Community Bereavement Trust v The New Zealand Qualifications Authority HC Hamilton CIV 2009-419-1588
[2010] NZHC 947
•9 June 2010
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2009-419-1588
IN THE MATTER OF the Judicature Amendment Act 1972
ANDIN THE MATTER OF an application for review of decisions by the First and Second Defendants
BETWEEN COMMUNITY BEREAVEMENT TRUST Plaintiff
ANDTHE NEW ZEALAND QUALIFICATIONS AUTHORITY First Defendant
ANDTHE FUNERAL SERVICES TRAINING TRUST OF NEW ZEALAND
Second Defendant
Hearing: 9 June 2010 (by telephone) Appearances: J L Witehira for Plaintiff
J B Orpin for First Defendant
J M Morrison for Second Defendant
Judgment: 9 June 2010
JUDGMENT OF COOPER J
This judgment was delivered by Justice Cooper on
9 June 2010 at 4.30 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Far North Law, PO Box 462, Kaitaia
G Adam, NZ Qualifications Authority, PO Box 160, Wellington 6140
Rainey Collins, PO Box 689, Wellington 6140Copy to:
J B Orpin, PO Box 5537, Lambton Quay, Wellington 6145
J M Morrison, PO Box 5029, Wellington
COMMUNITY BEREAVEMENT TRUST V THE NEW ZEALAND QUALIFICATIONS AUTHORITY AND ANOR HC HAM CIV-2009-419-1588 9 June 2010
[1] The plaintiff has filed an application for review under the Judicature Amendment Act 1972. It seeks to challenge a decision by the first defendant denying accreditation as a training provider in respect of its Level 5 National Diploma in Funeral Services. An alternative allegation is that accreditation was in fact granted, but unreasonably revoked some four weeks later. In addition, the plaintiff seeks damages in the sum of over $1 million.
[2] The defendants seek orders that the plaintiff pay security for costs. Initially, the first defendant had sought orders striking out the statement of claim or in the alternative staying the proceeding. The second defendant had also applied for an order staying the proceeding. Those applications were based on the failure by the plaintiff to pay costs (in each case the sum of $6,690) that were ordered to be paid when an earlier proceeding, in which the same decisions were challenged, was struck out for repeated failure to comply with procedural directions made by the Court.
[3] Since the applications were filed the costs ordered to be paid in respect of the earlier proceeding have in fact been paid. That leaves only the applications for security for costs that now need to be addressed. A fixture was established for today and I granted a request made by counsel for the defendants to conduct the hearing by telephone because they reside in Wellington. The solicitor for the plaintiff also resides at a distance.
The defendants’ applications
[4] In his written submission, counsel for the first defendant sought an order for security for costs in the amount of $20,000. Counsel for the second defendant seeks an order in the sum of $32,000. Mr Orpin did not seek to formally amend the first defendant’s application but did submit that the first defendant’s application may have been pitched too low if, as Mr Morrison for the second defendant contended, the subject matter of the litigation might result in a hearing of four days’ duration.
[5] Both defendants rely on r 5.45(1)(b) of the High Court Rules. The order for security is sought on the ground that it appears that the plaintiff will be unable to pay the costs of the defendants if unsuccessful in its proceeding. To a certain extent their
arguments were based on the inferences able to be drawn from the fact that, when the application was filed, the costs awarded when the previous proceeding was struck out had not been paid.
[6] Although those costs have now been paid, Mr Orpin relies on correspondence passing between the plaintiff and the first defendant which he claims shows that payment of the costs was contingent on the payment of money allegedly due by the plaintiff’s former solicitor. In this respect, Mr Orpin referred me to an e-mail from Mr Witehira, the plaintiff’s current solicitor to an employee of the first defendant. The e-mail read:
You will be aware that proceedings filed against NZQA were struck out as a result of the Statement of Claim being inadequate and failiure to file an Amended Statement of Claim. The Community Bereavement Trust filed a complaint with the NZ Law Society against the solicitor acting.
My client has now obtained judgment from the NZ Law Society for costs incurred on the proceedings between Community Bereavement Trust and NZQA and Funeral Standards Training Trust. They have asked for payment to be made to them by 30 October 2009 and this amount would be sufficient to pay the debt owing by NZQA.
Accordingly my client is seeking your confirmation to make payment of the debt to NZQA by 16 November 2009.
