La Famia no.1 Limited v Gan
[2015] NZHC 728
•16 April 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV2013-409-001696 [2015] NZHC 728
BETWEEN LA FAMIA NO. 1 LIMITED
Plaintiff
AND
KAIWAN GAN and JUZHEN YU First Defendant
AND
WIGRAM BASE LIMITED Second Defendant
AND
HARMON LYNN WILFRED Non Party
Hearing: 24 March 2015 Appearances:
A J Forbes QC and K W Clay for Plaintiff
S Caradus for First Defendant
D M Lester for Second Defendant
A J Forbes QC and K W Clay for Non PartyJudgment:
16 April 2015
JUDGMENT OF DUNNINGHAM J
Introduction
[1] La Famia No. 1 Limited (“LF1”) is suing the first defendants, Mr Gan and Mr Yu, alleging they sold assets of LF1’s restaurant business to the second defendant, Wigram Base Limited. The losses claimed against the defendants include approximately $75,000 for the chattels said to be wrongfully sold, and a claim for
$1,000,000 for the value of the goodwill of the business.
[2] Shortly after the lodging of the claim, LF1 was placed into liquidation. On
9 July 2014, the current liquidator, Murray George Allott, executed a deed of
LA FAMIA NO. 1 LIMITED v GAN and YU and ORS [2015] NZHC 728 [16 April 2015]
assignment, purporting to assign LF1’s claim to Mr Harmon Lynn Wilfred, a former director of LF1.
[3] On the basis of this deed of assignment, Mr Wilfred sought an order under r 4.52 of the High Court Rules, that the current plaintiff in the proceeding be replaced by himself (“the new parties order”). This application was strongly resisted by the defendants. While a new parties order is normally dealt with as an ex parte application on the papers, in the circumstances, Associate Judge Osborne directed
that the application be filed and served.1
[4] The Associate Judge declined the application in a judgment dated
10 December 2014, following a defended hearing.2 That judgment is the subject of this application for review with the applicant arguing that the Associate Judge acted on, or applied, a wrong principle of law. Had he approached the application correctly, the applicant asserts the order should have been granted.
[5] The applicant says, in summary, that:
(1)the Judge erred in his consideration of whether the order would create “undue expense or delay” because that test relates to the procedure for the making of the order, and not, as the Judge assumed, to the subsequent conduct of the proceedings following the making of the order;
(2)the Judge failed to make a finding as to whether it was “necessary” or “desirable” to make the order before entering the discretionary phase of his decision-making;
(3)the Judge erred in the exercise of his discretion in assuming he could adopt a broad discretionary approach to deciding whether the order was “necessary or desirable”, rather than exercising it after making a factual finding as to whether it was necessary or desirable to make an
order. Alternatively, if he did have a broad discretion, then he took
1 La Famia No. 1 Ltd v Gan HC Christchurch CIV-2013-409-001696, 7 August 2014.
2 La Famia No. 1 Ltd (in liquidation) v Gan [2014] NZHC 3158.
into account irrelevant considerations and failed to take into account relevant considerations, or gave excessive or inadequate weight to various factors in the exercise of his discretion; and
(4)the Judge erred in findings he made about the effect of the deed of assignment.
[6] For completeness there was also an application for stay of enforcement of the costs order made as consequence of the 10 December 2014 decision.
Approach to review
[7] Section 26P of the Judicature Act 1908 applies to a review of, or appeals against, decisions of Associate Judges. Reviews must be conducted in accordance with the High Court Rules and the Court may make such an order as may be just.3
[8] As the order being reviewed was made following a defended hearing and was supported by documented reasons, the provisions of High Court Rule 2.3(4) apply. These provide:
2.3 Review of decision
(4) If the order or decision being reviewed was made following a defended hearing and is supported by documented reasons,—
(a) the review proceeds as a rehearing; and
(b) the Judge may, if he or she thinks it is in the interests of justice, rehear the whole or part of the evidence or receive further evidence.
