Slavich v Hamilton District Court

[2012] NZHC 2995

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2012-419-672 [2012] NZHC 2995

IN THE MATTER OF     section 4 of the Judicature Amendment Act

1972

AND

IN THE MATTER OF an application for judicial review

BETWEEN  JOHN KENNETH SLAVICH Applicant

ANDHAMILTON DISTRICT COURT First Respondent

ANDBRENT DONALD BAIRD, MURRAY DAVID BRANCH, DEAN BARRY CUFF, MICHAEL JAMES DONOVAN AND JOHN RHODES MAURD

Second Respondents

Hearing:         8 November 2012

Counsel:         K I Bond for Mr Branch

T Sutcliffe for Messrs Baird, Cuff and Donovan
K Burroughs for Mr Maurd
J K Slavich in Person

Judgment:      12 November 2012

JUDGMENT OF KATZ J

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment with a delivery time of 4 p.m. on 12 November 2012.

Solicitors:           Harkness Henry, Hamilton – [email protected]

Copy to:            T Sutcliffe, Hamilton –  [email protected]

K Burroughs, Hamilton –  [email protected]

J K Slavich, Hamilton –  [email protected]

SLAVICH V HAMILTON DISTRICT COURT HC HAM CIV-2012-419-672 [12 November 2012]

[1]      These proceedings are an application for judicial review of a decision of the District Court at Hamilton staying prosecutions commenced by the applicant, Mr Slavich, against the second respondents.   The prosecutions were stayed on the grounds of abuse of process.  Mr Slavich seeks an order from this Court setting aside the stay.

[2]      The alleged offences largely relate to share offer documents prepared by the second respondents as directors of Pacesetter Print Group Limited (Pacesetter).  Mr Slavich claims that there were material omissions from the share offer documents and that they also contained material misstatements in breach of s 377 of the Companies Act 1993.  The prosecutions involved allegations of fraud and deceit in breach of ss 240 and 242 of the Crimes Act 1961.

[3]      The  second  respondents  apply  for  security  for  costs.    There  are  three applications before me:

(a)       Application  by  Mr  Branch  for  security  for  costs  in  the  sum  of

$31,584;

(b)      Application by Mr Maurd for security for costs in the sum of $31,584; (c)      Application  by  Messrs  Baird,  Cuff  and  Donovan  (the  remaining

second respondents) for security for costs in the sum of $31,584.

[4]      The sum of $31,584 represents the costs anticipated on the basis of a four day hearing, calculated on as 2B basis.

[5]      All three applications are opposed by Mr Slavich.

[6]      As a preliminary issue, Mr Slavich submitted that only Mr Branch is entitled to seek security for costs, as he is the only party to have filed a statement of defence. Mr Slavich submitted that it must therefore be assumed that the other respondents are, in effect, abiding the decision of the Court.

[7]      Counsel  for  the  second  respondents  (other  than  Mr  Branch)  indicated however that their clients intend to participate actively in the proceedings.  Different interests arise between the three different groups of respondents, hence the separate representation.    However,  until  the  security  for  costs  application  is  determined counsel for Mr Maurd (on the one hand) and Messrs Baird, Cuff and Donovan (on the other) have been taking a somewhat “minimalist” approach to the proceedings. Their aim is simply to reduce their clients’ costs exposure prior to the application for security for costs being determined and appropriate security being provided (if ordered).

[8]      I  accept  that,  in  these  circumstances,  all  of  the  second  respondents  are entitled to seek security for costs.

Security for costs – legal principles

[9]      Rule 5.45 of the High Court Rules provides that:

5.45     Order for security of costs

(1)      Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—

…

(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.

[10]     In Busch v Zion Wildlife Gardens Ltd (in rec and in liq)[1]  it was held that the

[1] Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17.

Court’s assessment should generally involve the following steps:

(a)       Has the applicant satisfied the Court of the threshold under r 5.45(1)?

In this case, the question is whether there is reason to believe the applicant will be unable to pay the respondents’ costs if the proceedings are unsuccessful.

(b)Is it just in all the circumstances that an order for security for costs be made?

(c)       What amount should security for costs be fixed at? (d)           Should a stay be ordered?

[11]     I consider each issue in turn.

Is there reason to believe the applicant will be unable to pay costs?

[12]     Mr Slavich is a current bankrupt.  He was adjudicated bankrupt on 29 June

2012, having only relatively recently been discharged from a previous bankruptcy order which was made in October 2006 and which was in effect for approximately four years.

[13]     Mr Slavich conceded that his ability to meet any award of costs in these proceedings will depend on the willingness of the trustees of the Slavich Family

Trust to meet an award of costs on his behalf.  There is no evidence before the Court, however, as to whether the trustees are willing to do so (and make a commitment to that effect).  Similarly, there is no evidence that they have sufficient means to do so.

[14]     There is accordingly clear reason to believe that Mr Slavich will be unable to pay the costs of the second respondents if he is unsuccessful in these proceedings.

Is it just in all the circumstances to grant security?

[15]     This issue was the main focus of argument.

