowledged a liability in affidavit evidence sworn and filed in the High Court in the caveat litigation, which may constitute a promissory note.

(d) Respondent has not forfeited the claims herein by operation of law.

(e) Respondent’s claim against Applicant is supported by Applicant’s own clear evidence in the High Court in the caveat litigation.

(f) Absent a Statement of Defence by Applicant, and Respondent’s Reply, there is no evidence that Applicant foreseeably will be entitled to costs.

(g) In view of the status of Respondent as known to Applicant, requests for payment were frivolous and unlikely to be complied with, particularly as Respondent must be prudent in allocating funds needed for litigation.

(h) The Amended Statement of Claim covers matters relevant to or tangential to the proceeding in the High Court in respect of the caveat matter, and/or the appeal in the Court of Appeal, where Applicant and Respondent have already provided evidence and documentation.

(i) Applicant has precipitated the litigation, by neither taking the necessary steps to transfer land to Respondent , nor paying him money; and the first High Court proceeding was precipitated by her attempt to remove the caveat from the title, and the appeal is current before the Court of Appeal; the question of bail did not involve her as a party; and Respondent withdrew the matter before the Tenancy Tribunal.

• 3.4 Even if the criteria have been satisfied, the Court should not exercise its discretion to award or order security for costs, for at least the following reasons:

(a) Respondent has regularly assisted Applicant with money, as follows:

(i) In or about 2002, when Applicant had a cancer scare, he provided funds to discharge completely the mortgage to the ASB bank, in a sum equalling about 25% of the government valuation of the land at the time, and thereby preserved the land in her name;

(ii) In about 2003 Respondent provided funds for improvement of the house for her benefit and work on

the land, in an amount equal to about 60% of the government valuation of the land at the time;

(iii) In 2017 Respondent paid her at least $65,000, again to relieve her financial position vis-à-vis the ASB bank.

(b) Applicant through her legal team in association with his former solicitor Clinton Baker have put before the Court of Appeal evidence which is clearly wrong and materially misleading, as to the circumstances in which the appeal was abandoned in the Court of Appeal.

4. Respondent relies upon High Court Rules 5.45 and 7.20, sections 3(2), 146, and 180 of the Senior Courts Act 2016, section 27 of the New Zealand Bill of Rights Act 1990, Magna Carta, and Tom Bingham “The Rule of Law”, the affidavits filed in the High Court in the caveat litigation and the affidavits filed in draft in the Court of Appeal in Wellington, a copy of each which has been provided to Applicant.

...

Mr Hitchcock’s affidavit affirmed 12 November 2021

• [25] In an affidavit affirmed 12 November 2021, Mr Hitchcock deposes that Ms Murphy has received substantial sums of money from him over the years. He says the only question is whether that money constituted a contribution to an equitable interest in Ms Murphy’s Coatesville property, or a debt obligation on her part. He says further that Ms Murphy has never acknowledged that he has an interest in the property, and neither has she repaid him any money.¹⁶

• [26] Of his other proceedings against Ms Murphy, Mr Hitchcock suggests his application to uphold the caveat in respect of the Coatesville property failed because his solicitor, Mr Clinton Baker, failed to adduce evidence in writing to support the caveat. He says also that his appeal against Associate Judge Gardiner’s decision was unilaterally abandoned by Mr Baker. He deposes that he has applied to the Court of Appeal to withdraw the notice of abandonment of appeal.¹⁷

¹⁶ Second affidavit of Stephen Lester Hitchcock in opposition to application for security for costs dated 12 November 2021 at [3]–[4].

¹⁷ At [6]–[8].

• [27] Mr Hitchcock disputes Ms Murphy’s claim that he was unsuccessful in the Tenancy Tribunal proceeding. Instead, he says he withdrew the proceeding.¹⁸

• [28] Mr Hitchcock says Ms Murphy’s evidence omits “all details of the extensive financial dealings between us. This absence links with her claim that my motivation for the ongoing litigation is ‘spite’”.¹⁹ He deposes that Ms Murphy has received money payments from him over the years, and that these fall into a number of different legal categories. Key contended payments include a 2003 payment of $147,262.16, a 2004 payment of $366,179 and a 2017 payment of at least $75,000.²⁰

• [29] The 2003 payment, Mr Hitchcock deposes, was to pay off Ms Murphy’s mortgage.²¹ The 2004 payment was to fund substantial work to Ms Murphy’s dwelling.²² And the 2017 payment was to rescue Ms Murphy from financial trouble.²³ He says all these sums remain owing.

