Craike v Tilsley
[2012] NZHC 565
•28 March 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-2846 [2012] NZHC 565
BETWEEN DJ CRAIKE AND JA CRAIKE First Plaintiffs
ANDSHOWFIELDS EQUESTRIAN CENTRE LIMITED
Second Plaintiff
ANDR TILSLEY First Defendant
ANDSD WATSON LIMITED Second Defendant
ANDS D WATSON Third Defendant
ANDE S WATSON Fourth Defendant
ANDR WATSON Fifth Defendant
Hearing: 11 November 2011
Counsel: N W Woods for Plaintiff
P Grace for First Defendant
P Webb for Second to Fifth Defendant
Judgment: 28 March 2012 at 3 pm
RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Security for Costs)
This judgment was delivered by me on 28 March 2012 at 3 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Rice Craig, PO Box 295 1701, Auckland
Franklin Law, PO Box 43, Pukekohe
Webb Morice, P O Box 316, Pukekohe
Date ..........................
DJ CRAIKE AND JA CRAIKE V R TILSLEY HC AK CIV-2010-404-2846 [28 March 2012]
[1] In this proceeding the plaintiffs sue the defendants for breach of contract and negligence.
[2] The first defendant is sued as the plaintiffs’ consulting engineer on a large project the plaintiffs embarked on to develop an equestrian centre. The second defendant is an earthworks and drainage contracting company that is sued in respect of major earthworks undertaken for the development. The remaining defendants are family members who own and operate, or work for, that company. The plaintiffs seek in excess of $900,000 in damages from the defendants, being the cost of remedial works they say the defendants are liable for.
[3] In the present application, the defendants apply jointly for an order for the giving of security for costs. The first defendant seeks security in the sum of
$108,852.00, and the remaining defendants seek a global order for security in the same amount. The application is made in reliance on High Court Rule 5.45.
[4] Relevantly r 5.45 states:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a) ...
(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] The application is opposed. The plaintiffs say they have a good case that they will be unable to pursue if they have to give security for costs.
[6] There is no dispute that the jurisdictional threshold in r 5.45(1)(a) is met. It is common ground that the plaintiffs are impecunious and will, in all probability, be unable to pay the costs of the defendants if their claim is unsuccessful. There is also no real dispute that if required to give security the plaintiffs will likely have to
abandon their claim. The real issue for determination is therefore whether there are discretionary factors that:
(a) Favour giving the defendants a measure of protection for their costs if the plaintiffs are unsuccessful, and
(b)Outweigh the likely adverse effect that such an order will have on the plaintiffs.
Background
[7] The first plaintiffs, Mr and Mrs Craike, own a rural property at 389 Springhill Road, Hampton Downs, Auckland. Mr and Mrs Craike are the directors and shareholders of the second plaintiff, Showfields Equestrian Centre Limited, which was to operate an equestrian centre at the property.
[8] Between November 2006 and February 2008, the plaintiffs had substantial works undertaken to upgrade the equestrian facilities at the property. The works were done in stages. Stage 2 works included several horse arenas (outdoor and indoor), a warm up area, car parking and access roads including an access road to the lower paddocks on the property, a pond and associated dam, and the related earthworks and storm water drainage.
[9] The Waikato District Council granted resource consent for the stage 2 works on 5 October 2007. The resource consent contained conditions governing the proposed earthworks and drainage works. Relevantly, Utilities Condition 4 required the submission of an Earthworks Plan for the Council’s approval prior to any construction commencing, and Utilities Condition 5 required that a Geotechnical Completion Report and a statement of professional opinion be submitted at the
completion of the works, in each case to the satisfaction of the Council.[1]
[1] These conditions require that:
(a) The Earthworks Plan show (among other things):
(i) Proposed depth of fill, volumes, cross sections and final contours;
(ii) Evidence that a minimum of 1.5 factor of safety is obtained on all cut and fill slopes; (iii) Details of the location and treatment of any surplus material; and
(iv) Confirmation that the proposed earthworks are permitted by the
Regional Council or evidence of the required consent; and
(b) The Geotechnical Completion Report include (among other things) a final contour plan, a site plan showing all fill excavated or placed on site and certification by a chartered professional engineer that the fill is or is not suitable for development, the depth of fills and cuts and cross sections of the original slope and the slope of the fill material.
