Paterson v Lepionka & Company Investments Limited
[2021] NZCA 494
•28 September 2021 at 9.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA521/2020 [2021] NZCA 494 |
| BETWEEN | GARTH BOWKETT PATERSON |
| AND | LEPIONKA & COMPANY INVESTMENTS LIMITED |
| AND | STEFAN JOZEF JOHN LEPIONKA, JOE DUNCAN AND GREGORY BERNARD HORTON AS TRUSTEES OF THE LEPIONKA BUSINESS TRUST |
| AND | LEPIONKA & COMPANY LIMITED |
| AND | STEFAN JOZEF JOHN LEPIONKA AND NIGEL WARREN HUGHES AS TRUSTEES OF THE SJ LEPIONKA FAMILY TRUST |
| AND | STEFAN JOZEF JOHN LEPIONKA |
| Counsel: | Appellant in Person |
Judgment: | 28 September 2021 at 9.30 am |
JUDGMENT OF COURTNEY J
(Review of Registrar’s Decision)
The application for review is declined.
____________________________________________________________________
REASONS
Introduction
Garth Paterson is appealing a judgment of Doogue J.[1] The context in which the appeal is brought is the long-running litigation between Mr Paterson’s interests and those of Mr Lepionka relating to a sub-divisional development in the Hawke’s Bay. One aspect of the decision under challenge is an order made under s 166(4) of the Senior Courts Act 2016 restricting Mr Paterson from commencing or continuing any civil proceedings relating in any way to specified land in the Hawke’s Bay for a period of three years.
[1]Paterson v Lepionka & Co Investments Ltd [2020] NZHC 2184.
In September 2020 security for costs was set at $7,060. Mr Paterson sought to have security for costs dispensed with. The Deputy Registrar handling the application requested more information from Mr Paterson to support his claim to impecuniosity. Mr Paterson responded with an explanation about why he could not borrow money from his family trust but did not provide the specific information sought. By letter dated 4 December 2020, the Deputy Registrar declined the request to dispense with security for costs. Mr Paterson requested a review of the decision.
The review had to await the outcome of an application by the Lepionka interests to strike out the appeal. On 16 December 2020, pending the strike-out application being heard, Mr Paterson was bankrupted for failing to pay costs orders made in favour of the Lepionka interests.[2] On 3 August 2021 this Court struck out the appeal, save for the challenge to the s 166(4) order.[3] The review of the Deputy Registrar’s decision now falls for determination by me.
Deputy Registrar’s decision
[2]Lepionka & Co Investments Ltd v Paterson [2020] NZHC 3332.
[3]Paterson v Lepionka & Co Investments Ltd [2021] NZCA 364.
Mr Paterson had sought to have security for costs dispensed with on grounds of impecuniosity as a result of the failure of the Lepionka interests to pay some $7 million owed to him and his inability as a result of COVID-19 to travel back to Australia to work as a property development consultant.[4]
[4]Mr Paterson also relied on s 24 of the Epidemic Preparedness Act 2006. But that provision does not add anything to the existing power of the Court to dispense with security for costs in the present context.
The respondents opposed any dispensation on the following grounds:
(a)Mr Paterson has not provided evidence of impecuniosity and, in any event, has since had security for costs paid in separate (now abandoned) proceedings returned to him from which he could pay security in this appeal.
(b)They do not owe Mr Paterson $7 million; his claim to be owed this money has been held to be totally without merit and, further, is inconsistent with his earlier claim that the money was owed to a company he controlled, LW354 Ltd.
(c)The appeal lacks merit and the respondents should not be put to the cost of defending it without security.
The Deputy Registrar canvassed the relevant principles applying to the dispensation of security as set out in Reekie v Attorney-General.[5] These were (correctly) summarised as follows:
[8] … security for costs should only be dispensed with if “it is right to require the respondent to defend the judgment under challenge without the usual protection as to costs provided by security”.[6]
[9] The discretion to dispense with security is generally exercised so as to “preserve access to the Court of Appeal by an impecunious appellant in the case of an appeal which a solvent appellant would reasonably wish to prosecute”. A reasonable or solvent litigant would not proceed with a hopeless appeal or an appeal in which “the benefits (economic or otherwise) to be obtained are outweighed by the costs (economic or otherwise) of the exercise”.[7] Some assessment is made of the merits of the appeal and any issues of public interest raised.[8] Security is the norm and exceptional circumstances are required before it should be dispensed with.[9]
[5]Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.
[6]At [21].
[7]At [35].
[8]At [27(e)], [35] and [41].
[9]At [28].
