LWR Durham Properties Limited (in receivership) v Vero Insurance New Zealand Limited

[2017] NZHC 1437

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-001781 [2017] NZHC 1437

BETWEEN

LWR DURHAM PROPERTIES

LIMITED (IN RECEIVERSHIP) Plaintiff

AND

VERO INSURANCE NEW ZEALAND LIMITED

First Defendant

IAG NEW ZEALAND LIMITED Second Defendant

Hearing:	26 June 2017 (by way of telephone conference)
Counsel:	J E Bayley for Plaintiff C Brick for Defendants
Judgment:	27 June 2017

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      By a judgment dated 18 July 2014  the Court  ordered the plaintiff LWR Durham Properties Limited (In Receivership) (LWR), to provide security for costs in two  tranches,  and  pursuant  to  that  order  the  sum  of  $318,206  has  been  paid. Presently, it is held in the trust account of the solicitors for LWR, Rhodes & Co. That firm has given an undertaking to pay the security monies if so required.  This undertaking was accepted by the Court in a minute dated 19 February 2015.

[2]      LWR  now  wishes  to  give  security by  a  different  means.    It  proposes  a guarantee by Commonwealth Bank in favour of the Registrar of the High Court in the same sum.  The guarantee has been put in place and the Court holds the original. The defendants, Vero Insurance New Zealand Limited (Vero) and IAG New Zealand

Limited (IAG), oppose the means by which security is given being altered as sought.

LWR DURHAM PROPERTIES LTD (IN RECEIVERSHIP) v VERO INSURANCE NEW ZEALAND LTD [2017] NZHC 1437 [27 June 2017]

[3]      Mr Bayley says the intended guarantee is given by a reputable and substantial bank, and is addressed to the Registrar of the High Court.   The guarantee can be called upon by the Registrar of the Court at any time, by the Registrar giving written notice that payment of all or part of the sum is required by the Registrar.   As Mr Bayley puts it, the Court remains the gatekeeper in relation to the security.

[4]      Ms Brick says that she has not been able to locate any case where a New Zealand court has accepted a guarantee from an Australian-based bank, and she notes that as the plaintiff is insolvent and in receivership, this is not just one of a number of possible sources from which to meet an adverse costs award, it is the only one.

[5]      Ms Brick says that it will be inconvenient for Vero and IAG to call on the guarantee on receipt of a favourable costs award.  She refers to her clients needing to take legal advice to determine if the guarantee is satisfactory.   She notes that the guarantee does not specifically refer to this case, so if LWR had, for example, another case in this court in respect of which it was subject to an adverse costs award, it could ask the Registrar to call on this guarantee to meet that award, thereby depleting the funds available for any adverse costs award in the present case.

[6]       I am satisfied that the means of giving security for costs can be varied as sought by LWR for the following reasons.   First, Commonwealth Bank is a large reputable bank.  I have no doubt that it gives guarantees in favour of New Zealand entities as part of its normal trading operations.

[7]      Secondly, I do not accept that any difficulty would be incurred in receiving payment.   If the Court makes a costs award in favour of Vero and IAG, and that award is not met by LWR on demand, Vero and IAG would ask the Registrar, as beneficiary of the guarantee, to call on the guarantee and receive payment, which would then be forwarded to Vero and IAG.   This is a standard application of a guarantee and I see no difficulty in this process being followed.

[8]      Thirdly,  I  do  not  see  any  practical  difficulty  in  the  requirement  in  the guarantee that the Registrar, who is the named beneficiary, make any demand that must be made by a letter in the English language with the Registrar’s signature

authenticated by the Registrar’s banker.  If, in the event of a demand being required, the bank actually required the Registrar to take that step I do not envisage it causing any difficulty or delay.  I also expect that if the bank was provided by the Registrar with a sealed order of this Court with a request for payment, the authority of the sealed order would prevail over any administrative requirement that the Registrar obtain authentication of her signature from the bankers to the Ministry of Justice.

[9]      Fourthly, I have considered the clauses within the guarantee in which the Commonwealth  Bank  advises  that  it  complies  with  a  number  of  local  and international laws and regulations, and that the guarantee is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 Revision.  I think it highly likely that all reputable banks comply with the same local and international laws as those listed in the guarantee (such as anti money laundering legislation, anti terrorism legislation, anti  drug trafficking legislation  and  so  forth).   Whilst the Court  does  not  have available to it the rules I have referred to, I do not consider there is any prospect that they will hold any difficulty for any party in the present case.  What is on offer in this case is a straightforward guarantee by a reputable bank which is in the business of giving guarantees when it is satisfied that it is suitably protected by its client in order to do so.  There are numerous laws which apply to guarantees.  The fact that this particular set of rules has been mentioned in the same document as the guarantee itself makes it clear, in my view, that the bank was aware of these rules and complied with them when it gave the guarantee.

[10]     Finally,  there  is  some  force  in  Ms  Brick’s  argument  that  the  guarantee submitted to the Court does not specifically apply only to an adverse costs award against LWR in this case, as distinct from any other case.  Plainly the guarantee does relate to this case because it is proffered by counsel in support of this application, and because the sum stated is exactly the same sum as the Court required by way of security.  However, out of an abundance of caution I record that the guarantee relates solely to the present proceeding and no other, and I direct that the Registrar will not make demand on this guarantee in respect of any other proceeding.  Nor will she at any point return this guarantee to the bank unless and until any adverse award of costs has been satisfied, unless the Court directs her to do so, nor give written

notification to the bank that the guarantee is no longer required, without an order of this Court having first been obtained.

[11]     I therefore order that instead of the sum held in the trust account of Rhodes & Co, security for costs in this proceeding may be given by LWR providing to the Registrar of the High Court at Christchurch a guarantee from Commonwealth Bank in the form submitted by counsel on the terms contained in this judgment.

[12]     Counsel did not refer to costs.  In my view as LWR has sought a variation to an accepted security position, it should pay the costs of this application.  Relevant steps comprise one memorandum of counsel for Vero and IAG, and a hearing of a half hour duration.  No written submissions were prepared or required, nor were any other documents filed beyond the memorandum I have referred to.  Costs will be for one memorandum and one quarter of a day, on a 2B basis.  Given that LWR is in receivership,  payment  of  costs  is  deferred  until  the  outcome  of  the  substantive

proceeding.

J G Matthews

Associate Judge

Solicitors:

Rhodes & Co, Christchurch
Fee Langston, Auckland