Mills v Dalzell
[2023] NZCA 68
•21 March 2023 at 11 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA557/2022 [2023] NZCA 68 |
| BETWEEN | LYNETTE JOY MILLS |
| AND | KELLY DALZELL |
| Counsel: | Appellants in person |
Judgment: | 21 March 2023 at 11 am |
JUDGMENT OF COURTNEY J
The application for review of the Deputy Registrar’s decision declining to dispense with security for costs and requiring increased security is declined.
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REASONS
The appellants have sought a review of a Deputy Registrar’s decision dated 29 November 2022 to decline their application under r 35(6)(c) of the Court of Appeal (Civil) Rules 2005 for a dispensation of security for costs, and to increase the level of security they must provide under r 35(6)(a) of the Rules.
Background
The first appellant, Ms Mills, and the fourth respondent, Mr Mills are former business and domestic partners. They owned two properties together which secured a joint current account in the form of a revolving credit account with the third respondent, ASB Bank Ltd (ASB), referred to as the overdraft facility. After the relationship ended, Ms Mills formed a relationship with the second appellant, Mr Peterson. It was agreed that Mr Peterson would buy Mr Mills’ interest in the properties and assume his obligations in respect of the mortgage and the overdraft facility. However, ASB declined to release Mr Mills from his obligations. A dispute arose between the three parties which escalated when, after finding that Ms Mills had increased the overdraft facility, Mr Mills withdrew funds from it without Ms Mills’ consent.
The appellants brought proceedings against Mr Mills, ASB, employees of ASB, a solicitor, and a legal executive. The proceedings included allegations of fraud. Those proceedings were eventually settled by way of a settlement agreement dated 21 December 2021. Notwithstanding the settlement agreement, the appellants brought fresh proceedings, making similar allegations. They did not consider that the settlement agreement precluded them from doing so. Associate Judge Johnston granted the respondents’ applications to strike out the proceeding.[1] The decision regarding security for costs relates to the appellants’ appeal against that decision.
[1]Mills v Dalzell [2022] NZHC 2439 at [85].
The appellants relied on two broad grounds as justifying dispensation. First, that Mr Mills and ASB hold security by way of an existing mortgage and/or caveat over the two properties owned by the appellants, which were the subject of the original dispute. They are said to be worth approximately $1.2 million, with debt of approximately $260,000 plus interest secured against them. In addition, the appellants have carbon credits which they value at slightly over $300,000 (though there are issues relating to the ownership and value of these which may affect the value of one of the properties). The appellants say that in light of their ownership of these properties and the security held by ASB and Mr Mills, there is no risk to the respondents in relation to costs in the event of the appeal failing.
The appellants say, secondly, that there is a prima facie case that all of the respondents have participated in frauds against them and, consequently, they are not bound by the settlement agreement, and it would be unfair and premature to require them to liquidate assets in order to pay security for costs.
The respondents opposed the application for dispensation. The first and third respondents sought increased security for costs, which was supported by the fifth and sixth respondents. In the decision under review, the application for dispensation was declined and the applications to increase security for costs were granted in part, with an order made increasing the security for costs to $27,500, to be paid by 19 December 2022.
Review of the Deputy Registrar’s decision
Relevant legal principles
The legal principles applying to the dispensation of security for costs were summarised by the Supreme Court in Reekie v Attorney-General.[2] Security should only be dispensed with if the Registrar is of the view that “it is right to require the respondent to defend the judgment under challenge without the usual protection as to costs provided by security”.[3] The discretion to dispense with security should be exercised so as to preserve access to the Court of Appeal by an impecunious appellant in an appeal that a solvent appellant would reasonably wish to prosecute; and to prevent the use of impecuniosity to secure the advantage of being able to prosecute an appeal that would not be sensibly pursued by a solvent litigant.[4] A reasonable and solvent litigant would not proceed with an appeal which is hopeless. Nor would a reasonable and solvent litigant proceed with an appeal where the benefits (economic or otherwise) to be obtained are outweighed by the costs (economic and otherwise) of the exercise.[5]
[2]Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.
[3]At [21].
[4]At [35] and [41].
