Athendale Property Limited v Western Bay of Plenty District Council

[2013] NZHC 965

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2012-470-000036

2013 NZHC 965

BETWEEN  ATHENDALE PROPERTY LIMITED Plaintiff

ANDWESTERN BAY OF PLENTY DISTRICT COUNCIL

Defendant

ANDQBE INSURANCE (INTERNATIONAL) LIMITED

First Third Party

ANDIAG NEW ZEALAND LIMITED Second Third Party

ANDCHARTIS INSURANCE NEW ZEALAND LIMITED

Third Third Party

Hearing:         23 April 2013

Appearances: Mr Bond for the Plaintiff/Respondent

Mr Crombie for the Defendant/Applicant

Judgment:      3 May 2013

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

3 May 2013 at 5 pm, pursuant to

Rule 11.5  of the High Court Rules. Registrar/Deputy Registrar

Date……………

Solicitors:

Niemand Peebles Hoult, P O Box 1028, Hamilton – [email protected]

Harkness Henry, Private Bag 3077, Hamilton – [email protected]

Cooney Lees Morgan, P O Box 143, Tauranga – [email protected] / [email protected]

Brookfields, P O Box 240, Auckland - by facsimile: 379 9350

ATHENDALE PROPERTY LIMITED V WESTERN BAY OF PLENTY DISTRICT COUNCIL & ORS HC TAU CIV-2012-470-000036 [3 May 2013]

Background

[1]      The defendant has applied for orders directing the plaintiff to provide further and better particulars of its claim, and for an order requiring the plaintiff to give security for costs.

[2]      After I had heard counsel on the former application, counsel conferred and agreed that they should be able to resolve the defendant’s concerns by further discussions and the filing of an amended statement of claim.   This judgment will therefore be restricted to the second application, that which was for security for costs.

[3]      The defendant seeks an order directing the plaintiff to pay into Court the sum of $60,000 by way of security for the plaintiff’s anticipated costs to complete the proceeding.  Counsel for the defendant estimated that costs on a category 2B basis amounting to approximately $66,000 together with expert witnesses’ fees in the order of $20,000 would be ordered against the plaintiff if it were unsuccessful at trial.  Mr Bond for the plaintiff did not question the accuracy of these estimates.  The figures mentioned seem to me to be reasonable.  It also seems likely to me that if the plaintiff  is  not  successful,  costs  will  be  ordered  on  a  2B  basis  which  is  the assumption underlying the calculation.

Security for costs

[4]      The application is brought pursuant to rule 5.45 of the High Court Rules which provides:

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.

[5]      Mr Bond submits that the approach that is taken to application of this section is aptly set out in Busch v Zion Wildlife Gardens Ltd (in rec and in liq),1 where it was held that the Court’s assessment should generally involve the following steps:

a)        Has the applicant satisfied the Court of the threshold under r 5.45(1)?

b)Is it just in all the circumstances that an order for security for costs be made?

c)        What amount should security for costs be fixed at?

d)       Should a stay be ordered?

[6]      Mr Bond submitted that in the particular circumstances of this case, the

Court’s focus should be on paragraph (b) above.

[7]      I agree that  there is  little doubt  that  the plaintiff will  have  difficulty in satisfying any order for costs that might be made if the plaintiff is unsuccessful in its proceeding.

[8]      Traditionally,  one  of  the  matters  that  is  taken  into  account  in  deciding whether it is just that an order should be made is the question of the strength of the

1 Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17.

plaintiff’s claim.  There was considerable argument about this matter as the reasons

which follow will make clear.

The plaintiffs claim

[9]      In order to assess the strength of the plaintiff’s claim it is necessary to make reference to the causes of action which are pleaded and the factual background behind them.