[16]    The Court in A S McLachlan Ltd v MEL Network Ltd[2]  emphasised the discretionary nature of security for costs and warned against attempting to construct

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

‘principles’ from the facts of previous cases.   That said, the learned authors of McGechan on Procedure observe that the following factors are generally considered to be relevant:

(a)      A balancing of the interests of the plaintiff and the defendant and in particular the question of whether the ordering of security would prevent the plaintiff from bringing its claim;

(b)      A preliminary assessment of the merits of the plaintiff’s case; and

(c)       Whether  the  plaintiff ’s  impecuniosity  arises  from  the  defendant’s

actions.

Balancing

[17]     In relation to the balancing exercise to be conducted by the Court under r 5.45(2), the Court in A S McLachlan Limited observed that a genuine plaintiff ought not lightly to be denied his or her access to the Courts.   Linked to this

observation, the Court has also observed that the desire of a defendant to prevent the

plaintiff from pursuing its case is not a proper factor for the Court to take into account: Tri Media International Ltd v Wellington Co Ltd.[3]

[3] Tri Media International Ltd v Wellington Co Ltd HC Wellington CIV-2008-485-2768, 6 August

2009.

[18]     Mr Slavich submitted that the second respondents’ purpose in seeking an order for security for costs was to prevent him from pursuing his case.  The second respondent’s response was that their aim is to ensure that any costs they do incur defending the proceedings are secured to an appropriate level.

[19]     The second respondents noted that Mr Slavich has brought various inter- related proceedings which all relate to the struggle for control of Pacesetter and the share issue which took place in 2005.  None of Mr Slavich’s various actions have been successful and two sets of proceedings have been struck out.

[20]     Mr Slavich has acted for himself in all of these proceedings (as he does here). Accordingly he incurs no legal costs himself, while his litigation opponents necessarily incur significant costs in defending his various actions, none of which have yet met with success.  Because Mr Slavich is impecunious (and bankrupt) the usual costs constraints that operate in litigation do not apply. An adverse costs award is no deterrent and Mr Slavich is not incentivised to conduct his litigation prudently or efficiently, in the knowledge he may have to meet an adverse costs award if he does not.

[21]     The respondents submit (and I accept) that any balancing exercise must take into account not only Mr Slavich’s desire to pursue his case but also the respondents legitimate concern that, if he does so, their costs in defending such a claim should be secured to an appropriate level.

Merits of the claim

[22]     Based  on  the information  currently before the Court,  the judicial  review application does not appear to have good prospects of success.

[23]     Mr Slavich’s pleading is not entirely clear, but the three causes of action

appear to be as follows:

(a)      Illegal  decision  –  the  District  Court  did  not  have  jurisdiction  in respect of the alleged offending under s 377 of the Companies Act

1993;

(b)Error in law – the District Court was wrong to find that Mr Slavich’s prosecution was brought without reference to other competent prosecuting authority because Mr Slavich himself constitutes a competent prosecuting authority; and

(c)      Breach  of  natural  justice  –  the  District  Court  were  wrong  and therefore the decision resulted from the District Court taking into account irrelevant considerations and failing to take into account relevant considerations.

[24]     The third cause of action appears to be the main focus of the judicial review proceedings.  In essence, Mr Slavich claims that the following factors considered by the Court were irrelevant:

(a)      The same factual issues had formed the basis of previous proceedings brought against all defendants ([16] of the judgment).

(b)Mr Slavich had been ordered to pay security for costs in other proceedings and the criminal prosecutions were at least partly driven by a desire to avoid a requirement to pay security ([21] of the judgment).

(c)      Mr Slavich had entered into a settlement agreement which caught the factual basis of the charges ([23] of the judgment).

(d)Mr Slavich had delayed bringing the prosecution and that delay had resulted in prejudice to the defendants, particularly in relation to their ability to call evidence of the applicant’s credibility.

[25]     Mr Slavich is obviously not entitled to challenge the specific factual findings themselves in the context of judicial review proceedings.  Rather, he must establish that  these  various  factors  were  irrelevant  and  should  not  have  been  taken  into account by the District Court Judge in ordering a stay of Mr Slavich’s criminal prosecutions against the second respondents.   In my view (which is necessarily preliminary in nature) he is likely to face significant obstacles in establishing that these factors were irrelevant to the Judge’s consideration of abuse of process issues.

[26]     Mr Slavich submitted that he was entitled to amend his pleadings and that such an amendment could address the respondents’ submissions as to the lack of merits of his judicial review application.  Any amendments of a “tidying up” nature, however,  would  not  significantly  alter  any  assessment  of  the  merits.     The fundamental arguments underpinning the proceedings appear, at least at this preliminary stage, to be weak.

Whether impecuniosity results from the second respondents’ actions

[27]     Security for costs may be refused where it is the defendant’s actions, being the subject of the litigation, that have caused the plaintiff’s impecuniosity: Bell- Booth Group Ltd v Attorney-General & BCNZ.[4]     It is, however, necessary for the applicant to establish by persuasive evidence a “reasonable probability” that his impecuniosity results from the respondents’ actions and a mere assertion that is the case will be insufficient: Davy v Howell; Weld Street Takeaways & Fisheries Ltd v Westpac Banking Corp.[5]

[4] Bell-Booth Group Ltd v Attorney-General & BCNZ (1986) 1 PRNZ 457.

