Davey v Cardinali
[2024] NZHC 3029
•29 October 2024
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2023-463-52
[2024] NZHC 3029
UNDER the Trusts Act 2019; the Law Reform (Testamentary Promises) Act 2040, the Family Protection Act 1955 and
Part 18 of the High Court Rules 2016
BETWEEN
HOWARD ADRIAN DAVEY
Plaintiff
AND
MYRA ANNE CARDINALI and ARLENE RENEE LU-ANA DAVEY-
DIESTERBECK as executors and trustees of the Estate of HOWARD ALBERT DAVEY First Defendants
MKYRA ANNE CARDINALI and ARLENE RENEE LU-ANA DAVEY-
DIESTERBECK as executors and trustees of the Estate of KATHLEEN DAVEY
Second Defendants
ARLENE RENEE LU-ANA DAVEY- DIESTERBECK
Third Defendant
MYRA ANNE CARDINALI
Fourth Defendant
Hearing: 12 September 2024 Appearances:
Plaintiff is self-represented
Erin Anderson for the First and Second Defendants Jose San Diego for the Third and Fourth Defendants
Judgment:
29 October 2024
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application by the Defendants for security for costs Application by the plaintiff for security for costs]
DAVEY v CARDINALI [2024] NZHC 3029 [29 October 2024]
This judgment was delivered by me on 29 October 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
TABLE OF CONTENTS Paragraph
Introduction
[1]
Background
[2]
Applications for security for costs
[8]
Defendants’ application dated 5 December 2023 [8] Plaintiff ’s application dated 16 January 2024 [10] Defendants’ submissions
[14]
Defendants’ application [14] Opposition to Mr Davey’s application [18] Mr Davey’s submissions
[21]
Mr Davey’s opposition to the defendants’ application [23] Legal principles
[24]
Analysis
[32]
Defendants’ application [32] Mr Davey’s application [34] Defendants’ application
[36]
Have the defendants satisfied the Court of the threshold under r 5.45(1)? [36] Conclusion in respect of r 5.45(1) [40] Should the Court exercise its discretion under r 5.45(2)? [41] Conclusion in respect of r 5.45(2) [48] What is the appropriate amount of security? [50] Conclusion in respect of security amount [52] Mr Davey’s application for security for costs
[52]
Conclusion in respect of Mr Davey’s application [57] Result
[59]
Should the proceedings be stayed pending payment of the security? [61] Orders
[ ]
Introduction
[1] On 5 December 2023, the first to fourth defendants filed an application collectively seeking security for costs to the value of $55,009.
[2] In lieu of filing opposition, on 16 January 2024 the plaintiff, Mr Howard Davey (Mr Davey), instead filed his own application for security for costs to the value of
$312,000.
Background
[3] The substantive proceedings relate to Mr Davey’s claims against Ms Myra Anne Cardinali and Ms Arlene Davey-Diesterbeck, both personally and in their capacities as executors of the estates of Mr Howard Albert Davey and Mrs Kathleen Davey respectively. Mr Davey, Ms Cardinali and Ms Davey-Diesterbeck are all children of the deceased.
[4] Mr Davey’s claims against the defendants are to the effect they breached their duties as executors of Howard Davey’s estate through unreasonable expenditure, along with their failure to remunerate him for services performed with respect to the family farm. This was filed on 24 July 2023.
[5] Mr Davey has filed almost identical claims against the defendants in a previous proceeding (the Original Claim).1 In a minute dated 29 May 2023, Campbell J struck out the Original Claim due to non-compliance with “unless orders” requiring Mr Davey to file and serve affidavits containing the evidence he wished to present at hearing.2 Costs were then awarded to the defendants by Brewer J (the Costs Order).3
[6] Mr Davey subsequently appealed this decision, and he was required to pay security of $14,120. On 20 June 2023, he filed a dispensation application seeking the Registrar waive the requirement to pay security for costs, on the basis he had no material assets or full-time employment. This was opposed by the defendants and
1 Davey v Cardinali & Davey HC Rotorua CIV-2021-463-33.
2 The “unless order” mandating this was made in a preceding minute: Davey v Cardinali & Davey
HC Rotorua CIV-2021-463-33, 9 May 2023.
3 Davey v Cardinali [2023] NZHC 2782.
the Registrar refused to waive security for costs, increasing the due amount to $16,940 on the basis of Mr Davey’s past procedural misconduct, the apparent lack of merit in the appeal and the defendants’ likely difficulty in having any costs award promptly paid. This was due for payment on 12 September 2023. Mr Davey did not pay security and the appeal was abandoned.
