Lee v Whangarei District Council
[2014] NZHC 2989
•24 November 2014
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2014-488-94 [2014] NZHC 2989
IN THE MATTER OF the Judicature Act 1908,
the Building Act 1991 and the Building Act 2004
BETWEEN
OLIVIA WAI YEE LEE Plaintiff
AND
WHANGAREI DISTRICT COUNCIL Defendant
Hearing: 24 November 2014 Appearances:
O W Y Lee, plaintiff in person, with McKenzie friend, Ms T Connor
F P Divich and H E Waldron for Defendant
Judgment:
24 November 2014
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Heaney & Partners, Auckland, for Defendant
Copy for:
Olivia W Y Lee, Plaintiff
LEE v WHANGAREI DISTRICT COUNCIL [2014] NZHC 2989 [24 November 2014]
[1] In this leaky building claim, the Whangarei District Council has applied for security for costs against Olivia Lee, the plaintiff. There is no real dispute that there is reason to believe that if she is unsuccessful, Ms Lee will not be able to pay the council’s costs. This decision turns on the balancing exercise, in which the court must weigh the competing considerations of the plaintiff’s access to justice and the defendant’s desire to be protected against a barren order for costs if it is successful.
[2] Before I deal with the application itself, I need to say something about the procedure adopted this afternoon.
[3] Ms Lee is Chinese. She migrated to New Zealand. While she has a good command of the English language, she does have difficulty expressing herself in public. Ms Connor who attended court today is a McKenzie friend. Normally, the role of a McKenzie friend is to sit with the party and give quiet assistance. On this occasion, however, Ms Lee asked the court for permission for Ms Connor to address me. I allowed that. I regard that as exceptional but I have to say that that has been useful for the hearing today. In effect, Ms Connor acted as an interpreter for Ms Lee and was able to convey what Ms Lee would have said if she had been able to express herself better in English. Ms Connor addressed me appropriately on the facts and also drew my attention to relevant principles of law. I have benefited from Ms Connor’s assistance.
[4] As I say, I regard this step as exceptional, but I have allowed it in the court’s
inherent jurisdiction. It was appropriate in the circumstances of the case.
Background
[5] Ms Lee had a house built on her property at 183 Sandford Road, Ruakaka, Whangarei. She applied for a building consent in August 2006. The consent was granted on 26 October 2006, after the council had requisitioned for further information on a number of aspects. Building work started in January 2007. During construction, the council carried out a number of inspections. Some of those inspections are in issue in this proceeding. Of particular relevance are field advice notes issued for inspections on 18 June 2007 and 26 June 2007. Ms Lee moved into
the house in December 2007. The council carried out a final inspection on 26 March
2008. The house failed that final inspection. The council issued a field advice notice, drawing attention to 21 separate items. Ms Divich identifies eight of them as relating to watertightness issues. The council issued a further field advice notice on
18 June 2008 in which it required sill flashings to be installed as per the approved building consent drawings. The council did not issue a code compliance certificate.
[6] An assessor’s report under the Weathertight Homes Resolution Services Act
2006 has identified a number of building defects in breach of the Building Code, which are said to give rise to water ingress problems.
[7] Ms Lee is suing the council for alleged negligence in the way it carried out inspections during construction. She has, for this hearing, focused in particular on the council’s approval of a wrap in a pre-clad inspection on 18 June 2007. It may be necessary later on in my decision to consider the merits of her claim more closely. She is claiming damages of $726,000 for the estimated repair costs. In addition, she is claiming general damages and other sundry relief.
[8] The council denies liability generally. Its statement of defence denies any duty of care to Ms Lee because she was the developer and head contractor, although in submissions Ms Divich accepted that the council could not properly at this stage obtain a finding that the council did not owe a duty of care at all to Ms Lee. The council also alleges contributory negligence by Ms Lee. The council casts Ms Lee as the project manager, who must carry a large amount of responsibility for the defects in the building. The council also says that for any damages which may be awarded, there should be an allowance for betterment.
