Eggleston v Nicholson HC Christchurch CIV 2007 409 2327

[2011] NZHC 32

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2007 409 002327

BETWEEN  DEAN TODD EGGLESTON AND GERALDINE MEERVELD

First Plaintiffs

AND  PRECISION PUBLICATIONS 2004

LIMITED Second Plaintiff

ANDCRAIG NICHOLSON Defendant

Hearing:         2 February 2011

Appearances: Plaintiff in Person (but only after initial judgment given) R J McGuire for Defendant

Judgment:      2 February 2011

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to security for costs

[1]      The plaintiffs purchased the business of the various companies involved in the production and marketing of yearly trade diaries.   The defendant was the sole shareholder and director of the companies purchased and it was he who negotiated with the plaintiffs.   The plaintiffs in this proceeding allege misrepresentations in relation  to  the  clients  of  the  business  and  the  quality,  reputation  and  financial standing of the business.  The defendant was not a contracting party.  The claim is brought  under  the  Fair  Trading  Act  1986  and  alternatively  in  deceit  and  in negligence.   The defendant denies misrepresentation and pleads that  a time bar

operates in relation to the Fair Trading Act causes of action.

DEAN TODD EGGLESTON AND GERALDINE MEERVELD V CRAIG NICHOLSON HC CHCH CIV 2007

409 002327 2 February 2011

The application for security for costs

[2]      On 12 October 2010 the defendant filed this application for orders that the first plaintiffs and the second plaintiff give security for costs.

Steps in relation to the application

[3]      On 19 October 2010 at a case management conference the Court allocated today for the hearing this application.   Counsel for the defendant has appeared. None of the plaintiffs has appeared.  The Court deferred the commencement of the hearing to 10.15am to ensure that the plaintiffs’ absence was not caused simply by a delay in reaching Court.

[4]      Mr Eggleston has been self represented.  Ms Meerveld has not been attending case management conferences and Precision Publications 2004 Limited was initially, with Me Eggleston and Ms Meerveld, represented by a solicitor but all ceased to have representation in August 2010.   Mr Eggleston has subsequently purported to file documents not only on his own behalf but also on behalf of Ms Meerveld and of the company.

[5]      On   18   November   2010   Mr   Eggleston   filed   a   document   headed

―Memorandum – Various‖.    It dealt with a number of matters, particularly with regard to the subject matter of the proceeding.  The document constituted neither a notice of opposition nor evidence in opposition.  To the extent it touched upon the security for costs issue Mr Eggleston simply recorded:

I would think that they would have to provide some reason to convince the

Court they have a chance of successfully defending this case in Court.

[6]      Mr Wallace for the defendant appropriately filed a brief memorandum noting in relation to security for costs that Mr Eggleston’s memorandum did not constitute a notice of opposition or evidence in opposition.   (Mr Wallace further noted, to the extent that the plaintiffs had leave to file interlocutory applications, that the memorandum did not constitute any such application).

[7]      Having regard to these matters, the Court, on the papers, on 6 December

2010  issued  a  Minute.  The  Court  noted  that  in  relation  to  any  interlocutory documents filed the High Court Rules had to be complied with, as did directions of the Court.  The Court recorded that Mr Eggleston’s memorandum would be ignored. The Minute advised the parties that if they wished matters to be dealt with by the Court they must comply by filing the appropriate procedural documents.

[8]      The plaintiffs have subsequently filed any notice of opposition or notices of application.

[9]      Yesterday   the   Registrar   received   from   Mr   Eggleston   an   unsigned memorandum which read:

May it please the Court

1.        The defendant’s application.

The defendant has applied for security, on the grounds that they (sic) believe we don’t have the means to pay costs. We own 84 Clyde Rd, Fendalton,  with  a  mortgage  of  approximately  $20,000.00.    We oppose this application for this reason.

The defendant provides no evidence to show that they (sic) can win this case.  We have written to the Court with written evidence of his lies in his statements to court and also his affidavit.  Unfortunately, the court’s bothered to read this evidence.

[10]     Mr Eggleston advised the Registrar he would provide a signed copy of that document to the Court today.   He has not appeared and not provided any further documentation.

