Spring v Browne
[2022] NZHC 247
•22 February 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000992
[2022] NZHC 247
BETWEEN MARC ROBERT SPRING
Plaintiff
AND
CORY DAVID BROWNE
First Defendant
GLENN CHARLES TULLOCH
Second Defendant
Hearing: 11 November 2021 Appearances:
Plaintiff in Person
J Evans for the Defendants
Judgment:
22 February 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 22 February 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Hayman Lawyers, Wellington
SPRING v BROWNE [2022] NZHC 247 [22 February 2022]
Introduction
[1] The defendants seek an order for security for costs under r 5.45 of the High Court Rules 2016, in the amount of $50,000. The application is made in the context of Marc Spring’s claim for injurious falsehood. Specifically, he claims that the defendants made false statements to a police officer that led to his property being searched, his detention and ongoing financial harm.
[2] The defendants contend that Mr Spring’s claim is without merit and will not succeed. They claim that if Mr Spring is unsuccessful at trial, he will not be able to meet a costs award, as he has limited income and assets and is involved in several other High Court proceedings.
[3] Mr Spring opposes the application on the basis that he does have adequate income and assets to meet a costs award in this proceeding and the other proceedings in which he is involved. Furthermore, he argues that his claim against the defendants is meritorious.
[4] This application calls me to decide, first, the threshold question of whether there is reason to believe that Mr Spring will be unable to meet the defendants’ costs if he is unsuccessful in the proceeding.
[5] If the answer to that question is yes, I will then consider whether it is “just in all the circumstances” for the Court to order security for costs, and if so, how much. This involves considering all the circumstances and endeavouring to balance the defendants’ interests in being protected from a barren costs order and the plaintiff’s right of access to the Court.1 I will consider:
(a)whether Mr Spring’s claim is unmeritorious; and
(b)any other relevant circumstances.
1 Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4]; Reekie v Attorney- General [2014] NZSC 63, [2014] 1 NZLR 737 at [2].
Legal principles
[6] 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.2
[7] An application for security usually requires the Court to determine the following three issues:
(a)Is there reason to believe the plaintiff will be unable to meet an award of costs against it (the threshold requirement)?
(b)Is it appropriate for an order for security for costs to be made?
(c)How much security is appropriate?
[8] The determination of each of these issues is at the Court’s discretion, which is generally not to be fettered by constructing “principles” from the facts of previous cases.3
[9] It is accepted however that the overriding consideration here is the balance of interests of the plaintiff and the defendant.4 For a plaintiff, there is always a strong right to access to justice.5 Accordingly, it will be in entirely exceptional circumstances where this Court will make an order for security for costs which would have the effect of preventing the plaintiff from pursuing a claim.6 The Court will also consider the extent to which the plaintiff’s impecuniosity may have been caused by the defendant’s conduct.7
2 High Court Rules 2016, r 5.45.
3 McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA) [McLachlan] at [14].
4 Highgate on Broadway v Devine [2012] NZHC 2288, [2013] NZAR 1017 [Highgate] at [24(c)].
5 At [23(b)].
6 At [22(e)].
7 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).
[10] For a defendant, the Court will recognise their interest in not being drawn into unjustified litigation, particularly where it is overcomplicated and unnecessarily protracted.8 To determine whether litigation is justified, this Court will consider the merits of the claim, to the limited extent that is possible at this early juncture.9 Notwithstanding that it would be inappropriate for the Court to predetermine the merits, an impression that the plaintiff’s claim is unmeritorious may weigh in favour of granting the defendant an order.10 A security for costs order that will have the effect of preventing the plaintiff from pursuing its claim should only be made after careful consideration and in a case in which the claim has little chance of success.11
Is there reason to believe Mr Spring will be unable to meet a costs award?
[11] The Supreme Court has said that what is contemplated is that “there should be credible … evidence of surrounding circumstances from which it may be reasonably inferred that the [party] will be unable to pay the costs”. This does not amount to proof that the party will, in fact, be unable to pay them.12
[12] In an unsworn affidavit filed in support of the application and an affidavit in reply sworn on 26 October 2021, Glenn Tulloch offers evidence to support the argument that there is reason to believe that Mr Spring will be unable to pay an adverse costs order. This evidence can be summarised as:
(a)His estimate that Mr Spring’s wholesale car business generates annual sales of around $100,000 and an annual profit after tax of around
$70,000. Mr Tulloch bases this estimate on his knowledge of Mr Spring’s business from the period he worked with him under a Heads of Agreement (10 June 2019 to 21 October 2020).
(b)His understanding that Mr Spring has no other assets.
8 McLachlan, above n 3, at [16].
9 Meates v Taylor (1992) 5 PRNZ 524 (CA); Lee v Lee [2019] NZCA 345 at [73].
10 Highgate, above n 4, at [24(c)].
11 McLachlan, above n 3, at [15].
12 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No. 2) [1977] 1 NZLR 516 (SC) at 519. See also New Zealand Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC) at 212 and Stephenson v Jones [2013] NZHC 638.
