Ballantyne Trustees Limited v HFK Limited
[2020] NZHC 1911
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2015-409-000173
[2020] NZHC 1911
BETWEEN BALLANTYNE TRUSTEES LIMITED, A N HEAD, B R HEAD, CALMWATER ENTERPRISES PTY LIMITED and S B
KEUNG as Trustees of the GBR Trust First Plaintiffs
AND
SEBG BOU KEUNG
Second Plaintiff
AND
HFK LIMITED
First Defendant
AND
KEIRAN ANNE HORNE
Second Defendant
Hearing: 24 July 2020 Counsel:
M J Tingey for Plaintiffs
J E Eckford for First and Second Defendants
Judgment:
31 July 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 31 July 2020 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BALLANTYNE TRUSTEES LTD v HFK LTD [2020] NZHC 1911 [31 July 2020]
The application
[1] In a judgment of 6 May 2016, Associate Judge Osborne ordered that plaintiffs to provide security for costs in two tranches.1 The first tranche was to cover the period up to the making of trial directions. The defendants now apply for the second tranche. The plaintiffs argue the application is premature and oppressive. They also say the sum sought as security is excessive.
Background
[2] The events that are the subject of the claim occurred in 2009. The plaintiffs did not commence the proceeding until 31 March 2015. The plaintiffs plead two causes of action, namely:2
(a)in respect of alleged breaches of duty under s 301 Companies Act 1993 (a claim against the second defendant, Ms Horne);
(b)a claim in negligence in specified particulars (a claim against Ms Horne and the first defendant).
[3] On 6 May 2016, Associate Judge Osborne ordered the plaintiffs give security of $25,000 (the first tranche) for costs and disbursements incurred to the point when trial directions are made.3 In respect of steps after trial directions were made, the defendants’ application was adjourned to be brought on five-day’s notice for resolution of any second tranche of security.4 The Judge also ordered the plaintiffs pay the costs of the interlocutory hearing; the quantum of which were fixed in a subsequent judgment of 24 July 2016.
[4] On 2 August 2016, a consent order was made that if the costs were not paid by 31 August 2016 the proceeding would be stayed. The costs were not paid by 31 August 2016 and the proceeding was stayed, although the costs were paid shortly thereafter.
1 Ballantyne Trustees Ltd v HFK Ltd [2016] NZHC 917.
2 The plaintiffs were refused leave under s 284 Companies Act 1993 to pursue a third cause of action.
3 Ballantyne Trustees Ltd v HFK Ltd, above n 1, at [71].
4 At [79].
[5] In October 2018, the defendants applied to strike out the proceeding for want of prosecution. At the first-call of that application, the stay was lifted.
[6] On 29 April 2019, Associate Judge Johnston dismissed the strike out application but made findings that the plaintiffs’ lack of action in pursuit of the claim was both inordinate and not excusable.5 Nevertheless, he was satisfied the claim could be fairly tried. A subsequent application for review of that decision was dismissed.6
[7] No further steps were taken by either party until the court gave notice of a teleconference to be held on 25 February 2020. The plaintiffs then sought to have the case set down for trial. The defendants resisted as discovery issues were unresolved. I directed that any interlocutory applications be filed by 16 March 2020. No interlocutory applications were filed although there were further skirmishes between the parties concerning discovery.
[8] Following a teleconference on 28 April 2020, I directed that any interlocutory applications were to be filed by 28 May 2020 and would be heard on 24 July 2020. The defendants filed this application for a second tranche of security for costs. The plaintiffs filed no applications.
Associate Judge Osborne’s reasons
[9]Osborne J arrived at his decision to order security for costs as follows:
(a)the defendants had satisfied the threshold test for an order that security be paid;
(b)the proceedings were not in a state that the court could conclude they were totally without merit;
(c)there was no basis to conclude that an order for security would bring the claim to an end;
