100 Investments Limited v Walker
[2023] NZHC 3740
•18 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2019-404-1160
[2023] NZHC 3740
BETWEEN 100 INVESTMENTS LTD
First Plaintiff
Continued…
AND
ROBERT BRUCE WALKER
First Defendant
Continued…
Hearing: 12 and 13 December 2023 Appearances:
A R Barker KC and R B Hucker for the first to fourth plaintiffs in 1160 and the first to fourth defendants in 0274
D J Cooper KC for the first defendant in 1160 and the fifth defendant in 0274
D R Bigio KC and N R Frith for the third defendant in 1160 and the seventh defendant in 0274
W D Hofer and R J Reeves for the fourth defendant in 1160 and the eighth defendant in 0274
J Moss for the fifth to seventeenth defendants in 1160 and the first to thirteenth plaintiffs in 0274Judgment:
18 December 2023
JUDGMENT OF CAMPBELL J
(Applications for discovery, directions, and admissibility challenges)
This judgment was delivered by me on 18 December 2023 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
100 INVESTMENTS LTD v WALKER [2023] NZHC 3740 [18 December 2023]
CIV 2019-404-1160
FTG SECURITIES LTD
Second Plaintiff
RFD FINANCE LTD
Third PlaintiffTOMANOVICH HOLDINGS LTD
Fourth PlaintiffAND
JOHN MARSHALL SCUTTER
Second Defendant
LPF GROUP LTD
Third DefendantSPF NO 10 LTD (In Liquidation) Fourth Defendant
KEVIN JOHN WHITLEY as Liquidator of Property Ventures Ltd (In Liquidation)
Fifth Defendant
PROPERTY VENTURES LTD (In
Liquidation)
Sixth DefendantCASHEL VENTURES LTD (In
Receivership and Liquidation) Seventh Defendant
TAY VENTURES LTD (In Receivership and Liquidation)
Eighth Defendant
LIVINGSPACE PROPERTIES LTD
(In Liquidation) Ninth Defendant
TUAM VENTURES LTD (In Liquidation) Tenth Defendant
CASTLE STREET VENTURES LTD (In
Liquidation)Eleventh Defendant
Continued…
LICHFIELD VENTURES LTD (In
Liquidation)
Twelfth Defendant
ST ASAPH VENTURES LTD (In
Liquidation)
Thirteenth Defendant
BEECHNEST LTD (In Receivership and Liquidation)
Fourteenth Defendant
92 LICHFIELD LTD (In Receivership and Liquidation)
Fifteenth Defendant
MONTECRISTO CONSTRUCTION
COMPANY LTD (In Liquidation) Sixteenth Defendant
FIVE MILE HOLDINGS LTD (In
Liquidation) Seventeenth Defendant
CIV 2022-404-274
BETWEEN KEVIN JOHN WHITLEY
First Plaintiff
PROPERTY VENTURES LTD (In
Liquidation) Second Plaintiff
FIVE MILE HOLDINGS LTD (In
Liquidation) Third Plaintiff
CASHEL VENTURES LTD (In Liquidation and Receivership)
Fourth Plaintiff
TAY VENTURES LTD (In Liquidation and Receivership)
Fifth Plaintiff
LIVINGSPACE PROPERTIES LTD
(In Liquidation) Sixth Plaintiff
Continued….
