New Zealand Democratic Party for Social Credit Incorporation v Minister for Land Information
[2020] NZHC 1104
•25 May 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-563
[2020] NZHC 1104
BETWEEN THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INCORPORATION
ApplicantAND
THE MINISTER FOR LAND INFORMATION
First Respondent
THE MINISTER OF FINANCE
Second RespondentWESTLAND DAIRY COMPANY LIMITED
Third Respondent
HONG KONG JINGANG TRADE HOLDING COMPANY LIMITED
Fourth Respondent
Hearing: 13 February 2020 Appearances:
R A Kirkness and S W Fletcher for Applicant
N C Anderson and S J Jensen for First and Second Respondents S V McKechnie and J C Dickson for Third and Fourth
Respondents
Judgment:
25 May 2020
JUDGMENT OF CLARK J
Introduction
[1] The New Zealand Democratic Party for Social Credit Inc (the party or Social Credit) has filed an application for judicial review of a decision made by the Overseas Investment Office.
THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INCORPORATION v THE MINISTER FOR LAND INFORMATION [2020] NZHC 1104 [25 May 2020]
[2] The third and fourth respondents, respectively Westland Dairy Co Ltd (Westland) and Hongkong Jingang Trade Holding Co Ltd (Jingang) have applied for security for costs. The application is made under r 5.45 of the High Court Rules 2016. The particular grounds on which Westland and Jingang each seek an order for security for costs in the sum of $20,000 are that:
(a)There is reason to believe that Social Credit will be unable to pay Westland and Jingang’s costs if Social Credit is unsuccessful in this proceeding;
(b)Despite requests, Social Credit has failed to provide evidence of its financial position sufficient to establish that it will be able to meet a costs award;
(c)Media reports and Social Credit’s “Give a Little Page” suggest that Social Credit needs to raise funds to meet the costs of the litigation;
(d)Social Credit has declared in its annual party donations that it has received no qualifying donations or loans for at least the last five years;
(e)It is just in all the circumstances to provide security for costs; and
(f)Social Credit was not directly affected by the decision and appears to have brought this proceeding to further its political agenda and profile.
[3]Social Credit opposes the application primarily on the basis that:
(a)Westland and Jingang have not shown that Social Credit is impecunious, which is a precondition for obtaining security under r 5,45; and
(b)An order for security would be inappropriate given the significant public interest in this proceeding.
Legal principles
[4] Rules 5.45 of the High Court Rules governs the security for costs regime. A Judge may order the giving of security for costs if the Judge considers it is just in all the circumstances having been satisfied:
(a)that a plaintiff—
(i)is resident out of New Zealand; or
(ii)is a corporation incorporated outside New Zealand; or
(iii)is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b)that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.
[5] Thus, if the plaintiff does not come within (a)(i)–(iii) there are essentially two requirements to be met. First, the applicant must show there is a reason to believe that a plaintiff will be unable to pay the costs of the defendant. Second, the Judge must consider it “just in all the circumstances” to order the giving of security of costs.
[6] The decision to order security for costs and the quantum of any security ordered are discretionary matters. The discretion is not to be fettered by constructing “principles” from the facts of previous cases.1
[7] Being broad, the discretion may be exercised to require security even if to do so would prevent a plaintiff from pursing a claim.2 That said, a genuine plaintiff is not lightly to be denied access to the court.3 In Lee v Lee the Court of Appeal confirmed the position summarised in the earlier Court of Appeal decision in A S McLachlan Ltd v MEL Network Ltd4
[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as
1 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14], cited in Andrew Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR5.45.01].
2 Lee v Lee [2019] NZCA 345 at [20].
3 At [20].
4 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).
contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.
[16] Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
First threshold requirement: “unable to pay the costs”?
