LIP and RAHIM v PANDEY [2023] NZHC 860

LIP and RAHIM v PANDEY [2023] NZHC 860 [21 April 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-241[2023] NZHC 860UNDER Rule 4.24(a) of the High Court RulesBETWEEN ALADDIN BIN MOHAMED LIP andNORCHIK BINTI ABDUL RAHIMPlaintiffsAND PRAKASH PANDEYDefendantHearing: 1 February 2023Counsel: R J Hollyman KC and V H H Hansen for defendant/applicantS V A East and S J Leslie for plaintiffs/respondentsJudgment: 21 April 2023JUDGMENT OF ASSOCIATE JUDGE TAYLOR[Applications for more explicit statement of claim, striking-outand security for costs]This judgment was delivered by me on 21 April 2023 at 3:00pm,pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors:Bell Gully, Auckland for PlaintiffsFarry & Co, Auckland for DefendantCopy for:R J Hollyman KC, Auckland, for the PlaintiffsTABLE OF CONTENTS ParagraphIntroduction [1]Background [3]Application for more explicit pleadings, to strike out elements of pleadingsand security for costs [10]Affidavit of Alan LeslieFisher dated 8 September 2022 [12]Affidavit of Rula Alemdar dated 25 November 2022 [13]Notice of Opposition [15]Affidavit of AladdinBin Mohamed Lip dated 19 September 2022 [16]Second affidavit of Aladdin Bin Mohamed Lip dated 31 January 2023 [18]Mr Pandey's submissions [19]More explicit pleading [20]Striking out elements of the statement of claim [22]Mr Lip and Mrs Rahim's submissions [30]More explicit pleading [31]Striking out elements of the statement of claim [33]Security for costs [41]Legal principles [45]More explicit pleading [45]Strike out [54]Security for costs [59]Approach to analysis [67]More explicit pleading [67]Issues for strike-out [68]Issues for security for costs [69]Analysis for strike-out [71](a) Limitation under s 43A of the FTA for s 9 claim [71]Conclusion on limitation under s 43A of the FTA for s 9 claim [79](b) Limitations under ss 11 and 14 of the Limitation Act for negligenceand dishonest assistance claims [81]Conclusion on limitations under ss 11 and 14 of the Limitation Actfor negligence and dishonest assistance claims [88](c) Reasonably arguable breach of s 9 of the FTA [89]Conclusion on reasonably arguable breach of s 9 of the FTA [96](d) Reasonably arguable duty of care in negligence [98]Conclusion on reasonably arguable duty of care in negligence [111](e) Reasonably arguable trust and breach of trust for dishonest assistance claim[114]Conclusion on reasonably arguable trust and breach of trust fordishonest assistance claim [126]Analysis of security for costs [129]Has Mr Pandey satisfied the Court of the threshold under r 5.45(1)? [130]How should the Court exercise its discretion under r 5.45(2) [131]Conclusion on the order for security for costs [138]Result [139]Orders [140]Costs [141]Introduction[1] In the substantive proceeding, the plaintiffs, Mr Aladdin Lip and Mrs NorchikRahim (Mr Lip and Mrs Rahim), sue in their own right and on behalf of a classaction and raise three causes of action against the defendant, Mr Prakash Pandey(Mr Pandey), for breach of s 9 of the Fair Trading Act 1986 (FTA), negligence anddishonest assistance.[2] This judgment relates to three interlocutory applications by Mr Pandey fororders:(a) requiring a more explicit statement of claim;(b) striking out elements of the plaintiffs' statement of claim; and(c) requiring the plaintiffs to provide security for costs.Background[3] Mr Lip and Mrs Rahim own a residential unit in 21 Viaduct Harbour Avenue,Auckland (the complex). They bring this proceeding in relation to arrangements theyentered into to lease their unit so that it could be part of a hotel operation. They saythat these arrangements were marketed to them directly by Mr Pandey, and that theywere misled as to those arrangements.[4] Mr Pandey is sued in his capacity as director of an entity which owns thecomplex's commercial units and some of the residential units. Mr Lip and Mrs Rahimsue personally and in a representative capacity on behalf of 78 other residential unitowners in the complex.[5] The proceedings concern an email dated 12 October 2011, in which Mr Pandeyset out a proposal in which the plaintiffs would lease their units to the entity ViaductQuays Hotel Limited (VQHL), which would then lease them to the hotel brand Accor.That proposal is now challenged as false and misleading.[6] At the time of the initial proposal the plaintiffs formally entered into anddocumented that arrangement between them as unit owners and VQHL.[7] In 2015, the plaintiffs initiated arbitration proceedings disputing their return oninvestment. Mr Pandey contends that those proceedings included, among othermatters, allegation by the plaintiffs which mirror, or at least underpin, theseproceedings.[8] In February 2022, the plaintiffs sued Mr Pandey based on claims arising fromthe 2011 proposal.[9] For the sake of completeness, in 2021 VQHL went into liquidation and thehotel shut down. A new hotel was established, in which the plaintiffs are not currentlyparticipating.Application for more explicit pleadings, to strike out elements of pleadings andsecurity for costs[10] Mr Pandey seeks orders:1More Explicit Pleading(a) requiring the Plaintiffs to file and serve:(i) a more explicit statement of claim; and/or(ii) an amended statement of claim providing further particularsof the claims;as detailed in Schedule A to this application; and(b) staying the proceeding until either the Court dismisses thisapplication, or the Plaintiffs comply with the Court's order requiring1 Interlocutory application on notice for order requiring a more explicit statement of claim and/orfurther particulars, for order for strike out, and for order for security for costs dated 12 August2022 at [1].a more explicit statement of claim and/or further particulars,whichever is applicable; andStrike out(c) striking out the following parts of the Statement of Claim:(i) paragraph 60;(ii) at paragraph 61(a) all references to conduct alleged to haveoccurred prior to:1. 8 March 2019; and/or2. 8 March 2016; and(iii) paragraph 61(b)(iv) paragraphs 65 and 66 of the Statement of Claim;(v) at paragraph 67, all references to conduct alleged to haveoccurred prior to 8 March 2016;(vi) the third cause of action;Security for Costs(d) requiring the Plaintiffs to provide security for costs, in such amountas the Court may decide;(e) that these proceedings are stayed until the Plaintiffs have givensecurity in the amount and form required by an order of this Court;(f) enlarging the time by which the Second to Sixth Defendants arerequired to serve an affidavit of documents, and produce nonprivileged documents listed in the same, to the 30th working day afterthe day on which security is in fact given; and(g) requiring the Plaintiffs to pay the Defendant's costs in with respect toeach of the above applications.[11] The grounds on which the orders are sought are:2More Explicit Pleading(a) The Statement of Claim presently fails to:(i) fairly define the contest between the parties;(ii) inform the Defendant, and the Court, of the necessaryingredients of the Plaintiffs' claims;2 At [2].