Takarangi v McConkey
[2021] NZHC 1813
•16 July 2021
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2019-054-486
[2021] NZHC 1813
BETWEEN MELANIE TAKARANGI
Plaintiff/Counterclaim Defendant
AND
GEMMA MCCONKEY
Defendant/Counterclaim Plaintiff
Hearing: 18 June 2021 Appearances:
J Forest for plaintiff/counterclaim defendant
M Josephson for defendant/counterclaim plaintiff
Judgment:
16 July 2021
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction and background
[1] This is an application for an order for security for costs. It is made by the plaintiff and counterclaim defendant, Melanie Takarangi, against the defendant and counterclaim plaintiff, Gemma McConkey. That is enough to indicate that Ms Takarangi’s claim in this case has been overshadowed by Ms McConkey’s counterclaim, which is unsurprising as the former is a debt collection claim for slightly more than $13,500 and the latter is a substantial claim for breach of contract or negligence in the context of a professional relationship.
[2] However, that is to get ahead of things. A narrative description of the background is called for. It will be as brief as possible.
[3] On 22 August 2014 the late Noel Clarke died leaving four children, one of whom, John Clarke, was the child of Mr Clarke and Ms McConkey. Mr Clarke’s estate
TAKARANGI v MCCONKEY [2021] NZHC 1813 [16 July 2021]
was valued at over $4m. In his will he left everything to his children. Letters of administration were granted to the children on 12 November 2015. There were obviously some differences within the family because the four administrators and beneficiaries all participated in a mediation to resolve these. This took place on 14 October 2016 on which date they executed a deed of family arrangement. This provided for how the estate would be distributed amongst them. It is common ground that this process of distribution was complete well before 8 December 2017, the significance of which date will become clear.
[4] Ms McConkey says that Mr Clarke and she were in a de facto relationship right up to the date of his death, and that she had a claim against his estate. Apparently as a result of her financial position, Ms McConkey had difficulty engaging solicitors and counsel to assist her to pursue any such claim. In any event, she did not do so until close to the end of 2016 when she engaged Mr Takarangi. There is some doubt about the precise date on which Mr Takarangi was engaged. On the evidence, it would appear that the earliest date that Ms McConkey could have engaged him was probably 1 November 2016 (the date from which the firm’s fee note indicates time was being recorded against the matter) and the latest date was probably 17 November 2016 (the date of a formal contract for the provision of professional services). In the end, it is not obvious that anything turns on whether it was the earlier or later date, or some date in between. For present purposes, I proceed on the basis that is most favourable to Ms McConkey, that is to say that she engaged Mr Takarangi on 1 November 2016.
[5] Mr Takarangi became seriously ill over the months that followed. Whether because of his illness or otherwise, it was not until 8 December 2017 that, on Ms McConkey’s behalf, Mr Takarangi commenced proceedings in the Family Court seeking orders regarding relationship property under the Property (Relationships) Act 1976.
[6] On 12 March 2018 Mr Takarangi died. On 27 March 2018 the administrators of the Clarke estate applied to strike out Ms McConkey’s claim. That application came on for hearing on 23 August 2018. In a reserved judgment dated 10 September 2018
Judge Smith struck the claim out.1 Ms McConkey appealed to this Court. Her appeal was dismissed by Ellis J in a judgment dated 30 April 2019.2 Ms McConkey sought leave to appeal, first from this Court and then from the Court of Appeal. Both applications were dismissed.3
[7] In the meantime, on 18 April 2018 the plaintiff and counterclaim defendant, Ms Takarangi, Mr Takarangi’s daughter and the administrator and trustee of his estate, had procured the firm to render the fee note referred to earlier.
[8] After a letter of demand dated 25 June 2019 was ignored, in September 2019 Ms Takarangi commenced this proceeding to recover the debt. In response Ms McConkey entered her defence and counterclaim. At that stage, the proceeding was transferred to this Court. Ms Takarangi filed and served this application for an order for security for costs on 1 December 2020. It is opposed.
Security for costs
[9]Security for costs is provided for in r 5.45 of the High Court Rules 2016:
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.