The effect of Plan Change 35

[10]     The plaintiff owned a property at Athenree which it wished to subdivide into residential sections.  It had become possible for what was previously rural land to be subdivided following Plan Change 23 which the Council adopted, I believe, in the early 1980s.  Initially, Plan Change 23 was to include provisions affecting the two areas  which  have  a  close  bearing  upon  the  present  claim.    The  Council  was concerned that it should meet its obligations under s 6 of the Resource Management Act (“RMA”).   These included protection of the water quality of the Tauranga Harbour which is contiguous to Athenree township.  As well, the Council wanted to ensure that items of archaeological significance such as Maori middens were not interfered with through construction of subdivisions and the resulting construction of housing.  It had therefore proposed that the district plan should include restrictions which would have the effect of “stepping back” development on the waterfront at Athenree.  Sections immediately on the waterfront would be subject to development restrictions.  This would be achieved by making earthworks etc on such land subject to conditional consents rather than being an unconditionally permitted activity.   I understand that it was proposed that restrictions against development on, or in the immediate vicinity of middens, were also going to be a feature of Plan Change 23.

[11]     The restrictions discussed above were not carried forward when Plan Change

23 was adopted.   However, the subject was revisited when the Council instituted proposed Plan Change 35 which was notified to the public in June 2005.  Up until this point, anyone making enquiries about restrictions on developing the land on the Athenree shoreline would not have found any reference to restrictions of the kind

which I have been discussing.   As part of Proposed Plan Change 35, the Council staff  prepared  a  map  setting  out  in  pictorial  form  where  the  so-called  cultural heritage and  archaeological  restrictions  already discussed  would  impact. Specifically, in relation to the plaintiff’s land, the maps made reference to the land owned by the plaintiff.   First, on the north-east boundary of the land adjacent to number 65 Athenree Road, the existence of a Maori midden was noted.  Clearly this would have an impact upon development of the plaintiff’s two titles.  Secondly, the map showed a harbour buffer zone directly in front of the plaintiff’s property.

[12]     Proposed Plan Change 35 was submitted to the Council for consideration before it was issued as a draft for public discussion.

[13]     As to the location of the Maori midden, the Council’s evidence is that this was placed where it was as a result of a report which the Council received from a local iwi, Ngati Hako.

[14]     The plaintiff, amongst other parties, made submissions on draft Plan Change

35.   As part of the review process, further evidence of location of archaeological sites was provided by a representative from a nearby marae, the Otawhiwhi marae, to the effect that midden material was scattered along the shore area and was not located in any particular place for which reason the noting of a midden on the boundary of the plaintiff’s property would not serve any particular purpose.

[15]     So far as the seashore buffer zone was concerned, there were apparently quite a number of submissions made to the Council that were unfavourable to the creation of such a zone, both within Athenree and in the wider Tauranga district.

[16]     In the event, when considering Plan Change 35, the Council decided not to proceed with either of the two restrictions on development.  As a result, when the Plan Change was promulgated, the accompanying maps made no reference to these two features in the vicinity of the plaintiff’s land.

[17]     It  is  necessary  to  deal  with  the  submission  which  the  plaintiff  makes

concerning the legal effect of the inclusion of the “red dots” which were shown on

the map supporting Plan Change 35.   It is the plaintiff’s position that from the moment of their inclusion in the Plan Change documents, features such as the new cultural heritage sites which were proposed in the Plan Change took immediate effect  with  relation  to  any  resource  consent  application  that  might  be  filed. Reference is made to schedule 1, cl 16B of the RMA in support of this submission.

[18]     The effect of that clause seems to be to make it clear that any variations that are put forward in relation to a proposed scheme change become part of that scheme change.   That is why subclause 2 of that clause says that from the date of public notification of the variation “… The proposed policy statement or proposed plan shall have effect as if it had been so varied”.  It is true that when the Council was considering a resource consent it was required to give consideration to the provisions “of  a  plan  or  proposed  plan”.    I  read  this  as  referring  to  the  commonsense proposition  that  an  authority hearing  a  resource  consent  application,  aware  that changes are proposed in an area relevant to the application, should consider those proposed changes when exercising its discretion.   Based on the limited argument which has been addressed to the Court on this point, it would seem to me that the legal position as at 2006 was that the effect of the statute is not to make the proposed changes part of the current district plan immediately on their notification and the changes signalled in the district plan review did not have “immediate legal effect on being notified” as the plaintiff suggests.