(iii) tell the Defendant exactly what the allegations are that thedefendant must answer — instead, the statement makesinferential assertions, and leaves the Defendant to guess;(iv) provide a proper opportunity for the Defendant to take stepsin advance to deal with the case the Defendant will have tomeet;(v) limit the scope of matters that the Plaintiffs may put in issueat trial, or in pre-trial settlement discussion;(vi) provide the defendant with a proper opportunity to seeksummary determination on the basis that the claim, aspleaded, is untenable;(b) the specific failing(s) of particular parts of the statement of claim areset-out in Schedule A to this application;(c) the consequence of the various failings of the statement of claim is toundermine the objective of the High Court Rules to secure just,speedy, and inexpensive determination of proceedings;(d) stay:(i) all subsequent procedural steps contemplated by the HighCourt Rules are predicated on the pleadings, beginning withthe statement of claim, providing a reference point for the just,speedy, and inexpensive conduct of a proceeding;(ii) more particularly:(1) before the parties can properly assess what documentsshould be required in discovery, the case that must beanswered should be defined as precisely as possible,so that the scope of discovery is not broader thannecessary to address the case to be answered;(2) a defendant cannot be expected to make precisedenials or admissions until the case the defendant isrequired to answer is precisely pleaded;(3) given the principle that an application for strike outmay be refused if the deficiency in question can befixed by re-pleading, a plaintiff should be required toparticularise their statement of claim fully, before adefendant should be put to the burden of anapplication for strike-out.Strike Out(e) as the statement of claim is pleaded, there is no arguable case that theDefendant was acting in trade for the purposes of the Fair Trading Act1986;(f) the issue of each monthly statement was a discrete action;(g) section 43A of the Fair Trading Act 1986 prohibits all claims brought3 years or longer after the date on which the loss or damage, orlikelihood of loss or damage, or ought reasonably to have beendiscovered;(h) the Plaintiffs knew about the alleged losses relied on with respect toparagraph 61(a) in commencing their arbitration claim against VQHLin 2015;(i) in any event section 11 of the Limitation Act 2010 prevents an actionfrom proceeding based on conduct or events that occurred 6 or moreyears before the Statement of Claim was filed and served;(j) the matters alleged at paragraph 61(b) are not capable of amountingto a breach, or breaches, of section 9 of the Fair Trading Act;(k) the facts relied on by the Plaintiffs at paragraph 64 of the Statementof Claim, in support of paragraphs 65 and 66, are incapable ofcreating:(i) the assumption of responsibility alleged at paragraph 65; and(ii) the duty of care alleged at paragraph 66;(l) the issue of each monthly statement was a discrete cause of action;(m) section 11 of the Limitation Act 2010 prevents an action fromproceeding based on conduct or events that occurred 6 or more yearsbefore the Statement of Claim was filed and served;(n) as pleaded, the Statement of Claim does not disclose the existence ofany trust, pursuant to which the Plaintiffs could allege:(i) breach of trust;(ii) dishonest assistance of such breach of trust;(o) clause 5.2 of the Lease(s) is incapable of supporting(i) the existence of a trust; or(ii) the alleged breach of trust.(p) as pleaded, the Statement of Claim does not disclose any facts, orprinciples, that can support the allegation of(i) assistance of the breach of trust, alleged at paragraph 74; and(ii) dishonesty, as alleged at paragraph 75;(q) the Plaintiffs are prevented from pursuing the third cause of action, ora portion of it, by the doctrine of laches.Security for Costs(r) all, or very nearly all, of the Plaintiffs and class members are residentoutside of New Zealand;(s) accordingly, there is an appreciable risk that in the event theDefendant becomes entitled to a payment of costs from the Plaintiffsand class members, the Defendant will be(i) defeated in the enforcement of the Defendant's costsentitlement, due to an inability to effectively enforce an orderin those countries outside of New Zealand where the Plaintiffsand class members reside or own valuable property; or(ii) denied the full value of the Defendant's costs entitlement bybeing required to pursue costly enforcement proceedings intwo or more foreign jurisdictions;(t) there is reason to believe that the Plaintiffs and class members will beunable to pay the costs of the Defendant if the Plaintiffs and classmembers are unsuccessful in the proceedings;(u) the Plaintiffs and class members themselves have presented evidenceto this Court, in related proceedings, that would support a finding bythis Court of an inability to pay costs;(v) that evidence was(i) the Plaintiffs and class members are of generally modestmeans;(ii) the Plaintiffs' and class members' respective units in thebuilding that is the subject of these proceedings, have novalue;(w) notwithstanding [(v)] above, the only known assets of the Plaintiffsand class members in New Zealand are real estate, and:(i) the extent of any security interests and the indebtedness thussecured, is unknown;(ii) the standing of such debts is unknown — the registeredinterest of any mortgagee or other creditor would, if executed,defeat or reduce the Defendant's interest in costs; and(x) real estate is not automatically liquid, and the steps required in theevent that the Defendant must have recourse to real estate owned bythe Plaintiffs and class members will be unduly onerous andexpensive.Affidavit of Alan Leslie Fisher dated 8 September 2022[12] Mr Fisher has made an affidavit in support of Mr Pandey's application. Hedeposes that during the time that VQHL leased units from the plaintiffs in thisproceeding, he was closely involved in the generation of the monthly statementsprovided to them under their leases. Each month's statement was stand-alone — theinformation in it was from that month alone and did not carry-over any informationfrom any months prior.3Affidavit of Rula Alemdar dated 25 November 2022[13] Ms Alemdar has made an affidavit in support of Mr Pandey's application. Shedeposes that she has personal knowledge of the files related to the defendant in thepresent proceeding and in the proceeding Een v Body Corporate 382911 (CIV-2020-404-1873 and CIV-2020-404-1899), in which the plaintiffs are very nearly identical tothose in this proceeding.