Apatu v Apatu HC Napier CIV-2010-441-195
[2011] NZHC 2018
•19 December 2011
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2010-441-195
BETWEEN ASHLEY KANARA APATU Plaintiff
ANDKENNETH TAMA 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: 1 December 2011 (Heard at Napier)
Counsel: No appearance for Plaintiff
M. Macfarlane - Counsel for Defendant
Judgment: 19 December 2011 at 2:30 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 19 December 2011 at
2.30 pm under r 11.5 of the High Court Rules.
Solicitors: Tamatekapua Law, PO Box 106 454, Auckland
Sainsbury Logan & Williams, Solicitors, P Box 41, Napier
AK APATU V KTT APATU AS EXECUTOR OF THE ESTATE OF WIRIHANA TIPENE APATU & ANOR HC NAP CIV-2010-441-195 19 December 2011
Introduction
[1] For decision is an application seeking security for costs against the plaintiff brought by the defendants as executors of the estate of Mr Wirihana Terrence Apatu (Mr Terry Apatu) and of the estate of Mr Wirihana Tipene Apatu (Mr Wirihana Apatu).
[2] That application has not been formally opposed by the plaintiff, Mr Ashley Apatu, and no appearance was made on his behalf. On 30 November 2011, however, a memorandum was received from the counsel for the plaintiff, Ms Kapua, informing the Court that the plaintiff has now been successful in his application for legal aid with respect to these proceedings. Ms Kapua further advised the Court at paras [5] and [6] of her memorandum:
5. It is therefore submitted that it would be unjust in the circumstances to require security for costs given the process (plaintiff now being legally aided) to date.
6. However counsel does not intend to do more than raise this matter with the
Court, given the late notice of the grant and will abide the Court’s decision.
Background
[3] The parties have been involved in protracted litigation which began in 2007. Mr Ken Apatu the first defendant, and Mr Terry Apatu were the executors and trustees of the estate of their late father, Wirihana Tipene Apatu (Mr Wirihana Apatu). The plaintiff is the brother of Mr Ken and Mr Terry Apatu and the son of Mr Wirihana Apatu. Mr Wirihana Apatu died in 1970. The plaintiff (along with others) is also a beneficiary of Mr Wirihana Apatu’s estate. All proceedings between these parties have generally related to the administration of the estate of their father Mr Wirihana Apatu by Mr Ken Apatu and Mr Terry Apatu. That history is set out in the recent judgment of Williams J: Apatu v Apatu HC Napier CIV-2007-
441-823, 3 November 2011.
[4] Those proceedings (CIV-2007-441-823) also concerned another plaintiff, Ms Winipera Mauger, sister to the plaintiff and the defendants. She was a plaintiff with respect to all of the claims brought by the plaintiff Mr Ashley Apatu and, as well, she brought separate proceedings against Mr Ken and Mr Terry Apatu, individually (CIV-2009-441-515). Mr Ashley Apatu and Ms Winipera Mauger appealed the
decision of Williams J dated 3 November 2011 (CA354/2011). However, on 19
October 2011 Arnold J made a direction under r 30(2) of the Court of Appeal Rules that the appellants were to file an amended notice of appeal. A direction was made that this notice was to be filed by 18 November 2011. I was advised by counsel before me that this notice has not as yet been filed. Prior to that, the appellants applied for security for costs to be waived on their appeal. The Registrar of the Court of Appeal however determined that security would not be waived. I was advised by counsel that Mr Ashley Apatu sought a review of that decision, but this was unsuccessful. Counsel also advised that this security has not been paid to the Court of Appeal.
[5] The present proceedings brought by the plaintiff represent claims for alleged breach of trust, breach of fiduciary duty and equitable fraud relating to assets of, or assets connected with, the estate of Wirihana Apatu.
Counsels’ Submissions and My Decision
[6] The defendants’ present application which is for security for costs is made under r 5.45 of the High Court Rules. That rule provides:
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.
