O'Brien v NZI Insurance

In O'Brien v NZI Insurance, the plaintiff sought to recover damages from the first defendant insurer for the alleged constructive total loss of his boat, and alternatively from the second defendant, the insurance broker, for professional negligence. The defendants sought an order for security for costs, limited to future costs, on the grounds that the plaintiff ordinarily resides out of the jurisdiction, is impecunious, and the action is really brought in his name as a nominee for the benefit of four creditors. The plaintiff opposed the application, arguing that any order for security would frustrate the action.

The court considered the arguments and found that the plaintiff ordinarily resides out of the jurisdiction and is impecunious. The court noted that the plaintiff had proposed to assign his rights under the insurance policy to one of his creditors, who intended to pursue the claim. The court held that the plaintiff's creditors were likely to provide security for costs and that the plaintiff had not provided any evidence to the contrary. The court also found that the plaintiff had little substantial interest in the outcome of the action, as his creditors were effectively controlling the proceedings.

The court exercised its discretion to make an order for security, subject to certain conditions. The order required the plaintiff's creditors to provide guarantees of his payment of any future costs ordered, limited to $25,000 for the first defendant and $20,000 for the second defendant, with liberty to apply to vary the amount. The court also ordered that the costs of each application be costs in the cause.

The court's decision was based on a balance of competing factors, including the plaintiff's absence from the jurisdiction, his impecuniosity, and the involvement of his creditors in the proceedings. The court noted that while the plaintiff had some residual interest in the outcome of the action, the high level of active interest of his creditors could not be ignored. The court also considered the delay in making the application for security and found that it was not inordinate, given the circumstances of the case.