Exporttrade Corporation v Irie Blue New Zealand Limited HC Auckland CIV-2008-404-007130

[2011] NZHC 1536

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-007130

BETWEEN  EXPORTRADE CORPORATION Plaintiff

ANDIRIE BLUE NEW ZEALAND LIMITED First Defendant

ANDEDITH SHELLEY ROZANNE GRIBBLE Second Defendant

ANDSCOTT GEOFFREY GRIBBLE Third Defendant

Hearing:         7 October 2011

Appearances: G Thwaite for Applicant

H Fulton for Defendant

Judgment:      14 October 2011 at 3:00 PM

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 14 October 2011 at 3:00 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date……………………….

Solicitor:             G J Thwaite, P O Box 6239 Wellesley Street, Auckland 1141

Fax: [phone] – Email: [email protected]

Counsel:             H Fulton, P O Box 5577 Wellesley Street, Auckland 1141

Fax: [phone] – Email: [email protected]

EXPORTRADE CORPORATION V IRIE BLUE NZ LTD & ORS HC AK CIV-2008-404-007130 14 October

2011

Introduction

[1]      The first  defendant,  Irie Blue NZ  Limited,  applies  for security for  costs against the plaintiff, Exportrade Corporation.  There are three grounds advanced in support of the application.   They are that Exportrade is incorporated outside New Zealand, that it has no known assets or trade in New Zealand and that it has failed or refused to pay a costs award made against it in this proceeding on 25 February 2011.

[2]      Under r 5.45 security for costs may be ordered if the prerequisites of r 5.45(1) are satisfied and  “if the Judge thinks that it is just in all the circumstances” to do so. The prerequisites for such an order are:

(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  of  a  corporation  incorporated  outside  New

Zealand; or

(b)That there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the proceeding.

[3]      Notwithstanding that the prerequisites may be satisfied, the decision to award security is a matter for the discretion of the Judge.[1]   The purpose of ordering security for costs and the importance of balancing the interests of the parties when doing so was explained by the Court of Appeal in A S McLachlan Ltd v MEL Network Ltd at [15]:

[1] A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).

The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs.   That must be taken as contemplating  also  that  an  order  for  substantial  security  may,  in  effect, prevent the plaintiff from pursuing the claim.  An order having that effect

should be made only after careful consideration and in a case in which the claim has  little  chance  of  success.   Access  to  the  courts  for  a  genuine plaintiff is not likely to be denied.

Of course, the interests of defendants must also be weighed.  They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.

The prerequisites under r 5.45

[4]      There is no dispute that Exportrade is a corporation incorporated outside New Zealand.   Neither does it trade and nor does it have assets here.   There is little evidence about its financial position.   When the proceedings were commenced in

2008 the president of Exportrade, Jeffrey Robert Firestone, swore an affidavit in which he said, amongst other things, that at all times material to the proceedings Exportrade was “in good standing in Florida”.   No updating information has been provided.   On the other hand, Exportrade has persisted in this proceeding, taking various steps to advance its case, including applying to set aside the defendants’ protest to jurisdiction in 2009 and defending a review Christiansen AJ’s decision dismissing the defendants’ protests.

[5]      Significantly, Mr Fulton, for Irie Blue, made little of the fact that Exportrade is incorporated outside New Zealand or of the lack of evidence as to Exportrade’s financial  position.    Irie  Blue’s  application  was  based  primarily on  the  fact  that Exportrade had not paid the costs award made against it in February 2011.   Mr Fulton asserted that, as a result, Irie Blue was concerned that any future costs award would  not  be  paid.    He  was  particularly  concerned  because  there  is  a  fixture allocated in a few weeks to deal with applications brought by Exportrade which will involve Irie Blue in further cost.

[6]      The  non-payment  by  Exportrade  of  the  costs  is,  however,  somewhat complicated;  Exportrade  maintains  that  the  costs  are  not,  in  fact  payable  and therefore its refusal to pay them does not give any reason to think that it will not be able  to  meet  a  costs  award  if  it  is  unsuccessful.    Mr Thwaite,  for  Exportrade, submitted that because the costs order pre-dated the recall of the judgment in respect of which it was made, it has effectively fallen away and the issue of costs is still to be properly determined.

[7]      This issue requires a review of the procedural history of the case.    The

relevant events are:

30September 2008:   Exportrade files its statement of claim asserting three causes of action.  The first seeks to enforce a default judgment obtained in Florida.   The second is a claim in debt and the third a claim based on an acknowledgement  of  debt.     Shortly  afterwards,  on  24  October  2008

Exportrade files an application for summary judgment in relation to the first

cause of action.

27 March 2009:    One of Irie Blue’s directors,  Mrs Gribble, (the second

defendant) is served in Barbados.

8 October 2009:    Irie Blue and  its  other director, Mr Gribble (the third

defendant) are served in New Zealand.

28October 2009:   Appearances under protest to jurisdiction are filed on behalf of all three defendants under r 5.49.   They are directed towards the first cause of action, with no mention of the essential elements of the other causes of action (particularly the acknowledgement of debt on which the

third cause of action was based).

18  December  2009:     Exportrade  applies  to  set  aside  the  protests  to jurisdiction.   There is reference to the Florida judgment but only once and only in relation to Irie Blue.  As against Mrs Gribble, it was asserted that her protest was filed out of time.[2]  As against Mr Gribble, it was said that since he was  served  in  New  Zealand he could  not  file a protest,  that  he was estopped from denying that he was domiciled in New Zealand and that there was a good arguable case that he was domiciled in New Zealand.  A separate ground (not specifically relating to any of the defendants) was that judgment

[2] In determining Exportrade’s application Christiansen AJ, held that this was correct and that Mrs

Gribble had submitted to jurisdiction.

on the summary judgment application was appropriate.

