Sandilands v Signal

[2020] NZHC 2354

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-434

[2020] NZHC 2354

BETWEEN

DUNCAN SANDILANDS

Plaintiff

AND

JANE SIGNAL

Defendant

Hearing:

20 August 2020

Appearances:

Plaintiff in person (by telephone)

A Darroch and S Lomaloma for defendant

Judgment:

10 September 2020

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction and background

[1]    Mr  Ian  Sandilands  died  on  7  June  2012.  He  had  outlived  his  wife,  Mrs Wanda Sandilands, by less than a year, for she had died on 19 October 2011.  Mr and Mrs Sandilands Snr had three sons and a daughter.

[2]    Mr Sandilands Snr appointed two of his sons, Mr Erskine Sandilands and the plaintiff, as the executors of his estate. They appointed the defendant as the Estate solicitor. Mr Sandilands Snr left his residual estate to his four children, but in unequal shares. He left 2/7 to each of his three sons and 1/7 to his daughter.

[3]    It seems there was general agreement within the family that the unequal distribution of Mr Sandilands Snr’s residual estate amongst the four children was unfair, and the defendant was apparently instructed to prepare a deed of family arrangement varying the terms of Mr Sandilands Snr’s will so as to provide for the

SANDILANDS v SIGNAL [2020] NZHC 2354 [10 September 2020]

distribution of the residue to his children in four equal shares. Although it is not entirely clear  on  the  affidavit  evidence,  it  appears  that  the  executors  —  Erskine Sandilands and the plaintiff — were aware that one of Mr Sandilands Snr’s other sons, Mr Malcolm Sandilands, had received money from his parents over the years and the executors wished to ascertain the details of these payments before the deed of family arrangement was finalised and the estate distributed. The defendant was therefore asked to look into this with Malcolm Sandilands or his advisers.

[4]    On  14  February  2013  the  defendant   received   an   email   from   Malcolm Sandilands disclosing details of these payments. He also made various observations concerning the plaintiff which it is unnecessary to go into here.

[5]    Erskine Sandilands apparently asked the defendant not to pass this information on to the plaintiff. She passed it on to the solicitors acting for the plaintiff at the time, but asked them not to pass it on to him. They did not do so. As a result, the deed of family arrangement was executed with the plaintiff being in ignorance of this information.

[6]    The plaintiff has complained to the Law Society about the defendant’s actions. Indeed he has made multiple complaints against the defendant and others. To date there has been no adverse finding, although the only extant complaint is yet to be disposed of.

[7]    Essentially, in this proceeding, the plaintiff says that had the defendant passed on this information he would have insisted that these payments be accounted for within the deed of family arrangement by debiting them to Malcolm Sandilands.

[8]    He says that because the defendant did not pass on this information to him he did not get an opportunity to insist on such changes to the arrangements within the family and that he has — in one capacity or another — suffered a loss.

[9]    Although this proceeding was commenced in May 2018, it is nowhere near ready to be set down for trial. The reasons for that will become apparent.

[10]Before the Court for determination are:

(a)An application dated 10 August 2018 in which the defendant seeks orders:

(i)requiring the plaintiff to particularise aspects of his claim;

(ii)for security for costs; and

(b)An application dated 16 august 2020 in which the plaintiff seeks orders concerning discovery and interrogatories that will be described more fully later in this judgment.

The defendant’s application

[11]   The apparent delay in dealing with this application is not as extraordinary as it may at first appear.

[12]   The application was first set down for hearing on 12 November 2018. The plaintiff did not appear. Having heard from Mr Darroch for the defendant I granted the application for an order requiring the plaintiff to particularise aspects of his claim, and stayed the proceeding pending compliance with the same. In the plaintiff’s absence, I was not prepared to make an order for security for costs and adjourned the disposal of that aspect of the application.

[13]   Since then the plaintiff has amended his claim twice — by amended statement of claim dated 18 November  2019 and  second amended  statement  of claim dated  7 August 2020.

