Corporate Jet Services Limited v Ward HC Auckland Civ-2006-404-357
[2007] NZHC 1735
•18 May 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2006-404-357
BETWEEN CORPORATE JET SERVICES LIMITED Plaintiff
ANDRUSSELL STEWART WARD First Defendant
ANDEDWARD FRANCIS DOHERTY, PAUL MORLEY DODD, RUSSELL STEWART WARD AND SUSAN MARY WARD AS TRUSTEES OF THE R & S WARD FAMILY TRUST
Second Defendants
ANDPAPAKURA DISTRICT COUNCIL Third Defendant
ANDJOHN DALE Fourth Defendant
ANDDENNIS THOMPSON INTERNATIONAL LIMITED Second Counterclaim Defendant
ANDDENNIS ALAN THOMPSON Third Counterclaim Defendant
ANDROBERT VICTOR BROWNE Fourth Counterclaim Defendant
AND KEVIN MITCHELL
Fifth Counterclaim Defendant
ANDRUDSITS TRANSPORT LIMITED Sixth Counterclaim Defendant
AND PROFLOORS LIMITED
Seventh Counterclaim Defendant
ANDGEOTEK SERVICES LIMITED Eighth Counterclaim Defendant
CORPORATE JET SERVICES LIMITED V RUSSELL STEWART WARD AND ORS HC AK CIV-2006-404-
357 18 May 2007
AND BRIAN MIDDLETON
Ninth Counterclaim Defendant
AND REESE HUMPHRIES
Tenth Counterclaim Defendant
Hearing: 30 April 2007
Appearances: H. Thompson for Plaintiff and First, Second and Third Counterclaim
Defendants
First Defendant Mr R.S. Ward in person
P.A. Craighead for Second Defendants
D.L. Badawi for Fifth Counterclaim Defendant
G.D. Stringer for Sixth and Seventh Counterclaim Defendants
Judgment: 18 May 2007 at 4.00 pm
In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 4.00pm on the 18th day of May 2007.
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Introduction
[1] This judgment concerns five interlocutory applications relating to this proceeding which are before the Court.
[2] The applications are:
a) An application by the second defendants both for leave to bring and for defendant’s summary judgment against the plaintiff.
b)An application by the first defendant expressed to be by way of strike out of the plaintiff’s claim, but which in effect is an application for further and better discovery and/or specific discovery.
c) An application by the second, third and fourth counterclaim defendants to strike out the first defendant’s counterclaim against
them.
2
d)An application by the fifth counterclaim defendant for security for costs against the first defendant.
e) An application by the sixth and seventh counterclaim defendants for security for costs against the first defendant.
[3] Originally it appeared that all of these applications were opposed.
[4] When the applications were called to be heard before me on 30 April 2007, however, it became apparent that the first defendant’s discovery application noted at paragraph [2](b) above did not require argument and certain directions were made by consent. A Minute to this effect was completed and I now repeat the directions
contained in that Minute:
a) As to discovery of the plaintiff’s bank statements and various invoices
and statements which have been at issue in this proceeding, the
plaintiff is to make these documents available to the first defendant, together with its other discovery documents, within 10 working days of 30 April 2007. b)
The first defendant is to have a period of a further 10 working days from that date to file and serve any further applications he may wish
to with respect to discovery issues if it is considered that discovery questions are still outstanding. c)
Leave is reserved for either party to approach the Court on 24 hours notice for further assistance on these discovery issues if required.
[5]
That
effectively deals with the first defendant’s application noted at
paragraph [2](b) above.
[6] Before turning to consider the other four applications before the Court, a brief description of the factual background to this proceeding is required.
Background Facts
[7] The proceeding concerns a claim by a plaintiff that an aircraft hangar at Ardmore Airport built by the first and/or the second defendants was built incorrectly, and that the contract for its construction was breached in various respects. As a result, the plaintiff says it was required to employ other contractors to complete the project and it suffered loss.
[8] The plaintiff’s claim appears to be based squarely in contract. The original building contract document dated 4 February 2005 records that it is between the plaintiff as principal and the first defendant as contractor. It appears to have been signed on behalf of the plaintiff as principal and by the first defendant personally as contractor. These signatures were witnessed.
[9] So far as the second defendants are concerned, the plaintiff’s case against them as trustees of the R & S Ward Family Trust appears to be based upon what is said to be the first defendant’s actual or implied authority to bind the second defendants to the contract and the hangar development generally.
[10] The basic contract price for the hangar development works was $342,000.00 plus GST.
[11] An initial deposit under the contract of $51,300.00 was paid by the plaintiff. It seems this amount was paid to the second defendants and credited to the second defendant’s bank account.
[12] Timeframes for the completion of the work were discussed between the parties and the plaintiff notified the first defendant that it required the project to be completed by 3 August 2005.
[13] According to the plaintiff, progress on the project was slow, and it was not completed by that date.
[14] In addition, the plaintiff contends that it had concerns about the quality of the work involved, and defects which it said had occurred.
[15] Various meetings took place, and then on 19 August 2005 the plaintiff apparently provided a formal written notice to the first defendant that unless the project was completed by 7 September 2005, then the first defendant would be in default.
[16] On 24 August 2005 the Papakura District Council issued a Notice to Fix pursuant to ss164 and 165 Building Act 2004 which apparently had the effect of halting further work until the Council’s concerns over the work undertaken by the defendants was satisfactorily addressed.
[17] On 1 September 2005 the defendants gave a Notice to Adjudicate under the Construction Contracts Act 2002 in relation to a dispute as to whether progress payment claim 3 dated 2 August 2005 was payable. Derek Firth was appointed as adjudicator on 13 September 2005.
[18] Mr Firth issued his determination on 14 August 2005 which was to the effect that the first defendant had not made a claim correctly under the Construction Contracts Act 2002, and secondly that in any event the milestone for the third progress payment in question had not yet been reached, in that the standing frames and the roof had not been completed to the standard required by the contract. Subsequently, the first defendant again referred his progress payment claim 3 to adjudication again under the Construction Contracts Act 2002, this time before a Mr Kenneth Johnston, with precisely the same result – the plaintiff’s refusal to pay the claim was justified.
[19] The original engineer for the contract, Mr Dale, in the meantime had been replaced by Mr Kevin Mitchell, the fifth counterclaim defendant. At that point Mr Mitchell also identified concerns over a substantial number of defects in the work undertaken up to that date, and as to the progress of construction. By letter dated 26
October 2005 pursuant to s14.2.1(c) of the general conditions of the contract, Mr
Mitchell certified that the defendant was persistently, flagrantly or wilfully neglecting to carry out his obligations under the contract.