[19]     Whether this issue has any effect on the plaintiff’s claim is dubious.  Because the  Council  had  an  undoubted  right  to  exercise  its  power  to  publicly  notify  a proposed change to the district plan, it cannot be the case that it was answerable for any adverse effects that would be caused to any particular private individual from it so doing for the reasons discussed elsewhere in this part of the judgment.

[20]     Part of the plaintiff’s claim against the Council is that the Council owed a duty to the plaintiff to take care when initiating the Plan Change process.   It is further alleged that the defendant breached that obligation because it permitted the recording of the Maori midden on the boundary of its property when it ought not to have been there and by including the coastal zone on the waterfront adjacent to the plaintiff’s property.

[21]     The defendant Council has identified a number of potential pitfalls which the plaintiff will have to surmount if it is to succeed with this part of its claim.  First, the claim  as  presently argued  by the plaintiff does  not  give due recognition  to  the distinction between the functions of the Council in its administrative role when managing its responsibilities under the RMA and in relation to the district plan, on the  one  hand,  and  the  quasi  judicial  function  that  the  Council  performs  when deciding whether or not to permit amendments to be made to the district plan.  This latter function, as Mr Crombie pointed out, is one that involves consideration of policy matters and generally the public interest.  It is not an area where the Court is likely to readily acknowledge the existence of a duty of care owed to a party in the position of the plaintiff.  Mr Crombie referred me to the discussion of the matter in the Court of Appeal judgment in Bella Vista Resort Ltd v Western Bay of Plenty

District Council.2

[22]     As to the functions of the Council staff in preparing documentation for Plan Change 35, while there may not be the same legal hurdles in the way of the plaintiff, there are nonetheless factual problems with the plaintiff’s claim.  The obligation on the Council staff is not one of infallibility but is an obligation to take reasonable care in the discharge of their functions.  The fact that the Council may at one point have included  the Maori  midden  on  the boundary of the plaintiff’s property and  yet dropped any reference to it in later iterations of the district plan does not mean that the inclusion in the first place gives rise to rights of action on the part of the plaintiff. As Mr Crombie pointed out, the Council is dependent upon the accuracy of information that is provided to it.  In the case of the Maori midden, it would appear that  the  defendant’s  staff  located  the  midden  where  they  did  as  a  result  of information which had been provided to them by the Ngati Hako iwi.  Information contradicting the assertions of that iwi which was provided by the Otawhiwhi marae came  to  hand  at  a  later  stage,  namely  2  March  2004.    That  information  was apparently provided at the instigation of Mr Yeoman who is one of the principals of

the plaintiff company.

2 Bella Vista Resort Ltd v Western Bay of Plenty District Council [2007] NZCA 33; [2007] 3 NZLR

429.

[23]     It is also part of the plaintiff’s claim that the Council is answerable for failing to act promptly to remove from the public domain references that were made in the plan Change 35 documents.  I understand that this argument is to the effect that the Council needed to take prompt and affirmative action to make it clear that the proposals which had been contained in the PC 35 documents which it put into circulation were not, after all, going to be proceeded on so as to remove any misunderstanding on the part of members of the public that the plaintiff’s land might still be affected by proposals to subject it to cultural heritage sites.

[24]     The  plaintiff  refers  to  the  fact  that  in  March  2006  the  Council  made  a decision that it would not be adopting the proposal for cultural heritage on the plaintiff’s property.  It says that notwithstanding the Council’s determination to that effect, that it understood that “the [plaintiff] had failed and/or omitted to remove the red dots from the district plan.”3    It further alleges that between October 2007 and April 2008, the Council was still issuing LIMs which recorded the presence of the red dots - that is to say, which still showed cultural heritage sites located on the plaintiff’s property.

