100 Investments Ltd v Walker
[2023] NZHC 2584
•15 September 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 2584
BETWEEN 100 INVESTMENTS LTD
First Plaintiff
Continued…
AND
ROBERT BRUCE WALKER
First Defendant
Continued…
Hearing:
Further Submissions:
17 and 18 July 2023
30 August 2023 and 6, 8 and 12 September 2023
Appearances:
R Hucker for the first to fourth plaintiffs in 1160 and the first to fourth defendants in 0274
D Bigio KC and N R Frith for the third defendant in 1160 and the seventh defendant in 0274
W Hofer and R Reeves for the fourth defendant in 1160 and the eighth defendant in 0274J Moss for the fifth to seventeenth defendants in 1160 and the first to thirteenth plaintiffs in 0274
Judgment:
15 September 2023
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 15 September 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 2584 [15 September 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] In a judgment dated 17 August 2023,1 I declined the application by LPF Group Ltd (LPF), the seventh defendant in the second of these two consolidated proceedings, to strike out the entirety of the plaintiffs’ claim in that proceeding. LPF had applied in the alternative for an order that those plaintiffs give security for LPF’s costs. This judgment deals with whether I should make any order that the plaintiffs give security (the parties having agreed that the amount of any security should be the subject of further submissions, if I find that security should be given).
LPF’s application and the questions that arise
[2] Mr Whitley is the liquidator of Property Ventures Ltd and of some of Property Ventures Ltd’s subsidiaries (together the PVL companies). In March 2022, Mr Whitley and the PVL companies commenced a proceeding, CIV 2022-404-274, in which they are the first to thirteenth plaintiffs. There are eight defendants to that proceeding, including LPF.
[3] LPF applies for security for costs under r 5.45 of the High Court Rules 2016. It says there is reason to believe the plaintiffs will be unable to pay LPF’s costs if they are unsuccessful.
[4]Rule 5.45 provides, relevantly:
(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.
…
1 100 Investments Ltd v Walker [2023] NZHC 2227.
[5] Where a defendant applies for security based on a plaintiff’s inability to pay costs, two questions ordinarily arise:
(a)Has the defendant satisfied the court there is reason to believe the plaintiff will be unable to pay the defendant’s costs if unsuccessful? This is a threshold question under r 5.45(1).
(b)If so, is it just in all the circumstances to order the plaintiff to give security? This is a discretionary question under r 5.45(2).
[6] Another question can arise where, as in this case, there are multiple plaintiffs. If the threshold test is met in respect of some plaintiffs (the qualifying plaintiffs) but not others (the non-qualifying plaintiffs), should the court order security even from the qualifying plaintiffs?
Procedural matters
[7] At the hearing of LPF’s application, the submissions of LPF and the plaintiffs addressed the threshold question and the discretionary question. The submissions did not touch on the multiple-plaintiffs question.
[8] By the time I issued my judgment declining LPF’s application to strike out the entirety of the plaintiffs’ claim, I had determined that, if I were to treat Mr Whitley independently of the PVL companies:
(a)As against Mr Whitley, LPF had not met the threshold test in r 5.45(1).
(b)As against the PVL companies, LPF had met the threshold test in r 5.45(1), and it would be just, in terms of r 5.45(2), to order security.
[9] On 17 August 2023, I issued a minute advising the parties of those determinations. I said the issue that then arose was whether I should make any order
for security even against the PVL companies. I referred counsel to the Court of Appeal’s statement in Ariadne Australia Ltd v Grayburn:2
Where, as here, two parties are suing in the same interest with the same solicitors and counsel there will ordinarily be only one set of costs. In those circumstances if one of the two can pay the costs no security will be needed
…
[10]I asked counsel to file brief submissions on this issue. They did so.
The threshold question: the PVL companies
[11] The PVL companies have been in liquidation for many years. LPF’s affidavit evidence included the most recent liquidator’s report for each company. It is clear from these that there is reason to believe the PVL companies would, if unsuccessful in their claims against LPF, be unable to pay LPF’s costs. Mr Moss, counsel for the plaintiffs, acknowledged as much in his written submissions.
The threshold question: Mr Whitley
[12] LPF filed an affidavit in support of its application for security from its executive director, Mr Woodhams. He deposed that LPF estimated its likely scale costs award (including disbursements) against the plaintiffs, should LPF succeed, would be $65,000. At the hearing of the application, LPF submitted that its estimated costs award was by then higher, given a then recent amended statement of claim. After the hearing, the plaintiffs amended their claim further. As a result, LPF filed a memorandum estimating that the likely award of costs and disbursements in its favour against the plaintiffs, should it succeed, was now $162,736.
