Lai v Huang
[2019] NZHC 115
•7 February 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-001535
[2019] NZHC 115
BETWEEN SOPHIE LAI also known as SHU-HWA LAI First Plaintiff
RICHARD HUANG
Second PlaintiffGINI HUANG
Third PlaintiffAND
LIU SHUN-MEI HUANG as executrix of the ESTATE OF HSIU-LIN HUANG
First Defendant
CHUN-CHING HUANG
Second DefendantCHUN-TA HUANG
Third DefendantLIU SHUN-MEI HUANG and
CHUN-CHING HUANG as trustees of the SONG LIN FAMILY TRUST
Fourth Defendants
Hearing: 7 February 2019 Appearances:
A Manuson for the Plaintiffs C Jiang for the Defendants
Judgment:
7 February 2019
ORAL JUDGMENT OF HINTON J
[Application for additional security for costs]
Solicitors:
Prestige Lawyers Ltd, Auckland Glaister Ennor, Auckland
SOPHIE LAI aka SHU-HWA LAI v LIU SHUN-MEI HUANG [2019] NZHC 115 [7 February 2019]
[1] This is an application by the defendants against the plaintiffs for $30,000 increased security for costs for civil proceedings scheduled for trial in March 2019.
[2] The key issue is whether there has been a material change in circumstances since the original order was made for security for costs by Thomas J on 28 November 2016.
Background
[3] The proceedings concern the estate of Mr Huang, and a trust set up by Mr Huang (the deceased) and the first defendant, his wife. Mr Huang died on 24 August 2012.
[4] The parties are all related to the deceased. In particular, the first plaintiff is the separated wife of the third defendant, who is one of five children of the deceased. The second and third plaintiffs are the children of the first plaintiff and the third defendant. They are now aged about 21 and 15. The 21-year-old son was at university, but is now working.
[5] Under the deceased’s will, he left his entire estate to his wife, who is the first defendant. She is the sole executrix of the estate, which was wholly distributed by 31 October 2014.
[6] The deceased and the first defendant settled the Song Lin Family Trust (the Trust) in 1996. In 1997, the Trust purchased a property at 1092 Coatesville-Riverhead Highway, Riverhead, Auckland (the Coatesville farm).
[7] At some point, the first plaintiff and the third defendant separated. On the first plaintiff’s evidence, at the very latest, that was sometime in 2016. The third defendant claims it was a lot earlier than that date.
[8] The first plaintiff alleges that she and the third defendant worked at the Coatesville farm and that they have an interest, whether by way of constructive trust, promises made, or otherwise, in that farm. There are a number of different causes of action.
[9] The defendants filed applications for strike out of causes of action under the Family Protection Act 1955 and the Law Reform Testamentary Promises Act 1949 and filed an application for security for costs.
[10]On 28 November 2016, Thomas J dealt with those applications. The Judge:
(a)struck out the Family Protection and Testamentary Promises claims, on the grounds that they were time-barred;
(b)held that the Coatesville farm did not form part of the deceased’s estate;
(c)directed the plaintiffs to file an amended statement of claim; and
(d)ordered security for costs against the plaintiffs in the sum of $10,000, of which $5,000 was to be paid within 10 working days of filing an amended statement of claim and another $5,000 by the close of pleadings date.
[11] The plaintiffs paid the first tranche of $5,000 of the security for costs order. The second tranche of $5,000 was due in about November 2018, which was the close of pleadings date. It was paid on 31 January 2019.
[12] On 5 March 2018, Thomas J awarded costs and disbursements of $18,385.53 in favour of the defendants in relation to their successful strike-out and security for costs applications.
[13]To date, the first plaintiff has only paid $7,170.36 of that sum, leaving
$11,215.17 outstanding costs owed to the defendants.1
[14] Of the $7,170 costs paid by the plaintiffs, $5,030.36 was a release of the first tranche of security for costs (including interest), from the High Court. The release of that sum was by consent, which it seems from Associate Judge Smith’s later judgment
1 The figure appearing in the defendants’ submissions is $11,115.17, but assuming the sum paid is correct, the correct balance would appear to be $11,215.17.
was consented to in material part because the parties understood that legal aid might be granted, or had been granted.2
[15] Apparently the first plaintiff has otherwise been paying $320 per month off the outstanding High Court costs award. Her counsel, Ms Manuson, says that, to the best of her understanding, the first plaintiff will continue to make these payments. She says her firm will account for these payments to the defendants.
