Morrell v World Solar Ltd

[2018] NZHC 518

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2017-425-000121 [2018] NZHC 518

UNDER

Section 174 of the Companies Act 1993

BETWEEN

ALLEN GODFREY MORRELL

Plaintiff

AND

WORLD SOLAR LIMITED

First Defendant

AND

DOONE ANTONIO MORRELL

Second Defendant

Appearances:	G L Wilkin for Defendants (Applicants for security) T C Gunn for Plaintiff (Respondent on security)
Judgment:	23 March 2018
(Determined on the papers)

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to security for costs

Introduction

[1]                   The plaintiff, Allen Morrell, is a shareholder and former director of the first defendant, World Solar Ltd (World Solar). The second defendant, Doone Morrell, is a shareholder and director of World Solar.

[2]                   Originally, there were three equal shareholders of World Solar. In 2013, the third shareholder transferred his shares to Doone Morrell, making Doone Morrell the majority shareholder. Around the same time, Allen Morrell was removed (without his consent) as a director of World Solar.

MORRELL v WORLD SOLAR LIMITED [2018] NZHC 518 [23 March 2018]

[3]                   Allen Morrell issued this proceeding for relief under s 174 Companies Act 1993 (the Act). He alleges unfairly prejudicial and detrimental conduct on the part of Doone Morrell. He seeks compensation for losses and other relief under the Act.

[4]                   The defendants, by their joint statement of defence, deny the material allegations in the statement of claim.

Application for security

[5]The defendants apply for security for costs.

[6]                   The defendants rely on the fact that Allen Morrell resides outside of New Zealand (namely in New South Wales). In support of the application, Doone Morrell has deposed that he is aware of financial difficulties experienced by Allen Morrell. He provides detail as to matters pointing to such financial difficulties. Allen Morrell has not opposed the application. By counsel’s memorandum he states that he neither opposes nor consents to the application. Mr Gunn’s memorandum implicitly accepts that the threshold test for an order of security is established. The Court must nevertheless consider whether to exercise its discretion to award security and, if so, in what sum or sums.

The security jurisdiction

High Court Rules

[7]                   Rule 5.45 High Court Rules empowers me to order the giving of security for costs when either the plaintiff is resident out of New Zealand (r 5.45(1)(a)(i)) or there is reason to believe the plaintiff will be unable to pay the costs of the defendant if the plaintiff does not succeed in the proceeding (r 5.45(1)(b)).

The threshold test

[8]                   The threshold tests under both r 5.45(1)(a)(i) and r 5.45(1)(b) are established in this case.

The discretion

[9]                   The general approach to the discretion (as contained at the time in r 60) was described by the Court of Appeal in McLachlan v MEL Network Ltd in these terms:1

[13]      Rule 60(1)(b) High Court Rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, “the Court…