…
[7] As to the threshold requirement contained in r 5.45(1)(b), Greig J said in Amev Life Assurance Co Ltd v Dixon-McIver [1993] 1 NZLR 733 (HC) at 738 that where a person has obtained a grant of legal aid, one may presume that that grant indicates an inability to pay legal costs and therefore indicates impecuniosity. While his Honour was considering a grant of aid made under the Legal Services Act 1991, his statement is equally apt under the Legal Services Act 2011, given the stringent requirements which an applicant must meet before a grant of aid is made under ss 10 and 11 of that Act. In addition, given the facts that security for costs has not yet been provided for the appeal brought against the decision of Williams J, that Williams J had ordered a substantial award of costs against the present plaintiff ($85,000.00) which has also not yet been paid (albeit that order was made on 3
November 2011) and finally that the plaintiffs in CIV-2007-441-823 had their hearing fees (for a 5 day hearing) waived, I am satisfied that the plaintiff in these proceedings must be considered to be impecunious.
[8] The issue then becomes whether the Court should exercise its discretion under r 5.45(2) to order payment of security. The principles relevant to that exercise in a case where the plaintiff is legally aided are set out in McGechan on Procedure at HR.5.45.14(1) as follows:
HR5.45.14 Party legally aided
(1) Plaintiff
(a) There is no statutory bar to ordering a legally aided plaintiff to give security for costs. The right to apply is one of the rights of the other party to the proceeding expressly preserved by s 115 of the Legal Services Act 2000.
(b) Although important, the fact that a party is legally aided is just one circumstance to be taken into account with all the other relevant circumstances in the exercise of the Court’s discretion under r 5.45.
(c) Because an applicant will need to show exceptional circumstances before costs exceeding a legally aided plaintiff’s personal contribution will be ordered, security should not exceed that personal contribution, unless the applicant can demonstrate that a higher costs order is likely. A claim wholly without merit or grossly exaggerated, conduct prior to trial, the state of the pleadings and whether any other
party may benefit from the proceeding are amongst factors which may be relevant to a finding of exceptional circumstances.
[9] Although I note that the fact that a person is legally aided is just one factor to take into consideration when considering the exercise of the court’s discretion: O’Malley v Garden City Helicopters Limited (1994) 8 PRNZ 182 (HC); Amev Life Assurance Co Ltd v Dixon-McIver [1993] 1 NZLR 733 (HC) and Bloor v IAG New Zealand Ltd HC Rotorua CIV-2004-463-425, 2 July 2007, there is no mention in the Legal Services Act 2011, the enactment under which legal aid is provided to an applicant, of this issue of security for costs. However, s 116 of that Act preserves a plaintiff’s liability for awards of costs under the High Court Rules.
[10] By s 45 of the Legal Services Act 2011 an award of costs may only be made against a legally aided person in civil proceedings where there are exceptional circumstances. Subsection (3) provides a non-exclusive list of the types of conduct exhibited by the aided person which may give rise to exceptional circumstances. Those are:
(a) any conduct that causes the other party to incur unnecessary cost:
(b) any failure to comply with the procedural rules and orders of the court: (c) any misleading or deceitful conduct:
(d) any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f) any other conduct that abuses the processes of the court.
[11] The High Court in Caldwell v Gaze Burt (1994) 7 PRNZ 491 also noted that exceptional circumstances will include a claim wholly without merit or grossly exaggerated.
[12] Before considering whether there are exceptional circumstances in the present case, I first consider whether I should exercise my discretion, quite apart from the issue of legal aid, to order costs against the plaintiff. In doing so, I must balance the interests of the plaintiff, in that he should not lightly be prevented from pursuing his claim, and of the defendants, that they should be protected against being drawn into unjustified litigation. That balancing test was summarised by the Court
of Appeal in A S McLaughlin Ltd v MEL Networks Ltd (2002) 16 PRNZ 747 (CA) at
[15]-[16]:
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.
Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over- complicated and unnecessarily protracted.
