Gillespie v Guest

[2013] NZHC 473

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-001629 [2013] NZHC 473

BETWEEN  BRUCE JAMES GILLESPIE, PRUDENCE JULIET GILLESPIE, CHRISTOPHER JAMES GILLESPIE, NICHOLAS JOHN GILLESPIE AND JONATHAN PAUL GILLESPIE Plaintiffs

ANDANDREW JOHN DEXTER GUEST First Defendant

ANDVIRANDA PROPERTY NETWORK LIMITED

Second Defendant

ANDRSM PRINCE & PARTNERS First Third Party

ANDGRAEME HAMILTON SINCLAIR Third Third Party

Hearing:         8 March 2013

Appearances: K M Burkhart for First Third Party

A J D Guest, First Defendant, in person

Judgment:      12 March 2013

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

This judgment was delivered by me at 4.00 pm on 12 March 2013

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Kennedys, PO Box 3158, Auckland.

Email: [email protected] / [email protected]

Mr A J D Guest (First Defendant), 3 Byron Avenue, Takapuna, Auckland. Email: [email protected]

BRUCE JAMES GILLESPIE, PRUDENCE JULIET GILLESPIE, CHRISTOPHER JAMES GILLESPIE, NICHOLAS JOHN GILLESPIE AND JONATHAN PAUL GILLESPIE V ANDREW JOHN DEXTER GUEST HC AK CIV-2011-404-001629 [12 March 2013]

[1]      RSM Prince & Partners has applied for an order directing Mr Guest to give security for costs in respect of his third party claim.  The application is opposed.

[2]      Rule 5.45 of the High Court Rules provides, to the extent relevant in this case:

5.45   Order for security of costs

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

(a)   ...

(b)   that there is reason to believe that a 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.

[3]      The onus is on the RSM Prince & Partners to establish that there is reason to believe that Mr Guest will be unable to pay its costs if his third party claim is unsuccessful.    If  that  threshold  is  met  I am  then  required  to  consider  whether directing that security for costs be paid is just in all the circumstances.

[4]      Deciding whether the threshold test has been met requires a broad overall assessment of the evidence presented on the application.[1]   There should be credible evidence of surrounding circumstances from which it may reasonably be inferred that Mr Guest will be unable to pay an adverse costs award.[2]    It is also recognised that by the very nature of an application of this kind an applicant cannot be expected to produce conclusive proof; it does not have access to the respondent’s personal financial records.  All an applicant can do, in most cases, is to point to surrounding circumstances, and invite the Court to make the broad overall assessment to which I have referred.[3]   A respondent need not disclose his financial position, but an adverse inference may be drawn on ability to meet costs if he does not do so.  Before making

this application the solicitors for RSM Prince & Partners raised this issue with

Mr Guest.    They  also  undertook  such  investigations  as  they  could,  into  public records, to determine his asset position.

[1] Hamilton v Papakura District Council (1997) 11 PRNZ 333 (HC).

[2] Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1997] 1 NZLR 516 at 519.

[3] Concorde Enterprises at 519.

[5]      Enquiries  with  Mr  Guest,  and  the  evidence  presented  by  him  on  this application disclose just one asset, a motor vehicle said to be worth $40,000 (without a valuation being provided) and an income of $240,000 per annum (without documentary support).  Enquiries in relation to land holdings reveal that he does not own any of the three properties which have been provided, at times, as his address or that of the company by which he conducts his business (Viranda Property Network Limited).    He  is  shown  as  having  a  legal  interest  in  36  properties,  each  in conjunction with other registered proprietors.   It is common ground that these properties are held by Mr Guest as a trustee.

[6]      As well, Mr Guest is a director and/or shareholder of over 100 companies.  In the end, however, the enquiries by the solicitors for RSM Prince & Partners fail to reveal any real estate or companies of which Mr Guest appears to be the sole owner.

[7]      RSM  Prince  &  Partners  introduced  evidence  about  Mr  Guest’s  personal financial dealings some 25 years ago, and he introduced evidence by way of explanation.  As I indicated to Ms Burkhart and Mr Guest at the hearing I am not prepared to give this evidence any significant weight, as the events concerned occurred around a quarter of a century ago.

[8]      One of the companies of which Mr Guest is a director is Arcadia Homes Limited.  This was a defendant in a recent case in the High Court, which resulted in judgment for the plaintiff of $632,000 together with interest on that sum for around four years, and on a greater sum for a period of around seven months.  A few weeks after the judgment  was  issued  Arcadia was  placed  into  voluntary liquidation,  a decision which must have been made by Mr Guest as director.

[9]      Mr Guest informed me that this case is under appeal to the Court of Appeal, with counsel agreeing to appear pro bono.

[10]     In the circumstances I have outlined, however, it is understandable that RSM Prince & Partners would have some concern that Mr Guest would be unable to pay an adverse costs award.  An assessment of likely costs shows that on scale 2B, the sum involved would be some $56,000.

[11]     Mr Guest has had ample opportunity to disclose that he, personally,  has sufficient assets to meet any costs award that might be made.  He has not done so, and I infer that he does not.   However, that is not the issue I have to determine. Mr Guest’s position is that he will meet a costs award should one be made.