[14]   The defendant accepts that the plaintiff’s pleading now provides a sufficiently coherent description of his claim so as to enable her to understand the four corners of the case against her and wishes to pursue the second aspect of her interlocutory application, the application for security for costs.

[15]I heard that application at a resumed hearing on 20 August 2020.

[16]Security for costs is provided for in r 5.45 of the High Court Rules:

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)A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.

(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.

[17]Here is how one leading text has described such applications:

The remedies discussed above all aimed to protect plaintiffs against potential abuses by defendants. There are, however, also remedies designed to offer some protection to the defendant. Where there are grounds for fearing that the

plaintiff, if unsuccessful, will be unable to pay the defendant’s costs, or it would be difficult to recover such costs, the rules establish a process whereby the plaintiff can be compelled to provide some security for the costs of the proceeding.

The decision to order security for costs requires the court to balance competing policy considerations. On the one hand, there are questions of access to justice: the procedure may be abused by the defendant as a tactical weapon to deter the plaintiff. On the other hand, an impecunious plaintiff can put a defendant to enormous trouble and expense with an entirely spurious claim. The aim of the courts is to be fair to both parties. They will accordingly frown on any abuse of the rule, but will insist that plaintiffs accept responsibility for their actions. There is no such thing as a free day in court.¹

[18]   The balancing exercise that Beck describes is always a difficult one. It involves trying to reconcile what in the end are mutually incompatible entitlements, the plaintiff’s right to put his, her or its case to the court for determination and the defendant’s right not to be exposed to unreasonable costs risks.

[19]   It is evident from the cases that the courts have struggled to develop a formula for striking the right balance.

[20]As a starting point the following propositions are uncontroversial:

(a)The decision to order security for costs and the quantum of any security ordered are discretionary;

(b)Rule 5.45(1) contains a threshold test — unless the applicant can establish that the case falls within at least one of the circumstances there described, an order will not be made;

(c)But it is no more than that — a threshold test — and it does not follow, simply because the case can be brought within one or more of the categories identified, that an order will be made;

(d)An order will only be made if the Court is satisfied that in all the circumstances it is just to do so — see r 4.5(2);

1      Andrew Beck Principles of Civil Procedure (3rd ed, Thomson Reuters, Wellington, 2012) at 9.8.1.

(e)The discretion inherent in that test is not to be fettered by constructing principles from the facts of previous cases,2 though previous cases may usefully be referred to to identify important considerations taken into account and in the way they are applied;

(f)A determination that it is just in all the circumstances to order security for costs then requires the court to consider the terms of the order including such things as:

(i)whether there should be one order or staged orders for security for costs;

(ii)whether the order should require the payment of any security in the form of cash or whether the court should order that security may take some other form; and

(iii)whether the proceeding is to be stayed pending the provision of security;

(g)Although the discretion is a broad one, sometimes requiring security even if this is bound to prevent a plaintiff from pursing a claim,3 it is important to keep in mind that access to the Courts for a genuine plaintiff is not lightly to be denied.4 Indeed, the Court will be slow to make an order for security that essentially stifles a legitimate claim.5

The threshold question

[21]   At this stage of the inquiry the Court will consider any credible evidence from which it may reasonably infer that the plaintiff may not be in a position to meet any costs award.6

2      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].

3      Lee v Lee [2019] NZCA 345 at [20].

4      A S McLachlan Ltd v MEL Network Ltd, above n 2, at [15].

5      Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].

6      Concord Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519.

[22]   There is no doubt that the threshold is met in this case. The plaintiff is a resident abroad and there is ample reason to conclude on his own evidence that he is impecunious and would be unable to pay a substantial costs award should he be unsuccessful and such an award made. To give just three examples of this evidence, the plaintiff has chosen to describe himself in the intitulements to his second amended statement of claim as “unemployed”; the plaintiff has given evidence of his inability to engage solicitors and pay them $6,000 to assist with the amendment of his pleadings; and (most critically) the plaintiff has chosen not to disclose to the Court his financial position.

In the circumstances, is it just to make an order?