[7] Since then, Mr Davey has failed to make any payments pursuant to the Costs Order.
Applications for security for costs
Defendants’ application dated 5 December 2023
[8] The defendants collectively have filed an application for security for costs on the grounds of Mr Davey’s repeated unwillingness or inability to pay costs awards, or orders for security for costs against him, as well as his demonstrated lack of financial means.
[9] The amount of $55,009 is sought, being the estimated 2B scale costs of defending the proceeding, which is to be apportioned equally to each of the represented groups of defendants (the first and second defendants on the one hand and the third and fourth defendants on the other), resulting in security of an amount of
$27,504.50 for each group of defendants.
Plaintiff ’s application dated 16 January 2024
[10] Mr Davey seeks security to the value of $312,000, this sum representing 50 per cent of the amount claimed by Mr Davey in his substantive claim against the defendants based on information from a forensic audit report prepared by Accounting Solutions BOP.
[11] Mr Davey seeks security on multiple grounds. First, he has refused to pay the Costs Order made against him by Brewer J as the decision was not signed. He also believes the defendants may be unable to pay a costs award against them in the event his claim is successful, should a forensic audit reveal Inland Revenue penalties are likely to be imposed on the estates. He proposes the security amount he is seeking be
used as a contingency fund, although the mechanics of how this fund would operate are unclear.
[12] The defendants jointly oppose Mr Davey’s application for security on the following grounds:
(a)The application cannot succeed and is an abuse of process as security is not available against defendant parties, in accordance with r 5.45(1) of the High Court Rules 2016.
(b)Mr Davey’s application is not for security for litigation costs, but rather security for the sum he claims in the substantive proceeding.
(c)Mr Davey’s conduct has resulted in an increase to the expenses incurred by the defendants. This includes failure to comply with directions of the Court as to filing, providing documents in a disorganised and incomprehensible manner, repeated and unreasonable requests for discovery and his propensity for attempting to file and serve non-compliant documents.
[13] The defendants also seek costs in the event they are successful in their opposition against Mr Davey’s application.
Defendants’ submissions
Defendants’ application
[14] Jointly for the defendants, Ms Anderson submits the test for an award of security for costs is made out in the circumstances and accordingly should be granted by the Court. First, the defendants hold genuine concern Mr Davey will be unable to pay an adverse costs award at the conclusion of the proceedings. Ms Anderson refers to Mr Davey’s history of failing to meet costs awards — most relevantly, for related proceedings also against the current defendants — as well as his professed lack of financial assets and full-time employment.
[15] Ms Anderson submits the second limb of the test — as to the whether the Court should use its discretion to make an order for security — is made out. Ms Anderson submits the balance of convenience is firmly in the defendants’ favour due to the failure of Mr Davey to meet his obligations under the Costs Order, as well as the significant risk to the defendants they will again incur costs that are not recoverable at the close of these proceedings.
[16] Ms Anderson also submits the claim lacks merit — while acknowledging the Court cannot reasonably assess the merits of a claim at this early stage, it is the defendants’ position that the claim has no prospect of success.
[17] Ms Anderson submits Mr Davey’s lack of counsel and participation in these proceedings as a litigant in person have resulted in the defendants incurring increased costs.
Opposition to Mr Davey’s application
[18] As to the defendants’ joint opposition, Ms Anderson submits the application cannot succeed and is an abuse of process as security is not available against defendant parties, in accordance with r 5.45(1) of the High Court Rules.
[19] Ms Anderson also highlights Mr Davey’s application is not for security for litigation costs, but rather security for a portion of the sum to be claimed by Mr Davey in the substantive proceeding.
[20] Ms Anderson submits Mr Davey’s conduct is a further consideration for the Court as he has demonstrated an unwillingness to follow filing and timetable directions.
Mr Davey’s submissions
Mr Davey’s application
[21] Although Mr Davey’s submissions were not accepted for filing by the Court, in the interests of justice, as he is self-represented I have allowed him to present his submissions to the Court.
[22] In support of his application for security for costs, Mr Davey’s submissions dated 28 August 2024 puts forward, in summary, the following points in support of his application:
(a)The Costs Order by Brewer J on 5 October 2023 is not signed and dated and no signed copy has been produced despite his extensive searches. This comment is possibly offered as an explanation as to why he has not paid the Costs Order.