[12]     Mr  Guest  invited  Prince’s  solicitor  to  make  enquiries  with  three  bank executives, and they did so.  In each case a solicitor from Kennedys telephoned the bank officer concerned and made a file note of the conversation.  An affidavit was then sworn by a different solicitor in the firm.   She gave evidence about the statements made by each bank executive.   Not surprisingly Mr Guest took strong exception to this.  Subsequently the solicitor who had the conversations concerned swore an affidavit and produced her file notes.   Mr Guest then arranged for each bank executive concerned to swear an affidavit.  The solicitor who spoke to the bank executives then filed an affidavit in which she took exception to those persons’ accounts of what had been said.

[13]     I have considered these affidavits with care and reached a clear conclusion that without cross-examination I am not able to determine exactly what was or was not said during the conversations concerned.   Nor, in the end, do I need to do so because the best evidence I have that is relevant to the issue I have to determine is contained in the three affidavits of the bank executives.  Whilst I am inevitably left with some misgivings about the quality of this evidence, given that it conflicts to an extent with contemporaneous written notes of conversations with the same persons, the only consequence that can follow on this application is that I reduce, to an extent, the weight that I give to their evidence.

[14]     Mr  Mark  Farrands,  the  area  manager,  Property  Finance  Auckland  for

Westpac, manages banking arrangements for Mr Guest, entities associated with him,

and in particular his business, Viranda.  He says Mr Guest is a longstanding client of the bank with a strong track record, and his financial position is comfortable.

[15]     Michael Doherty, the property finance manager for ANZ, and formerly the credit manager for HSBC and property finance manager for Westpac, says he has known and dealt with Mr Guest for a long time and managed the banking arrangements for him and his business entities including Viranda, when he had the position now occupied by Mr Farrands at Westpac.  He says both ANZ and Westpac have known and dealt with Mr Guest for a long time, that during his time at Westpac he had a close association with most of Mr Guest’s business interests mainly due to the success of Viranda and the large number of clients common to the bank and the Viranda business.   He says the relationship with Mr Guest was regarded as and remains successful for both himself, his clients and the bank and that Mr Guest is regarded  as  financially sound.    Further,  he  says  that  Mr  Guest  was  considered “unquestioned in respect of his ability to meet his financial obligations and commitments”.

[16]     Mr Hayden Reid, the property finance relationship manager with ASB Bank, where  he  has  worked  since  1993,  says  that  he  has  had  close  association  with Mr Guest  through  his  business,  Viranda,  since  1998.    He  says  that  although Mr Guest is not a client of ASB, the bank has known of and dealt with him for a very long time, is  aware of  the operation  of Viranda,  and  that  the relationship  with Mr Guest was regarded as very good.   He is regarded as financially sound and reliable.

[17]     In  addition  to  this  evidence,  Mark  Bridgeman,  the  managing  director  of Viranda and a business colleague of Mr Guest, swore an affidavit in which he said he and  Mr Guest each  drew $160,000 by way of income in their first  year of operation of Viranda (which replaces an earlier company by the same name) to July

2012 and that for the current year drawings have been increased to $240,000 each. The  company  employs  nine  full-time  executive  staff  including  the  directors. Mr Bridgeman says the business is successful and profitable and in his opinion will be  able  to  meet  increasing  payments  to  its  executive  directors,  which  includes Mr Guest.

[18]     In his affidavit Mr Guest discloses his ownership of a vehicle valued at about

$40,000 and says that no finance is owing on it.  He says he has a gold Mastercard with a $35,000 credit limit, drawn to less than $3,000 and pays the balance in full on due date every month.

[19]     Mr Guest says that he is a practising barrister and would usually charge his time at $300 per hour, but I understand that he does not actively practise as a barrister despite holding a practising certificate.  He works full time for Viranda.

[20]     The evidence establishes the following:

(a)     Mr Guest’s personal assets are confined to one vehicle.

(b)He directs numerous companies and has an apparently substantial and successful  longstanding  business  from  which  he  draws  a  salary  of

$240,000 per annum.

(c)     He is held in good stead by managers of three banks holding senior positions in property, and in particular he has a strong track record at Westpac where he and his business bank, and his financial position is regarded as comfortable by the property finance manager of that bank, for the Auckland region.

[21]     Whilst I accept that there is no single identifiable asset from which the costs might be met, Mr Guest is in receipt of a substantial income which is expected to rise, and he informed me that if the Court did order him to give security for costs he would, as he put it, pay it before leaving the court on the day of the hearing.  I take into account that Mr Guest told me this as an officer of the court appearing on his own behalf, and in that capacity also informed me that in the last 23 years he has not been  involved  personally  or  otherwise  in  any adverse  credit  incident.    He  is  a professional trustee.  Should judgment be entered against him for costs, there may well not be an asset against which a judgment creditor could seek immediate execution but the likelihood of Mr Guest being forced into bankruptcy in all the circumstances outlined to me is in my judgment small.   I am not satisfied that Mr Guest would be unable to meet an adverse costs award at the level predicted.

[22]     For these reasons the application is dismissed.  Mr Guest is entitled to costs on a 2B basis for items 23, 24 and 26 in Schedule 3 of the High Court Rules, item 26 being for a half day.  Mr Guest is also entitled to disbursements, to be fixed by the

Registrar.

J G Matthews

Associate Judge