Apatu v Apatu as executor of the Estate of Apatu HC Napier CIV 2007-441-823

[2010] NZHC 804

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2007-441-823

UNDER  the Administration Act 1969

BETWEEN  ASHLEY KANARA APATU AND WINIPERE EVA MAUGER Plaintiffs

ANDKENNETH TAAMA TE KAPUA APATU AS EXECUTOR OF THE ESTATE OF WIRIHANA TIPENE APATU

First Defendant

ANDNATHAN WIRIHANA APATU, RENATA ROBIN APATU AND KATHERINE LOUISE BATES AS EXECUTORS OF THE ESTATE OF WIRIHANA TERRENCE APATU Second Defendants

Hearing:         18 March 2010

Appearances: J.F. McLennan - Counsel for Plaintiffs

M.E.J. MacFarlane - Counsel for Defendants

Judgment:      24 March 2010 at 4.00 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 24 March 2010 at 4.00 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Holmden Horrocks, Solicitors, PO Box 1108, Auckland Sainsbury Logan, Solicitors, PO Box 41, Napier Langley Twigg, Solicitors, PO Box 446, Napier

AK APATU AND WE MAUGER V KTT APATU AS EXECUTOR OF THE ESTATE OF WIRIHANA TIPENE APATU AND ANOR HC NAP CIV-2007-441-823  24 March 2010

Introduction

[1]    The defendants seek an order for security for costs against the plaintiffs and, if successful, a stay of the proceedings pending payment of the security for costs.  The amount sought, as I understand it, is a total of $60,000.00.   The defendants’ application was brought pursuant to r 5.45 of the High Court Rules on 21 December

2009.

[2]    The application is opposed by the plaintiffs. A notice of opposition was filed on 9 March 2010.

Background Facts

[3]    The plaintiffs are children of the late Wirihana Tipene Apatu (Mr Apatu), who died on 11 May 1970. In his last will dated 2 March 1970, Mr Apatu appointed the plaintiffs’  brothers,  the  first  defendant  and  Wirihana  Terrence  Apatu,  as  his executors and trustees. Probate of the will was granted on 27 May 1970.

[4]    Under Mr Apatu’s will, the first defendant and Wirihana Terrence Apatu held the residue or remainder of the estate as trustees for Mr Apatu’s wife, Minola Apatu, and four residuary beneficiaries, including the plaintiffs. Minola Apatu was to be paid the net annual income arising from the residuary estate during her lifetime, and, upon her death, the residuary beneficiaries of the estate were to take equally between them, as tenants-in-common, the remainder of the estate.

[5]    Minola Apatu died on 24 April 2003.  Probate of her will was granted on 25

August 2003, with the first defendant and Wirihana Terrence Apatu appointed executors of her estate. Wirihana Terrence Apatu died on 5 June 2005. The executors of his estate are the named second defendants to this proceeding.

[6]    These proceedings were commenced in 2007. The parties’ dispute is long- running and concerns the defendants’ role as trustees and administrators of Mr Apatu’s estate. The plaintiffs claim that the first defendant breached his duty to the plaintiffs to provide accounts and other financial records for the estate, under s 44 of

the Administration Act 1969 or in equity. Furthermore, the plaintiffs allege that the defendants, as trustees of the estate, breached their fiduciary duty in profiting from their  position  as  trustees,  and  that  they failed  to  comply with  the terms  of  Mr Aputu’s will in that the plaintiffs did not receive their share of the remainder of the estate.

[7]    The defendants deny these allegations. They also argue that the third  and fourth causes of action are statute barred pursuant to ss 21 and 22 of the Limitation Act 1950, and that the delay in bringing these proceedings is such that relief should be denied in any case. They further argue that the estate of the deceased has been fully administered and there are no assets against which relief can be granted.

Parties’ Arguments and My Decision

[8]    The power to make an order for security for costs is contained in r 5.45 of the

High Court Rules. It provides in part:

5.45 Order for security of costs

(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.

(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.

[9]    The Court of Appeal provided a useful summary of the general approach to be applied in such applications in A S McLachlan Ltd v MEL Network Ltd (2002) 16

PRNZ 747:

[13] Rule 60(1)(b) High Court rules provides that where the court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, “the court may, if it thinks fit in all the circumstances, order the giving of security for costs”. Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing “principles” from the facts of previous cases.

