Rafiq v Latitude Financial Services
[2023] NZHC 1690
•3 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-108
[2023] NZHC 1690
BETWEEN RAZDAN RAFIQ
Plaintiff
AND
LATITUDE FINANCIAL SERVICES LIMITED
First Defendant
AND
BAYCORP (NZ) LIMITED
Second Defendant
Hearing: 22 June 2023 Appearances:
Plaintiff in person / respondent
W R Potter for the First Defendant/applicant Y Dong for the Second Defendant/applicant
Judgment:
3 July 2023
JUDGMENT OF GRICE J (SECURITY FOR COSTS)
This judgment was delivered by me on 03 July 2023 at 3.30 pm pursuant to R 11.5 of the High Court Rules
…………………..
Registrar/Deputy Registrar
Solicitors:
Mr Rafiq in personRussell McVeagh, Auckland
W R Potter, Barrister, Auckland
RAFIQ v LATITUDE FINANCIAL SERVICES LIMITED [2023] NZHC 1690 [22 June 2023]
[1] The first and second defendants apply for orders for security as to costs. The applications complement each other, in that the first defendant deals with security for costs for the whole proceeding and the second respondent focuses on its application for security for the summary judgment application.
[2] Mr Rafiq opposes the applications for security as to costs. He does not deny that he is impecunious. However, he says the defendants are taking advantage of his financial circumstances which have been caused by them, and their respective applications for security amount to a “mechanism to avoid scrutiny of its enterprise and thwart those proceedings from advancing to final stage.”
Background
[3] The plaintiff brings a claim by way of summary judgment against the first defendant and second defendant concerning various finance transactions in which he was recorded as the debtor and the steps taken to recover the debts by the first and second defendant. The first defendant is a finance company, and the second defendant is a debt collection company.
[4] Mr Rafiq says he was not the person who applied for the relevant credit and seeks declarations that the defendants are liable to the plaintiff for damages and that the defendants have breached the applicable provisions of the Credit Contracts and Consumer Finance Act 2003, as well as a permanent injunction for the “complete deletion and/or retraction of those debts from the records of those defendants.” The claim also seeks orders for damages totalling $2 million, being $1 million against the defendants jointly as general or compensatory damages as well as aggravating damages of $500,000 and exemplary or punitive damages of $500,000.
[5] The statement of claim and supporting materials that Mr Rafiq has filed are difficult to follow. The statement of claim amounts to a narrative of financial transactions that are the subject of the proceeding.
[6] Insofar as I am able to understand the statement of claim, it alleges that the first defendant “unreasonably and wrongly” accused the defendant of having credit cards,
an account with Noel Leeming and acted in breach of the “applicable Credit Contracts and Consumer Finance Act 2003”.
[7] In relation to the second defendant the claim refers to an infringement fee under the Land Transport Act 1998 and other debts. Mr Rafiq claims that the second defendant wrongly accused him of debts to those finance companies.
[8] The plaintiff has filed an amended statement of claim dated 23 May 2023 (filed 25 May 2023) replacing his original statement of claim dated 20 January 2023. The first defendant has not pleaded to the claim but has filed a notice of opposition to the application for summary judgment and affidavits in support.
[9] The second defendant has pleaded to the original statement of claim as well as filing a notice of opposition to the summary judgment application and affidavit in support of the opposition.
[10]I refer in more detail to the claims and defences below.
Legal principles
[11] Rule 5.45 of the High Court Rules 2016 provides that the Court may, if it thinks it would be just in all the circumstances, order a plaintiff to give security for costs where 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 proceeding.
[12] The rule does not imply any onus or standard of proof of the plaintiff’s alleged inability to pay costs; it simply states that the Court must be “satisfied” of the plaintiff’s inability to meet an award of costs. Put simply, the Court must come to a decision on the evidence before it.1 There should be credible evidence of surrounding circumstances from which it may be reasonably inferred that the plaintiff will be unable to pay costs; however, the evidence need not amount to proof that the plaintiff will, as a matter of fact, be unable to pay costs.2 In the absence of direct evidence, it can be sufficient to adduce evidence of surrounding circumstances from which an
1 Wishart v Murray [2015] NZHC 3132 at [7].
2 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC).
inference of inability to pay can reasonably be drawn.3 Further, although the Court will give due weight to a plaintiff’s sworn assertion that they will be able to meet costs awarded, that will not be decisive.4
[13] Whether an order for security of costs would be “just in all the circumstances”, and whether or not to order security and, if so, the quantum, are discretionary.5 The Court’s discretion is generally not to be fettered by constructing “principles” from the facts of previous cases.6 The following considerations may nevertheless be relevant:7
(a)Balancing the interests of the plaintiff and defendant is the overriding consideration.8 This includes the plaintiff’s right to access to justice.
