Penney v Wylie Properties Limited
[2023] NZHC 1171
•16 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-079
[2023] NZHC 1171
BETWEEN STEPHEN CHARLES PENNEY
Plaintiff
AND
WYLIE PROPERTIES LIMITED
First Defendant
AND
DAVID KEITH WYLIE
Second Defendant
Hearing: 17 April 2023 Appearances:
S R Mitchell KC for Plaintiff
S E McCabe and M Mitchell for Defendants
Judgment:
16 May 2023
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 16 May 2023 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Garry Pollock & Co., Auckland Martelli McKegg, Auckland
PENNEY v WYLIE PROPERTIES LTD [2023] NZHC 1171 [16 May 2023]
[1] Mr Penney was once married to the third defendant, Ms Simunovich. A 13.5-metre launch named Donna Marie (the Boat), formed part of their relationship property.
[2] The first defendant, Wylie Properties Ltd (Wylie Properties), owns premises which are used as storage facilities. The second defendant, Mr Wylie, is a director and shareholder of Wylie Properties.
[3] In the course of Mr Penney and Ms Simunovich’s separation, she arranged for the Boat to be uplifted and stored at Wylie Properties’ premises. The division of their relationship property was settled in October 2014, and steps were taken to implement or confirm Mr Penney’s direct or indirect ownership of the Boat, separately from Ms Simunovich, during 2015. Storage-related charges were brought up to date, to 27 April 2015. However, at the present time, around eight years later, the Boat remains at Wylie Properties’ premises, and further storage-related charges have not been paid.
[4] In December 2021, a notice was published in the New Zealand Herald indicating Wylie Properties’ intention to sell the Boat in the event of a failure by the owner, “understood to be [Mr Penney]”, to pay outstanding charges and to remove the Boat within around two weeks. In early 2022, Mr Penney issued this proceeding acting in his own behalf, alleging conversion and trespass to goods in respect of the Boat by all three defendants, and defamation on the part of the first and second defendants in issuing the notice. Wylie Properties counterclaimed, seeking storage fees and other sums on the basis of breach of contract or bailment.
Matters for determination
[5] Ms Simunovich applied for summary judgment to the effect that none of Mr Penney’s causes of action against her could succeed. That application was to have been heard before me on 17 April 2023. However, Mr Penney having instructed counsel, Mr Mitchell KC, filed his discontinuance in respect of Ms Simunovich on 14 April 2023. I will make directions on the filing of memoranda as to costs at the conclusion of this judgment.
[6] Wylie Properties applied for judgment by default in respect of its counterclaim, Mr Penney not having filed a statement of defence. All three defendants applied for orders that Mr Penney provide security for costs of $50,000. I heard substantive argument in respect of Wylie Properties’ application for judgment by default, and the application for security for costs to the extent it is maintained by Wylie Properties and by Mr Wylie, on 17 April 2023. This judgment deals with those matters.
[7] Through Mr Mitchell, Mr Penney filed an application on 14 April 2023, seeking to extend time for the filing of his statement of defence to Wylie Properties’ counterclaim. By the time of the hearing on 17 April 2023, Wylie Properties had not had an opportunity to file a notice of opposition or submissions. The consequence is also set out at the conclusion of this judgment.
Evidence on Ms Simunovich’s summary judgment application
Ms Simunovich
[8] Ms Simunovich filed an affidavit dated 23 March 2022 in support of her summary judgment application. There, she says that she and Mr Penney were married in 1997. They separated in July 2008, and their marriage was dissolved in 2010. Their separation was one of high conflict.
[9] Significant assets were accumulated in the course of the relationship, most of which were held in the Maria Charles Family Trust. The couple also owned a company called D & D Manufacturing Limited (D & D). By September 2006, the Boat was held in D & D’s ownership.
[10] In August 2010, Ms Simunovich arranged for the Boat to be uplifted by Boat Haulage Limited and stored at Wylie Properties’ premises.