[14] While collections of  authorities such as  that in  the  judgment of  Master Williams in Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a check list of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.

[10]  The plaintiffs oppose the application on  the basis either that  they are not impecunious or that any inability to pay costs was caused by the defendants, that there was unreasonable delay in bringing this application, and that the plaintiffs have a bona fide claim and it is in the interests of justice to allow it to proceed without the requirement of security for costs.

[11]  Rule 5.45 provides for a threshold requirement which is to the effect that the plaintiff   is   impecunious.   The   defendant   must   adduce   credible   evidence   of surrounding  circumstances  from  which  it  may  be  reasonably  inferred  that  the plaintiff if unsuccessful will not be able to pay the defendants’ costs. Failure by the plaintiffs to disclose their financial circumstances may give rise to an adverse inference: see McGechan on Procedure at HR5.45.02.

[12]  The defendants submit that the plaintiffs’ inability to pay is demonstrated by their failure to disclose any savings and by the fact that they are “without income of any significance”. The plaintiffs have filed affidavit evidence seeking to dispel this contention. This evidence consists of property interests owned by the plaintiffs in Maori  freehold  land.  A  valuation  was  provided  with  respect  to  one  of  these properties, which indicates that the total market value of the property is $250,000. Ownership of the property is split between five owners. The plaintiffs say that they

could make 3063.96 out of the 4202 ownership shares in the land available as security.

[13]  The defendants submit that the listed interests in Maori land do not establish an ability to pay, as there is no proper evidence as to value and marketability, or as to the processes required to procure realisation of the securities in the Maori Land Court.  They argue that the interests are unlikely to obtain market value unless they are sold together, which would require the consent of the other non-plaintiff owners.

[14]  In response, the plaintiffs submit that the defendants’ submissions are based on “unsupported hearsay” and that there is no evidence that an order by the Maori Land Court would not be forthcoming. Although they accept that the security could be difficult to realise, they maintain that it is sufficient to show that they would be able to meet an award of costs. With respect to the valuation, the plaintiffs note that there appears to be no dispute as to the estimate of the value of the property, despite apparent   –   but   unspecified   -   criticism   by   the   defendants   of   the   valuer’s qualifications.

[15]  In my view, there is no reasonable prospect on the evidence available that the plaintiffs’ interests in Maori freehold land would be easily realisable to meet a costs award  if  their  claims  are  unsuccessful.  It  is  conceded,  for  example,  that  any alienation of these interests is likely to require a vesting order to be made by the Maori Land Court. However, given my later conclusion that this application must fail in any event, it is not necessary for me to definitively determine whether the impecuniosity threshold is met. I thus turn to consider the other relevant factors the Court is to consider in exercising its discretion as to whether an order for security for costs is to be made.

[16]  Although the Court of Appeal warned in A S McLachlan v MEL Network Ltd against constructing “principles” from the facts of previous cases, it is clear that certain factors have been regularly regarded as relevant in dealing with security for costs applications. The first requires the balancing of the interests of plaintiff and defendant. The Court in McLachlan at [16] stated with reference to the interests of defendants  that  “[t]hey  must  be  protected  against  being  drawn  into  unjustified

litigation, particularly where it is over-complicated and unnecessarily protracted”. In considering the interests of plaintiffs, the Court further stated:

[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in  which the claim has little chance of success. Access to the courts for a genuine plaintiff is not lightly to be denied.

[17]  The issue of whether a claim “has little chance of success” is often fraught with difficulties in the context of applications for security for costs. Although the Court will attempt to assess the merits of the claim, there is a very real limit to how far such an assessment can extend: Meates v Taylor (1992) 5 PRNZ 524 (CA). It appears that the merits of the present case will largely depend on the determination of contested factual issues, such as whether there was adequate compliance with the plaintiffs’ disclosure requests and whether the plaintiffs failed to receive any of their entitlements under the will. The gist of the plaintiffs’ case is that the Court should examine the role that the defendants have played as trustees in the administration of the estate of their parents.

