Brown v Windowmakers Limited
[2016] NZHC 1024
•18 May 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-002771 [2016] NZHC 1024
BETWEEN TERENCE JOHN BROWN
Plaintiff
AND
WINDOWMAKERS LIMITED First Defendant
AND
MARTIN ERIC BAMFORD Second Defendant
Hearing: 14 March 2016 Appearances:
A G Maclean for the Plaintiff
K Sheehan for the First Defendant
J Armstrong for the Second DefendantJudgment:
18 May 2016
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 18 May 2016 at 4.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Armstrong Murray, Auckland
Shine Lawyers, Auckland
A Maclean, Auckland
BROWN v WINDOWMAKERS LIMITED & Anor [2016] NZHC 1024 [18 May 2016]
[1] The defendants, Windowmakers Limited and Martin Bamford, apply for an order for security for costs in the sum of $52,035.00 each against the plaintiff, Terence Brown, in reliance on High Court Rule 5.45. It is not in dispute that the plaintiff would be unable to pay costs should he be unsuccessful in this proceeding, and that accordingly, the jurisdictional threshold to make an order under rule 5.45 has been met.1 The question remains whether I should exercise my jurisdiction to make such an order.
Background
[2] This is the second proceeding in which the same causes of action have been pursued against the defendants. The first proceeding was issued by the plaintiff’s company, Architecture and Property Management Ltd (APML), but was discontinued in 2014 after APML went into voluntary liquidation.2 When the proceeding was terminated, the defendants unsuccessfully sought costs against the plaintiff as a non-party. The plaintiff was at the time director of APML, and had engaged a lawyer for APML on a contingency basis. The defendants argued he was the “real plaintiff”. The costs claim failed.3
[3] The primary substantive claim in that first proceeding was an allegation of trespass against Windowmakers for the removal of joinery from a property at
17A Churchhouse Rd on about 31 October 2008. APML had been building the property and the defendants were sub-contractors. Windowmakers had supplied and installed the joinery, while Mr Bamford was responsible for installing various bathroom items. In October 2008 Windowmakers demanded payment. Mr Brown informed it that there were insufficient funds to pay it then, but that money would be available when the property was sold. Windowmakers elected not to wait until the sale, and advised Mr Brown that it would remove the joinery pursuant to its terms of
trade, which provided that it retained ownership of all items supplied until they had
1Mr Brown has admitted in affidavit evidence that he would have no prospect of paying costs should he be unsuccessful.
2 The file number was CIV-2013-404-3023.
3 Architecture and Project Management Ltd v Windowmakers Ltd [2016] NZHC 700.
been paid for in full. On 31 October 2008 Windowmakers’ agents entered the property and removed all the joinery. Because the property was insecure, various other contractors removed fittings that they had supplied. Mr Bamford removed items including vanities, basins, tapware and plumbing fittings, the oven, oven-hood and dishwasher. Garage doors were also removed, as were the gas fireplace, kitchen cabinetry and carpet.
[4] As a result of this, receivers were appointed in November 2008; they considered it was uneconomic to repair the house and decided to sell it ‘as is’. The property was sold at auction for $740,000.
[5] APML was struck off the Companies Register, but was later restored for the purposes of bringing the original claim against Windowmakers, Mr Bamford, and another company, Platinum Pacific Homes Ltd. The defendants in that claim also filed an application for security for costs, but the action was discontinued before the application was heard. Mr Brown had originally attempted to join himself as a plaintiff in the original proceeding, but Venning J decided that a formal application was required, and the defendants planned to oppose that application. As a result, Mr Brown brought this new proceeding in which he is named as the plaintiff. Mr Brown’s right to sue arises as a result of an agreement under which the liquidators of APML assigned its rights to him in exchange for $20,000 plus a share of the net proceeds of the claim.
[6] Mr Brown now argues, as he did in the original claim, that the removals of items by the defendants were acts of trespass which caused APML to suffer losses of
$609,701.55 because the property was subsequently sold below its full value. He says that Windowmakers removed various windows and items of joinery; Mr Bamford removed various items and tapware from the bathroom; and Mr Bamford also authorised his own contractors to remove items they had installed. This, he argues, amounts to conversion and trespass to land.
