Philatelic Reference Library Ltd v Hogg
[2014] NZHC 3036
•1 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-1329 [2014] NZHC 3036
BETWEEN THE PHILATELIC REFERENCE
LIBRARY LTD Plaintiff
AND
DOUGLAS STUART HOGG Defendant
Hearing: 1 December 2014 Counsel:
D T Broadmore for Plaintiff
J McBride for DefendantJudgment:
1 December 2014
(ORAL) JUDGMENT OF HEATH J
Solicitors:
Buddle Findlay, Auckland Lowndes Jordan, Auckland Counsel:
J McBride, Auckland
THE PHILATELIC REFERENCE LIBRARY LTD v HOGG [2014] NZHC 3036 [1 December 2014]
The application
[1] The Philatelic Reference Library Ltd (Philatelic) is a limited liability company that was incorporated in the United Kingdom on 7 November 2011. Philatelic states that it “was incorporated to develop and implement software to record, aggregate and disseminate information relevant to the collectibles industry, including the Philatelic (postage stamp) industry”. The defendant to this proceeding, Mr Hogg, takes the view that the purpose of the company was no more than philately.
[2] Philatelic alleges that Mr Hogg was both a director of Philatelic, and its Chief
Executive Officer, (though the latter is disputed), from 7 November 2011 until 20
November 2013. Philatelic alleges that Mr Hogg, in breach of contractual and fiduciary obligations, conducted himself in a manner that compromised Philatelic’s ability to act in accordance with an agreed business plan. It is alleged that Mr Hogg received personal payments in a sum of more than £312,000 between 14 February
2012 and 21 February 2013. Philatelic alleges that he received those moneys, even though he had failed to provide services promised by contract.
[3] Mr Hogg is resident in New Zealand. He denies the allegations that have been made against him. Philatelic has sued him in this Court to recover damages for losses it says were suffered as a result of his conduct. Mr Hogg seeks security for costs, both on the grounds that Philatelic is a company registered in another
jurisdiction and alleged impecuniosity.1 Philatelic opposes the application, though it
has indicated that a sum of $20,0000 might be appropriate.
Legal principles
[4] This Court may make an order requiring a plaintiff to give security for costs that a defendant may incur during the proceeding. The purpose of such an order is to protect a defendant who is successful at trial.
[5] Rule 5.45 of the High Court Rules relevantly provides:
1 High Court Rules, r 5.45.
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.
….
(Emphasis added)
[6] I am satisfied that the threshold requirement under r 5.45(1) is satisfied. Not only was Philatelic incorporated outside New Zealand,2 but the evidence given by its own director, Mr Schroder, it is of doubtful solvency.3
[7] Once the threshold requirement is met, it is necessary for the Court to exercise its discretion whether or not to order security. As no one factor will
2 Ibid, r 5.45(1)(a)(ii).
3 Ibid, r 5.45(1)(b).
necessarily be decisive, the contest between the parties falls to be resolved through a balancing of discretionary factors.
[8] The appropriate approach was summarised by the Court of Appeal in AS McLachlan Ltd v MEL Network Ltd:4
[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 may, if it thinks fit in all the circumstances, order the giving of security for costs". Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing "principles" from the facts of previous cases.
[14] While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v BNZ (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a checklist of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.
[9] While counsel for both plaintiff and defendant endeavoured to persuade me of the merits or otherwise of Philatelic’s claim, it is always difficult to make an assessment of the merits at an early stage. All the Court can do is to ascertain whether an order might stifle an otherwise genuine claim.5 As Kós J perceptively put the question in Highgate on Broadway Ltd v Devine:6
[23] …
(b) Would ordering security deprive the plaintiff of the capacity to advance a prima facie meritorious claim? Access to justice is an essential human right. The cost of exercising that right is the payment of costs in the event of failure. The right of a successful defendant to costs in that event is arguably subordinate to the plaintiff’s right to be heard. Strong social policy considerations favour the use of Courts as an accessible forum for the resolution of disputes and grievances of almost all kinds. Only where a clear impression can be formed that the plaintiff’s claim is altogether without merit – so that in the alternative it would be amenable to being struck out – would it be right for
4 AS McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at paras [13] and [14].
5 Reekie v Attorney-General [2014] NZSC 63 at para [3].
6 Highgate on Broadway Ltd v Devine [2013] NZAR 1017 (HC) at para [23](b).
security to be ordered where to do so would bring the
plaintiff’s claim to a dead halt. …
[10] While there is no inflexible rule that security for costs should be given by a plaintiff with no assets in the jurisdiction, it will often be just to make such an order. In this case, for example, Philatelic accepts that it does not have any assets, save for the intellectual property in dispute, to meet any order for security for costs. Nevertheless, its director and shareholder, Mr Schroder, has deposed that he is “a significant shareholder in one of Europe’s largest privately owned clothes retailers,
…, which has 50,000 square metre stores in most major cities in Germany and which is currently expanding throughout Europe”. Mr Schroder states that the revenue of that entity is in excess of €900 million.
[11] While I am satisfied that the merits of the respective claims and defence are such that they should be considered neutral in the assessment of security, I am satisfied that some security should be given to enable Mr Hogg to be protected and to have the ability to recover that might be ordered against Philatelic if it were unsuccessful in its claim. I consider that staged security is appropriate. I direct that security be given in the sum of $40,000, with the amount of security to be reviewed at the next case management conference.
[12] To reiterate, I am satisfied that Mr Schroder has the means to fund a proceeding brought for the benefit of his interests. I am not satisfied that the provision of security will stifle the claim. The amount of security is relatively modest. Whether it is enough can be considered later.
Result
[13] I order that security for costs shall be given to the satisfaction of the Registrar in the sum of $40,000 on or before 30 January 2015. If security were not given by that time, the proceeding will be stayed.
Costs
[14] I have heard from counsel on the question of costs in relation to the present application. Mr McBride, for Mr Hogg, submits that costs should be awarded in
costs should lie where they fall. Having considered the respective submissions, I
propose to take a slightly different course.
[15] I reserve costs, which I will fix following the next case management conference. That will enable me to assess whether it is likely that any further security will be required that takes the amount involved to a level more akin to that submitted by Mr McBride today, or whether the outcome is closer to that for which Mr Broadmore contended. On that basis, costs are reserved.
Further directions
[16] An issue did arise as to particulars. Mr Broadmore has indicated that an Amended Statement of Claim will be filed. That will deal with the issue, to the extent that Mr McBride will be able to give consideration to it after the Amended Statement of Claim has been filed.
[17] I make the following directions:
(a) An Amended Statement of Claim shall be filed and served on or before 19 December 2014.
(b)The Registrar shall allocate a case management conference for one hour before me at 9am on the first available date after 2 February
2015. The conference shall be held in Court for chambers.
(c) A joint memorandum shall be filed by counsel no less than five working days before the conference. That memorandum shall set out the issues to be addressed at the conference and the respective positions of the parties on each.
P R Heath J
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