[14] She produces the following documents for the court:(a) affidavit of Aladdin Bin Mohamed Lip for the Applicants dated6 October 2020;(b) affidavit of Richard James Lawson dated 15 October 2020;(c) affidavit of Grahame Fong dated 20 October 2020;(d) affidavit of Prakash Pandey dated 20 October 2020;(e) reply Affidavit of Aladdin Bin Mohamed Lip dated 21 October 2020;(f) affidavit of Aladdin Bin Mohamed Lip in opposition to interlocutoryapplication by second to sixth defendants for an order that the plaintiffsgive security for costs dated 23 November 2021;(g) Affidavit of Aladdin Mohamed Lip in opposition to interlocutoryapplication by second to sixth defendants for an order that the plaintiffsgive security for costs dated 9 March 2021;3 Affidavit of Alan Leslie Fisher dated 8 September 2022 at [2] and [3].(h) affidavit of Grahame Boston Fong in support of interlocutoryapplication on notice by the second to sixth defendants for an order thatthe plaintiffs give security for costs, and associated orders, dated24 March 2022;(i) reply affidavit of Grahame Boston Fong in support of interlocutoryapplication for security for costs — replying to the affidavit of AladdinLip dated 24 March 2022;(j) Affidavit of Grahame Boston Fong in support of interlocutoryapplication for security for costs, dated 24 March 2022;(k) email correspondence between Wallace Revell, David Friar,Sarah Leslie and Nick Moffatt dated 13 April 2022; and(l) email correspondence between Sophie East, Wallace Revell andVita Hansen dated 26 June 2022.Notice of opposition[15] The plaintiffs oppose all applications on the following grounds:4More Explicit Pleading(a) The statement of claim filed by the plaintiffs meets the requirementsof High Court Rules 5.26 and 5.27 as pleaded and there is no basis forthe argument that a further amended statement of claim ought to befiled.(b) The statement of claim sets out, with more than sufficient detail andclarity:(i) The nature of the plaintiffs' claim to the relief sought (claimsunder s 9 of the Fair Trading Act, negligence and dishonestassistance and the pleaded facts that make out the essentialelements of those causes of action);(ii) The specific timing of the events in question, the partiesinvolved and the arrangements between them; and4 Notice of opposition to interlocutory application for order requiring a more explicit statement ofclaim, order for strike out, and order for security for costs dated 14 September 2022 at [3].(iii) The relief sought, being damages, interest and costs. Further,those damages that can be quantified now have been, and (asis common practice) other aspects of damages sought will bequantified prior to or at trial.(c) The purpose of a statement of claim is to set out the essential basis ofa claim and the necessary ingredients of it.5 The statement of claimfulfils that purpose and gives details of the claim sufficient for theparties to agree discovery categories and progress the proceeding.The defendant seeks information which exceeds the level of detailnecessary or appropriate for a statement of claim. Examples are setout in Schedule A to this notice of opposition, which responds toSchedule A of the application.(d) Pleadings are the documents which establish the parameters of a caseand are not briefs of evidence.6 A statement of claim must not strayinto setting out the evidence relied upon.7 The defendant'sapplication wrongly suggests that it must and seeks evidence of thecase against him rather than particulars of allegations. Examples areset out in Schedule A to this notice of opposition, which responds toSchedule A of the application.(e) It is inappropriate and unnecessary for this proceeding to be stayed onthe basis of a dispute as to particulars. The pleadings are adequatelyparticularised and the issues sufficiently clear in order for the partiesto be able to advance this proceeding to a discovery phase.(f) A stay of proceedings would be contrary to the objective in theHigh Court Rules of just, speedy and inexpensive determination ofdisputes.Strike out(g) It is reasonably arguable that the defendant was acting in trade inmaking a proposal to the plaintiffs to participate in a hotel businessand implementing that proposal;(h) It is reasonably arguable that the issue of each monthly statement wasnot a discrete cause of action in circumstances where Viaduct QuaysHotel Ltd (in liq) (VQHL) was obliged to provide an audited annualstatement, which it failed to do;(i) Section 11 of the Limitation Act 2010 and section 43A of the FairTrading Act 1986 apply as at the date the claim was filed, not when itwas served;(j) It is reasonably arguable that VQHL's application of funds due to theplaintiffs and deducted for a particular purpose, in circumstanceswhere those funds were required to be held in a separate bank account,was a breach of trust;5 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 18.6 At 17.7 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR679 at [84].(k) It is reasonably arguable that the defendant's knowing actions asdirector of VQHL in causing VQHL to commit a breach of trustamounted to dishonest assistance;(l) The doctrine of laches is not applicable to the third cause of action.Security for costs(m) The plaintiffs are in a position to meet any adverse award of costs thatmay be made against them:(i) Although they reside overseas, the plaintiffs own property ofvalue in New Zealand.(ii) There is no credible evidence from which the defendant canreasonably infer that the plaintiff's will be unable to pay acosts order. The same parties were recently involved in arelated proceeding where they met all costs ordered againstthem.8(iii) In that related proceeding, the Court found that there was notsufficient circumstances before it to give it reason to believethat the plaintiffs would be unable to pay a costs award madeagainst them.9(iv) The conduct of the defendant in inter alia under reportinghotel profit so as to deprive the plaintiffs of rental income, andputting VQHL into liquidation and commencing a new hoteloperation excluding the plaintiffs, was designed to injure theplaintiff's interest and it is inappropriate in the circumstancesfor security for costs to be ordered. Indeed, in the other relatedproceedings,10 the Courts have held or the defendant's relatedinterests have conceded that they have, unlawfully passedbody corporate resolutions that had the effect of preventingthe plaintiffs from using their unit to derive income, andunlawfully sought to have the plaintiffs pay (via a bodycorporate levy) for security for a hotel operation from whichthey were excluded.(n) The threshold in High Court Rule 5.45(1)(b) is not met.Affidavit of Aladdin Bin Mohamed Lip dated 19 September 2022[16] Mr Lip has made an affidavit in support of his opposition to the interlocutoryapplications.11 He deposes that he and Mrs Rahim have owned one residential unit inthe complex since 2006 and alongside the 78 other property-owning class members8 Een v Body Corporate 383911 [2022] NZHC 852 at [41].9 At [59].10 CIV-2020-404-1873, CIV-2020-404-1899 and CIV-2020-404-2385.11 Affidavit of Aladdin Bin Mohamed Lip in opposition to interlocutory application by defendant fororders for a more explicit statement of claim, strike out and security for costs dated 19 September2022.have leased their units to VQHL to run the Sofitel Hotel from 2012 until July 2020,when Mr Pandey put VQHL into liquidation.