5 Ballantyne Trustees Ltd v HFK Ltd [2019] NZHC 906 at [21]-[22] and [32].
6 Ballantyne Trustees Ltd v HFK Ltd [2019] NZHC 1425 at [26].
(d)given the delay in the commencement of the proceeding it would likely be more complicated and expensive than would have otherwise been the case;
(e)having regard to the “timely application for security” it was appropriate to deal with a first tranche to cover the period up to the making of trial directions with the application adjourned for resolution of any second tranche of security;7
(f)most of the steps in the proceeding were likely to involve costs appropriately dealt with on a 2B basis but a 2C award was likely to be more appropriate at the point the second tranche of security was ordered; and
(g)based on anticipated steps in the proceeding 2B scale costs up to the appearance of counsel at the final pre-trial case management conference totalled $25,199 (rounded to $25,000) and was a “just award of security by way of first tranche”.8
The parties’ positions
[10] The defendants argue there are no changed circumstances since Associate Judge Osborne issued his judgment, the case is ready for trial and a second tranche of security is payable. They say the extraordinary length of time the plaintiffs have taken to prosecute the claim supports security being provided sooner rather than later. The defendants seek further security in the sum of $81,979 comprised of legal costs on a 2B basis of $30,114 and disbursements of $51,865. The disbursements are for instructing experts (see appendix attached).
[11] As far as the experts’ fees are concerned, the defendants have had “preliminary discussions” with a proposed accountancy expert, Jeffrey Meltzer, who has provided a fee estimate. There is also an allowance for a valuer in “an abundance of caution”. There is no fee estimate from a valuer. There is also no claim for costs of counsels’
7 Ballantyne Trustees Ltd v HFK Ltd, above n 1, at [71].
8 At [75].
appearance at trial as the defendants consider this should be sought when there is a clearer idea of the length of the trial.
[12] The plaintiffs accept that at some stage a second tranche of security will be required. They argue this application is premature because the first tranche was in respect of all steps up to the final pre-trial case management conference and this has not been conducted. They also contend there are issues concerning discovery that should be resolved before the case is set down.
[13]The amount of security sought is excessive, the plaintiffs argue, as:
(a)not all steps identified by Associate Judge Osborne in calculating the amount of the first tranche have in fact been taken;
(b)the defendants have failed to provide evidence that their actual costs exceed the first tranche;
(c)in calculating the second tranche the defendants are claiming for steps that will not be taken;
(d)the court is not in a position to conclude that defendants will need to call expert witnesses; and
(e)the fee estimates for expert witnesses are not reasonable.
[14] Finally, the plaintiffs argue that in exercising its discretion the court should take into account the defendants are acting oppressively because this application is an attempt to stymie the plaintiffs’ claim.
Discussion
Is the application premature?
[15] The application is not premature. The plaintiffs’ submission is based on a mis- reading of Associate Judge Osborne’s judgment. The first tranche was to cover the
period up to the making of trial directions. The case is ready for trial directions to be made. The plaintiffs have previously sought to have the case set down and Mr Tingey advised me he supports such directions being made as the plaintiffs wish to get on with the claim. While the Associate Judge also used the terms “final pre-trial case management conference” and “final case management conference” these plainly referred to the case management conference at which trial directions were made.9
[16] In so far as the plaintiffs have any concerns that discovery issues are unresolved they have not made any interlocutory applications despite me directing that any interlocutory applications be filed in minutes of 24 February 2020 and 28 April 2020. Furthermore, there is no indication that the plaintiffs intend to make any such application.
The defendants’ actual costs
[17] Mr Tingey’s argument is that if the defendants’ actual costs to date do not exceed the amount of the first tranche this should be taken into account in determining the amount of the second tranche. The defendants’ solicitors have provided confirmation the defendants’ actual legal costs, excluding any costs relating to the plaintiffs’ application for leave under s 284 of the Companies Act 1993, the unsuccessful application to strike out and the application for review (all of which are subject to separate costs orders), exceed $25,000. This argument therefore falls away.
Are the amounts claimed excessive?
[18] Mr Tingey argues that allowances made by Associate Judge Osborne for filing case management memoranda and conferences exceed what has occurred and this must be taken into account when considering the quantum of the second tranche. My review of the file indicates that this submission is incorrect.
[19] In any event, I do not accept the submission in principle. Associate Judge Osborne could not foresee what steps would be taken in the proceeding. He made an
9 At [73] and [75].
assessment of likely steps “for security purposes”.10 The first tranche was to cover all steps up to the making of the trial directions regardless of what those steps might be.
[20] There are however two meritorious arguments advanced for the plaintiffs. The first is in relation to experts’ fees. In respect of Mr Meltzer, his fee estimate is contained in a letter of 11 May 2020. Mr Meltzer provides a fee estimate of $40,000 plus GST but states that he has not seen any documentation, nor the statement of claim and that he understands he will be required to review approximately 6,500 documents. The contents of that letter casts doubt on evidence provided for the defendants, in an affidavit of Emily Grace Duncan, that Mr Meltzer’s fee estimate is “based on his knowledge of the case”. His letter suggests he has no such knowledge.
