Friends of Houghton Valley Incorporated v Wellington City Council

[2015] NZHC 1515

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-000270 [2015] NZHC 1515

IN THE MATTER

of an application for review

IN THE MATTER

of subdivision and land use consents by the First Defendant under the Resource Management Act 1991 No SP295568 dated 25 November 2014

UNDER

the Judicature Amendment Act 1972

BETWEEN

FRIENDS OF HOUGHTON VALLEY INCORPORATED Plaintiff/Respondent

AND

WELLINGTON CITY COUNCIL First Defendant

KAIKOURA VIEW LIMITED Second Defendant/Applicant

Hearing:	2 July 2015
Counsel:	G D S Taylor for Plaintiff/Respondent E L Manohar for First Defendant H B Rennie QC and P D Tancock for Second Defendant/Applicant
Judgment:	2 July 2015

JUDGMENT OF COLLINS J

Introduction

[1]      I am ordering Friends of Houghton Valley Incorporated (Friends of Houghton

Valley) to pay the Registrar of the High Court $10,000 as security for costs.  This order is made under r 5.45 of the High Court Rules.

FRIENDS OF HOUGHTON VALLEY INCORPORATED v WELLINGTON CITY COUNCIL [2015] NZHC

1515 [2 July 2015]

[2]      I am also ordering the security for costs be paid to the Registrar by 28 August

2015.

[3]      No other orders are made at this juncture.

The litigation

[4]      Kaikoura  View  Ltd  (Kaikoura)  owns  a  vacant  site  on  the  slopes  above Houghton Valley in Wellington (the site).  The site is approximately 0.52 ha and is zoned “outer residential” in the operative Wellington City District Plan.

[5]      On 13 November 2013, Kaikoura applied to the Wellington City Council (the Council) for resource consent to subdivide and build 13 properties on the site (proposed development).   The Council issued resource consent on 25 November

2014.

[6]      The  Council’s  resource  consent  decision  is  a  comprehensive  28-page document, which reflects considerable thought and attention by the decision-makers.

[7]      During the time it took for the resource consent to be granted, a number of residents in Houghton Valley expressed their displeasure at the prospect of Kaikoura undertaking the proposed development.  Those residents held public meetings, wrote to the Council and made submissions to the Council.

[8]      On 23 January 2015, Friends of Houghton Valley was incorporated under the

Incorporated Societies Act 1908.

[9]      On 10 April 2015, Friends of Houghton Valley commenced its application for judicial review.  The proceeding is to be heard on 21 October 2015.  Four grounds of judicial review have been pleaded.

[10]     First, it is alleged the Council failed to have regard to the fact that the land immediately above the site is a scenic reserve.   It is said the Council failed to consider the effects of Kaikoura’s proposed development on the environment.1

[11]     Second, it is alleged the Council failed to address the submissions made to it by persons who are now members of Friends of Houghton Valley.2

[12]     Third, it is alleged the Council failed to provide adequate reasons for its decision.3

[13]     Fourth, it is alleged the Council failed to obtain and consider the hydraulic effects of increased storm water flow from the proposed development upon contaminated  ground  water  which  currently  comes  from  a  former  landfill  in Houghton Valley.4

[14]     All  grounds  for  judicial  review  are  firmly  denied  by  Kaikoura  and  the

Council. They say:

(1)the site was already zoned for residential use and the Council made no error when it issued the resource consent;

(2)the  Council  considered  all  relevant  matters  raised  by  those  who expressed concerns about the proposed development;

(3)the Council’s decision granting resource consent is a detailed written decision which fully explains the Council’s reasons for granting the resource consent; and

(4)the site is not part of the former landfill and ground water from the former landfill is not affected by the proposed development.

1 Statement of Claim, 10 April 2015 at [22].

2 At [23].

3 At [24].

4 At [26].

Security for costs application

[15]     Kaikoura has sought $24,278 security for costs.   In its written application, Kaikoura also sought an order that if it is not paid within four weeks, the proceeding is to be struck out or stayed.  However, at the hearing, Mr Rennie QC, senior counsel for Kaikoura, abandoned this part of its application.

[16]     The sum of $24,278 is calculated on a scale 2B basis and is based on the understanding the hearing of the application for judicial review will take one day.

[17]     Kaikoura’s grounds for security for costs can be distilled to the following

four points:

(1)Friends of Houghton Valley has been established as a vehicle for the proceeding in order to circumvent the possibility of orders for costs being made against its members if they were to personally initiate the claim for judicial review and lose.

(2)Friends of Houghton Valley will not be able to pay security for costs if the application for judicial review fails.

(3)       There are no merits to the application for judicial review.

(4)No prejudice will be suffered by Friends of Houghton Valley if an order for security for costs is made.  Conversely, Kaikoura will suffer prejudice and loss if security for costs is not ordered.

Legal principles

[18]     Orders for security for costs are governed by r 5.45 of the High Court Rules. The relevant parts of that rule confer a discretion on a Judge if he or she thinks it is just in all the circumstances to order security for costs.  An order for security for costs cannot be made unless there is reason to believe the plaintiff will be unable to pay the costs of the defendant if the plaintiff’s proceeding fails.

