Derek Edward Cutting and John Frederick Alexander v Kevin Francis Gould
[2005] NZHC 1853
•20 May 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2004-404-3957
BETWEENDEREK EDWARD CUTTING AND JOHN FREDERICK ALEXANDER
First Plaintiff
ANDPARKBROOK HOLDINGS LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)
Second Plaintiff
AND LESNAM HOLDINGS LIMITED
Third Plaintiff
AND FIFER RESIDENTIAL LIMITED
Fourth Plaintiff
AND KEVIN FRANCIS GOULD
First Defendant
AND DENNIS MICHAEL GRAHAM
Second Defendant
Hearing: 12 May 2005 Appearances: RJ Latton for Plaintiffs
DA Wood for Defendants Judgment: 20 May 2005 at 4.45pm
JUDGMENT OF ASSOCIATE JUDGE ABBOTT
[Re Defendants application to strike out and seek security for costs and the Plaintiffs application for discovery ]
Solicitors:Lowndes Associates, PO Box 7311, Auckland for Plaintiff in CIV 2004-404-3957 and Defendant in CIV 2003-404-442 and CIV 2003-404-441
Dennis Graham, PO Box 99188, Newmarket for Defendant in CIV 2004-404-3957 and Plaintiff in CIV 2003-404-442 and CIV 2003-404-441
DEREK EDWARD CUTTING AND JOHN FREDERICK ALEXANDER And Ors V KEVIN FRANCIS GOULD And Anor HC AK CIV-2004-404-3957 []
CIV 2003-404-442
AND BETWEEN KEVIN FRANCIS GOULD
Plaintiff
AND PAUL GRAHAM ALEXANDER
First Defendant
ANDPAUL GRAHAM ALEXANDER AND GRAEME ROBERT ANGUS AS TRUSTEES OF THE ALEXANDER FAMILY TRUST
Second Defendant
ANDMERLE DAWN ALEXANDER TRUSTEE OF THE MD ALEXANDER FAMILY TRUST
Third Defendant
CIV 2003-404-441
AND BETWEEN DENNIS MICHAEL GRAHAM
Plaintiff
AND PAUL GRAHAM ALEXANDER
First Defendant
ANDPAUL GRAHAM ALEXANDER AND GRAEME ROBERT ANGUS AS TRUSTEES OF THE ALEXANDER FAMILY TRUST
Second Defendant
ANDMERLE DAWN ALEXANDER AS TRUSTEE OF THE MD ALEXANDER FAMILY TRUST
Third Defendant
Applications for determination
[1]There are two applications before the Court for determination:
a)In proceeding CIV-2004-404-3957, an application by the defendants dated 7 December 2004 to strike out the pleading of the first plaintiff, and for an order that the second, third and fourth plaintiffs give security for costs; and
b)Also in CIV-2004-404-395 but affecting all three proceedings, an application by the plaintiffs dated 4 March 2005 for orders that the defendants provide a list of documents complying with the High Court rules, and for particular discovery.
Proceeding CIV-2004-404-3957 (“this proceeding”)
[2] This is a claim by four plaintiffs against a solicitor and barrister who the plaintiffs say were instructed on various occasions between mid-2000 and mid-2002 in relation to certain conveyancing transactions, and disputes arising out of those transactions. The plaintiffs claim to have suffered various losses as a result of breaches of contract of retainer and negligence by the defendants in the provision of their services.
[3] This proceeding was issued in July 2004 in response to earlier claims filed separately by the defendants (in April 2003) seeking judgment against Paul Graham Alexander and associated family interests, including Merle Dawn Alexander whose estate is named as the first plaintiff in this proceeding, for their costs of providing the services. These earlier claims are filed under numbers CP 117IM03 and CP 118IM03 (“the costs proceedings”).
[4] The defendants in this proceeding initially sought summary judgment in the costs proceedings. On 5 November 2003 this Court ordered that the bills of costs in question be referred to the Auckland District Law Society for revision. As a result of revisions of the various bills of costs, quantum on those claims is no longer an issue.
However, the defendants in the costs proceedings rely on the matters raised by the plaintiffs in this proceeding as defence to any liability on those earlier claims. In light of those defences, the applications for summary judgment were dismissed and all three proceedings are now being heard together. To complete the linkage of parties, on 1 April 2005 this Court made an order joining five further defendants to the costs proceedings. They included the fourth plaintiff in this proceedings, Fifer Residential Limited. All added defendants are companies associated with Mr Alexander.