[5]At [35].
Applications for dispensation with security for costs are most commonly made in cases of impecuniosity or where there is a public interest element in the proceeding. As the Deputy Registrar noted, the appellants did not claim to be impecunious, nor that the appeal involved any matter of public interest.
Review of decision
The Deputy Registrar correctly identified the relevant principles when she considered the appellants’ application for dispensation of security for costs. She approached the application by asking whether it would be right to require the respondents to defend the judgment under appeal without the usual protection of security for costs. There is no error in this approach.
The Deputy Registrar considered the appellants’ assertions that the third and fourth respondents held a mortgage or other security. While this was so in the case of the third respondent, it appeared that none of the other respondents held security over the appellants’ properties. ASB opposed the dispensation of security for costs on the basis that, given past history, the appellants were very likely to resist any attempt to enforce a costs award through the sale of the mortgaged properties. The Deputy Registrar accepted that the mortgage security was not an adequate substitute for security for costs because of the cost and complications of enforcing that security.
There is no error in this conclusion. The appellants do not say that they would co-operate in the sale of the properties in the event of costs being awarded against them. Given the history of the litigation it seems very likely that ASB would be forced to realise the security through an enforcement process that would be costly and time-consuming.
Nor did the Deputy Registrar consider that it would be unfair to require the appellants to liquidate their assets to meet a payment for security for costs. She noted that (as observed in Reekie) it was reasonable to ask whether an appellant could borrow funds or seek funds from a family member or family trust for the purposes of security. She considered that it must therefore be reasonable to expect an appellant to liquidate assets for that purpose. Again, I see no error in this conclusion. It is not unreasonable for appellants who have access to realisable assets to make use of them in advancing an appeal. Further, I note that in their memoranda in support of the application the appellants confirm that they are trying to sell one of the properties.
Finally, the Deputy Registrar, taking into account the reasons given by the Judge for striking out the claims, considered the possibility of the appeal being vexatious. Specifically, the Judge, in his costs judgment subsequent to the substantive decision to strike out the appellants’ claim, had found it “difficult indeed to see any genuine motivation for the proceeding other than an attempt to avoid the contractual commitment [the appellants] had made in the deed”.[6] In these circumstances the Deputy Registrar saw no basis on which security for costs could properly be dispensed with.
[6]Mills v Dalzell [2022] NZHC 3067 at [15].
In their application for review the appellants set out, in some detail, allegations going to the substantive issues that arose in the High Court proceedings and setting out the reasons they say the Judge’s decision should be reversed. They also challenged the basis for the Deputy Registrar’s reference to their previous failure to pay costs in the High Court, pointing out that they had been successful in the original proceedings in the High Court that led to the settlement agreement, and that costs awarded in the High Court had been subsumed into the settlement. They point to previous other successful litigation as showing that they cannot fairly be described as vexatious litigants.
I note, first, that the Deputy Registrar’s decision did not refer to the appellants as vexatious litigants. Rather, her assessment was that the appeal itself might be viewed as vexatious, having regard to the Judge’s findings that the claims brought were hopeless and some an abuse of process, given the terms of the settlement agreement and the application of the Limitation Act 2010.[7] Again, I see no error in the Deputy Registrar’s concern regarding the appeal. It is evident that the appellants accept that the substantive claim they wish to advance is effectively the same as the claim that was the subject of a settlement agreement. They do not accept that they are precluded by the settlement agreement or the Limitation Act from doing so. For the reasons given by the Judge, the prospects of the appeal succeeding appear slim. This is not an appeal that would sensibly be pursued by a solvent litigant. The respondents should not be required to defend it without the protection of security for costs.
[7]Mills v Dalzell, above n 1, at [85].
For the same reasons I am satisfied that the Deputy Registrar did not err in requiring increased security to be paid.
Result
The application for review of the Deputy Registrar’s decision declining to dispense with security for costs and requiring increased security is declined.
Solicitors:
MinterEllisonRuddWatts, Auckland for First and Third Respondents
Holland Beckett Law, Tauranga for Fourth Respondent
Morgan Coakle, Auckland for Fifth and Sixth Respondents
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