(b)He has since 2019 been denied full access to all the estates’ information that he has requested, areas broadly covered by the Trusts Act 2019. Partial discovery only was given over a 14-month process by the defendants.
(c)He is seeking a Court-appointed forensic audit to determine any possible criminal liabilities both estates may have to Inland Revenue for mismanagement by the defendants from 2010 onwards. The defendants have refused a Public Trust audit request since 2019 onwards so a Court-appointed forensic audit is a fair and just option.
(d)Costs of the audit should be borne personally by the defendants and not paid from any funds held in trust either from the proceeds of the sale of the farm or from the estate of Kathleen Davey.
(e)He has advanced three reputable firms with proposals to conduct an audit. The financial accounts for the farm have not been audited from 2010 onwards;
(f)He has concerns about the possible compounding penalties Inland Revenue may require to be paid by the estates, and whether this will leave nothing of any funds held in the contingency fund. The defendants would possibly unfairly have an opportunity for indemnity to any wrongdoings covered under several sections in the Trusts Act 2019.
(g)The reports from Accounting Solutions BOP from March 2022 relating to the farm accounts taken from the records of Stuart Wilson & Associates (the long-term farm accountant) show mismanagement by the defendants of a potential amount of $624,000. An independent forensic order may indicate a higher amount.
(h)He is seeking security from the defendants for 50 per cent of the amount he is seeking for the substantive proceeding, being $312,000, based on the alleged wrongdoing revealed by the Accounting Solutions BOP report to the value of $624,000.
Mr Davey’s opposition to the defendants’ application
[23] Mr Davey’s submissions in opposition to the defendants’ application for security for costs dated 28 August 2024 are essentially the same as his submissions in support of his own application for security for costs, and do not need to be repeated here.
Legal principles
[24]Rule 5.45 of the High Court Rules provides:
5.45 Order for security of costs
(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a)that a plaintiff—
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand; or
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b)that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.
(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3)An order under subclause (2)—
(a)requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i) by paying that sum into court; or
(ii) by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and
(b)may stay the proceeding until the sum is paid or the security given.
(4)A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.
(5)A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6)References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[25] In determining applications under r 5.45, the Court will generally follow these steps:4
(a)Has the applicant satisfied the court of the threshold under r 5.45(1)?
(b)How should the court exercise its direction under r 5.45(2)?
(c)What amount should security for costs be fixed at?
(d)Should a stay be ordered?
[26] The decision to order security, and the quantum of such security, are at the Court’s discretion. It is generally not to be fettered by constructing “principles” from the facts of previous cases.5 But the Court is to balance the competing interests
— being the defendant’s interest in protection from a costs order that is incapable of fulfilment and the plaintiff’s right of access to justice.6 Courts will be slow to make an order for security that will stifle a genuine claim.7 This balancing exercise is the Court’s overriding consideration.8
4 Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].
5 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].
6 Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].
7 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].
8 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24(c)].
[27]As above, the Court should assess whether there is:9
… credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the [party] will be unable to pay the costs. This does not, of course, amount to proof that the [party] will, in fact, be unable to pay them.
[28] The Court will assess the claim’s merits and prospects of success, to the extent that is possible at an early juncture.10 The Court will also consider the extent to which the plaintiff’s impecuniosity may have been caused by the defendant’s conduct.11
[29] A plaintiff’s unwillingness to pay previous judgment debts weighs in favour of an order for security.12 But whether a plaintiff has been a responsible litigant is secondary to the issue of whether the lack of merit of the claim justifies security that would prevent the claim from proceeding.13
[30] Quantum of security is discretionary and is assessed in the round. It need not be fixed by reference to likely cost awards.14 It is to be what the Court thinks fit in all the circumstances.15
[31]A Court will generally stay a proceeding until the security ordered is given.16
Analysis
Defendants’ application
[32] The issues to be determined in respect of the defendants’ application for security for costs are:
9 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1997] 1 NZLR 516 (HC) at 519; NZ Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) PRNZ 209 (HC) at 212; and Stephenson v Jones [2013] NZHC 638.
10 Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].
11 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).
12 Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand
[2016] NZHC 729 at [22] and Mawhinney v Auckland Council [2014] NZHC 3207.
13 Wright v Attorney-General [2019] NZHC 3046 at [26].
14 Sharp v Pillay [2017] NZHC 647; and Red 9 Ltd v The Learning Ladder Ltd (in liq) [2021] NZCA 284 at [30].
15 A S McLachlan Ltd v MEL Network Ltd, above n 5.
16 Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 at [68] and [85].
