Mawhinney v Environment Court
[2016] NZHC 20
•25 January 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2503 [2016] NZHC 20
UNDER the Judicature Amendment Act 1972 BETWEEN
PETER WILLIAM MAWHINNEY
Applicant
AND
ENVIRONMENT COURT First Respondent AUCKLAND COUNCIL
Second Respondent
Hearing: 3 December 2015 Counsel:
Applicant in person
No appearance for first respondent
P Moodley for second respondentJudgment:
25 January 2016
JUDGMENT OF KATZ J [Security for costs]
This judgment was delivered by me on 25 January 2016 at 3:30pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Crown Law, Wellington
Brookfields Lawyers, Auckland
Copy to: Applicant
MAWHINNEY v ENVIRONMENT COURT [2016] NZHC 20 [25 January 2016]
Introduction
[1] Peter Mawhinney has applied to judicially review a decision of the Environment Court ordering him to pay costs of $427,139.00 to the second respondent, the Auckland Council (“Costs Decision”).1 The Council seeks an order that Mr Mawhinney provide security for costs, in the event that his application for judicial review is unsuccessful.2
[2] The Court’s power to order security for costs is set out in r 5.45 of the High Court Rules. Rule 5.45 requires a two stage approach. First, as a threshold requirement, the Court must be satisfied that there is reason to believe that a plaintiff will not be able to meet an award of costs if unsuccessful in the claim. Second, if the Court is so satisfied, then the Court then has discretion to order security in whatever sum it considers just.3
[3] I will consider each issue in turn, after outlining the key aspects of the relevant background.
Background
[4] The Environment Court proceedings which resulted in the Costs Decision have a lengthy history, which has been summarised, at least in part, in a number of previous court decisions.4 The original proceedings commenced in 1998 when Mr Mawhinney lodged a reference in respect of a proposed plan. The first Environment Court hearings took place in 2002 and 2003. There have been further hearings in
2006, 2007 and 2010.
[5] On 22 July 2010, Mr Mawhinney was adjudicated bankrupt. While Mr Mawhinney was bankrupt, the Environment Court issued its final decision regarding the 1998 reference. In that decision, issued on 25 November 2010, the Environment
Court found for the Council. On 26 October 2011, the High Court upheld the
1 Mawhinney v Auckland Council [2012] NZEnvC 117.
2 The first respondent abides the decision of the Court.
3 McLachlan v MEL Network Limited (2002) 16 PRNZ 747 (CA) at [13].
4 See for example Mawhinney v Auckland Council (2011) 16 ELRNZ 608 (HC).
Environment Court’s decision and dismissed Mr Mawhinney’s appeal.5 The
Environment Court then delivered its Costs Decision.
[6] Mr Mawhinney was discharged from his 2010 bankruptcy on 24 September
2013. He was adjudicated bankrupt again, however, on 24 February 2015, as a result of his failure to pay the costs awarded against him in the Costs Decision. He remains bankrupt.
[7] Mr Mawhinney has previously filed a notice of appeal against the Costs Decision in this Court. Ellis J ordered him to pay security for costs in respect of that appeal in the sum of $995.00.6 Mr Mawhinney was bankrupt at the time and accordingly did not pay the required security. His appeal was deemed to be abandoned as a result.
[8] Mr Mawhinney then filed these judicial review proceedings. He also sought interim relief under s 8 of the Judicature Amendment Act 1972 to restrain the Council from taking any action to enforce the Costs Decision until these proceedings were determined. That application was refused by Wylie J on 18 November 2014.7
Is there reason to believe that Mr Mawhinney will be unable to pay costs?
[9] I now turn to consider the first key issue. Is there reason to believe that Mr Mawhinney will be unable to pay costs if he is unsuccessful in these proceedings?
[10] Although there is some lack of clarity in the pleadings, Ellis J found in an earlier interlocutory judgment in these proceedings that the Costs Decision was made against Mr Mawhinney in his capacity as the trustee of the Waitakere Forest Land Trust (“Waitakere Trust”), as it was in that capacity that he participated in the proceedings in the Environment Court. In light of that decision the Council accepts that these proceedings have been brought in a trustee capacity, despite some
indications in the pleading to the contrary.
5 Mawhinney v Auckland Council, above n 3.
6 Minute of Ellis J in Mawhinney v Auckland Council HC Auckland CIV-2010-404-0063, 7
August 2012.