[11] Ms Simunovich says that two initial agreements to settle the couple’s relationship property affairs, entered in 2011, foundered. These agreements were in written form and are attached to Ms Simunovich’s affidavit. They (respectively) refer to Mr Penney or his trust ‘retaining’ the Boat as his or its separate property.
[12] The trustees of the Maria Charles Family Trust were replaced in October 2013, by Noel Irvine and Michael Taylor.
[13] The couple and the Maria Charles Family Trust trustees executed a settlement agreement at a judicial settlement conference on 29 October 2014. By reference to the second of the September 2011 agreements, it recorded their agreement that the trustees of the Maria Charles Family Trust will transfer the Boat to Mr Penney’s ‘Nikolas & Petra Trust’, conditional on payment to the trust of certain amounts of cleared funds.
[14] Ms Simunovich says that all assets were transferred as agreed soon after a final court judgment of 16 March 2015. If this is correct, the Boat has been owned at law by the trustees of the Nikolas & Petra Trust since March 2015, subject to any onwards transfer which has not been evidenced. She says that Mr Penney was invited to uplift the Boat in March 2015. At around that time, the Maria Charles Family Trust brought the Boat’s storage costs up to date.
[15] Ms Simunovich says that she is unaware of why Mr Penney did not uplift the Boat. However, she notes that Mr Penney was declared bankrupt in October 2015.
Mr Penney’s affidavits
[16] Mr Penney filed an affidavit dated 13 April 2022 in opposition to Ms Simunovich’s summary judgment application, and an affidavit dated 3 May 2022 in opposition to the application for security for costs. In the 13 April 2022 affidavit, he says:
32.I agree that during the process of resolving our relationship property difficulties we agreed that the boat should be an asset of mine. But at no time did I agree that I would pay any of the storage costs, or any other costs, associated with the removal of the boat from its mooring, transport to wherever it was transported, and storage. If the storage company wanted to recover those costs it has always been my view it should recover the costs from the person who instructed them to act as it did. That was not me and nor was it any organization with whom I have or have had an association.
33.[Ms Simunovich] says that at some stage the ownership of the boat was transferred either to me or to the Nikolas and Petra trust. At present I am unsure who actually is the legal owner of the boat
although I argue that I am. If it is true their ownership was transferred either to me or to the Nikolas and Petra trust the boat could have and should have been returned. Had it been returned there may have been no further problems. But it was not.
[17]And in the 3 May 2022 affidavit, he says:
… during 2015 for some reason the organization that had been paying the storage costs stopped paying them. The storage company then said that their [sic] responsibility for paying these costs fell to the owner of the boat. I never agree to that. I was never asked. No one approached me And I would never have agreed that the responsibility to pay costs was mine.
...
Had they wished to return the boat to me they should have done that. I was given no notice of this change in position or that I could collect the boat. …
[18] Also in the 3 May 2022 affidavit opposing security for costs, Mr Penney says that he does not wish to set out his assets and income, referring to concern that Ms Simunovich could read it, but that his income and assets are “easily sufficient” to cover the defendants’ legal costs. He adds that he could have avoided his bankruptcy but “made a deliberate decision not to do so as it protected [him] from the noxious attacks directed at me by [Ms Simunovich]”.
Mr Wylie’s affidavit
[19] Mr Wylie filed an affidavit dated 22 June 2022 in response to Mr Penney’s affidavits. There, he takes particular issue with Mr Penney’s assertions quoted above. An email chain annexed to Mr Wylie’s affidavit indicates the following:
(a)On 6 March 2015, Mr Penney emailed ‘[email protected]’, providing Mr Wylie’s brother and co-director of Wylie Properties, Bob Wylie, his contact details and asking for copies of storage bills along with details on how they were paid and information regarding the boat’s insurance. Later that day, Bob Wylie responded advising that bills had been paid by the Maria Charles Trust, and that two months’ storage was outstanding. He also asked:
What do you think will happen with the boat. Will you need to store it for much longer?
(b)Still later on 6 March 2015, Mr Penney responded:
I have no idea about the storage costs it depends on the court. I plan to do what I want to do to get it back in the water as quick as possible. (I would say two months once I get confirmation from the court that the other side pays all the costs. Inclusive of putting it back in the water.
