Critchley v Bermingham HC Auckland CIV-2009-404-001190

[2011] NZHC 1650

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-001190

BETWEEN  GARRY CRITCHLEY Plaintiff

ANDWARRYN PATRICK BERMINGHAM First Defendant

ANDKENNETH JAMES TELFAR Second Defendant

AND26000 VODKA LIMITED Third Defendant

Hearing:         9 November 2011

Counsel:         N Carter for Plaintiff

AG Stallard for Defendants

Judgment:      10 November 2011 at 11:00 AM

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 10 November 2011 at 11:00 am

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:

N Carter, Carter & Partners, Auckland:  [email protected]

T Stallard, Stallard Law Limited, Nelson:  [email protected]

CRITCHLEY V BERMINGHAM & ORS HC AK CIV-2009-404-001190 10 November 2011

[1]      In this proceeding, the plaintiff sues the defendants for the alleged breach of an agreement to compensate him for services rendered by the allocation of shares in

26000 Vodka Limited, a company now in liquidation.

[2]      The proceeding has a lengthy history of interlocutory applications, not all of which are said to have added to the progress of the claim to a hearing. As a result of a recent change in the representation of the plaintiff, however, it is now anticipated that the case will be ready for hearing in March 2012.

[3]      In November 2009, when faced with an application by the defendants to provide security for costs, the plaintiff entered into an agreement to mortgage a property, in respect of which he has an interest, to secure the sum of $25,000.  It is said on behalf of the plaintiff that this was done not because the plaintiff conceded that an order for security was merited on the grounds of his impecuniosity, but because in return the defendants were prepared to agree to a freezing order which preserved the prospect of the plaintiff receiving the fruits of any judgment in his favour.

[4]      As a result of recent exchanges of correspondence, however, the defendants have become concerned that the plaintiff’s financial position may no longer be such that the 2009 agreement to mortgage provides them with sufficient assurance that any costs order would be met.   The defendants have made, therefore, a fresh application for security for costs, which is opposed by the plaintiff.

[5]      After hearing from counsel in respect of the security for costs application and on other matters related to the conduct of the proceedings,  I indicated that the application for security for costs would be declined but that other orders relating to the future conduct of the proceedings, including a timetable order, would be made. This judgment provides my reasons for not ordering security for costs and deals with the other ancillary matters.

Application for security for costs

[6]      Rule 5.45(1)(b) High Court Rules provides that an order for the giving of security for costs under r 5.45(2) may be made if a Judge is satisfied 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.  Rule 5.45(3) says that an order under sub-clause (2) will require the plaintiff to pay a sufficient sum into Court or give security for that sum, and that such an order may include an order staying the proceeding until the sum is paid or the security given.  The defendants seek a stay in this case.

[7]      Counsel were agreed that the Court’s power to make an order for security for costs is highly discretionary,[1] requiring a broad overall assessment.[2]   What is contemplated is that there should be credible evidence of surrounding circumstances from which it may reasonably be inferred that the plaintiff will be unable to pay the costs, without requiring proof that there will be an inability to pay.[3]

[1] AS McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747.

[2] Hamilton v Papakura DC (1997) 11 PRNZ 333, 335

[3] Concorde Enterprises Limited v Anthony Motors (Hutt) Limited (No. 2) [1977] 1 NZLR 516, 519.

[8]      Counsel referred me to the considerations set out in the commentary to r 5.45 in McGechan on Procedure,[4] namely, balancing the interests of plaintiff and defendant; considering the merits and prospects of success of the claim; taking into account  where  appropriate  that  the  plaintiff ’s  impecuniosity  results  from  the defendant’s actions; and any delay in bringing the application.  I have looked at those factors so far as they apply to this case.  In coming to my view, I have taken account of Mr Stallard’s estimate that the defendants have a valid claim for up to $18,000 to

[4] Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HR5.45,01-5.45.14].

$20,000 in respect of interlocutory proceedings to date, and that a costs order of

$40,000 to $50,000 on the substantive claim may be justified if the claim fails.

[9]      In the present case, I am satisfied on the evidence that Mr Critchley has an interest in a residential property at Omaha, north of Auckland, in which his half- share currently has a net worth of approximately $125,000.  He has access to cash totalling $48,000, and is employed on a salary of $100,000 per annum plus bonuses of up to $10,000 per annum.  Although no details are provided, he has deposed to having a shareholding in a private company to the value of $100,000.

[10]     Mr Stallard  has  suggested  that  the  evidence  of  Mr Critchley’s  financial

position is less than satisfactory and that, in particular, the first mortgagee’s security

over the Omaha property has a priority figure which exceeds the current government valuation of the property.  I am not persuaded, however, that the plaintiff ’s position is such as to lead to a belief that he will be unable to pay the defendants’ costs if his claim fails.

[11]     For those reasons, the application for an order for security for costs  was dismissed.

[12]     Counsel are to confer as to costs arising in respect of that application.  In the event that they are unable to agree, the plaintiff shall have 20 working days within which to file a memorandum seeking an order for costs; the defendants shall have 20 working days thereafter to file any memorandum in response.  A decision as to costs can then be made on the papers.

Timetable orders

[13]     By consent, the following timetabling directions are made:

(a)       The plaintiff is to file and serve an amended statement of claim by

25 November 2011;

(b)The defendants are to file and serve an amended statement of defence by 8 December 2011;

(c)       Inspection  of  documents  disclosed  in  the  affidavits  of  documents exchanged to date is to be completed by 22 December 2011;

(d)The parties shall have leave to file and serve any further interlocutory applications by 27 January2010;

(e)       The     plaintiff’s    briefs    of    evidence    are    to    be    served     by

24 February 2012; and

(f)       The defendants’ briefs of evidence are to be served by 8 March 2012. [14]    I confirm that the substantive proceeding will be set down for hearing in

Auckland over five days, commencing on 26 March 2012.  Counsel have indicated helpfully that they will reassess the likely duration of the trial after revision of the

pleadings and completion of inspection, and notify the Court if fewer than five days will be required.

................................................

Toogood J