(a)Have the defendants satisfied the Court of the threshold under r 5.45(1)?
(b)Should the Court exercise its discretion under r 5.45(2)?
(c)If so, what amount should security for costs be fixed at?
(d)Should a stay be ordered?
[33]I deal with each of these issues in turn in respect of the defendants’ application.
Mr Davey’s application
[34] The issues to be decided in respect of Mr Davey’s application for security for costs are:
(a)Can Mr Davey, as a plaintiff, apply for security for costs against the defendants under r 5.45(1)?
(b)Is the security sought by Mr Davey for costs of litigation or of some other nature?
[35]I deal with each of these issues in turn in respect of Mr Davey’s application.
Defendants’ application
Have the defendants satisfied the Court of the threshold under r 5.45(1)?
[36] Ms Anderson submits that the threshold test under r 5.45(1) is met as it can be reasonably inferred that Mr Davey will be unable to pay costs if his claim fails.
[37] She submits that Mr Davey has been either unwilling or unable to pay costs awards made against him or pay security for costs ordered against him on his various appeals, in particular:
(a)Mr Davey has failed or refused to pay the amounts ordered in the Costs Award made by Brewer J on 5 October 2023 of $58,170.67 and
$40,804.80 to the first and second defendants and the third and fourth defendants respectively;
(b)Mr Davey has failed or refused to pay security for costs on an appeal of Campbell J’s judgment dismissing his Original Claim, and the appeal was subsequently abandoned; and
(c)Mr Davey has failed or refused to pay his security for costs on an appeal of the Costs Order in the Court of Appeal and the appeal was subsequently abandoned.
[38] Ms Anderson also points to the fact that Mr Davey previously advised in July 2023 that he has little or no financial assets; being a self-litigant does not allow for full-time employment; and his entire savings have been used on costs. She submits that the defendants are not aware of any material improvement in Mr Davey’s financial circumstances since July 2023, and nothing has been presented by Mr Davey in his opposition to the defendants’ application which would signal he could (or would) meet another adverse costs award.
[39] Mr San Diego, for the third and fourth defendants, makes similar submissions to those made by Ms Anderson in respect of establishing that the threshold under r 5.45(1) is met, referring to Mr Davey’s failure to pay the Costs Order and failure to meet the security for costs ordered in respect of his appeals.
Conclusion in respect of r 5.45(1)
[40] I am of the view that the threshold test under r 5.45(1) is met as it can be reasonably inferred that Mr Davey will be unable to pay costs if his claim was unsuccessful. The reasons for this are:
(a)his failure to pay the Costs Order and failure to pay security for costs awarded against him in relation to his appeals resulting in the appeals being deemed to be abandoned; and
(b)his acknowledged impecuniosity in July 2023 and the absence of any evidence being presented to the Court by Mr Davey that his financial situation has improved since then.
Should the Court exercise its discretion under r 5.45(2)?
[41] Ms Anderson submits that on analysis of the factors which have been considered relevant by the Court in deciding this issue, the following applies in the present case:
(a)The balance of convenience lies firmly in the defendants’ favour. This is due to the failure of Mr Davey to meet his obligations under the Costs Order and the significant risk to the defendants that they will incur significant costs that are not recoverable even if costs are awarded in their favour.
(b)The substantive claim lacks merit, and while acknowledging that the Court cannot reasonably assess the merits of the claim at this early stage, she submits that the defendants’ position is that the claim has no prospect of success, and if it progresses it will be a time and resource-consuming exercise for counsel and the Court.
(c)Mr Davey is no longer retaining counsel and litigating in person adds a significant burden to the defendants which causes costs to escalate beyond what would usually be anticipated.
[42] Ms Anderson submits that Mr Davey’s conduct in the proceedings is vexatious. She refers to the Court’s statements made in Reekie v Attorney-General where the Court recognised that one of the purposes of the security for costs régime is protecting respondents/defendants from vexatious conduct:17
[39] Protecting respondents from vexatious appeals is a legitimate purpose of the security for costs regime. This is consistent with the approaches
(a) taken in relation to legal aid and (b) formerly taken in respect of appeals in forma pauperis. It is also consistent with Australian authority as to first
17 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [39]–[40].
instance proceedings.18 An appeal, or its conduct, may be vexatious even though it raises some issues which are arguable. Vexatiousness might be manifested, for instance, by the unreasonable and tendentious conduct of litigation, extreme claims made against other people involved in the case or perhaps a history of unsuccessful proceedings and unmet costs orders.19
[40] A litigant in person does not incur the expense of legal representation and, if impecunious, will obtain a fee waiver and will not be in a position to pay costs if unsuccessful. All costs associated with litigation so prosecuted fall on other parties. This means that litigants in person may be more prepared to engage in litigation which, when viewed in light of the costs that others must incur, is disproportionate to the occasion and which therefore would not be prosecuted by a solvent litigant. In such circumstances, the Registrar or reviewing judge may conclude that it is unjust to require the respondent to defend the judgment without the protection of security.