[18]  For example, the plaintiffs allege that they are entitled to receive a share of the block of land described as “Owhaoko Blocks: C2”, while the defendants contend that the plaintiffs have had vested in them any entitlements they may have had in the land. The plaintiffs claim further entitlements to land described as “Ohiti-Waitio Block 3A”, to paintings and ancestral Maori artefacts, to a life interest in 216 Lawn Road  in  Hastings,  to  interests  in  land  described  as  “Rakautatahi  1E5”,  and  to

$14,463.00 from the estate of Taranaki Te Uamairangi. The defendants, on the other hand, argue that the interest in Ohiti-Waitio Block 3A never formed part of Mr Apatu’s estate, that the paintings and artefacts passed to Minola Apatu pursuant to the will, that the plaintiffs’ disposed of their interests in 216 Lawn Road in 1973, that Mr Ashley Apatu assigned his interest in Rakautatahi 1E5 to his co-plaintiff Ms Mauger, and that Mr Ashley Apatu has received all of his entitlement under the estate of Taranaki Te Uamairangi.

[19]  It is virtually impossible for this Court at this stage of the proceedings to form a firm view on the merits of these largely factual disputes. An assessment of the plaintiffs’ claims would necessarily require that all the evidence be traversed and considered. Although it appears that the plaintiffs may well encounter great difficulties in proving their various allegations, this impression is not sufficiently grounded in evidence to allow the conclusion that the plaintiffs’ claim is particularly weak. In terms of the limitation issues raised by the defendants, I note that it is not at all clear whether the substance of the plaintiffs’ claim is statute barred under ss 21 and 22. Section 21(1)(b) would appear to be relevant if the defendants were still in possession of the alleged trust property or if it had been “converted to [their] use”, in which case it may well be that no limitation period would apply. Moreover, the plaintiffs  submit  that  their  right  of action  only accrued  after  the death  of  their mother, when they were entitled to receive the remainder of their father’s estate as residual beneficiaries. They accordingly argue that they were beneficiaries entitled to a future interest in the estate whose interest had not yet fallen into possession: see

21(2).

[20]  The plaintiffs further raise the issue of delay, submitting that there is no reason why the defendants’ application could not have been brought in late 2007 or early

2008 and that the defendants have acted unreasonably in this regard.  Based on

Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington CIV-2008-485-

1701, 24 April 2009, the plaintiffs argue that applications for security for costs that are made at a late stage in the proceeding are often unsuccessful (see [29]). Relevant considerations may include whether the application was made as soon as the defendant became aware of the plaintiff’s likely inability to meet costs, whether there was any needless delay and whether the delay has prejudiced the plaintiff: McGechan at HR5.45.03(4).

[21]  The plaintiffs contend that none of the information that the defendants rely upon in their application is “new” information, that the defendants did not make the application as soon as they became aware of any apparent inability to pay costs, and that a considerable amount of money and effort has been spent to get the proceeding to where it is today.

[22]  According to  the  defendants,  however,  any delay was  both  explained  and justified. They argue that they attempted to explain to the plaintiffs why their claims were wrong or misconceived and that they made careful efforts to negotiate or settle this  long-running  dispute  which  effectively attempts  to  unbundle  aspects  of  the administration of an estate running since the 1970s. Moreover, it is submitted that there is nothing to suggest that the plaintiffs were prejudiced by the delay, as they were  warned  that  security would  be  sought  in  July 2009  before discovery was completed. It is also alleged that the delay was in fact caused by long periods of inactivity on the plaintiffs’ part and their failure to file a final statement of claim before 8 December 2009.

[23]  At present, the proceeding is scheduled for trial in April 2010. It was indicated to me, however, that the plaintiffs would be seeking an adjournment of the hearing in order to allow this claim to be heard at the same time as a separate proceeding which is about to be brought by the plaintiffs regarding land that is not included in the present causes of action (I understand to be the Kemp Block and the Takapau Land). If an adjournment is to be granted, this could therefore not be considered as a “brink of trial” application that is overly prejudicial to the plaintiffs.  As I understand it, that was the position in Oceania Furniture Ltd v Debonaire Products Ltd. However, as it is unclear at this stage whether the plaintiffs’ application for adjournment will be successful, it would not be safe to proceed on that basis in determining the effect of delay on this application.

[24]  Further, I do not accept the defendants’ argument that the delay was caused by the plaintiffs’ failure to file a final statement of claim before 8 December 2009. Although the plaintiffs’ claim may have included fewer or different particulars at that stage, the nature of the allegations has remained broadly the same throughout. There is  also nothing to suggest that the defendants only became aware of the plaintiffs’ alleged impecuniosity in December 2009. In fact, the defendants were already aware in July 2009 that an order for security for costs would be sought. In these circumstances, the delay in bringing this application is a factor weighing in favour of the plaintiffs.

