Waite v Global Integrated Solutions Limited HC Auckland CIV 2010-404-8333
[2011] NZHC 1243
•2 September 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-8333
BETWEEN RUSSELL NEIL WAITE AND CHRISTINE LYNN WAITE Plaintiffs
ANDGLOBAL INTEGRATED SOLUTIONS LIMITED
First Defendant
ANDMARK ALAN OLIVER Second Defendant
ANDDAVID LESLIE GOULD Third Defendant
ANDKEITH ROBINSON Fourth Defendant
Hearing: 23 and 24 August 2011
Counsel: PD McKenzie QC for plaintiff
PJ Woods for first, sixth, seventh and eighth defendants
LM Kelly for second defendantDL Marriott for third and fourth defendants (did not appear but filed submissions in support and in reply to plaintiffs' submissions)
T Sissons for fifth defendant
MJ Tingey and DJ Friar for ninth and tenth defendants
Judgment: 2 September 2011 at 4:45 PM
JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for security for costs]
Solicitors: Lance Pratley Law, PO Box 1064, Wellington Anthony Harper, PO Box 2646, Christchurch Harmos Horton Lusk, PO Box 28, Auckland 1140
GCA Lawyers, PO Box 13 964, Christchurch
Bell Gully, PO Box 4199, Auckland 1140
WAITE V GLOBAL INTEGRATED SOLUTIONS LIMITED HC AK CIV 2010-404-8333 2 September 2011
……………………………./continued from previous page
ANDSHAPE TECHNOLOGY LIMITED Fifth Defendant
ANDITS NEW ZEALAND LIMITED Sixth Defendant
ANDINTEGRATED TECHNOLOGY SOLUTIONS LIMITED
Seventh Defendant
ANDACM HOLDINGS (NZ) LIMITED Eighth Defendant
ANDJOHN JOSEPH GREGTEN and ANDREW JOHN MCKAY
Ninth Defendants
ANDCASH HANDLING SYSTEMS LIMITED (IN LIQUIDATION)
Tenth Defendant
Introduction
[1] The plaintiffs in this case are suing eleven defendants. No specific cause of action is alleged against the tenth defendant. Mr McKenzie explained that the tenth defendant has been joined to this proceeding because its presence before the court is necessary for the purpose of any orders made under s 301 of the Companies Act
1993.
The applications for security for costs
[2] Five applications for security for costs are made. They are made on behalf of the five groups of defendants, who are separately represented.
[3] I refer to each group and their relationships to the plaintiffs’ claims.
[4] The second defendant was, with the plaintiff, an equal shareholder in the companies that are at the centre of this dispute. Collectively, they are the Cash Handling Systems group of companies.
[5] The third and fourth defendants were senior employees of the tenth defendant. The tenth defendant was the first company incorporated in the Cash Handling Systems group. The third defendant, Mr Gould, was the general manager until his resignation on 27 March 2009. His involvement was solely with the New Zealand operation. He had no involvement with the Australian operation. The fourth defendant, Mr Robinson, was the business development manager of the tenth defendant. He resigned on 4 April 2009. Like Mr Gould, he had no involvement with the Australian operation. Mr Gould took up employment with the Linfox Armourguard group. The parent company in that group owns the shares in the eighth defendant. The eighth defendant is the shareholder of the first, sixth and seventh defendants. Mr Gould confirms that he was appointed general manager of the seventh defendant on 30 March 2009. Mr Robinson took up employment with the first defendant on 4 April 2009.
[6] The first, sixth, seventh and eighth defendants are described as the ―ACM defendants‖. That is because they are now effectively owned by the eighth defendant, which is a holding company. As mentioned, they are all part of the Linfox Armourguard group. In a general way they can be described as the parties who ultimately acquired the business assets and contract rights of the tenth defendant.
[7] The fifth defendant is the company that made the hardware aspect of parking meters that the tenth defendant ultimately sold to its clients, which were primarily local authorities. Prior to the liquidation of the tenth defendant, the fifth defendant was a substantial creditor. As at 13 October 2008 it was owed $1,051,126.85. That indebtedness was reduced to $620,671.30 by January 2009. A significant portion of the fifth defendant’s business involved its sales to the tenth defendant. Its general manager put that as high as 39 per cent of total sales at one point.
[8] The ninth defendants are the liquidators of the tenth defendant. The application to appoint the liquidators was made by the second defendant on
10 February 2009. That application was made on the grounds set out in s 241 of the Companies Act 1993 that the company was unable to pay its debts. It was initially opposed by the plaintiffs. The plaintiffs’ opposition was formally withdrawn on
30 March 2009. The liquidators were appointed by the High Court in Auckland on
3 April 2009.
Background
[9] The affidavits filed contain much contentious information. Unfortunately, the initial affidavits filed by the defendants, other than on behalf of the ninth defendants, did not contain a full account of matters that could be relied upon to assess the merits of the plaintiffs’ case. They came with reply affidavits, which contained much material that went beyond matters of reply. The result is that the plaintiffs have not had an opportunity of commenting on much of that material. What I set out in the following paragraphs dealing with background is, as far as possible, limited to the non-contentious facts. It necessarily cannot, therefore, be complete.
[10] In March 1993 the first plaintiff, Mr Waite, was employed as the general manager of Mischa Scan Coin Ltd in Auckland. The second defendant, Mr Oliver, was also employed by Mischa Scan Coin Ltd. An opportunity arose for them to purchase their employer’s vending products division. Cash Handling Systems Ltd was incorporated in 1993 for this purpose. Mr Waite and Mr Oliver and their respective family interests each hold a 50 per cent shareholding in Cash Handling Systems Ltd.
[11] Mr and Mrs Waite hold 49,800 shares as trustees for a family trust called Waimanu Holdings. Mr and Mrs Waite each personally hold 100 shares. Mr and Mrs Oliver hold 49,800 shares in a family trust called MA and CF Oliver Family Trust. Mr and Mrs Oliver each hold 100 shares.
[12] Mr Waite and Mr Oliver were each appointed directors. The business grew. Its principal activity became the development of pay-and-display machines for parking meters and parking buildings. Its principal customers were local authorities and councils. It pioneered the development in New Zealand of pay by text parking in conjunction with Vodafone NZ and Synergy (now known as Fronde) called ―TXT- a-park‖. In 2005 the company won the 3M Business Excellence Award for Innovation. In 2008 it won the Good Design TM Award.