1 McConkey v Clarke [2018] NZFC 6919.
2 McConkey v Clarke [2019] NZHC 924, [2019] NZFLR 170.
3 McConkey v Clarke [2019] NZHC 2047; McConkey v Clarke [2020] NZCA 83, [2020] NZFLR 207.
(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.
[10] Such applications are always difficult. The court must balance the right of a plaintiff to prosecute his, her or its claim against the right of the defendant not to have to incur the cost of defending a claim where there is no real prospect of recouping these if the claim is unsuccessful. There is a sense in which this involves attempting to reconcile the irreconcilable.
[11]As Professor Zuckerman notes:4
Requiring a claimant to provide security for costs as a condition to proceeding with the claim is on the face of it an extraordinary jurisdiction. The principle of access to justice demands that citizens should have an untrammelled opportunity to pursue bona fide claims or defences in court…
[12] Nonetheless, there are situations where it is in the interests of justice to make an order for security, and where the principle of access to justice must yield to other
— often very contextual — considerations.
4 Adrian Zuckerman Zuckerman on Civil Procedure Principles of Practice (4th ed, Sweet & Maxwell, London, 2021) at [10.309].
[13] In reliance on Bush v Zion Wildlife Gardens Ltd (in rec and in liq)5 Ms Forest submitted that the questions that the Court must consider in dealing with an application under 5.45 are as follows:
(a)Whether the applicant can satisfy the Court that the threshold issue in (r 5.45)(1) is met;
(b)Whether the court should exercise its discretion to make an order for security for costs;
(c)If so what the amount and terms of any order should be; and
(d)Should the Court order a stay pending payment of all or any part of the security for costs.
[14]Mr Josephson accepted that those were the questions for determination.
[15] There are any number of cases in which the courts have attempted to chart the most appropriate approach. Some are more helpful than others. It does not seem to me to be helpful to go further than recording the most well settled principles:
(a)It is only if an applicant can establish that the threshold test in r 5.45(1) applies that the application can go any further. But this is nothing more than a threshold test. The fact that it is met in any given case does not mean that an order for security for costs will be made;
(b)Where the threshold test is met the Court has a discretion and may make an order for security for costs where the judge “thinks it is just in all the circumstances”, and on whatever terms the Court regards as just;
(c)Given that the Court must balance the interests of the parties in the way described earlier, a key consideration in any given case is likely to be the apparent merits of the parties’ cases. Obviously, though, in the
5 Bush v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17.
context of an interlocutory application, all the judge can do is gain an impression of these.6
[16] Beyond those core considerations the analysis tends to become very case specific, but points to which the courts have had regard have included:
(a)whether the claimant is being put up as the claimant because he or she is impecunious so as to shield others;7
(b)whether there is any evidence that the claimant has deliberately secreted or disposed of assets so as to avoid exposure to a costs award;8
(c)whether the claimant, though impecunious himself, herself or itself, has any other source of funding;9
(d)whether the claimant’s impecuniosity is a result of the very action or actions of the respondent that are the subject matter of the proceeding;10
(e)Whether making an order for security for costs would deprive the plaintiff of the capacity to advance a prima facie meritorious claim;11
(f)whether the cause involved is a public interest one;12
(g)the conduct of the parties in relation to the litigation and its subject matter.13
[17] In the end, the overriding consideration is to balance the interests of the plaintiff and the defendant.14
6 A S McLachlan v MEL Network Ltd [2002] 16 PRNZ 747 (CA) at [21].
7 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [22](a).
8 At [22](b).
9 At [22](d) citing Bell Wholesale Export Co Pty Ltd v Gates Export Corporation (1984) 54 ALR 176 (FCA) 179– 180.
10 At [23](a).
11 At [23](b); see also the consideration expressed in A S McLachlan v MEL Network Ltd, above n 6, at [15].
12 At [24](b).
13 At [24](a).
14 A S McLachlan Ltd v MEL Network Ltd, above n 6, at [15]–[16].
[18] In this case, it is common ground that the threshold test is met, and it is possible, therefore, to turn directly to the apparent merits of the parties’ cases.
[19] Clearly Ms McConkey engaged Mr Takarangi to act on her behalf in this matter and Mr Takarangi owed the usual duties that go hand-in-hand with an engagement for the provision of professional services — essentially to bring an objectively assessed reasonable level of care and skill to prosecuting his instructions.
