Hennah v Westpac Banking Corporation - [2024] NZHC 3537

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2526 [2024] NZHC 3537

BETWEEN
GEOFFREY MAURICE HENNAH and

CHERYL ELLEN HENNAH as trustees of the BEAULY TRUST

First Plaintiff

GEOFFREY MAURICE HENNAH and CHERYL ELLEN HENNAH (IN PARTNERSHIP)

Second Plaintiff

AND

WESTPAC BANKING CORPORATION

First Defendant

WESTPACT NEW ZEALAND LIMITED

Second Defendant

Hearing: 21 November 2024

Counsel:

L C A Farmer / G D Simms / N F D Moffatt for the Plaintiffs B J Upton for the Defendants

Judgment:

25 November 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 25 November 2024 at 12 midday.
Pursuant to Rule 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors/Counsel:
Wynn Williams, Auckland Simpson Grierson, Auckland

HENNAH v WESTPAC BANKING CORPORATION [2024] NZHC 3537 [25 November 2024]

Introduction

[1] Mr and Mrs Hennah are the trustees of the Beauly Trust and the Hennah Partnership. They sue Westpac Banking Corporation and Westpac New Zealand Ltd (together, Westpac) for losses alleged to arise from Westpac’s advice to Mr and Mrs Hennah and the Hennah group of entities regarding interest rate swaps as part of a finance package.

[2] On 30 June 2022, Associate Judge Andrew (as he then was), ordered Mr and Mrs Hennah to provide security for costs of $25,000 in respect of discovery and any interlocutory applications, with further security for costs to be reviewed after the conclusion of those steps (the judgment).1

[3] Mr and Mrs Hennah paid the security. Discovery has now been completed, and Westpac applies for further security for costs for preparation of evidence and trial. Westpac seeks security of $256,852, based on its calculation of an award of 2B costs for the anticipated steps to conclude the trial and an estimation of experts’ costs.

[4] Mr and Mrs Hennah argue that no further security should be required, and alternatively, any further security should be modest.

Legal principles

[5] The Court has a discretion to grant an application for security of costs under r 5.45(2) of the High Court Rules 2016 if it would be just in all the circumstances to do so. That discretion is engaged if the threshold test in r 5.45(1) is met.

[6] In the present case the threshold is met because there is reason to believe that Mr and Mrs Hennah will be unable to pay Westpac’s costs if the proceeding is unsuccessful. However, the imposition of security is not an automatic consequence of the plaintiff’s impecuniosity.2

1 Hennah v Westpac Banking Corporation [2022] NZHC 1526.
2 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [20]–[21].

[7] Exercise of the Court’s discretion under r 5.45(2) requires a balancing of the interests of plaintiff and defendant, as summarised by the Court of Appeal in McLachlan v MEL Network Ltd:3

[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs.…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NZHC 3537
Decision Date: 25 November 2024

CaseChat Overview and Summary

The case of Hennah v Westpac Banking Corporation [2024] NZHC 3537 concerns a dispute between Mr and Mrs Hennah, acting as trustees of the Beauly Trust and in partnership, against Westpac Banking Corporation and Westpac New Zealand Ltd. The plaintiffs allege financial losses resulting from Westpac’s advice on interest rate swaps as part of a finance package. Westpac has applied for further security for costs to cover preparation of evidence and trial, following an initial security order of $25,000. The court was required to determine the appropriate amount of further security, if any, and the timing of payment, balancing the rights of both parties under the relevant rules and precedents.

The court examined the discretion under r 5.45(2) of the High Court Rules 2016, which allows for an order for security of costs if it is just in all circumstances. The threshold for this discretion was met as there was reason to believe the plaintiffs would be unable to pay Westpac’s costs if the proceedings were unsuccessful. However, the court must balance this with the plaintiffs' right to access the courts and the defendants' right to be protected from unjustified litigation. The court considered factors such as the complexity of the case, the financial capacity of the plaintiffs, and the merits of their claims. The court found that the plaintiffs' claims, while facing significant obstacles, were not prima facie unmeritorious and that Westpac had not demonstrated that the plaintiffs would be unable to progress their claims if additional security was required.

The court concluded that further security of $150,000 was appropriate, to be paid in two instalments: $50,000 before the preparation of evidence and $100,000 before the trial. This amount was considered reasonable given Westpac’s significant financial capacity and the plaintiffs' demonstrated ability to raise initial security. The court also noted that Westpac could begin preparing for the trial before being served with the plaintiffs' briefs of evidence, justifying a staged payment approach.

The court ordered the plaintiffs to deposit $50,000 by 31 January 2025 and $100,000 by 31 May 2026. Failure to lodge the security would result in the stay of the proceedings. The court preliminarily determined that Westpac was entitled to costs on a 2A basis for the application, reflecting the reduced time required and the lesser amount granted compared to the amount sought.

Orders