Aerospace Developments Limited v Altitude Aerospace Interiors Limited - [2012] NZHC 2723

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
COMMERCIAL LIST

CIV-2012-404-2676 [2012] NZHC 2723

BETWEEN AEROSPACE DEVELOPMENTS LIMITED
Plaintiff

ANDALTITUDE AEROSPACE INTERIORS LIMITED
Defendant

Hearing: 12 October 2012

Appearances: N Flanagan for the plaintiff
N Gedye for the defendant

Judgment: 17 October 2012

JUDGMENT OF ALLAN J

In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 4.30 pm on Wednesday 17 October 2012

Solicitors.counsel:
Meredith Connell, Auckland nick.flanagan@meredithconnell.co.nz
Tompkins Wake, Hamilton
Nathan Gedye, Auckland Nathan.gedye@xtra.co.nz

AEROSPACE DEVELOPMENTS LIMITED V ALTITUDE AEROSPACE INTERIORS LIMITED HC AK CIV-2012-404-2676 [17 October 2012]

Introduction

[1] This is an application for an order directing the plaintiff to give security for the defendant’s costs. It is made in reliance upon High Court Rule 5.45 which provides as relevant:

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)—

(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.

Relevant principles

[2] An application for security gives rise to the following issues:

(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) At what amount should security for costs be fixed?
(d) Should a stay be ordered?

[3] The ordinary approach was helpfully restated by the Court of Appeal in A S McLachlan Ltd v Mel Network Ltd.[1] Whether or not to order security, and if so the quantum, are discretionary. They are matters for the Judge, who is to take into account all the relevant circumstances. The discretion is not to be fettered by constructing principles from the facts of previous cases.

[1] A S McLachlan Ltd v Mel Network Ltd (2002) 16 PRNZ 747 (CA) at [13]-[14].

[4] It is accepted by the plaintiff that the case meets the threshold test in r 5.45(1) because it accepts that it will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the proceeding.

[5] Where, for the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] NZHC 2723
Decision Date: 17 October 2012

CaseChat Overview and Summary

The plaintiff, Aerospace Developments Limited, a manufacturer of bespoke aircraft interiors, sought security for costs from the defendant, Altitude Aerospace Interiors Limited, a company involved in aviation design engineering. Aerospace alleged that it had a joint venture-like relationship with Altitude, which was breached when Altitude refused to engage Aerospace for subcontracts on two major projects, OG3 and Samsung. Aerospace claimed damages for loss of net earnings and other relief. Altitude, on the other hand, maintained that there was no exclusivity in their relationship and that it had no contractual or fiduciary obligations to Aerospace. Altitude also argued that Aerospace's financial difficulties stemmed from its own business decisions and not from Altitude's actions.

The court identified several issues for consideration, including whether Aerospace met the threshold criteria for security of costs under High Court Rule 5.45, how the court should exercise its discretion, the appropriate amount of security, and whether a stay should be ordered. Aerospace conceded that it met the threshold criteria as it could not pay Altitude's costs if unsuccessful. The court assessed the merits of Aerospace's claim, noting that while it was not hopeless, it faced significant hurdles. The court found that the link between Altitude's alleged conduct and Aerospace's financial difficulties was not strong enough to refuse an order for security. The court also considered the importance of ensuring that a plaintiff with a meritorious case is not denied access to the courts on financial grounds. Since there was no indication that meeting an order for security would end the proceedings, and certain persons associated with Aerospace were funding its legal costs, the court found it appropriate to grant Altitude's application for security of costs.

The court ordered Aerospace to provide security for costs in the sum of $20,000, to be paid into court by 4 pm on 2 November 2012. If not paid by that date, the proceedings would be stayed. The court also provided a timetable for further steps in the litigation, including extensions for the service of lists of documents and inspection volumes, deadlines for applications arising from discovery, and a further mention date. The court granted Altitude its costs on the application, calculated in accordance with category 2B.

Orders