[10] The plaintiffs engaged Mr Tilsley, the first defendant, to provide advice about geotechnical and drainage matters in connection with the Stage 2 works.
[11] On 20 October 2007, in accordance with the conditions of consent, Mr
Tilsley submitted an Earthworks Plan to the Council.
[12] There is evidence that when the Stage 2 works were carried out Mr Tilsley attended the site regularly. He also submitted several reports to the Council in fulfilment of the conditions of consent. These included a report dated 3 February
2008, the express purpose of which was to give a geotechnical assessment of the foundation bearing strengths of the covered arena pursuant to Utilities Condition 3. The report contains advice as to the nature of Mr Tilsley’s involvement in the project and the required earthworks. It indicates that the earthworks were substantially complete at the date of the report:
Site inspection and tests
The writer is the Project Manager of the entire project and has supervised the major earthworks on the Springhill Road site.
On the 25th January 2008, Council’s Compliance Officer inspected the earthworks which were substantially complete. There remains only minor trimming work and sowing of grass seed on the re-spread topsoil to be completed.
The site of the covered arena has been excavated and trimmed to the finished design profile. In addition the surface has been rolled with a steel wheeled roller to give a glass like finish. Compacted metal will be laid on this earth surface to give a satisfactory surface for the arena.
The Project Surveyor has carefully located the perimeter of covered arena and pegged the location of the foundation pads.
On Saturday the 26th January 2008 we carried out a series of scala penetrometer tests on the finished surface at the location shown on the attached plan...
[13] The earthworks for Stage 2 were carried out largely by the second defendant, S D Watson Ltd and members of the Watson family who are also named as defendants. There had been some work undertaken by another contractor but the arrangement had proved unsatisfactory to the plaintiffs.
[14] There is evidence that sometime in late January or early February 2008, the plaintiffs arranged for the S D Watson Ltd to carry out more extensive earthworks than those authorised by the resource consent or shown on the Earthworks Plan. The unauthorised works included two significant activities:
(a) Additional fill was placed over the southwest side of a gully to modify the warm up area. Instead of a sloping surface, a flat area was created; and
(b)Significant earthworks were undertaken to create a long and steep access road that commences at the edge of the warm up area where the additional fill had been placed, and traverses the slopes below, to the lower paddocks.
[15] Mr Tilsley also submitted a stormwater report dated 15 February 2008 to the Council with a new “as built” site plan that had first been completed.. Mr Tilsley commented on the site plan and on the earthworks generally. He reported on a much flatter contour created by the cut and fill operation:
Enclosed is a new site plan which is an “as built” and was completed just a
few days ago.
You will note the buildings and the other arena have been modified in some respects.
...
Generally the balance of the site has been re-contoured to the contours shown on the site plan.
The cut and fill operation has now produced a contour which is much flatter than the original site so run-off will be slower than the original ground.
In addition the surfaces are now either grassed berms or are sand covered open arenas.
[16] It appears that Mr Tilsley submitted a Geotechnical Completion Report dated
8 August 2008 after receiving a request from the Council. It is suggested that the report contained a statement that the “site is generally stable with some minor frittering of banks will occur over the first few years as control batters settle down and vegetation becomes established”.
[17] Various defects in the works emerged from August 2008 onwards. Significant defects included the collapse of fill and slope instability arising from the extensive unauthorised earthworks undertaken to level out the warm up area and to construct the unauthorised access road. Other defects included inadequate drainage and resulting ponding of the outdoor arena, overly steep access and erosion, and the serious contamination of equestrian sand with greywacke chips that caused damage to horses’ hooves.
[18] The plaintiffs and the defendants dispute the latter’s responsibility for the defects.
[19] In the case of Mr Tilsley, the dispute concerns (among other things) the extent of his role in relation to the works that were undertaken on site and principally his responsibility for the unauthorised earthworks. The plaintiffs contend that Mr Tilsley was not simply engaged to give engineering and drainage advice in connection with the authorised earthworks as he contends. They say that he was engaged to act as project manager for the entire works and failed to obtain their informed consent for work that fell outside the Earthworks Plan. Nor did he ensure that such work was authorised by the necessary consents or provide adequate supervision for it. They say that he allowed the earthworks contractor to level the warm-up area and to build the access road from the warm-up area to the lower paddocks, and failed to warn them of the risks of failure inherent in this work.