[20] Ms McConkey’s case is that Mr Takarangi did not exercise a reasonable level of care and skill. She says that he did not take obvious steps to protect her extant rights as at 1 November 2016. And she says that as a result she lost the chance to pursue a meritorious claim against the Clarke estate. In the course of his submissions Mr Josephson clarified that the allegation of breach of contract or negligence is that Mr Takarangi failed to:
14.1Make an application promptly for an extension of time under section 62 of the PRA;
14.2Make an application for an award under the Family Protection Act 1955 and/or for an extension of time under the FPA forthwith.
[21] So the thrust of Ms McConkey’s claim against Mr Takarangi’s estate in this proceeding is that at the time she engaged him — 1 November 2016 — she had extant rights that she lost because they became time-barred between that date and 8 December 2017 when her proceeding against the Clarke estate was commenced (as determined in the successful application by the administrators of the Clarke estate for an order striking out her claim).
[22] For Ms Takarangi in her capacity as the administrator of her father’s estate, Ms Forest submits that the rights Ms McConkey asserts that she lost as a result of Mr Takarangi’s alleged breach of contract or negligence either never existed because at no relevant time were she and Mr Clarke in a qualifying relationship, or because whatever rights she may have had were already time-barred when she engaged Mr Takarangi.
[23] Thus, the first issue for determination in the counterclaim will be whether a qualifying relationship existed between Mr Clarke and Ms McConkey at any relevant
time as alleged by her. Only if they were did Ms McConkey have any potential claim pursuant to the Relationship (Property) Act or the Family Protection Act.15
[24] The evidence before the Court at this stage as to this is not decisive. Ms McConkey says that they were in such a relationship. John Clarke who is the son of Mr Clarke and Ms McConkey says that he does not think that they were. A number of Mr Clarke’s friends and associates say that they saw no evidence of any relationship. Mr Josephson submitted that the very fact that they had a child is some evidence that a qualifying relationship existed. Perhaps. He also submitted that for the purposes of this application “the Court should proceed on the basis that there was a qualifying relationship”. I can see no basis for such an assumption.
[25] I do accept that this is a live issue and, as Mr Josephson also submits, that if Mr Clarke and Ms McConkey were in a qualifying relationship at any relevant time, then s 81 of the Property (Relationship) Act creates a rebuttable presumption that his property as at the date of his death was relationship property.
[26] Accordingly, it is at least open to Ms McConkey to argue that as at the date of Mr Clarke’s death she had a claim against his deceased estate.
[27] All other things being equal, conventionally, such a claim would be pursued by the applicant electing option A under s 62 of the Property (Relationships) Act and then pursuing a claim under the Act.
[28] Another, though less attractive, option might be to pursue a claim pursuant to the Family Protection Act for further — or, rather, some — provision from the estate.
[29] That brings me to what both Ms Forest and Mr Josephson submitted is the key issue for the purposes of this application, that is to say, whether, as at the date on which Ms McConkey engaged Mr Takarangi — 1 November 2016, she was already time-barred from initiating any such claim.
15 The Relationship (Property) Act provides that a qualifying relationship that existed any time in the three years before the deceased’s death may found a claim, but Ms McConkey’s assertion here is that the relationship existed as at the date of Mr Clarke’s death.
[30] Having regard to the terms of the legislation — both the Relationship (Property) Act and the Family Protection Act — the issue resolves itself into whether, as at the date on which she engaged Mr Takarangi, the estate had been finally distributed.
Property (Relationships) Act 1976
[31] Section 61 of the Property (Relationships) Act provides that when one party to a qualifying relationship dies, the other party may elect between two options. Option A is to apply for a division of relationship property pursuant to that Act, in which case the party making the option forgoes any entitlements that he or she may otherwise have had under an intestacy or pursuant to any will. Option B is to forego any rights under the Property (Relationships) Act. If Option A is not elected then Option B applies; Option B is the default option. Obviously, option B is of no value to Ms McConkey in this case.
[32] Section 62 provides that in the case of a substantial estate such as the Clarke estate any election under s 61 must be made within six months of the grant of administration. On application the Court may extend this period. However, such an application must be made before the final distribution of the estate.