[9] The starting point is the Associate Judge’s decision. The applicant has the burden of persuading the Court that the decision was wrong in that it rested on unsupportable findings of fact and/or applied wrong principles of law.4 The Court
will not repeat the weighing exercise unless the Associate Judge gave excessive
3 Judicature Act 1908, s 26P(1)(a) and (b).
4 Midland Metals Overseas Pte Limited v Christchurch Press Co Ltd (2002) 16 PRNZ 107 (HC) at
[13].
weight to some factor or patently inadequate weight to another, as to be “plainly wrong”.5
[10] However, as the authors of McGechan on Procedure note:6
As the decision being reviewed is a chambers decision without oral evidence, the High Court on review is not bound to defer to the decision of the Associate Judge if the High Court Judge thinks the Associate Judge was wrong. The reviewing judge should say so forthrightly.
[11] If I find that the decision was wrong, then I may, on review, “may make such
order as may be just”.7
The new party rules
[12] Rules 4.52 and 4.53 of the High Court Rules provide the procedure be followed when a new parties order is sought. Rule 4.52 provides relevantly:
4.52 New parties order
(1) Subclause (2) applies if, after a proceeding has commenced, there is an event causing a change or transmission of interest or liability (including death or bankruptcy) or an interested person comes into existence, making it necessary or desirable—
(a) that a person be made a party; or
(b) an existing party be made a party in another capacity.
(2) An application without notice may be made for an order that the proceeding be carried on between the continuing parties and the new party (a new parties order).
[13] Rule 4.53 provides that a person may apply to the Court to discharge or vary a new parties order within 10 working days from the service of the order. Thus, in the normal course, a new parties order is assumed to be a relatively uncontentious process where the order is made without reference to the other parties, and the
obligation falls to the continuing parties to apply to have it discharged or varied.8
5 Alex Harvey Industries Ltd v CIR (2001) 15 PRNZ 361 (CA) at [12]-[15].
6 McGechan on Procedure (online looseleaf ed, Brookers) at [HR2.3.02 (1)(d)], citing Teinangaro v Fastway Couriers (NZ) Ltd HC Napier CIV-2009-441-751, 25 November 2011 at [23(c)].
7 Judicature Act 1908, s 26B(1)(b).
8 Although the onus of proof that an order is necessary or desirable will remain on the party who obtained the original order. Greening v Ormond [1961] NZLR 965 (SC) at 968.
However, it was clearly open to the Associate Judge to deal with the application on notice given the likely opposition of the defendants to the application.9
Preliminary Issue – admission of further evidence
[14] The Associate Judge held that the deed of assignment was of questionable validity, because the assignor was identified as Murray George Allott, the liquidator, and not the plaintiff, LF1. While the applicant argued that Mr Wilfred was clearly entitled to the assignment of the cause of action under the deed, either through proper construction of the deed, or through rectification, the Court was satisfied that there was room for argument on the face of the deed that the parties to the deed were
Mr Allott and Mr Wilfred, rather than LF1 and Mr Wilfred.10
[15] To put the matter beyond doubt in this hearing, the applicant sought to adduce further evidence, which included a deed of rectification, to make it clear that it was the plaintiff, LF1, assigning the cause of action to Mr Wilfred. The applicant relied on r 2.3(4)(b) which provides that on an application for review, “the Judge may, if he or she thinks it is in the interests of justice, rehear the whole or part of the evidence or receive further evidence”. The applicant submitted that I had a broad discretion as to whether to receive such further evidence and here it would assist the Court if the further evidence was received to put the point which had troubled the Associate Judge beyond doubt.
[16] The second defendant firmly opposed the admissibility of this evidence. Mr Lester pointed out that the applicant had been expressly put on notice of the problems with the deed before the Associate Judge heard the new parties order application and so should not be afforded a further opportunity to repair its case. The second defendant also argued that further evidence could only be introduced if it
constituted “fresh evidence” pursuant to established guidelines.11
9 Noting that such an approach was adopted by Master Faire in Wayby Investments Ltd v
Krukziener (2003) 16 PRNZ 907 (HC).