[13] The company expanded into Australia in 1998. Two companies were incorporated to undertake the Australian operations. Cash Handling Systems Pty Ltd was incorporated in Victoria, Australia in 1998. CHS Global Australia Pty Ltd was incorporated in New Zealand in 2006. Although this company was owned by the interests of Mr Waite and Mr Oliver its shares were not held by Cash Handling Systems Ltd. By contrast, shareholding in other companies in the group was held by Cash Handling Systems Ltd.
[14] Effectively, Cash Handling Systems Ltd conducted the business in New
Zealand. Cash Handling Systems Pty Ltd conducted the business in Australia. From
1998 onwards, Mr Oliver was responsible for running the New Zealand operations and Mr Waite was responsible for the Australian operations. Mr Waite, however, was managing director and Mr Oliver was the technical director. As a result of the
entry of business into Australia, Mr Waite spent significant time in that country. He set up all the offices and developed the Cash Handling Systems operation in Australia.
[15] CHS Global Australia Pty Ltd, although incorporated in New Zealand, was set up to bid for and hold service contracts with councils and other customers in Australia and also to bill customers in Australia for servicing work. Cash Handling Systems Pty Ltd continued to employ the staff and to be the primary trading company in Australia. It provided services to CHS Global Australia Pty Ltd on a monthly fee basis for undertaking meter servicing work on that company’s behalf.
[16] As earlier mentioned, the manufacturing of the cabinets was outsourced to the fifth defendant, Shape Technology Ltd. The circuit boards and software were provided by Cash Handling Systems Ltd. There is considerable disagreement in the material filed on behalf of Mr Waite, on the one hand, and Mr Oliver, on the other hand, as to the extent of Cash Handling Systems Ltd’s information systems and intellectual property. Mr Waite’s position is pleaded in paragraphs 21 to 27 of the first amended statement of claim. There are numerous denials of those allegations in the corresponding paragraphs of Mr Oliver’s statement of defence. It is not possible, in this interlocutory application, to embark further on an analysis of those differences.
[17] Unfortunately, differences between Mr Waite and Mr Oliver surfaced in 2006. The evidence before me discloses that the dispute was well-known to customers, suppliers and Cash Handling Systems Ltd’s bankers. At one stage, the police had to be called to settle matters down.
[18] Discussions between Messrs Waite and Oliver took place in September 2006, when each indicated a preparedness to purchase the other’s shares. The company’s constitution contained pre-emptive rights provisions. Ferrier Hodgson was instructed to place a valuation on the Cash Handling Systems group and on an enterprise basis. The report has not been provided, but a summary of its conclusions has been set out in Mr Waite’s affidavit. He records:
Ferrier Hodgson assessed the total value of the CHS group of companies as being between 9.5m and 14.058m valued on a discounted cashflow basis. The value placed on the New Zealand and Australian operations was, in relation to New Zealand, between 4.683m – 5.827m and in relation to Australia between 6.39m – 8.19m.
[19] Messrs Waite and Oliver were unable to resolve matters. On 3 October 2008 the parties, acting in accordance with the company’s constitution, submitted the dispute to the arbitration of Mr Denholm Shale. The award set out a programme to be followed but, unfortunately, that programme appears to have been unable to be enforced.
[20] The next significant development came with the filing of an application to the High Court by Mr Oliver for the appointment of a liquidator and the placement of Cash Handlings Systems Ltd into liquidation. That occurred on 10 February 2009. As earlier indicated, that was initially opposed by Mr Waite. Copies of affidavits filed in that proceeding were produced to me. They disclosed that the company was not able to meet its debt obligations as they fell due. Thus, the company failed to satisfy the first part of solvency test prescribed by s 4(1)(a) of the Companies Act
1993.
[21] Mr Waite alleges that Mr Oliver and other staff took company property from the company’s offices in Albany. That is denied. The liquidators carried out their own investigations. It is not possible for me to make any final conclusions on that matter in this judgment. Obviously it will have to be assessed and resolved at trial.
[22] The liquidation had immediate consequences. Auckland City Council and North Shore City Council gave notice on 3 April 2009 terminating their respective supply agreements. A similar notice was given on behalf of the Palmerston North City Council on 7 April 2009. On 9 April 2009 Wellington City Council also gave notice terminating the contract. These notices appear to have followed Mr Oliver providing advice as to the position of the tenth defendant to the councils.
[23] Also on 3 April 2009 Global Integration Solutions Ltd was incorporated on the application of the fifth defendant. It had a capital of ten shares held as follows:
(a) six shares held by the fifth defendant;
(b) four shares held by the eighth defendant.
The directors on incorporation were the third defendant, Mr Gould, Mr R Schuitman and Mr DA Warner of the fifth defendant. The new company played an important role which will shortly be referred to.
[24] The liquidators were faced with a difficult position. Staff members had either resigned or were about to resign. Notice had been given cancelling contracts. Understandably they concluded that the business was rapidly losing value. They decided to adopt an expedited process for the sale of the company’s business in order to maximise return for creditors. At this time Mr Waite was being assisted by Mr Bruce Sheppard. The documents disclose he supported an early sales process and, in fact, emphasised that speed was essential. The liquidators’ discussions with the third parties, who might be possible buyers, disclosed an immediate problem. They would require full due diligence to be undertaken and would almost certainly seek warranties that the liquidators would not be in a position to give.
[25] The liquidators, therefore, concluded that the only realistic purchasers for sale in a short timeframe were either the plaintiff, Mr Waite, or the second defendant, Mr Oliver. The liquidators engaged in three rounds of bidding with Messrs Waite and Oliver. The first was on or about 8 April 2009. The second occurred on or about
15 or 16 April 2009. Their concerns regarding Mr Waite’s proposals were as to the delay of some 15 days that he proposed for settlement and his ability to actually perform. In the final round of bidding, the liquidators required a $2 million deposit that would be refundable to the unsuccessful party; and they set a deadline of 3pm on Friday, 24 April 2009. Mr Oliver submitted a bid within that deadline. Mr Waite did not. Mr Waite’s solicitors advised on the following Monday, 27 April 2009 that Mr Waite intended to lodge his bid, together with a cash deposit, that day. That did not eventuate. The result was that the liquidators accepted Mr Oliver’s offer on the evening of 27 April 2009.