[20] The plaintiff then terminated the contract pursuant to a notice given in terms of that document.
[21] The plaintiff’s complaints related generally to a number of concerns over the construction works, including allegations that the floor had not been laid in accordance with the specifications, and that other work had not been properly undertaken. In addition, other issues were raised concerning delays in the construction process.
[22] Damages are sought by the plaintiff against the defendants for:
a) $34,593.75 lost income;
b)$44,109.44 relating to engineering and legal fees, repairs to the roof and adjudication costs;
c) $157,636.00 being the difference between the contract price and the total amount paid by the plaintiff to other contractors to remedy the defendant’s defective work in completing the contract works;
d) Further losses and ongoing damages which are yet to be quantified;
e) Costs;
f) Interest.
Second Defendant’s Application for Summary Judgment against the Plaintiff
[23] The second defendants, the trustees of the R & S Ward Family Trust, have brought what is in effect a composite application for leave to bring a summary
judgment application, and for defendant’s summary judgment against the plaintiff. I
turn now to consider that application.
[24] Considering first the leave application, under r138(3) High Court Rules an application by a defendant for summary judgment must be made at the time the Statement of Defence is served on the plaintiff and may only be made later with the leave of the Court.
[25] Although r138 does not set out details of how this discretion is to be exercised by the Court, certain guidelines were given in Tip Top Ice Cream Company Limited v Polar Land Limited & Anor (2002) 7 NZBLC 103,564 at paragraph 28:
…Three factors assume importance where a matter of discretion is raised by the rules, namely:
(a) Has the delay been satisfactorily explained;
(b) Are the merits of the applicant’s case (in this case the defendants) for the relief sought (that is, summary judgment) particularly strong and therefore deserving of determination at a later time by the Court that is prescribed by the rules.
(c) Is there any risk of miscarriage of justice by determining the application at a later point in time.
[26] Here, the application pursuant to r138 is necessary because the defendants’ Statement of Defence was filed and served on 7 April 2006, and the summary judgment application was not filed until 27 October 2006.
[27] The reasons for this delay in applying for summary judgment are summarised in an affidavit of Edward Francis Doherty dated 27 October 2006 sworn in support of the application. They are summarised as:
a) Difficulties in assembling all the necessary information from the other trustees Mr Russell Ward and the accountant Mr Paul Dodd. The second defendants indicated that this information needed careful checking, as the only person said to be actually involved in the building project was the first defendant Mr Ward.
b)His claim that discovery was needed from the plaintiff to ascertain what it was basing its claim upon.
c) The third trustee Susan Ward lived overseas and the accountant Mr
Dodd was temporarily absent from New Zealand.
d)A bitter matrimonial dispute had erupted between Mr Russell Ward and Mrs Susan Ward causing delays in this matter as counsel needed to deal through their respective solicitors.
On this basis, the second defendants claim that the delay has been satisfactorily explained. In addition, the second defendants maintain there is little prejudice to the plaintiff if the leave sought is granted.
[28] So far as the merits of the applicant’s case are concerned, McGechan on
Procedure at para HR138.01 states:
If the absence of a defence has only become apparent after discovery or the exchange of briefs, this may well be an adequate reason for granting leave. In many cases, as with appeals, the leave question will be bound up with the merits, and it may be sensible to resolve the two together.
[29] In the present case, I am satisfied that the merits of the plaintiff’s claim against the second defendants will indeed impact upon the leave issue and it is therefore sensible for these to be resolved together.
[30] Here, as I understand it, the plaintiff took until 29 September 2006 to complete discovery of its documentation and finalisation of its claim. In my view the plaintiff is not prejudiced by the delay on the part of the defendant in bringing this summary judgment application. And, given too, as I have noted above, that the leave question is inevitably bound up with the merits of the plaintiff’s claim, it is appropriate that leave be given which effectively means these two issues will be resolved together.
[31] The second defendants’ application for leave to bring their summary judgment application is granted.
[32] I turn now to consider the substantive application itself.
[33] Defendant’s summary judgment is provided for in r136(2) High Court Rules which states:
The Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s Statement of Claim can succeed.
[34] A defendant’s summary judgment application is therefore similar to a strike out application, in that the defendant must demonstrate there is no possibility of the claim or any of the causes of action succeeding. However, determination of the application does proceed on the basis of affidavit evidence in addition to the pleadings. The general rule is that the Court will not attempt to resolve on a summary judgment application a genuine evidential dispute between the parties. Nonetheless, the Court may disregard factual disputes that are plainly spurious or contrived – Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14.
[35] Rule 136(2) has been considered by the Court of Appeal in a number of cases, including Westpac Banking Corporation v M.M. Kembla New Zealand Limited [2001] 2 NZLR 298, Burnard v Space 2000 Limited (2001) 15 PRNZ 338, and Attorney-General v Jones (2001) 15 PRNZ 347 – also considered by the Privy Council at [2004] 1 NZLR 433.
[36] The starting point in determining a defendant’s summary judgment application must be the principle that a plaintiff has the right to have its claim determined following a fair hearing by the Court – Attorney-General v Jones. In that case the Privy Council at page 440 said:
…Summary judgment should not be given for the defendant unless he shows on the balance of probabilities that none of the plaintiff’s claims can succeed. That is an exacting test, and rightly so, since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless.
[37] As I have noted, where a defendant applies for summary judgment, it will have the significant burden of establishing that none of the plaintiff’s causes of action can succeed. The Court should only give judgment against a plaintiff where
the defendant has a clear answer to the plaintiff which cannot be contradicted –
Westpac Banking Corporation v M.M. Kembla New Zealand Limited.
[38] And, as the Privy Council stated in Jones v Attorney-General at page 439:
It cannot be doubted that, properly used, r 136(2) can save both time and cost by permitting claims with no hope of success to be summarily dismissed at an early stage. But rarely, if ever, will the procedure be appropriate where the outcome of the action may depend on disputed issues of fact, and reliance on the rule in an inappropriate case may serve to increase both the length and the cost of proceeding.
[39] In the present case, the plaintiff’s claim against the second defendants, as I have noted, is one in the alternative. The plaintiff alleges that either the first defendant, or alternatively the second defendants, were the contractor who agreed to build the aircraft hangar, that this contract was breached in various respects, and as a result, the plaintiff suffered loss.
[40] As currently pleaded, the plaintiff’s case against the second defendants is based on the first defendant Mr Russell Ward’s actual or implied authority to bind the second defendants, and not on any apparent or ostensible authority or estoppel.
