Squair v Cribb

[2025] NZHC 827

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-4

[2025] NZHC 827

IN THE MATTER

of the Credit Contracts and Consumer Finance Act 2003

AND IN THE MATTER

of the Contract and Commercial Law Act 2017

BETWEEN

BRIAN JAMES SQUAIR and VICKI ANN SQUAIR

First Plaintiffs

SMI PROJECTS LIMITED (in receivership) Second Plaintiff

AND

BRIAN PHILIP CRIBB

First Defendant

WAIPARA TRUSTEES LIMITED, as

trustee of the BRIAN CRIBB FAMILY TRUST

Second Defendant

CRIBB FARMING LIMITED

Third Defendant

Hearing:

31 March 2025

Appearances:

P J Dale KC for Plaintiffs

T Mijatov and E Farrell for Defendants

Judgment:

8 April 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Security for costs)

SQUAIR v CRIBB [2025] NZHC 827 [8 April 2025]

[1]The defendants in this proceeding seek security for costs.

[2]        The principles are well known and are summarised in Mr Mijatov’s (counsel for the defendants) paragraph (6) of his submissions where he said:

It is correct that an application for security for costs has a threshold component and a discretion component. The threshold is that the Court is satisfied 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.1 The discretion to order security will be exercised if the Court “thinks it is just in all the circumstances”.2

[3]        There needs to be credible (believable) evidence of surrounding circumstances from which it may reasonably be inferred the plaintiff will be unable to pay costs.

[4]        A sworn assertion of ability to meet costs can be given due weight but is not decisive.3

[5]        If the threshold is met, the Court must consider its discretion and only order security if it is just in all the circumstances.

The threshold

[6]        In this case, I am satisfied there is reason to believe that the plaintiffs will be unable to meet costs if their proceeding is unsuccessful. I have reached that conclusion for the following reasons.

[7]        Ms Squair swore the evidence on behalf of the plaintiffs. Her first affidavit is dated 19 December 2024.

[8]        One of the difficulties the plaintiffs face is that a significant percentage of the assets they say they control are  held  in  a  company,  Squair  Holdings  Limited.  Ms Squair also refers to a property held in a partnership with the plaintiffs. However, Ms Squair’s statement of assets and liabilities refers to unpaid rates across a number

1      High Court Rules 2016, r 5.45(1)(b).

2      High Court Rules 2016, r 5.45(2).

3      Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430 (HC) at 436; and see  Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 as to weight given to affidavit evidence.

of the properties held in the company totalling $75,000. This shows the plaintiffs company is unable to meet its debts as they fall due, meaning the company does not meet the solvency test in s 4 of the Companies Act 1993. That fact gives no confidence that the plaintiffs could access funds from their company to meet an adverse costs award.

[9]        Ms Squair’s statement of assets and liabilities shows a surplus of assets over liabilities, but that is largely dependent on the value of shares held in Mr Squair’s architecture business, the value of bloodstock, and the recoverability of debtors, all of which are unsupported.

[10]      A real world assessment of the first plaintiffs ability to meet costs is called for when Ms Squair’s, in her affidavit of 18 March 2025, said:

… KiwiSaver funds of $7,541 are accessible if required. Brian withdrew most of his KiwiSaver entitlement last year to cover legal fees and to deal with     a particularly aggressive creditor. The $7,541 is what he has left. Mine has not yet matured as I am not yet 65.

[11]      The fact that Mr Squair had to withdraw funds from his KiwiSaver is an indicator of how illiquid his other assets are. Mr Squair was able to make that withdrawal without having to prove hardship — if he had had to establish financial hardship then that would reinforce my conclusion as to the threshold being met. That this was a “particularly aggressive creditor” suggests a creditor who had perhaps been kept waiting for payment or otherwise became frustrated at other reasons for not being paid.

[12]      This proceeding concerns the Squair’s purchase of a property from the first and second defendants at 169 Mackenzie Road, Waipara which is a vineyard/lifestyle block. There is a separate contract entered on the same day as the land purchase, where the first plaintiffs purchased from the third defendant the winery and accommodation business operated from the property. The purchase price was $2,340,000 for the land and $160,000 for the business — the plaintiffs did not put any cash into the purchases.

[13]      The contract provided for a deposit of $750,000 which was lent by the first and second defendants to the Squairs against security provided by the second plaintiff, being a mortgage over real estate owned by that company.

[14]      Settlement was deferred for 12 months’ and Mr and Mrs Squair went into occupation of the property pursuant to a deed of lease for a term of one year. The lease is dated 19 December 2022, and the rent was $750 per week.

[15]      The final rent payment made by the Squairs was on 17 September 2023 when they  gave  up  possession.  The  third   defendant  took  the   premises   back   on   15 February 2024. The Squairs said of their inability to pay the relatively modest weekly rental:

… While in occupation of the property we ran out of funds as the property was bleeding us dry. We reached the point where we felt we had paid enough and done enough on a property that should have been handed over in full working order but which was not the case.

[16]      The deed of lease required Mr and Mrs Squair to pay the rent without set-off or deduction, it being the 6th edition 2012, Auckland District Law Society Lease. That the Squairs ceased paying rent says something about their attitude to meeting their debts and also their ability to do so.

[17]      Other factors support my conclusion. The Squairs, across their company and partnership, have substantial secured debt. How that debt is to be serviced along with the costs of running this proceeding, when rates are unpaid is not explained. There is also evidence of other unpaid creditors. While Mr Squair’s income is at a reasonable level, it can only stretch so far, and at the risk of labouring the point, that income is not sufficient to meet current obligations.