[19]     In addition, s 17(1) of the Incorporated Societies Act 1908 is engaged in this case. That section provides:

17       Security for costs where society is plaintiff

(1)       Where  a  society  is  the  plaintiff  in  any  action  or  other  legal proceeding, and there appears by any credible testimony to be reason to believe that if the defendant is successful in his defence the assets of the society will be insufficient to pay his costs, any Court or Judge  having  jurisdiction  in  the  matter  may  require  sufficient security to be given for those costs, and may stay all proceedings until that security is given.

[20]     At the time Parliament passed the Incorporated Societies Act 1908, the High Court Rules only provided for security for costs where the plaintiff was resident out of  New  Zealand.5      It  is  difficult  to  see  any significant  differences  in  principle

between s 17(1) of the Incorporated Societies Act 1908 and r 5.45.6     I think it

appropriate to regard s 17(1) as simply conferring concurrent jurisdiction to order security for costs in this case.7

[21]     The challenge facing Judges required to consider applications for security for costs were succinctly stated by William Young J who said, when delivering the judgment of the Supreme Court in Reekie v Attorney-General:8

... The jurisdiction to require security poses something of a conundrum for the courts.  The poorer the plaintiff, the more exposed the defendant is as to costs and the greater the apparent justification for security.  But, as well, the poorer the plaintiff, the less likely it is that security will be able to be provided and thus the greater the risk of a worthy claim being stifled.

[22]     William Young J went on to explain that applications for security for costs at first instance require careful consideration and that Judges are “slow to make an order for security which will stifle a claim”.  These comments reflect the following observations of Bowen LJ in Cowell v Taylor:9

The  general  rule  is  that  poverty  is  no  bar  to  a  litigant,  that  from time immemorial, has been the rule at common law, and also, I believe, in equity. There is an exception in the case of appeals, but there the appellant has had

5      Judicature Act 1908, second sch, cl 577.

6      Ratepayers and Residents Action Association Inc v Auckland City Council [1986] 1 NZLR 746 (CA) at 749.

7      Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [22](a).

8      Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [2].

9      At [3]; citing Cowell v Taylor (1885) 31 Ch D 34 at 38.

the benefit of a decision by one of Her Majesty’s Courts, and so an insolvent party is not excluded from the Courts but only prevented, if he cannot find security, from dragging his opponent from one Court to another.

[23]     In A S McLachlan Ltd v MEL Network, the Court of Appeal explained the

discretion to order security for costs should not be “… fettered by constructing

‘principles’ from the facts of previous cases”.10

[24]     In the present case, I have been guided by the following considerations:

(1)Security for costs should not be ordered at first instance if the effect of such an order would risk stifling a worthy claim.11

(2)Assessing the worthiness of a plaintiff’s claim at an interlocutory stage is a difficult task and does not involve the detailed analysis associated  with  determining  the  outcome  of  substantive proceedings.12

(3)The diligence with which the application for security for costs has been made may also be a relevant consideration.13

(4)Cases in which the plaintiff is merely a nominal defendant that is representing the interests of others may be more amenable to orders for security for costs.14

(6)The   extent   to   which   the   litigation   involves   public   interest considerations may also be a factor that weighs in the evaluation.15

10     A S McLachlan Ltd v MEL Network (2002) 16 PRNZ 747 (CA) at [13].

11     Reekie v Attorney-General, above n 8, at [2].

12     A S McLachlan Ltd v MEL Network, above n 10, at [21]; see also Meates v Taylor (1992) 5

PRNZ 524 (CA).

13     Highgate on Broadway Ltd v Devine, above n 7, at [23](c); citing Cowell v Taylor, above n 9 and

Zuckerman on Procedure (2nd ed, Sweet & Maxwell, London, 2006) at 380.

14     At [22](a); citing Cowell v Taylor, above n 9, at [38], Lloyd v Hathern Station Brick Co (1901)

85 LT 158 (CA) and Greener v Kahn & Co [1906] 2 KB 374 (CA).

15     Highgate on Broadway Ltd v Devine, above n 7, at [24](c).

(7)Providing  it  is  of  substance,  an  undertaking  to  meet  any  costs awarded given by a body associated with the plaintiff may be acceptable.16

Analysis

Ability of Friends of Houghton Valley to pay costs

[25]     The evidence that Friends of Houghton Valley will be unable to pay costs if it fails  in  its  proceeding  comes  primarily  from  members  of  Friends  of  Houghton Valley. That evidence can be distilled to the following three points.

[26]     First, Friends of Houghton Valley was formed after the Council made its decision.  The following evidence shows it was established to be the vehicle for the application for judicial review and to protect individuals from possible costs associated with an application for judicial review:

(1)In a newsletter dated 9 April 2014, the writer explained the intention to form an incorporated society to “proceed to the judicial review stage”.   It appears therefore an application for judicial review was being contemplated more than six months before the Council made its decision.

(2)In a newsletter dated 9 December 2014, Ms Hyam, the Chairperson of Friends of Houghton Valley, explained the need to form an incorporated society to prepare for costs associated with the proposed application for judicial review.

