Eckhoff v Orbell [2023] NZHC 3002 (26 October 2023)

Last Updated: 21 November 2023

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-133 [2023] NZHC 3002

BETWEEN	PHILIPPA JANE ECKHOFF Plaintiff
AND	RUTH ALICE ORBELL First Defendant NICOLA ALICE HYSLOP Second Defendant WILLIAM HAMISH ORBELL Third Defendant continued over

Hearing:	6 October 2023
Appearances:	D R Tobin and R M Reeve for Plaintiff No appearance for First Defendant M J Wallace for Second, Fifth and Seventh Defendants S J Jamieson for Third and Fourth Defendants D M Jackson for Sixth Defendant
Judgment:	26 October 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 26 October 2023 at 3.15 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

ECKHOFF v ORBELL [2023] NZHC 3002 [26 October 2023]

RUTH ALICE ORBELL and WILLIAM

HAMISH ORBELL as trustees of HAMISH ORBELL FAMILY TRUST

Fourth Defendants

NICOLA ALICE HYSLOP, JONATHAN ANGUS HYSLOP and QA TRUSTEES

2012 LIMITED as trustees of the HYSLOP FAMILY TRUST

Fifth Defendants

JOHN DUNCAN McFARLANE

Sixth Defendant

JONATHAN ANGUS HYSLOP

Seventh Defendant

• [1] In a judgment of 5 May 2023, I ordered the plaintiff to provide security for costs to the second to seventh defendants to the satisfaction of the Registrar in the amount of $300,000 within 28 days.¹

• [2] I did not direct how security would be provided but noted that it may be provided by way of a first registrable mortgage over the plaintiff’s interest in a property owned by the plaintiff and her husband as joint tenants at Braeview Crescent, Dunedin.²

• [3] Although there was some delay, resulting in a stay of the proceeding, ultimately security was provided by the giving of a registrable first mortgage over the Braeview Crescent property.

• [4] The plaintiff seeks leave to appeal from my decision on several grounds, which I summarise as follows:

(a) That the threshold requirement in r 5.45(1)(b) of the High Court Rules 2016 was not met, as I inappropriately shifted the onus onto the plaintiff to show that she was in a position to pay costs if unsuccessful, and omitted facts in assessing the plaintiff’s evidence as to her assets and means to pay costs;

(b) That the proposed appeal has general and precedential value in respect to:

(i) the proper approach to be taken to the application of relationship property and joint tenancy legal principles when assessing a plaintiff’s means to pay costs;

(ii) the ordering of security for costs for several defendants on a global basis; and

¹ Eckhoff v Orbell [2023] NZHC 1068 at [50].

² At [47].

(iii) the ordering of security for costs against a beneficiary of a trust bringing an action to hold trustees to account for breaches of trust;

(c) That there were material errors in my assessment that the plaintiff’s claim against the sixth defendant did not appear strong; and

(d) That ordering the plaintiff to provide security for costs unjustly prejudices the plaintiff in the pursuit of her claim.

• [5] The application is opposed by the second to seventh defendants.

• [6] The first defendant, who is the plaintiff’s mother, did not seek security for costs and therefore takes no part in this application.

The relevant principles

• [7] Section 56(3) and (4) of the Senior Courts Act 2016 relevantly provide:

56 Jurisdiction

...

(3) No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

(4) Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court---

(a) striking out or dismissing the whole or part of a proceeding, claim, or defence; or

(b) granting summary judgment.

• [8] The principles that apply to an application for leave to appeal under s 56(3) are set out by the Court of Appeal in Greendrake v District Court of New Zealand.³ There, the High Court had made an order for joinder of an additional respondent. An

3. Greendrake v District Court of New Zealand [2020] NZCA 122. See also Lobb v Ryan [2021] NZCA 224 at [2].

application for leave to appeal from the joinder decision was declined by the High Court.⁴ Declining leave to appeal, the Court of Appeal stated:

• [6] In Finewood Upholstery Ltd v Vaughan, to which Dunningham J referred to in the leave decision, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made. The following considerations were recognised as relevant on an application for leave to appeal:

(a) a high threshold exists;

(b) the applicant must identify an arguable error of law or fact;

(c) the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d) the circumstances must warrant incurring further delay; and

(e) the ultimate question is whether the interests of justice are served by granting leave.