[41] Essentially, as I understand it, the second defendants’ defence to this claim is simply that the Trust was not involved in any respect in the hangar project, and further that any confusion which may have arisen is the fault of the first defendant Mr Russell Ward and the consequence of his use of the bank account held by the Trust for contract payments and his attempted use of the Trust’s GST registration and number for this contract.
[42] Further, the second defendants state and have deposed to the effect that the second defendant Trust did not benefit in any way from the hangar contract.
[43] Notwithstanding these contentions, a range of factual matters are clear from evidence placed before the Court on behalf of the second defendant Trust itself. These matters appear from the affidavit of Mr Russell Stewart Ward sworn 26
October 2006 which confirms:
a) Payments from the plaintiff under the building contract were made into the second defendant’s ANZ Bank account comprising:
i) $51,300.00 as a deposit on 7 February 2005.
ii) $25,650.00 as a progress payment on 4 May 2005.
iii) $38,475.00 as a further progress payment on 17 June 2005.
b) Tax invoices were issued by the second defendant Trust under its GST
number (76-322-961) dated 21 March 2005 (for $25,650.00) and on
31 May 2005 (for $38,475.00).
c) Subsequent tax invoices for the contract dated 2 August 2005 and 20
October 2005 were issued to the plaintiff according to Mr Ward, the first defendant, in his own name. These tax invoices, however, continued to have the GST number 76-322-961 affixed to them (this GST number presumably being the second defendant Trust’s GST registration number).
d)Minutes purporting to be of a meeting of the second defendant trustees dated 21 April 2004 (annexed to the affidavit of Mr Russell Stewart Ward dated 26 October 2006 as Exhibit “H”) state in part:
1. Russell Ward had built a set of hangar doors for Mr James Slade at Mr Slade’s hangar at Hood Aerodrome, Masterton.
2. Mr Slade had ordered a further set of doors for another hangar he was constructing, also at Hood Aerodrome, Masterton.
3. Other parties have approached Russell Ward and asked him to construct additional hangar doors and possibly complete hangars.
4. It was decided that the Trust should consider going into the hangar door and possibly the hangar construction business as a business venture on a temporary basis. If there was sufficient interest, a separate construction company would be formed at a later date to handle such
enquiries. Paul Dodd to seek approval from Edward
Doherty. (emphasis added)
e) Attached as Exhibit “I” to Mr Ward’s 26 October 2006 affidavit were
22 tax invoices addressed to the second defendant relating to the project. These were from Steel & Tube Hamilton, BOC Limited, Hi Lift Limited, BBD Concrete Cutting and Geotek Services Limited. They appeared to be for the supply of steel and wire and the specific erection of steelworks at the Ardmore Airport site on 13 July 2005 (by Hi Lift Limited) and the specific undertaking of concrete cutting at the Ardmore Airport site on 15 June 2005 and 21 June 2005 (by BBD Concrete Cutting).
[44] In his affidavit dated 17 November 2006 filed in support of the plaintiff’s opposition to this application, Mr Robert Victor Browne, a director of the plaintiff and a chartered accountant, deposes that from the total payments of $115,425.00 paid by the plaintiff into the second defendant’s Trust bank account, according to the evidence put before the Court in Mr Ward’s own affidavits, a total amount of only
$7,133.12 was paid out of the account in relation to the hangar project, which left a balance of $108,291.88 unaccounted for. Mr Browne appears to conclude in his affidavit that of this sum, $108,135.81 was expended from the Trust’s bank account in relation to the hangar project. It seems from Mr Ward’s subsequent affidavit in reply that he takes no issue with this specific point.
[45] Instead, the second defendants’ position seems to be:
a) A claim that there is a credible explanation as to why payments by the plaintiff, which the second defendants say were due to the first defendant, were paid into the second defendant Trust’s bank account. This explanation was said to be that the payments were directed to this account purely in error and at the direction of the first defendant Mr Ward solely. The second defendant contends the Trust bank account was used throughout by the first defendant for his personal transactions, and this is confirmed in affidavits of Mr Paul Dodd and
Ms Susan Ward, the second and third-named second defendants. In my view, this argument overlooks the volume of credit and debit transactions involved in this account all affecting the hangar contract. At the present summary judgment stage I am of the view that the second defendants’ arguments appear somewhat thin. They certainly do not satisfy the test that the second defendants here must show a clear answer to the plaintiff on this point which cannot be contradicted.
b)The second defendant Trust has never resolved to include the building of the hangar the subject of these proceedings as part of its business – the decision of Rodney Aero Club Incorporated v Moore [1998] 2
NZLR 192 is referred to in support of the proposition that a Trust is not bound unless all trustees agree. In affidavits filed on behalf of the second defendants it is said that the business of the Trust was purely grazing of stock, building of two sets of hangar doors for a Mr Slade, and the building of a hangar on the Trust’s farm land. Further, the second defendants maintain that the financial information provided for the Trust shows that it has not profited from the building of the hangar under consideration in this proceeding. As to this, I refer to the 21 April 2004 Minute of the second defendant trustees noted at paragraph [43](d) of this judgment, which in my view does not assist the second defendants in their argument here. Again, for the purposes of the present summary judgment application, these matters are not decisive for the second defendant.
c) As noted above, it is also suggested that possible explanations exist for the tax invoices for work issued in the names of the second defendants on the one hand and the suppliers accounts referred to the second defendants on the other. These explanations are simply that the invoices and accounts were issued in error at the behest of Mr Ward, the first defendant. In my view, as I have noted above, this explanation seems rather thin at this point of the proceeding.
d)The second defendants also contend there is no evidence before the Court of any representations made to the plaintiff or its representative that the second defendants would accept liability in this matter in any form as contractor, guarantor or otherwise. They note that Mr Ward’s evidence is that he admitted personally he was the contractor, and there is no evidence from the plaintiff as to any dealings it had with the Trust or members of it. As to this aspect, I note that Mr Ward, the first defendant, was himself a trustee of the second defendant Trust throughout. Further, in the 21 April 2004 Minute of the second defendant Trust (noted at paragraph [43](d) above) reference was made to Mr Ward’s undertaking of other aircraft hangar and door projects, including one for a Mr Slade, acknowledged to be carried out on behalf of the Trust. At this point in the proceeding, in my view these responses also provide some difficulty for the second defendants here.
[46] Turning now to my decision with respect to this application, I remind myself that the application is one by the second defendants for summary judgment against the plaintiff. Applications of this type are only appropriate where it can be shown a defendant has a clear answer to a plaintiff’s claim which cannot be contradicted or cured by an amended pleading – McGechan HR136.07. In the context of these applications, attempts to resolve genuine evidential disputes are not to be made.