[7] The defendants claim that the joinery was removed because APML owed Windowmakers the sum of $29,802.51 for the joinery, and had never paid that outstanding balance. They claim that APML knew that the items were to be removed
and that they were expressly or impliedly authorised to remove the items, by their terms of trade or by APML’s conduct. Further, they claim that there are issues as to whether the items removed were actually fixtures; causation; particulars and quantum of loss allegedly caused; and whether there was a failure to mitigate loss.
Legal position
[8] Rule 5.45 governs the making of orders for security for costs. It relevantly states:
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
…
(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.
…
(5) A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
…
[9] Once an order for security for costs is made, clause (3) stipulates that the proceedings may be stayed unless and until the amount required is paid into Court or security to the satisfaction of the Judge or the Registrar is otherwise given. Orders staying the proceedings are routinely made along with the order for security. As a result, the practical effect of orders under rule 5.45 may be that the proceeding
comes to an end.4
4 See for example Westpac New Zealand Ltd v Adams [2013] NZHC 3112.
[10] As noted, it is not in dispute that Mr Brown would be unable to pay costs should he be unsuccessful in the proceeding, and he is now overseas in any case. Therefore, the jurisdictional threshold under both (a) and (b) is met. It remains for me to decide whether it would be just in all the circumstances to make an order that Mr Brown provide security for costs.
[11] The principles relevant to my decision whether to exercise my discretion to make an order in a case such as this are well established:5
(a) There is no burden of proof or predisposition one way or the other.
The Court is to exercise its discretion having regard to the particular circumstances of the case.
(b)The interests of both the plaintiff and the defendant must be considered. The Court should not allow the rule to be used oppressively to deny plaintiffs with limited means the ability to bring their case before the Court. On the other hand, an impecunious plaintiff must not be allowed to use the inability to pay costs to act oppressively or to place unfair pressure on the defendant. A balancing of a number of factors is required.
(c) The general principles for the exercise of the discretion show that the Court’s discretion is not fettered by the automatic application of “principles”. The amount of the security ordered should not be illusory or oppressive, not too little nor too much.6
(d)The Court may take into account, in the exercise of its discretion, whether the action of the plaintiff has reasonable prospects of success. The courts are generally reluctant to allow an application for security
where that would have the effect of denying access to justice.7
5 See McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA); Highgate on Broadway Ltd v
Devine [2012] NZHC 2288 at [13]-[28], [2013] NZAR 1017 at [19]-[24].
6 McLachlan, above n 3, at [13]-[14].
7 Highgate, above n 3, at [22](e).
[12] Likewise, where the issue is that the plaintiff is resident overseas, that is not the end of the matter. As McGechan J noted in Aquaculture Corp v McFarlane Laboratories, there is no inflexible principle that a plaintiff without assets in the jurisdiction should normally be ordered to give security. The Court’s discretion is to be exercised by taking into account all the circumstances of the case and arriving at the conclusion which will do justice between the parties, just as where the issue is
impecuniosity.8
[13] Where a plaintiff is resident overseas, the ease, convenience and cost of enforcing a costs judgment in the plaintiff’s country of residence are important considerations. New Zealand courts have taken the view that the point of ordering security against an overseas plaintiff is to avoid the costs and difficulties of overseas
enforcement.9 It may, therefore, sometimes be relevant if the defendant is resident in
a jurisdiction where New Zealand costs orders can easily be enforced. A plaintiff who goes to reside permanently abroad after commencing a proceeding may be ordered to give security for costs.10
[14] In this case, however, enforcement overseas would be frustrated by Mr Brown’s lack of resources. I therefore deal with the issue on the basis that impecuniosity is the issue at the heart of the matter.
Analysis
[15] Mr Brown’s argument, essentially, is that he would be deprived of access to justice were I to make an order for security for costs in any meaningful amount. The argument for the defendants, on the other hand, is that there is limited merit in his claim; and that, in any case, the fact that he has purchased the litigation and so decided to become a litigant means that access to justice is not, in this case, a serious
public interest concern.
8 Aquaculture Corp v McFarlane Laboratories (1984) Ltd (1987) 1 PRNZ 467 (HC).
9 Phipps v Healthcare Otago Ltd HC Dunedin CP39/95, 25 March 1999; Okeby v Family
Court at Napier (1998) 12 PRNZ 159 (HC).