[13] Mr Woodhams’ affidavit addressed the financial position of the PVL companies but said nothing about Mr Whitley’s financial position. Mr Whitley filed an affidavit in opposition to the application. Mr Whitley deposed that he is a chartered accountant and a licenced insolvency practitioner with over 35 years’ experience in the insolvency industry. Mr Woodhams’ affidavit in reply was again silent on Mr Whitley’s financial position.
2 Ariadne Australia Ltd v Grayburn [1991] 1 NZLR 329 (CA) at 333.
[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
[15] It was for these reasons that I determined, as conveyed in my minute dated 17 August 2023, that LPF had not met the threshold in r 5.45(1) in respect of Mr Whitley.
[16] In submissions filed in response to my minute, Mr Bigio KC, counsel for LPF, disagreed with that determination. I will address the points he made.
[17] First, Mr Bigio submitted that LPF had put “the plaintiffs’ ability to pay costs in issue” in its application and therefore it was incumbent on Mr Whitley and the PVL companies to provide evidence of ability to meet a costs award. Mr Bigio noted that the plaintiffs had not, in their notice of opposition, joined issue with LPF’s claim that there was reason to believe the plaintiffs could not pay costs. He submitted that there was therefore “no dispute that Mr Whitley will be unable to meet an adverse costs award”. I do not accept this submission:
(a)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.
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.
(b)In its written submissions for the hearing, LPF addressed the threshold question in respect of both Mr Whitley and the PVL companies. LPF did not at that time suggest there was no dispute that Mr Whitley would be unable to pay costs.
(c)Mr Moss, in his written submissions for the hearing, submitted that LPF had provided no evidence to suggest Mr Whitley could not meet an adverse costs award. He therefore submitted at the hearing that the threshold test had not been met in respect of Mr Whitley. The matter was clearly in dispute.
[18] Secondly, Mr Bigio said this case was comparable to Walker v Forbes,6 in which the Court said:
[14] There is no dispute in the present case that, without third party assistance, the plaintiffs would be unable to meet the awards of costs that would inevitably be made in the event that their claims are unsuccessful. The corporate plaintiffs are all in liquidation and there is no evidence that the first plaintiffs, the liquidators of companies in the PVL group, have obtained funding from creditors to enable them to pursue the claims against the defendants and/or to meet any adverse award of costs.
[19] Walker v Forbes does not assist LPF. As is evident from the quoted passage, in that case it was not in dispute that the plaintiffs (including the liquidators) would be unable to meet an adverse costs award.7 Here, Mr Whitley’s inability to meet an adverse costs award was disputed.
[20] Thirdly, Mr Bigio submitted that evidence “is still customary to substantiate the liquidators’ ability to pay costs”, referring to one case example.8 This also does not assist LPF. That liquidators in other cases have adduced evidence of their ability to pay costs does not mean that liquidators in all cases are at risk of an inference of an inability to pay if they do not adduce such evidence. Whether such an inference might
6 Walker v Forbes [2017] NZHC 1212.
7 It is hardly surprising there was no dispute in that case. The plaintiffs had already agreed to give security for costs for earlier steps in the proceeding, and any adverse costs awards against the plaintiffs were estimated to total approximately $3.642 million. These provide further points of distinction from the present case.
8 Sentry Hill Winery (2006) Ltd v Parkes [2017] NZHC 1089.
arise will depend, as I have said, on the circumstances, particularly on the evidence that the applicant has put forward.
[21] Fourthly, 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.
Should security be ordered against the PVL companies?
[22] LPF having met the threshold in respect of the PVL companies but not in respect of Mr Whitley, the question then arises whether I should order security even from the PVL companies.
[23] I referred earlier to the Court of Appeal’s statement, in Ariadne Australia Ltd v Grayburn,9 that if two parties are suing in the same interest with the same solicitors and counsel there will ordinarily be only one set of costs, so that if one of the two can pay costs no security will be needed. This approach was approved, and clarified, by the Court of Appeal in Smith v Covington Spencer Ltd.10 The clarification was:
[33] …
(a) Where there are non-qualifying plaintiffs suing in conjunction with qualifying plaintiffs (in that case, plaintiffs who resided outside the jurisdiction), and all plaintiffs rely on the same cause(s) of action and are commonly represented, the court will generally not order security from the qualifying plaintiffs. This is on the basis that there is joint and several liability for costs. The assumption is that the non-qualifying plaintiffs will be able to meet any costs award, so that no security is required from the qualifying plaintiffs.