(b)As far as possible, bearing in mind the early stage of the proceeding, the Court will endeavour to assess the merits and prospects of success of the claim.9 There is however a very real limit as to how far such an inquiry can be made, particularly at this early stage in the proceeding.10
(c)Where the plaintiff’s impecuniosity results from the defendant’s actions, it may be unjust to order security for costs.11
[14] I now turn to consider the factors relevant to this application for security for costs.
3 Totara Investments v Abooth Ltd HC Tāmaki Makaurau | Auckland CIV-2007-404-990, 4 Māehe
| March 2009 at [28].
4 New Zealand Democratic Party for Social Credit Inc v Minister of Land Information
[2020] NZHC 1104 at [16].
5 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13].
6 At [13].
7 Robert Osborne (ed) McGechan on Procedure (online looseleaf ed, ThomsonReuters) at [HR5.45.03].
8 Highgate on Broadway v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24](c).
9 McGechan on Procedure, above n 7, at [HR5.45.03(2)].
10 Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].
11 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).
Inability to pay costs
[15] The defendants submit that the plaintiff is impecunious. They point out that he has filed with his documents in opposition to this application an application for waiver of the $110 filing fee on the basis that he is financially dependent on a jobseeker benefit in the amount of $397.20. In addition, the first defendant notes that the plaintiff’s affidavit in opposition to security for costs affirmed on 23 May 2023 does not assert that he will be able to pay costs nor provide any evidence of his ability to do so. In fact, although Mr Rafiq says in his notice of opposition to the application that there is no reason to believe that he will be unable to pay the cost of these proceedings if he was unsuccessful, he goes on to say that “[t]hose claims may be rendered nugatory if the securities for cost are imposed of any quantum.”
[16] The plaintiff also describes himself in his affidavit in the preamble as being of “no physical address, no occupation.” Information from previous decisions in which Mr Rafiq has been involved indicates that Mr Rafiq was made bankrupt relevant to a debt from a previous case.12 He also apparently has a tax debt to Inland Revenue.13
[17] Mr Marc Incerti for the first defendant in his affidavit of 8 May 2023 states that the first defendant’s files record an unpaid account by Mr Rafiq to Latitude of
$8,865.16 at the time the debt was sold to the second defendant, Baycorp. Ms Natalie Guerriero, for Baycorp, in her affidavit affirmed 9 May 2023 says that in addition to the debt to Latitude, the plaintiff is also listed with Baycorp as owing money to Columbus Financial Services Ltd in relation to a Q credit card and to Auckland Transport in relation to vehicle infringement notices. In relation to the Columbus Financial Services Ltd and Auckland Transport debts she says that Mr Rafiq did not appear to dispute those debts in this proceeding. It is difficult to tell from the pleadings whether that remains the position in the amended statement of claim.
12 Rafiq v Secretary for Internal Affairs and Chief Executive for Department of Internal Affairs
[2023] NZHC 127 [Rafiq v Internal Affairs] at [14(a)].
13 At [14(c)].
[18]Mr Rafiq in his oral submissions today also said that he had not paid costs of
$10,192.33 which he was ordered to pay by Downs J in a judgment dated 17 May 2023.14 Mr Rafiq said he was appealing that decision.
[19] On the evidence, I am satisfied that for the purposes of this application Mr Rafiq is impecunious and would be unlikely to pay any costs order were he unsuccessful in the proceeding or the summary judgment. The material before me, including the application for waiver, supports that conclusion and Mr Rafiq does not argue otherwise.
[20] I consider below whether his financial position is a result of the actions of the defendants.
Merits
[21] The defendants pointed out that consideration of the merits of proceeding at the early stages for the purposes of an application for security as to costs was usually difficult. However, in this case, there is a summary judgment application and so there is evidence before the Court in the form of Mr Rafiq’s affidavit in support of the application for summary judgment and affidavits filed by the defendants in response.