• [7] This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council indicated that considerations similar to the principles applicable to applications under the former s 24G of the Judicature Act 1908, as explained in Meates v Taylor [Leave], apply to applications under s 56(5), stating:

We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.

(footnotes omitted)

Issue one – the threshold issue

• [9] This is the kernel of the plaintiff’s proposed appeal.

• [10] In concluding his submissions, Mr Tobin summarised the plaintiff’s case as that on the evidence I should have found that the plaintiff had assets worth at least

$1.3 million and was, therefore, in a position to pay costs in the event she is unsuccessful.

⁴ Greendrake v District Court of New Zealand [2019] NZHC 2504.

• [11] Those assets are said to consist of the Braeview Crescent property worth

$935,000 (in which she has an undivided one-half interest), and a sum of $415,000, being the difference between the purchase price of the Braeview Crescent property and the sale price of a property at Hart Street, the proceeds of which were used in the acquisition of the Braeview Crescent property.

• [12] In my judgment, I discussed the plaintiff’s financial position and relevantly found that on the evidence her only major asset was her one-half undivided interest in the Braeview Crescent property as follows:

• [23] It appears from the evidence that the only asset of significant value owned by Philippa is an undivided one-half share in the family home. It is reasonable to assume the property is worth $935,000 given it was recently purchased for that amount. In addition, Philippa is employed but there are no details of her salary or expenses. While Mr Tobin submits Philippa is actively supported by her husband, he did not go so far as to suggest that her husband will accept responsibility for any costs award made in the defendants’ favour or allow his interest in the family home to be provided as security for payment of such costs.

• [24] As I noted earlier, Philippa’s evidence does not deal with what has become of the money representing the difference between the sale price of the Hart Street property and the purchase of the Braeview Crescent property, which is $415,000. In a case where Philippa has chosen to give evidence of her financial position but does not mention having any savings or other money as an asset, no inference can be drawn that there are funds available to pay costs.

• [25] An issue then arises as to the value of Philippa’s interest in the Braeview Crescent property. The easiest approach would be to assume that is one half of the property’s market value; that is $467,500. Such an approach is overly simplistic and does not take into account the very real costs and obvious difficulties that would be involved if the defendants are required to recover payment of any costs award made against Philippa from a sale of her half interest in the property.

(footnote omitted)

• [13] I do not accept there is an arguable case that I reversed the burden of proof requiring the plaintiff to prove she could pay costs and, indeed, the concept of a burden of proof is not apposite in this context. As was noted by Courtney J in Wishart v Murray:⁵

⁵ Wishart v Murray [2016] NZHC 3132 at [7].

Although some previous cases have proceeded on the basis that the defendant carries an onus of showing that there is reason to believe that the plaintiff will be unable to pay costs the meaning of “satisfied” is settled as not implying either any onus or standard of proof but, rather, merely indicating that the Court has come to a decision on the evidence before it. Ordinarily, the defendant will not have access to the plaintiff’s financial information. As a result, the threshold question will often fall to be answered by inference from the surrounding circumstances and such evidence as is available.

(footnotes omitted)

• [14] Mr Tobin submits that my finding that the value of the plaintiff’s interest in the Braeview Crescent property was no more than $467,500⁶ was wrong because it did not take into account the principle of land law that a joint tenancy regards co-owners as a single entity,⁷ and the consequences of the deferred property regime under the Property (Relationships) Act 1976.⁸

• [15] The submission advanced is that in the event the plaintiff is unsuccessful in this proceeding the defendants will have the ability to enforce any costs award against the whole of the Braeview Crescent property, not just her interest in it. I do not accept that submission.

• [16] If the defendants sought to enforce the judgment using the execution processes under the High Court Rules, they would have recourse only against the “estate, right, title or interest” of the plaintiff in the Braeview Crescent property.⁹

• [17] In Chambers v Grindley, there was a dispute between a judgment creditor and judgment debtor as to the extent to which a writ of sale could be executed against a jointly owned property.¹⁰ MacKenzie J said the position that “the whole of the property may be sold to meet the debts of one joint owner, is a startling one, contrary to basic principles of property law”.¹¹ I agree.