[16] The plaintiffs unsuccessfully appealed the November 2016 judgment of Thomas J. The Court of Appeal ordered costs against them of $9,665. These costs have all been paid, partly by application of about $6,660 paid as security in that Court, and the balance sometime later.
[17] Since the order for security for costs made by Thomas J in November 2016, inter alia, the plaintiffs have filed two amended statements of claim, including adding the trustees of the Trust as fourth defendants, and a new cause of action for breach of trustees’ duties. They have filed an interlocutory application to substitute the trustees of the Trust and brought an interlocutory application regarding a litigation guardian for Gini Huang, now the third plaintiff.
[18] While the defendants’ counsel took me to these further developments in the case, none of them was relied on as a material change of circumstance for purposes of this application. It seems that the applications, in particular, have either been dealt with by consent, or stayed, and have not in themselves led to material extra time.
[19] On 6 April 2018, the defendants filed the present application for additional security for costs of $30,000.
[20] This application was set down for hearing on 11 June 2018. However, the hearing was adjourned, on advice from the plaintiffs that they were obtaining legal aid. After some six months or so, the plaintiffs advised the Court, in December 2018, that legal aid counsel was not available. It seems that the solicitors for the plaintiffs did not register for legal aid and have reached something in the nature of a contingency
2 Lai v Huang [2018] NZHC 1207 at [20].
fee arrangement to continue with the work. I am advised that is consistent with the current legal aid regime. Obviously, any contingent fee arrangement would need to be reasonable. Ms Manuson is of the understanding that the arrangement is that no fees be paid if the plaintiffs are unsuccessful, other than disbursements, and that even if they are successful, the plaintiffs will only be billed on a normal billing basis.
[21] In any event, as a consequence of these delays, the hearing of the application for additional security for costs has not taken place until today.
[22] Discovery has apparently recently been completed. It was previously thought that there were outstanding issues in that regard, but I am advised there are not.
[23] The substantive proceeding is set down for a five-day hearing beginning on 11 March 2019. The defendants advise they have received no fewer than 14 briefs of evidence for the hearing from the plaintiffs.
The law on additional security for costs
[24]I consider first the position regarding security for costs itself.
[25] Under r 5.45 of the High Court Rules 2016, a Judge may, if they think it just in all the circumstances, order a plaintiff to give security for costs, if it appears the plaintiff will be unable to pay costs if the proceeding fails.
[26]Under an application for security for costs, the Court generally considers:3
(a)Has the applicant satisfied the Court of the threshold under r 5.45(1)?
(b)If so, how should the Court exercise its discretion under r 5.45(2)?
(c)What amount should be fixed for the security for costs?
(d)Should a stay be ordered?
3 See Busch v Zion Wildlife Gardens Limited (in rec and in liq) [2012] NZHC 17 at [2].
[27] Even if the threshold is met, whether or not to order security and, if so, the quantum, is a discretionary matter for the Court. The discretion is not to be fettered by constructing principles from the facts of previous cases.4
[28] The Court has an inherent jurisdiction to vary the order made for security for costs where there has been a material change of circumstances. Although not included in the defendants’ written submissions, Mr Jiang accepts that he should satisfy me there has been some material change of circumstances.5
Analysis – material change of circumstances
[29] The defendants point to two matters as amounting to a change of circumstances.
[30] First, Mr Jiang says it is more clear now than before that the first plaintiff is impecunious. He notes that Thomas J said only, “there is reason to believe the plaintiffs will be unable to pay the defendants’ costs”. Mr Jiang says that language was used because the Judge could not be certain at that point. He says she probably considered that the impecuniosity test or hurdle had only just been met. There was no evidence from any party as to the first plaintiff’s financial circumstances. The Judge had to effectively rely on the pleading in the statement of claim as follows:
(a)the plaintiff and her husband, the third defendant, were reliant on the deceased for financial support;
(b)they had worked on the Coatesville farm without remuneration;
(c)they depended on the use of the deceased’s ATM card (through the third defendant) to pay for the children’s living expenses;
(d)the children were unable to provide for themselves; and
4 A S McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747 (CA) at [13].
5 O’Malley v Garden City Helicopters Ltd (1994) 8 PRNZ 182 (HC) at 184.
(e)their mother, the first plaintiff, was unable to provide for their maintenance and support.
[31] Mr Jiang says the fact the first plaintiff’s impecuniosity was not crystal clear is further borne out by it now seeming that she had (despite her pleading), about
$20,000 in savings, based on the various lump sums paid towards costs orders.