[47] Taking into account the matters I have outlined above, I conclude that the threshold for defendant’s summary judgment has not been achieved by the second defendants here. As I see it, there is material before the Court which goes some way to supporting the plaintiff’s contention that as an alternative, it was the second defendants who were the contractors for the construction of the aircraft hangar and they may have some liability for the breach of this contract which the plaintiff alleges has caused it loss. In my view, the second defendants do not, therefore, have a complete answer to the plaintiff’s claim. They have been unable to satisfy the significant burden they bear in this summary judgment application of establishing that none of the plaintiff’s causes of action could succeed against them.
[48] The second defendants’ application for summary judgment against the plaintiff therefore fails and is dismissed.
[49] As to costs, I see no reason why costs with respect to this application should not follow the event in the normal way. Costs are therefore awarded to the plaintiff with respect to this summary judgment application calculated on a 2B basis, together with disbursements as fixed by the Registrar.
Application by Second, Third and Fourth Counterclaim Defendants to Strike
Out First Defendant’s Counterclaim
[50] The second counterclaim defendant Dennis Thompson International Limited (“DTI Limited”), the third counterclaim defendant Dennis Alan Thompson (“Mr Thompson”) and the fourth counterclaim defendant Robert Victor Browne (“Mr Browne”) apply to strike out the counterclaim filed against them by the first defendant.
[51] The grounds of this application are:
a) That the counterclaim discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading.
b)The pleadings are likely to cause prejudice, embarrassment or delay in these proceedings.
c) DTI Limited, Mr Thompson and Mr Browne have not been properly joined as defendants.
[52] The first defendant’s counterclaim against a range of parties, including DTI Limited, Mr Thompson and Mr Brown was filed on 27 November 2006.
[53] In summary, as I understand it, the causes of action pleaded against DTI are:
a) That the (unsigned) first draft of a contract for the construction of the hangar was described as being between DTI Limited and the first defendant.
b)That correspondence relating to the contract was sent to the first defendant under the letterhead of DTI Limited.
c) That the business premises that the first defendant visited at the relevant time had DTI Limited written on them rather than the name of the plaintiff.
d)That Mr Thompson had told the plaintiff that he was being set up, so that if there were any issues or problems he could just walk away from the plaintiff.
e) At the time the contract was signed, DTI Limited existed, but the plaintiff did not stop.
[54] So far as the allegations against Mr Thompson and Mr Browne are concerned, it appears these are based on the fact that Mr Thompson and Mr Browne are the two directors of the plaintiff company. And, in addition, the claim against Mr Browne appears to rely in part on the fact that he received copies of correspondence between Mr Thompson and the first defendant.
[55] In broad summary, the counterclaims against Mr Thompson and Mr Browne consist of a range of diverse allegations which include:
a) Mr Thompson had been trying to bankrupt the first defendant in order to get the building free of charge.
b)Mr Thompson did not inspect the building, because he never intended to pay the first defendant for its efforts.
c) Mr Thompson and Mr Browne:
i) Created a hostile atmosphere on the Ardmore work site.
ii)Tried to alter the terms and conditions of the contract without going through a contract amendment process.
iii) Tried to deduct monies from the payment schedule.
iv)Tried to increase the scope of the project without compensating the contract.
v)Insisted that the first defendant’s crew of workmen work in hazardous conditions.
vi)Set out a list of remedial tasks to be done to the project and then applied to the Papakura District Council Building Department to ensure the first defendant could not comply.
vii)Pretended to apply to a valuer for a release of funds when DTI Limited had no intention of paying any monies at all.
viii)Tried to claim there was a condition of payment in any building progress payment and that a valuer had to approve any claim when in actual fact there was no such condition stated in the contract.
ix) Stated that no claim was due as a claim should have been made to the engineer and not the principal, while all the time Mr Thompson had known of maxims such as “notice to the principal, notice to the agent, notice to the agent is notice to the principal”.
[56] The gist of all these allegations against Mr Thompson and Mr Browne as best as I can tell seems to be that first, as directors of both the plaintiff and DTI Limited, they were agents of those parties, and secondly, they made it difficult for the first defendant throughout, and interfered unduly in the contract.
[57] The present strike out application is brought pursuant to r186 High Court Rules and is to be heard on the basis that the Court is to assume the facts pleaded by the first defendant in his counterclaim are true (unless those pleaded allegations are entirely speculative and without foundation – Collier v Panckhurst J, 6 June 1999, CA136/97 – see Attorney-General v Prince & Gardiner [1998] 1NZLR 262). It is well settled that before the Court may strike out proceedings, the causes of action must be so clearly untenable that they could not possibly succeed – Attorney-General v Prince & Gardiner, and Takaro Properties Limited (in receivership) v Rowling [1978] 2 NZLR 314. The strike out jurisdiction is one to be used sparingly – Electricity Corporation Limited v Geotherm Energy Limited [1992] 2 NZLR 641, but will not be precluded by the application raising difficult questions of law requiring extensive argument – Gartside v Sheffield Young & Ellis [1983] NZLR 37 (CA). The Court, however, should be slow to rule on novel categories of duty of care.
[58] In their present application, DTI Limited, Mr Thompson and Mr Browne contend that even if the facts pleaded in his counterclaim by the first defendant are assumed to be true, they do not disclose any possibly tenable causes of action against any of those defendant parties. I turn now to consider each of the individual claims.
Claim against DTI Limited
[59] The principal allegation of the first defendant in bringing this claim is to the effect that the true parties to the contract were DTI Limited and not the plaintiff as employer/principal, and the first defendant as contractor.
[60] This central allegation, however, in my view, is entirely inconsistent with the first defendant’s counterclaim against the plaintiff itself and with the position the first defendant has taken elsewhere. In the first defendant’s counterclaim dated 27
November 2006, he states at paragraph 2:
2.The plaintiff is Corporate Jet Services Limited…carrying on business at Ardmore Airport, and was the principal in the building project.
[61] In addition, at paragraph 12 of the first defendant’s counterclaim, he refers to the contract “as previously described in the (plaintiff’s) first amended Statement of Claim dated 20 February 2006”. The contract itself, a copy of which is exhibited to the first defendant’s affidavit dated 26 October 2006 filed in this proceeding (and identified as “the contract” in that affidavit) is clearly expressed to be between the plaintiff and Mr Ward. DTI Limited does not feature in this contract.
[62] In addition, the second defendant has instigated two adjudications in terms of the Construction Contracts Act 2002 with respect to progress payments sought under the contract. Although in each case the first defendant’s claim was rejected, it is significant that the first defendant brought both claims solely against the plaintiff as principal/employer. No adjudication was sought against DTI Limited, nor was any claim made against Mr Thompson or Mr Browne in any way.