AND BEECHNEST VENTURES LTD (In
Liquidation) Seventh Plaintiff
CASTLE STREET VENTURES LTD (In
Liquidation)
Eighth PlaintiffLICHFIELD VENTURES LTD (In
Liquidation) Ninth Plaintiff
92 LICHFIELD LTD (In Liquidation) Tenth Plaintiff
ST ASAPH VENTURES LIMITED (In
Liquidation)
Eleventh PlaintiffMONTECRISTO CONSTRUCTION
COMPANY LTD (In Liquidation) Twelfth Plaintiff
TUAM VENTURES LTD (In Liquidation) Thirteenth Plaintiff
100 INVESTMENTS LTD
First DefendantFTG SECURITIES LTD
Second DefendantRFD FINANCE LTD
Third DefendantTOMANOVICH HOLDINGS LTD
Fourth Defendant
ROBERT BRUCE WALKER
Fifth DefendantJOHN MARSHALL SCUTTER
Sixth DefendantLPF GROUP LTD
Seventh DefendantSPF NO 10 LTD (In Liquidation) Eighth Defendant
Introduction
[1] These two consolidated proceedings have been on foot for some time. One was commenced in 2019, the other in 2022. A four-week trial is scheduled to commence 26 February 2024. Last week, I heard ten interlocutory matters:
(a)Three applications by defendants for further discovery from the plaintiffs.
(b)An application by Mr Cooper KC, litigation guardian for one of the defendants, for directions in relation to discovery.
(c)Three challenges by defendants to the admissibility of the evidence served by the plaintiffs.
(d)Two applications for security for costs.
(e)An application for leave to appeal an earlier security for costs decision.
[2] I have already delivered judgment on the applications described in (a)–(c).1 This judgment determines the applications in (d) and (e).
Background
[3] The general background to the proceedings is set out in the judgment I delivered last week, on 15 December 2023, on the other interlocutory matters. I use the same abbreviations as used in that judgment.
[4] The specific background to the three applications in (d) and (e) is an earlier judgment of mine of 15 September 2023, in which I declined LPF’s application for security for costs from the plaintiffs in the liquidator’s proceeding.2 In that proceeding, Mr Whitley is the first plaintiff. The twelve other plaintiffs are companies of which Mr Whitley is liquidator (the PVL companies).
1 100 Investments Ltd v Walker [2023] NZHC 3732.
2 100 Investments Ltd v Walker [2023] NZHC 2584.
[5] In my earlier judgment, I held that there was reason to believe the PVL companies would, if unsuccessful in their claims against LPF, be unable to pay LPF’s costs. But LPF had not filed any evidence about the financial position of Mr Whitley. I said:
[14] It was incumbent on LPF to adduce some evidence from which I could infer that there is reason to believe that Mr Whitley would be unable to pay costs to LPF if the plaintiffs are unsuccessful. All I have are LPF’s estimates of a likely costs award. There is no basis on which I could infer that there is reason to believe that Mr Whitley could not pay even LPF’s most recent (and highest) estimate of costs. This is particularly so given Mr Whitley is a liquidator and licensed insolvency practitioner. In the absence of a factual basis for a challenge to such a person’s ability to pay costs, the Court of Appeal in Red 9 Ltd affirmed that “much more than mere assertion would be required to raise such an issue”.3
[6] In response to some particular points advanced by Mr Bigio KC, counsel for LPF, I said:
[17] … To put ability to pay in issue, mere assertion is insufficient.4 An applicant has to provide some evidential basis for the assertion before any inference can be drawn from a respondent’s failure to provide evidence of ability to pay. What is a sufficient evidential basis to give rise to such an inference will depend on the circumstances.5 Here, LPF provided no such evidence.
…
[21] Mr Bigio pointed to the funding that has been provided to Mr Whitley and the PVL companies to pursue the litigation. He noted that there was no evidential basis to suggest the funder would put Mr Whitley in funds to meet an adverse costs award. This does not advance LPF’s position. That a liquidator is funded to pursue litigation does not raise any inference that the liquidator will be unable to meet an adverse costs award. A liquidator is usually disinclined to personally fund the litigation as the litigation is not for her or his benefit. The funding may indicate a lack of means on the part of the companies in liquidation but does not indicate a lack of means on the part of the liquidator.
[7] I was therefore not satisfied that there was reason to believe Mr Whitley would, if unsuccessful in his claims against LPF, be unable to pay LPF’s costs.