The two months out standing what is the total please
(c)Bob Wylie appears to have forwarded this exchange to Noel Irvine of Stewart & Co Limited, a trustee of the Maria Charles Family Trust. On 26 March 2015, Mr Irvine responded as follows:
Hi bob [sic],
Further to our telephone discussion, I confirm that we don’t wish to store the above named vessel after the end of March.
I understand you will forward a final account to the trust for March and that you will contact Stephen Penney regarding arrangements to uplift it.
[20] It appears communications between Wylie Properties and Mr Penney through the balance of 2015 were very limited. Mr Wylie observes that he no longer has access to the email address from which the majority of the correspondence was sent and received. However, on 18 September 2015, he sent the following to the email address Mr Penney had earlier advised was his:
Good afternoon Stephen.
I understand that you are the owner of the vessel we have stored in our shed at Boat Haulage, 300 Beachaven Road.
We now have the shed leased out and need the boat removed as soon as possible. No-one has paid storage since March and this account needs to be settled.
Can you please contact me as soon as possible to make arrangements.
[21] In his affidavit, Mr Wylie is adamant he provided Mr Penney with notice he could collect the Boat prior to April 2015 free of charge (since storage costs were up to date at that point), and since then has persistently “tried to convince” Mr Penney to satisfy storage costs and to collect the Boat. He refers to invoices and statements included in the defendants’ initial disclosure bundle dated 23 March 2022.
[22] On review of that bundle, there appears to be no more than three such documents, covering only the initial part of the period of storage since April 2015. Storage during that period is charged at the rate of $850 plus GST per month. Also in that initial disclosure bundle appears to be an email from Mr Wylie to Mr Penney (to which Mr Penney responded that day) advising of an increase in storage fees, to $1,200 plus GST per month, as of 30 June 2019.
Course of Wylie Properties’ counterclaim
[23] Wylie Properties filed and served Mr Penney with their counterclaim on 22 March 2022. Under r 5.56 of the High Court Rules 2016 (the Rules), Mr Penney had 25 working days to file a statement of defence. He did not do so.
[24] By application dated 23 June 2022, Wylie Properties applied without notice for default judgment. Its application came before Edwards J who directed it be served and listed for mention at the hearing of the defendants’ application for security for costs and Ms Simunovich’s summary judgment application, which had been fixed for 17 August 2022.1
[25] Mr Penney did not appear at the hearing on 17 August 2022. Shortly before the hearing, he filed an affidavit referring to his need, for two reasons, to have more time to prepare submissions: first, the defendants’ submissions were “complex”; and second, his back condition for which he was receiving ongoing treatment but which was causing him extreme pain. Associate Judge Johnston vacated the fixture for the interlocutory applications, and directed that they and the default judgment application be allocated a case management conference, noting that for jurisdictional reasons the latter might require to be fixed for hearing before a Judge of this Court.
[26]On 12 September 2022, Associate Judge Johnston:2
(a)having considered written submissions, ordered Mr Penney to pay the defendants’ wasted costs in the sum of $3,520 plus GST;
1 Penney v Wylie Properties Ltd HC Auckland CIV-2022-404-79, 8 August 2022.
2 Penney v Wylie Properties Ltd [2022] NZHC 2315.
(b)debarred Mr Penney from prosecuting his substantive claim pending payment of those costs (that order not being intended to interfere with the defendants’ ability to pursue summary judgment or default judgment); and
(c)directed the Registrar to liaise with the parties with a view to setting down the summary judgment and default judgment applications, the Registrar being reminded of the jurisdictional issue mentioned above.
[27] By email dated 12 October 2022, the Registry simply provided a Notice of Date of Interlocutory Hearing, advising that a one-day hearing date of 17 April 2023 had been fixed. On 13 April 2023, the Registry issued a reminder, but appears to have qualified or confused the nature of the hearing, advising that albeit the hearing would take place before a named Judge of this Court, it was intended to be of “the applications for summary judgment, security for costs and mention of the judgment by default application”.