[9] In the hearing, Ms Divich raised a new matter which had not been pleaded. She pointed out that this proceeding started in May 2014, whereas the cause of action had accrued more than six years before that date. In that, she was relying on the defence under s 4(1)(a) of the Limitation Act 1950.1 She conceded that the matter had been raised for the first time today.
[10] Ms Lee does not have legal representation. She is not legally qualified. At such short notice, she could not fairly be expected to respond on a difficult point as to the application of the limitation statute. I do not regard the limitation point as straightforward. There is some difficulty on the facts in establishing just when the cause of action would have accrued. Because the limitation point was raised so late without giving Ms Lee the opportunity to respond to it, I am going to disregard it.
[11] More to the point, there is a very live issue as to the role Ms Lee played in the construction of the house. The council points to the contract between Ms Lee and the builder, Rob Littlejohn Builders Ltd, which provided for a labour-only contract. The council says that Ms Lee was actively involved in the day-to-day management of the job. On the other hand, Ms Lee presents herself as the owner of the property, who engaged contractors to carry out the work while she was, for her part, involved in carrying on her own business. She relied on others: the tradespeople she engaged
- both contractors and subcontractors - and the council to ensure that the house was built in accordance with the Building Code and with the building consent plans.
[12] As well as Rob Littlejohn Builders Ltd, another significant contractor was Composite Cladding and Signage Manufacture and Installation Ltd, the cladding sub-contractor.
Other proceedings
[13] This case is not the first legal proceeding involving Ms Lee and the construction of the house at Sandford Road.
[14] In July 2008, there was an adjudication under the Construction Contracts Act
2002 in a dispute between Ms Lee and Rob Littlejohn Builders Ltd. The adjudicator upheld Rob Littlejohn’s payment claim. Ms Lee had resisted payment, alleging defective work by the builder. The adjudicator drew a distinction between defective work and defects appearing after work had been completed. It appeared that by this stage Ms Lee had engaged a building surveyor to give assistance in dealing with defects. The adjudicator held that the presence of defects which appeared after
completion was not by itself evidence of defective work by Rob Littlejohn Builders
Ltd.
[15] I note that the case was decided on the papers. The adjudicator did not interview the parties. He did not make a site visit. He did not request further information from the parties. That is consistent with the way that disputes under Part 3 of the Construction Contracts Act are determined – that is, roughly but promptly. The adjudicator did note that Ms Lee and Rob Littlejohn Builders Ltd had entered into a labour-only contract and the adjudicator held that Ms Lee assumed the role of main contractor, taking responsibility for all aspects of running the project. In his opinion, Ms Lee had shown that she had not adequately administered the contract and she was unable to identify defective work during the course of construction.
[16] The next litigation was with Composite Cladding and Signage Manufacture and Installations Ltd. That company sued Ms Lee in the Whangarei District Court for the unpaid balance of the contract price. Ms Lee counterclaimed, alleging defective workmanship. In October 2009, Judge David Harvey gave judgment in favour of Composite Cladding and Signage Manufacture and Installations Ltd, and dismissed Ms Lee’s counterclaim. Judge Harvey gave strong findings against Ms Lee. Amongst other things, he held that she was the person in charge and he rejected her denial that she was the developer and project manager.
[17] Ms Lee did not have legal representation for that case. She appealed. On appeal she did have legal representation. Rodney Hansen J allowed her appeal2 - primarily on procedural grounds. He held that the District Court had not given sufficient allowance for the fact that Ms Lee did not have legal representation. He directed a rehearing.
