MacDonald v C1 Gloucester Street Limited

[2012] NZHC 1874

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-001531 [2012] NZHC 1874

BETWEEN  RICHARD WILLIAM MACDONALD Plaintiff

ANDC1 GLOUCESTER STREET LIMITED Defendant

Hearing:         26 July 2012 [by telephone] Appearances: H C Matthews for Plaintiff

R G Smedley for Defendant

Judgment:      26 July 2012

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS [as to security for costs]

[1]      On 20 June 2007 the plaintiff agreed to purchase from the defendant two apartment units and associated car parks in a building to be constructed in Gloucester Street, Christchurch.  The purchase price was $2,600,000 inclusive of GST and the specified deposit of $195,000 was paid.   The building construction has been completed.  Title was issued in December 2009.

[2]      The plaintiff did  not settle.   He alleges breaches of the agreement.    He purported to cancel the contract and in July 2010 issued proceedings claiming relief for breach of contract, including an order directing the return of the deposit which is

held in a solicitor’s trust account, as stakeholder.

Solicitors:

White Fox & Jones, PO Box 1353, Christchurch. Email: [email protected]
Anthony Harper Lawyers, PO Box 2646, Christchurch. Email: [email protected]

RICHARD WILLIAM MACDONALD V C1 GLOUCESTER STREET LIMITED HC CHCH CIV-2010-409-

001531 [26 July 2012]

[3]      An  initial  application  for  summary  judgment  did  not  proceed,  and  the defendant issued a counterclaim seeking specific performance of the agreement or damages in the alternative.

[4]      The proceeding is set down for trial for three days of the week commencing Monday, 6 August 2012.  In a pre-trial conference with the trial Judge on 20 July, the defendant conveyed an intention to apply for security for costs.   The Judge indicated that a formal application would not be required, and that the Court would hear the application on Thursday, 26 July 2012 at 9.00 am, by telephone.

[5]      Rule 5.45 of the High Court Rules provides, relevantly, that if a Judge is satisfied on the application of a defendant that a plaintiff is resident out of New Zealand, he or she may make an order giving security for costs.  Further directions may be made in relation to the making of payment or giving other security, and staying the proceeding pending compliance.

[6]      In A S McLachlan Ltd v MEL Network Ltd,[1] the Court of Appeal said:

[1] A S McLachlan Ltd v MEL Network Ltd [2002] 16 PRNZ 747

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 BNZ ([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 the 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.

[7]      The plaintiff lives in Bulgaria.  Although he and his wife are both from New Zealand,  it  is  clear  that  they  are  permanently  resident  in  that  country.    Their residence  in  Bulgaria  was  known  when  the  proceeding  was  issued,  though Mr Smedley informed me that it was not known until recent discussions with counsel

for the plaintiff that his residence is permanent and he has no intention to return to

New Zealand.  It is common ground that the plaintiff does not have any assets in this country, apart from a contingent interest in the deposit referred to above.  There is no statutory reciprocal enforcement of judgments regime between New Zealand and Bulgaria.  It is the defendant’s position that if it is successful it will have significant difficulties enforcing a judgment, and thus an order for costs.  On that basis it is the defendant’s position that an order should be made requiring payment by way of security of a sum which will cover all costs which might be awarded to the defendant on a successful defence of the plaintiff’s claim.

[8]      In my opinion the following factors must be considered.  Firstly, the fact that the plaintiff resides permanently overseas.   It is not an inflexible principle that an order requiring security for costs should normally be made against a plaintiff in that position, without assets in this country.  It is a circumstance to be taken into account. Generally the purpose of ordering security for costs against an overseas plaintiff is to avoid the costs and difficulties associated with enforcement overseas and in the case of a country without an established protocol for enforcement of New Zealand judgments, that cost and difficulty could be substantial.

[9]      Secondly,  although  no  information  was  placed  before  the  Court  on  the financial circumstances of the plaintiff, there is no reason on material before me to form a view that making an order for security for costs would bring hardship to the plaintiff.  The evidence shows that the plaintiff purchased the property in question for $2.6m as an investment and for occasional use as a temporary residence on visits to New Zealand.

[10]     Thirdly, although the defendant faces the plaintiff’s claim, a significant part of the trial will lead to resolution of issues which will be of equal relevance to the counterclaim.   In essence, the plaintiff will succeed on both his claim, and in defending the counterclaim, if the defendant breached the contract.  Conversely the defendant will succeed in defending the plaintiff’s claim, and on its counterclaim, if the plaintiff was in breach.   Broadly, the facts to be canvassed at trial and legal principles to be considered are equally relevant to both.  It is not apparent that trial duration  will  be  affected  by  the  counterclaim  as  quantification  of  damages,  an

alternative  remedy  sought  by  the  defendant  on  the  counterclaim,  is  evidently reserved for later consideration.

[11]     Fourthly, this application has been brought very late in the piece, virtually on the brink of trial.  That said, it is not suggested that this application has been brought to embarrass or prejudice the plaintiff in any way, that the making of an order would prevent  the  plaintiff  from  proceeding,  or  that  the  application  is  in  any  way oppressive.

[12]     Fifthly, there are no assets in this country from which the defendant might recover costs if successful.  Mr Matthews argued that the deposit could be used, but if the defendant succeeds in defending the plaintiff’s claim, the plaintiff will be in breach of the contract and it would seem that the deposit is then forfeited to the defendant under cl 9 of the contract.   There does not seem any reason why that contractual right of forfeiture should be diminished by an expectation that an adverse costs award should be met from the same fund.

[13]     Having weighed up all these factors, in my opinion an order should be made directing the plaintiff to give security for costs to the defendant.  The principal factor weighing against the making of an order is the fourth factor to which I have referred. In considering this factor I have taken into account that there was no suggestion from the plaintiff’s counsel that an order could not be met or would cause embarrassment to, or practical or financial difficulties for, the plaintiff.

[14]     Mr Smedley submitted that security should be ordered to be paid in a sum which roughly equates the amount which might be ordered against the plaintiff on a Category 2B basis.  He put the figure at $41,000.  Mr Matthews submitted that if security for costs were to be awarded the sum could only be assessed prospectively for work remaining to be done by way of provisions of briefs, trial preparation and the conduct of the trial itself, which on the same scale is approximately $23,000.

[15]     There is no general rule preventing an order directing security for costs in respect of interlocutory steps which have already been taken.   It is a factor to be taken into account in exercise of the Court’s discretion.

[16]     Security for the full amount which might be recovered by the defendant should be tempered by the lateness of the application and the attendant need for the plaintiff to arrange funds in short order.

[17]     Weighing up all factors, I direct that the plaintiff is to give security for costs in the sum of $25,000.  Counsel are to confer on how this order is to be complied with.  On the face of it there does not appear to be any reason why the sum should not  be  paid  to,  and  held  by,  the  stakeholder  who  has  custody  of  the  deposit. However, I reserve leave to counsel to apply by memoranda for further directions if agreement cannot be reached.

[18]     The security is to be given no later than 5.00 pm on Wednesday, 1st  August

2012.   I refrain at present from directing that the proceeding will otherwise be stayed, but reserve the point as this may be a consequence if this order is not complied with.

[19]     Costs of this application are reserved.

J G Matthews

Associate Judge