10 La Famia No. 1 Ltd (in liq) v Gan, above n 2, at [47].
11 Paper Reclaim Ltd v Aoteroa International Ltd (Further Evidence) (No 2) [2007] 2 NZSC 1, [2007] 2 NZLR 124.
[17] While the first defendants abide the Court’s decision, should the Court allow the further evidence, then they sought leave to file the affidavit of Kimberley Lawrence, dated 19 March 2015. This affidavit discloses the legal advice given to Mr Allott prior to signing the deed of assignment, advice which the first defendants say has a bearing on the reasonableness of his actions.
[18] I consider the application to adduce further evidence should be considered in light of the purpose of the rule, which is to effect the addition or substitution of parties so that the proceedings can continue without undue expense or delay. Parties should not be put to the trouble of initiating fresh proceedings, where the relevant issues are already articulated in proceedings on foot. While I accept that the need for rectification of the deed was an issue raised prior to hearing the new parties order application, the deed of rectification was only entered into after the Judge’s decision came out and so, technically, is fresh evidence. However, even if it was not, I think it appropriate to allow the further evidence to be adduced, both to ensure the purpose of the rule is achieved, and to avoid subsequent debate about the efficacy of the deed.
[19] However, as in the circumstances I am effectively granting an indulgence, it is also appropriate to admit the evidence of Kimberley Lawrence, and to reflect the granting of an indulgence in the question of costs, which I discuss later.
[20] With the deed of rectification before the Court (which removes any question of ambiguity in the deed of assignment), as well as the further evidence of the advice given to the liquidator, I now reconsider the factual issues on which the Associate Judge’s decision turned, before moving to the grounds of review.
Was the deed of assignment effective?
[21] The Associate Judge held that the problem with the deed of assignment was the most significant issue precluding a new parties order.12 If there was not a valid assignment, then, as was the case in Wayby Investments Limited, it would be
pointless to make an order for substitution as sought. Put simply, the
12 La Famia No. 1 Ltd (in liq) v Gan, above n 2, at [49].
Associate Judge had to be satisfied that LF1 was the assignor, as the liquidator had no chose in action to assign. That was a matter of law. I accept that the deed, in the form put before the Associate Judge, left room for doubt as to whether the deed of assignment was effective. In those circumstances, it was open to the Court to find that a new parties order was neither necessary, nor would it be desirable, where there was no other basis for making such an order.
[22] However, with the admission of the further evidence, the position before this Court is different. The key concern which underpinned the earlier judgment has been addressed. The two parties, LF1 and Mr Wilfred, confirm that the contract was intended to record LF1 as the assignor, and have rectified the deed accordingly.
[23] The only objection the defendants can raise is that such evidence ought not to be admitted. However, as I have already concluded, it would be artificial to ignore this subsequent document clarifying the parties’ intentions and putting beyond all doubt that the cause of action has been assigned. I am therefore satisfied there was an effective assignment.
Did the liquidator act reasonably and efficiently in assigning the proceedings?
[24] If there is an effective deed of assignment, the second issue which the Associate Judge brought to bear in declining the application was his concern that “the liquidator’s decision may be capable of being set aside as unreasonable”.13
[25] The defendants relied on the decision in Callis v Pardington, where the Court of Appeal held that an assignment of a right of action by the Official Assignee to Mr Callis (the discharged bankrupt) had been made “without any attempted evaluation and without advice, and was therefore unreasonable”. 14 Accordingly the assignment was set aside.
[26] The rationale for the decision in Callis was that:15
13 At [56].
14 Callis v Pardington (1996) 7 NZCLC 261 (CA), (1996) 1 BCSLR 211.
15 At 261.
A decision made without any attempt at evaluation and without advice, however, is likely to be unreasonable. We think counsel was right to exclude the assignment of frivolous and vexatious causes of action, even where there is no cost to the assignee or the estate, and where there is a theoretical possibility of ultimate gain. Frivolous and vexatious proceedings are an abuse of the process of the Court and it is no part of the proper carrying out of an assignees or liquidators functions, as office of the Court, to traffic in such proceedings.