[17] In his affidavit he explains the 2011 email proposal and subsequent leasesbefore explaining how the lack of auditing led to 2015 arbitral proceedings, and theseproceedings after the 2020 liquidation of VQHL and the misreporting of funds. Heends by explaining that post liquidation the hotel reopened despite the plaintiffs notbeing given the opportunity to participate in the new venture and the problems arisingfrom new body corporate rules challenged in other proceedings.Second affidavit of Aladdin Bin Mohamed Lip dated 31 January 2023[18] Mr Lip has made a brief further affidavit in support of his opposition.12 In ithe responds to Mr Pandey's submission that the plaintiffs are simply relitigating issuesfrom the 2015 arbitral proceedings, namely the FFE contribution and All FixedCharges deduction. Mr Lip deposes that the arbitral proceedings were to seek an auditas the leases with VQHL entitled them to and which still has not been completed.Further, he deposes that at those proceedings he was unaware what was being deductedunder the All Fixed Charges heading nor did he have any cause to suspect the FFEcontributions were not being paid into a separate account or not being usedappropriately in accordance with the lease.Mr Pandey's submissions[19] Mr Hollyman KC, for Mr Pandey, submits that all three interlocutoryapplications should be granted. He takes each in turn.More explicit pleading[20] Mr Hollyman submits that the current statement of claim is not sufficientlyexplicit because it fails to meet the proper purposes and functions of a properly pleadedstatement of claim. Those purposes are to fairly define the contest between partiesand inform the opposing party of the essential basis, and necessary ingredients, of theclaim. And the functions are to promote the just, speedy inexpensive determination of12 Second affidavit of Aladdin Bin Mohamed Lip dated 31 January 2023.proceedings by telling the defendant exactly what the allegations are, enabling theparties to take steps in advance to deal with the case, providing a reference point fordiscovery, limiting the scope of matters that a plaintiff may put in issue at trial or inpretrial settlement discussion, and providing a defendant with the opportunity to seeksummary determination.[21] Mr Hollyman submits the schedule to the application sets out the statement ofclaim's deficiencies. He submits the statement leaves Mr Pandey and the Courtuninformed about various factual matters that underpin the assertions. It leavesMr Pandey unable to identify, with any precision, the factual matters and witnesses tobe pursued, and those that may be disregarded. Finally, it leaves Mr Pandey unable toassess the narrowest appropriate scope for the discovery that Mr Pandey should beproviding and requiring from the plaintiffs. Ultimately, it has impeded Mr Pandey'sability to assess whether the Court should be asked to strike out various elements ofthe statement of claim.Striking out elements of the statement of claim[22] Mr Hollyman makes four submissions: that the claims are barred by statutorylimitations, that no breach of s 9 of the FTA arises on the pleadings, no assumption ofresponsibility for negligence arises on the pleadings, and no trust nor breach of trustfor dishonest assistance arises on the pleadings.[23] On limitations, both the FTA and Limitation Act 2010 give cause to strike out.First, the FTA limitation period in s 43A prohibits all claims brought more than 3 yearsafter the date on which the loss or damage, or likelihood of loss or damage, wasdiscovered or ought reasonably to have been discovered. Mr Hollyman submits theevidence here shows actual knowledge of the claims in 2015 when the plaintiffsbrought arbitration proceedings against VQHL on these and similar grounds. Hefurther disputes that in so far as the claim now relies on subsequent monthlystatements, there can be no suggestion that the plaintiffs were in fact misled by thosestatements or actions. Second, s 11 of the Limitation Act prohibits all money claimsmore than six years after the alleged act or omission on which the claim is based.[24] On no breach of s 9, he cites the Supreme Court in Red Eagle for theproposition that the focus is on whether the alleged conduct was likely to mislead ordeceive reasonable people in the position of the plaintiffs.13 He submits the allegedmisleading conduct occurred in 2020 despite the email proposal being sent in 2011.Mr Pandey's 2020 conduct, liquidating VQHL in May 2020, establishing a new hotelin September 2020, and at a time when the leases would otherwise have run 11 moreyears, did not breach s 9 as it was not itself misleading nor deceptive, and the 2011email proposal cannot be made misleading and deceptive solely by reference to the2020 conduct. The 2011 proposal is now insignificant given VQHL and the plaintiffssubsequently negotiated and entered commercial contracts and the plaintiffs issuedarbitral proceedings based on those contracts. In sum, he submits s 9 cannot applybecause it does not enforce promises but merely prohibits misleading and deceptiveconduct.[25] On assumption of responsibility, he submits that statements in the 2011 emailproposal are insufficient to establish a duty of care based on an assumption ofresponsibility by Mr Pandey. Mr Hollyman submits the words fall short of makingsuch a statement, the plaintiffs entered a subsequent contractual relationship displacinga duty of care in negligence,14 and the court are rightly dubious about underminingseparate corporate personality by holding a company's director personally liable whenthe plaintiffs contracted with the company VQHL.15 On that last point he notes theCourt of Appeal's view that there is a presumption against a duty of care absentevidence the director was doing something other than acting on the company'sbehalf.16 He submits there is no such evidence here. Furthermore, he submits that thepleaded responsibility assumed is for the accuracy of VQHL's monthly statements andcontinuation of the hotel until 2031, which he submits is extraordinary given theproposal email was no more than a statement of opinion about the future and not aguarantee. Finally, he reiterates his s 11 Limitation Act argument finding thenegligence claim time-barred.13 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].14 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).15 Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA) at 523; Williams v Natural Life HealthFoods Ltd [1998] 1 WLR 830 (HL).16 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 at [33].