[26] The price achieved for the assets that were sold was $3.25 million. That, together with other recoveries effected by the liquidators, produced a recovery of
$4.3 million in total. That enabled the liquidators to pay all secured and preferential claims and, in addition, they made an interim distribution to creditors of 90c in the dollar for claims that had been approved on 22 October 2010. When all unsecured creditors’ claims are paid, the liquidators estimated that there would have been a surplus of $494,000. I was advised by counsel, however, that that figure has subsequently been reduced on account of presumably some additional claims and also costs of $147,000 so that, as at the date of the hearing, there was a net surplus of
$237,000. At that point in time that would be the figure available for distribution to shareholders.
[27] The sale effected by the liquidators was to Oliver Bid Co Ltd. That company had originally been incorporated by Mr Oliver on 9 October 2008 under the name CHS Global Ltd. The name change to Oliver Bid Co Ltd was registered on 7 April
2009. On the same day that the liquidators signed the sale agreement to Oliver Bid Co Ltd, the shares in Oliver Bid Co Ltd were transferred to Global Integrated Solutions Ltd. The total ultimate consideration paid under that transaction appears to have been $5.83 million and was paid in part by Mr Oliver’s interests taking up a 20 per cent shareholding in Global Integrated Solutions Ltd. Its board of directors was expanded to include Mr Broadhurst and Mr Casso of the Linfox group, and in particular from ACM Holdings (NZ) Ltd.
[28] The other companies associated with Messrs Waite and Oliver were then progressively brought into liquidation. On 16 March 2009 Mr Oliver, in his capacity as a director of Cash Handling Systems Ltd had a statutory demand served on CHS Global Australia Pty Ltd. On 29 April 2009 the High Court in Auckland appointed the ninth defendants the liquidators of that company and placed that company into liquidation.
[29] Cash Handling Systems Pty Ltd, the Australian registered company, was placed into administration and subsequently put into liquidation by the administrators on 9 September 2009. Its assets were sold by the administrators to the first defendant.
[30] The outcome of these sale processes was that the first defendant acquired all available New Zealand and Australian assets and undertakings of the former Cash Handling Systems group.
The court’s approach to security for costs applications
[31] The application is made in reliance on r 5.45 of the High Court Rules. The relevant parts of that rule for the purposes of this application are as follows:
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.
[32] In McLachlan v MEL Network Ltd helpful guidance is given as to the approach that should be taken on applications for security for costs.1 For the purposes of this application the Court’s comments at [13] – [16] are particularly helpful:
[13] Rule 60(1)(b) High Court Rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful,
1 McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA).
―the Court may, if it thinks fit in all the circumstances, order the giving of security for costs‖. Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing ―principles‖ from the facts of previous cases.
[14] While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v BNZ (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a checklist of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.
[15] The rule 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 the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.
[16] Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
[33] The reference in the Court of Appeal decision to r 60(1)(b) is a reference to the predecessor of the current rule that I have set out.
[34] The plaintiffs acknowledge that they are impecunious and, if unsuccessful, are unlikely to be able to meet the defendants’ costs.
[35] Mr Waite says he has minimal assets. He has no savings or investments. Over the last 18 months he has tried to return to the workforce without success. He is the director of Paytech Solutions NZ Ltd. That company is not trading.
[36] He is a discretionary beneficiary and one of the trustees of the trust known as Waimanu Holdings, which holds the majority of the Waite shares in Cash Handling Systems Ltd. He is also a trustee and a discretionary beneficiary in another trust, the Waite Family Trust. The information disclosed in relation to both trusts indicates that, certainly at the present time, neither would have access to funds if the trustees were minded to advance them to Mr Waite that could be so advanced. A third trust,
of which Mr Waite and his wife are trustees, is the RN & CL Waite Family Trust. That was established by deed of trust dated 1 August 1997. The discretionary beneficiaries are Mr and Mrs Waite, their children and grandchildren. It was established to hold the family home at 5A Craig Road, Milford, North Shore. That property, with a bank account, are the only assets of the trust. The property has a rateable capital value of $1.95 million. It is mortgaged to ASB Bank. The amount outstanding under the mortgage is $130,000. That mortgage is likely to increase, however, because of cost problems relating to Cash Handling Systems Pty Ltd, Australia. The property is no longer occupied by Mr and Mrs Waite. It is tenanted o a six-month basis at the rate of $1,050 per week. This is all committed to pay outgoings such that the trustees receive no surplus. Mr Waite notes that the trust is not a party to the litigation. He and his wife have three children.
[37] In the course of argument it was disclosed that there is an outstanding debt owed by this trust to Mr and Mrs Waite. That was an undisclosed personal asset of the plaintiffs. Mr Waite is currently aged 60 and his wife is 61. Mrs Waite has filed an affidavit. She confirms that she is living in rental accommodation. She owns the furniture estimated to have a value of between $3,000 and $5,000. She has debts and her only income is that received as a welfare beneficiary.
[38] The plaintiffs say that they are prepared to commit the sum of $150,000 as security for costs. How that is to be raised or secured is not explained. The inference is that it is the approximate sum owed by the RN & CL Waite Family Trust following its settlement and purchase of the family home. It is assumed that some of the initial advance would have been gifted and what remains is the current debt owed by the trust to the plaintiffs.
[39] There is no doubt that the Waites’ interests are the parties that have sustained the greatest loss as a result of the collapse of the Cash Handling Systems group. On the face of it they are the only parties who have suffered a loss or, perhaps to put it more correctly, have come away from the collapse of the Cash Handling Systems group with virtually nothing.
[40] However, the applications for security for costs in this case require consideration of the following matters:
(a) Whether a substantial order for security beyond the $150,000 currently offered by the plaintiffs may, in effect, prevent the plaintiffs pursuing the claim;
(b)If so, would a substantial order nevertheless be justified because the claim has little chance of success? In analysing this I bear in mind that access to the courts is not to be lightly denied; and
(c) The defendants’ position must not be overlooked because a defendant should not be drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
The security sought
[41] The second defendant seeks security in the sum of $290,899. It is calculated by applying Category 3 and Band C for preparation of the statement of defence, discovery, inspection and production for inspection, responses to amended pleadings, preparation for trial and trial appearance with principal counsel and a junior counsel. The trial time allowance and preparation for trial time allowance is based on 30 trial days. The security sought is based on 80 per cent of the total calculation. A Band B allowance is claimed for case management conferences and memoranda based on four conferences. The major component of this claim is the preparation for trial at
$166,800, together with the allowance for principal counsel at $83,000, and for a junior at $41,700 at trial.