Ms Anderson cites as examples of Mr Davey’s vexatious conduct:
(a)these proceedings are essentially a re-filing of the same claim after the Original Claim was struck out, and while it is accepted the strike-out did not determine the merits of the Original Claim, it plainly demonstrated Mr Davey’s refusal or inability to follow the Court’s directions and prosecute his claim;
(b)the filing of the two appeals, each requiring the defendants to take steps (which in turn incurred costs) to seek security, and each time Mr Davey failing or refusing to pay the security ordered so that his appeal could progress;
(c)failure or refusal to pay the Costs Order made against him;
(d)repeated references to “a forensic audit” in case management conferences despite the Court advising that it was not a matter that it could consider and/or order; and
(e)the nature and volume of the correspondence Mr Davey generates.
18 See, for instance, the comments of Heydon J in Jeffrey & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43, (2009) 239 CLR 75 at [91]; and Applegarth J in Mbuzi v Hall [2010] QSC 359 at [70].
19 See for instance the remarks of Applegarth J in Mbuzi v Hall, above n 18, at [70].
[44] She submits that Mr Davey’s conduct consumes a significant amount of time and resources of both the Court and counsel and results in increased costs for the defendants. She submits that Mr Davey operates without regard to the cost implications which he would usually incur and/or the cost implications of his conduct for the defendants. Accordingly, it is unjust for the defendants to defend this proceeding without the protection of security for costs.
[45] Ms Anderson submits that while access to justice was a primary consideration, and in this case there is a risk that if security is ordered Mr Davey will not be able to pay and the proceeding will come to an end, r 5.45 exists for a purpose and in some circumstances the principle of access to justice must yield to other considerations.20
[46] Mr San Diego made similar submissions to those of Ms Anderson, pointing to Mr Davey’s failure to pay the Costs Order against him and refers to Mr Davey’s pattern of behaviour consisting of:
(a)missing due dates, being given extensions and then failing to meet those obligations in his own claims;
(b)failing to meet deadlines and comply with directions, compounded by Mr Davey flooding the Court and counsel with documents and increased costs for the collective defendants; and
(c)conducting himself in a manner that can properly be described as oppressive to the third and fourth defendants.
[47] Mr San Diego submits that, given the conduct of Mr Davey in the proceedings, costs protection ought to be given to the defendants.
Conclusion in respect of r 5.45(2)
[48] I am of the view that security for costs should be awarded against Mr Davey in favour of the defendants. The reasons for this view are:
20 Counsel cites Crawford v Bacon [2022] NZHC 3085 at [12].
(a)The balance of convenience favours the defendants obtaining protection against costs. Mr Davey’s failure to pay the Costs Order made against him, and the failure to pay the security for costs ordered in respect of his appeals, means there is significant risk that the defendants will incur significant costs in defending the proceedings which are irrecoverable even if a costs award is made in their favour.
(b)A significant risk that the costs of defending the proceedings are likely to exceed what would usually be anticipated due to Mr Davey being self-represented and the manner in which he has conducted the Original Claim and these proceedings to date. He has filed a large amount of material which generally contains no explanation or obvious relevance to the proceedings. He continues to insist on a “forensic audit” of the accounts relating to the estates of Mr Howard Davey and Mrs Kathleen Davey, even though it has been made clear that this cannot be ordered by the Court. His manner of proceeding is clearly time-consuming and expensive for the defendants and they should be protected against this risk.
[49] The Court, on the evidence before it, is unable to make any assessment of the merits of Mr Davey’s claim, and this factor is neutral in relation to granting security for costs in favour of the defendants.
What is the appropriate amount of security?
[50] The defendants have sought an order for security for costs of $55,009. Ms Anderson submits that the amount of security is in the Court’s discretion and does not need to be fixed with reference to likely costs awards, citing A S McLachlan v MEL Network Limited.21 The two defendant groups have each sought 50 per cent of the estimated 2B scale costs expected to be incurred should the matter proceed to trial. Ms Anderson submits that this is a modest and reasonable approach, particularly in light of the nature of the proceedings, Mr Davey’s conduct and the likely costs the defendants will incur responding to the substantive claims.