9 Ariadne Australia Ltd v Grayburn [1991] 1 NZLR 329 (CA) at 333.
10 Smith v Covington Spencer Ltd [2007] NZCA 224, [2008] 1 NZLR 75 (CA).
(b) Where in a multi-plaintiff case the plaintiffs have different causes of action, there is a realistic possibility that costs will be ordered against them on other than a joint and several basis if they are unsuccessful. In this type of case, security may be ordered against qualifying plaintiffs but not against non-qualifying plaintiffs, and may be ordered on an aliquot basis.
[34] We are not, of course, able to determine trial costs. That is a matter for the trial Judge. But … we are entitled to make an assessment of what is “a reasonable possibility”. We think it unlikely, if this matter proceeds to a full-blown hearing, that costs at the end of trial will, if the plaintiffs fail, be awarded against them on a joint and several basis. While there is a common core to all the claims, the causes of action differ as between distinct categories of defendant. …
[24] I therefore proceed on the basis that, if it is likely that costs would be awarded against the plaintiffs on a joint and several basis, no security should be ordered. Conversely, if there is a reasonable possibility of costs being awarded other than on a joint and several basis, security should be ordered against the PVL companies.
[25] Mr Bigio submitted that if the plaintiffs are unsuccessful there is more than a “reasonable possibility” that costs will not be awarded against them on a joint and several basis. He submitted that this was because, although there is a common core to all the claims, there is “a divergence between claims brought by the plaintiffs against different defendants”. The only claims “properly” brought by Mr Whitley were those seeking directions under ss 284 and 301 of the Companies Act 1993. Those directions were sought only against the previous liquidators of the PVL companies, not against LPF. The claims against LPF were “properly” seen as being brought only by the PVL companies. Mr Bigio submitted that this meant that if the claims against LPF failed it was likely that only the PVL companies (and not Mr Whitley) would be liable to LPF in costs.
[26] Determining whether an award of costs in favour of LPF against the plaintiffs is likely to be joint and several depends on the pleadings against LPF. All the plaintiffs sue together on each cause of action against LPF. If those causes of action fail, all the plaintiffs will be unsuccessful, and all will be presumptively liable to pay costs to LPF. There is no reason to think their costs liability will be anything other than joint and several. Mr Bigio’s submission that these claims are not “properly” brought by Mr Whitley goes to whether Mr Whitley’s claims against LPF will succeed. If the
plaintiffs’ claims against LPF fail, and if it is found that Mr Whitley was not a “proper” party to those claims, that finding is most unlikely to relieve Mr Whitley of any costs liability or to be a reason for ordering costs other than on a joint and several basis.
[27] In my view, therefore, it is likely that if the plaintiffs are unsuccessful costs will be awarded against them on a joint and several basis.
[28] Mr Bigio made a further submission. He submitted that, in any event, the considerations which normally apply to security for costs are superseded by the existence of a litigation funder. He referred to the statement in Walker v Forbes that:11
… the existence of a litigation funder is a very significant factor that influences the exercise of the discretion in favour of making a substantial order for security.
[29] I accept that the existence of a litigation funder is a factor that is relevant to the exercise of the discretion under r 5.45(2).12 But one does not get to that discretion when, as here, the threshold test is met in respect of only some of the plaintiffs and it is likely that costs will be ordered on a joint and several basis. In such circumstances, as the Court of Appeal said in Smith v Covington Spencer, “[t]he assumption is that the non-qualifying plaintiffs will be able to meet any costs award, so that no security is required from the qualifying plaintiffs”.13
[30] For these reasons, I conclude that no security should be ordered from any of the plaintiffs.
Costs
[31] The plaintiffs are entitled to costs on this application. If counsel are unable to agree quantum, brief memoranda (not exceeding two pages each) may be filed: the plaintiffs by 29 September 2023 and LPF by 6 October 2023.
11 Walker v Forbes [2017] NZHC 1212 at [71].
12 It was primarily because of the presence of a funder that I determined, as conveyed in my minute of 17 August 2023, that if the PVL companies were considered alone it would be just, in terms of r 5.45(2), to order security.
13 Smith v Covington Spencer Ltd [2007] NZCA 224, [2008] 1 NZLR 75 (CA) at [33].
Result
[32]I decline LPF’s application for security for costs.
[33] The plaintiffs are entitled to costs on the application. Memoranda may be filed as set out in [31] above.
Campbell J
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