[25]     I will not comment on the merits of this part of the claim other than to say first of all that it seems doubtful as a matter of fact that the red dots ever found their way onto the district plan.  While there are gaps in the information before the Court as to how the process works, it would seem that after a proposed change to the district plan is adopted by the Council, some amendment to the maps which are part of the district plan will be required so that they reflect the updated position.  For that reason it seems inherently unlikely that any correction would be required in regard to a proposed change that never took effect.  I agree that the LIM documents are in a different category.  Once the Council resolved that PC 35 would not be proceeding in 2006, it is difficult to see that there would be any justification for the Council issuing documents which conveyed an impression that changes in the abandoned review actually or potentially affected a particular landowner’s property.  It might be possible  for  the  plaintiff  to  establish  that  copies  of  such  LIM  documents  were actually distributed to potential buyers and affected their decisions.  Given that the documents were part of a proposed change to the district plan, there would no doubt

be argument about whether any intending purchasers would read the documents as stating with certainty what the future position was going to be about cultural heritage sites on the plaintiff’s property.

[26]     The last observation that I make with regard to this part of the claim is that it would appropriately be categorised as action falling within the administrative sphere of the Council’s responsibilities.  It did not involve matters of policy as do some of the other allegations which the plaintiff makes and which will be more difficult to establish for that reason.

[27]     A further aspect of the plaintiff’s claim is that once the Council had made a decision with regard to the final form of Plan Change 35, the Council in its administrative capacity ought to have taken steps to promptly alter Council records so that it would be apparent to members of the public making enquiries about the properties that the waterfront zone and the Maori midden were no longer features of Plan Change 35 and were therefore not matters that intending purchasers of sections in the subdivision needed to concern themselves with.   This particular claim is brought as a claim for breach of the statutory obligation that is incumbent upon the Council pursuant to s 21 RMA, a provision which requires the Council to proceed with expedition in implementing changes of this kind.

[28] I have made reference to the question of just what correction was possible, and to what Council records corrections were required to be made at paragraph [25]. The cause of action based in breach of statutory duty calls into question similar considerations and I will not repeat here what I said above.

The “accretion” ground

[29]     It became apparent to the plaintiff in or about 1997 that there had been substantial accretion to the property that it owned.  I understand that it is alleged that over the years the foreshore levels had risen so that the mean high water springs line had  become  more  distant  from  the  shoreline  boundary  of  the  plaintiff’s  land. Because the extent of the plaintiff’s property was defined by, amongst other things, the mean high water springs line, the accretion process had meant that the boundary

of the property had moved in a seaward direction and increased the extent of the plaintiff’s land.

[30]     The plaintiff claims that the defendant failed to take account of this change when depicting on the Plan Change maps the extent of the landscape features that the defendant  proposed  for  the  area.    As  a  result,  it  is  said  that  the  district  plan incorrectly recorded “a significantly restricted building area for [four of the lots making up the subdivision].”

[31]     I have already noted that subdivision consent was granted in 2004.  It is also to be assumed that the form of the subdivision was conceptualised by the plaintiff in conjunction with its expert planning advisers.  While the evidence does not cover the point, it might be the case that the plaintiff will be able to establish that the Council was informed about the accretion but declined to acknowledge the change that it had made to the extent of the plaintiff’s property when approving the dimensions of the sections in the subdivision at the time that consent was granted.  It may be that if that were the case, the Council would be liable.

[32]     There would be greater difficulty in establishing the plaintiff’s claim if it were to the effect that the Council, not having itself investigated the accretion issue, approved the application for subdivision including section sizes on the basis of what the plaintiff put before it for approval.