The merits

[18]      The learned authors of McGechan on Procedure note that 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. However, it is recognised that there is a very real limit as to how far such an enquiry can go.4

[19]      The first issue in this proceeding is whether the deposit being lent by the first and second defendants to the plaintiffs was a consumer credit contract for the purposes of the Credit Contracts and Consumer Finance Act 2003 (the Act). The second issue is whether a $750,000 deposit on a purchase of $2,340,000 involved an element of penalty.   The first and second defendants have  already recovered some $650,000   of their $750,000 advance through realising the security they held.

[20]      Initially, the plaintiffs sought summary judgment in respect of their first to fourth causes of action (which encompass the issues referred to above) but not their fifth and sixth causes of action. These causes of action, which were in misrepresentation and under the Fair Trading Act 1986, are going to be abandoned. The summary judgment application was withdrawn following the filing of papers in opposition and the withdrawal of the application is to be the subject of a separate costs ruling.

[21]      Mr Mijatov submits that the abandonment of the application for summary judgment and the signalled abandonment of two causes of action, indicates the merits of the plaintiffs’ case are not strong. That is probably the high-water mark for that submission given the onus on a plaintiff seeking summary judgment. However, the withdrawal of the summary judgment application is confirmation that the plaintiffs do not consider they have a “lay down hand”.

[22]      Mr Mijatov submits that in relation to the consumer credit contract issue that the contractual arrangements between the parties are not a qualifying contract. He submits that the Squairs are experienced business people, including in the field of investment properties. So much seems to be confirmed from Ms Squair’s most recent affidavit which references a number of investment properties, including some they were trying to sell. There is a strong suggestion that the purchase in issue in this proceeding was a commercial transaction and not a domestic one — I note the current

4      Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR5.45.03(2)].

Fair Trading Act pleading, albeit one to be abandoned, is that “the transactions the subject of this proceeding were in trade”. I consider this to some extent undermines the plaintiffs’ claim that this was a consumer credit contract. The sale and purchase of the vineyard and accommodation business from the third defendant was completed on the fourth edition of ADLS Agreement for Sale and Purchase of a Business 2008. The agreement for sale and purchase of the land contained a due diligence clause making the contract conditional on the plaintiffs “being entirely satisfied that the property is a  suitable  investment  property”.  The  plaintiffs  took  possession  of  the property by way of a commercial lease and operated the property as a business. The Squairs’ own website said; “We are a small family business managing a boutique vineyard and B&B accommodation”.  The Squairs referred to the purchase as being  a commercial property purchase in a funding application. My impression is that the merits of the causes of action based on the Act are not strong.

[23]      As to the second cause of action, the merits are more evenly balanced. The deposit was not quite a third of the purchase price of the land — it is not clear but it may have been intended to be a deposit in respect of the purchase of the business which does not state a separate deposit, it in fact recording that the deposit payable was nil. Given the level of security held by the vendors over the second plaintiff’s property, it is not clear  why the  deposit was set at $750,000  and  not the usual     10 per cent of the purchase price. The property is re-listed at essentially the same price as paid by the Squairs, albeit it has not sold.

[24]      Counterbalancing those factors is the fact the first plaintiffs are not naïve or inexperienced in the business world and they knew what they were agreeing to. As one would expect, all parties had legal advice on entering into the transaction. The plaintiffs were purchasing the property with no cash upfront representing an increased risk to the vendor on default.

[25]      I am satisfied that the threshold for the ordering of security has been met and an order for security is appropriate.

[26]      Mr Mijatov suggests that the payment be made in tranches. When a summary judgment application was contemplated, Mr Mijatov, based on an estimated five-day hearing, proposed security of $100,000 paid in four tranches; the first after the making of the order for security; the second after judgment on the application for summary judgment; the third after the completion of discovery; and the fourth two months prior to trial. Mr Mijatov’s figure assumed two experts would be required. Mr Mijatov accepted that his proposed level of security needs to be revisited, as the dropping of the two causes of action removes some issues and the need for at least one expert witness. He suggested security of $75,000 to be paid in three tranches.

[27]      Mr Dale KC, counsel for the Squairs, submitted that scale costs for a five-day hearing would be around $60,000 on a 2B basis. He saw no need for the involvement of an expert. Mr Mijatov had suggested that an expert would be required as part of explaining why the deposit was nearly one-third of the purchase price.

[28]      As I have said, the merits of the second cause of action regarding whether the deposit was a penalty are more evenly balanced and that should be represented in  the approach to security. I fix the total sum of security at $45,000. Of that, $15,000  is to be paid within 10 working days of this judgment; a further $15,000 to be paid within 10 working days of completion of the affidavits of discovery; and a final payment of $15,000 to be paid two months prior to trial.

[29]      With the deletion of the misrepresentation and Fair Trading Act causes of action, it may well be that there is  merit  in  Mr Dale’s  submission  that  five-days of hearing time will not be required given the core facts are a matter of documentary record.

Costs

[30]As to the costs of this application, there is no reason why costs should not

follow the event on a 2B basis together with disbursements as fixed by the Registrar and there is an order accordingly.

Associate Judge Lester

Solicitors:

Bytalus Legal, Hamilton (for Plaintiffs) Smyth & Co, Christchurch (for Defendants)

Copy to counsel:

P J Dale KC, Barrister, Auckland (for Plaintiffs) T Mijatov, Barrister, Wellington (for Defendants)