[28] The first formal appearance of counsel on Mr Penney’s behalf was that made by Mr Mitchell on Friday, 14 April 2023. He filed a memorandum of submissions advising of:
(a)Mr Penney’s discontinuance in respect of Ms Simunovich;
(b)the grounds for Mr Penney’s opposition to the security for costs and default judgment applications; and
(c)the reason for delay in filing submission; that is, Mr Penney remaining unwell.
[29] At the hearing on Monday, 17 April 2023, Mr Mitchell provided a surgeon’s letter, certifying Mr Penney “underwent surgery on 27th February 2023 and is currently recuperating” and is unable “to meet his court commitments”. He also helpfully indicated that, although he had understood the hearing in respect of Wylie Properties’ default judgment application was to involve a mention only, he was not aware of any
significant prejudice that Mr Penney might suffer as a consequence of that misunderstanding. Mr Mitchell’s 14 March 2023 memorandum had set out full submissions in opposition to that application.
[30] Also at the hearing on 17 April 2023, the parties confirmed that Mr Penney had not paid Associate Judge Johnston’s wasted costs order.
Application for judgment by default
Legal principles
[31] In Part 15, Subpart 2, the Rules set out distinct procedures for the obtaining of judgment by default, depending on whether the relief claimed is payment of a liquidated demand in money (dealt with under r 15.7), the recovery of land or chattels (r 15.8), or judgment by default for other than a liquidated demand (r 15.9).
Relevantly, under r 15.7:
15.7 Liquidated demand
(1)If the relief claimed by the plaintiff is payment of a liquidated demand in money and the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, the plaintiff may seal judgment in accordance with this rule for a sum not exceeding the sum claimed in the statement of claim and—
(a)interest (if any) payable as of right calculated up to the date of judgment (if interest has been specifically claimed in the statement of claim); and
(b)costs and disbursements as fixed by the Registrar.
…
(3) A Judge or a Registrar may authorise the sealing of a judgment under subclause (1) if satisfied that the relief claimed by the plaintiff falls within this rule.
…
(5)For the purpose of this rule and rule 15.9, liquidated demand means a sum that—
(a)has been quantified in, or can be precisely calculated on the basis of, a contract relied on by the plaintiff; or
(ab)is quantified in, or can be precisely calculated on the basis of, or by reference to, an enactment relied on by the plaintiff; or
(b)has been determined by agreement, mediation, arbitration, or previous litigation between the same parties; or
(c)is a reasonable price for goods supplied or services rendered (when no contract quantifies the price).
[33]Under r 15.9:
15.9 Formal proof for other claims
(1)This rule applies if, or to the extent that, the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, and the plaintiff seeks judgment by default for other than a liquidated demand.
(2)The proceeding must be listed for formal proof and no notice is required to be given to the defendant.
(3)After a proceeding is listed for a formal proof hearing, no statement of defence may be filed without the leave of a Judge granted on the ground that there will or may be a miscarriage of justice if judgment by default is entered, and on such terms as to time or otherwise as the Judge thinks just.
(4)The plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a Judge's satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damages.
(5)If the Judge before or at the formal proof hearing considers that any deponent of an affidavit filed under subclause (4) should attend to give additional evidence, the Judge may direct accordingly and adjourn the hearing for that purpose.
[34] As can be seen, characterisation of the claim as one made for payment of a liquidated demand (or for recovery of land or chattels) entitles the applicant to “seal judgment”. On the other hand, judgment by default for “other than a liquidated demand” requires listing for formal proof, following which event no statement of defence may be filed without leave, and affidavit evidence seeking to establish each cause of action.
[35] In the former case, a judge or registrar may authorise sealing “if satisfied that the relief claimed” falls within r 15.7. In the latter, the required affidavit evidence is to establish each cause of action “to a Judge’s satisfaction”. Thus, claimants can obtain
judgment by default in respect of liquidated demands without filing evidence to substantiate their pleadings. Nevertheless, the relevant judicial officer must scrutinise the claim for compliance with the rule.