Unopposed application

[11]     Rule 7.24(1) High Court Rules provides:

7.24 Notice of opposition to application

(1)       A respondent who intends to oppose an application must file and serve on every other party a notice of opposition to the application within—

(a)       the period of 10 working days after being served with the application; or

(b)       if the hearing date for the application is within that period, 3 working days before the hearing date.

[12]     The consequence of the plaintiffs’ failure to file notices of opposition and evidence in opposition is that they are not entitled to oppose or be heard on the application.

[13]     On occasion, particularly where individuals are self represented the Court may find it just and appropriate either to treat informal documents which are before the Court as a sufficient basis of opposition or to adjourn an interlocutory application (albeit with costs implications) to allow time for notice of opposition and proper preparation by both parties in relation to issues thereby raised.

[14]     I  have  considered  in  this  case  whether  I  ought  to  treat  Mr  Eggleston’s documents as proper opposition(or more broadly) and have concluded that it is not just to grant the plaintiffs leave to oppose out of time or to adjourn to a later date.

[15]     In the event I am particularly influenced by two factors:

a.   The  defendant  through  counsel  appropriately  raised  the  issue  of proper procedure promptly upon receipt of the November 2010 memorandum and the Court by its direction of 6 December 2010 made clear to the plaintiffs the need for compliance with High Court Rules.

b.It is Mr Eggleston’s position, at least by implication (as notified by his memorandum of the last 24 hours) that he and other plaintiffs are in  a  position  to  pay  costs.    I  do  not  treat  the  memorandum  as evidence.  It is not.  But if it is the plaintiffs’ announced position that they are in a position to pay costs their failure to take any appropriate advice  as  to  Court  documents  (given  the  Court’s  directions  of  6

December 2010) is unexplained and inexcusable.

Security for costs – the jurisdiction

[16]     The defendant applies for security for costs pursuant to High Court Rule

5.45.

A risk that the plaintiffs will be unable to meet an award of costs

[17]     Rule   5.45(1)   contains   what   is   generally   referred   as   the   ―threshold requirement‖.  In this case Mr McGuire responsibly accepts that the defendant is not able to provide any definitive proof that the plaintiffs will unable to pay an award of costs.  But, as he submits, that is not the test.  Rule 5.45(1)(b) requires the Court to determine whether there is reason to believe that a plaintiff will be unable to pay costs to the defendant.  Credible evidence of surrounding circumstances from which such belief  may be  reasonably drawn  is  sufficient:  Concorde Enterprises  Ltd  v Anthony Motors (Hutt No 2) Ltd [1977] 1 NZLR 516 at 519.

[18]     In this case the defendant is able to point to the following evidence:

a.   The plaintiffs’ then solicitor advised the Court by memorandum in February 2010 that the business which is the subject of the litigation had been closed down by the plaintiffs in 2009.

b.When the defendant’s solicitor in May 2010 appropriately raised the implication of this information upon the financial position of the plaintiffs  and  requested  details  indicating  that  the  plaintiffs  could meet any order for costs, there was no reply given by or on behalf of the plaintiffs.

c.   The plaintiffs in August 2010 without prior warning dispensed with legal representation some three years into this litigation.

d.The plaintiffs have not put before the Court any evidence as to a financial ability to meet costs.   (As I have stated, Mr Eggleston’s memorandum of the last day does not constitute evidence).

e.   There is evidence that when structuring their affairs on the purchase of the business the first plaintiffs were forming a family trust with an independent trustee.  The solicitor said so in a letter. Taken with the other evidence this raises a real possibility that   any assets of value within the plaintiffs’ control may in fact be held in trust.

[19]     Against  this  background  I  find  that  there  is  reason  to  believe  that  the plaintiffs will be unable to pay the costs of the defendant if the plaintiffs are unsuccessful in this proceeding.

Security – the discretion under r 5.45(2)

[20]     Where the threshold test is satisfied under r 5.45(1) a Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.

[21]     This discretion is not to be fettered by constructing ―principles‖  from the

facts of previous cases: A S McLachlan Ltd v M E L Network Ltd (2002) 16 PRNZ

747 (CA) at [13] and [14].  As the Court of Appeal indicated in the McLachlan case, what is called for is a careful assessment of the circumstances of the particular case.

