Jo v Johnston
[2012] NZHC 2524
•2 October 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2009-409-000741 [2012] NZHC 2524
BETWEEN NAMGEUN JO AND SOON HEE KWON Plaintiffs
ANDBERNARD JOHNSTON First Defendant
ANDSOUTHERN HOSPITALITY LIMITED Second Defendant
Hearing: 27 September 2012 (By telephone) Counsel: S J Shamy for Plaintiffs
R Raymond for First Defendant
JDC Guest for Second Defendant
Judgment: 2 October 2012
JUDGMENT OF WHATA J ON SECURITY AS TO COSTS
[1] The plaintiffs claim that the first and second defendants negligently failed to take care when lodging applications for consents to develop the Stranges’ building on the corner of High and Lichfield Streets in Christchurch. It is claimed that the ducting requirements for the development were not properly assessed with the result that the design submitted for building consent was flawed and in fact could not be constructed. It is further claimed that the plaintiffs relied on the advice of the first defendant to proceed down a development route, that ultimately resulted in significant losses to them. The defendants deny these claims.
[2] The first defendant now seeks security for costs. It appears from the affidavit evidence of the plaintiffs that they have significant assets and income in Korea. However, there may be difficulty in accessing those funds, although Mr Shamy (for the plaintiffs) could not elaborate on the reasons why that is so. There is then an
offer to provide a yacht valued at $60,000 to $80,000 as security in lieu of a cash
JO AND KWON V JOHNSTON HC CHCH CIV 2009-409-000741 [2 October 2012]
sum. But the valuation is qualified and not a sound basis for making a decision around security.
[3] The further background to this application is that:
(a) The plaintiffs have successfully opposed two applications for summary disposal of the claim – so it cannot be said that the claim is completely without merit;
(b)Previous offers of security in the form of property have proved elusory – in one instance the property was sold without notice to the defendants and in another instance the property was subject to a caveat meaning that it did not in fact provide security.
Assessment
[4] The plaintiffs have not conducted themselves on the question of security in a manner that engenders confidence. Their offers of security have had a chimera like quality; revealed only after persistent enquiry by the first defendant. Balanced against this Mr Shamy makes the strong point that this Court has found that the plaintiffs have arguable causes of action of negligence. As Harrison J observed:
[22] However, I am satisfied that Mr Jo has an arguable basis for pursuing his other two allegations of negligence, presently described as failing to check the ducting properly before applying for a building consent and to take due care when lodging the application. In effect, the allegations are both sides of the same coin.
[5] Harrison J did, however, add:
... Mr Johnston’s liability, if any, would be restricted to wasted costs such as for engaging a new architect and the costs of fees paid to counsel for a building consent. He may possibly be liable for some special damages for a brief period of delay in submitting an application for a conforming ventilation system.
[6] Harrison J also said:
[33] I might add that, even if Mr Jo establishes negligence, Mr Johnston’s
liability is limited under the contract to a maximum of $30,000. Mr Jo will
have to give careful consideration to the economic viability of continuing to pursue a claim against Mr Johnston. He may be well advised to seek a prompt commercial resolution before incurring further costs in this litigation.
[7] The second summary judgment application by the second defendant, asserting that the plaintiffs never entered into a contract with the second defendant was also rejected.
[8] Overall, I am prepared to proceed on the basis that the claims have sufficient merit, that is, are arguable for the purpose of establishing liability. There will be significant issues around quantum, but I do not think it is appropriate for me to proceed on the basis that quantum would be limited in the way suggested by Harrison J. That really will be a matter for assessment at trial (if we get that far) on evidence dealing with causation.
[9] I must therefore address the principle enunciated by the Court of Appeal in A S McLachlan Ltd v Mel Network Ltd[1] to the effect that where there is an arguable case:
... Access to the courts for a genuine plaintiff is not lightly to be denied.
[1] A S McLachlan Ltd v Mel Network Ltd (2002) 16 PRNZ 747 (CA).
[10] There are, however, two unusual features to this case (in addition to the earlier defaults of the plaintiffs) namely:
(a) The plaintiffs aver to having funds and considerable income in Korea;
but
(b)There are no rights of reciprocal enforcement such that the defendants, if successful, could not gain direct access to the funds in Korea for the purposes of enforcement.[2]
[2] I am in this regard reliant on the submissions of Mr Raymond, not having had an opportunity for that matter to be properly researched.
[11] In these circumstances, I am confronted with a situation where, from the evidence before me, the plaintiffs are in funds but in the event the defendants are
successful, the defendants will not have direct enforceable access to those funds.
This in my view tips the assessment in favour of the first defendant. The hearing will be a substantial one, spanning some six days with expert evidence. Significant costs will be incurred by the defendants in preparing for trial and attending trial. By contrast, the plaintiffs are not obviously prejudiced by an order for security for costs given that they are not impecunious. I accept that Mr Shamy is concerned about gaining access to funds from Korea. But the plaintiffs have given the following evidence:
We have brought funds over from Korea in order to fund developments in
New Zealand.
[12] Given that is the case, and given that this entire proceedings relates to the development aspirations, I am not prepared to proceed on the basis that the plaintiffs are unable to access those funds. Rather I proceed on the basis that the plaintiffs are electing not to gain access to those funds at this stage.
[13] Given the foregoing, I direct that the plaintiffs provide security in the sum of
$40,000 or about two-thirds of the scale costs estimated by the first defendant. It will plainly fall short of the actual costs incurred by the defendants. It will not cover disbursement costs. But I think it represents a proper balance of the various interests, and I am conscious that a significantly larger sum might be difficult to obtain in terms of its accessibility in Korea.
[14] Both Mr Shamy and Mr Raymond accepted that were I to grant an order for security then the proceedings would need to be stayed. That seems sensible, given that this will avoid the incurring of substantial costs in preparation. It also has the practical benefit of enabling the Court to be able to reallocate that judicial resource to another matter.
[15] In the above circumstances I direct as follows:
(a) The plaintiffs are to provide security for costs in the sum of $40,000 in favour of the first defendant within one month from 28 September
2012;
(b)The proceedings are otherwise stayed pending the payment of security.
Postscript
[16] Mr Shamy has indicated that the plaintiffs may be able to lodge the security in short order. So the parties know where they stand, if the security is paid by 5 pm Wednesday, 3 October 2012, the hearing date will NOT be vacated.
[17] Given the tightness of the timetable, I reserve leave to any party to seek an adjournment in any event.
[18] Finally, and for the sake of clarity, if security is not paid by 5 pm Monday,
29 October 2012, the proceedings will be stayed.
Whata J
Solicitors:
S Shamy, Christchurch
Richard Raymond, Christchurch
JDC Guest, Dunedin
Shirley Law, Christchurch
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