• [30] Mr Hitchcock deposes that he and Ms Murphy began discussions in 2016 about him purchasing part of the Coatesville property. He says that acquisition would have involved a settlement of money due to him by way of loan or as compensation for work done on the property.²⁴

• [31] Next, Mr Hitchcock deposes that due to his asset forfeiture, he is not in a position to make a payment on the costs judgments in Ms Murphy’s favour. He says those costs judgments could be set off against the amount that she owes him or factored into the final settlement as part of the subdivision and allocation of land to him. And he says Ms Murphy is occupying the property in large part because of the large sums of money he has provided to her.²⁵

¹⁸ At [12].

¹⁹ At [13].

²⁰ At [15]–[20].

²¹ At [22]–[23].

²² At [24]–[29].

²³ At [30]–[31].

²⁴ At [32]–[34].

²⁵ At [35]–[38].

• [32] Mr Hitchcock denies he is taking this litigation out of a sense of spite. He says his purpose is to enforce his rights and obtain a place where he can live as of right.²⁶

Ms Murphy’s submissions

• [33] Ms Katie Hogan, for Ms Murphy, submits that Ms Murphy does not have to prove in a civil sense that Mr Hitchcock is unable to pay costs; rather, the Court need only be satisfied there is credible evidence of surrounding circumstances from which it may infer that he will be unable.²⁷

• [34] Ms Hogan submits that Mr Hitchcock’s ongoing pursuit of claims that have little chance of success is relevant to the determination. She points to five abortive or unsuccessful proceedings that Mr Hitchcock has pursued against Ms Murphy.²⁸

• [35] Based on Mr Hitchcock’s failure to meet two cost orders, respectively being the $12,069.50 plus $160 ordered by Associate Judge Gardiner and the $2,000 ordered by the Tenancy Tribunal, Ms Hogan submits there is reason to believe Mr Hitchcock will be unable to pay Ms Murphy’s costs if his present claim is unsuccessful.²⁹

• [36] Ms Hogan also submits that Mr Hitchcock has failed to respond to Ms Murphy’s request for him to pay $26,000 into the Court as security for costs.³⁰

• [37] Next, Ms Hogan submits that Mr Hitchcock is unemployed and has no substantial assets. Further, the Court should be wary of placing any weight on Ms Murphy’s contended debt to Mr Hitchcock — his success on that issue is far from assured.³¹

²⁶ At [39]–[42].

²⁷ Defendant’s submissions in support of security for costs application dated 25 January 2021 at [2.5], citing Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519; NZ Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC) at 212; and Stephenson v Jones [2013] NZHC 638.

²⁸ At [2.6].

²⁹ At [4.1]–[4.2].

³⁰ At [4.3].

³¹ At [4.4]–[4.5].

• [38] Ms Hogan says it is foreseeable that a costs order in the sum of at least $26,051 will be made against Mr Hitchcock in favour of Ms Murphy in this proceeding. Unless security is ordered, Ms Murphy will be significantly and unfairly disadvantaged.³²

• [39] In summary, the Court can be satisfied there is reason to believe Mr Hitchcock will be unable to pay Ms Murphy’s costs if he is unsuccessful. It is just in all the circumstances to order security for Ms Murphy’s costs and to stay the proceeding until that security is given.³³

Mr Hitchcock’s submissions

• [40] Mr Gregory Thwaite, for Mr Hitchcock, submits that the jurisdictional threshold for the exercise of the Court’s power has not been reached. Even if the Court has jurisdiction, it should not exercise its discretion to make an order.³⁴

• [41] Mr Thwaite submits Ms Murphy’s written argument “minimises the pillar of extensive undisputed financial dealings between Plaintiff and Defendant”. He says further that it is common ground between the parties that Ms Murphy owes a considerable sum of money to Mr Hitchcock.³⁵

• [42] Mr Thwaite proceeds to detail the particulars of Mr Hitchcock’s third amended statement of claim in this proceeding. I do not summarise those details here, as they appear not to relate directly to the security for costs issue.³⁶

• [43] Mr Thwaite submits Mr Hitchcock will not be in a position of being unable to pay costs if part of his claim fails. That is because, if he loses the claim for an interest in the property, he will succeed on the debt claim. He will therefore either have the money or a judgment against Ms Murphy. Similarly, if he wins on the claim for an interest in the property, but loses on the debt claims, he will have the interest in the real estate to fund any costs. Either way, he will not be liable for costs.³⁷

³² At [4.7]–[4.8].

