Mawhinney v Auckland Council
[2014] NZHC 3207
•15 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-004906 [2014] NZHC 3207
IN THE MATTER of the Resource Management Act 1991 BETWEEN
PETER WILLIAM MAWHINNEY as trustee of the WAITAKERE FOREST LAND TRUST
First Plaintiff
PETER WILLIAM MAWHINNEY as trustee of the FOREST TRUST Second Plaintiff
PETER WILLIAM MAWHINNEY as trustee in the SIXTY-SIX AUCKLAND TRUST
Third Plaintiff
AND
AUCKLAND COUNCIL Defendant
Hearing: 3 December 2014 Appearances:
Plaintiff in person
N R Hall for DefendantJudgment:
15 December 2014
JUDGMENT OF ASHER J
This judgment was delivered by me on Monday, 15 December 2014 at 11am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitor: Simpson Grierson, Auckland. Copy to: Plaintiff.
MAWHINNEY v AUCKLAND COUNCIL [2014] NZHC 3207 [15 December 2014]
[1] The Auckland Council seeks security for costs in this proceeding from the three plaintiffs. Given that Mr Mawhinney features as a trustee for each of the plaintiff trusts, I will refer to the plaintiffs collectively as the Mawhinney trusts.
[2] The current pleading is the third amended statement of claim dated December
2012 and filed on 8 January 2013. It pleads breaches of statutory duty on the part of the Council and claims judgment for considerable sums of damages for that breach and in the alternative an order of mandamus. The subject matter is the Mawhinney trusts’ various applications under the Resource Management Act 1991 (“RMA”) for or relating to the proposed subdivision of a 51.486 hectare block of land in Waitakere (“the land”). The applications were to the Council. Mr Mawhinney alleges a number of errors on the part of the Council in processing and considering the trusts’ applications and requests.
[3] The Mawhinney trusts initially sought summary judgment. The defendant sought to strike out the claim. In a judgment of 11 February 2013, Duffy J dismissed the Mawhinney trusts’ applications for summary judgment in their entirety and struck out those parts of the statement of claim that related to claims for damages for actionable breach of statutory duty.
[4] No steps have been taken to challenge the decision of Duffy J for over a year and Mr Mawhinney following her judgment took no steps to advance the case further. He has, however, now signalled that he wishes to continue with the proceeding.
[5] Rule 5.45 of the High Court Rules relates to security for costs. It sets out a two-stage approach. The Court first must be satisfied that there is reason to believe that the plaintiff will not be able to meet an award of costs if unsuccessful in the claim. Second, if the Court is so satisfied, it then has a discretion to order security in
whatever sum it considers just.1
1 McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13].
The initial question – is there reason to believe the Mawhinney trusts unable to pay costs?
[6] In approaching the threshold test, the defendant does not have to prove conclusively that the plaintiffs are impecunious. However, there must be credible evidence of circumstances from which it may reasonably be inferred that the plaintiffs will be unable to pay the costs.2 The Court will give due weight to a plaintiffs assertion that it will be able to meet a costs award, but this is not necessarily decisive.3 A broader overall assessment is required having regard to
commercial realities and the nature of the proceeding.4
h
2 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519.
[7]
the t
I no resho
(a)
te the following surrounding facts that are relevant to the assessment of ld issue:
Mr Mawhinney was adjudicated bankrupt, and discharged from
bankruptcy on 23 September 2013. (b)
Mr Mawhinney’s only income appears to be that of a superannuitant.
(c)
Mr Mawhinney has failed to pay costs of $427,139 awarded by the
Environment Court to the Council in different proceedings (relating to the same land).5 (d)
The Council has commenced bankruptcy proceedings against
Mr Mawhinney to recover those costs. Mr Mawhinney has sought to stay those proceedings. One of the bases put forward is that “there is nothing to gain” from his adjudication due to his lack of assets. He has also sought judicial review of the Environment Court’s costs decision. (e)
Mr Mawhinney has stated in the submissions that he filed in support
of an application to stay the bankruptcy proceeding: 3 Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430 (HC) at 436.
4 Hamilton v Papakura District Council (1997) 11 PRNZ 333 (HC) at 335.
5 Mawhinney v Auckland Council [2012] NZEnvC 117.
The [Auckland Council] has nothing to gain from [Mr Mawhinney] being adjudicated bankrupt as follows, and therefore nothing to lose by the interim orders sought.
(f) Mr Mawhinney has either personally or in his capacity as a trustee failed to pay three orders of security for costs:
(i) Order for security for costs in the sum of $3,500 by
16 November 2012.6
(ii)Order for security for costs in the sum of $1,990 by not later than 21 May 2013.7
(iii) Order for security for costs in the sum of $1,990 by 6 August
2013.8
(g) Mr Mawhinney either personally or in his capacity as a trustee owes
$11,462 to the Council for outstanding fees and charges.
(h)Another entity related to Mr Mawhinney in which he appears to control, Forest Trustee Ltd owes $96,059.58 as rates to the Council.
