Gardiner v Dyer

[2018] NZHC 3052

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2013-485-693

[2018] NZHC 3052

BETWEEN

JULIA FRANCES GARDINER AND PETER JOHN CLARK
Plaintiffs

AND

WAYNE DYER

Defendant

Hearing:

21 November 2018

Counsel:

F M Gush for Plaintiffs

R J B Fowler QC for Defendant

Judgment:

23 November 2018

JUDGMENT OF ELLIS J

[1]    The  plaintiffs are the Trustees  of the  Karaka Trust.  One  of the trustees,  Ms Gardiner, was in a relationship with Mr Dyer for a number of years, until their separation in June 2012. Mr Dyer was once, but is no longer, also a Trustee. At the time of the couple’s separation, the Trust’s principal asset was the property in which Mr Dyer and Ms Gardiner had lived during their relationship. Mr Dyer was (in his Trustee capacity) one of the registered proprietors of the property.

[2]    The Trust and its assets have formed a central part of an ongoing dispute between Ms Gardiner and Mr Dyer which has recently been the subject of a lengthy judgment in this Court, on appeal from the Family Court (the Family Court proceedings).1 It is fair to say that while Mr Dyer was partially successful at first instance, he was ultimately unsuccessful in this Court, on appeal.

1      Gardiner v Dyer [2018] NZHC 355.

GARDINER AND CLARK v DYER [2018] NZHC 3052 [23 November 2018]

[3]    Leave to appeal the High Court judgment, on a limited basis, was granted by Churchman J on 31 October 2018.2 The aspect of the proposed appeal on which leave was granted related to Mr Dyer’s claim under s  186  of  the  Family  Proceedings Act 1980.3

[4]    The present proceedings were filed in this Court by Ms Gardiner in 2013. They were brought because Mr Dyer was, at that point, refusing to consent to the sale of the property owned by the Trust. She sought a vesting order under the Trustee Act 1956. Mr Dyer opposed the making of such an order and filed a counterclaim challenging the Trust’s validity and, alternatively asserting (inter alia) a constructive trust over the Trust’s property.

[5]    On 25 March 2014, this Court was advised that that matter had settled, although there were “residual issues between the parties which need to be argued at some stage in future”.4 Counsel also advised:

… the parties to this proceeding are also parties to proceedings in the Family Court, and the more likely outcome is that all remaining issues in this proceeding will be resolved in the context of the Family Court proceeding.

[6]    As a result, a number of orders adjourning these proceedings were made. In the meantime, the Family Court proceedings progressed.

[7]    It was on receipt of Churchman J’s judgment on appeal in those proceedings that Mr Dyer advised that he wished to revivify his counterclaim in these proceedings. Upon receipt of that notification, Ms Gardiner filed applications to strike out the counterclaim and for security for costs.

[8]    On 13 August 2013, Mr Dyer filed an amended counterclaim and notices of opposition to both Ms Gardiner’s applications. But in those notices he made it clear that his pursuit of the counterclaim was, effectively, a “fall-back” position, and one he would pursue only if he was unsuccessful in the Family Court proceedings in the Court of Appeal.

2      Dyer v Gardiner [2018] NZHC 2796.

3      That being one of the matters on which Churchman J differed from the Family Court Judge.

4      It seems tolerably clear that the “settlement” involved Mr Dyer’s agreement that the property could be sold.

[9]    Both Ms Gardiner’s applications were scheduled to be heard by me on the afternoon of 21 November. On 20 November, I issued a minute saying:

It seems clear to me that:

(a)The application to strike out Mr Dyer’s counterclaim raises difficult issues and I am, of course unfamiliar with the lengthy history of the matter. Unless Mr Fowler QC is correct in his blanket proposition that issue estoppel is an inapt basis for strike out (a question that I cannot possibly determine in advance of the hearing) argument on those substantive issues will be required. For myself, I doubt that half a day will be sufficient to traverse them.