(3)       In two other newsletters sent by Ms Hyam in February and March

2015, she explained “the incorporated society protects any individual from fees or outcomes incurred by [the judicial review proceeding]”.

16     Shalimar Supermarket Ltd v Toulis HC Wellington CP653/90, 15 May 1991; Combined Logging

Co Ltd v Crown Forestry Management Ltd HC Wanganui CP40/91, 30 September 1996.

(4)In her affidavit in opposition to the application for costs, Ms Hyam says she, and other members of Friends of Houghton Valley, “understood that an incorporated society provides protection to individuals from costs”.17

(5)In the same affidavit Ms Hyam points out that Kaikoura is a company which protects its shareholder from personal liability “… and it is fair for us to oppose him through an incorporated society that protects us from personal liability for debts owed by the society”.18

[27]     Second, Ms Hyam has explained that Friends of Houghton Valley is funded by membership fees and donations.  She explains that Friends of Houghton Valley is undertaking fundraising activities and it expects to raise “well over $10,000” to support  the  litigation.19      As  at  today’s  date,  Friends  of  Houghton  Valley  has

$1,971.13 in its account.

[28]     Third, Friends of Houghton Valley has not provided any explanation as to how it could meet a costs award that would be likely to be made if its action fails.

[29]     These facts, which mainly emanate from Friends of Houghton Valley, leave me in no doubt it will not be able to pay the costs of Kaikoura if its proceeding fails. Thus, the relevant mandatory requirement for an order for security for costs in r 5.45 is established.

Discretionary considerations

[30]     I have weighed the following factors when exercising my discretion: (1)      The merits of the application for judicial review.

(2)       Prejudice.

(3)       Public Interest.

17 Affidavit of V C Hyam, 22 May 2015 at [10].

18 At [12].

19 At [13].

(4)       Plaintiff’s diligence.

(5)       Absence of undertaking to pay defendants’ costs.

Merits

[31]     My primary concern is to ensure that an order for costs does not stifle a meritorious claim.

[32]     At this juncture, it is difficult to assess the merits of the application for judicial review even though all evidence has been filed.  All I can say is that on the basis of the preliminary assessment I have made, it is clear Friends of Houghton Valley faces challenges in relation to each ground of judicial review.  This is not a case in which it could be said that an order for security for costs would stifle an obviously meritoriously claim.

Prejudice

[33]     As part of the exercise of my discretion, I have evaluated the competing claims of prejudice.

[34]     I accept that imposing security for costs will create some hardship for Friends of Houghton Valley.  At the same time, Kaikoura is facing real financial prejudice as its proposed development of the site remains stalled.   Mr Geursen, a director of Kaikoura, has explained:20

… Our current investment in the project is approximately $800,000.  In the event that the proceedings are drawn out and our timetable for development is delayed we will incur considerable interest and costs which will impact upon our costings for the project and in turn will affect either the sale price of the houses, or the profitability of the project, or both.

[35]     Mr  Geursen  has   also   explained  that  Kaikoura  is  incurring  costs   of approximately $1,330 per week while the application for judicial review remains

unresolved.21

20 Affidavit of S M Geursen, 8 May 2015 at [54].

21 Affidavit of S M Geursen, 18 June 2015 at [141].

Public interest

[36]     In addition, I accept that there is an element of public interest associated with the application for judicial review.  This is a factor which weighs against making an order  for  security  for  costs.    However,  in  my  assessment,  the  public  interest associated with the proceeding is not an overwhelming factor and is best addressed when setting the level of security. This is why in the exercise of my discretion I have opted to order security for costs at a level that is below that sought by Kaikoura.

Diligence of the plaintiff

[37]     The application for judicial review was commenced six months after the council made its decision and will be heard in October 2015.  While there have been unfortunate delays, I do not think the delays are a factor which favours either side of the equation in the decision I am required to make.

Absence of undertaking to pay defendants’ costs

[38]     Ms Hyam has said Friends of Houghton Valley intends to pay the costs associated with its application for judicial review.  I do not doubt the sincerity of that intention.   However, an intention to pay costs is not the same as an unequivocal undertaking to pay the defendants’ costs.  This is a factor that weighs in favour of the application.

Assessment

[39]     In  my assessment,  the overall  interests  of justice are best  served  by me ordering Friends of Houghton Valley to provide a level of security for costs which should be attainable without stifling any chance of it pursuing its claim. At the same time, the level of security that I will impose will provide a modest level of comfort to Kaikoura.

[40]     As I have signalled at the outset of this judgment, I am ordering Friends of Houghton Valley to pay $10,000 to the Registrar of the High Court as security for costs.  That sum is to be paid by 28 August 2015.  I will not make any further orders

at this juncture.   If security for costs is not paid in terms of this judgment further

applications may need to be considered.

D B Collins J

Solicitors:

Ruthe Denee & Co, Wellington for Plaintiff/Respondent

DLA Piper New Zealand, Wellington for First Defendant
Bartlett Law, Wellington for Second Defendant/Applicant