Strike out
[5] The defendants bring their application to strike out the first plaintiffs’ pleading on the grounds that one of the co-executors in the estate had no prior knowledge of, and has not authorised, issue of the proceeding; that the executors are obliged to act jointly; and that the first plaintiffs’ proceeding having been issued without authority is an abuse of process.
[6] The plaintiffs have not filed notice of opposition to the application nor any evidence to contest the evidence as to lack of authority filed by the defendants.
[7] Counsel for the plaintiffs invited me to adjourn the application on the basis that whilst there had been some problems in the administration of the estate, those were being resolved and the executors were discussing a possible assignment of the first plaintiffs’ rights in the litigation to another party. This proposal is altogether too nebulous to warrant serious consideration. Even if it were to eventuate, it is something that ought to be done on proper application, with an opportunity for the defendants to oppose.
[8] In the absence of formal opposition, and indeed of any sustainable grounds of opposition, I order that the first plaintiffs’ pleading be struck out.
Security for costs
[9] Again the plaintiffs have not filed notice of opposition to this application. Notwithstanding that, counsel for the plaintiffs, Mr Latton, asked to be heard in opposition. Mr Latton said that his submissions would be directed primarily towards the amount of any security. Counsel for the defendants, Mr Wood, advised that he would not oppose Mr Latton being heard, provided he limited his argument to material on the Court file.
[10] The defendants bring their application under Rule 60 of the High Court Rules, and more specifically Rule 60(1)(b):
(1)Where the Court is satisfied, on the application of a defendant, - … - the Court may, if it thinks fit in all the circumstances, order the giving of security for costs.
(b)That there is reason to believe a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.
[11] The Court’s discretion to order security, and as to quantum, is well established. The broad nature of this discretion was restated by the Court of Appeal in McLachan v MEL Network Limited in CA39/02 29 August 2002:
Rule 60(1)(b) High Court Rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, “the Court may, if it thinks fit in all the circumstances, order the giving of security for costs”. Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing “principles” from the facts of previous cases.
While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a check list of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.
[12] The fact that the second plaintiff is in receivership and liquidation is not a bar to an order for security. It is generally accepted that unusual circumstances are needed to justify awards of security against liquidators and receivers. However, the fact that a proceeding is brought in the name of the company (in receivership and liquidation), rather than by the receiver or liquidator, is still a factor to be taken into account as it increases the likely difficulty of the defendants recovering costs in the event that they are successful:
McGechan on Procedure, HR60.23(4).
Cory-Wright v KPMG Peat Marwick [1993] 2 NZLR 701
Tasman Charterers Inc v Kamphuis HC AK CIV 2002-404-1642 29 April 2004
[13] The existence of affirmative defences and/or for a counterclaim is a factor that the Court can take into account, particularly where they are likely to occupy a significant part of the trial time:
McGechan on Procedure HR60.16.
[14] Counsel for the defendants advanced their application on the following grounds:
a)The evidence of inability to meet costs was unchallenged.
b)Although security was being sought against the second plaintiff (in receivership and liquidation) as distinct from the receiver or liquidator in person, the controlling role of Mr P Alexander would in any event constitute unusual circumstances.
c)The merits of the case were at least evenly balanced in that the plaintiffs’ claims are based on oral contracts of retainer, and oral instructions and advice, requiring findings of credibility as between Mr P Alexander and the defendants.
d)The quantum of the defendants’ set off having been fixed by the costs revisions, the majority of the five days currently estimated for trial would be taken up by the plaintiffs’ case. Quantum needs to be set
having regard to the amount of the plaintiffs’ claim, the five day estimate for trial and the likely costs award to the defendants if the plaintiffs were unsuccessful.
[15] Counsel for the plaintiffs, as he indicated at the outset, confined his argument to matters of quantum. He submitted that no security should be payable, or alternatively any security should be limited to $5,000.00, having regard to the inter relationship between the three proceedings, and the need for the defendants to address in their own proceedings the same matters that the plaintiffs were arguing in this proceeding.
[16] Notwithstanding the lack of formal opposition to the application for security, it is still for the defendants to establish their case under Rule 60(1)(b) that the plaintiffs will be unable to pay costs if unsuccessful. For this purpose they rely on the following evidence in the affidavit of Mr Graham sworn on 7 December 2004:
2.The First Plaintiffs are the Executors of the Estate of Myrle Dawn Alexander. I am aware from the Second-named First Plaintiff that the Estate has no assets and relies for both its legal fees and costs it may incur at the suit of the Defendants upon a Deed of Indemnity given by Paul Graham Alexander, A Bankrupt.