3 Red 9 Ltd v The Learning Ladder Ltd [2021] NZCA 284 at [28].
4 Red 9 Ltd v The Learning Ladder Ltd [2021] NZCA 284 at [28].
5 New Zealand Kiwifruit Marketing Board v Maheatataka Cool Pack Ltd (1993) 7 PRNZ 209 (HC) at 212.
[8] LPF having met the threshold test for a security for costs application in respect of the PVL companies but not in respect of Mr Whitley, the question then arose as to whether I should order security even from the PVL companies. In reliance on two Court of Appeal decisions,6 I considered that, if it was likely that costs would be awarded against the plaintiffs on a joint and several basis, no security should be ordered against any of them. I held it was likely that if the plaintiffs were unsuccessful costs would be awarded against them on a joint and several basis. I therefore concluded that no security should be ordered from any of the plaintiffs.7
Current applications by LPF and SPF
[9]There are three applications before me:
(a)LPF makes a second application for security for costs from the plaintiffs in the liquidator’s proceeding and applies (if leave is required to make that second application) for leave to do so.
(b)SPF applies for security for costs from the plaintiffs in the same proceeding.
(c)LPF applies for leave to appeal my earlier security for costs judgment.
LPF’s second application for security for costs
[10] Rule 7.52(1) of the High Court Rules 2016 provides that a party that fails on an interlocutory application must not apply again for the same or a similar order without first obtaining the leave of a Judge. Rule 7.52(2) says leave may be granted only in “special circumstances”. Special circumstances are wide, comprehensive and flexible words indicating something abnormal, uncommon or out of the ordinary but something less than extraordinary or unique.8
6 Ariadne Australia Ltd v Grayburn [1991] 1 NZLR 329 (CA); and Smith v Covington Spencer Ltd
[2007] NZCA 224, [2008] 1 NZLR 75 (CA).
7 100 Investments Ltd v Walker [2023] NZHC 2584 at [22]–[30].
8 Cortez Investments Ltd v Olphert & Collins [1984] 2 NZLR 434 (CA).
[11] Almost immediately after my earlier judgment, LPF took steps to obtain the sort of evidence of Mr Whitley’s financial position that had been absent from its first application. LPF’s counsel sent an email to Mr Whitley’s counsel seeking confirmation that Mr Whitley was personally in a position to pay costs and requesting evidence of the same. Mr Whitley’s counsel responded that the question of security for costs had already been resolved. LPF’s solicitors undertook title searches for properties owned by Mr Whitley. These suggested that Mr Whitley owned properties only in a trustee capacity. LPF’s solicitors wrote to Mr Whitley’s solicitors, said they were concerned by this, and sought evidence of Mr Whitley’s ability to pay costs. Mr Whitley’s lawyers declined to do so.
[12] LPC’s primary submission was that leave was not required to bring the second application, as Mr Whitley’s circumstances had changed since LPF brought (in December 2022) its first application for security for costs, thereby “allowing a fresh assessment of the question of security”. I do not accept that submission. Rule 7.52 is plainly engaged: LPF failed on its earlier application, it is bringing an application for the same order, and so it needs leave. A change in circumstances might sometimes mean there are special circumstances justifying the grant of leave, but it does not mean that r 7.52 is inapplicable.
[13] Alternatively, LPF submitted that leave should be granted so that Mr Whitley’s means to pay LPF’s costs could be “substantively addressed in the context of the evidence available”. LPF wants the opportunity to re-argue the earlier application on the basis of evidence that it could have adduced, but did not, the first time around. This falls well short of the special circumstances required by r 7.52. I decline to grant leave to LPF to bring a second application.
SPF’s application for security for costs
[14] SPF is a wholly-owned subsidiary of LPF. It is represented separately from LPF. It did not make an earlier application for security for costs.
[15] SPF’s application focussed on whether there is reason to believe Mr Whitley will be unable to pay costs if unsuccessful. SPF relied on the following matters: that Mr Whitley has, despite repeated requests, failed to provide any evidence of his ability
to pay costs; that Mr Whitley owns three properties, but only in a trustee capacity; that Mr Whitley practises through a closely-held company that appears to be owned by him and his partner (rather than practising “as a partner of a large accounting practice”); and that, in a memorandum to the Court, Mr Whitley’s counsel has said that Mr Whitley “has limited resource and one counsel”.