Delays in dealing with entranceway to subdivision and pumping station

[33]     It is claimed that the defendant caused loss to the plaintiff by issuing two stop work notices.   One of the alleged notices required the plaintiff to stop work on a sewer pump station on the property.  This notice was issued 25 January 2006.  It is alleged that the notice was lifted 8 February 2006.4    The second stop work notice was issued 3 April 2006 according to the plaintiff and required it to stop work with respect to the entranceway to the subdivision on the grounds that provision needed to be  made  to  ensure  that  the  entranceway  “blended  appropriately  with  Athenree

Road”.5     This stop work notice was allegedly withdrawn 26 July 2006 and work continued.

[34]     There is little evidence available concerning these particular causes of action in terms of their effect on the plaintiff.   It is difficult to regard the stoppage of construction of the pumping station which lasted less than a month as having a significant financial detriment to the plaintiff.   Ms Sellers, the real estate agent, refers in her affidavit to delays on completion of the subdivision and notes, “the entranceway to Avondale Subdivision I remember at this time being an unformed, loose metalled shambles.”

[35]      If that evidence is correct, it is likely that the entranceway to the subdivision would have made a negative impression on visitors.   That would have been particularly unhelpful for sales efforts given the time of the year at which it occurred, being during the Summer.

[36]     This cause of action appears to be to the effect that Council officers, in the course of supervising construction of the subdivision, wrongly concluded that they had grounds to direct a halt to construction of the subdivision.  It is difficult to assess whether a duty of care might be attributed to the Council as a result because of the lack of particulars as to how the cause of action might have arisen.  Given that the Council officers would have been exercising statutory powers - the plaintiff would say misusing them - policy questions may arise as to whether the Court should recognise a duty of the kind postulated.

[37]     It should also be noted that the plaintiff puts its claims on the alternative basis that Council officers are liable under the tort of malfeasance in public office.  Given that in order to succeed, a plaintiff must establish either deliberate action made in the conscious knowledge that it was an excess of the officer’s powers to so act or that the officer acted with maliciousness, commission of the tort in this context would be difficult to establish.

General considerations concerning plaintiff's claim

[38]     Apart from recognition of the claimed legal duties of care and whether they were  breached,  there  are  other  difficulties  with  the  plaintiff’s  claim.    Even  if inclusion of the reference to the two features which are the subject of controversy, the midden and the waterfront zone, were somehow referable to a breach of duty of care on the part of the Council staff, it will be necessary for the plaintiff to show that they resulted in loss being caused to the plaintiff.

[39]     It  is  the  plaintiff’s  case  that  because  of  the  uncertainty  about  the  two contentious  matters,  intending  purchasers  would  have  been  discouraged  from making a firm commitment to purchase sections in the subdivision.

[40]     In the first place, it can be said in response to a claim of that kind that many proposed changes to district plans will have exactly the unsettling effect which the plaintiff attributes to Plan Change 35 in this case.  Action cannot be brought against the Council simply for the reason that a review of its district plan is productive of uncertainty.

[41]     Further,  one  would  have  thought  that  a  reasonable  person  who  was  an intending purchaser of one of the sections would have appreciated, or would have obtained advice telling him/her, that the proposed change plan was just that and that may not eventually become part of the permanent district scheme.

[42]     As well, at least so far as the waterfront zone was concerned, this affected only a few of the sections (possibly three or four) comprising the overall subdivision. It is difficult to see that the waterfront zone provision can be the explanation for why the sections in the subdivision did not sell well.  Tellingly, a real estate agent who gave evidence on behalf of the plaintiff said that when she was involved in selling the sections in 2006 she was not even aware of the nature of the “red dots” and their effect which he described as being “that construction and other development on affected land was a discretionary activity requiring consultation with iwi”.   The following comment that she made that the presence of the “red dots” being a significant disincentive to purchasers is rather difficult to follow.  If purchasers had been put off proceeding with an offer on the section for that reason, one would have

expected that the real estate agent would have been one of the first people to hear about it.  A valuation report which was obtained in November 2006 makes reference to the fact that “a significant landscape feature is registered along the harbour frontage”.  This would seem to suggest that the valuer was aware of the proposed waterfront zone at the time when he prepared his report.  The plaintiffs plead in their

statement  of  claim6    that  PC  35  was  “publicly  notified”  on  11  June  2005.