[5] Davy v Howell (1993) 7 PRNZ 141; Weld Street Takeaways & Fisheries Ltd v Westpac Banking

Corp [1986] 1 NZLR 741.

[28]     In this case Mr Slavich submitted that his impecuniosity was a result of the second respondents’ actions.  This was strenuously denied by the second respondents who submitted that Mr Slavich’s ability to earn a livelihood was more likely compromised  by his  criminal  conviction  and  subsequent  term  of  imprisonment. They further submitted that public documents suggest that Mr Slavich’s financial difficulties pre-date the events complained of in the criminal proceedings which are

the subject of the judicial review application.

[29]     Ultimately it is not necessary for me to determine these issues, which were addressed via submissions.  Quite simply, there is no evidence at all before me as to the precise reasons for Mr Slavich’s impecuniosity.  I am not therefore able to form a view as to whether or not it is in any way related to the conduct he alleges on the part of the second respondents.   I further note that there does not appear to be any judgment of this Court in the various proceedings which have been issued which establishes wrongdoing on the part of the second respondents which has caused financial loss to Mr Slavich.

[30]     Balancing the various matters outlined above, it is my view that the overall interests of justice favour an award of security for costs in this case.

Amount of security

[31]     In considering the question of the quantum of any order for security for costs, the Court must endeavour to fix what is appropriate in the interests of justice in having regard to all the circumstances of the case:  A S McLachlan Ltd v MEL Network Ltd.[6]

[6] A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).

[32]     In this case, I accept the submission of counsel for Mr Branch (supported by counsel for the other second respondents) that costs would likely be awarded on at least a 2B basis.  Given that Mr Slavich is not a solicitor his pleadings are somewhat confusing and it is difficult to discern the exact basis for his three causes of action. Mr Slavich’s status as a lay litigant and the extensive litigation history of matters relating to Pacesetter suggests that these proceedings may well be relatively complex and expensive to litigate, with the potential for multiple interlocutory applications.

[33]     I refer in this context to the judgment of Priestley J in Slavich v R[7]  in which his Honour describes, in relation to litigation filed by the applicant, the “plethora of applications for recalls, private prosecutions, and proceedings which are either naked or thinly-disguised collateral attacks or revisitations on litigation which is at an end”.

Mr  Slavich’s  actions  in  that  case  gave  rise  to  “considerable  and  unnecessary

expense” justifying indemnity costs being awarded.  His Honour observed that had Mr Slavich sought competent legal advice, or been able to reflect objectively on his situation, his proceedings were unlikely to have been filed.

[7] Slavich v R [2012] NZHC 900.

[34]     Similarly, in these proceedings, the second respondents should not be unduly disadvantaged as a result of the applicant not having the benefit (or incurring the cost) of legal advice: Bevan-Smith v Team NZ Ltd.[8]

[8] Bevan-Smith v Team NZ Ltd HC Auckland CIV-2003-404-468, 5 April 2004.

[35]     The second respondents’ estimate the hearing time at four days, whereas Mr Slavich estimates the hearing time at ½ a day.  In my view a realistic hearing time probably lies between those two extremes.   However, it is difficult to make a definitive estimate at this stage.   Similarly, it is somewhat difficult to predict the interlocutory path that this litigation might follow.  It seems clear, however, that the litigation is unlikely to be entirely straightforward.

[36]     Accordingly, while the second respondents’ estimate of costs (annexed as a schedule to Mr Branch’s submissions) appears to over-estimate the likely hearing time, it also probably under-estimates the attendances which may be required in relation to interlocutory issues.  Taking both of these factors into account it is my view that a reasonable amount of security in this case would be $20,000 in favour of each respondent (or group of respondents) who are separately represented.  I propose to order payment of that security in two equal tranches.

Should a stay be granted?

[37]     The usual course is that if security is ordered the proceedings will be stayed until security is paid.  There is nothing in the circumstances of this case that justify a

departure from the usual course.

Result

[38]     I make the following orders:

(a)       Security for costs is to be provided forthwith in the sum of: (i)           $10,000 in favour of Mr Branch;

(ii)      $10,000 in favour of Messrs Baird, Cuff and Donovan; and

(iii)     $10,000 in favour of Mr Maurd.

(b)Further security in the sum of $10,000 in favour of each of the three groups of respondents (i.e. a total of $30,000) is to be paid within 10 working days of the setting down date.

(c)      These proceedings are stayed until the security set out in (a) above is paid, to the satisfaction of the Registrar.

(d)Further, the proceedings shall be stayed if the security set out in (b) above is not paid within 10 working days of the setting down date, to the satisfaction of the Registrar.

(e)      The costs of this application are awarded to each of the three groups of respondents on a 2B basis plus disbursements, as fixed by the

Registrar.

Katz J