[22] In relation to the prospects of success, the first defendant points out that the plaintiff has served an amended statement of claim since the applications for security were filed. It says the pleading is prolix and the legal basis on which the claims are made, and relief is sought remains unclear. The statement of claim as it relates to the first defendant was summarised by counsel for the first defendant as follows:
(a)paragraphs 1 to 7 summarise documents and correspondence related to the plaintiff’s account with Latitude;
(b)paragraphs 42 to 54 allege that those documents were misleading and contrary to the Credit Contracts and Consumer Finance Act 2003, in that they unreasonably and wrongly accused the plaintiff of, among
14 Rafiq v Secretary for Internal Affairs [2023] NZHC 1188 at [5].
other things, seeking a loan, having a debt account and having credit card debts;
(c)paragraphs 94 and 95 say that the debt is still active, which has affected the plaintiff’s credit history and caused him to be declined for a credit card in December 2022;
(d)paragraphs 96 to 99 set out that the plaintiff claims $1 million general compensatory damages, $500,000 aggravated damages and $500,000 exemplary damages from the defendants jointly, in addition to other orders; and
(e)the prayer for relief in paragraph 100 seeks declarations, an injunction, damages in the above sums and 2B costs.
[23] Latitude submits that the premise of the plaintiff’s claim is that he was not the applicant for the Harvey Norman credit card underwritten by Latitude in January 2017. That is denied by the defendants. However, Latitude says even if it were correct, the plaintiff’s claim would be unlikely to succeed because the loan application was made to Latitude in the plaintiff’s name in January 2017 using documents that reasonably confirm his identity, including his driver’s licence.
[24] The second defendant responded to the plaintiff’s assertions that he was not the correct debtor with details of the information necessary for it to investigate how the account was opened, including a statutory declaration and police report. For reasons that have not been explained, the plaintiff did not provide this information to Baycorp.
[25] In addition, the first defendant says any effect of the Latitude debt on the plaintiff’s ability to obtain credit will have been modest in light of his history of bankruptcy and his outstanding debts to other creditors. There is no allegation in the plaintiff’s pleading that the records or steps taken to recover the debts said to be outstanding have caused the plaintiff any financial loss or damage.
[26] The first defendant points out that if the plaintiff was not the true applicant for the Latitude loan, he has been a victim of an identity theft, which would not give rise to an entitlement to $1 million in damages from the creditor that has been defrauded. Finally, the first defendant says that most, if not all, of any claim against Latitude under the Credit Contract and Consumer Finance Act would appear to be time-barred under s 95 to the extent that it is a claim for orders under s 93, which is unclear from the amended statement of claim. Since then, Latitude has sold the debt to Baycorp in October 2017 and the plaintiff has been in correspondence with Baycorp about the debt since May 2018.
[27] In respect of the claim as it relates to the second defendant, insofar as it could be understood, Ms Dong submitted:
7.To the extent that Baycorp understands Mr Rafiq's claim (which is unclear, difficult to follow and does not give sufficient particulars), and putting the claim at its highest, the allegations appear to be that:
(a)Baycorp has breached the right to a fair trial by sending demands for payment to Mr Rafiq on 15 November 2017;
(b)Baycorp has engaged in conduct in breach of the Credit Contracts and Consumer Finance Act 2003 (“CCCFA”) in respect the Latitude Debt, because Mr Rafiq did not apply for credit from Latitude, Mr Rafiq could not be approved for credit while he remained bankrupt and Baycorp did not remove his name upon request; and
(c)Baycorp has engaged in conduct in breach of the CCCFA in respect of the Columbus Debt, because Mr Rafiq did not apply for credit from Columbus and could not be approved for credit while he was bankrupt.
8.Mr Rafiq appears to seek:
(a)declarations that Baycorp is liable in tort (it is unknown what tort) and under the CCCFA;
(b)a permanent injunction for complete deletion and/or retraction of the Latitude Debt, Columbus Debt and AT Debt from Baycorp’s records;
(c)general and/or compensatory damages of $1,000,000;
(d)aggravated damages of $500,000; and
(e)exemplary or punitive damages of $500,000.