[42] The third and fourth defendants have sought security in the sum of $374,744. It is calculated by applying Category 3 and Band C to each step, including the case management conferences, and without any percentage deduction. Similarly, the claim is based on a 30 day trial. The largest components of the claim are the preparation for trial allowance of $166,800, the allowance for principal counsel
$83,400, and for a junior at $41,700 at trial.
[43] The first, sixth, seventh and eighth defendants seek an order for security in the sum of $355,284. That also has been calculated by applying Category 3 and Band C to the same steps as the previous defendants.
[44] Counsel for the fifth defendant did not advance a specific figure. However, in the affidavits filed in support on the fifth defendant’s behalf, a helpful analysis of the position based on a six-week trial is to be found. That analysis showed costs calculated on a 2B basis would total $194,016, whilst costs on a 3C basis would total
$287,255.
[45] The ninth defendants originally sought a figure of $288,000 as security for costs. That was based on 80 per cent of costs calculated on Category 3, Band C ,for similar steps as outlined by the other defendants.
[46] The ninth defendant now seeks security in the sum of $561,464. It has added to the previous calculations that are similar to those applied by other defendants allowance for interlocutory applications preparation of $11,120, preparation for interlocutory hearings of $27,800 and interlocutory hearings of $27,800. In addition,
$100,000 for expert fees and $20,000 for disbursements and photocopying are also claimed, which has the effect of adding a further $186,720 on to the calculation. No discount for contingencies is provided for.
[47] The total security sought is $1,869,646, which is beyond the resources of the plaintiffs to provide.
The causes of action in general
[48] The claim in reality can be broken into five parts.
[49] The first part involves the first to eight defendants and involves three causes of action. The prayer for relief is the same in each and is as follows:
(a) An order directing that an inquiry be made into the extent of the enrichment, on the part of the part of the respective defendants, and that after provision has been made to repay creditors of CHS, all surplus from the sum so ascertained be paid to the plaintiffs.
(b) In the alternative:
(i) damages of $4m;
(ii) an order directing an inquiry into the value of the Australian tender rights and directing the said defendants to pay damages to the plaintiffs in the sum representing half their value;
(c) Interest from 27 April 2009; (d) Costs.
[50] The second part is a cause of action against the second, third and fourth defendants and seeks orders for the repayment or return of money pursuant to s 301 of the Companies Act 1993. The prayer for relief sought in this cause of action is as follows:
(a) An order under s.301(1) of the Companies Act 1993 that there be an inquiry into the conduct of the second, third and fourth defendants or any one of them as the Court directs, either by the Court itself or by the Registrar of Companies or such other person as the Court may direct to conduct such inquiry;
(b) An order that the second, third and fourth defendants or any one of them as the Court directs:
(i) repay or restore the money or property or any part of its misapplied by such defendants with interest at the rate the Court thinks just; or
(ii) to contribute such sums to the assets of the company by way of compensation as the Court thinks just;
(c) Costs.
[51] The third part involves two causes of action against the second defendant. They are the fifth and seventh causes of action, respectively. The fifth alleges breach of fiduciary duty as a party to a joint venture with the plaintiffs. The prayer for relief is expressed similarly to that which is expressed in relation to the first, second and third causes of action. Essentially, the second defendant is asked to make good any gain.
[52] The seventh cause of action alleges liability under a constructive trust by way of knowing receipt and seeks an inquiry as to the amount of consideration, which the
second defendant received and seeks orders that funds be held on behalf of Cash
Handling Systems Ltd.
[53] The fourth part is the sixth cause of action, pleaded against the first defendant, which alleges that liability is imposed under a constructive trust by way of knowing receipt. It seeks an inquiry to determine assets received that have been misappropriated from Cash Handling Systems Ltd and orders that those assets be held on constructive trust for the company.
[54] The focus of the plaintiffs’ causes of action just referred to is on events which took place leading up to the liquidation on 3 April 2009 and the following sales process so far as the first to eighth defendants were involved.
[55] The fifth part of the claim involves the two causes of action against the ninth defendants, the liquidators. The eighth cause of action alleges breach of a duty to act impartially and with good faith and care and without reckless disregard for the position of the plaintiffs in the liquidation process. It seeks damages of $4 million and an order valuing the Australian tender rights and a consequential order that the plaintiffs should be reimbursed for half of the value so found.
[56] The ninth cause of action, incorrectly shown as eighth cause of action in the statement of claim, requires the liquidators to contribute to the assets of Cash Handling Systems Ltd in reliance on s 301 of the Companies Act 1993. The relief sought is an inquiry into their conduct and consequential order that they contribute such sum to the assets of the company by way of compensation as the court thinks just.
First cause of action
[57] The plaintiffs allege that the first to eighth defendants intentionally caused harm to the economic interests of the plaintiffs by unlawful means. Counsel were agreed that the essential elements of this cause of action and the tort concerned were
summarised in Van Camp Chocolates Ltd v Aulsebrooks Ltd.2 The plaintiffs must prove that:
(a) The defendants intended to cause loss to the plaintiffs;
(b)In pursuit of that intention the defendants have interfered with the actions of a third party in which the plaintiffs have an economic interest;
(c) The defendants have used an unlawful means; and
(d) Damage has resulted.
[58] The difficulties in this case for the plaintiffs are proof of the necessary intention to interfere. That must be more than an incidental consequence that is foreseen by the defendants. The plaintiffs must also prove that the defendants have used an unlawful means.
[59] Mr McKenzie submitted that the plaintiffs’ claim is that although the defendants acted for the purpose of their own economic interests, the way they achieved this by pre-empting the sales process intentionally distorted that process in their favour, to the known detriment of the Waites. He next cited a number of forms of unlawful means, such as the alleged unlawful appropriation and conversion of property, including intellectual property and confidential information, inducing customers to terminate their relationship and break their contracts, engineering the liquidation of Cash Handling Systems Ltd and knowingly assisting in a breach of the second defendant’s fiduciary duties to Cash Handling Systems Ltd. He properly pointed out that there is some contest as to whether the last ground could be sustained. It is, in fact, noted as a matter that would be required to be separately
analysed in Van Camp Chocolates Ltd v Aulsebrooks Ltd.3
[60] Mr Woods drew attention to the fact that the first defendant was incorporated on 3 April 2009 and the sixth defendant was incorporated on 14 September 2009.
2 Van Camp Chocolates Ltd v Aulsebrooks Ltd [1984] 1 NZLR 354 (CA).
3 Ibid.
He submitted that the cause of action against those defendants is untenable and cannot stand. I do not separately deal with that issue because it is the position of all the defendants for whom Mr Woods acts that this question is being analysed. Certainly, no separate consideration was advanced for some of the defendants for whom he is acting as against others. My assessment of the evidence adduced in relation to this cause of action is that there are difficulties in the way of the plaintiffs succeeding with it.