[8] The applicant for security for costs is not expected to produce conclusive proof of the plaintiff’s financial position or inability to pay. But “there should be credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the [party] will be unable to pay costs.”5 If there is no direct evidence available, it may be sufficient to adduce evidence of surrounding circumstances from which an inference of inability to pay can reasonably be drawn.6
Parties’ submissions
[9] Westland and Jingang contend that Social Credit has failed to provide evidence of its financial position sufficient to establish it will be in a position to meet any costs award. They argue that from two financial statements, there is an “apparent trend” of Social Credit recording operating losses. Westland and Jingang also claim that various media reports, a “Give a Little” page and the fact that Social Credit has not received any donations for the last five years all suggest Social Credit is impecunious.7
[10] Social Credit’s position is that Westland and Jingang have failed to satisfy the “unable to pay” threshold. Mr Kirkness, counsel for Social Credit, made the following submissions:
(a)The 2017 financial year was an election year and it is unsurprising the party recorded an operating loss.
5 Concorde Enterprises Limited v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519; New Zealand Kiwi Fruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 at 211.
6 Totara Investments v Abooth Ltd HC Auckland CIV-2007-404-990, 4 March 2009 at [28].
7 The media reports either mention the fact that Social Credit is seeking financial assistance or has set up a ‘Give a Little” page.
(b)The donations received by Social Credit did not need to be declared under electoral law.
(c)Give a Little pages are a common method of funding public interest litigation and indicate nothing about their ability to pay costs.
(d)The media reports simply noted that Social Credit did not have the resources to lodge an interim injunction against a complex commercial transaction three days after it was announced. This does not establish anything about Social Credit’s ability to pay costs on judicial review.
(e)Christopher Leitch, the leader of the Social Credit party, has deposed that Social Credit can meet an adverse costs award against it and that there is around $100,000 in member funds available that could be used to meet such an order.
Analysis
[11]Mr Leitch’s evidence is that:
If Social Credit is unsuccessful in these proceedings and the Court makes an award of costs against it Social Credit would pay those costs. I have no reason to believe that Social Credit would be unable to meet a costs award against it.
[12] Mr Leitch has exhibited to his affidavit a copy of Social Credit’s statement of financial performance and statement of financial position as at 31 December 2017. The statements show operating deficits in 2016 (of $60,000) and in 2017 (of
$123,000). Accumulated funds dropped from $233,000 in 2016 to $109,000 in 2017. Ms McKechnie, counsel for the third and fourth respondents, submitted the evidence Social Credit has provided is not sufficient to alleviate Westland’s and Jingang’s concerns about its ability to meet a costs award. Ms McKechnie referred to the circumstances leading to the making of the application. In particular:
(a)On 28 July 2019 Social Credit stated in a media release that it did not have the “financial and legal resources to lodge an [injunction] application before the takeover date of August 1st” and sought
donations from the public.
(b)Social Credit set up a “Give a Little page to procure funds for the litigation. As at 8 November 2019, the page recorded donations of
$350. From the bar, Ms McKechnie advised that as at 12 February 2020, the day before the hearing, the Give a Little page reflected donations of approximately $450.
(c)Social Credit’s annual party donations and loans returns for the last five years indicate Social Credit has received no qualifying donations over that period.
(d)A solicitor’s letter was sent to Social Credit’s solicitors on behalf of Westland and Jingang on 29 October 2019. It appeared to Westland and Jingang that the application for judicial review was ill-conceived and brought primarily for political gain. Social Credit was invited to withdraw its proceeding on the basis it was said it lacked substantive merit. Further, the letter recorded Westland and Jingang’s “serious concerns regarding Social Credit’s asset position and ability to meet any costs award against it”.
(e)Although Social Credit’s solicitors were instructed to send an email to the Crown Law Office confirming Social Credit would “honour” any costs award made against it and has the means to do “so”, that instruction gave no comfort to Westland and Jingang. Further, it was noted that under s 13 of the Incorporated Societies Act 1908, Social Credit’s members had no liability for obligations incurred by Social Credit.
[13] Ms McKechnie submitted that Mr Leitch’s “uncorroborated statement” that Social Credit would pay an award of costs made against it is of little probative value when no grounds have been put forward to support his assertion.