7 Mawhinney v Environment Court [2014] NZHC 2872.
[11] The key issue therefore is whether Mr Mawhinney, in his trustee capacity, will be able to meet an award of costs if he is unsuccessful in these proceedings. The main trust asset is the property at 131-149 Anzac Valley Road (“Property”), which was the subject of the Environment Court proceedings. Mr Mawhinney and the Waitakere Trust are the registered proprietors of the Property. Mr Mawhinney says that both those entities hold the land as trustees for the Waitakere Trust.
[12] The Council must point to credible evidence as to circumstances from which it may reasonably be inferred that there will be insufficient trust assets to meet the costs of these proceedings, if Mr Mawhinney is unsuccessful. A broad overall assessment is required, having regard to commercial realities and the nature of the proceeding.8
[13] The ability of various trusts apparently associated with the Property (“Mawhinney Trusts”) to meet an award of costs was considered in some detail by Asher J in a decision delivered on 15 December 2014, in related proceedings.9 His Honour noted that the only asset in which the Mawhinnney Trusts appear to have an interest is the Property. He concluded, however, that there was no equity in the Property. He further observed that his overall impression from Mr Mawhinney’s
repeated refusals to pay sums that should be paid was that Mr Mawhinney would do all he could to avoid paying costs and that any options for payment involving the trusts should be seen in light of that history. Mr Mawhinney was ordered to pay security for costs in the sum of $50,000.
[14] Further relevant information for present purposes includes that:
(a) Mr Mawhinney and/or the Waitakere Trust have failed to pay the costs of $427,139 awarded by the Environment Court in the Costs Decision. There has been no stay of execution of the Costs Decision.
There accordingly appears to be no reason why the Official Assignee
8 Hamilton v Papakura District Court (1997) 11 PRNZ 333 (HC) at 335.
cannot pursue Mr Mawhinney’s claim for indemnity from the
Waitakere Trust in respect of that costs award.10
(b)Mr Mawhinney (who is currently bankrupt, for the second time) has either personally or in his capacity as a trustee failed to pay a number of court orders of security for costs:
(i) Order for security for costs in the sum of $3,500, payable by
16 November 2012.11 (Appeal dismissed due to failure to provide security).
(ii) Order for security for costs in the sum of $1,990 payable by 21
May 2013.12 (Appeal dismissed due to failure to provide security).
(iii) Order for security for costs in the sum of $1,990 payable by 6
August 2013.13 (Appeal dismissed due to failure to provide security).
(c) In a proceeding involving a different party, by a decision dated 4 July
2014, the High Court ordered Mr Mawhinney pay security for costs of
$40,000.00.14 Those costs have not been paid.
(d) In another proceeding, by decision dated 15 December 2014, the High
Court ordered Mr Mawhinney pay security for costs of $50,000.00.15
Those costs have not been paid.
(e) Mr Mawhinney either personally or in his capacity as a trustee owes
$11,462 to the Council for outstanding fees and charges.
10 Mawhinney v Environment Court [2015] NZHC 1663.
11 Mawhinney v Auckland Council [2012] NZHC 1943.
12 Minute of Ellis J in Mawhinney v Auckland Council HC Auckland CIV-2013-404-1895, 7 May
2013.
13 Minute of Katz J in Mawhinney v Auckland Council HC Auckland CIV-2013-404-3384, 23 July
2013.
14 Mawhinney v Commissioner of Inland Revenue [2014] NZHC 1554, (2014) 26 NZTC 21-080.
(f) Forest Trust Limited, the former trustee of the Waitakere Trust, was put into liquidation on 13 March 2015 following its failure to pay outstanding rates of $96,059.58 in respect of the Property. The Official Assignee was appointed as liquidator and will likely be entitled to exercise the trustee’s right of indemnity against the Trust’s assets in respect of the outstanding rates, which now stand at
$118,129.65. (The last rates payment was made in February 2008).
(g)On 10 March 2015 Mr Mawhinney, in his capacity as trustee, was ordered to pay an additional $18,706 to the Council.16 That sum has not been paid.
[15] The basis for Mr Mawhinney’s opposition to this application is essentially that circumstances have changed since Asher J’s decision of 15 December 2014. As a result, it would now be possible for him to meet a costs award out of the assets of the Waitakere Trust. In particular, at the time of Asher J’s decision the Waitakere Trust had no equity in the Property, because mortgages had been registered against the Property that exceeded its Council valuation of $5,445,000. In particular, there is a first mortgage (a vendor mortgage) registered against the Property in favour of Nags Head Horse Hotel Limited. The Mawhinney Trusts appear to have been unable to pay either principal or interest in respect of that mortgage. Including accumulated interest, the amount owing is likely to currently be well in excess of $1 million. The priority amount is $840,000.