[20] Mr Tilsley insists that the plaintiffs’ contentions are wrong. He denies that he was ever engaged to act as project manager and insists that he was not responsible in any way for the unauthorised works to the warm-up area and the access road. Relevantly, he says that his brief was confined to the engineering aspects of the authorised earthworks and drainage work and that he was unaware the unauthorised
works were to be undertaken. In his affidavit evidence, Mr Tilsley discusses the unauthorised works to develop the warm-up area by reference to discussions he had with Mrs Craike in 2007, and the Earthworks Plan, and the accompanying letter that he sent to the Council in October 2007:
16.The Earthworks Plan notes two areas to the south and west of the indoor arena. One is labelled as the Outdoor Arena the other is labelled the Grass Area. My letter to the Council noted that the contour of the Grass Area created a 2.5 metre cross fall. The gaps in the contours would be filled with soil to smooth the slope. Jayne had originally wanted the Grass Area to be completely level so it could be used as a warm-up area for horses before they entered the main arena for competition. I told her this was quite impossible unless she was prepared to spend a large amount of money on retaining walls and other geotechnical experts. This is because to level the existing slope would require fill up to 6 m² from the bottom of the slope over an area covering 4800 m². That fill would then fall away if not properly retained by either large and expensive retaining walls, or the fill had to be stepped.
17.…Stepping was not an option as this would markedly reduce the area of land available for the warm-up area... I made it quite clear, that without proper retention this slope would fail.
[21] Mr Tilsley further elaborates that he learned about the unauthorised work to create the warm-up area in late January or February 2008, and though he cautioned against it, he could do nothing about it. Whether ultimately material or otherwise, his evidence is not wholly consistent. He says on the one hand that he was no longer regularly on site and infers he did not know therefore about this work until it was underway. At the same time, he was on one of his regular visits when he says he discovered what had happened:
20. Sometime towards the end of January 2008 Jayne or David instructed Robert Watson to fill the slope on the Grass Area. At that point in time I was no longer regularly onsite...
21. I discovered what Jayne had done in late January or early February
2008. I was one of my regular visits and saw what had been done. I immediately spoke to Robert Watson and asked him who had undertaken the filling and why. He had said he had filled the slope on Jayne’s instruction (and in fact was still doing it when I spoke to him). I then went and spoke direct with Jayne. I told her, as I had told her before, that what Robert Watson had done was unauthorised and that, in any event the soil would slip sooner or later. I told her the soil needed to be removed and the land reinstated in accordance with the Earthworks Plan. Jayne said she was not prepared to remove the soil and was prepared to take the risk as to whether or not it would fail. There was nothing further I could do. It was her land
and she could do with it whatever she liked. I knew it was unauthorised but it was not for me to complain about my employer to the Council. Jayne knew very well what the Counsel’s requirements were, she knew of the warnings I had given her (both before and after the EP was lodged, but she elected to proceed regardless. [Emphasis added]
[22] In his affidavit evidence, Mr Tilsley also comments on the work to the lower access road. He is emphatic that he had nothing to do with it and did not find out about it until April 2008. He deposes:
22.Sometime in February 2008 S D Watson Ltd, at the instruction of either David or Jayne, or both, created an access track from the upper level down to the motorway paddocks. I was not consulted about this and knew nothing about it. Had I been consulted I would have advised:
(a) It was not authorised by the Resource Consent or mentioned in the EP, and amendment of the EP was required;
(b) Unless the track was properly cut and retained it was bound to slip and fail in the same way I advised the Grass Area would fail if not properly retained;
(c) I would have specific geotechnical advice and design would be required.
23. I was not on site when the track was cut by the Watson.
24.I found out about the lower track in April 2008 when Jayne rang about the storm water drains Robert Watson had placed alongside the lower track. My reply was “What lower track?” and it was then that I learnt that the Watsons had been instructed by either David or Jayne to create this track, which similarly was not part of the approved EP.