10 Philpot v Subritzky HC Auckland A195/76, 10 October 1979; Massey v Allen (1879) 12 Ch D
807.
[16] I am satisfied that in all the circumstances of this case it is just to order the plaintiff to provide security for costs, but in an amount less than the defendants seek. The amount each defendant seeks is based on an award of 2B costs.
Access to justice
[17] I have some serious doubts about the way in which Mr Brown has approached the proceeding. I have difficulty, for example, seeing how the alleged conversion or trespass to land in which approximately $30,000 of items was taken could result in a loss of hundreds of thousands, unless Mr Brown failed to mitigate his loss. Nor can the defendants be blamed for the sale of the house in a mortgagee sale; that must have been related to APML’s financial situation and cash flow. That is, even if the defendants can be blamed for a diminution in value of the land, it is questionable whether that can be compared to a sale in the ordinary way, or whether it should be compared to a mortgagee sale; and if the second, what condition I should assume a notional comparator house would have been in. It seems to me that Mr Brown is likely to have serious difficulties justifying the quantum of damages he alleges.
[18] However, at the heart of the matter must be the factual question whether there was consent for the defendants to remove the items. It seems to me to be inarguable that at least some of the items were fixtures, particularly the windows; and if they were fixtures, they became part of the land.11 Once that happened, to remove the fixtures without consent would constitute a trespass to land.12 There might also be only limited ability to rely on implied consent, depending on the exact facts of the case.13 Though the removal of the items, in my view, cannot be the sole cause of the enormous loss alleged, once it is conceded that they were removed illegitimately, it must surely be accepted that that removal caused some degree of loss, and therefore
there is a reasonably arguable cause of action here, at least as regards
Windowmakers.
11See for example Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406 (CA).
12 See Reynolds v Eurovision Ltd [2013] NZHC 3015 at [33].
13 Compare Whenuapai Joinery, above n 10.
[19] The claims against Mr Bamford are less strong, because the items he took are less clearly fixtures; if they are not fixtures, and consent is established, then the claim against him may collapse.
[20] I have not been presented with documents which explicitly authorised the removal of the items in the circumstances. The question of consent, therefore, is one of fact, and it will be necessary for evidence to be presented and tested in order to resolve it. It is not the place of this Court, on an application for security for costs, to resolve matters of seriously disputed facts. Likewise, the question whether Mr Bamford instructed other contractors to remove items they had installed seems to me to be a question of fact.
Other relevant factors
[21] I accept the defendants’ submission that Mr Brown’s comments at the time of the sale indicate that his financial distress was not caused by them, but rather by either his own conduct, market forces, or some combination of the two.
[22] The cost of a trial is likely to be significant, and if Mr Brown seeks to prove consequential loss, I accept that it is likely that expert evidence will be required as to valuation. I bear in mind that I am required to look beyond the plaintiff’s mere asserted right to have his day in court, and look at the economic realities of the case.14
[23] Also, without wishing to refer to any kind of general principle as to the approach in cases where the right to sue has been assigned, I note also that Mr Brown did purchase the right from APML for a significant sum despite his evident impecuniosity; and that he did so after it became evident that his efforts to prosecute to the original proceeding would be resisted, both by opposition to his joinder application and by the filing of an application for security for costs.
[24] I am of the view that in the event Mr Brown is successful in an eventual proceeding, he is likely to recover a sum significantly smaller than he currently
14 Hamilton v Papakura District Council (1997) 11 PRNZ 129 at 336; applied in BAM v GJM
[2013] NZHC 304 at [7]
seeks; and that sum may well be smaller than the costs the defendants will incur. Though I do not wish to impede Mr Brown’s access to justice, on a realistic view of the issue, that possibility must influence my decision. The factors I have referenced above reinforce my conclusion on the matter.
Result
[25] I order that the plaintiff is to give security for costs to the first and second defendants in the global sum of $40,000 by paying that sum into Court or by giving, to the satisfaction of the Registrar, security for that sum. In all the circumstances, the sum of $40,000 will afford some reasonable measure of security for the defendants’ costs.
[26] In the meantime this proceeding is stayed until the security is paid.
Associate Judge Sargisson
0
6
0