The Deputy Registrar noted her request that Mr Paterson provide specific financial information to support the claim that he was impecunious, specifically: details of assets, liabilities and sources of income to support his lifestyle; bank statements for the past three months; the financial circumstances of any family trust, partner or close relative who could assist in funding the appeal; security that could be provided; attempts to borrow to fund the appeal; and confirmation as to whether he had applied for legal aid.
The Deputy Registrar summarised Mr Paterson’s response to her request for further financial information. In essence, this was that Mr Paterson could not properly be described as impecunious because he was the trustee of a family trust from which he could borrow if he could provide a personal guarantee, but the bankruptcy proceedings then on foot precluded any loan. The Deputy Registrar considered that:
[14] Even if Mr Paterson cannot currently borrow funds from his family trust or a third party lender, I still have no evidence that Mr Paterson has no money to pay security, or could not be assisted by his partner or a close family member. It is not enough that the pandemic may have caused his income to reduce. …
[15] I am therefore unable to be satisfied that Mr Paterson is impecunious and cannot fund security for costs.
The Deputy Registrar went onto consider the potential costs, benefits and merits of the appeal. She estimated a costs award of at least $9,650 based on the Court of Appeal (Civil) Rules 2005 in the event of the appeal being unsuccessful. The potential benefit was the removal of the restriction on Mr Paterson’s ability to advance the proceedings against the respondents, including the claims that had been struck out. As to the merits, given the basis on which the claims had been struck out in the High Court and the fact that the s 166(4) order was based on six proceedings assessed as having no merit, as opposed to just the two required by s 166, the Deputy Registrar considered that Mr Paterson would face real difficulties in the appeal. However, she did not consider it to be completely hopeless, characterising it as arguable.
Despite his indication that he intended to apply for legal aid, Mr Paterson had not done so. The Deputy Registrar therefore proceeded on the basis that he was not legally aided.
Stepping back, the Deputy Registrar concluded that although the appeal might not be completely hopeless, nor did it involve any issues of public interest and Mr Paterson had failed to establish that he is impecunious. It would therefore not be right to require the respondents to defend the judgment under appeal without security for costs.
Review
Mr Paterson filed submissions in support of his application for review. As he notes, the power to review a Deputy Registrar’s decision is exercised de novo.[10]
[10]Reekie v Attorney-General, above n 5, at [23].
I start with the issue of impecuniosity. When the Deputy Registrar made her decision, Mr Paterson said himself (conveying his lawyer’s view) that he could not properly be described as impecunious because of his access to a family trust. However, it was said that he could not borrow from the trust because he was facing bankruptcy proceedings. He failed to provide other adequate information from which the Deputy Registrar could have reached a conclusion that he was impecunious. In my view the Deputy Registrar’s conclusion was right, on the information she had before her.
Now, of course, Mr Paterson is bankrupt. It is, however, telling that in his submissions in support of the review, he makes no effort to address the issue of impecuniosity. He notes the Deputy Registrar’s query as to whether security could be provided by the family trust but, instead of addressing that possibility, proceeds to explain that the proceeding in respect of which the appeal is brought was “primarily prosecuted by me in my capacity as a trustee of [the family trust]” and why, in his view, the first respondent, Lepionka & Company Investments Ltd (LCIL) owes the family trust $7.763 million. As a result, he submits, the respondents effectively have security for costs.
The respondents have put before the Court a copy of Mr Paterson’s affidavit in CA389/2019, made in support of an application to review the refusal to dispense with security for costs. The proceeding was an appeal brought by LW354 Ltd (which Mr Paterson controls) against LCIL, concerning the same dispute. In the affidavit, Mr Paterson asserted that “LW354 stands in the shoes previously occupied by GLW Group Ltd, (GLW), as trustee for my not of legal age sons …”. He then set out a calculation to show that LCIL owed GLW/LW354 $8.994 million. The basis of the calculation is remarkably similar to that contained in Mr Paterson’s submission in this review. In short, Mr Paterson has previously alleged that the moneys he now says are owing to his family trust were actually owed to GWL/LW354.
For obvious reasons I do not accept Mr Paterson’s current assertion provides any basis on which to dispense with security for costs. The liability of the Lepionka interests to the Paterson interests has been canvassed in several proceedings. There is no judgment against any of the Lepionka entities and no basis on which to conclude that the respondents owe money to Mr Paterson, either in his personal capacity or as a trustee of his family trust. Given the inconsistencies between Mr Paterson’s previous affidavit and his current submissions, I could not accept his assertions. Nor is there any basis on which to conclude that Mr Paterson does not have access to funds with which he could pay the security.
The history of these parties shows that it would be unfair to require the respondents to defend the appeal without the protection of security for costs.
Result
The application for review is declined.
Solicitors:
Bell Gully, Wellington for Respondents
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