[36] The rules relating to default judgments are silent on their application to counterclaims. Case law suggests they apply. In Smith v NZI Bank Ltd, (then) Master Williams QC held, under the previous Rules regime, that “[w]here the counterclaim is for a liquidated demand a counterclaiming defendant may seal judgment on such counterclaim if the plaintiff fails to file a statement of defence in time”.3
[37] Further, I consider that the ‘lacuna provision’, r 1.6, mandates application of the default judgment rules to counterclaims. Under r 1.6, headed “Cases not provided for”:
(1)If any case arises for which no form of procedure is prescribed by any Act or rules or regulations or by these rules, the court must dispose of the case as nearly as may be practicable in accordance with the provisions of these rules affecting any similar case.
(2)If there are no such rules, it must be disposed of in the manner that the court thinks is best calculated to promote the objective of these rules (see rule 1.2).
[38] There is express provision for use of the summary judgment procedure by defendants.4 But that procedure may be used only where there is no arguable defence, and in many cases will require a counterclaiming defendant to incur additional costs and/or delay. Accordingly, this Court is required to dispose of counterclaims by adapting the rules for judgment by default.
[39] As Mr Mitchell pointed out, counterclaiming defendants are not required to serve notices of proceeding. The Court should therefore adapt the wording of rr 15.7 to 15.9 so that the default judgment procedure becomes available to counterclaiming defendants upon expiry of the time limit set out in the rules relating to counterclaims; that is, 25 working days.5 It seems unlikely that injustice might arise from this adaptation, because plaintiffs/counterclaim defendants will in each case have initiated
3 Smith v NZI Bank Ltd [1991] 1 NZLR 621 (HC).
4 Rule 12.16.
5 Rule 5.56.
the proceeding, including by serving their own notice of proceeding setting out the applicable timeframe for response.
Analysis
[40] Wylie Properties’ counterclaim set out two causes of action: breach of contract and breach of bailment. In each case, it sought judgment for unpaid storage fees, an order for sale of the boat, and interest and costs.
[41] Wylie Properties’ June 2022 application for default judgment was stated to rely on r 15.7, to the exclusion of r 15.9. This overlooked the fact that it sought an order for sale of the Boat, to meet the amounts it said were payable by way of liquidated demand. That issue was largely overcome by Edwards J’s direction that the matter be dealt with on notice. It has since proceeded essentially by way of formal proof.
[42]However, for reasons set out below:
(a)In terms of r 15.7, I am not satisfied that the amounts claimed by way of liquidated demand are properly characterised as such. The entire application therefore requires to be determined under r 15.9.
(b)In terms of r 15.9, I am not satisfied of Wylie Properties’ causes of action.
[43] In essence, there are two possible grounds on which Wylie Properties’ claim could be treated as a liquidated demand, namely “contract relied on by the plaintiff” or “reasonable price for goods supplied or services rendered (when no contract quantifies the price)”. As will become clear I do not think either ground is available. Further, Wylie Properties’ pleading of a ‘bailment for reward’ adds nothing of substance to its claims.
Contract
[44] Wylie Properties’ first cause of action relies on what is described as a contract, assigned by the trustees of the Maria Charles Family Trust to Mr Penney, or
alternatively a ‘bailment for reward’. However, its statement of counterclaim does not expressly allege that Mr Penney accepted the assignment. The thrust of the pleading is that the assignment occurred by implication arising from Mr Penney’s failure to uplift the Boat.
[45] Review of the evidence, including that outlined above, demonstrates good reason for that degree of caution. It seems to me that upon acquisition of the Boat by the trustees of the Nikolas & Petra Trust in March 2015, Mr Penney has sought to avoid express assumption of liability by way of contract.
[46] On that basis, and in the absence of a full hearing with cross-examination, I cannot be satisfied Mr Penney’s conduct was such as to give rise to an assignment of the contract for storage by way of implication. In the context of a claim for default judgment, this limb of the liquidated damages definition is not met.