(c)His understanding that Mr Spring is involved in at least four other High Court proceedings.
(d)An indemnity costs award against Mr Spring in separate High Court proceedings.
[13] In response, Mr Spring has sworn three affidavits addressing his financial position and the other court proceedings, and an affidavit by John Robert Marshall Rowe, chartered accountant.
[14]Mr Spring’s evidence is:
(a)He can pay any costs award against him in this proceeding and the other proceedings, including if he is unsuccessful in all of them.
(b)He has a personal net worth (assets less liabilities) of approximately $1 million. His personal income over the last 12 months has been
$150,000.
(c)He is the director and sole shareholder (personally and through a related trust) of a company called Daytona Group Limited. It is a wholesale car business. The company generated a profit before tax and owner remuneration of $228,999,70 for the six months ended 30 September 2021. Mr Spring has exhibited to one of his affidavits a one page unaudited profit and loss account for the company that records this result. Mr Rowe has affirmed that he has viewed the unaudited internal management accounts for Daytona Group Limited for that six month period and confirmed that they show this profit.
(d)For the period of the Heads of Agreement with Mr Tulloch, it was not an exclusive arrangement and he was working with other car dealers and earning other income.
(e)He is the director and 33.3% shareholder of a start-up business that exports flavoured vodka, named FCV Limited. He receives a salary, although he does not specify how much or provide proof. He exhibits a photo of the company’s stock on a pallet ready for export to refute Mr Tulloch’s assertion that the company is a fiction.
(f)He has no debt, no credit cards, and no overdraft facilities for either of his businesses (Daytona Group Limited and FCV Limited).
(g)He “has access to” the funds of the “Willis Family Trust”. He exhibits an undated bank statement for the “Willis Family Trust” bank account, which shows a balance of $961,715.92. It appears from Mr Tulloch’s affidavit that this trust is the family trust of Mr Spring’s partner, Ms Rewa Willis. Mr Rowe deposes that Mr Spring and his partner have bank deposits of around $1.2 million. It is unclear whether Mr Rowe refers to this bank account and what accounts for the difference.
(h)He paid the adverse costs judgment against him of $15,983.50 referred to by Mr Tulloch.13
(i)He is the plaintiff in two other civil claims in the High Court. One, Spring v The Attorney General & Anor14, is an action against the Attorney-General for unreasonable search and seizure and unlawful detention arising out of the same events concerned in this proceeding. It was scheduled for trial this month. The other, Spring v Thomson & Potton & Burton,15 is a defamation proceeding which will be the subject of a judicial settlement conference later this year. The other two proceedings identified by Mr Tulloch are private criminal prosecutions relating to the same individual, which have not yet been filed.
13 Frog Rock Trust v Toon (as liquidator of Social Media Consultants Ltd) [2020] NZHC 1407.
14 Spring v The Attorney General & Anor HC Auckland CIV-2020-404-2003.
15 Spring v Thomson & Potton & Burton HC Auckland CIV-2021-404-346
[15] In his second reply affidavit dated 19 November 2021, Mr Tulloch questions the authenticity of the profit and loss statement of Daytona Group Limited that Mr Spring has produced. He suggests that the gross profit figure is highly exaggerated and could not be possible in the current economic climate. He surmises that the company’s vehicle creditors have been excluded from the accounts and are “hidden” in the Willis Trust. He refers to a company of Mr Spring’s, Trinity Media Group Limited, which is now in liquidation. He attaches a report from the liquidators where they write that they considered taking legal action against Mr Spring but decided that it would not be economic to do so. Mr Tulloch also makes other comments which I will not repeat as they are speculative or are hearsay evidence.
[16] Having carefully reviewed this evidence, I cannot confidently infer that Mr Spring will not be able to pay any cost award in this proceeding. Mr Spring has presented enough evidence to satisfy me that he has enough funds, or access to enough funds, to satisfy a cost order. I do not overlook that there are gaps in the financial picture he has presented, such as the balance sheet for Daytona Group Limited, his relationship to the Willis Family Trust and ability to access funds from that trust, and corroborating evidence of his personal financial position. However, he has established that he is the shareholder and director of an apparently profitable wholesale car business and of another start-up company. He has provided evidence from a chartered accountant who states that he has reviewed the unaudited accounts of Daytona Group Limited. Mr Spring has deposed that he has access to third party funds – apparently the family trust of his partner. He has also deposed that he has a personal annual income of around $150,000 and that he does not have any liabilities. He paid an earlier costs order by this Court.
[17] I am not prepared to reject Mr Spring’s evidence as false as the defendants ask me to do. Much of Mr Tulloch’s evidence is speculation. I had the opportunity to hear from Mr Spring during the hearing of this application. It was a limited interaction, but it did not cause me to doubt his veracity.
Result
[18]The defendants’ application for security for costs is dismissed.
[19] The plaintiff will be paid his costs on a 2B basis and disbursements as fixed by the Registrar. It should be possible to agree quantum but failing that I will receive submissions from Mr Spring within 10 working days and from the defendants within a further 10 working days.
Associate Judge Gardiner
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