The second and third causes of action
[61] These causes of action can be dealt with together. They are pleaded against the first to eighth defendants. They are for conspiracy to injure by an unlawful means, with an unlawful object or purpose. Mr McKenzie accepted that in order to establish these torts, the plaintiffs must show not only that these defendants, or some of them, intended to harm the plaintiffs’ interests, but that such harm was the purpose of the alleged conspiracy. Mr Kelly submitted that whatever grudge the plaintiffs may perceive that Mr Oliver bore against them, it is difficult to see why the other defendants, particularly the corporate defendants, would have anything other than commercial self-advancement as the key objective to their actions in this case. I accept that the plaintiffs will have considerable difficulty proving that there was a conspiracy that had the predominant shared intention of injuring or punishing the plaintiffs.
The fourth cause of action
[62] The fourth cause of action seeks relief against the second, third and fourth defendants pursuant to s 301 of the Companies Act 1993.
[63] Section 301(1) of the Companies Act 1993 provides:
301 Power of Court to require persons to repay money or return property
(1) If, in the course of the liquidation of a company, it appears to the Court that a person who has taken part in the formation or promotion of the company, or a past or present director, manager, administrator, liquidator, or receiver of the company, has misapplied, or retained, or
become liable or accountable for, money or property of the company, or been guilty of negligence, default, or breach of duty or trust in relation to the company, the Court may, on the application of the liquidator or a creditor or shareholder…
[64] Mr McKenzie drew attention to the fact that relief pursuant to this section is available to a creditor or shareholder of the company. It is also the reason why the company in liquidation has been joined as tenth defendant.
[65] Mr McKenzie noted that the court’s power is not simply limited to ordering the restoration of company property but permits the ordering of compensation to the company in any case where there has been breach of duty or trust in relation to the company by a past director or manager.
[66] Mr McKenzie referred to three examples contained in Foster Bryant Surveying Ltd v Bryant.4 They deal with the situation where a director resigns in order to obtain for himself a business opportunity which was previously been negotiated to be obtained on behalf of his company employer.5 In Kawhia Offshore Services Ltd v Rutherford & Anor the court provides a helpful summary of the applicable principles.6 This cause of action, particularly so far as it relates to Mr Oliver, cannot be dismissed as baseless. He appears to have received some benefit following the collapse and sale of Cash Handling Systems Ltd’s assets. The position is less clear in respect of the third and fourth defendants.
The fifth cause of action
[67] The plaintiffs plead a joint venture with the second defendant and breach of fiduciary duty owed by the second defendant to the plaintiffs in relation to that. Mr Kelly has submitted that there were considerable difficulties with this cause of action, with which I agree. The co-owners of Cash Handling Systems Ltd were principally the Waite and Oliver family trusts, not the two individuals. The parties
elected incorporation as the method by which their commercial arrangements would
4 Foster Bryant Surveying Ltd v Bryant [2007] 2 BCLC 239 (CA).
5 Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162; Canadian Aero Service
Ltd v O’Malley (1973) 40 DLR (3d) 371; Island Export Finance Ltd v Umunna [1986] BCLC
460.
6 Kawhia Offshore Services Ltd v Rutherford HC Hamilton CP61-99, 24 April 2002, Glazebrook J.
be run. In these circumstances, there is a strong inference that they elected to have the relationship governed by the Companies Act and not in some other way. This cause of action will pose difficulties for the plaintiffs.
The sixth cause of action
[68] The sixth cause of action seeks relief from the first defendant and alleges that liability arises under a constructive trust by way of knowing receipt. The first defendant is the company that received the assets representing the business of the tenth defendant. Mr McKenzie and Mr Woods both drew attention to the position that the type and degree of knowledge required to sustain this cause of action is yet to be determined. Mr McKenzie cited Equiticorp Industries Group Ltd (in Stat Man) v The Crown where the cause of action was approached from the position of an
action in unjust enrichment.7 What degree of knowledge can be imputed to the first
defendant is clearly a matter that will have to be determined at trial. I do not overlook the fact that this defendant was incorporated on the day of the liquidation. However, its receipt of the property occurred some 24 days later. I would not place this cause of action as having a low level of success, although it is not possible at this stage to make any more precise assessment.
The seventh cause of action
[69] The seventh cause of action alleges that Mr Oliver is liable under a constructive trust by way of knowing receipt. The plaintiffs’ case alleges that with the onsale to the first defendant by Oliver Bid Co Ltd the second defendant received a substantial deferred payment in breach of his fiduciary duties as a director of the tenth defendant. The second defendant’s answer is to deny that he received any personal benefit. If anybody received a benefit it would have been his family trust. The plaintiffs have now applied to join the second defendant’s family trust. That application is not before me and is yet to be considered by the court. What is clear to me is that this cause of action will cover much of the same evidence as is required for the purposes of the fourth cause of action.
The eighth and ninth causes of action
[70] These are both referred to in the first amended statement of claim as the eighth causes of action, although two separate causes of action are pleaded. The first asserts that the liquidators failed to act impartially, in good faith and with care, and acted with reckless disregard for the position of the plaintiffs. The allegation is made in relation to the sales process.
[71] The second of the eighth or the ninth cause of action again complains about the liquidators’ conduct in relation to the sales process and pleads that the plaintiffs as shareholders are entitled to apply to the court for orders under s 301 of the Companies Act 1993.
[72] The complaints that form the basis of both causes of action, therefore, are the same. What will be required at trial is an analysis of the actual duties imposed on a liquidator. Heath and Whale on Insolvency list four propositions as follows:8
the Court should not be quick to condemn a person in the difficult position of liquidator, and, in particular, should not judge his or her conduct with wisdom born of hindsight. It is not every error of judgement that will be accounted negligence;
at the same time, a high standard of care and diligence is to be expected of a liquidator as a professional person who is being paid for his or her services;
a liquidator is under a duty to complete the administration of the assets within a reasonable time and not to protract the liquidation unduly;
if there is a difficulty at any stage of the administration, it is the
liquidator’s clear duty to inform the Court and seek directions.