³³ At [4.9]–[4.12].

³⁴ Synopsis of plaintiff’s submissions in respect to defendant’s application for security for costs dated 2 February 2022 at [1].

³⁵ At [3]–[4].

³⁶ At [5]–[6].

³⁷ At [8].

• [44] Next, Mr Thwaite says Mr Hitchcock’s present cash position is temporary and arises from Ms Murphy’s own default. Mr Hitchcock has “substantial assets” in the form of his claim against Ms Murphy. And Mr Hitchcock’s failure to pay costs orders is “reasonable ...given [his] need to husband resources for litigation”.³⁸

• [45] Mr Thwaite submits that the Court should not exercise its discretion to order Mr Hitchcock pay security for costs. That is because Mr Hitchcock has repeatedly provided Ms Murphy with funds, while Ms Murphy is unable or unwilling to pay those sums back, transfer to him some interest in the property, or allow him to live at the property.³⁹

• [46] For these reasons, Mr Thwaite submits the application should be dismissed, with costs to Mr Hitchcock.⁴⁰

Legal principles

• [47] Rule 5.45 of the High Court Rules 2016 provides:

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)—

³⁸ At [8].

³⁹ At [8].

⁴⁰ At [10].

(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.

(4) A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.

(5) A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.

(6) References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.

• [48] In determining applications under r 5.45, the Court will generally follow these steps:⁴¹

(a) Has the applicant satisfied the court of the threshold under r 5.45(1)?

(b) How should the court exercise its discretion under r 5.45(2)?

(c) What amount should security for costs be fixed at?

(d) Should a stay be ordered?

• [49] The decision to order security, and the quantum of such security, are at the Court’s discretion. It is generally not to be to be fettered by constructing “principles” from the facts of previous cases.⁴² But the Court is to balance the competing interests

— being the defendant’s interest in protection from a costs order that is incapable of fulfilment and the plaintiff’s right of access to justice.⁴³ Courts will be slow to make an order for security that will stifle a genuine claim.⁴⁴ This balancing exercise is the Court’s overriding consideration.⁴⁵

⁴¹ Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].

⁴² A S McLachlan Ltd v MEL Network Ltd [2002] NZCA 215; (2002) 16 PRNZ 747 (CA) at [13] and [14].

⁴³ Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].

⁴⁴ Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].

⁴⁵ Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24(c)].

• [50] As above, the Court should assess whether there is:⁴⁶

... credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the [party] will be unable to pay the costs. This does not, of course, amount to proof that the [party] will, in fact, be unable to pay them.

• [51] The Court will assess the claim’s merits and prospects of success, to the extent that is possible at an early juncture.⁴⁷ The Court will also consider the extent to which the plaintiff’s impecuniosity may have been caused by the defendant’s conduct.⁴⁸

• [52] A plaintiff’s unwillingness to pay previous judgment debts weighs in favour of an order for security.⁴⁹ But whether a plaintiff has been a responsible litigant is secondary to the issue of whether the lack of merit of the claim justifies security that would prevent the claim from proceeding.⁵⁰

• [53] Quantum of security is discretionary and is assessed in the round. It need not be fixed by reference to likely cost awards.⁵¹ It is to be what the Court thinks fit in all the circumstances.⁵²

• [54] A Court will generally stay a proceeding until the security ordered is given.⁵³

Analysis

Has the defendant met the threshold under r 5.45(1)?

• [55] I turn now to the steps set out in [48] above. The first of these is to address the issue as to whether the applicant has satisfied the Court that the threshold under

⁴⁶ Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2), above n 27, at 519; NZ Kiwifruit Marketing Board v Maheatataka Coolpack Ltd, above n 27, at 212; and Stephenson v Jones, above n 27.

⁴⁷ Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].

⁴⁸ Bell-Booth Group Ltd v Attorney-General [1986] NZHC 570; (1986) 1 PRNZ 457 (HC).

⁴⁹ Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand

[2016] NZHC 729 at [22] and Mawhinney v Auckland Council [2014] NZHC 3207.