22 January 2010:  Notice of opposition filed on behalf of the defendants.  The grounds of opposition appear to be directed towards the first cause of action, though it states that the summary judgment application “does not fall for consideration   pending   determination   of   the   defendants’   protest   to jurisdiction”.  Had the protest been intended to be limited to the first cause of action one might have expected it to assert that if the protest was not set

aside, the summary judgment application would inevitably fall away.

9 April 2010:  Second amended statement of claim filed.

28April 2010:  Christiansen AJ grants the application to set aside the protests of all defendants.[3]   Submissions filed on behalf of the defendants state:

[3] Exportrade Corp v Irie Blue NZ Ltd HC Auckland CIV-2008-404-7130, 28 April 2010.

The primary issue is the enforceability of the Florida judgment in New Zealand by this action brought on the basis of that judgment in the first cause  of  action.    Other causes  of  action  are  apparently intended to plead the merits of the claim for subsequent proof at trial as expressed in the second and subsequent causes of action.

The Associate Judge ultimately did not regard the Florida judgment as being determinative.  He held that there was a good arguable case that service upon each of the defendants had been properly effected and that was sufficient to dispose of the application to set aside the protests.  There was no reference to

the summary judgment application.

4 May 2010:   The defendants apply to review Christiansen AJ’s decision.

The grounds focused on Christiansen AJ’s refusal to determine the validity of

the Florida judgment.    There was no mention of the summary judgment application.

8July 2010:  The defendants file a second protest to jurisdiction which deals with the second and subsequent causes of action (including new causes of

action contained in the second amended statement of claim.

22December 2010:  Duffy J allows the review application.  The judgment deals solely with whether this Court had jurisdiction to enforce the Florida judgment.   However, the order made is that “The plaintiff’s proceeding to

enforce the Florida judgment in New Zealand is, therefore, dismissed.”

14January 2011:    Exportrade seeks to have the judgment recalled on the basis that the effect of the judgment was to dismiss the proceeding in its

entirety.

25 February 2011:  Duffy J delivers a costs judgment awarding costs against

Exportrade. There is no reference to the application to recall the judgment.

11  March  2011:     Duffy  J  issues  a  minute  dealing  with  Exportrade’s application to recall the judgment because of the apparent effect of the substantive decision.   The Judge recalled and re-issued her judgment the same  day,  changing  the  order  made  to  read  “The  plaintiff’s  summary judgment proceeding to enforce the Florida judgment in New Zealand is

therefore dismissed.”

6 May 2011:  Exportrade files applications for, amongst other things, orders

setting aside the second protest and setting aside the costs judgment.

[8]      I consider that the costs judgment was not affected by the subsequent recall of the judgment and is still valid.  Ideally, the application to recall would have been dealt with first and the costs determined once that position was settled.   There is, however, no reason that a judgment delivered in these circumstances is to be viewed as unenforceable simply because of a minor change to its substantive wording.  The most appropriate course would have been to apply for a stay of the costs judgment pending the outcome of the application to set it aside.  Strictly, therefore, the costs judgment is payable.

[9]      Notwithstanding my conclusion regarding the status of the costs order against Exportrade, I have reservations about the conclusion that Mr Fulton invites me to draw from Exportrade’s non-payment of the costs.  It is not for me to consider the

substance of either the recalled judgment or the costs judgment; they are the subject of the forthcoming applications.  But there does appear to be some justification for Exportrade’s concerns.  The order made in the judgment of 22 December 2010 was worded unhappily, so as to suggest that the plaintiff’s entire proceeding had been struck out.   The recalled judgment was also confusing; it referred to “summary judgment proceeding” rather than the usual “summary judgment application” and since the decision being reviewed was not a decision striking out the summary judgment application it is unclear why there should have been any reference to that application.

[10]     In these circumstances, I am not satisfied that the non-payment of the costs does signify a risk that Exportrade will not or will not be able to pay an award of costs made in less contentious circumstances.

Exercise of discretion

[11]     I do not consider that this is an appropriate case for an award of costs.   In addition to my view regarding Exportrade’s reason for not paying the costs award, there are other factors that I consider relevant.

[12]     First, only Irie Blue seeks security for costs; Mr Gribble makes no such application for security for costs even though one might think that he is at equal, if not greater, risk and therefore likely to incur the same, if not greater, defence costs. The current pleading is the second amended statement of claim dated 9 April 2010. Although the first and second causes of action (action on the Florida judgment and action on a contract) are pleaded against all three defendants, Mr Gribble alone is the subject of the third cause of action which is based on an acknowledgement of debt by him personally.  Mr Gribble and Ms Gribble only are named in the fourth cause of action (negligence for breach of the Companies Act of Barbados) and the fifth cause of action (breach of statutory duty for breach of the Companies Act of Barbados).  It is curious that the third defendant who is personally exposed on an alleged acknowledgement of debt should not himself be seeking security for costs.

[13]     Secondly, I take into account Exportrade’s complaint that the defendants have sought to delay and obstruct the progress of the substantive proceeding through the filing of the second protest.  Although the second amended statement of claim did add new causes of action, it retained the original second and third causes of action, to which  the  original  protest  was  (apparently)  not  directed.    This  application  for security for costs was made some five months after the award.   If security were ordered the forthcoming hearing of Exportrade’s applications would be vacated, resulting in more delay.

[14]     For these reasons I do not consider it is just to order security for costs.  The application is refused.

P Courtney J