[73] There is some debate as to the extent of the liquidators’ duty which, at the appropriate time, will require full argument. The position has not yet been authoritatively defined in New Zealand. Heath and Whale on Insolvency refers to the Privy Council’s analyse of the position relating to receivers in Downsview
Nominees Ltd v First City Corporation Ltd and have suggested that it may be
8 Justice Paul Heath and Michael Whale (eds) Heath and Whale on Insolvency (looseleaf ed, Lexis
Nexis) at [22.7].
arguable that a general duty of care and negligence would not be imposed on liquidators by a New Zealand court.9
[74] This application for security for costs is not the time when that matter of principle can be authoritatively determined. What I must do is look at the practical situations that faced the liquidators in this case and determine whether there is clear case forming a foundation for default on the liquidators’ part in what happened.
[75] The plaintiffs’ principle criticism of the liquidators is a failure to respond to a number of complaints that Mr Waite made about the actions of persons associated with Mr Oliver as the sale process was proceeding. Mr McKenzie drew attention to the fact that virtually all of the staff had moved to the seventh defendant. The company’s intellectual property was being used by the fifth defendant. There is an allegation that someone had access to Vodafone and the use of the SIM cards by the tenth defendant’s staff which, he submitted, founded a strong suspicion that someone had access to the tenth defendant’s systems for an improper purpose. Mr McKenzie submitted that the liquidators should have inquired as to how a competitor could recruit the tenth defendant’s staff en masse and gain access to its software. All of that has to be balanced against the fact that, had Mr Oliver’s interests not proceed and Mr Waite not been able to establish a funding line to effect the purchase himself, the liquidators would have lost the opportunity to effect what was a reasonable recovery – certainly a recovery that was sufficient to satisfy all the creditors.
[76] What is significant in this analysis, however, is that the matters that the plaintiffs allege the liquidators should have investigated at the time were all matters that, no doubt, will form the basis for the causes of action against the other defendants, but more particularly Mr Oliver. Theoretically it is possible that the plaintiffs could fail against the first to eighth defendants and nevertheless succeed against the ninth defendants, although when one considers the material that has so far been advanced, that result seems a reasonably remote possibility.
[77] There is yet another factor that needs to be taken into account in considering the position of the liquidators. They currently hold a surplus of funds beyond that
which is required to satisfy the creditors. Mr Tingey accepted that if the liquidators were unsuccessful in their defence they could not have access to that surplus funds to pay their costs. He argued, however, that if they were successful in their defence they could have access to the funds as the defence was a step necessarily incidental to their work as liquidators in the proceeding and, for that reason, the surplus should not be taken into account.
Quantum
[78] The starting point for this aspect of the case are the cost rules contained in r 14 of the High Court Rules and, in particular, Schedules 2 and 3. Having said that, I do not overlook the fact that quantum is discretionary and requires a consideration of all the circumstances.10
[79] At this stage, I do not intend to list all the relevant circumstances that effect quantum. In any analysis at an early stage of a case, a number of assumptions have to be made. Because it is necessary to make assumptions, allowance for contingencies and variables must also be made. The greatest variable at an early stage is the estimate for trial preparation and trial time. That is why the court frequently looks at security on a staged basis so that these matters can be better clarified as preparation advances. Even with interlocutories, one must be careful that cost allowances should not be held against a plaintiff, because it may well be that the plaintiff will be the successful party if there are interlocutories. In this particular case consideration has to be had for the fact that the defendants have the opportunity to co-operate because the causes of action involve similar, and in many cases identical, consideration for each of the defendants.
[80] What I have set out in the previous paragraph are just some of the reasons why the Court of Appeal emphasised that quantum is discretionary and requires a consideration of all the circumstances.
[81] Coming back to the starting point analysis I note:
(a) R 14.1 gives the court a discretion to order costs in relation to a step taken in a proceeding. That discretion is generally to be exercised in accordance with the specific rules contained in rr 14.2–14.10: Glaister v Amalgamated Dairies Ltd.11. In Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd the Court of Appeal said of the costs regime contained in what is now r 14.2–14.10 that:12
There was a strong implication that a court is to apply the regime in the absence of some reason to the contrary.
The test to be applied is entirely an objective and not a subjective one. The only reference that is necessary to make towards actual costs is to be found in r 14.2(f), namely, that an award of costs should not exceed the costs incurred by the party claiming the costs: Glaister v
Amalgamated Dairies Ltd.13
(b)The rules require the categorisation of a proceeding. Provision for this is made in r 14.3. All defendants submitted that this proceeding fits within Category 3 as set out in r 14.3. The three categories are as
follows:
Category 1
proceedings
Proceedings of a straightforward nature
able to be conducted by counsel considered junior in the High Court
Category 2 proceedings
Proceedings of average complexity requiring counsel of skill and experience considered average in the High Court
Category 3 proceedings
Proceedings that because of their complexity or significance require counsel to have special skill and experience in the High Court
11 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [19].
12 Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd
(2002) 16 PRNZ 662 at 668.
13 Glaister Amalgamated Dairies Ltd, above n 11 at [14].
Whilst there are complexities with this case and it is acknowledged that the plaintiffs have employed the services of a Queen’s Counsel, I must analyse the proceeding itself to determine whether the issues that arise are of such complexity that this case requires counsel to have special skill and experience in the High Court. I have considered the pleadings filed and the submissions advanced in support of the applications for security for costs, and I consider that this case does not yet justify being placed in Category 3. I have referred to the fact that there will be an opportunity for the defendants to confer amongst themselves on much of the material that will be advanced in opposition to the plaintiffs’ case. To suggest that, because of the complexity of the case, each of the five groups of defendants require to have counsel who have special skill and experience in the High Court is not justified. Accordingly, I proceed on the basis that this is a Category 2 case;
(c) As a Category 2 case, Schedule 2 applies and the allowance per day is therefore $1,880;
(d)The next issue that requires a determination is what a reasonable amount of time for each step that is anticipated to be taken in this proceeding is. This, in particular, requires consideration of r 14.5 and the Third Schedule. The particular contest in relation to most steps that will arise in this case is as to whether Band B, which allows a normal amount of time for the step, or Band C, a comparatively larger amount of time, is appropriate. I now break that analysis down having regard to the items that are mentioned in Schedule 3:
Item 2 – Commencement of defence
All defendants are represented on a multi-party basis. Some allowance therefore has to be taken of that fact. In my view, it is reasonable to allow Band C for the commencement of the defence,
which includes researching the facts and law and preparing and filing the statement of defence.