[23] Mr Tilsley argues that his position on the lower access road is beyond contention. He deposes:
25.The fact I had no involvement in the creation of the lower track is totally clear from:
(a) The Resource Consent. (b) The Earthworks Plan.
(c) The Second to Fifth Defendant’s Statement of Defence dated
13 October 2010 which states affirmatively (at para 2).
As an affirmative defence the Second, Third, Fourth and Fifth Defendants plead that all works carried out by them (save with possible exception of the access road to the lower
paddocks) were carried out under the supervision of the
First Defendant
[Emphasis added]
26.Paras 12 to 24 of David’s Affidavit also illuminate who gave the instructions to Robert Watson to create the Lower Track, viz:
(24) I did not give the Watson’s authorisation to create the lower access road in the way that they did, the slips to upper slopes, slips to lower slopes, fencing collapsing, ski jump to the upper end of the road, and most of the length/width of the road either collapsing and/or riveted. If road as built had been known to me prior to commencement, I would not have given any go ahead
[Emphasis added]
[24] The plaintiffs do not say that Mr Tilsley authorised S D Watson Ltd to construct the access. Their allegation is, in essence, that he did not warn of the dangers or take reasonable steps to ensure it was adequately engineered or authorised by the Council which, they say, he had a duty to ensure.
[25] The plaintiffs and the Watsons also dispute the Watsons’ responsibility for the defects including those relating to the unauthorised works. The plaintiffs say, in essence, that an experienced and competent earthworks and drainage contractor would or should have been alert to the need to ensure the works were authorised by, and carried out in compliance with, the necessary consents and the Earthworks Plan. Furthermore, such a contractor would have known of the dangers inherent in carrying out the additional unauthorised fill in the grassed area and in building the steep access road. They say in effect that they were uninformed and naive and relied on the contractor to get things right.
[26] The plaintiffs therefore commenced the proceedings on 7 May 2010.
[27] The plaintiffs allege breach of contract and breach of duty of care against the first and second defendants. They also claim that the second defendant is vicariously liable for the actions of the third to fifth defendants in so far as they committed the same breaches. In the alternative, the plaintiffs claim that the third to fifth defendants are independently liable for these alleged breaches.
[28] The defendants deny the plaintiffs have any case against them and raise affirmative defences based on a failure to mitigate and contributory negligence. Mr Tilsley also raises a defence based on termination of contract on 28 January 2008, save to oversee authorised earthworks. He asserts unauthorised earthworks constructed after that date were not part of his contract and were not his responsibility to oversee. S D Watson and the members of the Watson family say that the plaintiffs caused or contributed to any damage or loss suffered by refusing to listen to the concerns they raised in respect of the work.
[29] Mr Tilsley seeks an indemnity or contribution from the second to fifth defendants if he is found to be liable to the plaintiffs.
Legal principles
[30] The cases emphasise that the court’s discretion is not to be fettered by constructing “principles” from the facts of the previous cases as they are not a substitute for a careful consideration of the facts of the particular case. In particular:[2]
It is not a matter of going through a checklist of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given a disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.
[2] A S McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].
[31] Importantly, there is no presumption in the exercise of the Court’s discretion under r 5.45. The circumstances of the case as a whole are relevant.[3]
[3] Attorney-General v Transport Control Systems (NZ) Ltd [1982] 2 NZLR 19 (CA) at 20.
[32] The discretion whether to grant security therefore involves a balancing of the plaintiff’s and the defendant’s interests.[4]
[4] McLachlan at [15] and [16].
[33] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. This must also be taken as contemplating that an order for substantial security may, in effect, prevent the plaintiff from
pursuing the claim. In those circumstances, an order having this effect should only
be made after careful consideration, and where the claim has little chance of success. Access to the court for a genuine plaintiff is not lightly to be denied.[5]
[5] Ibid at [15].
[34] The difficulties of assessing the strength or weakness of a case at an interlocutory stage are well recognised. However, it is also trite law that where possible, the court should try to assess the merits of the case.[6] Dubious prospects of success increase the chances of the plaintiff facing an order for security.
Issues
[6] Meates v Taylor (1992) PRNZ 524 (CA) at 527
[35] The overarching issue for determination is whether it is just in all the circumstances that I exercise my discretion to require the plaintiffs to give security for the defendants’ costs.