[13] The merits of a plaintiff’s case are a proper matter for consideration in the context of security for costs: see Ambrose v Pickard [2009] NZCA 502. Other matters which may be assessed in undertaking that balancing exercise include:
(a) Whether the impecuniosity was caused by the defendant’s actions;
(b)The means of anyone associated with the proceeding which may be able to assist the plaintiff;
(c) Delay on the part of the defendant in bringing the application; and
(d)Whether the making of an order might prevent the plaintiff from proceeding with a bona fide claim.
[14] In conducting this balancing exercise, I proceed on the basis that the plaintiff will be able to make out the factual propositions that he advances in support of his claim. Accordingly, the question is whether, assuming the facts as alleged, the claim has so little chance of success that the defendants should be protected from being drawn into it without security for costs.
[15] As to the matters which may be considered, the principal one which is of real relevance in the present application is that concerning the merits of the plaintiff’s claim. Of course, there is some scope for an argument that the plaintiff’s impecuniosity was caused by the alleged actions of the defendants in not compensating him for the land in question and removing him from that land which he says he could have farmed. However, those actions occurred around 40 years ago. Therefore, if they might have contributed to the plaintiff’s impecuniosity, even if the plaintiff had mounted an argument in support of that proposition (which he has
not done here) in my view given that passage of time he would have a great deal of difficulty in showing any real causation in fact. Further, I must acknowledge that there has been a passage of over a year between the plaintiff’s filing of his statement of claim (on 29 March 2010) and the defendants’ bringing their application for security for costs (17 August 2011). However, given that this time was occupied by the hearing before Williams J (heard on 19-30 April 2010 and judgment delivered on
10 May 2011) that passage of time as I see it is excusable.
[16] The claims brought by the plaintiff in these proceedings relate to two blocks of land. The first, a block known as Rakautatahi. The second, a block identified as Ohiti Waitio 1E3B, but commonly referred to as the Kemp Block.
[17] The claims with respect to both blocks relate to events dating back to the
1970s. With regard to the Kemp Block it seems the plaintiff was farming this block in 1973. He was then advised by the defendants that the block needed to be farmed for the benefit of their mother. He alleges that this did not happen but that Mr Ken Apatu later obtained significant portions of the Block for his own business purposes.
[18] As to the claim with regard to Rakautatahi, the plaintiff alleges that he was removed from that block upon their father’s death in 1970. He says that the defendants removed him from that block without payment for the improvements that he had made to it.
[19] Both claims are similar in nature to those considered by Williams J in CIV-
2007-441-823, but they appear to relate to different lands. In those proceedings, claims were made of breach of trust and fiduciary duty or fraud on the part of the defendants. Nevertheless, no basis has been asserted here as to why the claims in the present proceeding were not able to be brought along with those claims considered by Williams J. Indeed, no basis has been asserted as to why those claims were not brought in 1970. And, Arnold J in the Court of Appeal in his 19 October 2011
Minute (with regard to CA354/2011) said at [3] that some of Mr Ashley Apatu’s grounds of appeal relate to arguments to the effect that Williams J did not address the issues arising in the present proceeding (CIV-2010-441-195) among the issues considered by Williams J in the other proceeding CIV-2007-441-823.
[20] Before Williams J, not only did the plaintiff’s claims fail on their merits (bar one, with respect to a claim under the Administration Act 1969), but in many his Honour commented that they were either brought out of time or that the Court would have exercised its jurisdiction to relieve the Trustees from personal liability for any breach of trust under s 73 of the Trustee Act 1956.
[21] Many of the plaintiff’s claims failed, as recorded in the judgment, on the basis that the plaintiffs could not satisfy the burden of proof necessary to bring a civil claim. That difficulty arose due to the substantial passage of time between the occurrence of the necessary events and the date of hearing. There is nothing in the present claim which leads me to conclude that the plaintiff will have any easier task in these proceedings. Indeed, another two years have passed and memory recall of witnesses would certainly not have become any easier. Further, the findings by Williams J that he would have exercised his jurisdiction under s 73 of the Trustee Act 1956 even if many of the plaintiffs’ claims had been made out is relevant. That is because, it appears, the defendants impressed Williams J as being honest and conscientious executors and trustees operating for the benefit of the beneficiaries. I consider that while the present allegations in this proceeding are fresh, in the sense that they are with respect to different blocks of land or the same block of land but for a different time period, when one looks at the entire factual matrix at that time, it is difficult to go past his Honour’s findings as to the defendants’ honest and reasonable conduct.