[8] Mr Mawhinney in his submissions emphasised that he had issued the proceedings as a trustee, and as a trustee he has a right to be indemnified from the trust. However, on the face of it, accepting that the trust owns the land, there is no equity in the land. The latest Government valuation which Mr Mawhinney relied on, shows that the property is worth $5,455,000. The mortgages on the property, not including accumulated interest, are as follows:
(a) Nags Head Horse Hotel Ltd, first mortgage : $420,000
6 Mawhinney v Auckland Council [2012] NZHC 1943.
7 See minute of Ellis J in Mawhinney v Auckland Council HC Auckland CIV-2013-404-1895,
7 May 2013.
8 See minute of Katz J in Mawhinney v Auckland Council HC Auckland CIV-2013-404-3384,
23 July 2013.
(b)Zebra Crossings Trading Ltd and Peter William Mawhinney mortgage : $5,000,000
[9] The total indebtedness therefore roughly equates to the value of the land. On the face of these figures there is no significant equity.
[10] The Nags Head Horse Hotel Ltd mortgage is an arm’s length mortgage and must remain a first mortgage. However, Mr Mawhinney submitted that the second mortgage could be disregarded for the purposes of this exercise as he controls it. He suggested that if security for costs were ordered, that a second mortgage could be provided with Zebra Crossings Trading Ltd giving it priority.
[11] The difficulty with this submission is that Mr Mawhinney is not legally in control of the mortgage Zebra Crossings Trading Ltd. He is a director of that company, but so is his brother Anthony Milton Mawhinney. The main shareholder in that company is his brother. There is no affidavit or any other document binding them to take any action in relation to this proceeding at all.
[12] Indeed, Mr Mawhinney is not the sole owner of the land. The land is also owned by Waitakere Forest Trust Ltd. There is no Companies Office printout relating to that company. However, Mr Mawhinney indicated that in addition to himself, one of the shareholders is a company Sixty-six Auckland Ltd and in that again his son is a shareholder. The beneficiaries of the Waitakere Forest Land Trust are, I was informed, his son and his niece. It cannot be said that Mr Mawhinney has control of the other part owner.
[13] It is far from clear therefore that Mr Mawhinney would be able to control any actions in relation to either the land or the second mortgage. Standing back, Mr Mawhinney is a recently discharged bankrupt, and now faces further bankruptcy proceedings that are based on a judgment of the Environment Court. He has significant debts that are in his name and has regularly failed to pay security for costs orders.
[14] The trust that he claims will indemnify him is not necessarily controlled by him, and it is not clear that it will use its assets to support him. Further, the beneficiaries might be well able to oppose any application for indemnity by Mr Mawhinney in respect of costs on the basis that Mr Mawhinney had acted improperly and indeed recklessly in incurring the expenses.9
[15] I conclude that there is both direct and indirect evidence indicating that Mr Mawhinney will be unable to meet an award of costs if unsuccessful in the claim. Mr Mawhinney’s recent history shows the regular non-payment of debt. The only asset in which he may have some interest (although just as a trustee) is the land, and the complexities that surround the ownership and mortgages of that land, and his lack of any beneficial interest in the land, mean that its existence does not change the assessment.
[16] Mr Mawhinney argues a number of points to say that he is not impecunious. He submits that the second plaintiff is owed more than $600,000 by Inland Revenue in the form of a tax return and that this amount is more than sufficient to cover an award of costs against the plaintiffs. He also submits that the third plaintiff holds a lease and forestry rights and that the value of the forestry right is in excess of the sum that the defendant seeks for security for costs. These arguments do not go a long way in supporting Mr Mawhinney’s case that he is able to pay costs. The prospect of a tax return is uncertain. The issue has already been litigated in this
Court.10 In regards to the forestry right, the crop would need to be harvested before
a value is realised and there is no evidence that this could be done within a reasonable time.
[17] There being no evidence of any cash or readily realisable asset available to meet costs, I am satisfied therefore that the threshold test of him being unable to pay
costs has been met.
9 Re O’Donohue [1998] 1 NZLR 116 (HC) at 121.
10 The litigation history is set out in Associate Judge Christiansen’s decision in Mawhinney v
Commissioner of Inland Revenue, above n 14.
Exercise of the discretion
[18] The Court has an overriding discretion under r 5.45 as to whether to order security for costs. It must balance the interests of the plaintiff and the defendant. It should not lightly prevent a plaintiff from pursuing a claim. On the other hand defendants must be protected from being drawn into unjustified litigation, particularly when it is overcomplicated and unnecessarily protracted.11 The merits
and the prospects of success are relevant to the exercise of the discretion.12 The
Courts will be more reluctant to make an order for security for costs that may prevent the case from proceeding when that claim appears to have real merit and substance.
[19] I bear in mind that a causal link between the conduct for which remedies are claimed and the plaintiff’s impecuniosity can be a factor which weighs against awarding security for costs. That is the position that may apply here as Mr Mawhinney claims that at least in part the Council’s actions are preventing him from realising the value of the land. However, this is just a factor and the merits assessment will be particularly relevant.
