Jo v Johnston

[2013] NZHC 552

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2009-409-000741 [2013] NZHC 552

BETWEEN  NAMGEUN JO AND SOON HEE KWON Plaintiffs

ANDBERNARD JOHNSTON First Defendant

ANDSOUTHERN HOSPITALITY LIMITED Second Defendant

ANDMAINTENANCE UNLIMITED LIMITED Third Party

Hearing:         19 March 2013

(Heard at Christchurch)

Appearances: M I Withers for Plaintiffs (not appearing - attendance excused)

R Morgan for First Defendant (not appearing - no interest in this application)

JCD Guest for Second Defendant

Judgment:      19 March 2013

ORALJUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to security for costs]

[1]      This is the second defendant’s application for an order that the plaintiffs

provide security for costs.

Appearances

[2]     I convened yesterday an urgent telephone conference because informal communications received from Mr Jo, the first-named plaintiff, indicated that he wanted this hearing adjourned to accommodate difficulties he is facing.  He refers,

for instance, to the fact that he is at present residing in Korea and it seems that may

JO V JOHNSTON HC CHCH CIV-2009-409-000741 [19 March 2013]

have  been  impelled  as  a  result  of  immigration  issues.    He  also  refers  to  the difficulties he is having with replacing counsel as his former barrister ceased to act late last  year.   Mr Withers has  only ever had  the role purely of an  instructing solicitor.  On that basis, although Mr Withers attended the telephone conference yesterday, I excused his attendance today.

[3]      A trial of this proceeding is scheduled for 1 July 2013.  The plaintiffs have been on notice since 4 February 2013 that this interlocutory fixture would proceed today.  That decision was made by the Court in the light of difficulties that the plaintiffs were having in relation to representation.   Given the background of this case with two aborted trials, it would not have been appropriate to delay the determination of this interlocutory application.  I therefore issued a Minute yesterday indicating that Mr Jo could attend this hearing today by telephone if he wished.  He has not so appeared.  This morning an email was brought to the Court’s attention by the Registrar which was forwarded by a person I understand to be the plaintiffs’ son. The email is from Mrs Jo, the second-named defendant (by another name).  She essentially goes over material similar to that previously put forward by her husband earlier in the year before the Court issued its February Minute.

[4]      I therefore deal with this application in Mr and Mrs Jo’s absence.

This proceeding

[5]      The proceeding was filed in April 2009.   The plaintiffs seek damages for losses of building value, rental income and other expenses totalling close to $4m.

[6]      Two earlier trial dates were vacated.   A November 2011 date was vacated because of the plaintiffs’ failure to file briefs on time.  An October 2012 date was vacated because of the plaintiffs’ inability or failure to meet security requirements.

[7]      The trial date of 1 July 2013 is therefore the third trial date allocated.

The security applications

[8]      The first defendant filed application for security for costs in August 2011 which eventually was brought on for hearing in September 2012.   On 2 October

2012, Whata J ordered the plaintiffs to pay security in the sum of $40,000 with the proceeding stayed if it was not paid by 29 October 2012.[1]

[1] Jo v Johnston [2012] NZHC 2524.

[9]      The second defendant then filed this present application on 10 December

2012.  The application relies heavily on the evidence filed in support of the previous security application.   It is also supported by an affidavit of Andrew Doherty, the second defendant’s chief executive.

[10]     Mr Doherty deposes that it was distressing for his company that the late-2012 trial date was missed and that that was no fault of the second defendant.  He notes, correctly, that the second defendant is now facing additional costs through preparing for the third fixture, with a significant block of costs still to come at the hearing.

[11]    He deposes that he had previously considered the position of the second defendant  in  terms  of  costs  but  had  believed  from  what  had  been  said  by the plaintiffs that they had assets in New Zealand.  He accepted at that point that they would be likely to be able to meet any costs order against him.  With the abandoning of the fixture late last year and filing of the first defendant’s evidence it became apparent to Mr Doherty that he had previously been given an incorrect understanding of the plaintiffs’ position.  He deposes that the documents he received late last year showed that the plaintiffs did not honour the informal arrangement that had been in place for the first defendant previously; that the plaintiffs’ assets in New Zealand by late last year were minimal and their value uncertain and further; that the plaintiffs had been evasive when it came to their assets.  He concludes by referring to the plaintiffs’ present residence apparently outside New Zealand and their continued avowal that they have assets in Korea.