[27] In the present case the Associate Judge had evidence that a lawyer, Mr van Schreven, provided advice to the liquidator, but “the Court [was] given no information as to the advice provided by Mr van Schreven. For all the Court knows the advice may have indicated that there was little or no substance to the claim”.16
[28] I now have the benefit of seeing the advice given by Mr van Schreven. While it was given after the parties had agreed on a sum to be paid in consideration for the assignment, I am satisfied that this agreement was conditional on receiving advice from the liquidator’s lawyer that assignment of the cause of action for that sum was appropriate.
[29] That is a long way removed from the circumstances in Callis v Pardington. In Callis, the relevant test was held to be whether the Official Assignee had acted in a way in which no reasonable assignee or liquidator could have acted. In Callis, it was held that acting “without any attempt at evaluation and without advice is likely to be unreasonable”.17 That is not the case here where the liquidator did seek advice as to the legality of the assignment and to the claim’s prospects of success. Furthermore, while the claim was assessed as “not [having] a significant prospect of success and certainly not at anywhere near the quantum that the company is seeking to recover in terms of the pleadings”,18 it was not a frivolous or vexatious cause of action such as incurred the Court’s criticism in Callis.
[30] Accordingly, again I am in a better position to assess the merits of the claim
that the liquidator’s decision was unreasonable. By reference to the advice that the liquidator relied on, I cannot conclude that the liquidator’s decision could be held to
16 La Famia No. 1 Ltd (in liq) v Gan, above n 2, at [55](d).
17 Callis v Pardington, above n 14, at 261.
18 Letter from Hans Derk Peter van Schreven (solicitor and partner of Clark Boyce) to Murray George Allott (liquidator of LF1) providing legal advice regarding the proceedings (3 July 2014) at [6].
be unreasonable therefore militating against the making of a new parties order. While the claim has low prospects of success, the liquidator did not act in a way “which no reasonable assignee or liquidator could have acted”, as was the case in Callis.19
Are aspects of the plaintiff ’s claim grossly inflated?
[31] This issue was considered by the Associate Judge. He, correctly in my view, held that “there is not the detailed evidence before the Court to enable me to reach any reliable view as to the merits of quantum of the chattels claim”.20 He also noted that the sum of $5,000 agreed to by Mr Allott for the assignment of the proceeding stood as an indication of what he considered he could reasonably accept on behalf of LF1.21 However, he could not conclude that the proceeding was frivolous or vexatious.
[32] In my view, the procedure in r 4.52 is not intended to be a procedure by which claims are effectively struck out because they are assessed as being over-inflated, or having only low prospects of success. If the proceedings cannot be struck out on the usual grounds, then it would be inappropriate to use the r 4.52 process as a de facto strike out procedure. Just as the defendants should not be prejudiced by a new parties order, the defendants cannot use the new parties order procedure to gain an advantage they would not otherwise have if the plaintiff’s identity had not changed.
Will there be prejudice or disadvantage to the defendants if there is a new parties order?
[33] It is clearly open to the Court, in the exercise of its discretion, to grant a new parties order on terms which address any prejudice or disadvantage to the other parties as a consequence of the making of the order.
[34] The Associate Judge correctly acknowledged that “there will be a practical
disadvantage to the defendants if there is a new parties order without security being
19 At 261.
20 La Famia No. 1 Ltd (in liq) v Gan, above n 2, at [58].
21 At [62].
dealt with at the same time”.22 However, as he considered that a new parties order should not be made on other grounds, this issue was not addressed.
[35] In the hearing before me, it was proposed, and I accept, that an order for payment of security for costs would appropriately address this concern. It was also acknowledged that existing costs orders needed to be paid before an order took effect. I address those issues at the conclusion of this judgment.
First ground of review - “undue expense and delay”
[36] The purpose of the r 4.52 procedure has been held to enable orders to be made “without undue expense and delay”. This is not, of course, stated in the rule itself, but is an observation on the purpose of the rule which was articulated in the decision in Smytheman v Clark.23
[37] The competing submissions here were as to whether the purpose articulated in Smytheman was confined to the r 4.52 procedure itself, or whether, as the defendants argued, it allowed the Associate Judge to consider the subsequent impact of the making of an order on issues that might arise in the ongoing litigation.