[18] The rehearing was before Judge Sharp. At this hearing, Ms Lee was represented. Judge Sharp dismissed Ms Lee’s claim and again made findings adverse to Ms Lee. While the Judge accepted that there were watertightness defects,
she held that Ms Lee had not proved that Composite Cladding and Signage Manufacture and Installations Ltd was responsible for them. At [55]-[59] of her decision, Judge Sharp made a number of findings adverse to Ms Lee. She found Ms Lee to be the project manager. She also found contributory negligence on the part of Ms Lee.3 She apportioned liability 99 per cent against Ms Lee and 1 per cent against Composite Cladding.
[19] Ms Lee appealed against the decision of Judge Sharp. She applied for leave to adduce further evidence but Wylie J dismissed that application. Woodhouse J heard the appeal and dismissed it. Woodhouse J did not disturb Judge Sharp’s findings as to Ms Lee being the project manager and as to her contributory negligence. That was because that was not the focus of argument before Woodhouse J.
[20] With regard to Judge Sharp’s decision, I consider her key finding was that Ms Lee had not established liability on the part of Composite Cladding, whereas the other findings, as to her being the project manager and as to contributory negligence, are obiter only. In the hearing today, Ms Lee established - to my mind at least - that if she were able to run a case against the council, she may be able to produce evidence that would run counter to the findings (in some respects) of Judge Sharp.
[21] As well as the proceedings involving Composite Cladding, Ms Lee began a proceeding in the Weathertight Homes Tribunal. The respondents were the District Council, Mr K J Fong (a draftsman), the joinery installer (Altherm Aluminium Northland Ltd), Northland Waterproofing Solutions Ltd, and Design Metal Roofing Ltd.
[22] In March 2013 the Tribunal ordered Ms Lee’s proceeding to be terminated under s 60(5) of the Weathertight Homes Resolution Services Act 2006. That was because the subject matter before the Tribunal was also the subject of other proceedings. The basis for that was that Ms Lee had lodged an appeal against the determination in the Construction Contracts Act adjudication with Rob Littlejohn Builders Ltd, and had counterclaimed against Rob Littlejohn. That proceeding had
been stayed pending arbitration. In addition, the Tribunal noted the pending proceeding between Ms Lee and Composite Cladding.
[23] Ms Lee tried to appeal against the decision of the Tribunal. She filed an appeal in November 2013 but that was out of time. She needed leave to appeal out of time but Wylie J dismissed that application.4
[24] Finally, I was advised today that Ms Lee’s arbitration with Rob Littlejohn Builders Ltd led to a hearing which went for two-and-a-half days, and an award which was given on 8 November 2014. Contrary to the run of losses, Ms Lee had a win. She has obtained an award of over $700,000 against Rob Littlejohn Builders Ltd.
Rule 5.45
[25] The rule says:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a) that a plaintiff—
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand;
or
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b) that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding.
(2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3) An order under subclause (2)—
(a) requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i) by paying that sum into court; or
(ii) by giving, to the satisfaction of the Judge or the
Registrar, security for that sum; and
(b) may stay the proceeding until the sum is paid or the security given.
(4) A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.
(5) A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6) References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[26] Applications under r 5.45 generally follow these steps:
(a) Has the applicant satisfied the court of the threshold under r 5.45(1)? (b) How should the court exercise its discretion under r 5.45(2)?
(c) What amount should security for costs be fixed at? (d) Should a stay be ordered?
The threshold
[27] The threshold requirement which the council relies on is that there is reason to believe that Ms Lee will not be able to pay any costs to the council after a defended hearing. Ms Lee does not contest that aspect. The evidence shows that Ms Lee does have financial difficulties. Her current income is not enough to service her mortgage to the Westpac bank. She also acknowledges a liability to family members for funds advanced, said to be $375,000. Ms Connor, who has appeared as her McKenzie friend, is a creditor for some $36,145.52. She owes costs of $55,000 to Composite Cladding. In addition, as a result of her unsuccessful application for
leave to appeal out of time against the decision of the Weathertight Homes Tribunal, the council, Altherm Aluminium Northland Ltd, and Northland Waterproofing Solutions Ltd have obtained costs orders against Ms Lee. She has not paid those orders for costs. The council can justifiably point to the fact that having obtained one order for costs against Ms Lee which she has not paid, there is good reason to believe that she will be no better for a fresh order for costs.