[16] In addition, at the time of Asher J’s decision, there was a second mortgage to
66 Auckland Limited (a company associated with Mr Mawhinney) in the amount of
$5 million (excluding any accumulated interest).
[17] Since Asher J’s decision, however, Mr Mawhinney has procured the registered proprietors of the Property (being trustees of the Waitakere Trust) to grant themselves a second mortgage, which has priority over the mortgage to 66 Auckland
Limited, in the sum of $200,000. Mr Mawhinney submits that, as a result, the
16 Costs order of Duffy J in Mawhinney v Auckland Council HC Auckland CIV-2012-404-4906, 10
March 2015.
Waitakere Trust now has in effect, $200,000 equity in the Property. This, he says, could be used to meet any costs awarded against him (as trustee) in these proceedings.
[18] In my view this submission is flawed in a number of respects. As I have noted above, a broad overall assessment is required, having regard to commercial realities and the nature of the proceeding. The prospects of the Waitakere Trust’s
$200,000 equity in the Property being available to meet any costs award in these proceedings are, in my view, exceedingly remote.
[19] First, the Waitakere Trust has no other available assets and its equity in the Property would only become available if the Property were sold. The “equity” is not therefore readily available. The history of these proceedings indicates that any attempts by the Council to force a sale of the Property would be strenuously opposed.
[20] In the event that the Property was ultimately sold, the Council would be an unsecured creditor, in circumstances where the Trust’s debts already far exceed its assets (being its $200,000 equity in the Property). Those debts include the costs of
$427,139 awarded by the Environment Court in the Costs Decision and the
$118,129.65 owing in respect of rates on the Property. Indeed it may well be that steps are taken to enforce payment of those debts well before these proceedings are finally resolved. Further, at least a portion of the debt to 66 Auckland Limited is likely to be unsecured and could also give rise to a competing claim on the $200,000 “equity” in the Property.
[21] The observations of Environment Court Judge Dwyer in respect of the Council’s recent successful application for security for costs in the Environment Court proceedings, appear to be equally apt in the present context.17 Judge Dwyer ordered Mr Mawhinney and the Trust to provide security for costs in the sum of
$7,000 and stayed the Environment Court proceedings until such time as those security for costs were paid. In reaching his decision, His Honour made the following observations:
[22] … What becomes apparent from consideration of the affairs of the applicants as they have been disclosed to the Court, is that the ownership of the Property is intermingled with a number of other entities, including companies, trusts and individuals (including Mr Mawhinney personally) in a complex mix of financial arrangements involving unpaid debts, disputed debts, mortgages, priorities, bankruptcies, insolvencies and numerous Court proceedings. One example of these dealings can be found when considering the decision of Associate Judge Christiansen in Mawhinney v Nags Head Horse Hotel Limited [2013] NZHC 1530
[23] Absolutely determining the destination of proceeds of sale of the Property in the event of any sale taking place (and there was no evidence before the Court that one is imminent) promises to be an exercise testing skills of any forensic accountant, legal practitioner or potentially interested parties such as the Official Assignee. This situation requires the utmost care in considering any information which comes before the Court regarding the applicants’ financial circumstances.
[22] I also note that the restructuring of the mortgages on the Property to “free up”
$200,000 in equity appears to have been undertaken for the sole purpose of defeating the present security for costs application. It is obviously possible, given the long history of contentious litigation between the Mawhinney interests and the Council, and Mr Mawhinney’s apparent determination not to meet the various costs orders that have been made to date, that a further restructuring would be undertaken in order to attempt to defeat any enforcement attempts by the Council in relation to any costs awarded in these proceedings.
[23] For all of the reasons I have outlined, I am satisfied that there is a strong evidential basis to conclude that Mr Mawhinney, in his trustee capacity, will not be able to meet an award of costs if unsuccessful in these proceedings.