[38] The applicant argued that the phrase “without undue expense and delay” relates to the procedure under r 4.52, which was intended to enable an order to be made via a simple without notice procedure. It was not intended to require an assessment of whether the “product” of the order, being the continued litigation, could be concluded without undue expense and delay.
[39] The applicant said it was clear that the Associate Judge’s approach to the task wrongly embarked on the wider enquiry. This was apparent from his conclusion where he stated:24
I firmly conclude that the avoidance of “undue expense and delay” which is the intended product of a new parties order would not be achieved in this case. Rather, the parties (including the newly constituted plaintiff) would be
22 At [68].
23 Smytheman v Clark [1935] NZLR 604 (SC) at 606, discussing an earlier iteration of r 4.52 : R457.
24 La Famia No. 1 Ltd (in liq) v Gan, above n 2, at [69].
embarking on a new phase of litigation complicated and lengthened by the issues which I have discussed.
[40] The defendants also cited Smytheman v Clark for the Court’s statement that “[t]he purpose of R 457 is to facilitate the carrying on of proceedings without undue expense and delay”. The defendants submit that this decision encompassed the ability to consider the proceedings as a whole and whether, if the order was made, those proceedings would be carried on without undue expense and delay.
[41] The first defendants say that the applicant’s argument (which is that considerations of undue expense and delay relate to the process rather than the product of a new parties order) cannot be reconciled with r 7.46(2) or Wayby Investments Limited. They say where the intended party can take over proceedings without causing “undue expense and delay” (for example an administrator taking over the deceased’s litigation) then the Court may permit that new party to do so. Otherwise the intended new party must start its own proceedings afresh.
[42] Rule 7.46(2) is the rule providing for an interlocutory application to proceed on notice, and the Wayby Investments decision was a case where the Court considered it appropriate to do so. I do not see those legislative and judicial authorities as offending against an interpretation of Smytheman which focuses on the purpose of the procedure, not the product of the order. The rule allows a new party to be added or substituted for an existing party in a relatively simple way. This interpretation of the rule avoids what the defendant suggests should happen, which is the need for an intended new party to start proceedings afresh or, in the case of a new defendant, discontinuing the old proceedings and starting fresh proceedings naming the replacement defendant. Introducing the new party to the extant proceedings, usually by an ex parte application, is a quicker, cheaper process than starting proceedings afresh.
[43] There may be occasions where, as here, there is a question about whether the new party is entitled to replace the existing party (for example where it is asserted the assignment is void), or where an order may create injustice or prejudice (for example where the new party will not have the means to meet costs that the existing party had). Those issues can be debated by proceeding on notice and taken into
account when deciding whether to make the order and, if so, on what terms. However, those issues are able to be dealt with in the r 4.52 process and do not mandate an enquiry into whether the subsequent litigation can be continued without undue expense and delay (except to the extent that any such issue is an aspect of prejudice caused by substitution as opposed to being inherent in the proceedings).
[44] It follows that I consider the Associate Judge effectively elevated the observation in Smytheman v Clark as to the purpose of the r 4.52 procedure into an additional requirement which should prevent such substitution when the subsequent litigation will be complex and costly. I consider that approach was wrong in law.
[45] However, that does not mean that such issues are irrelevant or that he was wrong to have regard to them. As already noted, issues of undue expense or delay which are caused by the new parties order itself, and are not simply inherent in the litigation, may well be relevant to the exercise of the discretion to grant an order which I go on to discuss.
Second ground of review – necessary or desirable
[46] The second error alleged is that the Associate Judge failed to determine whether the order was “necessary” or “desirable” as a matter of fact, before turning to the exercise of his discretion. Instead he ignored that first stage of the enquiry and considered those were determined through an exercise of his discretion.