[28]Ms Dong went on to say:
9.Baycorp’s position is that:
(a)in respect of the Latitude Debt and Columbus Debt, Baycorp is not the correct defendant and did not engage in the alleged conduct;
(b)as the AT Debt was returned to Auckland Transport on or around 9 February 2018, Baycorp is not the correct defendant in respect of:
(i)any permanent injunction for complete deletion and/or retraction of the AT Debt;
(ii)any remedy which involves writing off the AT Debt and clearing it from Mr Rafiq’s credit history; or
(iii)any damages in respect of any conduct that did not occur between around 12 September 2017 to around 9 February 2018;
(c)notwithstanding that Baycorp is not the correct defendant, on the basis of documents available to Baycorp it maintains that:
(i)Mr Rafiq applied for credit from, and entered into credit contracts with, Latitude and Columbus;
(ii)there was no blanket legal position that Mr Rafiq could not be approved for credit; and
(iii)Mr Rafiq owed or owes the Latitude Debt, Columbus Debt and AT Debt;
(d)there is no evidence from Mr Rafiq that the Columbus Debt and AT Debt are not owed;
(e)even if any cause of action could be and was established, no loss or damage could be established; and
(f)to the extent that Mr Rafiq may be seeking statutory damages under s 88 of the CCCFA or an order under s 93 of the CCCFA, Baycorp has a limitation defence under s 90(3) or 95(3) of the CCCFA.
[29] Insofar as the summary judgment application is concerned, the first defendant submits that the case is plainly inappropriate for summary judgment. Notably:
(a)both defendants filed evidence credibly disputing the factual premise for the plaintiff’s claim;
(b)that evidential contest is not suitable for resolution on affidavit;
(c)no evidence has been adduced by the plaintiff that would support an order for general or compensatory damages in the sum of $1 million (or any amount);
(d)no evidence has been adduced by the plaintiff that would support orders for aggravated exemplary damages;
(e)it is unclear from the plaintiff’s pleading what the legal basis is for the relief sought; and
(f)the apparently novel aspects of the plaintiff’s claim and the declaratory relief sought would weigh against the Court exercising its discretion to grant summary judgment.
[30] Counsel submitted that the claims as pleaded are unclear and cannot succeed. Counsel also noted that the plaintiff has a history of bringing unmeritorious claims, which weighs against him having the benefit of the doubt that his proceeding may have hidden merit.
[31] Mr Rafiq in his submissions merely iterated the basis of his claims. In his oral submissions, which were respectful and relatively succinct, he emphasised the basis for his claims and that if he were required to pay security for costs justice would be denied, or at least delayed while he appealed any decision. He did not address the defendants’ submissions insofar as they particularly related to issues relevant to security for costs.
[32] As I have pointed out, the pleadings and supporting documentation, including Mr Rafiq’s affidavits, are unclear, confusing and difficult to follow. I accept the defendants’ submissions in relation to the merits of the pleadings. In this application, when assessing the merits, the Court has had the advantage of evidence in the summary judgment application. It is clear that the summary judgment application is highly unlikely to succeed. The proceedings generally also appear to lack merit.
[33] Despite the fact that this is an early stage of the proceedings, the state of the pleadings and material that Mr Rafiq relies on are virtually unintelligible. I am satisfied for the purposes of the security application that on the information before me the proceedings in general, and the application for summary judgment in particular, have little merit or chance of success.
History of claims
[34] The first defendant also points out that the plaintiff has a history of unmeritorious claims and has previously been barred from bringing civil claims without permission because he was declared vexatious.15 His history as a vexatious litigant is summarised in a recent decision of the court in Rafiq v New Zealand Customs Service.16
[35] In Forrest v Attorney-General, Osborne AJ noted that the plaintiff before him in that case did not dispute that a significant proportion of his litigation had been unsuccessful.17 His Honour said:
[41] The weight I attach to this factor is modest, but still to be taken into account. Mr Forrest comes to the Court as a person with a case of minimal (if any) merit. But this is not the first or even the second or third time on which he has come to Court to address a case of minimal merit. Access to justice issues do not weigh so heavily in such circumstances.