⁶ Eckhoff v Orbell, above n 1, at [27].

⁷ Gateshead Investments Ltd v Harvey [2014] NZCA 361, [2014] 3 NZLR 516 at [10].

⁸ Reference was made in oral submissions to ss 20A and 20B of that Act.

9. High Court Rules 2016, rr 17.40(1) and 17.74(3). Under r 17.74(3) the Court may order the sale of the interest of someone other than the liable party in property, but there was no suggestion the circumstances would justify that here. See for instance Hull v Calvert [2019] NZHC 154 at [33].

¹⁰ Chambers v Grindley (HC) (2007) 18 PRNZ 450.

¹¹ At [6].

• [18] MacKenzie J went on to find that it was quite clear that the only sale which could be effected under the writ of sale was the judgment debtor’s interest in the property, which would operate to sever the joint tenancy.¹²

• [19] As in this case, reliance was placed on ss 20A and 20B of the Property (Relationships) Act 1976 which MacKenzie J rejected as providing a basis for the sale of anything other than the judgment debtor’s interest in the property.¹³

• [20] Mr Tobin submitted that Chambers v Grindley applies only to writs of sale and that there are other means by which a judgment may be enforced, such as bankruptcy proceedings and the sale of land under s 339 of the Property Law Act 2007, but it was not explained how, in either case, the whole of the Braeview Crescent property would be available for payment of the plaintiff’s costs liability.

• [21] Regarding the $415,000 referred to earlier at [11], in an updating affidavit filed in opposition to the defendants’ application for security for costs the plaintiff noted the Hart Street property, which had been held in a family trust, was sold for $1.35 million and that the Braeview Crescent property had been purchased for $935,000. She said nothing about how the balance of the proceeds of sale of the Hart Street property had been applied.

• [22] In her affidavit in support of her application for leave to appeal the plaintiff says:

12. ... The only inference to be drawn from my evidence is that the profit we received from sale of Hart Street remains our property. In the three months between my Fourth Affidavit and Sixth Affidavit, those funds were neither squandered nor applied to a sudden, undisclosed debt or purchase. As can be inferred from my evidence, collectively, Dave and I have about $1.25 million safely available to call on at the present time, which does not include our two full-time salaries.

• [23] It will be observed that even in her latest affidavit the plaintiff does not say what became of the $415,000. She says it was not “squandered” or “applied” in certain

¹² At [11].

¹³ At [12]–[15].

respects but does not explain what has in fact become of it. This is not quibbling over a matter of semantics.

• [24] I do not accept Mr Tobin’s submission that the plaintiff’s failure to address the issue directly in her evidence was due to constraints upon her not to introduce new evidence at this late stage. That is exactly what her latest affidavit does when she says the money was not squandered and how it was not applied.

• [25] The plaintiff chose to put her financial circumstances before the Court. She did not say she had the $415,000 available to pay costs. I agree with Mr Jackson that the plaintiff’s evidence appears carefully crafted so as to avoid stating what has become of the money. But the real point is that when the security for costs application was heard there was no evidence from which I could reasonably infer that the $415,000 was available to the plaintiff to pay costs, and this remains the position.

• [26] I do not accept the plaintiff has raised a serious question that the threshold issue was not met.

Issue two — precedential value

• [27] The plaintiff submits that the proposed appeal has general and precedential value in respect to:

(a) the proper approach to be taken to the application of relationship property and joint tenancy legal principles when assessing a plaintiff’s means to pay costs;

(b) the ordering of security for costs for several defendants on a global basis; and

(c) the ordering of security for costs against a beneficiary bringing an action to hold trustees to account for breaches of trust.

• [28] I have already dealt with the first of these issues above, and do not consider it has any precedential value.
• [29] I awarded the second to seventh defendants costs on a global basis. Mr Tobin fairly said that he could see there was merit in the approach I adopted, while maintaining that guidance from the Court of Appeal on when this is appropriate would be beneficial. It would be inappropriate to grant leave to appeal for guidance on an issue which is not seriously contestable.