⁵⁰ Wright v Attorney-General [2019] NZHC 3046 at [26].

⁵¹ Sharp v Pillay [2017] NZHC 647; and Red 9 Ltd v The Learning Ladder Ltd (in liq) [2021] NZCA 284 at [30].

⁵² A S McLachlan Ltd v MEL Network Ltd, above n 42.

⁵³ Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 at [68] and [85].

r 5.45(1) has been met. Mr Thwaite submitted that the threshold had not been met. His grounds for advancing this are set out at [8] of the synopsis of his submissions.

• [56] I am of the view that the threshold under r 5.45(1) has been met in that there is reason to believe the plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding. The reasons for this are those set out in Ms Hogan’s submissions, namely:

(a) Mr Hitchcock has to date (and despite demand) failed to meet two cost orders made against him in favour of the defendant, being:

(i) $12,069.50 plus $160.00 ordered by Associate Judge Gardiner on 16 December 2020;

(ii) $2,000 ordered by the Tenancy Tribunal on 12 July 2021.

(b) Mr Hitchcock is unemployed and has no assets of a substantial or a permanent nature. In particular, some of his assets have recently been forfeited to the State under the Criminal Proceeds (Recovery) Act.

Should the Court exercise its discretion under r 5.45(2) to order security for costs?

• [57] I turn to the second issue under [48] above as to whether the Court should exercise its discretion under r 5.45(2) to make an order for security for costs. I am of the view that the Court should not exercise its discretion to order security for costs against the plaintiff. The reasons for this are set out in the following paragraphs.

Merits of plaintiff ’s claim

• [58] Prior to a full trial, only a preliminary impression can be formed of the strength of the plaintiff’s claim. Ms Hogan in her submissions has submitted that the plaintiff has already unsuccessfully pursued a number of claims against the defendant being:

(a) a High Court application that his caveat not lapse (the plaintiff was unsuccessful);
(b) an appeal against the outcome of that application (abandoned by the plaintiff);

(c) an application in the course of criminal sentencing to reside at Ms Murphy’s property on home detention (the plaintiff was unsuccessful);

(d) a Tenancy Tribunal proceeding (the plaintiff was unsuccessful); and

(e) an application to the Court of Appeal to withdraw the notice of abandonment of appeal (the plaintiff was unsuccessful).

• [59] Notwithstanding the unsuccessful or withdrawn applications by the plaintiff which Ms Hogan has referred to, in my view the plaintiff’s claim as now formulated in the amended statement of claim dated 13 November 2020 is not without merit. Ms Hogan has pointed out that the plaintiff’s claim to sustain the caveat was not successful, notwithstanding the very low threshold to sustain a caveat of being able to show an arguable case that the plaintiff had a caveatable interest in the defendant’s property. However, I think this overlooks that the plaintiff’s causes of action relate to claiming an equitable interest in the defendant’s land, but if that is unsuccessful an alternative claim is made for repayment of debts which the defendant owes to the plaintiff. These debts are arguably partially admitted by the defendant, a point which I discuss below.

• [60] I think there is some strength in Mr Thwaite’s submission that the plaintiff has a reasonable chance of success in obtaining a judgment for at least part of the debts he is claiming against the defendant if he does not succeed in gaining an equitable interest in the defendant’s property.

• [61] Ms Hogan has submitted that the quantum of the debt is in dispute and also whether it has fallen due for payment. She also has raised a number of set-off issues which she says impact upon the plaintiff’s ability to recover the debt. These issues relate to unpaid rent (the plaintiff having lived on the property for in excess of

10 years), unpaid costs awards, and future costs. Ms Hogan denies that any interest will be payable in relation to the debts.

• [62] Ms Hogan also has argued that issues relating to the plaintiff’s alleged equitable interest in the land are res judicata and have already been litigated in the caveat proceedings in which the plaintiff was unsuccessful. Mr Thwaite’s answer to this is that the pleadings in the caveat proceedings were not properly formulated and argued before Associate Judge Gardiner and resulted in a change of legal counsel. He has a number of arguments which were not advanced in relation to the claim by the plaintiffs to an equitable interest in the defendant’s property in the caveat proceedings. He believes these arguments are still available and the issue is not res judicata.