3.Whilst I have no personal knowledge of the Receivership or Liquidation of the Second Plaintiff, I am unaware of any assets owned by the Company.
4.I incorporated the Third Plaintiff, whose Director and Shareholder, a Mr. Mansell, is a nominee for Mr. P.G. Alexander. To my knowledge that Company had and has no assets.
5.The Fourth Plaintiff was also a Company under the control of Mr.
P.G. Alexander. To my knowledge that Company has no assets.
6.In view of the above and the fact that Mr. P.G. Alexander controls all of the Plaintiffs, I am of the view that the Plaintiffs will be unable to pay the Defendants’ costs.
[17] I am satisfied that this unchallenged evidence establishes reason to believe that the Plaintiffs will be unable to pay the defendants costs if the plaintiff is unsuccessful.
[18] Mr Latton informed me that his instructions for the second plaintiff come from the receiver. Although this may be unnecessary given that it is the company rather than the receiver in person that is the party, I find that unusual circumstances exist for the making of an order against the second plaintiff:
a)The plaintiffs’ acknowledgement that the proceeding is a response to the claims for fees brought by the defendants against Mr Alexander and his associated interests; and
b)The unchallenged evidence of Mr Graham that Mr Alexander controls the plaintiffs; and
c)The fact that the plaintiffs’ case is likely to hinge on the credibility of Mr Alexander.
[19] Mr Wood took me through the history of the transactions as pleaded to support a submission that the majority of the time at trial will be taken up with evidence from Mr Alexander, and contrasted that with the comparatively short time that would be taken up by the defendants on their affirmative defences. He submitted that that fact together with the quantum of the plaintiffs’ claim (approximately
$645,000.00 after eliminating the amount that had been claimed by the first plaintiff), the length of trial (five days estimated) and hence the likely scale costs ($79,460.00 for the two defendants) warranted a substantial order for security. Somewhat optimistically, he submitted that an order in the sum of $60,000.00 was appropriate (allowing for a 25% reduction from scale due to the defendants being represented by the one counsel).
[20] As already indicated, the plaintiffs’ opposition to the application for security focuses on quantum. Before going on to deal with that, however, I mention briefly an additional point raised in counsel’s submissions, namely delay in bringing the
application. Mr Latton did not expand on this in his oral argument. I do not see any merit in the point. The proceeding was filed on 27 July 2004 and statements of defence on 18 October 2004. The initial case management conference scheduled for this proceeding was adjourned until 15 December 2004 by Associate Judge Faire when he delivered his judgment on the applications for summary judgment in the costs proceedings. The defendants filed their applications for security on 7 December 2004, ahead of that conference. There is no evidence that the plaintiffs have been prejudiced in any way by the brief delay between filing their statements of defence and filing the applications for security.
[21]The thrust of the opposition to the applications for security is:
a)Security is (and can only be) sought in respect of this proceeding.
b)This proceeding is a direct response to the claims in the costs proceedings. The claims advanced by the plaintiffs in this proceeding are also the basis for defence in the costs proceedings. The essence of the plaintiffs’ argument is that the services for which the defendants seek to recover costs were negligently performed.
c)All three proceedings hinge upon findings of credibility in relation to the oral contracts of retainer (the defendants specifically plead these oral contracts, and implied terms in relation to them, in the costs proceedings).
d)Whilst the parties are not identical there is a high level of commonality, particularly as to parties for whom work was being done, to whom duties might be owed, and who could conceivably have some responsibility for fees.
[22] As further support for the inter relationship of the proceedings, the plaintiffs point to:
a)The recognition of this inter relationship in Associate Judge Faire’s judgment on the summary judgment applications.
b)The fact that the proceedings are being heard together.
c)The use by the defendants in their strike out application of an affidavit filed in the costs proceedings.
d)The defendants’ use of lists of documents filed in the costs proceedings for discovery in this proceeding.
[23] The plaintiffs submit that, in light of the above, the defendants will not be put to any greater cost in defending this proceeding than they have to face in prosecuting the costs proceedings. They rely on Kimber Timber Products (1996) Ltd (in receivership) and Ors v Kimber Timber Products Ltd and Ors (26/6/97, Master Kennedy-Grant, High Court, Rotorua CP25/96) where the Court had to consider this point and had the following to say:
There is substantial equality of claims here by both parties. I am not satisfied that the prosecution of the plantiffs’ claims for their full amount will result in an appreciable increase in the length of the trial.