• [30] Mr Tobin submits that an important issue in this case is whether security for costs should ever be ordered against a beneficiary who seeks to hold trustees to account for breach of trust. He provides no authority for the submission that such a litigant should be treated differently in this context, and I cannot see why a different approach would be taken.

• [31] I do not see that this case has any precedential value justifying an appeal.

Issue three - errors in my assessment of the sixth defendant’s claim

• [32] In arriving at my decision, it was necessary to attempt, as best I could, an assessment of the merits of the plaintiff’s claim and the defences raised to it. I considered, on what was before me, that the plaintiff’s claim against the sixth defendant did not appear strong. The plaintiff takes objection to my assessment and says that in certain respects my view is based on errors of fact or law.

• [33] This is a red herring. While I considered the plaintiff’s case against the sixth defendant was weaker than against the other defendants, he was treated the same as the other defendants. Ultimately my conclusion had no bearing on the orders made.

Issue four - ordering the plaintiff to provide security for costs unjustly prejudices the plaintiff in the pursuit of her claim.

• [34] The plaintiff argues that she has been treated unjustly by being ordered to provide security, most relevantly because the order may stifle her claim or at least make it more difficult to finance her litigation. That is said to be because she cannot now resort to her equity in the Braeview Crescent property and will need to finance filing fees, disbursements, expert witnesses’ costs and the like from her wages and other sources.
• [35] The submission is incongruent in the context of the plaintiff’s evidence that I should have inferred she has $415,000 available to pay costs. If she had such a sum, it would be available to fund her litigation and she would not have to resort to her equity in the Braeview Crescent property.

• [36] In any event, there is no evidence the plaintiff will be disadvantaged in the manner asserted. The reason why it was suggested the security for costs be provided by way of a registrable mortgage over the Braeview Crescent property was to avoid the possibility of such disadvantage occurring.

• [37] Further, if there is a material change in circumstances such that the plaintiff is in fact prejudiced and is unable to fund the costs of her litigation, a review of the orders made could be sought in the exercise of the Court’s inherent jurisdiction.¹⁴ This possibility had not been considered by counsel.

Other matters

• [38] As this case is not set down to be heard until early 2025, Mr Tobin submits there is no risk that an appeal will cause a delay in taking the case to trial. I accept that is likely to be the case, but delay in obtaining a hearing is just one factor to be considered. There is other prejudice to the parties that will or might result from the granting of leave to appeal.

• [39] Obviously there will be significant costs associated with an appeal, which I do not consider is justified when weighed against the likelihood of success of an appeal, particularly in a matter concerning the exercise of discretion.¹⁵

• [40] More importantly, however, the case has been set down for hearing over 20 days. This will be a complex trial involving expert witnesses in several disciplines. I understand counsel to be of the view that if the parties are to resolve their differences by agreement it is essential that expert evidence is first exchanged.

14. Robert Osborne and others McGechan on Procedure (online ed, Thomson Reuters) at [HR5.45.04(2)].

¹⁵ Jindal v Liquidation Management Ltd [2023] NZCA 413 at [29].

• [41] There is shortly to be an issues conference, which will include putting in place a timetable for the exchange of evidence and other pre-trial directions. It is understandable that the parties will not commit to the costs of instructing experts and preparing their evidence pending the hearing of an appeal. The granting of leave to appeal is likely to cause delay in this respect and diminish the prospect of an early resolution by settlement.

Interests of justice

• [42] Ultimately the issue for me is whether the interests of justice require that leave to appeal be granted. I do not accept that the plaintiff has raised arguable grounds that I incorrectly exercised my discretion to order that she provide security for costs, or that there is any precedential value in an appeal. It has also not been shown that the plaintiff will suffer any prejudice from the orders that were made justifying an appeal. In those circumstances, I consider the interests of justice weigh against granting leave to appeal.

Result

• [43] The application for leave to appeal is dismissed.

• [44] Counsel are to confer with a view to reaching agreement on costs. If they cannot agree they may submit memoranda. It may assist that my preliminary view is that the interests of all defendants were aligned on this application such that only one set of costs is appropriate.

O G Paulsen Associate Judge

Solicitors:

Wilkinson Rodgers, Dunedin Gresson, Dorman & Co, Timaru

Tavendale and Partners, Christchurch Berry & Co, Oamaru