[63] Further, the first defendant does not in any way appear to suggest the existence of any agency relationship between the plaintiff and DTI Limited. Nor does the second defendant allege that there was any mistake in the recording of the correct parties to the contract, or seek rectification of that contract to reflect who he contends may be the “correct party”. Indeed, if he was to do so, this would be inconsistent with his counterclaim against the plaintiff itself.
[64] The first defendant’s position, whilst acknowledging that the plaintiff is a duly incorporated company, appears to suggest that it is in some way a fictitious entity, and that the Court should somehow lift the corporate veil here so as to find DTI Limited liable.
[65] Alternatively, the first defendant appears to hold the view that the law should not distinguish between the plaintiff company or DTI Limited, or indeed Mr Thompson or Mr Browne. This fails to acknowledge that these parties are separate legal entities, and as I have noted, the first defendant’s pleading does not in any way support a multiplicity of obligations under a single contract with one contracting party.
[66] Any contention from the first defendant that an original unsigned first draft of the contract may have been between DTI Limited and the first defendant is of little relevance here. The final concluded contract was with the plaintiff and not DTI Limited. Further, the various progress payment claims made in the name of the first defendant and the second defendants with respect to the contract were made in invoices effectively addressed to the plaintiff. There was no mention by the first defendant of DTI Limited in any of these invoices.
[67] And, there is no evidence before the Court to support the first defendant’s claims that Mr Thompson had said the plaintiff was being set up so that if there were any issues or problems, Mr Thompson could just “walk away from the plaintiff”. It is also of no relevance, in my view, to the issue of who the first defendant may have contracted with, that business premises he visited had the name DTI Limited written on them rather than the name of the plaintiff.
[68] Weighing up all these matters and the arguments which the first defendant endeavoured to advance before me, I conclude that on the allegations made by the first defendant in his counterclaim, no reasonably tenable cause of action has been made out against DTI Limited.
[69] The application by DTI Limited for an order striking out the counterclaim filed against it by the first defendant succeeds. A strike out order will follow.
Claims against Mr Thompson and Mr Browne
[70] The allegations in the first defendant’s counterclaim against Mr Thompson and Mr Browne are summarised in paragraph [55] above. Mr Thompson and Mr Browne contend that these allegations do not disclose a tenable cause of action against either of them.
[71] The essence of those allegations appears to be that Mr Thompson and Mr Brown in their capacities as directors of the plaintiff or DTI Limited have obstructed the first defendant’s efforts to complete his obligations under the contract and frustrated his efforts to be paid by the plaintiff under that contract.
[72] In addition, the first defendant at paragraph 95 of his counterclaim contends that Mr Thompson and Mr Browne as directors of the plaintiff had “an equal responsibility to act fairly and adhere to the terms and conditions of the contract”.
[73] To some extent, by this the first defendant is contending that Mr Thompson and Mr Browne as directors of the plaintiff in some way guaranteed, or were obliged to guarantee, the performance of the plaintiff’s obligations under the contract with the first defendant.
[74] I am satisfied there can be no basis in law for this contention. The relevant duties of Mr Thompson and Mr Browne as directors of the plaintiff are those set out in the Companies Act under s131 (duty to act in good faith and in the best interests of the plaintiff company) and s137 (duty to exercise reasonable, care, diligence and skill). Those duties are owed to the plaintiff company itself and not to third parties – s169(3) Companies Act 1993.
[75] Before me, counsel for Mr Thompson and Mr Browne accepted that allegations made by the first defendant at paragraph 97 of his counterclaim might conceivably support a claim based on the tort of unlawful interference with contractual relations, were it not that these allegations are to the effect that Mr Thompson and Mr Brown were acting as directors of the plaintiff company itself. The first defendant’s allegation essentially is that the plaintiff itself, through the agency of its directors, obstructed the first defendant’s performance of its contract with the plaintiff.
[76] Under these circumstances it is clear that no sustainable cause of action has been made out in the first defendant’s counterclaim against Mr Thompson or Mr Browne.
[77] An order striking out that counterclaim is to follow.
[78] Although strictly speaking, it is not necessary to deal with the further arguments raised on behalf of Mr Thompson and Mr Browne to the effect that the counterclaim is:
a) Unnecessarily prolix given that it covers 20 pages and contains 137 paragraphs including much irrelevant material; and
b)Vague and embarrassing in that it is frequently difficult or impossible to ascertain what causes of action are being relied on, and many allegations are inconsistent with positions taken elsewhere in the counterclaim and in the first defendant’s Statement of Defence;
In my view, there is also substance in these contentions.
[79] Finally, before me counsel for DTI Limited, Mr Thompson and Mr Browne submitted that these parties have been improperly joined to this proceeding, and their names should be struck out pursuant to r97 High Court Rules.
[80] It is clear that the principles on which the Court is to exercise its discretion under r97 are the same as those which apply under r186 – that is whether the allegations are so clearly untenable as to be incapable of success – McKendrick Glass Manufacturing Company Limited v Wilkinson [1965] 1 NZLR 717, and Business Associates Limited v Telecom Corporation (1992) PRNZ 317.
[81] For all the reasons I have outlined above, I find also here that the allegations made in the counterclaim by the first defendant against DTI, Mr Thompson and Mr Browne have no prospect of success and accordingly, their names as counterclaim defendants should be struck out.
Conclusion
[82] It will be apparent, therefore, that the strike out applications by DTI Limited, Mr Thompson and Mr Browne have been successful.
[83] An order is now made pursuant to r186 High Court Rules striking out the first defendant’s counterclaims against DTI Limited, Mr Thompson and Mr Browne.
[84] In so far as it may be necessary, an order is also made pursuant to r97 High Court Rules striking out the names of DTI Limited, Mr Thompson and Mr Browne as second counterclaim defendant, third counterclaim defendant and fourth counterclaim defendant respectively in this proceeding.
[85] As to costs, DTI Limited, Mr Thompson and Mr Browne have succeeded in their applications, and as I see it, there is no reason why costs should not follow the event in the normal way. Costs are therefore awarded to DTI Limited, Mr Thompson and Mr Browne against the first defendant with respect to these application on a category 2B basis, together with disbursements, if any, as approved by the Registrar.
Applications by the Fifth Counterclaim Defendant and the Sixth and Seventh
Counterclaim Defendants for Security for Costs Against the First Defendant
[86] It is convenient to consider both of these applications together, and I now do so.
[87] The fifth counterclaim defendant, Kevin Mitchell, was appointed engineer to the hangar construction contract on 30 August 2005.