[36] The first defendant also points to comments by Bell AJ in an earlier proceeding brought by the plaintiff that:18
… Ordinary litigants will be constrained in running cases by the prospects of costs orders if they are unsuccessful. That induces a sense of responsibility in the conduct of litigation. But Mr Rafiq is not deterred by that. That is clear from the reckless way in which he has undertaken proceedings and from the fact that orders for costs have really not had any restraining effect on his conduct.
[37] I do not attach significant weight to the fact that Mr Rafiq has a history of unsuccessful claims. Even without that factor, I am satisfied on the material before
15 Rafiq v Internal Affairs, above n 12, at [5].
16 Rafiq v New Zealand Customs Service [2022] NZHC 1756 at [3]–[5].
17 Forrest v Attorney-General HC Ōtautahi | Christchurch CIV-2010-442-202, 14 Tīhema | December 2010.
18 Rafiq v Meredith Connell [2014] NZHC 1597 at [56].
me that the application for security for costs should succeed. Mr Rafiq has made a claim that appears unmeritorious, it cannot succeed on the information before me at summary judgment and I am satisfied that Mr Rafiq is impecunious, which impecuniosity is not as a result of the defendants’ actions.
Amount of security as to costs
[38] The amount of security ordered is within the Court’s discretion. Relevant considerations include:19
(a)amount or nature of the relief claimed;
(b)nature of the proceeding, including the complexity and novelty of the issues, and therefore the likely extent of interlocutories;
(c)estimated duration of trial (or fixture); and
(d)probable costs payable if the plaintiff is unsuccessful, and perhaps also the defendant’s estimated actual (that is, solicitor and client) costs.
[39] The first defendant seeks the sum of $35,000 for the substantive proceeding. It has attached a schedule of costs calculations based on a category 2 band under the High Court Rules totalling $40,391. The calculations have been based on a conservative estimate of time involved for a two-day hearing.
[40] The second defendant submits that $8,000 is appropriate as security in respect of the first stage of the proceeding, up to and including the determination of Mr Rafiq's summary judgment application. This amount is based on counsel’s assessment of likely scale costs on a 2B basis for a quarter-day hearing on the summary judgment application, amounting to $8,484.50.
[41] I consider that the calculations for both the general proceedings and for the summary judgment application alone are reasonable, and in fact conservative. The
19 McNaughton v Miller [2022] NZCA 273 at [17], which adopted the summary in McGechan on Procedure, above n 7, at [HR5.45.07].
likely actual costs for those defendants which would be incurred in the conduct of their defences to the proceeding and the summary judgment application are likely to be well in excess of those amounts.
[42] I consider in the present circumstances it is appropriate for me to order the sum of $8,000 for each of the first and second defendant to be held in a solicitor’s trust account nominated for that purpose by the defendants and either agreed to by the plaintiff or otherwise and approved by this court for that purpose and to be paid as directed by this court at the conclusion or disposition of the application for summary judgment.
[43] I also consider that it is relevant that the standard of the pleadings and the material in support of the claims suggests that any litigation is likely to be long and drawn-out. Mr Rafiq, also a litigant in person, is otherwise unrestrained by costs implications. The indications are that the defence will require substantial resourcing.
[44] I also consider the sum sought by the first defendant of $35,000 for the total proceedings, which would include the summary judgment application security for costs, is reasonable, and in fact conservative in the circumstances. However, I consider it should be paid into the relevant trust account for security as to costs in tranches, with the first amount of $8,000 paid, as I have directed, for the summary judgment application. The second amount of $8,000 is to be paid into the trust account as security for costs following the summary judgment application (if it does not succeed) and the third amount of $19,000 to be paid to the relevant solicitor’s trust account on the setting down of the trial. Leave is also reserved for any further applications should that become necessary due to the costs or conduct of the proceedings or otherwise.
Conclusion
[45] The application for security for costs of the second defendant is granted for the summary judgment application stage and proceeding in the sum of $8,000. The application for security for costs for the first defendant of $35,000 for the proceedings in general is granted but to be paid in tranches, including $8,000
immediately in relation to the summary judgment application. The details of the manner in which the payments are to be made held are set out above.
[46] Subject to any further submissions on the point, it appears appropriate the costs in this matter be awarded on a 2B basis to the defendants as the successful parties. Any application for costs should be filed within five days of the date of this judgment together with submissions, any response submissions to be filed by memoranda within a further five days and any reply within a further three days.
Grice J
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