[26] On dishonest assistance, Mr Hollyman submits that there is no trust, noassistance and no loss on the pleadings. No trust arises on the lease's terms becausethe lease entitled VQHL to make deductions from revenue to expend as of right onfixtures, fittings and equipment (FFE), the lease does not state the FFE fund was heldon trust nor for the plaintiff's benefit, the lease does not require a discrete bank accountfor FFE deductions and any separate bank account requirement can be no more thanan informational requirement sounding in breach of contract. There is no pleadedbasis of Mr Pandey's assistance beyond mere reliance on him being VQHL's director.And there is no loss as the FFE funds were not held on trust for the benefit of theplaintiffs. Finally, he reiterates his s 11 Limitation Act argument finding the dishonestassistance claim time-barred.Security for costs[27] Mr Hollyman relies on rule 5.45 of the High Court Rules 2016 to assert thatthe plaintiffs meet both alternative thresholds for security for costs: that they areresident outside New Zealand, or there is reason to believe they will not be able tomeet an award of costs if the proceeding fails.[28] Mr Lip and Mrs Rahim, who would be liable for costs, live overseas inMalaysia and the only New Zealand property they have provided evidence of owningis this residential unit, which is encumbered and of no realisable value. Furthermore,Mr Hollyman submits they have provided little to no financial information on theirability to meet any eventual costs award.[29] Ultimately, Mr Hollyman submits that an order for $350,000 in costs to be paidin instalments against the estimated $520,000 total is appropriate.Mr Lip and Mrs Rahim's submissions[30] Ms East, for Mr Lip and Mrs Rahim,17 submits that all interlocutoryapplications should be dismissed. In short, she submits the statement of claim meetsthe r 5.26 standard by showing the nature of the claim, relief sought and sufficient17 Some of the submissions on behalf of Mr Lip and Mrs Rahim were made by Ms East and someby Ms Leslie. For simplicity, I refer to submissions by Ms East throughout.particulars of the facts underpinning the causes of action. It is inappropriate to strikeout parts of the proceedings as there is an arguable duty of care in negligence, a breachof s 9 arises when Mr Pandey made promises he had no intention of honouring, breachof trust arises on the pleadings, and the claims are not so clearly time-barred as to bean abuse of process. Finally, she submits security for costs is unnecessary as theplaintiffs are in a position to meet any adverse award and the Court should not exerciseits jurisdiction for the same reasons as the Court in the related proceeding of Een vBody Corporate 383911.18More explicit pleading[31] Ms East submits the statement of claim presents the material facts clearly,logically and succinctly, uses appropriate headings to signal topics, sets out the natureof the relief sought and the facts underlying the causes of action, and does not containirrelevant material. It comfortably meets the required r 5.26 standard and concludeswith relief complying with r 5.27.[32] In relation to the schedule of alleged deficiencies, Ms East responds in aschedule in their notice of opposition. Broadly she contends that the allegeddeficiencies are either differences of interpretation and disputes as to underlying facts,or assertions that matters are pleaded without a sufficient evidential basis. As to theformer, she submits these are matters to be resolved in the proceeding, and as to thelater she submits that this is best left for trial with the plaintiffs not required to set outall the evidence they will rely on to prove their case.Striking out elements of the statement of claim[33] At the outset, Ms East submits where partial strike-out is sought, it may not bea productive use of the parties' and court's resources to strike out parts of the claim onlimitation grounds when similar transactions are within time and will be tested attrial,19 nor on substantive grounds where similar issues will need to be addressed even18 Een v Body Corporate 383911, above n 8.19 Scott v ANZ Bank New Zealand Ltd [2020] NZHC 906, [2020] 3 NZLR 145 at [190].if some matters are struck out.20 Ms East then addresses each of Mr Pandey'sstrike-out claims in turn.[34] On s 9 of the FTA, she submits contrary to Mr Pandey that there is ample caselaw providing that a promise a defendant has no interest in honouring can bemisleading and deceptive.21 She submits Mr Pandey's intention is a matter for trialwith the benefit of discovery but there is an arguable basis in Mr Lip's affidavit. Sheturns to the subsequent contractual relationship and submits that it is well establishedthat a person can be liable under the FTA despite acting for a company,22 and the Courtof Appeal in Body Corporate 202254 v Taylor dismissed a similar argument, findingthat if a person is in trade, it did not need to be on their own account and it wassufficient that the conduct was undertaken as agent for another business or company.23Finally, Ms East asserts there is genuine dispute about whether the plaintiffs excludedthemselves from the new hotel's operation.[35] On duty of care, she submits it is at least arguable that Mr Pandey assumedresponsibility for an arrangement: (i) which would deliver the plaintiffs what theywere owed after hotel operating costs came out; (ii) that was transparent; and (iii) thatwould give the plaintiffs some certainty in terms of their participation in an Accorhotel going forward.[36] Regarding the subsequent contractual relationship, Ms East rejectedMr Pandey's submission that Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd20 Econicorp Holdings Ltd v Minister of Education [2011] NZSC 148 at [3].21 Martel v Auckland City [2012] NZHC 241; Gunton v Aviation Classics Ltd [2004] 3 NZLR 836(HC); GSE Group Ltd v Walters Supplies Ltd HC Auckland CIV-2005-404-3045, 16 July 2008;McKeown Group Ltd v Russell (2010) 13 TCLR 1 (HC); Philip Moore & Co Ltd v Surridge [2018]NZHC 562, (2018) 15 TCLR 79; Yan v Mainzeal Property and Construction Ltd (in liq) [2021]NZCA 99, [2021] 3 NZLR 598.22 Robert Hollyman Falsehood and Breach of Contract in New Zealand (Thomson Reuters,Wellington, 2017) at [14.2.5]: "The person who in fact acted in a misleading or deceptive way is,on the current law, personally liable. They do not escape separate liability on the basis that theyare also acting on behalf of a company", citing Body Corporate 202254 v Taylor, above n 16, at[78]; Kinsman v Cornfields Ltd (2001) 10 TCLR 342 (CA); Newport v Coburn (2006) 11 TCLR831, (2006) 8 NZBLC 101,717 (CA) at [56]; Gilmour v Decisionmakers (Waikato) Ltd [2012]NZHC 298; NZX Ltd v Ralec Commodities Pty Ltd [2016] NZHC 2742 at [235]; SpecialisedLivestock Imports Ltd v Borrie CA72/01, 28 March 2002 at [27]; Commerce Commission v MegaVitamin Laboratories (NZ) Ltd (1994) 6 TCLR 95 (DC); Lynn v AC Fryer & Sons Ltd [2013]NZHC 2942, (2013) 14 NZCPR 879 at [60]; Mace v Strategic Planning Group Ltd [2014] NZHC1500 at [28]–[30]; Commerce Commission v Callaghan (1993) 5 TCLR 394 (DC).23 Body Corporate 202254 v Taylor, above n 16, at [91].stands for the proposition that a tortious duty of care in negligence is generallydisplaced by contractual duties. The present case is also distinguishable because theplaintiffs are not endeavouring to enforce obligations between parties other thanthemselves. In any event the Court of Appeal in Rolls-Royce recognised that a causeof action for negligent misstatement pre-contract could co-exist with subsequentseparate contractual claims. This is the current position in New Zealand assummarised by the authors of Todd on Torts.24[37] Regarding the undermining of separate corporate personality, Ms East submitsthe cases cited highlight the significance of facts and context in deciding whether therehas been an assumption of personal responsibility by a director. In a number ofinterlocutory judgments, the Court has declined to strike out claims on the basis thatthere ought to be the opportunity for further evidence as to the extent of the director'spersonal involvement.25 The plaintiffs submit that the pleading ought to survive strike-out so that this issue of Mr Pandey's personal liability can be properly tested with thebenefit of the full set of facts.