Wilson v Shi

[2014] NZHC 2508

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-7233 [2014] NZHC 2508

BETWEEN

NORMAN GARY WILSON

Plaintiff

AND

LEI SHI
First Defendant

AND

GUANG SHI, JUAN DENG AND JIAN DENG

Second Defendants

CIV-2013-404-3693

BETWEEN  NORMAN GARY WILSON Plaintiff

ANDLEI SHI Defendant

Hearing:	8 October 2014
Appearances:	H Fulton for Plantiffs A Choi & L M Nicholson for Defendants
Judgment:	14 October 2014

JUDGMENT OF KEANE J

This judgment was delivered by Justice Keane on 14 October 2014 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Solicitors:

Bell-Booth Sherry, Takapuna, Auckland

Dyer Whitechurch, Auckland

WILSON v SHI [2014] NZHC 2508 [14 October 2014]

[1]      This case, which has gestated over eight years, six years in the Family Court and two in this Court, is finally set down for hearing over 10 days commencing on

17 November 2014; a fixture I authorised in my decision, dated 9 May 2014.  In that decision, and another given on 20 August 2014, I resolved the remaining issues as to discovery.

[2]      In an application, filed on 18 September 2014, Ms Shi and her co-defendants now apply for an order requiring Mr Wilson to give security for costs in the region of

$147,758 on the grounds that (i) he is admittedly impecunious and appears to have an arrangement with his lawyers allowing him to litigate on credit; and (ii) he is protected by a caveat and preservation order over their assets, should he succeed, whereas they have no such protection.

[3]      Consequently, they apply for an order for security for costs; and, if security is not given, an order for stay.  But they wish also to maintain their fixture.  If security is  not  given  within  10  working  days,  they  seek  the  discharge  of:  (i)  a  caveat registered against 325 Riverhead Road, Riverhead,  registered in the name of  Guang Shi, Ms Shi’s father, a property in which the equity appears to be in the order of

$700,000; and (ii) a preservation order made in the Family Court on 27 June 2007, securing in a stakeholders’ account $1.4M presently, to which a deposit with Geneva Finance Limited in the name of Jian Deng, Ms Shi’s brother, had been transferred.

[4]      Mr Wilson opposes this application. He contends that it is an eleventh hour attempt to prevent him from advancing his case at trial.  His lack of means, he contends, was evident as early as 2011 when the Family Court released preserved funds to Ms Shi and himself to pay their then lawyers. He contends that his case has merit and ought not to be stayed; and that his inability to pay security cannot justify setting aside the caveat and preservation order, which secure the primary assets in dispute.

Orders applied for

[5]      In  their application  the  defendants  seek,  unusually,  not  just  an  order  for security for costs, and a stay.  They seek as well two other orders, the setting aside of the caveat and the discharge of the preservation and transfer order, which are quite distinct forms of order.

[6]      Under r 5.45 a plaintiff may be required to give security for costs either by paying a sum into Court, or by giving satisfactory security for it; and the proceeding may be stayed until the sum is paid or the security given.1     But, even where a plaintiff is clearly without means, an order for security in itself calls for a careful exercise of discretion. As the Supreme Court said in Reekie v Attorney-General:2

The jurisdiction to require security poses something of a conundrum for the Courts.   The poorer the plaintiff, the more exposed the defendant is as to costs and the greater the apparent justification for security.  But, as well, the poorer the plaintiff, the less likely it is that security will be able to be provided and thus the greater the risk of a worthy claim being stifled.

[7]      So too, in the earlier case A S McLachlan Ltd v MEL Network Ltd,3 the Court of Appeal confirmed that the discretion is to be exercised on ‘a careful assessment of the circumstances of the particular case’; and that a balancing exercise is called for.4

[8]      An order preventing a plaintiff from pursuing a claim, the Court of Appeal said, ‘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’.5    As against that, ‘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’.6

[9]      Where a case is complex, the Court of Appeal said, any assessment before

trial of its merit ‘can be no more than an impression’.7    That being so, it may be that

1      High Court Rules, r 5.45(2)(3).

2      Reekie v Attorney-General [2014] NZSC 63 at [2].

3      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13], [14].

4      Above, n 1, At [15] – [16].

5 At [2].

6 At [16].

7 At [21].

an order for security, which would bring the claim to a halt, ought to be withheld unless it is clear that the claim is altogether without merit and might, alternatively, deserve to be struck out.8   Where an application for security is made close to trial, it seems to me also, that has to be independently concerning.  But I accept that there are cases where the order has been made close to the eleventh hour.9

[10]     Quite apart, furthermore, from what r 5.45 requires for an order for security, and a stay to be given if need be, there is no instance to which I have been referred in which the removal of caveats or the setting aside of preservation orders has been linked by order to a failure to give security. That is unsurprising.

[11]     A notice of claim under s 42 of the Property (Relationships) Act 1976 may be a registerable interest and, once lodged against a title, may have the effect of a caveat against dealings under s 137 of the Land Transfer Act 1952.  The Family and District Courts may share the ability of this Court to resolve applications for removal.  But the removal of a caveat deriving from a s 42 notice of claim remains governed by the Land Transfer Act 1952;10  and I understand that the caveat in this case has already withstood a challenge.

[12]     So far as I can see also, the 2007 preservation and transfer order must have been  made  under  s  43  of  the  Property  (Relationships)  Act  1976,  to  restrain disposition of the sum on deposit; and, if that is so, then it can only be set aside on evidence demonstrating that the order never was, or has ceased to be, necessary.11

Conclusions

[13]     There can be no doubt that Mr Wilson is impecunious and that, if his claim fails, he will be unable to pay the defendants’ costs.  It is also true that even though, as Mr Fulton assured me, Mr Wilson has no third party funding or any contingent fee agreement with his lawyers, in which they take a premium if he wins, they continue

to act for him.  In that sense they are funding his claim and sharing his risk.

8      Highgate on Broadway Ltd v Devine [2012] NZHC 2288 at [23](b).

9      Navigator Finance Ltd v Petrecivic HC Auckland CIV-2010-404-3763, 3 February 2011.

10     Hayball v Lewis [1996] 1 NZLR 717 at 720.

11     S v S [Relationship Property] [2008] NZFLR 227 (HC).

[14]     That said, this application has been made very late, as well as very close to trial, and that is what distinguishes it from any other case.  This case has gestated over eight  years.   It has a fixture, and it is imperative that  it is then resolved. Moreover, security could have been applied for earlier. The full scale of Mr Wilson’s debt to his lawyers may only recently have become fully evident.  His inability to pay them has been known for at least three years.

[15]     There is also this related difficulty.  The defendants may be confident that Mr Wilson’s claim is completely without merit, and that he has no answer to their accounting analysis.  But the very fact that a 10 day fixture has been asked for and given suggests that there may well also be complicating issues of credibility to resolve. Any assessment of the merit of Mr Wilson’s claim at this stage must remain a matter of impression.

[16]     Finally,  the  defendants’ application  faces  the  difficulty  to  which  I  have alluded, that they seek two orders beyond those for security costs and a stay, either in priority to or as well as a stay, the removal of the caveat and the setting aside of the preservation order.  Such orders call for distinct applications and tailored evidence.

[17]     I decline the application for an order for security for costs and the three consequent orders.   Mr Wilson is entitled to an award in scale 2B, which can be

taken into account in the ultimate disposition of the case.

P.J. Keane J