Sroubek aka Antolik v Bozhenko

[2023] NZHC 3137

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-2463

[2023] NZHC 3137

BETWEEN

KAREL SROUBEK aka JAN ANTOLIK

Plaintiff

AND

ALEXANDER BOZHENKO and NATALIA BOZHENKO

Defendants

EKATERINA BOZHENKO

Counterclaim Plaintiff

Hearing:

On the papers

Counsel:

Plaintiff in person

W A McCartney for the Defendants / Counterclaim Plaintiff

Judgment:

8 November 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 8 November 2023 at 11 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:

Davies Law, Auckland

Carson Fox Legal, Auckland

SROUBEK v BOZHENKO [2023] NZHC 3137 [8 November 2023]

Introduction

[1]    The defendants, Mr and Mrs Bozhenko, seek leave to appeal my judgment dated 28 July 2023 declining to order the plaintiff, Mr Sroubek, to give security for costs in respect of his claim (the judgment).1 Mr Sroubek abides the decision of the Court.

[2]    The background to Mr Sroubek’s claim is set out in the judgment and need not be repeated here.

The judgment

[3]    I found that Mr and Mrs Bozhenko had established the threshold required for an order for security, based on evidence of what was known about Mr Sroubek’s financial position since 2015, and drawing the inference that he will be unable to meet an adverse costs order.2

[4]    I then carried out the required balancing exercise and exercised the discretion under r 5.45(2) of the High Court Rules 2016 (HCR) in Mr Sroubek’s favour. The factors in favour of that exercise of discretion were my findings that:

(a)Mr  Sroubek  has  a  tenable  claim  that  he  and  his  former  wife,  Ms Bozhenko, share a joint equitable interest in the property that is the subject of this proceeding.3

(b)Mr Sroubek’s and Ms Bozhenko’s equitable interests in the subject property, whether held severally or jointly, are likely to be relationship property.4

(c)To determine the relationship property proceeding, commenced by  Ms Bozhenko and consolidated with this proceeding, the Court will need to determine whether Mr Sroubek and/or Ms Bozhenko hold an

1      Sroubek v Bozhenko [2023] NZHC 1995.

2      At [24]–[30].

3 At [45].

4 At [49].

equitable interest in the subject property and whether any equitable interest is relationship property or separate property.5

(d)Mr and Mrs Bozhenko are directly interested in the Court’s determination of the issues that arise in the relationship property proceeding.  Irrespective of whether Mr Sroubek’s claim proceeds,  Ms Bozhenko’s   relationship   property   claims   and   Mr    and    Mrs Bozhenko’s claims against Mr Sroubek will still need to be determined together.6

[5]    I concluded that the interests of justice were best served by all claims between the parties proceeding to a hearing and that an order for security for costs might stymie that.7

Legal principles

[6]    Pursuant to s 56(3) of the Senior Courts Act 2016, Mr and Mrs Bozhenko are required to obtain the leave of this Court to pursue an appeal against my refusal to order security for costs.

[7]    The rationale behind the requirement for leave is simple: it serves as a filtering mechanism, ensuring that neither unmeritorious appeals of interlocutory orders, nor appeals against insignificant interlocutory orders, are allowed to proceed so as to delay unnecessarily the proceedings in which the orders are made.8

[8]    The approach to an application for leave, and the principles governing its grant or refusal, are well-established:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

5 At [50].

6 At [51].

7 At [52].

8      Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the circumstances must warrant incurring further delay; and

(e)the ultimate question is whether the interests of justice are served by granting leave.9

[9]    The threshold for leave may be lower in respect of a judgment that in a practical sense finally determines a proceeding.10

[10]   In the event leave is refused, the applicant is not barred from later raising their intended appeal point in an appeal against the substantive High Court decision in the proceeding.11

[11]   The HCR do not specify when a hearing is required for an interlocutory application, including an application for leave to appeal, except to provide that a hearing is not required if a respondent consents or does not oppose the making of an order.12 Mr and Mrs Bozhenko agreed to determination of their application for leave on the papers.