[38] On dishonest assistance, Ms East submits express words are not necessary tocreate a trust and cites two cases which found implied express trusts and that the extentof fiduciary duties is determined by the implied and express terms of contract, by thecommercial context, and by the nature of the tasks a party has committed toundertake.26 She concludes that the existence of an implied trust is reasonablyarguable. She submits that Mr Pandey's assistance in managing the flow of moniesbetween the hotel operator and plaintiffs must be fairly implied in the context and thatdespite Mr Pandey's denial in submissions (not evidence) the plaintiffs are entitled totest that contention through discovery. Finally, Ms East submits that as there was atrust and an obligation to hold FFE funds for the beneficiaries, loss is reasonablyarguable.24 Stephen Todd (ed) Todd on Torts (8th ed, Thomson Reuters, Wellington, 2019) at [1.1.03].25 C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317 (CA); Body Corporate 202254 v Taylor,above n 16; DB Breweries v Domain Name Company Ltd (2001) 52 IPR 280 (HC).26 Bethell v Papanui Properties Ltd [2019] NZHC 3169; Re STA Travel (NZ) Ltd (in liq) [2022]NZHC 1398.[39] On limitations, Ms East submits that s 43A of the FTA provides that the claimonly must be filed with three years of when the loss was discovered or oughtreasonably to have been discovered. Similarly, she contends that ss 11 and 14 of theLimitation Act provide for a primary limitation period of six years, and an additionallate knowledge period of three years, if the plaintiffs did not know nor oughtreasonably to have known all of the following relevant facts during the primary period:(a) The fact that the act or omission had occurred;(b) The fact that the act or omission involved Mr Pandey;(c) The fact that the plaintiffs suffered a loss.[40] Ms East submits late knowledge arguably applies on these fact. The monthlystatements were provisional only, and the information prepared by VQHL would notnecessarily be accurate or complete, or able to be relied upon by the recipients, untilverified by a third party in the annual audited statement, which never occurred.Further the 2015 arbitral proceedings did not raise any underreported income issues,did not assert VQHL was not entitled to deduct the All Fixed Charges amount, and didnot raise the FFE contribution. Ms East concludes that the proceeding is not so clearlytime-barred so as to be an abuse of process, and that loss that only occurred followingVQHL's 2020 liquidation is obviously not time-barred.Security for costs[41] Ms East submits that Mr Lip and Mrs Rahim are in a position to meet anyadverse costs award despite their overseas location. Mr Lip and Mrs Rahim own theunit in the complex which was purchased for $499,000 in 2006 and which is, contraryto defence submissions, unencumbered. The plaintiffs here are not making a "bareassertion" of an ability to pay with no evidence of financial position. The plaintiffshave given clear evidence of real property they own in New Zealand, that is identicalto property the defendant's interests have recently purchased for at least $150,000 perunit.[42] The plaintiffs also sue on behalf of other unit owners in the building. Thisgroup is the same group that has brought related proceedings against the bodycorporate of the complex and four companies of which Mr Pandey is a director, namelyEen v Body Corporate 383911. The Court in Een has observed that the plaintiffs havepaid existing costs awards and "there are no background circumstances of unpaid costsawards."27 This is contrary to the difficulty the plaintiffs have had getting thedefendant parties to pay costs in that case.[43] Ultimately, Ms East submits the threshold under r 5.45(1)(b) is not met giventhe evidence of New Zealand property ownership. The Court should further notexercise its discretion to issues security for costs under r 5.45(2) in line with Een wherethat Court declined to exercise that discretion because: (a) the units have value; (b)there is the potential for the plaintiffs to earn income by leasing the units as part of ahotel operation or similar; (c) the plaintiffs claim is not without merit and they shouldnot be deprived of an opportunity to pursue it; and (d) the conduct of the defendantsweighed against the ordering of security for costs.28[44] If the Court considers that security should be ordered, the quantum of securityshould be considerably less than the $350,000 claimed by Mr Pandey. The plaintiffshave prepared their own schedule of likely costs which adds to approximately half ofthe value the defendant's interests have recently paid for a single unit in the complex.Legal principlesMore explicit pleading[45] Rule 5.26 provides that the statement of claim must show the general nature ofthe plaintiff's claim to the relief sought, and it must give sufficient particulars of fact— "time, place, amounts, names of persons, nature and dates of instruments, and othercircumstances to inform the court and the party or parties against whom relief is soughtof the plaintiff's cause of action".27 Een v Body Corporate 383911, above n 8, at [57].28 At [60].[46] In Platt v Porirua City Council, Kós J held that particulars of pleadings areimportant to:29(a) inform defendants as to the case they have to meet;(b) limit the scope of matters the plaintiff may put in issue at trial (or inpre-trial settlement discussions);(c) enable defendants to know what witnesses they will need to retain andenable them to start preparing evidence ahead of the formal exchangeof evidence; and(d) provide an opportunity for defendants to seek summary determinationon the basis that the claim as pleaded is untenable.[47] The ultimate touchstone is whether the pleading is sufficiently particularisedto give fair notice of the pleaded case, and to prevent trial by ambush.30[48] Rule 5.27 further provides that the statement of claim must conclude byspecifying the relief or remedy sought (and separately in respect of each cause ofaction).