[25]  The plaintiffs also submit that, should they be considered impecunious, any such impecuniosity has been caused by the defendants. It is generally established

that any “reasonable probability” that the plaintiff’s impecuniosity was caused by the defendants’ actions that are the subject of the proceedings is a relevant factor which militates against an order for security: Bell Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 at 461. However, the plaintiff must produce persuasive evidence that goes beyond mere assertions: Davy v Howell (1993) 7 PRNZ 141. As an assessment of this factor necessarily requires consideration of the validity of the plaintiffs’ allegations, it is clearly very difficult at this stage to come to a conclusion on this submission.

[26]  The plaintiffs here refer to the defendants’ failure to account to the plaintiffs and to pay to them their rightful shares from the estate; their decision to evict Mr Ashely Apatu without compensation from a block of land which, he claims, he successfully tendered for; and the failure to compensate him for improvements that he made to the land. The defendants submit that the evidence does not establish a “reasonable probability established by persuasive evidence” that the plaintiffs’ impecuniosity has been caused by the actions of the defendants. They argue that the plaintiffs have failed to particularise their supposed entitlements, and that there is no explanation for the delay in bringing some of these claims, which appear to have nothing  to  do  with  administration  of  the  estate.  The  plaintiffs  accept  that  the evidence that is provided is not detailed, but submit that this lack of detail is the result of the defendants’ failure to inform the plaintiffs about the nature of Mr Apatu’s estate and their entitlements.

[27]  In my view there is substance in the suggestion by the defendants that there is here no persuasive evidence that would indicate that the defendants are to blame for the plaintiffs’ impecuniosity, even though part of the reason for this lack of evidence may be found ultimately to lie with the defendants.

[28]  Interestingly, in his submissions before me, Mr MacFarlane, counsel for the defendants conceded that it might assist the parties’ wider family if the plaintiffs were  allowed  to  proceed  without  security  to  enable  this  dispute  to  be  finally resolved.   In particular, I quote directly from Mr MacFarlane’s submissions to the Court at paragraphs 15 to 17:

15.       In some respects it might help the wider family for the plaintiffs to be allowed to proceed without security so they can see from an objective decision-maker whether or not there was anything in the many claims now made, irrespective of the outcome.

16.       For the second defendants that is particularly important because it is their deceased father against whom fraud and negligence is asserted, and it is his reputation which, only after his death and long after the relevant events, his brother and sister have put in issue with their now many times amended claims.  The first defendant is of course alive and can defend himself, but he too could be excused for wishing to have this litigation out so that his reputation can be preserved by a formal judgment.

17.However that personal context aside these proceedings involve estates, their executors and trustees, and duties owed to the Court.  The defendants should not be obliged to defend the claims without protection as to costs ....

[29] And, with his final conclusion at paragraph 17 of his submissions, Mr MacFarlane contended that the defendants should not be forced to defend the claims here without security for costs, given the quality and timing of the plaintiffs’ claims, their age, the lack of particulars, and the probably low value that is likely to be involved.

[30]  Given the long history of these disputes, their family nature and the many factual  issues  that  will  need  to  be  resolved  at  trial,  I conclude  that  the  proper balancing of the parties’ interests here must fall on the side of the plaintiffs who should not be denied access to this Court so late in the proceeding.  I say this too with the comments of Mr MacFarlane, counsel for the defendants, outlined at paragraph [29] above, firmly in mind.   Although the plaintiffs’ allegations will be difficult to prove, I am not satisfied that they are so weak as to make an order for security for costs appropriate in the present circumstances. In my view, it is in the interests of justice that the plaintiffs’ claims proceed to trial without an order for security for costs.

Conclusion

[31]  The  defendants’  application  for  security  for  costs  against  the  plaintiff  is declined.

[32]  As to costs, the plaintiffs have succeeded in opposing the present application and in the usual way are entitled to an order for costs against the defendants. Costs

are therefore awarded to the plaintiffs on this application on a category 2B basis together with any disbursements as fixed by the Registrar.

‘Associate Judge D.I. Gendall’