[36] Counsel have raised the following questions as material to the exercise of that discretion:
(a) What are the likely merits of the plaintiffs’ case against the first and remaining defendants? Are the merits weak as the defendants contend, or will the plaintiffs have little difficulty making out their case against the defendants, as the plaintiffs contend?
(b) Did the defendants unduly delay in applying for security of costs when
they knew, or ought to have known, of the plaintiffs’ impecuniosity?
(c) Was the plaintiffs’ impecuniosity caused by the actions of any of the defendants? Or does their impecuniosity arise through no fault of the defendants?
[37] I discuss each in turn.
.
What are the likely merits of the case?
[38] For the purpose of the application, all parties accept that the plaintiffs that have suffered damage as a result of the unauthorised works that were undertaken by the Watsons and the estimated costs of rectifying the damage. The parties simply dispute liability.
[39] There is also no real dispute that it is the unauthorised works that have caused the major damage and associated costs; that is the fill to level the southern end of the warm-up area and the earthworks to create the access road to the lower paddocks. It is these works on which the submissions of the parties were principally focussed.
[40] Counsel for the Watsons made substantial concessions at the hearing. I begin
first with the merits of the plaintiffs’ claim against them.
The Watsons
[41] Counsel for the Watsons argued initially that they relied on the plaintiffs and
Mr Tilsley to ensure that the works carried out were authorised and safe.
[42] During the course of the hearing, counsel for the Watsons accepted that there is evidence that they did not consult the Earthworks Plan or satisfy themselves that the works were consented to, and indeed that they knew they were undertaking unauthorised work. But he submitted there is evidence that the plaintiffs knew too. He also submitted that the Watsons accept they should have been more cautious but they say they told the plaintiffs that the work was not sensible and were told to go ahead anyway, which the plaintiffs refute. The issue in relation to the Watsons for the purpose of this application has therefore become one of shared responsibility or contributory negligence as between themselves and the plaintiffs.
[43] Though I do not express a view that is in any way determinative, it is evident that the plaintiffs’ case against the Watsons has merit. Certainly there are real questions to be tried. The fact that there are issues as to degrees of responsibility between the Watsons and the plaintiffs does not mean that this is a case where the plaintiffs’ claim is weak or that, as far as the Watsons are concerned the Court should
impose a security order that seriously threatens the plaintiffs’ ability to prosecute their claim. This conclusion weighs in favour of the plaintiffs.
Mr Tilsley
[44] The position with respect to Mr Tilsley is a somewhat different. Counsel for Mr Tilsley makes no concessions about the plaintiffs’ contentions. He argues that the plaintiffs face substantial difficulties and that their claim against Mr Tilsley is patently weak.
[45] Counsel argues that Mr Tilsley was a consultant engineer who was merely approached to provide earthworks and drainage advice after other consultants had secured resource consent for the overall development and was not engaged to act as project manager. He submits that Mr Tilsley’s duty of care clearly extended only in respect of authorised earthworks, and not to any earthworks that were unauthorised or carried out beyond 28 January 2008 when he says Mr Tilsley ceased regular site visits. He points out that there is documentary evidence that indicates that the Council’s compliance officer inspected the earthworks on 25 January 2008 and had no concerns. He submits that it is to be inferred that Mr Tilsley’s on-site role came to an end before the unauthorised works were undertaken and hence Mr Tilsley’s reports to the Council after 28 January 2008 should be read in that light. They should not be read as an endorsement of the unauthorised works.
[46] Counsel relies on a number of other factors as supporting Mr Tilsley’s position. Among other things he referred to a letter that Mr Tilsley sent to the plaintiffs on 7 September 2007 outlining what work he was able to complete; and to the opinion of an independent geotechnical engineering expert, Mr Goldsmith, that Mr Tilsley appears not to have been engaged to undertake the tasks typical of a project manager. Counsel also stressed that Mr Tilsley’s own emphatic evidence is, that he did not know about the unauthorised works at first, and strongly advised against them when he discovered them. Pertinently, Mr Craike’s evidence and the Watsons’ statement of defence appear to absolve Mr Tilsley of any responsibility for authorising the access road, as counsel for Mr Tilsley also pointed out.