21 A S McLachlan v MEL Network Limited, above n 5, at [27].
[51] Mr San Diego points out in his submission that the amount is to be divided equally between the first and second defendants on the one hand, and the third and fourth defendants on the other, representing 50 per cent of the total costs for each party amounting to $27,004.50.
Conclusion in respect of security amount
[52] The interest of Mr Davey in being able to pursue his claim must be balanced against protecting the defendants against a barren costs award if Mr Davey’s claim is unsuccessful, particularly in the light of Mr Davey’s failure to pay the Costs Order and his conduct as a litigant in person. Balancing these matters, in my view the amount of
$40,000 as security for costs is appropriate. The amount is shared between the first and second defendants on the one hand and the third and fourth defendants on the other, and Mr Davey’s conduct in the proceedings to date raises the risk that costs will be increased above what would usually be expected.
Mr Davey’s application for security for costs
[53] Ms Anderson submits that there are two insurmountable hurdles for Mr Davey’s application for security for costs:
(a)security is only available for defendant parties, not plaintiffs; and
(b)Mr Davey’s application appears to be seeking security over a sum that will be claimed in the substantive proceeding rather than any anticipated costs of litigation.
[54] Ms Anderson submits that r 5.45(1) is clear that security can be ordered against plaintiffs and she submits that this is entirely consistent with the underlying principles of security for costs as a mechanism for protecting defendant parties’ interests. She acknowledges that, where a plaintiff becomes a counterclaim defendant, the position changes in respect of eligibility for security for costs but this is inapplicable in the present context where the defendants have not pleaded a counterclaim.
[55] Accordingly, she submits that Mr Davey is not entitled to seek security for costs against the defendants and his application must fail.
[56] Ms Anderson submits that, as to the second reason, Mr Davey does not adduce any evidence to connect the sum he seeks as security to any anticipated costs of litigation and the documents filed by Mr Davey do not provide any basis for arguing that such orders are appropriate. She submits that Mr Davey’s attempts to secure funds claimed in the underlying proceedings is misconceived and substantively flawed.
[57] Mr San Diego makes similar submissions on behalf of the third and fourth defendants.
Conclusion in respect of Mr Davey’s application
[58] I am of the view that Mr Davey’s application for security for costs is fundamentally flawed as, under r 5.45(1), only defendants are entitled to apply for security for costs against plaintiffs, other than where the defendants become counterclaim plaintiffs. This is sufficient to dispose of his application.
[59] In any event, his application is misconceived as it attempts to obtain security for part of the sum claimed in the substantive proceedings, which is unrelated to anticipated litigation costs. This is clearly not in accordance with the security for costs régime which is designed to protect a party from a barren costs award against an unsuccessful claimant. For this reason, Mr Davey’s application should be refused.
Result
[60] As a result of the conclusions I have reached at [40], [48], and [52], the application by the defendants for security for costs of $40,000 should be granted.
[61] In accordance with the conclusion I have reached at [58] and [59], Mr Davey’s application for security for costs against the defendants should be declined.
Should the proceeding be stayed pending payment of the security?
[62] Normally, an order would be made staying the proceedings until payment of the security by Mr Davey. However, the defendants have sought an order not only that the proceedings are stayed pending payment of the security ordered, but unless the security is paid within 14 days, Mr Davey’s claim is to be struck out.
[63] Given the circumstances relating to Mr Davey’s past conduct of failure to pay the Costs Order and the security for costs on his appeals, I consider an “unless order” is appropriate, although I will allow 28 days for Mr Davey to make the payment.
Orders
[64]I make the following orders:
(a)The defendants’ application for security for costs against Mr Davey is granted to the extent of $40,000;
(b)Mr Davey is to pay the amount ordered for security into Court within 28 days of the date of this judgment. If he does not pay the security as ordered by due date his claims will be struck out and no further action will be required by the defendants in respect of the strike out.
(c)Mr Davey’s application for security is declined.
(d)The defendants are the successful party and costs should follow the event. The first and second defendants and the third and fourth defendants are each to submit a memorandum as to costs within 10 working days of the date of this judgment.
…………………………….. Associate Judge Taylor
Solicitors:
Braun Bond & Lomas (Erin Anderson), Hamilton, for the First and Second Defendants Cowan Law (Jose San Diego), Auckland, for the Third and Fourth Defendants
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