The discretion
[28] The Court of Appeal’s decision in A S McLachlan Ltd v MEL Network Ltd5 remains authoritative guidance on the exercise of the discretion once the threshold has been established. The Court said:6
Rule 60(1)(b) High Court Rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, “the Court may, if it thinks fit in all the circumstances, order the giving of security for costs”. Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing “principles” from the facts of previous cases.
While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a checklist of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.
The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the courts for a genuine plaintiff is not likely to be denied.
Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
5 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).
[29] The Court also recorded the recognised approach that on a security for costs application the court must form some impression as to the respective strengths of the case for each side.7
[30] I have also found useful guidance in the decision of Kós J in Highgate on
Broadway Ltd v Devine.8 He said:
While impecuniosity makes an order for security for costs more likely, primarily because it is likely that to permit the case to proceed further without security may well be unduly oppressive of the other parties, it has never been the case that impecuniosity per se requires the making of such an order. That was so at common law, and it is so also under the rules since that threshold has been introduced. As Professor Zuckerman says [citing Zuckerman on Procedure (2nd ed, Sweet & Maxwell, London, 2006) at 380]:
“An order for security for costs directs that unless the claimant (or exceptionally, the defendant) provides a security that will underwrite any liability for costs that he may incur towards the defendant, he will not be allowed to proceed with the claim. On its face of it, this is an extraordinary jurisdiction. The principle of access to justice demands that citizens should have untrammelled opportunity to pursue bona fide claims in the Court. Therefore, requiring a claimant to provide security for costs, as a condition to being allowed to pursue his claim, will normally constitute an unjust constraint of his right of access to justice: Abraham v Thompson [1997] 4 All ER 362 (CA). However, considerations of justice support the imposition of security into two types of situations: where the claimant intends to evade any future liability as to costs, and where the claimant would otherwise be effectively immune from costs orders.”
Considerations relevant to the discretion may favour, tend against or be neutral to the making of an order. I do not suggest the list that follows is complete. The caution expressed by the Court of Appeal in McLachlan that such considerations are not evenly weighed, and must not be used to fetter discretion, must be recalled. On the other hand, an ordered and principled approach is a good reminder that the imposition of security is not an automatic consequence of the plaintiff’s impecuniosity. A point that is often overlooked by applicants for security. Many seem to assume that if the impecuniosity threshold is passed, and that state is not necessarily a direct consequence of a cause of action, security will be ordered. The analysis required is actually much more subtle.
Kós J set out a number of questions which may bear on the exercise of the discretion.9 I do not intend to go through each of those questions as if they were a
7 At [22].
8 Highgate on Broadway Ltd v Devine [2012] NZHC 2288; [2013] NZAR 1017 at [20]-[21].
checklist - the Court of Appeal cautioned against such an approach. Nevertheless, I have benefited from Kós J’s judgment.
Relevance of earlier proceedings
[31] I have referred to the earlier proceedings involving Ms Lee. The fact that Ms Lee has been unsuccessful in other proceedings is not conclusive against her in any claim she may bring against the council now. The council was a party to only one of those proceedings - the claim in the Weathertight Homes Tribunal. That proceeding was terminated on technical grounds - there was no substantive finding as to the merits of the claim.
[32] Under s 50 of the Evidence Act 2006, the judgments and findings in the other proceedings - particularly those involving Rob Littlejohn Builders Ltd and Composite Cladding - are not admissible in this proceeding to prove the existence of facts in issue in this proceeding. There is no res judicata or issue estoppel which stands in the way of Ms Lee. All the same, the fact that in earlier proceedings other parties have been able to obtain findings adverse to Ms Lee provides a basis for believing that the council may be able to obtain the same findings in this proceeding. At the same time, I also take into account the fact that Ms Lee has apparently been successful in her arbitration against Rob Littlejohn Builders Ltd. That is a pointer Ms Lee can rely on to say that failure in other proceedings is not necessarily conclusive as to the way in which a proceeding against the council might run.