I therefore consider that there is no justification for requiring the plaintiffs to provide security for costs in respect of their proceeding when they can raise exactly the same arguments and claim substantially the same relief in their defence to the first defendant’s counterclaims.
[24] At the conclusion of the oral submissions, Mr Latton acknowledged that some security was appropriate, but submitted that it should be no more than
$5,000.00.
[25] On the information currently available I believe there is some merit in Mr Latton’s submission that this proceeding will not involve the defendants in substantially greater cost than they would face in prosecuting the costs proceedings. However, the parties are not identical and I cannot rule out the possibility that different issues may arise in this proceeding from the costs proceedings. This was not explored to any significant extent before me, although Mr Latton submitted generally that an assessment of credibility was difficult at this stage given that discovery has not been completed. I take the view that discovery may provide assistance on whether, and if so, to what extent, issues will arise in this proceeding which would be additional to those the defendants have to address in the costs proceedings.
[26] I take the view that security needs to be considered on a staged basis. I consider that an order ought to made at this time to reflect the likelihood that the defendants will have costs in this proceeding additional to those in the costs proceedings (primarily due to the difference in parties), but that the parties ought to have leave to review security at the completion of discovery and inspection.
[27]I make the following orders on the defendants’ application for security:
a)The second, third and fourth plaintiffs are to provide security for the costs of each of the defendants in the sum of $5,000.00 (a total sum of
$10,000.00) by 8 June 2005.
b)This proceeding (CIV 2004-404-3957) is stayed pending provision of that security.
c)The parties have leave to apply for review of this security following discovery and inspection in the event that documents emerge which are likely to have a significant effect on any finding on credibility, or demonstrate that the costs which the defendants are likely to be put in defending this proceeding are likely to be substantially greater than the cost they will incur in prosecuting the costs proceedings.
Plaintiffs’ application for discovery
[28] The plaintiffs did not proceed with their application for particular discovery as the parties had agreed prior to commencement of the hearing on documents to be provided. That part of the application is therefore dismissed.
[29] The plaintiffs pursued the other aspect of their application, namely for an order that the defendants provide a list of documents in accordance with the High Court Rules (applicable to all three proceedings).
[30] Mr Latton took me to the lists of documents filed in the defendants’ proceedings, which the defendants also rely on in this proceeding. The defendants have merely listed their files on the various transactions and disputes, without identifying individual documents within those files of relevance to the proceedings, or even numbering the documents to assist with requests for production. Even these lists were filed late and after a non-compliance hearing when the defendants explained delay to that point on the basis that discovery was very extensive.
[31] In my view the defendants’ lists of documents (both verified on the 13th day of December 2004 and filed in CP 118IM03) do not comply with the requirements of the High Court Rules. In particular (and I refer to the lists of documents and to the affidavit of Anthony Stephen Kuran sworn on 24 February 2005):
a)It appears that irrelevant documents have not been removed from the files;
b)It is doubtful from the limited material placed before me, whether all the documents in each file are “of the same nature” so as to justify being grouped rather than listed individually; and
c)In any event, and even with any documents that may justify grouping, there has been no effort to number them in a convenient sequence.
[32] Mr Latton said his instructions were simply to seek proper discovery in accordance with the High Court Rules, rather than ask the Court to apply cost sanctions for lack of compliance to date. Mr Wood, quite properly, conceded that he could not oppose an order.
[33] Accordingly, I direct that the defendants in this proceeding (and the plaintiffs in the costs proceedings) are to file and serve lists of documents complying with the High Court Rules (particularly having regard to the matters identified in paragraph 32 above) by 22 June 2005, subject to security having been provided as ordered in paragraph 28 above.
Costs
[34] The defendants in this proceeding having succeeded on their application for security are entitled to costs on that application on a 2B basis with disbursements to be fixed by the Registrar.
[35] The plaintiffs in this proceeding having succeeded on the application for discovery are entitled to costs on that application on a 2B basis with disbursements to be fixed by the Registrar.
Next event
[36] All three proceedings are to be listed for mention in the Chambers list on Friday, 10 June 2005 at 10.45am and for making of further timetabling directions (including a second case management conference) if the security ordered has been provided.
D.H. Abbott Associate Judge
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