Reasonable price
[47] Understandably, Wylie Properties’ claim does not plead, and its evidence does not outline, what would be a reasonable price for the storage services that have been rendered following March 2015. Wylie Properties appears to have proceeded on the basis of its understanding that the Boat’s new owner(s) would meet the contractual rate established vis-à-vis its former owners. This limb of the liquidated damages definition is not met either.
‘Satisfied’ re each cause of action?
[48] For the reasons outlined above, I am not satisfied in the context of this application for default judgment that a contractual obligation to meet Wylie Properties’ storage fees was properly assigned, whether expressly or by (necessary) implication. The obscure correspondence of Mr Penney that is in evidence may well have created an expectation on the part of Wylie Properties, but does not necessarily imply his agreement to meet storage costs on an ongoing basis.
[49] The bailment action is not straightforward. A bailment at its core involves a bailor, the holder of a possessory interest in chattel(s), transferring that possessory
interest to the bailee.6 Bailments frequently arise by way of contract, but do not require to do so.7 An action pursuant to a bailment can be based on contract, tort or on the bailment itself.8
[50] Wylie Properties argue that the present circumstances give rise to a bailment for reward. However, bailment for reward is a species of contractual bailment.
Consideration is required.9
[51] If there were no contract, the bailment would seem to be a ‘gratuitous bailment’. Gratuitous bailments do not, normally, entitle the bailee to compensation.10 In limited circumstances, a bailor may be required to indemnify the bailee for their costs in preserving the chattel but that is subject to two considerations:11
… first, the circumstances and inferrable assumptions of the parties which attained at the time the gratuitous bailment was created; and secondly, the nature of the hazard against which the bailee exerted his cost-incurring precaution.
[52] Again, in the present context, there is insufficient evidence to satisfy me that this indemnification exception applies. And if I were to find that it did, I would have to determine the reasonableness of Wylie Properties’ price. Again, I do not have sufficient evidence to justify doing so.
[53] Overall, Wylie Properties’ causes of action fail in the context of formal proof. In my view, a trial is best suited to test the causes of action that have been pleaded, or any further cause of action, by way of estoppel.
6 Commercial Law in New Zealand (online ed, LexisNexis) at [21.1.1].
7 Roger Thornton (ed) Gault on Commercial Law (online ed, Thomson Reuters) at [AB2.01]; and Jan McCartney Laws of New Zealand — Bailment (online ed, LexisNexis) at [(1)1].
8 Halsbury’s Laws of England Bailment and Pledge (volume 4) at [224], citing to Sutcliffe v Chief Constable of West Yorkshire [1996] RTR 86 (CA) at 90.
9 Thornton, above n 7, at [AB2.01(1)].
10 Thornton, above n 7, at [AB2.03]: “If the bailment is for consideration, the bailee has a right to the compensation. This is subject to the terms of the agreement. A bailee may also be entitled to reimbursement for expenses incurred in safekeeping the property. Consequently, the bailee may be able place the possessory right of lien over the bailor’s property.”
11 McCartney, above n 7, at [22] (fn 1), citing to China Pacific SA v Food Corporation of India
[1982] AC 939 (HL).
Application for security for costs
Legal principles
[54]Rule 5.45 of the Rules relevantly provides:
5.45 Order for security of costs
(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(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.
(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3)An order under subclause (2)—
(a)requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i)by paying that sum into court; or
(ii)by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and
(b)may stay the proceeding until the sum is paid or the security given.
(4) …
(5)A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6)References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[55] In determining applications under r 5.45, the Court will generally follow these steps:12
(a)Has the applicant satisfied the court of the threshold under r 5.45(1)?
(b)How should the court exercise its direction under r 5.45(2)?
(c)What amount should security for costs be fixed at?
(d)Should a stay be ordered?