[22]     The  merits  and  bona  fides  of  a  plaintiff’s  claim  will  be  of  heightened relevance if an order for security may deprive a plaintiff of the opportunity to pursue its claim.   In this case it is not realistic to suggest that the Court can have a clear view of the merits one way or the other at this point.  There is evidence before the Court, because the plaintiffs initially applied for summary judgment, which points to an arguable claim.   On the other hand, the plaintiffs subsequently withdrew that summary judgment application.  That might reasonably be taken as carrying some acceptance that the defendant’s position was arguable.  Also an application by the defendant to strike out the plaintiffs’ claim was withdrawn, arguably carrying an implication that the defendant accepted that the plaintiffs’ claim, at least as pleaded, was not hopeless.

[23]     In short, I regard the plaintiffs’ claims in this case as appropriately being treated as having a prospect of success so that issues of access to justice should be considered:  see Ambrose v Pickard [2009] NZCA 502 at [40].

[24]     On the other hand, while there is reason to believe that the plaintiffs may be financially unable to meet a costs award, the plaintiffs themselves have chosen to given no evidence to the Court as their ability or to source funds for the continuation of this proceeding, including by the provision of security for costs.  The possibility of assistance from a trust arises.   Mr Eggleston’s own assertions as to house ownership are before me, byt not as evidence.  I have no sound basis in this case for concluding that the plaintiffs will be without access to justice if an award of security for costs is made.  Any concerns which might arise in that regard can be ameliorated by the approach I have taken both as to the items costs to be considered and the proportion of a scale 2B award to be ordered.

[25]     While r 5.45 does not expressly address the situation of a delayed application, any aspect of delay is a factor to be brought into account in the exercise of the discretion.  On their facts, applications for security for costs made at very late stage in a proceeding are often unsuccessful: see Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington CIV-2008-485-1701, 24 April 2009.  Such cases have often arisen where the application has been very close to a hearing date (not so in this case) or where the applicant has stood by allowing the plaintiff to incur considerable expense without even an informal request in relation to security.

[26]     In this case it the defendant within a reasonable time after becoming aware of the closure of the plaintiffs’ business initiated his inquiry of the plaintiffs as to their financial ability to meet an award of costs.   The plaintiffs’ abandonment of legal representation in August 2010 was a factor which could reasonably lead a defendant, combined with the closure of the business, to conclude that a security application had  now  become  appropriate.    I  do  not  find  in  these  circumstances  that  an application filed in October 2010 involved such delay that it should impact on either the award or the amount of costs.   That still assumes the adoption of the usual approach (as accepted by Mr McGuire for the defendant) that the Court should

award security only in relation only to steps taken after the application for security was made.

[27]     It is also appropriate that the Court considers whether the plaintiffs should be excused from having to provide security on the grounds that their financial position has resulted from the defendant’s actions complained of in this proceeding: see Ambrose v Pickard.  In relation to that consideration, any conclusion must be closely parallel to that in relation to the merits of the respective parties’ positions.  There is no clear conclusion to be drawn at this point of the litigation.  The present quantum of the plaintiffs’ claim (close to $390,000.00) involves a significant sum which might reasonably be expected to impact on the finances of individuals.  On the other hand, those individuals have not provided to the Court any evidence as to their financial position and the impact on that from the circumstances giving rise to the litigation.

The appropriate orders in this case

[28]     It  is  appropriate  that  there  be  orders  for  security to  be  provided  by the plaintiffs.

[29]     It is appropriate, as conceded by Mr McGuire, that the items in relation to the assessment of the amount of security be only for preparation for trial and trial itself (10  days  and  5  days  respectively).    The  case  has  been  treated  agreement  as  a Category 2 case from the outset.  On a 2B basis the likely costs of the defendant to the end of trial would be $28,200.00.

[30]     The defendant seeks security on that basis.

[31]     There is no presumption in favour of an order equating to a full 2B award.

[32]     Standing back, and making some allowance for at least a possibility of access to justice issues I view a figure of approximately 66% of a 2B calculation as just.  A total sum of $18,500.00 by way of security is just.  Having regard to the proximity of the setting down date I view it as appropriate that the security be provided in a single

stage, to coincide with the setting down date so as to ensure that the defendant at that point knows whether he needs to commence preparation of evidence for a trial.

Orders

[33]     I order:

a.   The  plaintiffs  shall  provide  security  for  costs  in  the  sum  of

$18,500.00 to the satisfaction of the Registrar, to be provided in a single tranche no later than the setting down date.

b.In the event that the security is not provided by the setting down date, the proceeding will be stayed until such security is provided.