Significantly, it seems to me the valuer did not treat the notification of PC 35 as having a downward impact upon the value of the sections.  His assessment of the value of the 24 lots was that they would be worth $7.4 million approximately once a subdivision had been completed.

[43]      Further, there is a good argument available that the plaintiff suffered a stroke of bad luck in that the marketing of the sections overlapped with the global financial crisis (GFC).  I accept that the GFC did not in fact impact New Zealand until 2008 and that a slowdown in sales of beach sections is unlikely to have been an operative factor  before  2008.    However,  according  to  the  same  valuation  report  that  I mentioned above, the market for beach sections had steadied “after the nationwide boom  recorded  in  2003  to  2004”.    It  is  necessary to  say  something  about  the chronology to put this issue in perspective.   The owners of the plaintiff company applied for resource consent to develop the Athenree property in March 2004. Consent  was  obtained  later  that  year.    Mr  Yeoman,  one  of  the  owners  of  the company, deposed that in the period September 2004 to April 2005 the plaintiff obtained seven “pre-sales” of sections on the subdivision.  In April 2005, he deposes, the company obtained an offer of finance to carry out the subdivision.  Two months later,  he  says,  the  defendant  advised  the  plaintiff  about  Plan  Change  35.    The plaintiff also pleads that in March 2006 the Council made its decision on PC 35 which was to the effect that the heritage feature and the archaeological site relevant to the plaintiff’s property were not to be adopted.  There was an appeal against that decision but by the end of 2006, the Council’s position on PC 35 was confirmed.  It appears that titles were issued sometime in the latter part of 2006.

[44]     Since the time of the GFC, no sales have occurred.   In a letter which Mr

Yeoman sent to the mortgagee of the property 11 January 2010 he said that, “it is not

6 Paragraph 43.

Athendale that is making people hesitate to buy, so much as people being afraid to take the plunge to buy anything in this ‘unsure’ economic climate.”

[45]     There is evidence that carrying out a subdivision in Athenree was always going to be difficult because of factors inherent in the locality.  It has been pointed out that there is no commercial/shopping centre in the town.   It is located in the upper Tauranga Harbour which in that part is tidal in its nature.

[46]     I will now attempt to summarise the position.  The subdivision has not been a success.   To this day, 16 sections in the subdivision remain unsold.   The plaintiff does not enjoy high prospects of success in bringing a claim against the Council which essentially asserts that loss was caused because of PC 35.   The fact that planning maps associated with that Plan Change may have contained an error concerning the location of the supposed Maori midden may possibly give rise to a claim in negligence.  It may be possible that the plaintiff can convince the Court that the Council acting in its administrative capacity at that stage of the PC 35 review owed a duty of care.  However, it would appear that the Council staff based their views about the location of the midden on a cultural report received from Ngati Hako, a local tribal organisation.  In the absence of some indications that this report might be have been flawed, it is difficult to accept that the Council staff were negligent in proceeding on the basis that it was accurate.   The fact that a second report  from  the  representatives  of  the  Otawhiwhi  marae  came  to  a  different conclusion which the Council ultimately came to accept as being the correct position does not prove negligence.

[47]     Assuming that negligence is established, persuading the Court that loss was caused and the extent of that loss will be difficult.  In the first place, it would have been apparent to intending purchasers that the detail of the PC 35 might yet be rejected by the Council after it had heard submissions.   I accept, though, that it is possible that some interested parties might have been put off proceeding with the purchase because of the marking of the midden on the maps and because of the cultural heritage area.  There does not seem to have been any negligence with regard to the proposal that a cultural heritage feature on the waterfront should be included

in the plan.  Whether that was another factor that explained a reluctance on the part of purchasers to commit to a sale is another imponderable.