[56] The decision to order security, and the quantum of such security, are at the Court’s discretion. The discretion is generally not to be fettered by constructing “principles” from the facts of previous cases.13 But the Court is to balance the competing interests — being the defendant’s interest in protection from a costs order that is incapable of fulfilment and the plaintiff’s right of access to justice.14 Courts will be slow to make an order for security that will stifle a genuine claim.15 This balancing exercise is the Court’s overriding consideration.16
[57] “Satisfied” means that the Court has arrived at a decision based on the evidence.17
[58]The Court should assess whether there is:18
… credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the [party] will be unable to pay the costs. This does not, of course, amount to proof that the [party] will, in fact, be unable to pay them.
[59] The Court may draw an adverse inference where the defendant has sufficiently put in issue the ability, or rather the inability, of the plaintiff to pay.19 Where the
12 Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].
13 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].
14 Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].
15 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].
16 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24(c)].
17 Wishart v Murray [2016] NZHC 3132 at [7]; and Gold Star Invest Ltd v V [2021] NZHC 334 at [25].
18 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519; NZ Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC) at 212; and Stephenson v Jones [2013] NZHC 638.
19 Arnold v Fairfax New Zealand Ltd [2017] NZHC 1757 at [9].
plaintiff refuses to disclose their financial position, the inference will be more readily available.20
[60] The Court will assess the claim’s merits and prospects of success, to the extent that is possible at an early juncture.21 The Court will also consider the extent to which the plaintiff’s impecuniosity may have been caused by the defendant’s conduct.22
[61] A plaintiff’s unwillingness to pay previous judgment debts weighs in favour of an order for security.23 But whether a plaintiff has been a responsible litigant is secondary to the issue of whether the lack of merit of the claim justifies security that would prevent the claim from proceeding.24
[62] Quantum of security is discretionary and is assessed in the round. It need not be fixed by reference to likely cost awards.25 It is to be what the Court thinks fit in all the circumstances.26 This discretion also extends to the manner and form of the security provided. In circumstances where there are no assets available to meet a security for costs, the Court may impose a security over real property.27 The Court would similarly have jurisdiction to impose a security over personal property.
[63]A Court will generally stay a proceeding until the security ordered is given.28
Submissions
[64] Ms McCabe pointed to Mr Penney’s inaction in this proceeding. Mr Penney’s first substantive response to Wylie Properties’ counterclaim of March 2022, was to instruct Mr Mitchell to make an application for an extension of time to file a statement
20 Monnery v Parsons [2021] NZHC 2854 at [51]-[52].
21 Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].
22 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).
23 Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand
[2016] NZHC 729 at [22]; and Mawhinney v Auckland Council [2014] NZHC 3207.
24 Wright v Attorney-General [2019] NZHC 3046 at [26].
25 Sharp v Pillay [2017] NZHC 647; and Red 9 Ltd v The Learning Ladder Ltd (in liq) [2021] NZCA 284 at [30].
26 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).
27 Burgess v Monk (No 5) [2017] NZHC 2732; and Bligh v Earthquake Commission [2017] NZHC 2994.
28 Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 at [68] and [85].
of defence. Further, Mr Penney’s inadequate response to Ms Simunovich’s summary judgment application and this application for security for costs resulted in Associate Judge Johnston’s wasted costs order.
[65] Ms McCabe submitted that the threshold for security for costs is met because: Mr Penney has not yet paid his wasted costs order; he was recently declared bankrupt; and on his own evidence he voluntarily chose to be declared bankrupt.
[66] Ms McCabe also referred to other proceedings in this Court involving Mr Penney. By judgment dated 18 October 2022, following a hearing on 5 August 2022, Associate Judge Sussock declined an application made by My Trustee Company (Nik and Pet) Limited (formerly named My Trustee Company (Nikolas and Petra) Limited) for an extension of time to file a statement of defence to liquidation proceedings brought against it by Prestige Motors Limited.29 My Trustee Company had failed to file a statement of defence within the time prescribed. Rule 31.20 prohibited My Trustee Company from appearing at the hearing of the application for liquidation, without an extension of time or special leave of the Court.