[49] Where the claim is a claim for money, r 5.32 requires that the statement ofclaim "must state the amount as precisely as possible". This is a variable requirement,which as the authors of McGechan on Procedure explain:31 may vary from minute precision in an action to recover a loan plus interest, to pureintuition in a claim for general damages for defamation.[50] As the authors elaborate:32Difficulties can arise where entitlement to particulars of damage can be alleged, butat the time the claim is filed insufficient information is available for precisequantification. One option is to estimate the figures concerned, in the knowledge that29 Platt v Porirua City Council [2012] NZHC 2445 at [19].30 Body Corporate 74246 v QBE Insurance (International) Ltd [2015] NZHC 1360 at [18(h)].31 Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR5.32.02].32 At [5.32.02].such can later be amended when more information emerges. Others are to allegedamage in "amounts to be notified after discovery", and to claim in the first instances"an inquiry as to damages". Whether or not strictly permissible in terms of the rule,both the latter have been recognised in practice as acceptable stopgap measures.[51] The case law makes clear however that delaying stating the amount will not bean acceptable practice in cases where the plaintiff is in fact capable of providing someassessment as to loss, whether that be an estimate or a particular sum.33[52] The Court of Appeal cautioned in Pricewaterhouse v Fortex Group Ltd that theview that an exchange of briefs of evidence before trial might be seen as curing anylack of particularity in the pleadings is misguided.34[53] That Court continued however that the level of particularity required is "not anarea for mechanical approaches or pedantry".35 In summary, a pleading:36 does not require the full detail which later will be contained in a brief of evidence.Nor does the modern requirement for pre-trial exchange of briefs dilute the earlier anddifferently based requirement for sufficiently particular pleading. What is required isan assessment based on the principle that a pleading must, in the individualcircumstances of the case, state the issue and inform the opposite party of the case tobe met. As so often is the case in procedural matters, in the end a common-sense andbalanced judgment based on experience as to how cases are prepared and trials workis required.Strike-out[54] Rule 15.1 of the High Court Rules provides:15.1 Dismissing or staying all or part of proceeding(1) The court may strike out all or part of a pleading if it—(a) discloses no reasonably arguable cause of action, defence, orcase appropriate to the nature of the pleading[.][55] There are established criteria for strike-out:3733 See CrossFit Inc v Exercise Industry Association Ltd [2016] NZHC 1028 at [130]; Hunt v NewPlymouth District Council [2011] NZCA 406 at [82].34 Price Waterhouse v Fortex Group Ltd, above n 5, at 17.35 At 19.36 At 19.37 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney-General [2008]NZSC 45, [2008] 3 NZLR 725 at [33].(a) a strike-out application proceeds on the assumption the pleaded factsare true, unless those pleaded facts are entirely speculative or withoutfoundation;(b) the cause of action or defence must be clearly untenable;(c) the jurisdiction is to be exercised sparingly and only in clear cases;(d) the jurisdiction is not excluded by the need to decide difficult questionsof law;(e) the Court should be slow to strike out a claim in any developing area ofthe law, perhaps particularly where a duty of care is alleged in a newsituation.[56] Also relevant to this case is limitation periods under the FTA and LimitationAct 2010. Section 43A of the FTA provides:43A Application for order under section 43A person may apply to a court or the Disputes Tribunal for an order undersection 43 at any time within 3 years after the date on which the loss ordamage, or the likelihood of loss or damage, was discovered or oughtreasonably to have been discovered.[57] Section 11 of the Limitation Act provides:11 Defence to money claims filed after applicable period(1) It is a defence to a money claim if the defendant proves that the dateon which the claim is filed is at least 6 years after the date of the actor omission on which the claim is based (the claim's primaryperiod).(2) However, subsection (3) applies to a money claim instead ofsubsection (1) (whether or not a defence to the claim has been raisedor established under subsection (1)) if—(a) the claimant has late knowledge of the claim, and so the claimhas a late knowledge date (see section 14); and(b) the claim is made after its primary period.(3) It is a defence to a money claim to which this subsection applies if thedefendant proves that the date on which the claim is filed is at least—(a) 3 years after the late knowledge date (the claim's lateknowledge period); or(b) 15 years after the date of the act or omission on which theclaim is based (the claim's longstop period).[58] Section 14 continues:14 Late knowledge date (when claimant has late knowledge) defined(1) A claim's late knowledge date is the date (after the close of the startdate of the claim's primary period) on which the claimant gainedknowledge (or, if earlier, the date on which the claimant oughtreasonably to have gained knowledge) of all of the following facts:(a) the fact that the act or omission on which the claim is basedhad occurred:(b) the fact that the act or omission on which the claim is basedwas attributable (wholly or in part) to, or involved, thedefendant:(c) if the defendant's liability or alleged liability is dependent onthe claimant suffering damage or loss, the fact that theclaimant had suffered damage or loss:(d) if the defendant's liability or alleged liability is dependent onthe claimant not having consented to the act or omission onwhich the claim is based, the fact that the claimant did notconsent to that act or omission:(e) if the defendant's liability or alleged liability is dependent onthe act or omission on which the claim is based having beeninduced by fraud or, as the case may be, by a mistaken belief,the fact that the act or omission on which the claim is based isone that was induced by fraud or, as the case may be, by amistaken belief.(2) A claimant does not have late knowledge of a claim unless theclaimant proves that, at the close of the start date of the claim'sprimary period, the claimant neither knew, nor ought reasonably tohave known, all of the facts specified in subsection (1)(a) to (e).