Mr and Mrs Bozhenko’s argument

[12]   Mr and Mrs Bozhenko’s primary contention is that this Court was wrong to decline to make an order for security for costs on the basis that such an order might prevent Mr Sroubek’s claim from proceeding to a hearing, because Mr Sroubek did not oppose the application on that basis or provide any evidence to that effect. Mr and Mrs Bozhenko say that the Court should not have taken into account the proposition that an order might prevent Mr Sroubek’s claim being heard.

9      Tomar v Tomar [2021] NZCA 419 at [6].

10     See Simons v ANZ Bank New Zealand Ltd [2022] NZHC 2842 at [7]; Singh v Body Corporate 207650 [2023] NZHC 1269 at [13]; and D v RMC [2023] NZHC 1931 at [16].

11     Senior Courts Act 2016, s 56(6).

12     Rule 7.37.

[13]   Mr and Mrs Bozhenko argue that their proposed appeal cannot be overtaken by the substantive hearing or considered in the context of an appeal of a substantive judgment, and that they will be prejudiced if they are not allowed to appeal the security for costs decision before trial.

[14]   Finally, Mr and Mrs Bozhenko submit that the appeal is of sufficient importance to them to outweigh any resulting costs or delay, and there may not be any delay because a trial date has not yet been set. They consider there is good reason to consider the appeal now.

Discussion

Arguable error

[15]   I accept Mr and Mrs Bozhenko’s submission that Mr Sroubek did not give direct evidence that he would be unable to pay security for costs. In the same vein, Mr Sroubek did not give evidence that he would be unable to meet an adverse costs order.

[16]   It is settled law that it is open to the Court to find that a party will be unable to meet an adverse costs order by drawing an inference from credible evidence of surrounding circumstances, as noted in the judgment.13 Mr and Mrs Bozhenko met the threshold of establishing that Mr Sroubek would be unable to meet an adverse costs award, based on inferences.

[17]   The logical corollary is that the same surrounding circumstances can support an inference that an order for security of costs may prevent the plaintiff from pursuing a claim. That proposition was confirmed by the Court of Appeal in AS McLachlan Ltd v MEL Network Ltd:14

[15] [Rule 5.45 of the HCR] itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which

13     Sroubek v Bozhenko, above n 1, at [19].

14     A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA). This passage was quoted in the judgment: Sroubek v Bozhenko, above n 1, at [20].

the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.

[18]   This statement of principle is reflected in my finding that an order for security for costs may stymie Mr Sroubek’s ability to bring his claim, which followed from my finding, by inference, that Mr Sroubek is unable to meet an adverse costs order. In this respect, Mr and Mrs Bozhenko cannot establish an error in the judgment.

General or public importance

[19]   Even if an arguable error had been identified, there is no issue of general or public importance.

Importance of the issue to the applicants

[20]   Mr and Mrs Bozhenko seek protection for their costs, and any issue of legal principle that impacts upon their entitlement to security for costs will therefore be important to them. However, this factor alone does not support a grant of leave, given my finding that there is no arguable error of law in the judgment, and considering the interests of justice.

Interests of justice

[21]   Litigation between the parties will continue regardless of whether security is ordered in respect of Mr Sroubek’s claim because Mr Sroubek and Ms Bozhenko must resolve their relationship property proceeding, and to do so it is necessary to resolve whether Mr Sroubek and/or Ms Bozhenko have an equitable interest in the subject property. The interests of justice are best served by all claims between the parties, including Mr and Mrs Bozhenko, proceeding to a hearing. An interlocutory appeal will unduly delay resolution of the substantive proceeding.

Result

[22]Leave to appeal is refused.

[23]Costs on the application for leave lie where they fall.

[24]   The Registrar shall allocate a case management conference on the next available date.

Associate Judge Brittain