(b)Mr Dyer has accepted (in his notice of opposition) that the counterclaim is only necessary in the event that his proposed appeal to the Court of Appeal in the Family Court proceedings (limited leave to  appeal,  at  least,  having  been  granted  by  Churchman  J  on   30 October 2018).

(c)Moreover, if an order for security for costs is made against Mr Dyer now, then the need to determine the strike out will depend on if and when he is able to pay that security. And on the basis of the evidence before the Court (and Churchman J’s observations in his 30 October decision) he has no prospect of making such a payment unless he has a significant victory in the Court of Appeal.

For these reasons I can presently see no point at all in hearing the strike out on Wednesday. It does not appear to me to be the most expeditious way forward. On the contrary, it seems likely to involve wasted court time and cost to the parties.

Accordingly, my strong preference is to hear only the application for security this week. But if counsel disagree they are to advise the Registry (and give reasons) by 5 pm today.

[10]   Both counsel subsequently advised the Registry of their agreement that only the security application should be heard this week. So, it is solely to that application that this judgment relates.

Should an order for security be made?

[11]HCR 5.45 materially provides:

(1)Subclause (2) applies of a Judge is satisfied, on the application of a defendant,— …

(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 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.

[12]   In Reekie v Attorney-General the Supreme Court observed that applications for security for first instance proceedings call for careful consideration and that judges are slow to make an order for security which will stifle a claim, noting the review of the jurisdiction by the Court of Appeal in McLachlan v MEL Network Ltd.5 In that case, the Court stated that whether or not to order security, and the issue of quantum, are discretionary matters for the Judge and that the discretion is not to be fettered by constructing “principles” from the facts of previous cases. The Court said:6

[14]     … It is not a matter of going through a checklist 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.

[15]    The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse awards of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursing 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 lightly to be denied.

[16]    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.’

[13]    The Court is entitled to assess the merits and prospects of success of the claim,7 but there is a very real limit as to how far such an inquiry can be made, particularly at an early stage of the proceeding.8

[14]    The amount of any security ordered is, likewise, in the Court’s discretion. It is not necessary that it be fixed by reference to likely costs’ awards but rather will be what the Court thinks fit in all the circumstances.

5      Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.

6      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747.

7      Ambrose v Pickard [2009] NZCA 502 at [32].

8      Meates v Taylor (1992) 5 PRNZ 524 (CA).

[15]   The general approach to an application for security for costs involves four steps:

(a)Has the applicant satisfied the Court of the threshold under r 5.45(1)?

(b)How should the Court exercise its discretion under r 5.45(2)?

(c)What amount should security for costs be fixed at?

(d)Should a stay be ordered?

[16]I consider each, in turn.

Is the threshold met?

[17]   There is no real dispute that, as things presently stand, the threshold is met. Mr Dyer does not contend that he is in funds or able readily to access them. Moreover, a significant amount of money has already been expended in pursuit of the Family Court proceedings. In the context of Mr Dyer’s leave application, Churchman J noted:9

[11]              The respondents point to the fact that the levels of costs incurred to date are extraordinary and are likely to be in the range of $1.2-$1.3 million. The respondents submit that the relationship property had a net value of some

$190,000 and the Trust assets some $770,908, giving a total value of some

$962,000.

[12]              Even if all the Trust assets were held to be relationship property, the costs of running this litigation substantially exceed the value of all the assets. An appeal is only going to exacerbate this.

[13]              The respondents also point to the fact that, as at January 2017, the intended appellant’s financial position was estimated to be negative

$345,777.26. One consequence of that is that if he is unsuccessful he is unlikely to be in any position to meet an award of costs.

9      Above, n 2.

[18]   Accordingly, any prospect Mr Dyer has of meeting a future costs award against him, depends entirely on the outcome of his appeal to the Court of Appeal. And given Mr Dyer’s position that he will only pursue his counterclaim in these proceedings if he fails in the Court of Appeal, there is indisputably good reason to believe that     Mr Dyer will be unable to pay the Trustees’ costs if he is unsuccessful in these proceedings.

