Jaques v Main
[2016] NZHC 779
•22 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2015-404-000619 [2016] NZHC 779
BETWEEN DAVID ARTHUR JAQUES
Plaintiff
AND
VICTOR RAYMOND MAIN First Defendant
THOMAS CLARENCE HODGSON Second Defendant
Hearing: 22 April 2016 Appearances:
Plaintiff/Respondent in person
B L Gray for the Defendants/ApplicantsJudgment:
22 April 2016
ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
D A JAQUES v V R MAIN and T C HODGSON [2016] NZHC 779 [22 April 2016]
[1] The defendants apply for an order for security for costs against the plaintiff. The defendants say they believe the plaintiff (Mr Jaques) will be unable to pay the costs if his claim against the defendants is unsuccessful.
The proceeding
[2] Mr Jaques’ statement of claim focuses upon an agreement by which he says his services were as CEO of Nouveau-Zenith Limited (NZL); that Mr Jaques could purchase a shareholding in NZL for $60,000; and he would acquire an interest in the intellectual property of that company.
[3] He worked as CEO from March to September 2011 by which time he said he had paid the $60,000 share purchase price.
[4] When their business relationship terminated in September 2011, a sum of
$30,000 was repaid to Mr Jaques.
[5] It is pleaded that on 24 September 2011, the parties entered into a written settlement agreement which provided, inter alia:
(a) Mr Jaques would be repaid $30,000 by bank cheque and no longer have any right to acquire shares in NZL;
(b)the sum of $4,600 per week would be paid from 10 April 2011 until the $30,000 was paid (on account of the management contract being terminated prematurely); and
(c) all money owing was to be paid by 10 April 2014.
[6] Other than the $30,000 referred to no further money has been paid since the settlement agreement was entered into.
[7] Mr Jaques’ proceeding, filed on 20 March 2015, claimed damages in a sum of
$986,800, together with $4,600 per week from 10 April 2015 until all monies were paid in full.
[8] Mr Jaques filed an application for summary judgment. This was heard by
Associate Judge Doogue on 24 August 2015. His Honour dismissed that application.
[9] His Honour commented that there was an area of substantial dispute about whether or not Mr Jaques’ initial funding was linked to an ultimate acquisition of shares in NZL; that it seemed to be that Mr Jaques would put money in and that depending on how the affairs of the Company turned out he might get some shares in the future.
[10] His Honour noted that Mr Jaques’ agreement for services was with NZL and not with the defendants personally, but that questions arose when they signed the settlement agreement that might indicate they were accepting personal liability for the amounts claimed – or did they, on the other hand, execute that agreement as directors of the Company?
[11] His Honour noted that questions about Mr Jaques’ claims of qualifications were relevant to his contract for services, but that those could not likely provide any basis for the defendants avoiding liability under the settlement agreement; that their position when negotiating a settlement agreement was quite different from the position that NZL found itself in when it was assessing the merits of a prospective employee. His Honour added:
… By contrast, when the settlement agreement was being entered into the defendants were considering quite a different arrangement, namely how they could most beneficially end their relationship with the plaintiff. In such circumstances, whatever attributes he had claimed for himself at the outset of the relationship when he was attempting to convince NZL to employee him would not seem to be particularly relevant.
[12] His Honour expressed unease with the proposition that a claim for $30,000 could develop into a summary judgment application for nearly $1 million four years later. He noted out that he had pointed out to Mr Jaques that the agreement did not provide any explicit arrangements for settling the liability that NZL/the defendants might have arising from the premature termination of the contract for services. Rather:
[18] … What the parties seem to have had in mind is that the repayment of the $30,000 would be carried out at the same rate as the plaintiff would have
been paid under the contract for services. It was only in this indirect way that the contract for services had any connection with the settlement agreement. If this analysis is correct, what has happened is that the only debt fixed by the agreement has increased 33 times over four years. If that is the effect of the agreement, this raises questions of whether the contract is unenforceable because it imposes a penalty on the defendants: Bridge v Campbell Discount Company Limited [1962] AC 500.
[19] In order to better understand what the effect of the contract was, further consideration will have to be given to what the parties actually intended by their contract. It would seem to at least be arguable that the effect of the contractual arrangements was that the amount that was owing under the contract, $30,000, was repayable at the rate of $4,000 per week. This last amount was presumably chosen because that would involve payment of an amount that would otherwise have been expended on the liability which the Company owed on account of the contract for services that it entered into with the plaintiff. That being so, the $30,000 should have been paid off within seven-and-a-half weeks. …
[20] If the defendants had not paid that amount off within seven-and-a- half weeks they would have not complied with their contractual obligation. That may not have amounted to a breach of contract, though, because of the further requirement that all payments were to have been completed by April 2014.
