Zhang v Zhai
[2013] NZHC 1303
•5 June 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-6491 [2013] NZHC 1303
BETWEEN SHAOHE ZHANG Plaintiff AND
XIAOJUN ZHAI and AIDONG ZHONG Defendants
Hearing: 29 May 2013 Appearances:
Mr Henry for applicant
Mr St John and Mr Liu for respondentJudgment:
5 June 2013
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
[on Application for Security for Costs]
This judgment was delivered by me on
5.06.13 at 4 p.m, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
ZHANG v ZHAI & Anor [2013] NZHC 1303 [5 June 2013]
[1] The plaintiff has brought proceedings seeking to enforce an agreement for sale and purchase that was entered into between the parties in or about 3 August
2003 pursuant to which the plaintiff agreed to purchase a property from the defendants situated at 23A Margan Avenue, New Lynn, Auckland for $348,000. The plaintiff paid a deposit of $20,000 on the transaction. The agreement was conditional upon issue of a new title but there is no dispute that that occurred and that the agreement in fact became unconditional. That occurred in or about 22 June
2004.
[2] There was a long period of inactivity during which the defendants continued to reside in the property. On 14 May 2012 the plaintiff arranged service of a settlement notice on the defendants but the defendants have refused to settle the transaction. On 1 November 2012 the plaintiff filed the present proceeding.
[3] The defendants have filed a defence in which they first of all agreed about the outlined facts concerning the agreement for sale and purchase including the incorporation into the agreement of the condition relating to the issue of a new title. They alleged that the plaintiff is in breach of a contract because he would not at any time comply with his settlement obligations by which the defendants mean tendering the balance of the purchase price or any of the settlement documents required to be tendered by the plaintiff. By way of affirmative defences they allege, again, the failure to tender settlement documents etc. They further allege that the plaintiff is engaged in prolonged, inordinate and inexcusable delay in bringing the action and that he has acquiesced in the matters complained of. As well, Mr Henry advised me that the defendant will be further alleging that the plaintiff made statements to the defendants which amounted to express acquiescence in the failure to complete the transaction. As well the defendants say that requiring them now to settle the transaction would cause them hardship. They say that the property currently has a capital valuation of $540,000 compared with the purchase price of bargained for in
2003 of $348,000. They also allege that the defence of laches is available to them because by analogy with the limitation period in the Limitation Act the plaintiff should be regarded at equity as being barred from bringing the claim that he does for specific performance. They also plead the action is barred by s 4 of the Limitation
Act 1950. The defendants further raise an affirmative defence that the contract has been frustrated because an obligation to provide a code compliance certificate which was assumed by the defendants in the agreement cannot now be satisfied because as a result of changes to the requirements for the issuance of a code compliance certificate it is impossible for the building specifications of the subject property to satisfy those requirements.
[4] The defendants have filed an application for an order for security for costs pursuant to r 5.45 of the High Court Rules which so far as relevant provides as follows:
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.
[5] The plaintiff opposes the making of any order.
[6] The defendants allege that the plaintiff comes within r 5.45(1)(a)(i) because he is resident out of New Zealand.
[7] The defendant says that he has residency with rights in respect of New Zealand. He agrees that he spends most of his time in his home country of China. He has a residence in China. He says that he spends more time in China than New Zealand but that he and his wife have made plans to retire in New Zealand and that
his ultimate goal is to settle down in New Zealand in the next two to three years. He says that he is able to meet any order for costs and he refers to the fact that that he has made a $700,000 term deposit with the ASB Bank in New Zealand which he renews from time to time. He says that the deposit of $20,000 that he has made has not been refunded.
[8] I shall deal first with whether the defendant is resident out of New Zealand. The first step is to consider what the provision in High Court Rule 5.45(1)(a) actually means. It would seem that the terms “resident” refers to the conventional position as defined in the Oxford English Dictionary, namely, “as one who resides, dwells, or has an abode in a place; living somewhere on a long term basis”.
[9] Secondly, the reasons behind the enactment of rule 5.45(1)(a) is concerned with matters which give rise to risk that orders for costs that an unsuccessful party is directed to be paid may not actually be paid. A person who is primarily resident in another country will be not be as easy to obtain personal remedies against such as an order adjudicating him bankrupt. Further, the concentration on the place of residence reflects the usual position that a person’s property will generally be located in the country where he resides. The fact that litigants have property out of the jurisdiction means that obtaining execution orders against that property can be difficult. There may be other elements to the policy that underlie the rule but the discussion to this point is sufficient to give an indication of what the term “a resident out of New Zealand” means for present purposes.