[88] I noted above that around 2 August 2005 the first defendant Mr Ward submitted payment claim 3, which was payable “on standing frames and roof”. The plaintiff refused to pay the claim on the basis that this milestone had not been reached.
[89] Around 1 September 2005 the first defendant served the plaintiff with a notice to adjudicate under the Construction Contracts Act 2002. A Mr Firth was appointed adjudicator, and his determination was issued on 14 October 2005. The determination found no monies were owed, as the claim was incorrectly made. It found the milestone of standing frames and roof for the hangar had not been met.
[90] As I have noted earlier, also at the end of August 2005 the Papakura District Council inspected the site, and on 24 August 2005 issued a Notice to Fix pursuant to s164 and s165 of the Building Act.
[91] The Council required additional design information. Mr Mitchell suggested that it would be prudent for the first defendant to engage Mr Dale, the original engineer under the contract, in relation to the additional work.
[92] The first defendant argued that Mr Mitchell should provide the designs, as he was engineer to the contract now. Mr Mitchell’s reply was that he had not been engaged as the design engineer, and his role under the contract was administrative.
[93] Around 20 October 2005 the first defendant reissued payment claim no. 3. The plaintiff again refused to pay, because the contractual milestone had not been reached.
[94] Around 26 October 2005 Mr Mitchell certified that the first defendant was persistently flagrantly or wilfully neglecting to carry out his obligations under the contract and required him to remedy the default.
[95] Subsequently, the construction contract was terminated by notice dated 11
November 2005.
[96] The plaintiff had also at some point made allegations against the first defendant that the floor had not been properly laid in accordance with specifications and it appears that after the 11 November termination date, reconstruction of the floor was required.
[97] From his counterclaim, the first defendant’s claims against Mr Mitchell appear to be that:
a) He should not have determined that the floor had to be remedied by complete reconstruction.
b) He refused to certify payment claim no. 3.
c) He refused to certify payment for the additional design work of Mr
Dale.
d) He refused to undertake any design work.
[98] Security for costs by the fifth counterclaim defendant Mr Mitchell here is sought in the sum of $47,680.00. This represents category 2B scale costs calculated by counsel for Mr Mitchell based upon a four day trial.
[99] So far as the counterclaims against the sixth counterclaim defendant (Rudsits Transport Limited) and the seventh counterclaim defendant (Pro Floors Limited) are concerned, I now set out the background to these claims.
[100] In March 2005 Mr Ward apparently approached Mr Rudsits, a director of the sixth counterclaim defendant, to supply and lay hardfill material as preparatory work for the laying of the concrete slab at the Ardmore hangar site.
[101] On 23 March 2005 the sixth counterclaim defendant provided a quotation to Mr Ward for this work. The sixth counterclaim defendant was duly engaged in accordance with that quotation and subcontracted the seventh counterclaim defendant to undertake part of the work.
[102] The sixth and seventh counterclaim defendants undertook the work between
March and April 2005.
[103] On 28 April 2005 they were told by Mr Ward that he did not wish them to undertake any further work at the property.
[104] On 30 April 2005 the sixth counterclaim defendant rendered an invoice to the first defendant for the sum of $11,160.03 (incorporating the seventh counterclaim defendant’s invoice of $3,532.50). The first defendant paid a portion of this invoice, but a balance of $5,160.03 remains outstanding.
[105] On 27 November 2006 the first defendant issued his counterclaim against the sixth counterclaim defendant and the seventh counterclaim defendant.
[106] In the counterclaim Mr Ward seeks judgment against the sixth counterclaim defendant and the seventh counterclaim defendant for amounts which seem to total approximately $700,000.00, with further damages still to be quantified.
[107] It is clear that the works carried out by those counterclaim defendants were minimal in terms of the total project. Their total invoice for this work rendered in April 2005 was $11,160.03.
[108] Although it is somewhat difficult to discern, it appears that Mr Ward’s counterclaim against the sixth counterclaim defendant and the seventh counterclaim defendant alleges that they did not properly carry out their contract to supply and lay hardfill material at the site, and thereby problems arose subsequently with the laying of the concrete slab on top of this material which meant the floor had to be completely reconstructed.
[109] This is strongly disputed by the sixth counterclaim defendant and the seventh counterclaim defendant.
[110] As to the quantum of security for costs sought here, the sixth counterclaim defendant and the seventh counterclaim defendant together seek security in the sum of $53,920.00. They say this sum is for a five day trial. Again, it is calculated, however, upon a category 2B scale basis.
Counsel’s Arguments and My Decision
[111] The present security for costs applications were made pursuant to r60(1)(b) High Court Rules which provides:
60. Power to make order for security for costs
(1) Where the Court 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 -
the Court may, if it thinks fit in all the circumstances, order the giving of security for costs.
[112] On the counterclaim the first defendant effectively stands as the plaintiff in terms of this rule and the counterclaim defendants are the defendants. The two-step approach under the rule is well established. Turning to r60, first the Court must address whether the “threshold test” (reason to believe a plaintiff/claimant is unable to pay costs) has been met. Once this threshold has been passed, a second question arises – Should the Court exercise its discretion to order security for costs in the circumstances of the case (Hamilton v Papakura District Council (1997) 11 PRNZ
333, 335-336).
[113] The threshold test requires the Court to be satisfied that there is reason to believe that if unsuccessful, the plaintiff/claimant will not be able to meet an adverse costs order. Authority exists to the effect that a plaintiff’s/claimant’s failure to provide information about its means may be construed as inferring impecuniosity – Nikau Holdings Limited v BNZ (1992) 5PRNZ 430, 436. However, before such an adverse inference may be drawn, some evidential foundation to support the contention will be required – New Zealand Kiwifruit Marketing Board v Maheatataka Coolpack Limited (1993) 7 PRNZ 209, 213.
[114] With regard to the second question, the authorities suggest that the Court’s discretion under r60 is not to be fettered by the application of principles. It is to be exercised based on a careful assessment of the circumstances of the particular case – A.S. McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747. There is no pre-disposition towards either the grant or refusal of an application – Bell Booth Group Limited v Attorney-General (1986) 1 PRNZ 457, 460.
[115] A balancing of the interests of the parties is necessary at this point. If an order for security for costs will prevent the plaintiff/claimant bringing a claim, such an order should be made only after careful consideration and where the claim has little chance of success. This must be balanced against the need to protect a defendant from unjustified litigation (especially where it may be overly complicated or unduly protracted – A.S. McLachlan Limited v MEL Network Limited).
[116] The merits of a case, in so far as they can be assessed at the interlocutory stage will be relevant to the exercise of the discretion under r60. As McGechan on
Procedure at para HR60.03(b) notes, there is of course a very real limit as to how far such an enquiry as to the merits of a case can be made, particularly at an early stage of the proceeding – Meates v Taylor (1992) 5 PRNZ 524 (CA).