[32] Mr Jiang says, by contrast, it is now very clear that the first plaintiff has no further funds at all, and no ability to pay beyond the $320 per month ongoing payments referred to above. In other words, she is more impecunious than before. He accepts that the first plaintiff would have to find any further security that might be ordered from elsewhere, as she would not have it within her own resources. (He questions, though, whether she would not be able to find it from elsewhere, as for example, she has found money each time she has absolutely had to do so.)
[33] As a second change of material circumstance, Mr Jiang says that, whereas security for costs of $10,000 was ordered, there is only $5,000 held because of the
$5,000 that was paid out by agreement towards the costs order made by Thomas J. He accepts that this change would be addressed by an order that an extra $5,000 be paid, rather than the extra $30,000 that is sought.
[34] The defendants do not rely on any other material change of circumstance. I have already noted they do not rely on the additional pleadings or interlocutory applications. They also do not submit that non-payment of a costs order is per se a basis for increasing security for costs. They do not rely on the default in payment as a material change of circumstance, but rather on the related point of impecuniosity being clear as a result.
[35] Beyond the two changes in circumstance, the defendants point to various factors relevant to discretion, as I would still have to exercise the discretion if satisfied there were a relevant material change of circumstance. In this regard, they point to the hearing being as long as five days; the claim being complex and lacking in merit; and that, as a result of the contingency arrangement, if the first plaintiff loses she is not disadvantaged, whereas the defendants are completely out of pocket. Mr Jiang
says it also does not necessarily follow that the Trust, which is not engaged in every one of the causes of action, will bankroll the proceedings for all of the defendants.
[36] I have decided that there is no material change of circumstances justifying additional security being ordered. The language used by the Judge, which Mr Jiang says is equivocal, in my view reflects the language of the rule which provides a Court can order security “if it appears the plaintiff will be unable to pay …”. Anyone reading the statement of claim and the assertions of impecuniosity made by the defendants on their application for security would take it, in the absence of any assertion to the contrary, that the plaintiffs were impecunious. The fact that it transpires that the first plaintiff apparently had savings of about $20,000, may only mean that was not entirely correct. I do not see any material change in circumstances in it now being crystal clear, or at least clearer, that the first plaintiff is impecunious.
[37] In terms of the second asserted change in circumstances, I agree it is a change in circumstances that $5,000 of the security for costs was applied to Thomas J’s own costs order, but I have decided it is not a material change in circumstances. In the grand scheme of things, $5,000 is a relatively modest amount, and the payment out was made by consent, without any condition that the plaintiffs had to subsequently top-up the security for costs payment.
[38] It is not therefore necessary for me to turn to discretionary factors as to whether I should exercise my discretion, as there is no basis for me to do so. However, I am further influenced in my decision by the fact that:
(a)The hearing is so close, albeit that is the result of delay caused by the plaintiffs themselves.
(b)Even if the $5,000 were ordered and not paid, I would not consider it appropriate for there to be a stay until it were paid. And indeed, Mr Jiang very fairly says that no stay is sought and that the trial would proceed regardless of the order not being met. In those circumstances, I can see little point in making an order that is relatively minor anyway.
(c)The Coatesville farm is apparently worth something in the order of
$20M, so that the defendants as a group, at some point, are in a materially better position than the plaintiffs are currently, despite some years of the first plaintiff being married to the third defendant. In this regard, it is difficult to comment on the merit of the proceedings, as it will turn to a significant degree on an assessment of the facts.
(d)Although the hearing has been set down for five days, that is shorter than contemplated by Thomas J. (Mr Jiang noted it may possibly take longer than five days, given the number of the plaintiffs’ briefs, but the relevant facts are of limited compass.)
(e)The first plaintiff is making ongoing payments of $320 per month off the outstanding costs award.
[39]For the above reasons, I decline to order increased security for costs.
Stay
[40] On 25 May 2018, Associate Judge Smith declined an immediate stay of proceedings, but said the issue could be reconsidered along with this application. Mr Jiang did not wish to re-advance the stay application on any footing. His clients understandably, especially at this stage of preparation, want the matter disposed of.
Costs
[41] I make no order as to costs on this application. The defendants have been unsuccessful, but the application was not unreasonable, and in circumstances where the first plaintiff has been fortunate that the defendants agreed to a partial pay-out of the security sum, and fortunate that the defendants have not enforced payment of the
outstanding costs, it would scarcely be appropriate for there to be any costs order against the defendants.
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Hinton J
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