[12]     Mr Doherty notes, correctly (as previously observed by Whata J in reliance

on Mr Raymond’s submissions and now reinforced by Mr Guest’s submissions to

me), that enforcement of any costs order in Korea would be difficult.  Mr Doherty goes on to say “or even impossible” although that may not be strictly correct.  I nevertheless take notice of the fact that the size of any costs order, even allowing for the six-day trial of this proceeding is likely to be such that the difficulty of enforcement which Mr Doherty first refers to is inevitable.  The major difficulty will be the economic cost in international commercial terms of enforcing a relatively modest sum.

[13]     Mr Jo filed an affidavit in opposition to a security order.  He traverses matters relating to the history of his claim and deposes to serious financial and other consequences that have befallen him and his family.  He identifies a $400,000 cost of the litigation to date.  Apart from that detail there is, as Mr Guest submitted, little in Mr Jo’s  evidence to  inform  the decision  of this  Court  on  security.    Rather the affidavit is largely a plea to the defendants to offer to settle the plaintiffs’ claims.

Principles

[14]     Justice Whata determined the first defendant’s security application pursuant to the general principles which govern applications for security for costs.

[15]    High Court Rule 5.45 provides for the making of orders for the giving of security  for  costs.    Rule  5.45(1)  contains  what  is  generally  referred  to  as  the threshold requirement.  Rule 5.45(2) provides that a Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.

[16]     As Whata J identified, the discretion is discussed by the Court of Appeal in A S McLachlan Ltd v MEL Network Ltd.[2]   It is a discretion which is not to be fettered by constructing “principles” from the facts of previous cases.

[2] A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747.

[17]     I turn briefly to the issue of a late application.  I deal with the matter having regard to the fact that the plaintiffs are neither present nor represented and that this application was not filed until after the first defendant had pursued his application to hearing.

[18]     Rule 5.45 does not expressly address the situation of a delayed application. Any  aspect  of  delay  is  a  factor  to  be  brought  into  account  in  exercising  the discretion.  On their facts, applications for security for costs made at a very late stage in a proceeding are often unsuccessful: see Oceania Furniture Limited v Debonaire Products Limited.[3]    Cases where delay has been fatal to an application for security are often those where the application was made very close to the hearing date or where the applicant had stood by allowing the plaintiff to incur considerable expense without even an informal request in relation to security: see J Delaney, Security for Costs[4].

[3] Oceania Furniture Limited v Debonaire Products Limited HC WG CIV 2008 485 1701, 24 April

2009 (Clifford J).

[4] Security for Costs J Delany (1989) at 124–127 and 174–175 (which provides examples from

Australian jurisdictions).

[19]   Drawing  on  Clifford  J’s  judgment  in  Oceania  Furniture,  relevant considerations as to delay include:

(a)      Whether the application was made as soon as the defendant became aware, or could with reasonable inquiry have become aware, of the plaintiff’s likely inability to meet costs;

(b)Whether there has been needless delay in the application, particularly if it was designed to prejudice the plaintiff.

(c)      Whether and if so to what extent the delay has prejudiced the plaintiff, such as where a plaintiff has expended substantial sums to bring a proceeding to the brink of trial.

[20]     None of those considerations is decisive – Oceania Furniture is an example of a case where the Judge accepted that the relevant financial information had only very recently come to the knowledge of Oceania but the application for security was

declined within the Court’s discretion.

Discussion

[21]     I have had the benefit, in advance of this hearing, of a written synopsis from

Mr Guest.   I have also had the benefit of digesting the judgment of Whata J of 2

October 2012.  I respectfully adopt the findings of Whata J in relation to the financial position of the plaintiffs.  The threshold test has been clearly established.  I also have regard to Whata J’s acceptance (in his Honour’s assessment of the plaintiffs’ case) of the observations of Harrison J in an earlier hearing in relation to this proceeding. Whata J was prepared to proceed on the basis that the plaintiffs’ claims had sufficient

merit in that they were arguable for the purpose of establishing liability.[5]     I also

adopt that conclusion.  It is against that background that I then proceed to consider the other circumstances of this case.

[5] At [8].

[22]     The order of Whata J was that the plaintiffs provide security for costs in the sum of $40,000.   My approximate estimate of a 2B award is that such an award would just cover the costs of preparation for a six-day trial and attendance at the six- day trial on the basis of one counsel, together with a small sum for disbursements. The reality is that for this defendant, appropriately represented by Dunedin counsel, there will be significantly more disbursements certified than in a local-counsel situation.  $40,000 is therefore a realistic assessment for the likely award in relation to preparation and trial.