[48]     Finally, titles in the subdivision have been available for some seven years. During about the same period, intending purchasers would have had any concerns about the Maori midden and the cultural heritage feature cleared up by reason of the Council deciding not to include those features in the revised district plan.  And yet very few sections have been sold.   Further, it cannot be assumed that the Maori midden proposal would have had a dampening effect on all the sections on the subdivision, because it may not have affected building entitlements with regard to all of the sections.  In the background, there are also other explanations as to why this subdivision did not prosper.  There are indications that any boom that there might have been in coastal properties was over by the end of 2006.   Even though the position about the features and PC 35 which the plaintiff found objectionable was clarified from the end of 2006 there was still a clear year for sales opportunities before the GFC impacted in 2008.  Finally, there are other competing explanations as to why the subdivision failed to catch the interest of the buying public which cannot possibly be related to any alleged negligence on the part of the Council.

[49]     Of course these remarks are made in the context of an interlocutory application.  Should this matter go to trial, it may prove that the plaintiff has answers to the issues that the Court views as problems with its claim.  But the observations that are made represent the Court’s assessment of the plaintiff’s prospects of success on the basis of material before the Court at present.

Impecuniosity

[50]     It was not seriously argued that the plaintiff is not an insolvent.  It still has some sections to sell but given progress to date that is unlikely to occur at an early point.   The plaintiff admitted impecuniosity but said that had been caused or contributed to by the actions of the defendant.

[51]     It is not necessary to again canvas the various problems which have led to the difficult financial position that the plaintiff now finds itself in.   The question of whether that is the responsibility of the defendant covers much the same ground as

the review of the strength of the plaintiff’s case.  In summary, the plaintiff’s case is not a strong one to the extent that it pleads that its financial position is the result of actionable conduct or omissions on the part of the Council.  In areas where the facts are not disputed, such as the issue of PC 35, there must be considerable reservations about whether they can be the basis of a viable cause of action against the Council. In the area of causation of loss, the Court is likely to have some hesitation in attributing the loss to what the Council did or failed to do.   There are other more convincing causes of the loss which the Council will be able to point to at the trial which include the relative desirability or otherwise of a subdivision at Athenree, whether the subdivision has been carried out in accordance with best practice and, most critically, the onset of the GFC in 2008.

Delay in bringing the application for security for costs

[52]     This proceeding was commenced in the first part of 2012.  The application for security for costs was brought in January 2013.  The proceeding is set down for trial in late August 2013.   There is still quite a lot of work to be done to get the matter ready for trial, particularly in the area of particularisation of the plaintiff’s claim.   In explaining the chronology, Mr Crombie for the defendant advised the Court that there was a change of legal representation during the course of that year following insurers declining to continue with the obligation of defending the proceedings on the defendant’s behalf.

[53]     The reason why delay is relevant to applications of this kind is that it would not be just for a defendant to stay its hand in seeking security for costs in the initial stages  of a proceeding only to bring such an  application after the plaintiff had expended considerable time and effort and financial resources on progressing its claim.  This will be unfair in circumstances where there is at least an appreciable risk that  making an  order  for security for  costs  will  spell  the end  of the plaintiff’s proceeding.  I regard the present proceedings as being subject to just such a risk.

[54]     In the present case, substantial resources would have been committed to the proceeding on the plaintiff’s part by at least 18 May 2012 which is the date when it provided discovery.  On the other hand, it has already filed one amended statement

of claim7 and a further version was produced in draft form at the hearing before me. Assessment of the merits of the plaintiff’s claim will not have been a straightforward matter.  This has been at least in part due to the lengthy and discursive statement of claim which is on the file which in many respects does not comply with the rules in that it pleads purely evidential material.8

[55]     I do not accept that the change of counsel is a factor which can be taken into account  when  considering the materiality of delays  on  the part  of the plaintiff. Overall I consider that there has been some delay.  On the other hand, the delay is not great.