[33] Section 90 of the Property (Relationships) Act provides that in the case of a substantial estate proceedings pursuant to the Act must be commenced within 12 months after a grant of administration. The Court may extend this period. However, again, only if the application for the extension is made before the final distribution of the estate.
Family Protection Act 1955
[34] In terms of s 9 of the Family Protection Act a proceeding must be commenced within 12 months from a grant of administration. Just as with the limitation periods under the Property (Relationships) Act, on application the Court may extend this period, but only if the application is made before the final distribution of the estate.
[35] The core submission made on behalf of the plaintiff and counterclaim defendant by Ms Forest is that prior to 1 November 2016 and Mr Takarangi’s engagement, the Clarke estate had been distributed so that Ms McConkey had no extant claim that was not already time-barred, and that her claim for the loss of a chance cannot succeed because, as at the date Ms McConkey engaged Mr Takarangi, she had no chance to lose.
[36] When precisely the Clarke estate was fully distributed depends on what is meant by distribution under the two Acts.
[37] The high watermark of Ms Forest’s submission for the plaintiff and counterclaim defendant is that final distribution occurred upon the administrators of the Clarke estate entering into the deed of family arrangement on 14 October 2016.
[38] The underlying premise for that submission is that the administration of an estate generally involves both an executorship function and a trusteeship function, most commonly of course by the same individual or individuals. The former responsibility involves gathering in the estate and dealing with it as directed down to the point where an irrevocable commitment is made as to the distribution of the estate, whereupon the executors cease to act as such and become the trustee or trustees for the identified recipients who from that point have a vested beneficial interest. The argument here is that upon the execution of the deed of family arrangement on 14 October 2016 the administrators of the estate irrevocably committed to the distribution of the estate in the terms set out in that deed and became mere legal owners of the various components of it for and on behalf of the beneficial owners.
[39] In a comprehensive and compelling analysis, which was not questioned by Ellis J in her Honour’s judgment of April 2019, Judge Smith concluded that for the purposes of the limitation periods contained in the Property (Relationships) Act the phrase “final distribution of the estate” was to be given its common law meaning, that is to say the point in time in the administration of an estate at which the executorship function concludes and the administrators or executors become trustees for the beneficiaries.16 As Judge Smith explained, there is high authority for this in the form
16 McConkey v Clarke, above n 1, at [73].
of the Privy Council decision in Lilley v Public Trustee and judgments that have followed and applied that decision.17
[40] Judge Smith concluded that the common law position as described applied to the limitation periods provided for in the Property (Relationships) Act because there is nothing in that Act that altered the position, saying:18
The position here is clear. The deed of family arrangement between the respondents in their capacities as administrators and as the residuary beneficiaries concluded the administration of the estate of Noel Clarke.
[41] As Mr Josephson submitted, the position is different in the case of the Family Protection Act because s 2(4) of that Act provides:
For the purposes of this Act no real or personal property that is held upon trust for any of the beneficiaries in the estate of any deceased person … shall be deemed to have been distributed or to have ceased to be part of the estate of the deceased by reason of the fact that it is held by the administrator after he has ceased to be administrator in respect of that property and has become trustee thereof, or by reason of the fact that it is held by any other trustee.
[42] That provision means that the reasoning that Judge Smith applied in relation to the Property (Relationships) Act does not necessarily apply in the case of a claim under the Family Protection Act.
[43] There is evidence indicating that the final distribution of the Clarke estate in the sense contemplated in s 2(4) of the Property (Relationships) Act did not occur, or was not complete, until after 1 — and indeed 17 — November 2016, so that Ms McConkey may be able to contend that, had Mr Takarangi taken the steps she asserts he should have taken pursuant to that Act immediately upon receipt of instructions, that would have preserved her rights, or some of them.
[44] Accordingly, it is not possible entirely to exclude the prospect of Ms McConkey succeeding in establishing that as at 1 November 2016 she still had an extant claim under the Family Protection Act.
17 Lilley v Public Trustee [1981] 1 NZLR 41; Re Magson [1983] NZLR 592; IER v GJD
[Relationship Property] [2009] NZFLR 607 and see also Lai v Huang [2017] NZCA 499.