[23]   As already mentioned, the authorities are very clear that from start to finish the essential question is whether it is just to make an order. The assessment is not to be undermined by the identification and application of rigid lists of criteria.

[24]   I bear that very much in mind in identifying below a series of factors that have influenced my consideration of the central question.

The merits of the claim and defence

[25]   The Court is only required to form an impression of the merits of the parties’ cases.7 Obviously, the more meritorious the claim the more the scales tend to favour the plaintiff’s interest in being able to pursue it, and the more meritorious the defence the more scales tend to favour the defendant’s entitlement to a degree of protection.

[26]It appears to me that the plaintiff faces some difficulties in this case.

[27]   The plaintiff’s fundamental assertion is that both of the executors engaged the defendant to act as the estate solicitor and that she owed her professional duty to them jointly. Accordingly, the plaintiff says, for her consciously to have withheld information from either executor at the behest of a solicitor acting for a third party, or propose such a course, was a breach of her professional responsibilities. It would be

7      Highgate on Broadway Ltd v Devine [2012] NZHC 2288; [2013] NZAR 1017 at [22](c).

difficult to argue against that proposition. To that extent, the plaintiff appears to have a legitimate complaint.

[28]   But, as Mr Darroch says, the real question is whether that translates into a viable claim for damages.

[29]   The first point to make in relation to this is that the plaintiff’s claim appears to conflate or confuse the two capacities that he had throughout — one as the executor of the estate and the other as a beneficiary. It was as one of the executors of the estate that he engaged the defendant and it was in that capacity that he is entitled to say that he was owed duties by her. Yet the loss he says that he suffered, he can only have suffered in his capacity as a beneficiary. There is therefore a mismatch between the basis for the claim and the loss which the plaintiff says he suffered.

[30]   Quite independently of that point, the loss the plaintiff says he suffered may be more apparent than real. If Malcolm Sandilands received loans from his mother or father or both (as opposed to gifts) then it may remain open to the executors of the estates to pursue recovery of those loans.

[31]   For those reasons, I am inclined to the view that the plaintiff’s claim is not an obviously strong one.

[32]   Accordingly, the plaintiff’s right to pursue his claim may not carry as much weight as the defendant’s entitlement to a degree of protection.

The course of the proceeding

[33]   Under headings such as this the courts tend to make an assessment of the steps necessary to get to trial and how these are likely to unfold. In this case we have some history already which enables the Court to make an assessment of how matters might develop. The plaintiff is acting for himself and not assisted as far as I am aware by solicitors or counsel, or, for that matter, by anyone with more knowledge than he as to the conduct of litigation.

[34]   The plaintiff’s inexperience may, indeed probably has, increased the time and cost associated with the interlocutory stages of this proceeding. It certainly complicates matters when pleadings are inadequate, affidavits contain a confusing mix of evidence and submission and memoranda are filed and served for no obvious reason.

[35]   I do not say this to be critical of Mr Sandilands. It does however cause me to think that the remaining interlocutory stages of this proceeding are likely to be more complex than necessary and I suspect that the same might be said in relation to the trial, at least if Mr Sandilands continues to act for himself he apparently intends to do.

[36]   Those considerations lead me to the view that the costs for the defendant are likely to be greater than might otherwise be the case, and reinforces the view that the defendant is entitled to a measure of protection.

Delay

[37]   In some cases a defendant’s delay in making an application weighs in the balance against the application for security for costs.

[38]   For the reasons already explained, my view is that the defendant has not delayed in making its application. This seems to me to be is a neutral factor.

The conduct of the parties

[39]I need to say little about this.

[40]   I have already made some observations about the difficulties that the plaintiff faces in the conduct of the litigation and some of the likely consequences. I repeat that I do not criticise the plaintiff, I merely record that this reality is likely to add to the costs involved.

Public interest considerations

[41]   This is quintessentially a private law case. There are no public interest considerations.

[42]This too is a neutral factor.