[33] It is therefore necessary to look more closely at the merits of Ms Lee’s
claims.
Duty of care
[34] As indicated earlier, Ms Divich did not submit that the council could not owe a duty of care to Ms Lee. There is a line of cases that hold that although local authorities might owe duties of care to owners and occupiers of buildings, they may not owe a duty of care to the negligent building owner who is the source of his own
loss. That goes back to a dictum of Lord Wilberforce in Anns v Merton London
Borough Council:10
The duty [of a local authority inspector] is owed to them [owners or occupiers of the house] - not of course to a negligent building owner, the source of his own loss.
[35] While that dictum has been applied in New Zealand, it seems to have been applied only in cases of commercial developments. It has not commonly, in my experience, been applied against ordinary house owners. More typical are cases such as Riddell v Porteous,11 where a duty of care was held to be owed to owners who engaged a number of contractors on a labour-only basis.
Breach of duty
[36] The council’s argument went rather to the question of breach of any duty of care. The council relied on the absence of a code compliance certificate, and on the field advice notes issued during construction which identified defects that required attention - in particular, those going to watertightness issues. Ms Divich said that these factors distinguished Ms Lee’s case from the general run of leaky building cases. In a typical claim against a council, a code compliance certificate has been issued which shows the council’s view that the building does comply with the Building Code and with the plans approved on the issue of a building consent. She says that there was no reliance on the council’s view in this case because the council declined to issue a code compliance certificate. In fact, on final inspection it found
20-odd items requiring attention, of which a number related to water ingress defects.
[37] In Ms Divich’s submission, the worst case for the council was that it may have failed to identify defects early in the piece. In that worst case, if defects had been identified earlier in construction Ms Lee might have a claim for increased remedial costs incurred as a result. Against that, she also pointed to the findings of contributory negligence on the part of Ms Lee, particularly in the judgment of Judge Sharp in the Composite Cladding case. She also referred to contemporaneous
documents, to the building contract, to statements made in the assessor’s report, and
10 Anns v Merton London Borough Council [1978] AC 728 (HL) at 758.
11 Riddell v Porteous [1999] 1 NZLR 1 (CA) at 6 and 13.
to other findings that Ms Lee had a significant role in supervising the construction of the property. In effect, the council’s case was that Ms Lee had, at best, a weak case against it. That, combined with the impecuniosity, required the council to be protected.
[38] To a certain extent, Ms Lee’s submissions dovetailed with Ms Divich’s analysis of the case. A significant issue in the construction of the house was the use of an outer aluminium composite cladding panel. This was said to operate only as a rain screen, not as something offering complete water ingress protection. At the building consent stage, the council identified that further protection was required. When the council issued the building consent it required a rigid barrier behind the cladding. The building consent was issued only on the assurance that that would be provided. That required a rigid air barrier between the exterior rain screen cladding and the wall, and that all joints would be taped and sealed to provide a continuous air-seal function.
[39] Ms Lee’s attack is that while the council had identified that as a requirement at the consent stage, it fell down at the inspection stage. Ms Lee refers to a field advice note of 18 June 2007 for a pre-clad inspection. While that field advice notes that the flashings were not approved, the wrap was approved. It is Ms Lee’s case that that constituted an incorrect approval of something that did not meet the requirements of the consent. Her case is that if those defects had been identified then, considerable costs could have been saved given the greater costs of repairing those defects now.
[40] In response, Ms Divich points out that that is only one of the causes of water
ingress. The assessor’s report identified a number of other causes.