[47] The applicant considered the order was both “necessary” on the facts because Mr Wilfred was the assignee of the proceeding under a deed of assignment, and it was also “desirable” on the facts (while pointing out that only one of these grounds needed to be established).
[48] The first defendants say that it cannot be assumed it was “necessary” on the facts because the validity of the assignment was disputed. The onus was on the applicant to prove the order was necessary or desirable and, where the validity of the assignment was contested, that onus had not been discharged.
[49] The second defendant endorsed that approach and relied on Eddowes v Slade, where Edwards J said: 25
To justify me in making the order asked for it must be shown that it is “necessary or desirable” that it be made. In considering whether this has been shown, I have to exercise a discretion.
[50] The Associate Judge was therefore entitled to approach this issue in a broad, discretionary way.
[51] I accept that the rule is worded so that the requirement that it is “necessary or desirable … that a person be made a party” is a prerequisite to the making of an order. In considering whether an order is necessary the learned authors of McGechan note, “given that the original plaintiff or defendant was a necessary party to the proceedings, substitution under the rule will usually be necessary to enable complete and effective adjudication”.26 Thus, where there has been an effective change or transmission of interest or liability, then an order will normally be “necessary”.
[52] The alternative requirement, that an order be “desirable”, broadens the ambit of persons who can be made a party. This was the case in Warnock (deceased) v Director-General of Social Welfare,27 where an individual beneficiary suing the Department of Social Welfare died, but where the matter in issue affected a number of other beneficiaries. 28 In those circumstances the Court concluded it was desirable that the Combined Beneficiaries Union be joined in substitution for the deceased.
[53] While the decision in Eddowes identifies that questions of necessity or desirability involve the exercise of a discretion, there must first of course, be factual findings made on which the Court could reasonably decide, for example, that a new
parties order was “desirable”.
25 Eddowes v Slade (1906) 8 GLR 658 (SC) at 658.
26 McGechan on Procedure (online looseleaf ed. Brookers) at [HR4.52.02].
27 Warnock (deceased) v Director-General of Social Welfare HC Wellington AP206/98,
9 December 2002.
28 Eddowes v Slade (1906) AGLR 658.
[54] In the Eddowes decision, an order was denied because it would result in the immediate of entry of judgment by the plaintiff without the proposed new defendant having been afforded an opportunity to respond to the claim because time limits to do so had already expired.29 However, I concur with the authority of McGechan on Procedure that as the order was necessary to progress the claim, the most likely approach the Court would take now, in the exercise of its discretion, and to avoid
prejudice to either party, would be to extend the time limits for responding to the claim.
[55] The requirement that an order is “necessary” is therefore unlikely to engage the exercise of a discretion where there has been a straightforward change or transmission on interest or liability. The discretion would go, instead, to the terms in which an order was made to avoid any injustice. This might include an order for security for costs.
[56] The question of desirability, embracing, as it does, a wider class of potential new parties, will involve a more obvious exercise of the Court’s discretion, although the Court would need to articulate the factual findings it made which underpinned its conclusions on the issue of desirability.
[57] In the present case, I consider the Judge did make such factual findings. The Judge was not satisfied that the order was necessary on the facts. The evidence did not persuade him that there had been a valid assignment of the interest in the litigation and so the applicant did not establish that the order was necessary. He also made factual findings as to whether an order was desirable, including that problems with the deed of assignment would lead to undue expense and delay, making a new parties order undesirable. Accordingly, I am satisfied that the Judge did turn his mind to whether these tests were satisfied on the facts, before exercising his discretion.
[58] I do not consider that the Associate Judge erred by failing to make a finding of fact on whether the application was necessary or desirable. However, as I go on
29 Eddowes v Slade, above n 25.
to discuss, the facts were presented somewhat differently to me and as a consequence, I have reached a different conclusion.
Third ground of review – discretion
[59] I have already touched on the exercise of a discretion when discussing the previous ground of review. I also observe that the rule makes no express provision for the exercise of the discretion. However, it has long been accepted that an exercise of discretion is involved, particularly in determining whether a new parties order is “desirable” and, in deciding what terms an order should be made on in order to prevent prejudice or injustice to the continuing parties.