[22] The mix of allegations alleged in the plaintiff’s present claim against the defendants as executors include broad claims of theft and equitable fraud and also suggestions of the making of profit in breach of fiduciary obligation, and vague allegations of representation, for which no fraud seems to be pleaded or properly particularised but curiously appears as an allegation in the ―relief sought‖.
[23] As I see it these do not make any sense where the plaintiff’s principal complaint is loss of rights to the lands in question (if indeed he had them) that he held in his own right and not as a beneficiary in the relevant estate. Indeed he does not plead that he was a beneficiary and so it would seem he cannot be treated as suing in that capacity.
[24] Having failed after a lengthy trial in all his claims in the first proceeding before Williams J, the Court on that occasion being prepared to grant relief to the trustees under s 73 of the Trustee Act 1956, and now significantly in his present claim without the support of any other of the beneficiaries in the estate, in my view this is one of those rare cases in which, the Court is able to say of the plaintiff’s claim that it is a particularly weak one.
[25] In part at least, I conclude that the plaintiff’s present claims present in reality as an attempt to revisit and re-litigate issues which were dealt with in the first claim.
[26] Finally I find that the plaintiff’s principal complaint and claim for compensation as essentially a personal claim, and not a claim by him as a beneficiary. The relief he seeks in A on page 4 of his statement of claim is referable to just such personal rights – “the right to farm or crop”. For the Kemp Block the relevant pleading is at paragraph 9 and for the Rakautatahi Block at paragraph 12. None of that appears to arise from the will or the duties of the defendants as trustees and executors. Any claim that he then had should have been brought by the plaintiff against the executors and trustees not as a matter or administration but as a conventional civil claim against the estate. The correct limitation provision then in my view was that for contract and/or tort and to be found in s4(1) Limitation Act
1950 – 6 years. This proceeding clearly therefore does not comply with that limitation requirement.
[27] With these arguments advanced here, in my view the defendants are on a strong footing. Of course, some of the plaintiff’s claims do relate to fraud allegations and so limitation defences would be of no effect. Nevertheless, in the circumstances in this case as I have outlined them above, I consider that the plaintiff’s prospects of success in this claim are low.
Balance
[28] For the reasons noted above, I have found that the plaintiff’s claims for compensation and for breach of trustee’s obligations and fiduciary duties are weak. In the case of the plaintiff’s allegations of fraud, those of course will depend on the facts of the case, but given the passage of time, they will also be very difficult to establish. While that is clearly the case here, a Court should be reluctant to prevent a
claimant’s access to the courts, particularly where allegations of fraud are at play. Nevertheless, on balance, I consider that the defendants should not be required to engage in this litigation without the safeguard of a payment of security for costs given the very low prospects of success which I have evaluated the plaintiff’s claims as having.
Exceptional circumstances
[29] While that would be the decision which I would reach had the plaintiff not been in receipt of a grant of legal aid, in light of the fact that he has received legal aid, I turn to consider whether there are exceptional circumstances here for an order to be made against the plaintiff.
[30] Mr Macfarlane, for the defendants, submitted that as for the types of conduct noted in s 45(3) which may give rise to exceptional circumstances, the defendants principally rely on (d) (any unreasonable pursuit of one or more issues on which the aided person fails) in the present case. I agree with Mr Macfarlane’s suggestion that this consideration requires me to look prospectively and to endeavour to place myself in the shoes of a notional judge considering a costs application after the hearing of the dispute disclosed by the plaintiff’s statement of claim. He submitted that the context of the present claim is a long acrimonious family dispute on various causes of action which are in truth personal claims, and not administration claims, and so will meet limitation defences. Further, he contended that, given that the Court (in Williams J decision) has already preferred the defendants’ evidence over that of the plaintiff and excused any trustee breach under the Trustee Act 1956 provisions, it is difficult to think of a class of case which more readily fits the requirements of ―exceptional circumstances‖ than the present one.