Accordingly, I allow Band C. 6 days
Item 4.5 – Lists of documents on discovery
Undoubtedly, for the reasons I have set out in this judgment, there will need to be an extensive exercise undertaken by the defendants. This must be very much an estimate, but allowing for the fact that there are several defendants involved in each group I again consider that Band C is the
appropriate allowance. 6 days
Item 4.6 – Production
The period in which the documents will have been created is months, not years. Once the documents have been identified for the purposes of preparation of discovery, I would not anticipate that putting the documents together for production purposes would justify anything more than Band B. For that
reason, I allow Band B. 1 day
Item 4.7 – Inspection of documents
This involves the inspection of the plaintiffs’ documents. The plaintiffs’ difficulty with this case is a lack of access to the relevant documents and accordingly I would not anticipate that inspection of the plaintiffs’ documents would be a substantial exercise. For that reason, I allow Band B for
inspection of the plaintiffs’ documents. 1.5 days
Item 4.10 – Preparation for case management conference
I anticipate that one should allow three case management conferences for this case. That is one more than the norm although it does take into account that there should probably be a pre-trial conference. Band B for the preparation of the conference memoranda should be sufficient. Based
on three conferences, I allow Band B. 1.2 days
Item 4.11 – Appearances at case management conferences
For the reasons set out above, I assess this based on
Band B and for three conferences. .9 of a day
(e) The above assessment, which takes the case to the close of interlocutory matters, gives a total day allowance of 16.6 days, which, at the Category 2 rate, suggests a potential cost figure of $31,208;
(f) Item 8 of the Third Schedule deals with the preparation of the case for hearing for which an allowance of twice the number of hearing days is made. There are several possibilities with this case. All counsel for the defendants have worked on the basis of a six-week trial. No analysis has been given to me as to how that assessment was made. In particular, for example, no explanation is given as to whether it is limited to liability issues, or includes what I will call the whole exercise. The prayer for relief seeking inquiries in many of the causes of action indicates that some form of split hearing is almost inevitable. That position can change, however, as discovery is completed and information is made available and often leads to a position where a plaintiff can plead damages with precision before the hearing. Making the best assessment I can at this stage and allowing a reduction on the basis that liability is only investigated, when Items 8 and 9 (the preparation for hearing and the hearing itself) are taken
into account, and allowing for one counsel, a figure of $112,800 is achieved. When that is added to the figure I have arrived at for interlocutories the total allowance is $144,008. I intend to use that as
the starting point for the analysis of quantum in this case.
Conclusions
[82] No defendant advances their case on the basis that the plaintiffs’ case would
not survive a strike out or a defended summary judgment application.
[83] Had a summary judgment application been filed, there would have been an opportunity to evaluate the evidence more closely and the problem referred to at [9] may not have arisen. I am hampered in just how far an evaluation of the merits of this case be taken.
[84] The Cash Handling Systems groups’ downfall was caused by a lack of liquidity. The sale by the liquidators discloses that assets exceeded liabilities. Save for the shareholder dispute, given time and appropriate provision being made for working capital, the company may well not have failed. In short, there was value to be had if it was placed in the right hands.
[85] The precise cause of the liquidity problems is contentious. The immediate cause was the lack of bank assistance for working capital and the change of credit position in the trading relationship with the fifth defendant, Shape Technology Ltd.
[86] Both the Oliver and Waite interests desired the retention for themselves of the business. It can be assumed that both saw the potential for future business success. The real problem was their inability to get on and agree on the path forward for the group’s business. There is some evidential foundation that supports the theory that Mr Oliver had put in place a strategy to remove the Waite interests from Cash Handling Systems group’s business. His advice to Shape Technology Ltd, the fifth defendant, and direction not to supply and the alleged lack of co-operation towards an approach to the bank and his initiation of the liquidation proceedings at a time which best suited his position lends some support for this. Having said that,
however, there is evidence that Mr Oliver faced considerable problems with staff morale and a financial deterioration that was outside his control and from his perspective that was not being properly addressed by Mr Waite.
[87] The case at this early stage lends itself to an inquiry confined to liability issues so far as the claim against the first to eighth defendants is concerned. That is self-evident when one analyses the prayers for relief that I have already referred to in relation to causes of action affecting these defendants.
[88] The claim against the liquidators could, likewise, be separated from the balance of the claim. It is difficult to see how the liquidators could be liable if the causes of action against the other defendants failed.
[89] Discovery undoubtedly will be important in this case. The plaintiffs’ case, at this stage, is dependent upon accessing documents dealing specifically with a number of matters which include:
(a) The immediate events leading up to the liquidation;
(b)The supply of the necessary product so that it could complete what was required to meet its contractual obligations, including the payment for that product;
(c) The position relating to creditors; (d) The bank arrangements;
(e) Staff contracts and arrangements;
(f) Negotiations with parties concerning the operation of the business after Mr Waite’s departure;
(g)The actual arrangements that were associated with the acquisition of the business;
(h)The material necessary to make an assessment of the value of the business that was transferred from the liquidators; and
(i)Documents sourced from the Cash Handling Systems group and used in the future operation of the business following its acquisition.
[90] The position of the third and fourth defendants needs special attention because neither appears to have obtained any real advantage from the business collapse, unlike the other defendants that make up the balance of the group comprising the first to eighth defendants. However, they were potentially involved in the transfer of staff and the company’s systems to the purchaser.
[91] The plaintiffs’ actual financial position and their ability to fund security for costs is unclear. Two of their trusts are unlikely to be able to provide any assistance even if they wished to. The RN & CL Waite Family Trust probably owes the plaintiffs money which, as a minimum, should be available to satisfy claims for security for costs. There may also be provision in that trust to make additional advances.
[92] The liquidators’ position needs to be considered. They have a surplus of funds in their possession which, even after payment of all secured creditors and costs to date, is currently $237,000.
[93] The real value of the business at the time of liquidation and the time of subsequent sale is open to debate and will require further inquiry. Much greater analysis than that undertaken at the hearing is required. The liquidators received
$3,252,000 from the sale to Oliver Bid Co Ltd. They received an additional
$1,070,000 made up of pre-liquidation bank balance, debtors collected and trading receipts. The purchaser from Oliver Bid Co Ltd disclosed in its accounts the costs incurred by it for its purchase of $5,830,000.
[94] The liquidators’ summary position based on total realisations of $4,300,000 disclosed that, after payment of all creditors, there was a surplus of $494,000. That suggests that the total liability of the business was the difference, namely
$3,806,000. If that figure is taken from what the purchaser from Oliver Bid Co Ltd says he had paid, there would appear to be a capital surplus in the region of
$2,024,000. These calculations are necessarily tentative and, I emphasise, were not the subject of any comment by those who were closely associated with the business at the time.