[60] As discussed under the second ground of review, I consider that the exercise of the discretion must follow on from factual findings which make it either necessary, or might make it desirable, that an order is made. However, I do not find it necessary to consider this ground of review further, because of the more comprehensive evidence now before me which was not before the Associate Judge. This requires me to reconsider the matter afresh, rather than defer to the Associate Judge’s exercise of the discretion.
Outcome
[61] I have had to consider the application for a new parties order in different circumstances from those before the Associate Judge. In respect of the grounds for review, the only ground I have upheld was that the Associate Judge erred in assuming the rule’s purpose of avoiding “undue cost and delay” applied to the product of a new parties order, rather than to the process for making it. However, he was entitled to take into account undue expense and delay if it was as a consequence of the substitution of the party and not inherent in the litigation itself as a matter relevant to the exercise of his discretion. Furthermore, in the factual context of the earlier hearing of the application, my decision would have been the same, as I would have held that the order was not necessary or desirable given the concerns about the validity of the deed of assignment. Those concerns have now been addressed by the further evidence provided.
[62] On the evidence before me I am satisfied that there is a valid deed of assignment and, furthermore, that in entering into the deed of assignment, the liquidator was acting reasonably, based on legal advice, and was not trafficking in frivolous and vexatious proceedings.30 Accordingly, as this is a simple case of a transmission of the interest in the litigation, the application reached the threshold of being “necessary” to make Mr Wilfred a party.
[63] However, in the exercise of my discretion, I consider it appropriate to make such an order on terms to ensure no prejudice or disadvantage to the defendants resulting from the change of identity in the plaintiff (as opposed to the mere fact that the litigation will continue). Those terms include that all costs in the litigation to date which are payable to the defendants must be paid within 10 working days of the date of this judgment, including those of the 1 December 2014 hearing. This requirement reflects the fact that the applicant has succeeded because of the more comprehensive evidence placed before this Court, when he was put on notice that was required before the 1 December hearing, and where the issues relevant to that evidence were pivotal to the Associate Judge’s decision.
[64] Furthermore, because in the present hearing, the applicant was essentially granted an indulgence to adduce the further evidence, I do not consider he is entitled to costs in his favour on the outcome of this hearing. Costs in this hearing are to lie where they fall.
[65] I also consider, in all the circumstances, it is appropriate to order that security for costs be paid and the applicant now accepts that too. The defendants have calculated 2B costs to take the matter through to hearing as being between $34,427 and $38,805. The applicant suggests that provision for security for costs be staged with only half of that sum required now, and the balance provided when the matter is set down for hearing.
[66] Taking into account the liquidator’s assessment of the merits of the claim, I
think it appropriate that the amount of security to be provided is set at a level which reflects that evidence. I therefore will require security for costs to be provided in the
30 To use the terminology in Callis v Pardington, above n 14.
sum of $34,000, with $20,000 to be paid or otherwise provided to the satisfaction of the Registrar within 10 working days of the date of this judgment and the balance to be provided when the matter is set down for hearing.
Summary of orders made
[67] Accordingly, I order:
(1) Harmon Lynn Wilfred is named as plaintiff in place of La Famia No. 1
Limited in these proceedings on the following terms:
(a) all costs awarded in the defendants’ favour in the proceedings to date are paid within 10 working days of the date of this judgment, including those awarded in the 1 December hearing; and
(b)security for costs is to be provided by Mr Wilfred in the sum of $34,000, with $20,000 of that sum to be paid or otherwise provided to the satisfaction of the Registrar within 10 working days of the date of this judgment.
(2)If any of the terms in Order 1 are not satisfied in the timeframes specified, the order allowing the proceeding to be continued in the name of Harmon Lynn Wilfred as plaintiff is revoked and the proceedings stayed.
(3) Costs in this proceeding are to lie where they fall.
Solicitors:
Kevin Clay, Christchurch
Duncan Cotterill, Christchurch
Dale Lester, Christchurch
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