Angland v Mower HC Christchurch CIV 2008-409-1990

[2010] NZHC 2275

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2008-409-001990

BETWEEN  JOHN SHEARER ANGLAND First Plaintiff

ANDTREVOR JOHN BURT Second Plaintiff

ANDMICHAEL TONG CHEE CHIN Third Plaintiff

AND  THOMAS ELWIN MOWER Defendant

ANDPHILLIP BOYD WILSON First Counterclaim Defendant

ANDRONALD W ANGLAND & SON Second Counterclaim Defendant

Hearing:         8 December 2010

Appearances: HDP van Schreven for Plaintiffs

HC Matthews and Ms Frampton for Defendant
Ms Hannagan for First Counterclaim Defendant

Judgment:      16 December 2010

RESERVED JUDGMENT OF ASSOCIATE JUDGE DOHERTY

on various applications

1.    Defendant’s Application to file

Second Amended Statement of Defence and Counterclaim

2.Application for Further and Better Discovery: a)   Plaintiffs v First Counterclaim Defendant b)   Plaintiffs v Defendant

c)    Defendant v Plaintiffs

3.    Application for security for costs: plaintiffs v defendants

ANGLAND AND ORS V MOWER AND ORS HC CHCH CIV-2008-409-001990  16 December 2010

Defendant’s application to file second amended statement of defence and counterclaim

[1]      The defendant seeks leave to file a second amended statement of defence and counterclaim outside the terms of a timetable order made by this Court.

[2]      Subject to the issue of costs, the plaintiffs take no issue.

[3]      In  so  far  as  it  is  required,  leave  is  given  to  file  the  defendants  second amended statement of claim and counterclaim outside the terms of the timetable order.

[4]      Costs are reserved.

Application for further and  better discovery: plaintiffs  v first counterclaim defendant

[5]     The plaintiff had sought further and better discovery against the first counterclaim defendant.

[6]      Agreement has been reached between the following counsel as to the nature and extent of further discovery.

[7]      By consent, orders are made that the first counterclaim defendant:

a)      make a request of Julie Blaney to provide copies of emails and correspondence between the first counterclaim defendant and the defendant  and  others  conveyed  through  Julie  Blaney’s  hotmail account and filing a further affidavit providing discovery of those documents;

b)give details of the viruses and hard drive crashes that have resulted in the loss of his copies of communications and correspondence, in particular in relation to the existence of any copies of communications and correspondence between the first counterclaim defendant and the defendant’s US attorney relating to the defendant’s purchase of an

interest in Hossack Station Limited and the Glenhope and Glenwye

Station attempted purchases;

c)       file a further affidavit providing discovery of the first counterclaim defendant’s US cellphone records from 2004 to date.  Confidentiality is claimed in respect of certain of these records.

[8]      The issue of discovery for documentation which has been labelled the “White Elk Ranch” documentation is specifically reserved.  This is on the basis that there is an alternative mechanism for gleaning the sought information.   The plaintiffs will administer interrogatories.

[9]      I direct the following timetable, by consent:

[1]       The first counterclaim defendant is to comply with the consent orders above by 28 January 2011.

[2]       Any notice to answer interrogatories is to be served on the first counterclaim defendant by 28 January 2011.

[3]       Any affidavit in answer to those interrogatories is to be filed and served by 25 February 2011.

[10]     I adjourn the application for further and better discovery in respect of the

White Elk Ranch documents until a case management conference at 2.30 p.m., 19

April 2011, with an obligation on counsel for the plaintiffs to either withdraw the application on that date or to seek that it be set down for further hearing.

[11]     Costs  are  reserved  to  19  April  2011  for  indication  by  counsel  as  to  a mechanism for determining those.

Application for further and better discovery: plaintiffs v defendant

[12]     In the course of argument it was agreed by counsel that the discovery sought would be dealt with without orders of the Court provided the defendant produced the

defendant’s personal telephone records of calls to telephone numbers associated with:

a)        the first plaintiff;

b)        the first counterclaim defendant;

c)        the defendant’s US attorneys and New Zealand solicitors.

[13]     Pending satisfactory resolution on that basis, this application is adjourned to at 19 April 2011.

Application for further and better discovery: defendant v plaintiffs

[14]     This application arises as a result of the filing (for which leave was given) of the defendant’s second amended statement of defence and counterclaim.

[15]     Strictly speaking, this application needs leave as it was not contemplated by the earlier timetabling directions of the Court.  No issue is taken by counsel for the plaintiffs.

[16]     Leave is given for the filing of this application, the short notice of which will require contemplation by counsel for the plaintiffs who in particular will need to assess the relevance of documents being sought.

[17]     The application is adjourned until 19 April 2011. [18] Costs are reserved.

Application for security for costs: plaintiff v defendant

[19]     The plaintiffs collectively seek security for costs against the defendant.  They recognise  that  security  can  only  be  granted  as  a  result  of  the  defendant’s counterclaim.