• [63] While there may be uncertainty around the strength of the plaintiff’s claim in respect of an equitable interest in the defendant’s land, if his claim in that respect fails, then in my view the claim for repayment of a debt owing by the defendant is not without merit. Mr Thwaite points to acknowledgments by the defendant that she owes substantial amounts to the plaintiff. In particular, he points to the defendant’s affidavit of 22 July 2021 in relation to the caveat proceedings, in which the defendant makes various acknowledgments that she owes the plaintiff substantial amounts of money.⁵⁴

• [64] There is debate whether the amounts the defendant acknowledges she owes the plaintiff are currently repayable, as there is a dispute about the conditions that must be satisfied before repayment is due. In the plaintiff’s view, this condition was satisfied when the defendant’s property was able to be subdivided under planning rules, and in the defendant’s view that is when part of the property is sold. In the evidence from the bar, it appears the subdivision of the property is complete and part of the property is able to be sold. While not expressing any firm view on the merits of the plaintiff’s claim on this point, the statement by the defendant at [15] of the defendant’s affidavit of 22 July 2020 in the caveat proceedings that “I repeatedly stated to the applicant that I would repay him when I sold the property or when the planning rules enabled me to

⁵⁴ Affidavit of Susan Kerrie Murphy in opposition to originating application for an order that a caveat not lapse dated 22 July 2020 at [15] and [16].

subdivide the property and sell part of it” does lend some support to the plaintiff’s position.

• [65] In summary, therefore, in my view the plaintiff is in the following position:

(a) he still has arguments available to him to establish an equitable interest in the defendant’s land notwithstanding the caveat decision of Associate Judge Gardiner. The merits of these arguments are hard to assess without a full hearing; and

(b) the claims that the defendant owes him a substantial debt (acknowledged by the defendant) are not without merit.

• [66] Ms Hogan also submitted that whatever assets the plaintiff obtained by way of judgment in his favour in these proceedings were potentially at risk of being forfeited to the Crown under the Criminal Proceeds (Recovery) Act, and therefore would not be available to meet a costs award against the plaintiff. Mr Thwaite refuted this suggestion. There was no evidence before the Court to support Ms Hogan’s submission, and I do not place any weight on it.

• [67] Ms Hogan referred me to the Kelsey case.⁵⁵ I did not find this case particularly helpful in the present instance as the facts were very different. As the Court of Appeal said in A S McLachlan Ltd v MEL Network Ltd:⁵⁶

[13] Whether or not to order security and, if so, the quantum is 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.

• [68] Mr Thwaite has also argued that the plaintiff’s present position of impecuniosity is due to the defendant’s actions in failing to recognise his equitable interest in the property or failing to repay him debts owed. I place limited weight on this submission because, as stated by Asher J in the Birnie decision:⁵⁷

⁵⁵ DK Kelsey Ltd v Matakana 2008 Ltd [2016] NZHC 2634.

⁵⁶ A S McLachlan Ltd v MEL Network Ltd, above n 42, at [13].

⁵⁷ Birnie Capital Property Partnership Ltd v Birnie HC Auckland CIV-2010-404-3000, 29 October 2010 at [49] (footnote omitted).

[49] But only limited weight can be put on this factor in the present circumstances, as any assumption as to the cause of impecuniosity assumes that the plaintiff will succeed. As observed, there is also an element of circularity in this sort of impecuniosity argument. It will generally be the case that if the defendant [had] paid the sum of money claimed by the plaintiff in the proceedings, then the plaintiff would no longer be impecunious. This is a feature of most security for costs applications and is not in itself a reason to refuse an application.⁵⁸

• [69] Summing up, I am of the view that given the plaintiff’s circumstances an order for costs will impede his ability to pursue his claims against the defendant. A preliminary view of the plaintiff’s position is that the claims against the defendant are not without merit, at least in respect of the claims relating to debts owed by the defendant to the plaintiff, and he should not be deprived of the opportunity to pursue them.

Result

• [70] Accordingly, the defendant’s application for security for costs against the plaintiff is dismissed.

• [71] As no order for security for costs has been made, the question of a stay of the proceedings until the security order is satisfied does not arise.

Costs

• [72] The plaintiff as the successful party is entitled to costs on a Schedule 2B basis.

................................... Associate Judge Taylor

⁵⁸ See Computer Training Services Ltd v Universal Data Systems Ltd [2001] NZCA 305; (2001) 15 PRNZ 401 (CA).