[117] Further factors have been regarded as relevant in considering applications for security for costs. These were outlined in McGechan on Procedure at para HR60.03 in the following terms:
(c) Impecuniosity; any “reasonable probability” established by persuasive evidence - mere assertion will not suffice - that the plaintiff’s impecuniosity results from the defendant’s actions complained of in the proceeding: Davy v Howell (1993) 7 PRNZ
141; Weld Street Takeaways and Fisheries Ltd v Westpac Banking
Corporation [1986] 1 NZLR 741 at 743. As with the merits assessment of this factor, short of a full hearing, is regularly
acknowledged as being very difficult, if not impossible: Meates v
Taylor (1992) 5 PRNZ 524 (CA).
(d) Delay; in terms of delay, factors include:
(i) Whether the application was made as soon as the defendant became aware, or could with reasonable enquiry have become aware, of the plaintiff’s likely inability to meet costs.
(ii) Any needless delay, particularly if designed to prejudice the plaintiff.
(iii) Whether, and if so to what extent, the delay has prejudiced the plaintiff. An obvious example is a plaintiff who has expended substantial sums, including legal costs, to get a proceeding to the brink of trial, only to be met by an application for security, deliberately withheld to the eleventh hour.
[118] In addition, it is clear that security for costs may be ordered against a litigant in person – Mihaka v Attorney-General (HC Whangarei, 1 November 2000, CP3/00, Robertson J).
[119] I turn now to consider the two applications before the Court, bearing in mind the various matters which I have outlined above.
Threshold Test of Impecuniosity
[120] As I have noted, this threshold test requires the Court to be satisfied that there is reason to believe that if unsuccessful, the first defendant here will not be able to meet an adverse costs order. For the reasons I will now outline, in my view there is little doubt in the present case that this impecuniosity test has been met.
[121] First, it is not disputed here that the first defendant has failed to put before the Court any information of any kind about his means or his financial position. In my view there is a reasonable argument that this can be construed as inferring impecuniosity in the present case – Nikau Holdings Limited v BNZ. Mr Ward has not provided what one would expect - a list of his assets and liabilities, nor any financial statements or information of any kind as to his financial position.
[122] Secondly, unrefuted suggestions are made in the affidavit of Mr William Keith Rudsits filed in support of the sixth and seventh counterclaim defendants’ application that Mr Ward has been unable to pay his subcontractors, as he was going “broke”.
[123] And, according to counsel for the fifth counterclaim defendant, there is only one property which could be found in which Mr Ward appeared to have an interest of any kind, and that was owned by a family trust in which he is a trustee. In addition, that property has a claim or caveat registered against it. Further, in documents dated 19 February 2007 which Mr Ward has supplied in reply to the present applications, he states:
The first defendant is entitled to justice in this situation, irrespective of his financial circumstances.
(emphasis added)
This comment, linked with Mr Ward’s complete failure to provide any information as to his financial position, as I see it, can reasonably be said to imply impecuniosity on his part. And finally, before me Mr Ward went so far as to acknowledge that he was quite unable to meet any adverse award of costs against him of amounts totalling
$30-40,000.00 or more.
[124] For all these reasons I find, therefore, that the threshold test of impecuniosity is met here.
Merits of Proceeding
[125] In considering the merits of the first defendant’s counterclaim, I remind myself of the comments noted above (at paragraph [116]) that there is always a difficulty and a very real limit as to how far such an enquiry can be made, particularly at what is often a relatively early stage of the proceeding – Meates v Taylor.
[126] Notwithstanding this, counsel for both the fifth counterclaim defendant and for the sixth and seventh counterclaim defendants have each submitted that the claims made by Mr Ward against their respective clients are weak.
[127] So far as the claim against the fifth counterclaim defendant, Mr Mitchell, is concerned, the contentions regarding non-certification of the payment claim no. 3 would seem to have little substance. This payment claim was twice the subject of adjudication under the Construction Contracts Act 2003 by Mr Derek Firth and Mr Kenneth Johnson. Each adjudicator found the refusal to pay the claim to be justified, as Mr Ward had not reached the milestone requirements required for payment.
[128] Regarding the claim against the fifth counterclaim defendant for remedial work required on the floor, it seems that the decision to remediate the floor by reconstruction was made subsequent to the construction contract being terminated.
[129] The plaintiff itself appears to be claiming from the first defendant an amount representing the cost of the remediation of the floor in its Statement of Claim, but the first defendant denies remediation was necessary. A remedy of course exists for the first defendant if, as he maintains, the floor did not require remediation and/or that the quantum of the claim is unreasonable. This is to raise these matters in his defence of the plaintiff’s claim.
[130] So far as non-certification by the engineer Mr Mitchell of Mr Dale’s additional design work is concerned, there seems to be a reasonable argument that it was not part of Mr Mitchell’s role to undertake this design work. The design had been completed prior to Mr Mitchell’s appointment to the contract. As I see it, there is substance in the argument that Mr Mitchell properly refused to provide amendments to Mr Dale’s work.
[131] Further, it seems in any event difficult to see how this matter may have caused the first defendant any loss here.
[132] In my view, therefore, at this early stage of the proceeding, it could not be said that the first defendant’s claims against the fifth counterclaim defendant Mr Mitchell are strong.
[133] With regard to the claims against the sixth and seventh counterclaim defendants, as I have noted already (at paragraph [106]), Mr Ward’s claim here is substantial, particularly given the small amount of work (for which an invoice of only $11,160.03 was rendered) undertaken by those counterclaim defendants on the project.
[134] On this aspect, counsel for the sixth and seventh counterclaim defendants properly notes that these parties had a very limited scope of retainer with respect to hardfill works they were to carry out. Their position too is specifically that the first defendant did not supply them with any details of the project, including documents and plans, that they were directed by Mr Ward throughout in terms of the work undertaken and followed his instructions, and when they were told at a certain point to cease the works that they were undertaking, they did so immediately.
[135] Before me there was no real response from Mr Ward to these contentions advanced for the sixth and seventh counterclaim defendants. He made no comment or submission upon the contention that he controlled the project fully and directed the sixth and seventh counterclaim defendants in the work they undertook.
[136] Again, on this basis, it seems reasonable to conclude that Mr Ward’s counterclaim against the sixth and seventh counterclaim defendants may not turn out to be a particularly strong one.
Cause of First Defendant’s Impecuniosity?