[31] I agree. For seven reasons which I outline below, I consider that a notional judge considering an application for costs following the plaintiff’s hearing would consider that the plaintiff here has unreasonably pursued at least some of the issues contained in his statement of claim. First, the present claims and those heard by Williams J could have been heard together, given that they contain similar factual disputes. Indeed, that appears, clearly from the comments of Arnold J on 19 October
2011 noted above. Secondly, this Court has once already exercised its discretion
under s 73 of the Trustee Act 1956 to excuse the defendants’ conduct as they were found to have acted honestly and reasonably throughout the administration of their father’s estate. Thirdly, the long passage of time here makes the plaintiff’s allegations difficult to prove, if not impossible when met by strong arguments with regard to statutory time limits. Fourthly, the way in which the previous proceedings were prosecuted, as recorded in Williams J’s costs judgment dated 3 November
2011, was far from cost effective. Fifthly, the plaintiff has attempted to appeal Williams J’s decision but that appeal is now likely to be treated as having been abandoned evidencing, again, a propensity on the part of the plaintiff not to use the courts’ processes efficiently and effectively. Sixthly, the relative costs which the defendants will again be put to in defending these claims in my view is unacceptable and unnecessary. Seventhly, the claimant here is a person who has initiated these proceedings prior to hearing and determination of the related claim proceedings, and yet he still seeks to prosecute the present claims notwithstanding the adverse result in his earlier proceedings.
[32] In those circumstances, I am satisfied that a court would find there were sufficiently exceptional circumstances to make an award of costs under s 45 of the Legal Services Act 2011. In that light, I consider it appropriate to make an award of security for costs in the present case.
Quantum
[33] As to the issue of quantum of security to be awarded, in A S McLaughlin Ltd v MEL Networks Ltd (2002) 16 PRNZ 747 the Court of Appeal made it clear at [14] that there is no checklist or simple formula for decisions on the quantum of security for costs. Further, the amount of security is not necessarily to be fixed by reference to the scale (at [27]). What the court must do is make an assessment of what is just in the particular circumstances of the case.
[34] Before me, counsel estimated a four day fixture would be required here. In that light, counsel sought security to be fixed at $25,000. Although, I do note that the defendants’ affidavit filed in support requested security to be fixed at $20,000.
[35] Section 45(1) of the Legal Services Act 2011 provides:
If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
[36] The only real statement of the plaintiff’s means which is before the Court is an affidavit sworn for the purposes of the defendants’ security for costs application in CIV-2007-441-823, dated 21 December 2009. At paragraph 9 of that affidavit it alleges that the plaintiff has a bad reputation for paying his debts and has no assets to speak of.
[37] As to the other circumstances prevailing here, as I have noted above the plaintiff’s present proceeding is yet another claim relating to a family dispute which seems to me to be an entirely personal claim but said to be a dispute over administration of his late father’s estate. It does not raise any issues of public interest. As I see the position it relates to many issues already unsuccessfully litigated by the plaintiff. And, there is no argument that the trial of this matter will occupy four days.
[38] Under all the circumstances, I am satisfied that exceptional circumstances exist here and that an order for security for costs of $20,000.00 as the amount originally sought is appropriate.
Conclusion
[39] I allow the defendants’ application for security for costs.
[40] I order:
(i). That the plaintiff is to provide security for costs to the defendants in the sum of $20,000, which sum shall be paid to the Registrar of the Court within 30 working days of this order and;
(ii).This proceeding is stayed until the plaintiff has provided security as required in accordance with (i) above.
[41] As to costs I see no reason why costs should not follow the event in the normal way. The defendants having succeeded in this application they are entitled to an order for costs against the plaintiff which I now order on a category 2B basis together with disbursements as fixed by the Registrar.
‘Associate Judge D.I. Gendall’
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