Assessment of strength of case
[41] I need to assess the strength of Ms Lee’s case. Necessarily, it must be a broad-brush assessment. Clearly there are conflicts as to the construction of the house in which many people took part. To a certain extent, Ms Lee has had a trial and error experience. But she has apparently learned from other cases how to refine
her case. At this stage my view is that she does have an arguable case against the council. It is not a case that would be vulnerable to strike-out or summary judgment. It is a case where the council will be able to avoid responsibility for at least some of the water ingress problems, because the council can show that it did identify other defects during construction. Ms Lee has, at this stage, identified at least one area where the council did pass an item which turned out to be defective. The fact that approval was given to the wrap meant construction continued so that the costs of repairing the matter later on were greater. The claim cannot be dismissed out of hand. It does need to be taken seriously.
[42] While adverse findings were made against Ms Lee in the District Court, she has satisfied me that trying to run this case in the face of those findings would not be a frivolous exercise. As an example, Judge Sharp made a finding against her that she changed the system of guttering from one of external guttering to internal. Ms Lee pointed to the building plans approved for the consent that show a system of internal guttering only.
[43] All the same, Ms Lee faces an uphill task. One factor inclining me to say that is that she does not have legal representation. That is understandable. She cannot afford a lawyer and she is unlikely to get legal aid. I am not criticising her for not having legal representation, but I note that that does impose a further handicap on her. Leaky building litigation is very much a specialist area for lawyers. It does present particular challenges in terms of the tests for liability, the detail of evidence that needs to be adduced and presented properly to the court and the requirement for expert evaluation of defects, causes of damage and remedial measures. The council has competent representation. Ms Lee is going to find herself at a significant disadvantage. Hers is only the second case I am aware of where a lay person has brought a leaky building claim against a territorial authority.
Exercise of discretion
[44] In my experience, applications for security for costs in leaky building cases are rare. This is the first I have come across where a territorial authority has asked for security for costs from the owner of a dwellinghouse. In many leaky building
cases, plaintiffs may be in dire financial circumstances. Often the discovery of water ingress problems results in them losing equity in their property and they also have cash-flow problems, struggling with servicing a mortgage, the costs of repairs and the costs of litigation. The relative rarity of security for costs applications suggests that, on the whole, defendants recognise that in cases where a building is identified as suffering water ingress problems, there will be enough merits in a plaintiff’s case that their right to be heard in court should prevail over any injustice to defendants, even if any costs order should be barren.
[45] I explored with Ms Divich why the council had applied for security for costs in this case. Ms Divich pointed to Ms Lee’s established impecuniosity, also the absence of the code compliance certificate and the fact that the council would have a strong defence on the merits. That may provide a good explanation why the council applied for security for costs, but it is not by itself conclusive as to the way I should decide the case.
[46] There are good reasons why the courts require security for costs. It comes back to the reason why costs are awarded. They have two roles. The first is the normal financial one, of providing some contribution towards the costs of the successful party. The other is that costs go to moderate the conduct of parties to litigation. The prospect of adverse costs orders discourages irresponsible litigation. A potential risk for defendants is that if plaintiffs are not deterred by costs, they may litigate recklessly.
[47] As to the first aspect, while any defendant who achieves victory at the end of a case but is not compensated by costs will suffer some hardship, the District Council may be in a better financial position than most leaky building defendants. The hardship to it may be less than hardship to defendants in other cases.
[48] As to the other aspect - responsibility in the conduct of litigation - while Ms Lee has been unsuccessful in most of the proceedings (except the arbitration against Rob Littlejohn Builders Ltd), I cannot say that she has been irresponsible. That may be because, at least in my work, I see much litigation that I regard as being conducted entirely irresponsibly. Ms Lee has, even if unsuccessful, tried in good
faith to pursue remedies available at law. I see nothing in the conduct of this case to indicate that she is litigating recklessly. In the balancing exercise, my assessment is that while it would be unfair for the council not to be able to recover costs if it is successful, it would not be a serious injustice to the council. Against that, I have to weigh Ms Lee’s interest in having access to the court to bring a claim, difficult as it may be to run.