[20] Both parties have filed extensive submissions by way of submissions in a schedule as to the merits. They are complex and I do not propose to go into the detail. It is significant that in a judgment of 11 February 2013,13 Duffy J dismissed an application by Mr Mawhinney for summary judgment in these proceedings in its entirety and struck out parts of his statement of claim relating to the claim for damages for actionable breach of statutory duty. This decision took much out of the
claim, leaving a claim for mandamus. However, in its existing form the statement of claim does not make sense and it needs to be amended. It is significant that Mr Mawhinney has taken no steps to amend that pleading even though in excess of
21 months has gone by.
11 McLachlan v MEL Network Ltd, above n 1, at [16].
12 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC) at 461.
13 Mawhinney v Auckland Council [2013] NZHC 159, (2013) 17 ELRNZ 150.
[21] The judgment records that insufficient time was available for the hearing of the remainder of the Council’s strike out application.14 The balance of the application is therefore adjourned for future determination. I note that Mr Mawhinney and the various trusts have already challenged the validity of the Council’s RMA actions in other forums, including the Environment Court and the Court of Appeal without success. In each case his claim has not been upheld.
[22] It is significant that Mr Mawhinney is choosing to go outside the prescribed RMA procedures in this proceeding, and to base his claim on breach of statutory duty and, since part of it was struck out, only on one of the ancient prerogative writs, the writ of mandamus.
[23] On its face, given the history and the unusual nature of the proceeding, Mr Mawhinney’s claim faces real difficulties and his chances of success would not appear to be strong. Further, the Council’s submission that Mr Mawhinney is a serial litigant has some force. He repeatedly challenges decisions that are adverse to him, and repeatedly seeks to re-litigate the same issues by expressing those issues in different ways. I do not pre-judge the ultimate determination of the proceeding, should it go that far, but it is not possible to discern from the jumbled facts that Mr Mawhinney is putting forward any meritorious claim that the Council has caused his impecuniosity.
[24] I note that Mr Mawhinney has recently been ordered to pay security for costs in the decision of Associate Judge Christiansen in Mawhinney v Commissioner of Inland Revenue.15 Although that proceeding still arises from dealings that relate to the land, the nature of the claim is different. Associate Judge Christiansen in that proceeding noted that Mr Mawhinney had been unable to pay filing fees, and this was inconsistent with a claim that he was not impecunious. He considered on an
overview Mr Mawhinney should pay security for costs in the sum of $40,000 in that
proceeding.
14 At [2].
15 Mawhinney v Commissioner of Inland Revenue [2014] NZHC 1554, (20114) 26 NZTC 21-080.
[25]
order
I a for se
(a)
m satisfied in the exercise of my discretion that it is appropriate to make an curity for costs in this case. I summarise my key impressions as follows:
There is a strong evidential basis for a conclusion that Mr Mawhinney
is unable to pay his debts. (b)
The overall impression that is to be gained from Mr Mawhinney’s
repeated refusals to pay sums that should be paid, is that Mr Mawhinney will in any event do all he can to avoid paying costs. The words in r 5.45(1)(B) are “will be unable to pay” and refer to people who are financially unable to pay and not those who are just
unwilling to pay.16 However, the options for payment involving the
Trusts and third parties have to be seen in the light of his history, which indicates that no payment would be forthcoming. (c)
This order for security for costs may not, if Mr Mawhinney was
prepared to really expose himself financially, prove impossible for him to meet. There is no doubt that if the second mortgagee co- operated, there is equity or the possibility of a second mortgage on the land. So if he really wanted to continue, and was prepared to be at risk for costs, he might be able to find security (although history indicates he will not). (d)
This litigation has all the hallmarks of litigation that the plaintiffs are
determined to continue no matter what setbacks are suffered, and if necessary, in defiance of repeated judicial indications that the case lacks merit. (e)
There is no meritorious claim put forward that the Council had caused
Mr Mawhinney’s impecuniosity.
16 Highgate on Broadway Ltd v Devine [2012] NZHC 2288 at [8].
A second mortgage as security for costs?
[26] Mr Mawhinney did indicate that a possible outcome could be that if security for costs were ordered it could be secured by way of a second mortgage over the land. He indicated that the trusts might well co-operate in accepting that the mortgage for security for costs had priority over the second mortgage.
[27] I am not prepared to make an order that security for costs be provided in that way. The history of Mr Mawhinney’s dealings which I have set out, shows that he does not willingly pay costs in any circumstances. There is nothing to indicate that the second mortgagee would co-operate, save for his oral assurance. As I have set out, the other parties have not sworn affidavits.
[28] More importantly, I accept Ms Hall’s submission that there must be a real likelihood of difficulties should the Council obtain an order for costs and seek to enforce a mortgage securing costs. It could be easily seen that Mr Mawhinney would seek to oppose any mortgagee sale. Indeed, it can be assumed on his past record that every effort would be made to resist any payment through a second mortgage.
Result
[29] I conclude therefore that security for costs should be ordered. Given that the scale costs are likely to exceed $50,000, not including disbursements, the sum sought of $50,000 appears to be reasonable, particularly given that it will include disbursements.
[30] I order therefore that these proceedings are stayed pending the sum of
$50,000 being paid by Peter William Mawhinney, or on his behalf, to the Registrar of the High Court at Auckland as security for costs.
……………………………..
Asher J
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