[47] I accept there are factors that suggest the case against Mr Tilsley is not strong. In the case of the access road, there is more than a suggestion in the material before the Court that the Watsons build it at the Craikes’ request without any input from Mr Tilsley. And in the case of the major unauthorised fill in the warm-up area, the inference should not be too lightly drawn that, as the engineer charged with preparing the Earthworks Plan and certifying compliance, Mr Tilsley would blithely approve or fail to caution against significant departures from the plan.
[48] As against these factors, Mr Tilsley’s evidence is not unchallenged. Mrs Craike claims Mr Tilsley approved a change to the area of the outdoor arena, and also said it would be alright to fill the corner of the gully to form the warm-up area. There are some indications in the evidence that suggest the possibility that Mr Tilsley did have some involvement in the unauthorised work on the warm-up area.
[49] Mr Tilsley’s own contemporaneous correspondence and notes suggest a possibly greater onsite supervisory role than he has been prepared to acknowledge. His notes of a site meeting on 11 January 2008 record that he was at that point assuming responsibility as project manager. Quite how far that responsibility extended is unclear but when the notes are viewed alongside his reports to the Council, they possibly belie his claimed lack of involvement in the unauthorised works on the warm-up area.
[50] In his report to the Council of 15 February 2008 Mr Tilsley says the new site plan was “completed just a few days ago.” He was it seems on site in February. His contention that he discovered the unauthorised fill in the warm-up area but did not have any part of it, sits somewhat strangely alongside the advice that he gave to the Council on 15 February 2008 that “generally the balance of the site has been re- contoured to the contours shown on the site plan” and that “the cut and fill operation has now produced a contour which is much flatter than the original site so run off will slower than the original ground,” as does his contention that it was not his responsibility to complain to the Council. It seems that in August 2008 Mr Tilsley was willing to certify compliance with the Earthworks Plan by the submitting a Geotechnical Completion Report.
[51] In the case of Mr Tilsley, as is typically the case, it is not possible for the court to form a firm view on the evidence before trial or the merits of the arguments as to liability. Certainly the plaintiffs’ claims in connection with the access road seem weak. This is a factor that favours Mr Tilsley. Their claims about the warm up area seem to raise real questions to be tried. This is a factor that favours the plaintiffs.
Did the defendants unduly delay in applying for security of costs?
[52] This proceeding was commenced in May 2010. The plaintiffs say that since that time they have incurred significant costs, 80% of which have been incurred since the end of 2010. It is their position that had they known then that they were facing the possibility that they would have to give security at a later stage they would have stopped investing in the proceeding. Now however they find themselves in the unexpected position where they have made a major outlay which will have been pointless if they are prevented from continuing to trial. They also say that the defendants ought reasonably to have made their application by late 2010 as by then S D Watson Ltd was well aware of the plaintiffs’ financial difficulties.
[53] Counsel for the Watsons accepts that a relevant consideration is whether the defendants’ application was made as soon as the defendants became aware, or could have become aware with reasonable inquiry, of the plaintiffs’ inability to meet costs on an unsuccessful claim.[7]
[7] Oceania Furniture Ltd v Debonair Products Ltd HC Wellington CIV-2008-485-1701, 24 April 2009.
[54] I accept that there is some evidential basis for the contention that S D Watson Ltd was aware that the plaintiffs might be facing some financial stress when they commenced their proceeding. Counsel for the Watsons says that they were aware of the plaintiffs’ unpaid debts to themselves, and to other contractors. However, he submits they were not in a position to apply for security of costs until late August
2011 as it was only then that they had objectively credible evidence from which it
could be reasonably inferred that the plaintiffs might be unable to pay costs if
ordered to do so. That was when they were given a copy of a letter the plaintiffs’ solicitors had sent to a debt collection agency, which set out the second plaintiff’s inability to make payments for quarry supplies. Counsel for the Watsons also submits that there is no basis for finding that the delay was designed to prejudice the plaintiffs.