[67] In doing so, Associate Judge Sussock observed Mr Penney had personally taken various steps related to the proceeding: the filing of a letter making various allegations against counsel for Prestige, on 8 June 2022; and pursuit of a separate proceeding, struck out by Moore J on 9 June 2022 on the basis it sought to re-litigate arbitral proceedings.
[68] My Trustee Company’s application for time extension had been filed by counsel on 21 July 2022, the day before the second call of the liquidation proceeding on 22 July 2022. The 5 August hearing was fixed during the second call. The application appears to have been supported by an affidavit of Mr Penney, setting out “briefly” his difficulties in instructing counsel, and the evidential basis on which My Trustee Company resisted liquidation.30 Associate Judge Sussock found
29 Prestige Motors Limtied v My Trustee Company (Nik and Pet) Ltd [2022] NZHC 2700.
30 At [37].
Mr Penney’s evidence insufficient to show it was arguable My Trustee Company would be able to pay its debts in a relatively short time.31
Analysis
[69] I am satisfied that the threshold has been met; that is, that Mr Penney will be unable to meet a costs award if Wylie Properties were successful in the proceeding. The most salient factors are that Mr Penney has refused to disclose his financial position and his earlier voluntary bankruptcy.
[70] I must therefore consider whether to exercise the Court’s discretion. I am satisfied this discretion should be exercised. The same factors that engaged the threshold question are relevant here. There are a number of further factors I consider relevant:
(a)First, Mr Penney and My Trustee Company’s conduct in the above-mentioned proceedings bear disturbing similarity to the present proceedings. The Court has a responsibility to ensure its processes are complied with and run in an orderly and timely manner. Mr Penney has frustrated these processes.
(b)Second, Mr Penney has not paid Associate Judge Johnston’s wasted costs order.
(c)Third, Mr Penney’s claims appear to be largely unmeritorious. (Although, I have considered the counterclaiming defendants’ claims do not satisfy the judgment by default threshold, Mr Penney’s original claims are a separate matter).
[71]That leaves the matter of the amount and form of the security.
[72] Ms McCabe has suggested the Court make an order for security over the Boat and/or an order for its sale. I am not inclined to accept that suggestion. An order for
31 At [57].
security of costs should focus on the ability of the plaintiff to pay the costs award and not the potential judgment liability.
[73] Further, while I accept that the Boat would likely cover the full amount of any costs award considered in isolation, Wylie Properties seeks an order for the Boat’s sale to meet storage fees that are allegedly outstanding. The consequence is that I must consider whether the Boat alone could cover both the costs and judgment liability. I consider there is a real risk that the Boat could not cover both amounts. I am not satisfied it would amount to good security.
[74] Mr Mitchell criticised the claimed amount of $50,000 for security. I agree that amount is excessive. I consider $35,000 is an appropriate sum in contemplation of costs not already recognised by way of wasted costs order.
[75] In my view, Mr Penney’s claims against Wylie Properties should be stayed until security for that amount is provided.
Result
[76]Wylie Properties’ application for judgment by default is dismissed.
[77] Mr Penney’s application for an extension of time in which to file a statement of defence is accordingly rendered unnecessary. Wylie Properties’ claims no longer being set down for formal proof, leave to file Mr Penney’s statement of defence is no longer required under r 15.9. However, in the interests of prompt disposal of this proceeding, I direct that any statement of defence by Mr Penney to Wylie Properties’ counterclaim must be filed and served within seven working days of this judgment.
[78] The Registry is to schedule a case management conference in respect of Wylie Properties’ counterclaim against Mr Penney on the next convenient date after the expiry of those seven working days.
[79] Mr Penney’s claims against Wylie Properties are stayed until he gives security for costs in the sum of $35,000, by paying that sum into court, or by giving security for that sum to the satisfaction of the Registrar other than in respect of the Boat.
[80]In respect of Mr Penney’s discontinuance against Ms Simunovich:
(a)Ms Simunovich is to file and serve a memorandum in respect of costs within 10 working days of this judgment; and
(b)Mr Penney is to file and serve a memorandum in respect of costs within 10 working days thereafter.
Johnstone J
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