[13] His Honour then commented how the sum of $4,000 per week would have accrued to a sum owing of $548,000 to April 2014 (by which date payment had to have been made). As His Honour noted, that if the defendants had not paid by April 2014 then they were subject to “very large additional imposts which cannot be explained as conventional interest and which arguably amount to penalties. A contract of that kind would not arguably be enforceable.”
[14] On 9 October 2015, Associate Judge Bell issued directions for the filing of a
statement of defence and any reply thereto. The learned Judge’s Minute noted:
[6] I invite the plaintiff to review his claim in light of Associate Judge Doogue’s Judgment. On one view of the matter, this case may be within the jurisdiction of the District Court. If the plaintiff accepts that he cannot hope to obtain judgment for a sum of more than $200,000, then it may be worth transferring this case to a District Court.
[15] The learned Judge noted that if the defendants wished to apply for security for costs then they should file an interlocutory application in the normal way.
Application for security
[17] They also seek an order that the costs reserved upon the unsuccessful summary judgment application be fixed on an indemnity basis at $37,602.
[18] The defendants also apply for a stay of proceeding until fixed costs are paid and security is provided.
[19] The defendants claim Mr Jaques would be unable to pay their costs if he was unsuccessful; that there evidence from which the Court can reasonably infer that is the case.
[20] Mr Gray submits reasonable inferences of impecuniosity can be drawn from: (a) the fact the plaintiff is self-represented;
(b) he is a former bankrupt;
(c) the defendants have not caused his impecuniosity;
(d)he was the director of 21 companies that had been struck-off the Companies Register, with 10 of those returning no dividend to creditors upon liquidation;
(e) despite requests for evidence that he would be able to pay costs, none such has been provided;
(f) the plaintiff has offered as security, property he does not own and, further, has been unable to provide credible valuation evidence in regard to that property.
[21] The evidence in support of the security application has been provided by the affidavits of, Mr Main the first defendant, a Mr Gordon and Helen Jaques. The Court does not intend referring to that evidence because it does not identify any issues requiring consideration.
[22] Mr Jaques opposes any order for payment of security on grounds:
(a) the defendants have failed to show he would be unable to pay costs if unsuccessful;
(b) he has a valid claim that is likely to succeed;
(c) there is no evidence he has acted vexatiously, frivolously, improperly or unnecessarily in bringing his claim; and
(d)the defendants have contributed to his impecuniosity by failing to repay the $30,000 that he had paid towards a share purchase option that was cancelled.
[23] Affidavits in opposition include those that have been provided by the plaintiff, Deena Jaques (the plaintiff’s wife) and Ray Scott.
[24] Mr Jaques believes he has provided sufficient information regarding his ability to provide security.
[25] On 28 February 2016, Mr Jaques tendered a statement of position showing a monthly net disposable income of $4,965 and net assets of $1,075,500. He says he is the beneficiary of several Trusts and has been authorised by each trustee to include his entitlement as part of his overall position. Mr Jaques says if ordered to pay costs then he will be able to do that.
[26] Mr Jaques confirms that he and his wife Deena agreed to provide a personal guarantee of $40,000 as security for costs, with a caveat securing their Taupo property as support. Defendants’ counsel Mr Gray responded that the instructing solicitor would be instructed to provide a deed of guarantee and indemnity for his wife Deena to sign but Mr Jacques says no such deed has been forthcoming.
[27] Mr Jaques then gives his account of those circumstances by which he and the defendants established their commercial relationship. In this regard clearly all three have regrets that relationship occurred at all.
[28] In the Court’s view, it is not necessary in the context of the present
application to review that history.
[29] Likewise, it is clear that the defendants’ presentation of Mr Jaques as an untrustworthy and unreliable person does not require any further comment upon this application.
[30] Regarding the three properties owned by family Trusts, Mr Jaques advises he is a discretionary beneficiary of those and that each trustee has agreed he may “apply the full force of the assets and income to the progression of this case”. He says all three properties have a significant net equity. He confirms his wife Deena will guarantee the payment of any costs award. He claims he has an excellent credit rating, and that a credit report dated October 2015 shows he has no judgments or defaults recorded against him.
[31] He says his claim includes the sum of $717,600 for a three-year contract of service that was terminated prematurely (giving a combined total of $747,600 as the claim in this proceeding). He also seeks compensation for losses beyond the end of the three-year contract of services term.