[55] I do not think that the evidence points to a clear cut failure to seek security at the first reasonably available opportunity or that such opportunity arose in late 2010. What is or is not the first reasonable opportunity was a matter of judgment that must allow for some difference of view and I accept that the Watsons cannot be criticised for holding back until August 2011 when they go the letter that put the matter beyond contention. There is no basis to conclude that the Watsons’ behaviour was designed to prejudice the plaintiffs.
Was the plaintiffs’ impecuniosity caused by the actions of any of the defendants?
[56] Counsel for the plaintiffs submits that there is an obvious connection between the damage to the plaintiffs’ land and associated loss, and their inability to provide security. He submits that the causal connection is so obvious that it goes without saying. The plaintiffs faced the costs of delay and were not able to attract the international events that they had planned to. He also argues that weight should be placed on the evidence of the plaintiffs’ accountant who sets out his preliminary opinion as to the causal connection between the plaintiffs’ difficult financial position and the failed work. Counsel submits that the accountant’s evidence is persuasive in that identifies specific income lost premised upon a full historical analysis of cash flow, and makes reasonable assumptions about the likely profit had the plaintiffs been able to fulfil their objective of running an equestrian event centre.
[57] Counsel also submits that, though Mrs Craike’s own evidence recognises that no one factor has led to the plaintiffs’ impecuniosity, the evidence overall establishes proximity between the defendants’ actions and the plaintiffs’ financial troubles.
[58] Counsel for the Watsons submits that the accountant’s evidence does not support the plaintiffs’ assertion that the Watsons caused their impecuniosity. There are significant shortcomings in the evidence relied upon to estimate loss of income due to delay in the completion of the centre. A key deficiency is the failure to acknowledge that the delay was largely a result of the plaintiffs’ own inability to make progress payments so that the work could be completed. There is, he argues, also no evidence that the plaintiffs could anticipate attracting international events in any case.
[59] Counsel for Mr Tilsley argues that, by Mrs Craike’s own admission, the plaintiffs’ poor financial position is primarily due to the “conduct of the Watsons and their workmanship” and not Mr Tilsley’s actions.
[60] The question whether the plaintiffs’ impecuniosity was caused by actions of the defendants is typically one of conflicting evidence and argument and it is not possible to form any definitive view of the plaintiffs’ assertion on the limited evidence currently before me. It is however clear that whatever prospects the plaintiffs may have had of making a success of the equestrian centre have gone. The site is seriously damaged as a result of the failure of the unauthorised works, and the plaintiffs cannot operate at all. It is a reasonable to infer in these circumstances that the unauthorised works have been one of the factors contributing factor to their serious financial woes. This is a factor that favours the plaintiffs.
Result
[61] On balance, this is a case where I think the plaintiffs should provide a modest amount of security in respect of the claim against Mr Tilsley, but not I think in respect of the claims against the Watsons.
[62] That brings me to the question of the appropriate amount of the security that should be provided in respect of Mr Tilsley. Counsel have referred to the probable
scale costs in the event that the plaintiffs are unsuccessful. I accept that is a relevant factor and indeed others counsel referred to.[8]
[8] Counsel referred to:
(a) The amount or nature of the relief claimed;
(b) The nature of the proceeding, including the complexity and novelty of the issues and the likely extent of interlocutories;
(c) The estimated duration of the trial.
[63] However, bearing in mind that a key factor that weighs strongly against the imposition of a higher figure is the plaintiffs’ impecuniosity, and the effect that any order will have on them, I would fix the amount at $20,000.
[64] I think the sum of $20,000 as security for costs in favour of Mr Tilsley is appropriate on the basis that this amount will provide him some protection in the event that his contentions are correct.
Orders
[65] I make orders as follows:
(a) The application is granted in part in that the plaintiffs are ordered to give security for the first defendant’s costs in the sum of $20,000 cash or other form of security to the satisfaction of the Registrar within 14 working days ;
(b)The application is otherwise declined. The plaintiffs are not required to give security for the costs of the remaining defendants;
(c) Leave is reserved to seek further orders by way of memorandum if security is not provided as ordered. A memorandum may be filed on on
two days notice.
(d) There will be a case management telephone conference on 29 March
2012 at 3.30 pm to discuss outstanding timetable issues and the issue of costs on the application. In the meantime costs are reserved.
Associate Judge Sargisson
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