[10] In my view the plaintiff is caught by the rule. While he may come and go from New Zealand on occasions, that does not derogate from the fact that being “resident” is concerned with where a person abides for most of the time. If that is the correct interpretation of the rule then the evidence before the Court establishes that the plaintiff is resident out of New Zealand. Therefore there is jurisdiction to make an order under r 5.5(1)(a)(i).
[11] The next consideration is that if there is jurisdiction:
(2) A judge may, if the judge thinks it is just in all the circumstances, order the giving of security for costs.1
[12] The matters which bear upon the exercise of the discretion of the Court in this case are as follows.
[13] First, there is no counterbalancing prejudice which the plaintiff would be subject to if an order was made which outweighs the potential prejudice to the defendants if they are successful but yet are unable to enforce an order for costs.
[14] Secondly, it is conventional for the Court to have regard to the strengths of the respective parties’ cases. In the context of this case that question may be posed by asking whether the strength of the plaintiffs case in the corresponding weakness of the defendants’ defences is such that it is unlikely that the plaintiff will be ordered to pay costs to the defendants. If the chances of the defendants succeeding are low then the undoubted inconvenience that will result to the plaintiff in having to pay to give security for costs would not justify the Court in making an order.
[15] In this case there is no dispute that the agreement for sale and purchase of the property was entered into and there is little doubt that it became unconditional.
[16] The issue of whether the plaintiff is ready, willing and able to meet his obligations under the contract arises at the point where he seeks to enforce the agreement. The fact that he may not have been at various times in the past is not relevant.
[17] A limitation defence is also advanced. Such a defence will not prevent a
Court with equitable jurisdiction making orders for enforcement of agreements.
[18] It would appear that the relevance of delay is undoubted when the Court is balancing the equities. The fact that there has been a long delay may give rise to an inference as a matter of commonsense that delay in making a claim has prejudiced
the defendant.2
1 High Court Rules, r 5.45(2).
2 Wellington City Council v New Zealand Law Society [1990] 2 NZLR 22 at 26 (CA).
[19] Further, there is an additional element which was referred to in the Supreme
Court decision of Eastern Services Limited v No 68 Limited.3
[39] Equity has been most reluctant to accept that an equitable interest in land could be “lost or destroyed by mere inaction”, as shown by cases such as Sharp v Milligan and Williams v Greatrex which were considered by Baragwanath. He distinguished them on the basis that they involved actual possession by the plaintiffs. It is the case that actual possession of the land, the subject of the equitable interest, has been considered relevant. But the dominant feature is that in such cases all that needs to be done between the parties is the conveyancing step of transferring the legal estate. That is the position in this case, and of course a right of way easement, although an interest in land, cannot be physically occupied.
[20] In the present case, the defendants have had possession of the property ever since 2003 when the agreement for sale and purchase was entered into. On the other hand, the plaintiff has never paid the full price and has paid only a deposit which the defendants are not, apparently, minded to give back. The balance of equities is therefore reasonably even. The plaintiffs have continued in uninterrupted possession of the property that they own. It is true that on the other hand the plaintiff, if successful, would reap a capital gain of over $100,000 by only the outlay of a
$20,000 deposit.
[21] In my view the defence of laches and accompanying prejudice which the defendants put forward is not wholly without merit.
[22] I note Mr Henry’s submission that it would be quite easy for the plaintiff to move the $700,000 term deposit out of the jurisdiction in the event that a costs order was made against the plaintiff and that the location of that fund within New Zealand could be of little assistance to the defendants if they held an unsatisfied costs order.
[23] I conclude that no identified hardship would result to the plaintiff if an order for security for costs were to be made. On the other hand, it would not be just or unreasonable to expose the defendants to a risk of an unpaid costs order which
would be the case if the application for security for costs was declined.
3 Eastern Services Limited v No 68 Limited [2006] NZSC 42.
[24] For all of those reasons I direct that the plaintiff is to provide security for costs.
[25] The extent of the security for costs must be fixed in relation to the fact that this proceeding is likely to take three days at trial. Standing back and looking at matters overall I consider that security in the sum of $25,000 would be justified. It is usual for security to be given by way of a cash deposit lodged with the Registrar of the High Court. I do not intend to give particular directions on that at the moment because it is possible that the plaintiff can provide security in other ways, perhaps linked to the term deposit fund to which reference has already been made. The parties should confer on that aspect of the matter I am sure that if suitable security is available by alternative means to a cash deposit with the Registrar, that that should be acceptable to the defendants. In the event of failure to agree I will make orders which are likely to be that a case deposit is to be provided.
[26] If the parties wish to be heard on costs they are to file memoranda not exceeding three pages on each side within ten working days. Alternatively they can
confer on costs and come up with some sensible solution.
J.P. Doogue
Associate Judge
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