Ireland v Ireland
[2015] NZHC 1655
•15 July 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000130 [2015] NZHC 1655
BETWEEN PATRICIA ANN IRELAND
Plaintiff
AND
HAMISH ROBERT KAY IRELAND Defendant
Hearing: 15 July 2015 Appearances:
S N van Bohemen for Plaintiff/Counterclaim Defendant
(Applicant)
M J Wallace for Defendant/Counterclaim Plaintiff (Respondent)Judgment:
15 July 2015
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on application for security for costs
The substantive litigation
[1] The plaintiff (Mrs Ireland) and defendant (Mr Ireland) were wife and husband. I have earlier refused Mrs Ireland summary judgment on her claims.1 In my earlier judgment, I explained the background to the litigation:
[1] Hamish Ireland (“Hamish”) and Patricia Ireland (“Trish”) were married in 1990 but separated in 2011. They had numerous interests in businesses and trusts. They had differences about ownership and control of property which led to almost two years of negotiation and litigation.
[2] Ultimately, on 22 May 2013, they were able to execute what they called a “Deed of Settlement of Relationship Property, Trust and Other Matters”, which they recorded to be in full and final settlement of their property claims. They agreed upon a number of transactions by which ownership of assets was to alter; some assets were to be realised; interests in trusts were to change; and debt was to be dealt with. Most transactions were to be settled by 31 May
2013. Two matters were to be dealt with by 7 November 2013.
1 Ireland v Ireland [2014] NZHC1432.
IRELAND v IRELAND [2015] NZHC 1655 [15 July 2015]
[3] The Deed contained ten “general provisions” – Hamish and Trish acknowledged that they had been unable to reach agreement on the extent and value of relationship property assets; they considered the terms of the Deed fair and reasonable based on their own assessment as to the value of relationship and other property; and they wished to achieve certainty and settlement of their differences about ownership and control of property. They acknowledged and agreed, notwithstanding any legal advice to the contrary, that they wished to sign and be bound by the terms of the Deed, with neither subsequently to seek to void the Deed for lack of proper or inadequate advice.
[4] It is common ground that Hamish and Trish have completed most of the transactions agreed to in the Deed. But the hope of certainty and settlement of all differences has not been fulfilled.
[2] After I refused summary judgment, both parties amended their pleadings. I have recently ordered by consent the consolidation of two proceedings, namely Mrs Ireland’s proceeding and a separate proceeding commenced by Mr Ireland in the Family Court pursuant to the Property (Relationships) Act 1976, subsequently transferred to this Court.
[3] Mrs Ireland seeks to enforce the Deed. She seeks specific orders in relation to three obligations:
(a) an order that Mr Ireland transfer a property and assign the EQC and insurance benefits to her;
(b) an order that Mr Ireland repay a debt of $80,000; and
(c) an order that Mr Ireland indemnify her in respect of 50 per cent of the payments made in relation to another property.
[4] Mr Ireland has filed a defence to Mrs Ireland’s claims by way of set-off and counterclaim. He asserts that Mrs Ireland was in breach of fundamental obligations under the Deed, is not ready, willing and able to perform all her obligations and that Mrs Ireland’s default has caused Mrs Ireland loss. Mr Ireland seeks an order of stay preventing Mrs Ireland from enforcing the deed and also seeks unquantified damages for breach. Alternatively, he seeks orders either that the deed be set aside upon the basis that its enforcement would cause serious injustice to him or an order that the
deed is void for uncertainty. Mr Ireland’s consolidated proceeding involves an application under s 21J Property (Relationships) Act 1976 for an order setting aside the Deed.
[5] Mr van Bohemen noted that there is an unresolved issue as to the narrowness of the claim which Mr Ireland filed in the Family Court and has recently been transferred to this Court. Mr van Bohemen relies on Wood v Wood2 as establishing that an application such as Mr Ireland’s ought to have been for division of the parties’ property.
Mrs Ireland’s application for security
[6] Mrs Ireland applies for security for costs upon the basis that there is reason to believe that Mr Ireland will be unable to pay costs if he is unsuccessful on his counterclaim. Mrs Ireland seeks security for costs in the sum of $34,228.3 Mrs Ireland also seeks a stay of Mr Ireland’s counterclaim until any ordered security is provided.
[7] Mrs Ireland gave evidence of a number of recent financial developments which indicate that Mr Ireland may be unable to meet his debts.