[32] Mr Jaques claims the defendants do not dispute that he entered into a three- year contract of service at the rate of $4,600 per week; nor have they introduced any evidence that they had grounds to terminate it in September 2011.
[33] He denies he has caused 10 companies to go into liquidation and says most of those were closed by him because they ceased to trade.
Principles
[34] Rule 5.45(1)(b) of the High Court Rules provides that security may be ordered if a Judge is satisfied there is reason to believe a plaintiff will be unable to
pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s
proceeding.
[35] If the Judge considers security ought to be paid then the Court may require payment of a sufficient sum into Court or the giving of satisfactory security. A Judge may order the proceeding to be stayed until the sum is paid or the security is given.
[36] The Court will review available evidence to consider whether it can reasonably be inferred the plaintiff is unable to pay the costs.
Considerations
[37] Mr Jaques submits there is no evidence that he cannot pay and therefore upon this application for security there is nothing he is required to answer.
[38] It will be apparent from the review of the evidence that there is a dispute about whether, in this case, Mr Jaques will be able to pay costs if unsuccessful; and if he is unable to, whether sufficient security is available instead of requiring any payment into Court.
[39] There is little the plaintiff and defendants can agree upon in that regard. It does appear, however, that Mr Jaques does not have sufficient available cash resources at his disposal. He has provided a statement of position but assets include his interests in properties owned by a Trust of which he is a discretionary beneficiary.
[40] Mr Jaques’ wife Deena has undertaken to permit her interest in the Taupo
property to be utilised to provide security if needed.
[41] Two other factors are relevant in this case. The first is the fact that Mr Jaques was previously a bankrupt. Although this occurred some years ago it is a factor not to be ignored.
[42] The other factor concerns the state of the present proceeding. In this Court’s
view, and whilst his claim for repayment of the sum of $30,000 may have proper
foundation, the Court is much less assured about Mr Jaques’ prospects of claiming
damages for an alleged breach of a service contract.
[43] Mr Jaques has placed somewhat of a premium on the quality of proof he suggests that is required before a Court can conclude he would be unable to meet costs if he lost his case.
[44] But, as Mr Gray submits, it is not necessary to prove Mr Jaques’ inability to pay in the normal civil sense; that in the absence of direct evidence it can be sufficient to adduce evidence from surrounding circumstances from what an inference of an ability to pay can reasonably be drawn.
[45] Mr Jaques has had the opportunity to provide credible evidence as to his means but he has chosen not to.
[46] His claims of property interests and of income received relate to properties owned by Family Trusts and rental payments received for those. Those properties are not his. No evidence has been provided regarding Trust structure or operation. There have been promises by a trustee and also by Mr Jaques’ wife Deena that they or the Trusts will indemnify Mr Jaques should he have to pay costs.
[47] There is insufficient evidence of the extent of equity in the Trust properties. There is a degree of equivocality regarding promises on behalf of the Trusts to indemnify Mr Jaques; i.e, it will occur should Mr Jaques require it and because it would subject to a Deed of Arrangement that the Trusts consider is reasonable.
[48] The Court has no knowledge of the Trusts’ financial positions.
[49] A lot of affidavit evidence has been exchanged about whether or not the Court could rely on Mr Jaques to fulfil his promises to pay if costs against him were awarded.
[50] Much of this is historical. Its relevance for present purposes is uncertain. It is clear Mr Jaques has been a bankrupt. He has been associated with the formation
of a large number of business companies, a significant proportion of which have now been struck off the Register.
[51] Adding to these factors is the Court’s assessment of Mr Jaques’ claims.
[52] Mr Jaques is self-represented. It can be assumed he cannot afford the cost of engaging a lawyer.
[53] The balance of considerations clearly favours the grant of an Order for payment of security into Court. It is apparent from the reasons provided by Judge Doogue that Mr Jaques did not even come close to succeeding with his summary judgment application.
[54] Although indemnity costs are sought in the outcome of the summary judgment hearing, in this Court’s view 2B scale costs only should be payable. Likewise, 2B costs and disbursements are awarded on the security for costs application.
Orders
[55] The plaintiff is directed to pay into Court the sum of $30,000 by way of security pending determination of the proceeding. Leave is reserved to apply for additional security prior to the close of pleadings date and when trial costs can better be estimated.
[56] There will be an Order staying the proceeding until that security is paid.
[57] If that security is not paid by 24 June 2016, the Court will consider thereafter any application in writing on behalf of the defendant to dismiss the proceeding.
Associate Judge Christiansen
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