Decision

[56]     The issues concerning late application are part of the discretionary matters that the Court is required to take into account when considering an application for security for costs.

[57]     Given the evidence of the insolvency of the plaintiff, it is unlikely that an order for costs will be able to be met from the company’s resources.  There is no evidence about the possibility of one of the shareholders/directors of the company being able to contribute additional capital which could be used to meet any order for security for costs and the company does not have any ability to borrow funds in the vicinity of the amount sought in the application.

[58]     It is therefore the case that if an order for security for costs is made, it is likely to prevent the plaintiff bringing its proceeding to trial.  It would not appear to make any difference whether the order was fixed at $60,000 or even half of that amount.  The position that the plaintiff takes is that anything other than a nominal amount of costs will prevent it from continuing with its proceeding.   That consideration  does  not  of  course  persuade  the  Court  in  appropriate  cases  from making an order for security for costs.  In A S McLachlan Limited v MEL Network

Limited9 the Court of Appeal said:

7 On 20 July 2012.

8 Public Trustee v McArdle [1942] 2 NZLR 13 (SC).

9 A S McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747 (CA).

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 only be made after careful consideration and in the case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not likely to be denied.

16.Of course, the interests of the defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.

[59]     Further, In Hamilton v Papakura District Council,10 Hammond J said:

In contemporary circumstances, it really will not do for Courts to approach these sorts of issue on a simplistic “the Plaintiff is entitled to a day in Court” thesis. The economic realities of a case must be looked into.

[60]     There are features of the plaintiff’s claim which cause concern.   First, the way in which the case has been laid out can fairly be described as “over- complicated”.  It is difficult to understand.  As I have noted, a further iteration of the plaintiff’s claim is imminent which will be the second amended statement of claim. Unfortunately, the draft retains some of the undesirable features of the earlier statements of claim to which I have referred already.  As well, the formulation of the various claims does not suggest that they have been rigorously analysed before being advanced in the statement of claim.  There are also the issues of causation that I have made reference to.  There is a lack of proportionality between the size of the claim - approximately $5.3 million at a minimum - and the extent of the arguable contribution, if any, of the Council to the plaintiff’s loss.

[61]     The  plaintiff’s  claim  is  unconvincing  in  many  respects.     The  most fundamental problem is how the Council through publishing a proposed amendment to the district plan which it carried out in accordance with its statutory obligations can have exposed it to liability for a large claim of damages.

[62]     Finally, there are the other competing explanations for why the plaintiff’s

subdivision was not a success.

10 Hamilton v Papakura District Council (1997) 11 PRNZ 333 (HC) at 336.

[63]     For all of these reasons I consider that the justice of the case requires that an order for security for costs be made.  I also consider that the quantum of the order sought is reasonable.

[64]     The next stage of the trial which will result in major expenditure will be preparation for trial which will take place approximately from June 2013 onwards. A substantial part of the security for costs ought to be paid by then and that is a factor which is influential in deciding when the tranches of security for costs are to be paid.  I consider that one half ought to be paid by the end of May 2013 and the balance by mid July.

[65]     If any part of the sums ordered is not paid when they are due, it is reasonable that an order for stay of proceedings ought to be directed.

[66]     The orders I make are these:

a)       the plaintiff is directed to pay security of $60,000 to the registrar of the High Court at Tauranga to be held as security for the plaintiff’s costs in the proceeding;

b)        security is to be paid in two equal tranches on 31 May 2013 and 19

July 2013;

c)       unless security is paid on the dates directed, an order for stay of proceedings is to be issued without need for further application.

[67]     The parties are to confer on the question of costs in the present application and if they are unable to agree are to file memoranda not exceeding four pages in

length within 21 days of the date of this judgment.

J.P. Doogue

Associate Judge