[23]     Mr Guest, by seeking $40,000, does not seek any additional sum for previous attendances in relation to the case.   In doing so, he approaches the matter on the same basis as I have certainly previously approached applications which are brought at a late date before trial.  I adopt what was said by McKenzie J in Pickard v Ambrose[6] which was the subject of an appeal sub. nom. Ambrose v Pickard,[7] which was allowed in part, but with the Court of Appeal apparently accepting the reasoning of McKenzie J on this point.  His Honour said:

It will not generally be appropriate to make an order for security for costs which have already been incurred by the defendants.

[6] Pickard v Ambrose HC WG CIV 2003 091 143, 13 August 2009, at [9].

[7] Ambrose v Pickard CA548/2009 [2009] NZCA 502.

[24]     As I have indicated, Mr Guest’s application does not seek to provide security for past costs.  I take into account the extent to which the plaintiffs have already expended very substantial sums in bringing this proceeding to the brink of trial.  But that is counter-balanced by the extent to which the defendants through the earlier course of this proceeding had been led to believe that the plaintiffs’ financial position was sound.

[25]     I turn then to the other considerations identified in Clifford J’s judgment in Oceania Furniture.[8]I find that this application has been made promptly after the second defendant became reasonably aware of the plaintiffs’ likely inability to meet costs.  The second defendant’s position in that regard is somewhat fortified by the conclusion reached by Whata J which I adopt namely that there had been less than accurate and frank disclosure of the plaintiffs’ true financial position through to the granting of security late last year.   Secondly, I find that there has not been any

needless delay by the second defendant in relation to this application.  It has not been brought as an application designed to prejudice the plaintiffs.  It is an application brought, understandably, in a sense of some exasperation by the second defendant at the repeated inability of the plaintiffs to ready this case for trial. I am satisfied it has brought the matter before the Court at an entirely appropriate time.

Conclusion

[8] Above [15].

[26]     I find that this is an appropriate case in which to order security in favour of the second defendant.  I find that $40,000 is an appropriate sum for security.  I am reinforced in that finding by the view that it would be inappropriate to deal with security for the first defendant and the second defendant differently.

[27]     I will make an order that the plaintiff pay the costs of this application and the disbursements in any event.   As a fall-back there will be an inclusion of the appropriate sum of costs in the order for security.   I do not view it as realistic to make the proceeding of the trial on the due date dependent on the payment of what is

a relatively modest sum of interlocutory costs.

Orders

[28]     I order:

(a)      The plaintiffs are to provide security for costs in favour of the second defendant in the sum of $43,300 to the satisfaction of the Registrar within 20 working days from 20 March 2013;

(b)The plaintiffs are to pay in any event the costs and disbursements of this application which I fix at $3,300;

(c)       Within the said sum of $43,300 is contained the costs sum of $3,300.

In the event the plaintiffs in the meantime pay to the second defendant the said costs of $3,300 the sum required for security shall reduce to

$40,000;

(d)Failing provision of security as above ordered, this proceeding will otherwise be stayed 20 working days from 20 March 2013, but with leave  reserved  to  counsel  for  the  first  defendant  to  have  this application brought back before me on two working days notice for reconsideration of the stay from the perspective of the first defendant;

(e)      I  adjourn  this  application  pursuant  to  the  leave  reserved  in  the previous paragraph.

Pre-trial directions

[29]     A direction has previously been made for a pre-trial conference before Whata J who is the allocated Trial Judge in this proceeding.  In view of the judgment I have just delivered, it is appropriate that that pre-trial conference be brought forward to a date approximately 10 working days hence.   I direct the Registrar, in consultation with the Judge and counsel and Mr and Mrs Jo if they can be contacted, to so convene an earlier conference.  Counsel for the defendants will be expected to confer

as to the most workable way to ensure that this trial can proceed in the interests of all parties on the due date taking into account the stay that is now ordered.

Associate Judge Osborne

Solicitors:

Murray Withers & Associates, PO Box 13589, Christchurch 8141

Duncan Cotterill, PO Box 5, Christchurch

Downie Stewart, PO Box 1345, Dunedin
Mr N Jo and Mrs S H Kwon - Email: [email protected]