Should an order for security be made?

[19]   A Court will always be reluctant to order security for costs in circumstances where it might operate to restrict a litigant’s access to justice. By definition, however, that will often be the effect of such an order and I accept that it may well prove to be so here.

[20]   Against that, however, is the fact that a number of closely related matters have already been (and continue to be) litigated by Mr Dyer. Indeed, that forms one of the bases for the Trustees’ application to strike out; they contend that issue estoppels in relation to certain key matters operate to prevent him pursuing his counterclaim. While I express no firm view on the merit of that proposition I would venture to suggest that does not seem unarguable. Mr Dyer’s counsel, Mr Fowler QC, acknowledged at least a degree of overlap with the s 186 matter.

[21]   As well, it can be assumed that Mr Dyer’s pursuit of the Family Court proceedings while leaving the present ones in abeyance for over five years was a choice based on his own assessment or advice as to the litigation course that was likely to bear the most fruit. That could also fairly be seen as also speaking to the merits of the counterclaim, at least inferentially.

[22]   Mr Fowler’s principal argument against the making of an order for security was that it was premature and should await the outcome in the Court of Appeal. But as he rightly recognised that argument is far from compelling in circumstances where any order can, in any event, be tailored to take into account the relevant contingencies. And the short point is that I see no purpose or advantage in requiring the matter potentially to be argued twice.

[23]In my view, the order should be made, on terms, now.

How much?

[24]   Ms Gush submitted that the amount of any security ordered should reflect scale costs in the Family Court proceedings (including in the appeal in this Court) which she puts at around $84,000. Although I agree that a relatively substantial amount is warranted my view the appropriate sum is more in the vicinity of $60,000, which was at the upper end of what Mr Fowler suggested. And I agree with him that the requirement to pay that amount should be staged by reference to steps in the proceedings. Ms Gush did not demur. I have attempted to tailor the directions made at the end of this judgment accordingly.

Should a stay be ordered?

[25]There are two aspects to the stay issue here.

[26]   The first is the usual question arising in relation to applications such as the present, namely whether a failure to pay the security ordered should result in a stay of the proceedings. In light of the history of the matter, I am in no doubt that it should.

[27]   But the second is whether it is also appropriate to stay these proceedings as a whole pending the outcome of Mr Dyer’s appeal to the Court of Appeal. As I understood it, the parties were really in agreement about that, and I so order.

[28]   It follows (I think) that the order for security should also not be “activated” immediately. Rather, I propose to incorporate the requirement for staged security payments in directions for the future (post-Court of Appeal) conduct of these proceedings. Those directions are as follows:

(a)within 20 working days of either receipt of the Court of Appeal’s judgment or any other resolution of his appeal, Mr Dyer is to advise the Court whether he intends to pursue his counterclaim;

(b)if he advises that he does wish to do so:

(i)he is to pay the first security for costs instalment of $20,000 within 10 working days of giving that advice;

(ii)upon receiving payment of that amount, the Registry is to liaise with counsel and allocate a hearing date for the Trustees’ strike out application;

(iii)Mr Dyer is to pay to the Registrar the second instalment of

$20,000 by way of security 20 working days before the hearing date so allocated;

(iv)to the extent the parties wish to file further submissions in relation to the strike out application, the timeframes in the High Court Rules will apply;

(v)in the event that the strike out does not succeed and the counterclaim is to proceed:

Ø  there should be a further case management conference to timetable the matter to trial; and

Ø  the  third  payment  of  $20,000  is  to  be  made  within  20 working days of that conference.

[29]   In the event that any of the three payments is not made in accordance with the above directions, the proceedings will be stayed, pending further order of the Court.

[30]I reserve:

(a)costs on the application which are to be resolved as part of costs in the cause; and

(b)leave to the parties to seek to have the matter called in the Judge’s Chambers List in the event of some relevant change of circumstances or other unforeseen eventuality.

Rebecca Ellis J