[14] Initially, I was unconvinced by the financial performance statement as at December 2017. As against Mr Kirkness’s submission that it showed Social Credit had significant cash assets available to it, I queried whether that remained the position as at February 2020. There was a basis for querying the position because, to the extent that a trend can be discerned from a comparison of only two years’ statements, the trend suggested a diminution in assets. As Ms McKechnie had queried, how would one know that trend had not continued?
[15] Ultimately, I am satisfied that there is sufficient evidence from which I am able to infer that in the event Social Credit is unsuccessful in its application for judicial review, and is ordered to pay costs, it will pay those costs.
[16] In relation to Social Credit’s public plea for donations Mr Kirkness submitted there is a distinction between looking for a stream of funding to initiate court action and complying with court orders. I accept that submission. Social Credit publicised that it needed not just financial but legal and other resources to initiate court action in 2019. Ultimately, it did not apply for the injunction that Westland and Jingang argue should have been applied for. Significantly, Mr Leitch has sworn that if costs are awarded against Social Credit then Social Credit “would pay those costs”. And he has further sworn he has no reason to believe Social Credit would be unable to meet a costs award against it. That deposition is not to be lightly ignored. While it does not have the legal force of an undertaking to the Court it is to be seen in the same light as its instructions to its solicitors in 6 November 2019 to counsel for all respondents that “it will honour any costs award made against it and has the means to do so”.
[17] The acknowledgement of an obligation to comply with court orders, combined with holding assets in the sum of approximately $100,000 as at the end of December 2017 provides a sufficient evidential basis from which I infer Social Credit will, and will be able to, pay any costs award against it. Mr Kirkness suggested that the downward trend in cash assets was arguably a reflection of the party’s election year expenditure. That may very well be but, it is a matter of speculation. Mr Leitch himself provided no such explanation nor any explanation at all.
“Just” in all the circumstances?
[18] I have found that the impecuniosity threshold is not met but even if it were I would not consider it to be just in all the circumstances to order the giving of security for costs. My reasons are primarily threefold.
[19] First, although it is argued on behalf of Westland and Jingang that the application for judicial review asserts errors in the decision-making that are of a “technical nature” and that, therefore, the chances of success are remote I take a different view of the pleadings. The succinct 12-page statement of claim pleads three grounds of review. Under the first ground Social Credit pleads that the Overseas Investment Office failed to apply the correct test under the Overseas Investment Act 2005 when reaching its decision on Jingang’s application for consent to acquire 100 per cent of the shares in Westland, and a declaration of unlawfulness and invalidity is sought. The second ground of review seeks similar relief in respect of the same decision although on different grounds. And the third ground of review challenges the exercise of delegated power by the chief executive of Land Information New Zealand.
[20] The Court is required to do no more than form an impression of the merits of the claim.8 It is not necessary therefore that I attempt to assess the prospects of success of each of the grounds of review. Rather, the focus should be whether:9
a prima facie case can be established that [Social Credit’s] claim is unmeritorious … a prima facie lack of merit will be weighed in the balance; the less apparently meritorious then the more likely the security is.
[21] I find it difficult to assess the statement of claim even from the point of view of a prima facie lack of merit. As I understand it, the core of the case concerns the status of the Rolleston Milk Processing Plant which is on more than five hectares of farmland said to be used exclusively for agricultural purposes. The application before the Overseas Investment Office involved the acquisition of the Rolleston Milk Processing Plant’s land. Social Credit says its land satisfies the definition of “farmland” under the Overseas Investment Act, is therefore “sensitive land” for the
8 Highgate on Broadway Ltd v Devine [2012] NZHC 2288; [2013] NZAR 1017 at [22](c).
9 At [22](c).
purposes of the Act and therefore the “benefit to New Zealand” test had to be applied to the decision but was not.
[22] Under the second ground of review Social Credit pleads there was a failure to consider whether the land was “farmland” and therefore whether it was “non-urban land” (both of which are defined in the Act) and consequently whether the land is “sensitive” under the Act — which it is if the land is, or includes “non-urban land”.10
[23] I can say little more about the merits beyond observing that the statement of claim raises arguable questions of statutory interpretation and whether the Overseas Investment Office applied the proper test and whether, if it did not, relief is likely to be granted.