[137] The next matter for consideration is whether the conduct of the fifth counterclaim defendant or the sixth and seventh counterclaim defendants has itself caused or contributed to any impecuniosity the first defendant suffers. As I have noted above, the authorities establish that where there is a reasonable probability a party has caused or significantly contributed to a claimant’s impecuniosity, this militates against an application for security – Davey v Howell and Weld Street Takeaways & Fisheries v Westpac Banking Corporation.
[138] Again, before me, Mr Ward advanced no real arguments to suggest that his impecuniosity may have been caused or contributed to by the actions of the fifth counterclaim defendant or the sixth or seventh counterclaim defendant here.
[139] As the authorities note, it must be established that there is a “reasonable probability” that Mr Ward’s impecuniosity here results from the other parties’ actions. This “reasonable probability” needs to be established by the advancing of some persuasive evidence. A mere assertion will not suffice. In my view, in this case the plaintiff has failed to establish this reasonable probability by a wide margin. This aspect does not assist the first defendant here.
Balancing the Interests of the Parties
[140] From the authorities it is clear that access to the Courts for a genuine plaintiff is not lightly to be denied. On the other hand, the Court is also to note the interests of a defendant which need to be weighed in the balance. In this regard, a defendant must be:
Protected against being drawn into unjustified litigation, particularly where it is overcomplicated and unnecessarily protracted.
- A.S. McLachlan Limited v MEL Network Limited.
[141] In the present case, Mr Ward has joined nine counterclaim defendants. This has the potential of greatly increasing the likely cost of this proceeding. Discovery and inspection alone will be onerous and trial costs will be significantly increased due to the number of parties involved.
[142] As I have alluded to already, in my view Mr Ward’s counterclaim is prolix and does not include with any precision a clear statement of what the fifth counterclaim defendant or the sixth and seventh counterclaim defendants are alleged to have done wrong.
[143] I conclude that the proper balancing of these interests in the present case must fall on the side of the fifth, sixth and seventh counterclaim defendants.
Delay
[144] Turning to consider now any questions of delay, in the present case I am satisfied that there has been no unreasonable delay on the part of the fifth counterclaim defendant or on the part of the sixth and seventh counterclaim defendants in making the present applications, given that the counterclaim against them was brought only on 27 November 2006. This aspect also is of no assistance to the first defendant’s opposition to the applications.
[145] In conclusion, I find that in balancing all the factors I am required to consider the present security for costs applications should succeed. Orders for security for costs are now to be made first in favour of the fifth counterclaim defendant, and secondly in favour of the sixth and seventh counterclaim defendants against Mr Ward with respect to his counterclaims.
Quantum
[146] As to the quantum of security to be ordered in each case as I noted earlier, the amount sought by the fifth counterclaim defendant is $47,680.00, based upon
category 2B costs for a four day trial. The amount sought by the sixth and seventh counterclaim defendants is $53,920.00, which is also category 2B costs based upon a five day trial.
[147] On the issue of quantum, McGechan on Procedure para HR60.07 states:
The amount of security is equally in the Court’s discretion. It is not necessarily to be fixed by reference to likely costs awards. Rather, it is to be what the Court thinks fit in all the circumstances: A.S. McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747 (CA). Those circumstances include:
(a) The amount or nature of the relief claimed.
(b) The nature of the proceeding, including the complexity and novelty of the issues, and therefore the likely extent of interlocutories.
(c) The estimated duration of trial.
(d) The probable costs payable if the plaintiff is unsuccessful, and perhaps also the defendant’s estimated actual (i.e. solicitor and client) costs.
[148] Here, a breakdown of the category 2 scale costs calculation has been provided by counsel. In each case, costs calculated at the category 2 scale rate of
$1,600.00 per day have been used.
[149] Before me, the first defendant took no real issue with the quantum sought. [150] As I have noted, the fifth counterclaim defendant calculated costs based on a
four day trial. Mr Stringer, counsel for the sixth and seventh counterclaim defendants, was adamant that a five day trial would be required, given especially the first defendant’s decision to join nine extra parties to the litigation. Mr Ward was able to provide no assistance on this issue of the hearing time required for trial. On balance, I accept Mr Stringer's five day trial estimate and I find, therefore, that total category 2B scale costs in this matter would amount to $53,920.00. This of course excludes any disbursements or experts fees.
[151] In considering the ultimate quantum of any award, McGechan on Procedure at para HR60.07 notes in part:
In so far as past awards of security are a legitimate guide, they generally represent some discount on the likely award of costs as calculated under Schedule 3.
[152] With this factor in mind, in my view the appropriate amount for security for costs in the present case is for the applicants on each of the two applications before me to have a total figure towards costs and disbursements of $43,000.00.
Conclusion
[153] The applications for security for costs by the fifth counterclaim defendant and by the sixth and seventh counterclaim defendants succeed.
[154] An order is now made that within 30 working days of the date of this judgment the first defendant is to give security for costs as follows:
a) To the fifth counterclaim defendant:
i) The sum of $43,000.00, by paying that sum into Court.
ii)Such security sum is to be deposited in an interest-bearing account, with the interest accrued thereon to be available as further security for costs.
iii)If the first defendant is unable to satisfy this order for security for costs within the 30 working day period from the date of this judgment noted in this paragraph, then from that date this proceeding is stayed against the fifth counterclaim defendant until security in the sum of $43,000.00 is properly provided.
b) To the sixth and seventh counterclaim defendants:
i) The sum of $43,000.00 by paying that sum into Court.
ii)Such security sum is to be deposited in an interest-bearing account, with the interest accrued thereon to be available as further security for costs.
iii)If the first defendant is unable to satisfy this order for security for costs within the 30 working day period from the date of this judgment noted in this paragraph, then from that date this proceeding is stayed as against the sixth and seventh counterclaim defendants until security in the sum of
$43,000.00 is properly provided.
[155] As to costs on these applications, the fifth counterclaim defendant and the sixth and seventh counterclaim defendants have each been successful and are entitled to awards of costs. Costs are therefore awarded to the fifth counterclaim defendant on the one hand and to the sixth and seventh counterclaim defendants on the other against the plaintiff on these applications on a category 2B basis, together with
disbursements as fixed by the Registrar.
Associate Judge D.I. Gendall
Solicitors:
Knight Coldicutt McMahon Butterworth, Auckland for Plaintiff
Duthie Whyte, Auckland for Second Defendants Heaney & Co, Auckland for Third Defendant Duncan Cotterill, Auckland for Fourth Defendant
Morgan Coakle, Auckland for Fifth Counterclaim Defendant
Inder Lynch, Auckland for Sixth and Seventh Counterclaim DefendantsPhillips Fox, Auckland for Eighth Counterclaim Defendant
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