[21] Whilst I accept it is usual for security for experts’ fees to be sought on the basis of fee estimates, I am not able to conclude Mr Meltzer has any useful evidence to give, that he is likely to be called as a witness or that his fee estimate is sufficiently reliable to form the basis for payment of security.
[22] As far as the expert valuer is concerned, there is no fee estimate provided at all and Ms Eckford could not cogently explain why an expert valuer is necessary.
[23] It appears likely that the defendants will be required to call at least one expert witness, but I would not be justified in making any allowance for this at the present time on the state of the evidence. I will adopt the approach suggested by Mr Tingey in his written submission to require the defendants to provide further evidence.
[24] Second, in the defendants’ calculation of the second tranche there are costs claims for filing memoranda for case management conferences and appearances at case management conferences totalling more than $5,000. There should be no need for such conferences and those claims are disallowed. However, the claim for a pre- trial conference is appropriate.
10 At [73].
Is the defendants’ application oppressive?
[25] Mr Tingey referred to the strike out application and the review. He argued the defendants have shown an unreasonable attitude on procedural issues and had failed to provide evidence to support this application. He referred to excessive amounts being sought as security. Despite this, I do not accept Mr Tingey’s submission this application is an attempt by the defendants to stymie the claim. The defendants’ strike out application and review were reasonable to pursue although unsuccessful. There have been considerable delays by the plaintiffs which the court has found were inordinate and not excusable.
[26] There is nothing oppressive in the defendants seeking security for costs in reliance upon a judgment of the court made in their favour. In so far as the evidence the defendants have provided is unsatisfactory, this will be reflected in the orders made.
[27] The argument that the defendants have sought excessive security may in time be cast in a different light if and when the defendants provide further evidence in relation to experts’ fees.
The amount of the second tranche
[28] Associate Judge Osborne considered it appropriate to fix security on a 2B basis, while noting that for preparation to trial a 2C award was likely to be more appropriate. Mr Tingey did not raise any matters that leads me to depart from the approach taken by Associate Judge Osborne. To the contrary, the delays in progressing the case reinforce the need for what the Judge referred to as the defendants’ legitimate interest in obtaining a full measure of protection for their costs.11 I intend to adopt the Associate Judge’s approach.
[29] For security purposes I allow the items sought by the defendants for the pre- trial conference, preparation of briefs/list of issues/common bundle and preparation
11 At [66](e).
for hearing totalling $25,095 (rounded to $25,000). In other respects I do not allow the claims at this time.
Result
[30]I make the following orders:
(a)The plaintiffs shall within 10 working days of this case being set down for hearing give further security for the costs of this proceeding in the sum of $25,000 to the satisfaction of the Registrar (the second tranche). I expect that the case will be set down at the next teleconference.
(b)Except as provided in (d) below, the second tranche is to be provided as security for costs between the setting down of the case for hearing up to and including the pre-trial conference.
(c)In the event that the second tranche is not provided as ordered the proceeding shall be stayed until further order of the court.
(d)I reserve leave for the defendant to apply for further security for costs in relation to experts’ fees and counsels’ appearances at the trial.
[31] My preliminary view is that both parties have had a degree of success on this application and costs should lie where they fall but if parties disagree they may submit memoranda of no more than five pages within 14 days.
[32] There shall be a teleconference at 3pm on 26 August 2020 to make directions for trial. Counsel are to confer and submit preferably a joint memorandum (or separate memoranda if they cannot agree) addressing all schedule 5 High Court Rules matters no later than 24 August 2020.
O G Paulsen Associate Judge
Solicitors:
Ronald W Angland & Son, Leeston, Canterbury Parker Cowan, Queenstown
Appendix - schedule for further security for costs
Item Description
Time
Amount $
11
Filing memorandum for case management conference (0.4 x 3)
1.2
2,868.00
13
Appearance at case management conferences (0.3 x 3)
0.9
2,151.00
15
Pretrial conference
0.5
1,195.00
Preparation of briefs, list of issues, authorities and agreeing common bundle for witness hearing
5.0
11,950.00
33(b)
Preparation for hearing
5.0
11,950.00
TOTAL
12.6
$30,114.00
Disbursements:
Jeffery Meltzer, expert accountant
$40,000.00
Expert valuer
$5,000.00
Courier and other incidental costs
$100.00
$45,100.00
Plus GST at 15%
$6,765.00
Total
$51,865.00
3
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