[8] Mr Ireland opposes the application for security and asserts:
(a) there is no reason to believe that he will be unable to pay Mrs
Ireland’s costs if he is unsuccessful;
(b)any impecuniosity (which is denied) has been caused by Mrs Ireland’s actions and/or by the unjust and unreasonable terms of the Deed and/or the uncertainty of the terms of the Deed; and
(c) Mr Ireland’s defence or set-off and his counterclaim all arise from the
Deed which Mrs Ireland seeks to enforce.
2 Wood v Wood [1998] 3 NZLR 234 (HC), at 237 per Fisher J.
[9] Mr Ireland filed an affidavit in opposition. The affidavit focuses on his efforts to settle issues between the parties and on what he says has been the non- performance of Mrs Ireland which has impacted on his financial position. He does not provide any evidence as to his financial position save to refer to the liquidation of his company (Ireland Developments Ltd) at the suit of the Commissioner of Inland Revenue.
The security jurisdiction
The High Court Rules
[10] Rule 5.45 empowers me to order the giving of security for costs where there is reason to believe that a plaintiff will be unable to pay the defendant’s costs if the plaintiff does not succeed in the proceeding.
[11] Rule 5.45(6) allows a plaintiff who is a counterclaim defendant to make an application for security, providing:
5.45 Order for security of costs
…
(6) References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
The principles
[12] The general approach to the discretion (as contained in r 60) was described by the Court of Appeal in A S McLachlan v MEL Network Ltd in these terms:4
[13] Rule 60(1)(b) High Court rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, “the Court may, if it thinks fit in all the circumstances, order the giving of security for costs”. Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing “principles” from the facts of previous cases.
4 A S McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA).
[14] While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a check list 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 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 lightly to be denied.
The threshold test in this case
[13] The failure of Mrs Ireland to give any evidence in response to Mr Ireland’s evidence as to his financial circumstances is telling. Had it been necessary to do so, I would have found that the threshold test, as summarised at [10] above, was made out.
The discretion
[14] The real issue on this application is as to the exercise of the discretion.
[15] The substantive issues in the proceeding all arise from the Deed. Mrs Ireland asserts that the unperformed provisions of the Deed ought to be performed. Mr Ireland asserts either that the remaining provisions of the Deed ought not to be performed for the time being (until Mrs Ireland remedies alleged defaults) or that they ought not to be performed at all (and the Deed cancelled or set aside).
[16] A parallel situation existed in Oceania Furniture Ltd v Debonaire Products Ltd.5 In that case, Oceania sued for the balance owing under a contract for the sale of furniture and Debonair counterclaimed for breaches of the terms of the sale
agreement.
5 Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington CIV-2008-485-1701, 24 April
[17] I respectfully adopt the statement of principle of Clifford J, when his Honour said:
[9] Particular considerations also apply where security for costs is sought in relation to a counterclaim. Security for costs will not be awarded against a defendant in favour of a plaintiff. Similarly, whereas security for costs may be ordered on what is in substance an independent counterclaim, they will not be ordered where the counterclaim is in effect a defence to the plaintiff’s claim. This general principle is usefully summarised by Lord Esher MR and Lord Lindley in Neck v Taylor [1893] 1 QB 560 (CA):
Where, however, the counterclaim is not in respect of a wholly distinct matter, but arises in respect of the same matter or transaction upon which the claim is founded, the court will not, merely because the party counterclaiming is resident out of the jurisdiction, order security for costs; it will in that case consider whether the counterclaim is not in substance put forward as a defence to the claim, whatever form in point of strict law and of pleading it may take, and, if so, what under all the circumstances will be just and fair as between the parties; and will act accordingly. Therefore, the Court in that case will have a discretion. (per Lord Esher MR at 562).
The matters set out in the counterclaim appear to me to be of such a nature and so closely connected with the cause of action that, whatever according to legal technicalities they may be called, they are, in substance, in the nature of a defence to the action. The plaintiff sues for a debt for which he holds security. The defendant says, ‘I owe you nothing give me back my security.’ Under these circumstances it does not seem to me just or fair that the defendant should have to give security for costs as the price of being allowed to plead such defence. (per Lindley LJ at 563)
[10] Subsequently, in Hutchison Telephone (UK) Ltd v Ultimate Response
Ltd [1993] BCLC 307 (CA) Lord Bingham stated the question:
as a question of substance, not formality or pleading: is the defendant simply defending himself, or is he going beyond mere self-defence and launching a cross-claim with an independent vitality of its own? (at 317)
[11] Although recognising that no “simple rule of thumb” exists to answer this question, factors that may be relevant are whether the counterclaim arises out of the same transaction, whether the amount counterclaimed exceeds that which is claimed and whether the defendant/counterclaim plaintiff would have issued proceedings had the plaintiff not done so (per Lord Bingham at 317).