[24] As Ms McKechnie submitted relief is discretionary. Westland and Jingang will bear the burden of providing evidence relevant to the exercise of the Court’s discretion. Ms McKechnie further submitted it would be difficult, if not impossible, for the scheme of arrangement11 which received shareholder approval in the requisite majorities consent under the Act and under the Overseas Investment Regulations 2005 and court approval.12 Ms McKechnie is undoubtedly correct to emphasise the difficulties (at the least) in attempting to unwind the scheme so many months — if not a year by the time the judicial review application is determined — after the scheme has been implemented. Unwinding the scheme would involve, at the least:
(a)recovering payments made by Jingang to approximately 333 shareholder farmers who received over $250m in total on 1 August 2019; and
(b)returning the shares in Westland to the farmer shareholders with the underlying assets in unchanged form, several months after the business was handed to Jingang.
10 Overseas Investment Act 2005 sch 1, pt 1.
11 Under the scheme of arrangement Jingang agreed to acquire 100 per cent of the shares in Westland for $3.41 cash per share. The scheme of arrangement was under pt 15 of the Companies Act 1993.
12 Re Westland Co-Operative Dairy Co Ltd [2019] NZHC 1683.
[25] I was initially persuaded to the view that the merits of the application for review turned on what I saw as the remote prospect of relief being granted. The potential impact on Westland and Jingang of the Overseas Investment Office’s consent being quashed is significant and, as Ms McKechnie submitted, likely to be “vastly disproportionate” to the alleged error. This will be a factor in the Court’s consideration of relief.
[26] But as Mr Kirkness submitted submissions are yet to be made in the High Court on relief. A declaration of unlawfulness would be regarded by Social Credit as a successful outcome. Mr Kirkness also submitted that if the decision were set aside for unlawfulness it would most likely be remitted back in order to be made properly.
[27] A further consideration in the assessment of the interests of justice is whether the litigation serves any “public interest”. Ms McKechnie challenged Social Credit’s motivation in bringing the claim. She drew the Court’s attention to Social Credit’s long-held policy of opposing foreign takeovers and the sale of land into overseas ownership. She submitted there is a political motive to Social Credit’s application for judicial review which appears to be part of a wider political platform. Following Social Credit’s filing of its judicial review proceeding Stuff reported Mr Leitch as saying a ministerial directive to the Overseas Investment Office in November 2017 clearly set out criteria on how applications under the Act should be considered.
We want to see New Zealanders reaping the benefit of that world leadership in the primary sector, not overseas shareholders.
There’s a tidal wave of applications from overseas entities that want to snap up the best agricultural land and agricultural and horticultural businesses that New Zealand has, so we are taking a stand on the issue.
[28] I take counsel’s point but as I indicated at the time, even if the institution of proceedings is politically motivated, in the sense that Social Credit has a policy interest in the application of the Act, I can only make my assessment of whether any public interest is served by the litigation, by reference to the statement of claim. Social Credit has standing to bring the proceeding. It is not a “mere busybody engaged on a fruitless exercise”.13 There is a public interest in having the issues raised by the
13 Ratepayers and Residents Action Association Inc v Auckland City Council [1986] 1 NZLR 746, at 753.
claim heard and determined and, as the Court of Appeal stated in the Ratepayers decision, that must be a factor for consideration in deciding whether to order security and if so, what sum should be fixed.14
Result
[29]Accordingly, the application for security for costs is dismissed.
[30] Having succeeded in its opposition to the interlocutory application Social Credit, the third and fourth respondents are to pay Social Credit’s costs which I award on a 2B basis. The Crown did not seek security and although counsel appeared, no written submissions were filed.
Karen Clark J
Solicitors:
Woods Fletcher, Wellington for Applicant
Crown Law Office, Wellington for First and Second Respondents Simpson Grierson for Third and Fourth Respondents
14 At 750.
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