If this is not acceptable to NZQA, then my client would like to commence repayment of the debt by making weekly payments of $100.00 until such time as the compensation from NZ Law Society is paid to them at which time they can pay the full amount owing at that time.
Please let me have your response.
[7] The first defendant responded to that e-mail by agreeing to extend the time for payment in full to 16 November 2009. However, it was noted that if full payment had not been made by that date the first defendant would be proceeding to recover the debt due. When payment was not received a statutory demand was served on the plaintiff. This prompted a letter dated 26 January 2010 from Mr Witehira to the first defendant which was in the following terms:
Community Bereavement Trust Incorporated – Statutory Demand
As advised in previous correspondence, the debtor filed a complaint with the New Zealand Law Society against Patel Law of Hamilton, the solicitors acting for it in proceedings that resulted in the Judgment awarding these costs to NZQA. The claim before the Law Society was to cover legal costs
incurred by the defendants as per the order of the court. The New Zealand Law Society found in favour of the debtor as the complainant and awarded costs against the solicitors to the amount being sought by NZQA. The solicitor has filed an appeal against the New Zealand law Society Disciplinary Committee and a hearing date has been given to hear the appeal.
Accordingly the debtor proposes to pay the outstanding debt at the rate of
$100.00 per week and to secure the debt by registering a charge over one of the debtor’s vehicles being a Ford Mercury Registration No.ZM8355, valuation $9,500.00. There is no finance owing on the vehicle.
Should the matter with the New Zealand Law Society be resolved, I am instructed to obtain immediate settlement and make payment on the debt outstanding to NZQA.
Please advise at your earliest convenience as to whether the above arrangement to meet the debt is acceptable to NZQA.
[8] Mr Orpin submits that the Court should infer that the plaintiff remains in the same financial position as it was when that letter was written. The only change that has occurred is that in the meantime the Trust received payment from its previous solicitor and was able for that reason to meet the previous costs award. He points out that the only evidence of any income that the plaintiff has is the fact that it was in January able to offer to pay $100 per week and to offer security on a motor vehicle valued at $9,100. Mr Orpin submits that since the context of that offer was a response to a statutory demand served by the first defendant it can be assumed to represent the plaintiff’s maximum ability to pay.
[9] Mr Orpin also referred to Arklow Investments v MacLean[1] in which it was held that failure by a plaintiff to disclose its financial circumstances may give rise to an adverse inference as to ability to meet costs.
[1] Arklow Investments v MacLean (1994) 8 PRNZ 188.
[10] Mr Morrison adopted a similar position for the second defendant. He submitted that the correspondence to which I have referred effectively amounted to an admission by the plaintiff through its solicitor that it was unable to the pay costs other than by small instalments. Further, the plaintiff had provided no evidence in response to the present applications to substantiate that it was in a position to pay costs if unsuccessful in the proceeding.
The plaintiff’s opposition
[11] Mr Witehira acknowledged that a statutory demand had been received in respect of the costs awarded against it in the previous proceeding. However, the offer to pay $100 per week and to offer a charge over the motor vehicle had simply been an interim offer of payment until the costs awarded to the plaintiff by the New Zealand Law Society could be paid to the first and second defendants. Once that offer had been rejected the first defendant had made no request for further information as to the plaintiff’s financial position and neither had there been any inquiry by the second defendant. Mr Witehira submitted that there was insufficient evidence on which the Court could make an order on the basis of the matters relied on by the defendants.
[12] Mr Witehira noted that there was financial information in the form of annual accounts that the plaintiff had chosen not to put before the Court. It did not wish to disclose the accounts unless ordered to do so. The plaintiff was of the view that since the defendants had failed to establish a reason to believe that the plaintiff would be unable to pay costs, it was not required to establish that it could.
Discussion
[13] As was emphasised by the Court in Arklow Investments v MacLean the rule requires a defendant to establish that the plaintiff is “outside the usual run of plaintiffs”. It must be shown that there is “reason to believe” that the plaintiff will be unable to pay the successful defendant’s Court costs. It followed from this, as Thomas J put it, that it is:
… not enough for the defendant to challenge the plaintiff’s ability to pay costs, and then seek security for those costs relying upon the plaintiff’s refusal or failure to furnish details of its financial position.