[16] The plaintiffs opposed the application. Mr Moss, counsel for the plaintiffs, submitted that the evidence was not sufficient for the Court to be satisfied that Mr Whitley would be unable to pay costs. He submitted that Mr Whitley’s failure to provide evidence of his financial position did not give rise to an inference that he would be unable to pay costs. He also submitted that, in any case, SPF should not be allowed to advance the application, either because my earlier judgment raised an issue estoppel against SPF or because the application was an abuse of process in a Henderson v Henderson sense.9 Finally, Mr Moss submitted that, if I were to find that SPF was able to bring the application and that there was reason to believe Mr Whitley would not be able to pay costs, the application should be declined given SPF’s delay in bringing the application.
[17] In order to meet the threshold test in respect of Mr Whitley, there has to be evidence of surrounding circumstances from which it may reasonably be inferred that he would be unable to pay costs if unsuccessful.10 Mr Whitley’s refusal to provide financial information will not give rise to an inference that he is unable to pay costs unless there is first an evidential basis for asserting he is unable to pay. What is a sufficient evidential basis to give rise to such an inference will depend on the circumstances.11
[18] I consider that the evidence on this application does not provide a foundation from which I can draw an adverse inference from Mr Whitley’s refusal to disclose financial information. That Mr Whitley practises through a closely-held company is not indicative of any inability to pay costs. That the only properties of which he is a registered owner appear to be held by Mr Whitley in a trustee capacity
9 Henderson v Henderson (1843) 3 Hare 100 (HL).
10 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516.
11 New Zealand Kiwifruit Marketing Board v Maheatataka Cool Pack Ltd (1993) 7 PRNZ 209 (HC) at 212.
is of little moment, given that he is a chartered accountant, a licenced insolvency practitioner, and has over 35 years’ experience in the insolvency industry. That his counsel said that Mr Whitley has limited resource merely indicates that there may be limits on the funding provided by the creditor that is fuding this litigation. It does not say anything about Mr Whitley’s personal financial resources. A liquidator is usually disinclined to personally fund litigation on behalf of the company in liquidation, as the litigation is not for her or his benefit. That there may be limits on the funding that is available may indicate a lack of means on the part of the funder or of the company in liquidation but does not indicate a lack of means on the part of the liquidator.
[19] I therefore find that SPF has not met the threshold test in respect of Mr Whitley. It is unnecessary for me to address the other matters that were in issue on the application.
LPF’s application for leave to appeal earlier decision on security for costs
[20] In case I declined LPF’s application for leave to bring a second application for security for costs (which I have), LPF applied under s 56(3) of the Senior Courts Act 2016 for leave to appeal my earlier decision on security for costs.12
[21] In Lendlease Capital Services Pty Ltd v Arena Living Holdings Ltd,13 the Court of Appeal said leave to appeal under s 56(3) should not be granted unless the proposed appeal:
(a)raises some question of law or fact capable of bona fide and serious argument in a case involving some interest (public or private) of sufficient importance to outweigh the cost and delay of the appeal; and
(b)has some reasonable prospect of success.
12 LPF applied promptly (on 13 October 2023) for leave to appeal. Regrettably, the existence of that application (and of the other nine interlocutory matters that I heard last week) was not brought to my attention until 28 November 2023, hence the delay in hearing the application.