[20]     The application is based on the fact that the defendant is resident out of New Zealand (r 5.45(1)(a)(i)).  The defendant accepts that his permanent residency out of New Zealand crosses the threshold of the rule.  He also accepts that he is in jeopardy of a security for costs order because of the filing of the counterclaim.

[21]     There is no argument between the parties as to the general principles which are helpfully set out in Aquaculture Corp v MacFarlane Laboratories (1984 Limited) (1987) 1 PRNZ 467.

[22]     The plaintiffs realistically accept if the counterclaim is in reality a defence to their claim then security is not likely to be given.  However, they say an analysis of the counterclaim shows it goes further than merely providing a shield.

[23]     There  is  no  doubt  that the  Courts have  accepted  that  the  existence  of a counterclaim or even affirmative defence is relevant, and particularly so where the counterclaim issues are likely to occupy a significant part of trial time (Oceania Furniture Ltd v Debonair Products Ltd HC Wellington CIV-2008-485-001701, 24

April 2009, Clifford J and Ansell v State Insurance Ltd (1996) 10 PRNZ 133).

[24]     An analysis of the pleadings in this case shows that the defendant goes much further than merely defending the claim.

[25]     The plaintiff’s claim is primarily based on specific performance of a partly performed contract.  The defendant’s counterclaim alleges misrepresentation, breach of the Fair Trading Act 1986 and specific allegations of negligence and breach of fiduciary duties against the first plaintiff.  Whilst the prayer for relief seeks return of money paid, general damages are also claimed.   In those circumstances, the counterclaim itself is used as a sword rather than a shield, and it is accepted by the defendant that the counterclaim will increase the scope and length of the trial.

[26]     Counsel for the plaintiffs estimated the claim itself would occupy ten sitting days  of  hearing  time,  whereas  both  parties  accept  that  there  is  likely to  be  an additional five sitting days caused by the counterclaim issues, ie an increase of 50 per cent.

[27]     The defendant accepts that the cause of action in the counterclaim alleging fraud places a significant onus on the defendant, and whilst resisting the application in total, falls back on the proposition that if security is to be awarded it should only be for the extension of trial time occasioned by the fraud pleading.

[28]     The defendant is acknowledged to be a man of financial substance.  The real issue is whether or not, if he is unsuccessful in his counterclaim, he would pay any award of damages in New Zealand.  A relevant factor to that issue is his conduct to date.  He has himself conducted litigation against the first plaintiff (and the company the shares of which are the subject of this litigation) in both Utah and Nevada in the United States of America (“the US proceedings”).   The claims against the first plaintiff in those jurisdictions alleged similar issues to that which the counterclaim refers.  The first plaintiff denies that he was acting as a solicitor for the defendant, but if he was then it is the second counterclaim defendant who should have been sued in his stead.   Judgment was entered against the first plaintiff (who did not contest the issue) in one of the US proceedings.

[29]     This  proceeding  includes  a  counterclaim  by  the  second  counterclaim defendant against the defendant in respect of the defendant’s actions in bringing the US proceedings.  The second counterclaim defendant is the firm of which the first plaintiff was a principal.  An issue is how the defendant obtained judgment in the US when the contract in issue in this proceeding and the US proceedings included a clause  agreeing that  the  laws  of New  Zealand  and  the  jurisdiction  of  the New Zealand Courts applied.

[30]     The very fact that the defendant chose despite that clause to litigate the matter in the US is a relevant factor in the exercise of my discretion.   It seems to me a reasonable inference to draw on the information available to me that the defendant elected not to submit to jurisdiction of the New Zealand Courts despite agreement to do so.  That might well be evidence of an intention to do his utmost to stay out of litigating in New Zealand.   That behaviour might well be an indication of future attitude and behaviour.

[31]     I am not attracted to the defendant’s argument that because the first plaintiff was aware of the US proceedings, the plaintiffs must have known the defendant would counterclaim against them should they bring this action in New Zealand.

[32]     The drawing of the inference I have referred to, together with my view that the counterclaim is a very real claim in itself and not a defensive action, leads me to the view that the application ought to be granted.

[33]     Counsel agree that solicitor/client costs for each plaintiff and the defendant is likely to be in the order of $250,000.  The plaintiff has calculated 2B costs of a 15- day hearing (with usual interlocutory matters) to be approximately $125,000.  On a purely arbitrary basis that the counterclaim might lengthen the trial time by 50 per cent, the costs attributed to that on a 2B basis might be $40,000.

[34]     Bearing in mind the estimate of one-third of the costs on a 2B basis relating to the counterclaim is rather arbitrary, I think an appropriate award for security would be 50 per cent of that figure.

[35]     The application is granted and the defendant is ordered to pay security for costs of $20,000.  The amount is to be paid to the defendant’s solicitors, to be held in trust on account of security for costs until further order of this Court.

[36]     The counterclaim is stayed until security has been given on these terms.

Costs

[37]     Costs on this application are appropriate and should follow the event.   I

award the plaintiff costs on a schedule 2B basis together with disbursements as set by the Registrar.

Associate Judge Doherty