[12] New Zealand cases illustrating this general principle include Onop Properties Ltd v Fallon Properties Ltd (1988) 1 PRNZ 261 and McCracken & Anor v Burt HC AK CIV-2006-404-006027 24 May
2007.
[18] There is a practical rationale to the approach taken in Neck v Taylor and Oceania Furniture Limited v Debonaire Products Limited. The object of security is to give the defendant some protection in relation to the costs it will incur through the plaintiff’s litigation. If the plaintiff (wearing another hat as counterclaim defendant) is going to incur the same level of costs whether its claim were pursued alone or its claim were pursued in conjunction with its defence of the counterclaim, there is no additional cost brought about by its defence of the counterclaim.
[19] I do not overlook Mr van Bohemen’s reference to Wood v Wood6 and his proposition that Mr Ireland’s claim under the Relationships (Property) Act may have to be broadened. For the time being, the only relief Mr Ireland seeks under that Act is the setting aside of the Deed.
[20] In the present case, the claims of both parties are factually and legally inter- connected. They relate to the one Deed. If the Court ultimately finds in favour of Mr Ireland that the Deed ought not to be enforced or ought to be set aside, such a finding would almost certainly be a complete answer to Mrs Ireland’s claims. In that sense, Mr Ireland will have successfully defended the claims, although it will have involved the making of an order or orders upon Mr Ireland’s counterclaim. To that extent, Mr Ireland’s position in resisting the application for security in this case is stronger than that of the defendant in Oceania Furniture Ltd v Debonaire Products Ltd. In that case there was the possibility that the plaintiff’s and defendant’s claims could succeed or fail independently of each other.
[21] The conclusion which Clifford J reached on the facts in Oceania Furniture
Limited v Debonaire Products Limited was thus expressed:7
[26] Debonaire’s counterclaim is not – as a matter of strict legal principle
– a defence to Oceania’s claim. To some extent it does raise issues independent of those claims. Nevertheless the counterclaim arises out of the same contract, is factually closely, - if not inextricably – linked to the factual circumstances on which Oceania succeeded in its application for summary judgment and, moreover, can be seen as providing the legal basis upon which moneys due and owing from Oceania to Debonaire and vice versa are finally to be determined under the supply agreement. In my judgment those considerations count against granting Oceania’s application.
6 Above at [5].
7 Above, n 5.
A similar analysis applies in relation to Mr Ireland’s cross-claims.
[22] There are no other circumstances pertaining to this litigation or the parties in particular which outweigh the consideration just discussed. I briefly touch upon other considerations raised by Mr van Bohemen for Mrs Ireland:
· The merits – Mr van Bohemen submits that Mrs Ireland has a strong case because the Deed, the culmination of two years of negotiation, has been substantially performed. But the Court has already dismissed Mrs Ireland’s summary judgment application, thereby recognising the arguability of Mr Ireland’s defence. This is not a case where the defence can be seen to be without merit.
· The conduct of the parties – Mr van Bohemen emphasises the extent to which Mrs Ireland has sought to honour and implement the provisions of the Deed. But the central issue remains as to the extent (if any) to which remaining provisions of the Deed should be implemented.
· Cause of Mr Ireland’s impecuniosity – it is unnecessary, having regard to the conclusion that other grounds make it appropriate to dismiss the application for security, to reach any conclusions as to Mr Ireland’s assertion that his impecuniosity (if any) has been caused by Mrs Ireland’s actions. I do not regard the available evidence as strongly indicating such causation.
[23] In this case, justice as between the parties requires that both claims and counterclaims be able to proceed without any impediment imposed by an order of security.
Outcome
[24] I am not satisfied that it would be just in all the circumstances of this case to order Mr Ireland to give security for costs of this consolidated proceeding.
Application for further particulars
[25] Mrs Ireland’s notice of application included an application for further
particulars.
[26] Counsel have informed me that that aspect of the application has been resolved.
[27] By consent, the application for further particulars as withdrawn, with no issue as to costs.
Costs
[28] The argued application was in relation to security for costs.
[29] Counsel addressed me on the question of costs in relation to the security application. It was accepted that this is appropriately a Category 2 matter and that costs should follow the event.
Orders
[30] I order:
(a) Mrs Ireland’s application for security for costs is dismissed;
(b) Mrs Ireland is to pay the costs of the security application on a 2B
basis together with disbursements to be filed by the Registrar.
Associate Judge Osborne
Solicitors:
Godfreys Law, Christchurch
Counsel: S van Bohemen, Barrister, Christchurch
Dallison Stone, Christchurch
Counsel: M J Wallace, Barrister, Christchurch