Mahon v Edney

[2017] NZHC 2092

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2017-404-000993

[2017] NZHC 2092

BETWEEN

NEVILLE CHRISTOPHER MAHON

Plaintiff

AND

TIMOTHY LAIRD EDNEY

First Defendant

THE STATION AT WAITIRI LIMITED

Second Defendant

Hearing:

30 August 2017

Appearances:

A Glenie for the Plaintiff/Respondent

D Chisholm QC/M Lenihan for the Defendants/Applicants

Judgment:

30 August 2017

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

N C MAHON v T L EDNEY AND THE STATION AT WAITIRI LIMITED [2017] NZHC 2092 [30 August 2017]

The application for security for costs

[1]                 The defendants seek an order that the plaintiff (Mr Mahon) pay security for costs upon his claim of an interest in the Park Street properties land presently held by the second defendant (Waitiri) which is a company controlled by the first defendant (Mr Edney).

The plaintiff’s claim

[2]                 Mr Mahon seeks orders directing Waitiri to transfer land to him for the price he says was agreed with Mr Edney in December 2015.

[3]                 The proceeding has a five day trial scheduled in 2018. The defendants have calculated 2B costs of $53,074 excluding expert witness fees. Overall estimates including expert fees range from $80,000 to $100,000. It is clear the present application for security was filed promptly after the proceeding was served.

Background

[4]                 Issues relate to Mr Mahon’s claims of having negotiated the purchase of the Park Street properties in June 2015 for $5m. Mr Mahon says in mid-December 2015 he and Mr Edney met and reached an understanding about those properties by which Mr Mahon was to nominate a special purpose vehicle (SPV) associated with Mr Edney to settle the purchase; the directors of the SPV were to be Mr Edney and one of Mr Mahon’s associates and Mr Edney was then to “warehouse” the Park Street properties for a period, and when requested by Mr Mahon, Mr Edney was to transfer those to Mr Mahon in exchange for a fee.

[5]                 Mr Edney paid for the purchase deposit. Mr Mahon says Mr Edney incorporated a SPV but in January 2016, Mr Mahon was informed by Mr Edney, that the property would be transferred to Waitiri, a company of which Mr Edney was a director.

[6]                 Mr Mahon says he told Mr Edney in early February 2016 he was ready to acquire the land. Mr Edney refused to transfer the land to him even though, in Mr Mahon’s view, Mr Edney had been simply “warehousing” the land for Mr Mahon.

[7]                 Mr Mahon says they met on 28 May 2016 to discuss arrangements for the transfer. He said initially Mr Edney was agreeable to receiving a $200,000 fee for  his warehousing support but a few hours later he said Mr Edney resiled, seeking more money.

[8]                 Mr Mahon then lodged a caveat against the property. Mr Edney applied for the caveat to be removed and on 4 April 2017 the High Court dismissed Mr Mahon’s application to sustain his caveat. Mr Mahon has appealed that decision. That appeal was heard on 26 July 2017. A decision is still awaited.

[9]                 Mr Edney’s claim for security addresses issues of prospects of success and claims of Mr Mahon’s impecuniosity. Mr Mahon is hopeful that the awaited  Court of Appeal decision will enhance prospects of an endorsement of his claims of an interest in the property. For present purposes his proceeding pleads four causes of action including contract and constructive trust. The court defers to the background summary provided by Associate Judge Bell by his judgment in declining Mr Mahon’s claims of a caveatable interest.

[10]              Mr Chisholm submits Mr Mahon’s claims of a binding oral agreement for Mr Edney to transfer the property to him, was only made 12 months after Mr Mahon claims such an agreement was reached. Further, that there is nothing in writing to sustain that claim; that there is no written evidence supporting, nor of any claim of his having arranged finance in that regard.

[11]              It is acknowledged there is evidence of discussion regarding arrangement options, but evidence of a binding agreement is unclear; and the evidence of email exchanges suggests different transactional outcomes. Mr Edney states that Mr Mahon had to show an ability to buy the properties before he would negotiate a fee to transfer those.

[12]              Mr Mahon’s claims of a constructive trust concerning the property are rejected by Mr Edney. Mr Edney claims that Mr Mahon was never in a position to pay the deposit let alone to settle the purchase of the property in question.

[13]              It is Mr Edney’s position that Mr Mahon has provided insufficient evidence  to show that he can meet costs if he was unsuccessful in his proceeding. Mr Edney has deposed to claims of financial difficulties that Mr Mahon faces in relation to other property purchase developments. Mr Edney says Mr Mahon is liable for a sum of about $2.2m in respect of a Beach Road project, and concerning a Coronation Gardens development, he says there may be a multimillion dollar shortfall on the sale of the property for which Mr Mahon is liable as a guarantor.

[14]              Regarding the claim of a debt in relation to the Beach Road property Mr Mahon says he believes Mr Edney is in fact liable to him. Regarding the Coronation Gardens property he says he believes there is a serious buyer preparing to purchase the property at a value that will create a multimillion dollar surplus.

[15]              Regarding the subject Park Street property Mr Mahon says he did not seek to involve Mr Edney ‘out of desperation’ but did so because the two men had a long history of working together on property developments.

[16]              Mr Mahon says he is ready, willing and able to complete the purchase of the Park Street property. He has however provided no acceptable evidence of his ability to do so. Mr Mahon says he has “substantially more than sufficient net assets to  meet the costs award” if unsuccessful. There is insufficient evidence provided at this time to support that claim.

[17]              Regarding his unwillingness to disclose details of his financial background, Mr Mahon responds it would be inappropriate for that information to be made available to Mr Edney “who could exploit that information for commercial ends”.

Considerations

[18]              By these applications the court usually needs to make some assessment of the merits of the case in dispute. In the High Court it was held that Mr Mahon had not made out a reasonable arguable case for his claim of an interest. Associate Judge Bell commented that Mr Mahon’s claims were not commercially realistic.  Mr Mahon has appealed that decision. The appealed decision is awaited. Any further assessment of the merits is inappropriate meantime.

[19]              Regarding his ability to pay security, much of that Mr Mahon claims, rests on positive outcomes in situations where there can be no certainty in that regard.

[20]              The court does not have sufficient evidence to persuade it to accept that Mr Mahon can pay costs if this proceeding was unsuccessful. It is a reasonable  inference that he involved Mr Edney in his purchase of the Park Street properties because Mr Mahon was not able, on his own, to complete the purchase of those. Mr Mahon does not want to provide details of his financial circumstances because he suggests Mr Edney might use that to Mr Mahon’s disadvantage. Those concerns could have been addressed by appropriate disclosure limitations. The fact is Mr Mahon has provided no evidence at all of his present financial ability to pay costs, if his proceeding is unsuccessful.

[21]              Even if Mr Mahon should convince the Court of Appeal that there is an arguable basis to sustain a claim of a caveatable interest, Mr Mahon remains short of proving the existence of that warehousing agreement he says supports claims that Mr Edney should transfer the property to him. In support of that claim he will have to prove that he was financially able to purchase the properties. He has not done this.

Conclusion

[22]This is a proper case for fixing security for costs.

[23]              The court believes the figure of $60,000 is appropriate and that should be paid into court as to:

(a)$20,000 within 15 working days of the issue of this judgment; and

(b)$40,000 at least 10 working days prior to the close of pleadings date.

[24]In default of the first payment, the proceeding will be stayed.

[25]In default of the second payment the proceeding will be struck out.

[26]              Mr Edney is awarded costs upon this application on a 2B basis together with disbursements, approved by the Registrar.

Associate Judge Christiansen