[14] There must be some evidential foundation for the allegation charge that there is reason to believe that the plaintiff will be unable to pay the costs before the Court is justified in drawing an adverse inference, in the absence of evidence from the plaintiff itself establishing an ability to pay.
[15] In the present case, it seems to me that the defendants can point to circumstances which do indicate there is reason to believe that the plaintiff will be unable to pay the costs of the defendants in the event that the plaintiff is unsuccessful. I am not convinced by Mr Witehira’s assertion that having received a statutory demand requiring payment of the costs awarded to the first defendant the plaintiff’s offer of part-payment was simply intended as an interim measure. Apart from any other consideration I have simply received that assertion by way of submission and there is no evidence before the Court which justifies the inference Mr Witehira invites the Court to draw.
[16] On the other hand, the more natural inference is that the offer made was the best or close to the best that the plaintiff could offer as at January 2010. Subsequently, the debt to both defendants has been paid but that does not indicate that the plaintiff has other funds from which it could meet any subsequent award of costs.
[17] Since the defendants can point to circumstances justifying a conclusion that r 5.45(1)(b) applies it was up to the plaintiff to point to some evidence to the contrary. There has been no such evidence and I am satisfied that this is an appropriate case to order security for costs.
[18] Once that point has been reached and the Court thinks it is just in all the circumstances to order the giving of security for costs[2] the amount of the security ordered is a matter in the discretion of the Court. Rule 5.45(3)(a) simply refers to the giving of security for a sum “that the Judge considers sufficient”. The Court of Appeal confirmed the wide nature of the discretion in A S McLachlan Ltd v MEL Network Ltd[3] and it will usually be necessary to strike a balance between the interests of the parties, recognising that an order for substantial security may have the result, undesirable in the interests of justice, of preventing a plaintiff from pursuing its claim. In A S McLachlan Ltd the Court of Appeal observed that:
[2] r 5.45(2)
[3] A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747.
[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as
contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.
[16] 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.
[19] The quantum of costs sought by the second defendants equates the amount of the security to be ordered with the costs that would be awarded to the second defendant, if successful, assuming Category 2B and a four day hearing. The first defendant’s estimate is a considerably lower sum but I infer that that simply reflects a different arithmetical calculation as to the likely costs award. Certainly, my assessment at this stage is that the costs which the first defendant (whose decision is subject to attack) might incur in defending the claim could well be more than those likely to be incurred by the second defendant. I note too my impression that the four day hearing on which Mr Morrison’s calculation was based is likely to be overly generous even though the addition of a damages claim may add to the time that might normally be anticipated for an application for review.
[20] Mr Orpin submits that one of the reasons justifying an order for security equivalent to the costs that would be awarded at the end of the trial is that the plaintiff’s claim is a weak one and has little chance of success. However, apart from briefly making that assertion he did not go into the reasons for it. That issue was not addressed by Mr Morrison and Mr Witehira, understandably in the circumstances, did not go into the merits of the claim. In the circumstances it would not be satisfactory to proceed on the basis that security awarded should be the full amount of the costs likely to be awarded given the successful defence of the claim.
[21] The logic of ordering a plaintiff to pay security for costs is that it may not be able to afford to meet an award of costs at the conclusion of the proceeding. That also means however that if the amount of security required is too high, that might prevent the plaintiff from proceeding. The Court’s task is rendered more difficult where, as in the present case, the plaintiff provides no information as to its financial position.
[22] Balancing these considerations as best I can, I consider that the appropriate course to follow is to order the payment of security for costs in the sum of $6,000 in respect of the first defendant and $4,000 in respect of the second defendant, a total of
$10,000.
[23] Mr Witehira sought that in the event that the Court was satisfied that an order for security for costs was appropriate then the order should be couched in terms contemplated by r 5.45(3)(a)(ii), that is the requirement for security should be met by the giving of security to the satisfaction of a Judge or the Registrar for the amount. I am not inclined to accede to that request having regard to the delays that attended payment of the costs awarded in the previous litigation.
Result
[24] I direct that the plaintiff is to pay security in the sums of $6,000 in respect of the first defendant’s costs and $4,000 in respect of the second defendant’s costs, to be payable to those parties if they are successful in the proceeding.
[25] The total of $10,000 is to be paid into Court within 20 working days of the date of this judgment.
[26] The proceeding is stayed until that sum is paid.
[27] The defendants are entitled to their costs on the present applications, calculated in accordance with Category 2 Band B.
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