[95] The above assessment suggests that there is at least some basis for the proposition that Mr Oliver, through Oliver Bid Co Ltd, may have obtained a substantial profit, being the difference between what his company paid the liquidators for the business and what he was able to on-sell it for to the subsequent purchaser, Global Integrated Solutions Ltd.
[96] Were it not for the plaintiffs’ inability to meet an award of costs if they are unsuccessful, all causes of action should be heard in the one hearing. However, the plaintiffs are not able to meet the likely costs of a trial of all the causes of action. It is therefore necessary to approach this case from the perspective of what are the important areas that require determination so that they are not put out of the plaintiffs’ reach. The fourth, sixth and seventh causes of action should be determined. If the plaintiffs cannot succeed with these, it is unlikely that they would succeed with the remaining causes of action. On the information that is placed before me, the level of security fixed should allow for the security to be provided and for those causes of action to proceed. With the other causes of action, when the competing positions of the plaintiffs and defendants, which I have referred to at [40], are taken into account, there is less justification for reducing the security beyond the analysis that I have carried out at [81].
[97] The form of security has not been subject of detailed analysis. There is scope for a form of security to be given which is attainable on the plaintiffs’ part, but provides a measure of protection for the defendants in the event that they are successful. I have taken this possibility into account in the orders I have made because I anticipate that when my principal rulings are taken into account, a practical solution may well be able to be worked out by the parties or, if it cannot, a process could be put in place where, after receiving some further evidence I could order how the security is to be given.
[98] I bear in mind that the plaintiffs have offered $150,000 as security. A determination of the fourth, sixth and seventh causes of action would involve two distinct sets of representation on the defendants’ part. The second defendant is involved in the fourth and seventh causes of action. The first defendant is involved in the sixth cause of action. Although the fourth cause of action is pleaded against the second, third and fourth defendants, it can proceed separately against the second defendant. Indeed, the relief that might be ordered under this cause of action could be different as applied to the three defendants against whom the cause of action is pleaded. There is, therefore, in my view, a proper basis for a significant reduction in the amount of security to be ordered so far as it affects the fourth and seventh causes of action as they are pleaded against the second defendant and the sixth cause of action, pleaded against the first defendant. I have taken that into account in the rulings givem in this judgment.
[99] The amount of security that I consider is appropriate for those causes of action for which I consider the plaintiffs’ prospects are not strong is $140,000 in respect of each application for security: and therefore in respect of each of the groups of defendants that are separately represented. For those causes of action, namely the fourth, sixth and seventh causes of action, I consider there should be some reduction in the amount of security provided for the groups of defendants who are separately represented. I consider that the security in respect of those parties should be fixed at
$70,000.
[100] As to the form of security, the plaintiffs should have the option of paying a sum into court, but I suspect that a more appropriate form of security that involves less cost is an agreement that records the giving of security over some acceptable property. There is a need to determine the acceptability of the property for the security for the amount to be secured and the form that the security takes: whether it be an agreement to mortgage supported by a caveat, for example, or some other form as appropriate. I am deliberately leaving open the form of the security for the parties to agree or, failing agreement, for them to come back to the court with a view to appropriate evidence being advanced so that the court can settle the appropriate form of security.
[101] My overall assessment is that if the plaintiffs wish to proceed with all causes of action in the one hearing each of the five groups of defendants should have security in the sum of $140,000 so that the total security provided is $700,000.
Orders
[102] I order as follows:
(a) On the second defendant’s application for security for costs:
(i)The first, second, third and fifth causes of action are stayed until security for costs in an amount of $140,000 is provided in one of the forms set out in this order;
(ii)The fourth and seventh causes of action are stayed until security for costs in an amount of $70,000 is provided in one of the forms set out in this order;
(iii)The orders made in (i) and (ii) are not cumulative, so that if security for costs is provided by the plaintiffs in the sum of
$140,000, none of the causes of action shall be stayed;
(b)On the third and fourth defendants’ application for security for costs, the first, second, third and fourth causes of action are stayed until security for costs in an amount of $140,000 is provided in one of the forms set out in this order;
(c) On the first, sixth, seventh and eighth defendants’ application for
security for costs:
(i)The first, second and third causes of action are stayed until security for costs in an amount of $140,000 is provided in one of the forms set out in this order;
(ii)The sixth cause of action is stayed until security for costs in an amount of $70,000 is provided in one of the forms set out in this order;
(iii)The orders made in (i) and (ii) are not cumulative, so that if security for costs is provided by the plaintiffs in the sum of
$140,000, none of the causes of action shall be stayed;
(d)On the fifth defendant’s application for security for costs the first, second and third causes of action are stayed until security for costs in an amount of $140,000 is provided in one of the forms set out in this order;
(e) On the ninth and tenth defendants’ application for security for costs the causes of action referred to as the eighth cause of action and the second eighth cause of action are stayed until security for costs in an amount of $140,000 is provided in one of the forms set out in this order;
(f) Security may be provided by the plaintiffs in one of the following ways:
(i) By paying the appropriate sum into court; or
(ii)By the plaintiffs’ signing with the appropriate defendant an agreement recording the form in which the security is given and for such agreement to be filed in court;
(iii)In the event that the parties are unable to agree on the form of security then leave is reserved to the plaintiffs and the party concerned to apply by memorandum for a hearing to determine the form of security.
Costs
[103] The plaintiffs and the respective defendants have all achieved a measure of success in the positions they have adopted in relation to these applications. I reserve costs and invite counsel to confer with a view to reaching agreement on the appropriate position. In the event that a party seeks to have costs fixed because no agreement on a position can be reached, at the conclusion of the procedure I have ordered that is to take place in relation to fixing the form of security, memoranda in support, opposition and rely in relation to costs shall be filed and served at seven-day intervals.
Case management conference
[104] The Case Officer who has responsibility for this file is asked to check with counsel as to progress in resolving the form of security. If the form of security is resolved a case management conference should be scheduled and advised to counsel. In that event, counsel shall file and serve memoranda dealing with the matters set out in Schedule 5 of the High Court Rules two working days before the allocated conference date.
[105] In the event that the issue as to the form of security is not resolved, and counsel seeks the matter to be determined by the Court, the Case Officer is asked to confer with me with a view to fixing a case management conference before me at
which directions will be given preparatory to a hearing to fix the form of security.
JA Faire
Associate Judge
0