Costs

[34]     The defendant appropriately put the plaintiffs on notice as to security for costs  issues  before  commencing  his  interlocutory  application.     He  has  been successful in the application.  Costs must follow the event.

[35]     I  order  that  the  plaintiffs  (jointly  and  severally)  pay  the  costs  of  and incidental to this application on a 2B basis, such costs to be paid in any event.  The costs are to include an allowance as for item 4.14 Schedule 3 High Court Rules (preparation for hearing of a defended interlocutory application) upon the basis that with the plaintiffs self represented and with Mr Eggleston filing memoranda suggesting opposition, the defendant had to make allowance for the possibility that

on the hearing date formal opposition might emerge.

Solicitors

D T Eggleston in Person
Layburn Hodgins, Christchurch

ADDENDUM

[36]     After I had delivered the judgment and was in the course of conferring with Mr McGuire as to trial directions and pre-trial directions Mr Wallace and Mr Eggleston entered the courtroom.  Mr Wallace is counsel who has had conduct of the defence on Mr McGuire’s instructions.   Mr Wallace explained that while he was appearing in another Court Mr Eggleston had entered the courtroom and upon seeing Mr Wallace present had assumed, understandably, that he was in the correct courtroom.

[37]     I explained to Mr Eggleston the nature of the judgment I have just given and explained to him that I was prepared to hear from him on the limited issue of whether I should treat the documents which he had filed as sufficient notice of opposition and documents in opposition to treat the present interlocutory application as anything other than an unopposed application.   I endeavoured to make clear to Mr Eggleston that I was not prepared to deal with the substance of the security application before I dealt with any submissions he wished to make on whether to recall my judgment to allow opposition to the application.  He was to deal with his right to be heard.

[38]     Mr Eggleston explained that after the memoranda of last year and the Minute which had issued from the Court he had asked the Registry  for assistance as to what form of documents he should use and indicated that in his view he had not been given any proper indication.  He indicated to me that it was his understanding that what he was doing was sufficient.

[39]     In the light of Associate Judge Doherty’s Minute to which I have referred I cannot  accept  that  Mr  Eggleston’s  position  was  reasonably taken.    The  Minute clearly referred to the requirements for notices of opposition and evidence in opposition and if Mr Eggleston was pursuing interlocutory applications, for formal notices of application.   None of that has been attended to.   I explained that to Mr Eggleston.   I explained also that it  was not the function of the High Court Registry to given legal advice. That is the function of lawyers.

[40]   Mr Eggleston then explained that he had experienced difficulties in his relationship with his solicitor in relation to the costs of representation and in relation to what he perceived as unsatisfactory advice, or the lack of conclusion as to the prospects of meaningful recovery from the defendant should the plaintiffs be successful in their case.

[41]     All the parties are entitled to the protection of the rules which are there to ensure issues are properly notified to others and are then properly able to be dealt with at a hearing of the kind today.

[42]     The plaintiffs were put on notice by the Court that the formal requirements of opposition were to be met. They have not been met.

[43]     The  difficulties  of  advice  which  Mr  Eggleston  has  experienced  are  not matters  which  can  excuse  the  plaintiffs’  failure  to  properly  raise  matters  of opposition.

[44]     The need for a notice of opposition and evidence in opposition could have been the subject of brief and relatively inexpensive advice from a solicitor who need not have been previously retained by the plaintiffs.   The solicitor would not have needed any significant knowledge of the substance of these proceedings to be able to advise  on  the  procedure  required  of  a  notice  of  opposition  and  affidavit.    The plaintiffs  have  for  understandable  reasons  chosen  not  to  go  back  to  the  same solicitor, but that situation does not constitute sufficient grounds to cut across reasonable requirements of the Court and of the rules in relation to opposition.  The factors that I have set out in my oral judgment earlier and particularly at paragraph [15] continue to weigh with me as much now as they did when I gave judgment.

[45]     In these circumstances, while I heard from Mr Eggleston for the purpose of considering whether to recall my judgment and deal with the matter in a different way,  I now conclude that grounds to recall the judgment are not made out.   I therefore confirm that I will not hear from Mr Eggleston on his own behalf or, indeed, on behalf of other plaintiffs in relation to the subject matter of the security application.  My earlier judgment therefore stands in all its terms.