18 McConkey v Clarke, above n 1 at [76].
[45] Having regard to the above analysis the view I have reached in relation to the merits of the claim are as follows:
(a)There is an issue whether Mr Clarke and Ms McConkey were in a qualifying relationship as at the date of the former’s death. However, the preponderance of evidence before the Court in connection with this interlocutory application suggests not. Further than that it would not be appropriate to go on the basis of untested evidence;
(b)Essentially for the reasons articulated by Judge Smith in his judgment of September 2018, there is no realistic prospect of Ms McConkey being able to establish that she had an extant right of action pursuant to the Property (Relationships) Act as at 1 November 2016;
(c)There remains an issue whether Ms McConkey had an extant right of action pursuant to the Family Proceedings Act as at 1 November 2016, essentially because s 2(4) of that Act, contrary to the common law position, provides that an estate will not be regarded as having been distributed for the purposes of limitation periods until such time as the dispositions have passed to the beneficiaries. It is open to Ms McConkey to contend that that had not occurred as at 1 November 2016. That provides her with a basis for contending that, had Mr Takarangi taken steps immediately to preserve whatever rights she may have had under the Family Protection Act, those may not have been lost as they certainly were within a short space of time thereafter.
[46]My overall view is that Ms McConkey’s claim is not strong.
[47] Of the other factors to which the courts have regard (see [16] above), two appear to me to be significant here. First, as Ms Forest submits, Ms McConkey has a history of failing to pay costs ordered — she has not paid the costs in the unsuccessful litigation she initiated against the Clarke estate. That is a point that must be weighed in the balance in favour of an order here. Second, although there is no detailed evidence as to this, it seems clear that a substantial order for security for costs would
effectively prevent Ms McConkey from pursuing this claim. Access to the courts for a genuine plaintiff is not lightly to be denied.19 That is a factor against an order — or at least a substantial one.
[48] Against that background, I have concluded that it would be just in all the circumstances to make an order for security for costs.
[49] That of course raises the question of the quantum of any such order. This too is a discretionary matter. An order for security will however usually reflect some discount on the likely award of costs as calculated under the High Court Rules.20
[50] Ms Forest has provided the Court with an analysis of the likely scale costs of trial. Calculating these on a 2B scale basis she arrives at an estimate of $55,000. Mr Josephson does not question that assessment.
[51]Ms Forest seeks an order for $35,000 by way of security for costs.
[52]There is a sense in which that is probably a restrained claim.
[53] However, weighing all relevant considerations, including the merits of the claim and the additional considerations I have identified as being relevant, it appears to me to be necessary to identify an order that will give Ms Takarangi a measure of protection but not shut Ms McConkey out of pursuing her counterclaim. With those considerations in mind, I have concluded that $15,000 would be an appropriate order. I consider the appropriate approach would be to direct the payment of security for costs in the sum of $7,500 immediately and a further $7,500 when the case is set down for trial.
[54] As to the need for a stay, in my view, the effect of the immediate order would be rendered nugatory unless the proceeding were stayed pending payment at each stage, and I propose to make orders for stays accordingly.
19 A S McLachlan Ltd v MEL Network Ltd, above n 6, at [15].
20 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 5.45.07].
Conclusion
[55]For those reasons, I make the following orders:
(a)I make an order pursuant to r 5.45 of the High Court Rules 2016 requiring the defendant and counterclaim plaintiff to pay to the plaintiff and counterclaim defendant security for costs in the sum of $15,000,
$7,500 payable immediately and $7,500 payable if and when the proceeding is set down for trial;
(b)Until such time as the first of those payments is made, the counterclaim (as opposed to the plaintiff and counterclaim defendant’s claim) will be stayed;
(c)Not having heard from counsel in relation to costs, I reserve these. My preliminary view is that the plaintiff and counterclaim defendant as the successful application in this interlocutory proceeding is entitled to a costs award on a 2B basis. In the unlikely event that counsel are unable to resolve costs, as I would expect them to do, they may come back to the Court by memorandum in the usual way.
Associate Judge Johnston
Solicitors and counsel:
Janey Forrest, Barrister, Wellington for plaintiff/counterclaim defendant Cairns Slane, Auckland for defendant/counterclaim plaintiff
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