Exercise of discretion
[24] In exercising my discretion under r 5.45 as to whether to order security for costs, I must balance the interests of both parties. In terms of Mr Mawhinney’s interests, it is well established that a Court should not lightly order security for costs where the impact of doing so may be to prevent a plaintiff from pursuing a claim. On the other hand, defendants must be protected from being drawn into unjustified
litigation, particularly where it is complicated and unnecessarily protracted.18
[25] The merits of a plaintiff’s claim are relevant to the exercise of the Court’s discretion. In this case, however, it is somewhat difficult to accurately assess the merits of Mr Mawhinney’s claim, even on a preliminary basis, given the complexity and lengthy history of the proceedings. Mr Mawhinney’s strongest argument appears to be based on an obiter observation made by Wylie J in a decision dated
26 October 2011, to the effect that the proceedings that give rise to the Costs Decision appeared to be beyond the scope of the Environment Court.19 In effect, his Honour appears to have been suggesting that the Environment Court could have brought the proceedings to a close much sooner, instead of “generously affording Mr Mawhinney every opportunity to resolve matters”.20 Mr Mawhinney did not attempt to develop this argument, or explain why the Environment Court could not (or should not) have afforded him the full hearing it did. Rather, he simply relied on Wylie J’s comment, which appears to have been made somewhat in passing. Wylie J’s obiter comment will not, however, be binding on the Judge who ultimately hears and determines these judicial review proceedings. The onus will be on Mr Mawhinney to establish that the Environment Court lacked jurisdiction to hear his appeal. If he is able to do so, then that may provide some basis for his challenge
to the Costs Decision.
[26] Mr Mawhinney’s other grounds of review appear to be fairly weak. Most of the matters pleaded relate to the substantive decision of the Environment Court, rather than the Costs Decision.
[27] Ultimately I have not been persuaded that the merits of Mr Mawhinney’s proceedings are such that the Council, as the successful party before the Environment Court, should be denied the protection of an order for security for costs in these proceedings. As Asher J has previously observed, the Council’s submission
that Mr Mawhinney is a serial litigant clearly has some force:21
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.
19 Mawhinney v Auckland Council, above n 4, at [112].
20 At [112].
21 Mawhinney v Auckland Council, above n 9, at [23].
[28] Defending the multiplicity of proceedings brought by Mr Mawhinney is no doubt an expensive exercise for the Council (and ultimately its ratepayers). The prospects of Mr Mawhinney, in his capacity as trustee, being able to meet the costs of these proceedings in the event that security for costs is not ordered appear to be remote. I share Asher J’s view that the overall impression from Mr Mawhinney’s repeated refusals to pay sums that should be paid is that he will do all that he can to avoid paying costs, and that any options for payment involving the Mawhinney Trusts have to be seen in light of that history.
[29] Mr Mawhinney further submitted that the Trust’s impecuniosity was caused by the Council, which weighs against an award of costs. Mr Mawhinney did not explain in any detail precisely how or why the Trust’s impecuniosity has been caused by the Council. The primary reason why the Waitakere Trust’s debts exceed its assets appears to be that there is a third mortgage of $5 million in favour of an entity associated with Mr Mawhinney. Further, to the extent that Mr Mawhinney has previously raised substantive allegations that the Council has failed to comply with its obligations to him, those issues have already been addressed and determined. Mr Mawhinney did not point to any credible evidence that the Trust’s impecuniosity was caused by the Council.
[30] Taking all of these matters into account I am satisfied that this is an appropriate case in which to order the provision of security for costs.
[31] The Council has provided a schedule of the costs that will likely be incurred in these proceedings, calculated on a 2B scale costs basis, but excluding disbursements such as expert witness costs. The total sum set out in that schedule is
$43,975, although I note it does not take into account the recent increase in daily recovery rates. In light of that schedule I have concluded that security for costs in the sum of $22,500 (approximately half of 2B scale costs) would be appropriate at this stage. Leave is reserved to the Council to make a further security for costs application following the exchange of briefs of evidence, at which stage a clearer picture of the likely final quantum of costs and disbursements (in the event that Mr Mawhinney is unsuccessful) is likely to be available.
Result
[32] Security for costs in the sum of $22,500 is to be paid by or on behalf of Mr Mawhinney, to the Registrar of the High Court at Auckland. The proceedings are stayed pending payment of that security.
[33] Mr Mawhinney is to pay the Council the costs of this application on a 2B scale basis. If the parties are unable to agree the appropriate quantum then leave is reserved to file memoranda. Any memorandum from the Council is to be filed by
15 February 2016, with any response from Mr Mawhinney to be filed by
29 February 2016.
Katz J
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