[49] I come back to Kós J’s judgment in Highgate on Broadway Ltd v Devine:12
In contrast, affirmative answers to the following enquiries may tend against an order against an impecunious plaintiff: ...
(b) Would ordering security deprive the plaintiff of the capacity to advance a prima facie meritorious claim?
Access to justice is an essential human right. The cost of exercising that right is the payment of costs in the event of failure. The right of a successful defendant to costs in that event is arguably subordinate to the plaintiff’s right to be heard. Strong social policy considerations favour the use of Courts as an accessible forum for the resolution of disputes and grievances of almost all kinds. Only where a clear impression can be formed that the plaintiff’s claim is altogether without merit – so that in the alternative it would be amenable to being struck out – would it be right for security to be ordered where to do so would bring the plaintiff’s claim to a dead halt. In cases where the claim is being seriously misconducted (with undue complexity or expense), security orders short of effective termination of the claim may be appropriate. As the Court of Appeal said in McLachlan, “access to the Courts for a genuine plaintiff is not lightly to be denied”.
[50] Ms Lee is a genuine plaintiff. Any order that Ms Lee should put up security - particularly security of the sort the council is seeking - would effectively bring this proceeding to an end. In the balancing exercise, Ms Lee’s right of access to the court in my view must prevail over the council’s interest in being protected against a fruitless claim and a barren costs order.
[51] I make that assessment on the basis that Ms Lee appears to be conducting this proceeding responsibly. I appreciate that because she does not have legal representation, this case will take more time and resources than with competent
representation. That is a factor in any case where litigants act in person. The council
12 Highgate on Broadway Ltd v Devine, above n 7, at [23].
is entitled to some protection against the irresponsible conduct of litigation. That might happen if Ms Lee were to refuse to comply with directions, delayed in taking steps or ran pointless interlocutory skirmishes or unmeritorious review applications. If developments of that sort were to arise, the council should be free to raise the question of security for costs afresh.
[52] Accordingly, the course I propose to take is not to make any order for security for costs at present but to hold this application over and reserve leave to the council to revive the application if later conduct by Ms Lee in this proceeding shows a need for the council to be protected. Balancing the interests of Ms Lee and the council, I prefer the interests of Ms Lee and I decline to order security at this stage.
Further directions
[53] I now give further directions:
(a) I direct the District Council to file and serve any amended statement of defence by 19 December 2014.
(b)I direct the District Council to file and serve an affidavit of documents by 19 December 2014.
(c) I direct Ms Lee to file and serve an affidavit of documents by 31
January 2015.
(d)The District Council may join third parties without seeking leave, so long as the joinder is made before 9 February 2015.
(e) I direct a further case management conference at 2:00pm on 9
February 2015. The purpose of that conference will be to review discovery by both parties.
[54] I encourage the parties to liaise with each other as to how discovery should be carried out. While the defendant should have no difficulty in complying with these directions, I regard discovery by a lay litigant as something which is extremely
challenging and difficult to achieve. I attach to this judgment a copy of Form G 37 for an affidavit of documents. Ms Lee should also be guided by the council’s affidavit of documents. I encourage Ms Divich to write to Ms Lee and Ms Connor as to the council’s requirements for discovery. I understand that Ms Lee holds approximately 25 cartons of documents relating not only to the building project but also the subsequent litigation. I have no doubt that the council will want to see all of those documents.
[55] Ms Connor has an apartment in central Auckland. It may be that those documents could be made available for inspection at those apartments. Alternatively, Ms Lee and Ms Connor could deliver the documents to Ms Divich’s firm, to allow the documents to be photocopied there. But I encourage co-operation between the parties. If discovery and inspection has been completed by 9 February
2015, I will give further directions at the conference.
[56] I make no order as to costs. Although she has successfully resisted the
council’s application, Ms Lee is not entitled to costs as she does not have a lawyer.
Associate Judge R M Bell
2