Reasons for the plaintiff’s impecuniosity

[43]   If, as is the case here, the plaintiff is on the face of it impecunious, then the courts have in a number of cases indicated that to the extent that the plaintiff’s impecuniosity has been brought about by the defendant’s actions which are the subject of the proceeding, then that will count against the making of an order.8

[44]   This is a case in which no such considerations apply. The quantum of the claim ($37,000) is enough to dispel any such suggestion.

Any other considerations

[45]   I am satisfied that none of the other considerations of the sort which sometimes feature in cases such as this (whether the plaintiff is being put up as a nominal litigant in order to protect others from costs consequence; whether there is evidence of the plaintiff disposing of or hiding assets and whether the plaintiff may have available other sources of funding for the litigation) are relevant in this case.

[46]   I turn therefore to the fundamental question which is the balance of the interests between the plaintiff and the defendant.

Discussion and conclusion as to security for costs

[47]   Standing back from the matter and having regard to the considerations I have identified as being important in this case, the view I take is that the plaintiff’s entitlement to pursue his case must to a degree be subordinated to the defendant’s entitlement to a measure of protection against costs.

[48]   The most important consideration in this case appears to me to be the nature and merits of the claim and defence, although the way in which the case has been conducted to date and the likely costs of various stages has also influenced me.

8      See for example Davy v Howell (1993) 7 PRNZ 141 (HC).

[49]   That leads me to the point of dealing with the consequential components of the application.

[50]   The amount of security is a discretionary matter,9 but, as is clear from the relevant commentary in McGechan on Procedure:10

Insofar as past awards of security are a legitimate guide, they generally represent some discount on the likely award of costs as calculated under sch 3.

[51]    In the circumstances of this case the view I have reached is that the right course is to require the defendant to pay an amount of $15,000 by way of security for costs.

[52]   That figure is my assessment of the scale costs likely to be incurred by the defendant down to the point at which the case is ready to be set down for trial discounted by a factor of 25 per cent.

[53]That amount is to be paid into Court.

[54]   Pending payment of that security to the Registrar, the proceeding will be stayed.11

The plaintiff’s application

[55]   The plaintiff’s application dated 16 March 2020 is apparently seeking the discovery of some documents and requiring the defendant to provide certain information, so effectively an application for discovery together with an application for an order that the defendant answer interrogatories.

[56]   I am not prepared to order that the defendant provide discovery on a piecemeal basis. Assuming that the plaintiff pays the security for costs which I have ordered, and the parties embark upon further interlocutory stages of this proceeding, then I would expect to make standard discovery orders requiring both parties to provide discovery.

9      A S McLachlan Ltd v MEL Network Ltd, above n 2, at [13].

10     McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 5.45.07].

11     High Court Rules 2016, r 5.45(3)(b).

[57]   As to the interrogatories, as I explained to Mr Sandilands during the course of the hearing, his proposed interrogatories are directed at establishing the defendant’s insurance position and to that extent are illegitimate. The interrogatory process exists for the purpose of parties being able to establish admissions on factual aspects of the case, not in relation to legal issues and much less in relation to other parties’ insurance arrangements.

[58]I decline to make either of the orders sought by the plaintiff.

Summary of conclusions

[59]For those reasons, I make the following orders:

(a)Pursuant to r 5.45, the plaintiff is ordered to pay into Court security for costs in the sum of $15,000;

(b)Pending payment of that amount, the proceeding is stayed;

(c)Assuming the plaintiff pays security for costs, and the interlocutory stages of the proceeding concluded, the defendant will have leave to renew her application for security in relation to the costs of the trial should she elect to do so;

(d)The plaintiff’s application dated 16 March 2020 is dismissed.

[60]   I have not heard from the parties in relation to the costs of these two applications, and I formally reserve costs. My preliminary view is that the defendant is entitled to her costs on a 2B basis in relation to both. If the costs issue cannot be resolved by the parties, memoranda can be filed in the usual way and I will deal with costs on the papers.

Associate Judge Johnston

Solicitors:
Darroch Forest, Wellington for defendant