13 Lendlease Capital Services Pty Ltd v Arena Living Holdings Ltd [2020] NZCA 471 at [4].
[22] The Court of Appeal has also said that a high threshold exists and that the ultimate question is whether the interests of justice are served by granting leave.14
[23] Mr Bigio submitted that in my earlier decision I erred in my approach to the threshold question of whether there was reason to believe Mr Whitley would be unable to pay costs. The first alleged error is that I did not attribute sufficient weight to the funded nature of the Whitley parties’ case when considering that threshold. This submission must be that the mere15 fact that a plaintiff is funded raises an inference (in the absence of the plaintiff providing evidence of their financial position) that the plaintiff will be unable to pay costs. I do not consider that point to be seriously arguable. A liquidator is seldom willing to personally fund litigation, as the litigation is not for their personal benefit. That the litigation is funded therefore says nothing about the liquidator’s ability to pay costs.
[24] The second alleged error is that, in any event, the combination of circumstances was sufficient to establish reason to believe that Mr Whitley would be unable to pay costs. The circumstances advanced by LPF can be summarised as:
(a)The PVL companies cannot contribute to any costs award, so Mr Whitley would have to pay the entirety of any award. I consider this does not, in the absence of some other evidence indicating an inability to pay the likely costs award, give rise to an inference of inability to pay.
(b)The litigation is funded, suggesting that Mr Whitley is not willing to spend his own, or his firm’s, money on the litigation. As I noted earlier, this is unexceptional.
(c)The funder of the litigation, 100 Investments Ltd, has had security for costs ordered against it (in favour of LPF) in the secured creditors’ proceeding. This tells us something about the position of 100 Investments Ltd. It says nothing about Mr Whitley’s financial position.
14 Tomar v Tomar [2021] NZCA 419 at [6], referring to Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9] and [14].
15 Remembering that LPF had not put forward any evidence on Mr Whitley’s financial position.
[25]I therefore consider the second alleged error is not seriously arguable.
[26] It is, therefore, not necessary for me to address whether the alleged errors are sufficiently important to outweigh the cost and delay of an appeal. I merely make two observations. I accept that the matter is important to LPF, as it is going to incur significant further costs in defending the liquidator’s proceeding. I am not satisfied it is of public importance. LPF submitted that there would be a wider benefit to participants in the justice system if there was clarification of whether there is a presumption that funded plaintiffs should pay security for costs. LPF said there were inconsistent approaches to funded cases at the High Court level. LPF did not refer me to any authorities. I suspect any apparent inconsistency might simply reflect the different circumstances of the plaintiffs in various cases.
[27]I decline LPF’s application for leave to appeal.
Costs
[28] In my judgment last week, I said I would give directions on costs for all applications when delivering this judgment.
[29] The Whitley parties were the successful parties on LPF’s and SPF’s applications for further discovery. The Whitley parties are entitled to costs on those applications.
[30] Mr Walker succeeded in his discovery applications against both sets of plaintiffs. He is entitled to costs on those applications.
[31] Mr Cooper succeeded in his application for directions. The application was not opposed by any party. However, it was brought as a proper response to the letter that Mr Moss wrote to Mr Cooper. Mr Moss wrote that letter on behalf of both sets of plaintiffs. Mr Cooper is entitled to costs on his application against both sets of plaintiffs.
[32] In respect of the challenges to the admissibility of evidence in the briefs served in the secured creditors’ proceeding, I found significant parts of Mr Henderson’s and
Mr Whale’s briefs, and the entirety of Mr Downey’s brief, to be inadmissible. I consider LPF, SPF and Mr Walker to have succeeded overall. They are entitled to costs on those challenges, with a modest reduction for their failure on some challenges.
[33] In respect of the challenges to the admissibility of evidence in the briefs served in the liquidator’s proceeding, I found significant parts of Mr Whitley’s brief to be inadmissible, but rejected other challenges. Success was shared and costs are to lie where they fall on those challenges.
[34] The Whitley plaintiffs are entitled to costs from the respective applicants in the three applications determined by this judgment.
[35] If the quantum of any costs cannot be agreed, memoranda may be filed. Each memorandum may not exceed two pages, excluding relevant annexures and schedules.
Result
[36] I decline LPF’s application for leave to bring a second application for security for costs.
[37]I decline SPF’s application for security for costs.
[38]I decline LPF’s application for leave to appeal.
Campbell J
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