(3) The fact that a claimant did not know (or had not gained knowledge),nor ought reasonably to have known (or to have gained knowledge),of a particular fact may be attributable to causes that are or includefraud or a mistake of fact or law (other than a mistake of law as to theeffect of this Act).Security for costs[59] Rule 5.45 of the High Court Rules provides:5.45 Order for security of costs(1) Subclause (2) applies if a Judge is satisfied, on the application of adefendant,—(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 theCompanies Act 1993) of a corporation incorporatedoutside New Zealand; or(b) that there is reason to believe that a plaintiff will be unable topay the costs of the defendant if the plaintiff is unsuccessfulin 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 ismade to give security for costs as directed for a sum that theJudge considers sufficient—(i) by paying that sum into court; or(ii) by giving, to the satisfaction of the Judge or theRegistrar, security for that sum; and(b) may stay the proceeding until the sum is paid or the securitygiven.(4) A Judge may treat a plaintiff as being resident out of New Zealandeven though the plaintiff is temporarily resident in New Zealand.(5) A Judge may make an order under subclause (2) even if the defendanthas taken a step in the proceeding before applying for security.(6) References in this rule to a plaintiff and defendant are references tothe person (however described on the record) who, because of adocument filed in the proceeding (for example, a counterclaim), is inthe position of plaintiff or defendant.[60] In determining applications under r 5.45, the Court will generally follow thesesteps:38(a) Has the applicant satisfied the court of the threshold under r 5.45(1)?(b) How should the court exercise its discretion under r 5.45(2)?(c) What amount should security for costs be fixed at?(d) Should a stay be ordered?[61] The decision to order security, and the quantum of such security, are at theCourt's discretion. It is generally not to be to be fettered by constructing "principles"from the facts of previous cases.39 But the Court is to balance the competing interests— being the defendant's interest in protection from a costs order that is incapable offulfilment and the plaintiff's right of access to justice.40 Courts will be slow to makean order for security that will stifle a genuine claim.41 This balancing exercise is theCourt's overriding consideration.42[62] As above, the Court should assess whether there is:43 credible (that is, believable) evidence of surrounding circumstances fromwhich it may reasonably be inferred that the [party] will be unable to pay thecosts. This does not, of course, amount to proof that the [party] will, in fact,be unable to pay them.[63] The Court will assess the claim's merits and prospects of success, to the extentthat is possible at an early juncture.44 The Court will also consider the extent to whichthe plaintiff's impecuniosity may have been caused by the defendant's conduct.45[64] A plaintiff's unwillingness to pay previous judgment debts weighs in favour ofan order for security.46 But whether a plaintiff has been a responsible litigant is38 Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].39 McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].40 Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].41 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].42 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24(c)].43 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (HC) at 519;NZ Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC) at 212; andStephenson v Jones [2013] NZHC 638.44 Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].45 Bell-Booth Group Ltd v Attorney-General & BCNZ (1986) 1 PRNZ 457 (HC).46 Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand[2016] NZHC 729 at [22] and Mawhinney v Auckland Council [2014] NZHC 3207.secondary to the issue of whether the lack of merit of the claim justifies security thatwould prevent the claim from proceeding.47[65] Quantum of security is discretionary and is assessed in the round. It need notbe fixed by reference to likely cost awards.48 It is to be what the Court thinks fit in allthe circumstances.49[66] A Court will generally stay a proceeding until the security ordered is given.50Approach to analysisMore explicit pleading[67] I have dealt with the application by Mr Pandey for more explicit pleadingand/or further particulars to be filed by the plaintiffs by means of Schedule A attachedto this judgment. Schedule A sets out the result in respect of each paragraph of thestatement of claim in respect of which Mr Pandey sought more explicit pleadingand/or further particulars.Issues for strike-out[68] The issues to be determined in this judgment in relation to Mr Pandey'sapplication to strike out parts of the plaintiffs' statement of claim are:(a) Whether the claim for breach of s 9 of the FTA is time-barred unders 43A of the FTA?(b) Whether the claims in negligence and dishonest assistance aretime-barred by ss 11 and 14 of the Limitation Act?(c) Whether it is reasonably arguable that a breach of s 9 of the FTA ariseson the pleadings?47 Wright v Attorney-General [2019] NZHC 3046 at [26].48 Sharp v Pillay [2017] NZHC 647; and Red 9 Ltd v The Learning Ladder Ltd (in liq) [2021] NZCA284, (2021) 25 PRNZ 780 at [30].49 McLachlan Ltd v MEL Network Ltd, above n 39.50 Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 at [68]and [85].(d) In respect of the negligence claim, whether it is reasonably arguablethat a duty of care arises on the pleadings?(e) Whether in relation to the claim of dishonest assistance it is reasonablyarguable that a trust exists and, if so, whether it is reasonably arguablethat a breach of trust arises on the pleadings?Issues for security for costs[69] The issues to be determined in relation to Mr Pandey's application for securityfor costs are:(a) Has Mr Pandey satisfied the Court of the threshold under r 5.45(1)?(b) If so, how should the Court exercise its discretion under r 5.45(2)?(c) If security for costs is ordered, what should the amount be fixed at?(d) If security for costs is ordered, should a stay be ordered?[70] I deal first with the strike-out application and then security for costs.Analysis of strike-out(a) Limitation under s 43A of the FTA for s 9 claim[71] Section 43A of the FTA provides that a claim must be filed within three yearsof the date of the loss or damage, or the likelihood of loss or damage, being discoveredor ought reasonably to have been discovered. A useful statement in relation to theapplication of s 43A is set out in Commerce Commission v Carter Holt Harvey Ltd inwhich the Supreme Court stated:51Time should not start running when past loss is just a mere possibility orsomething that could well have happened. Nor should the commencement ofthe three years be deferred until past loss is a near certainty. Likelihood ofpast loss in the sense that it is more probable than not strikes an appropriate51 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [31].balance between the competing interests in legislation the principal purposeof which is consumer protection. [72] Mr Hollyman submits that the plaintiffs had actual knowledge in 2015, whichis not only more than three years but more than six years prior to the filing of theproceeding. He submits that the claim for breach of s 9 of the FTA relies on theproposal of October 2011 and monthly statements issued by VQHL from February2013. He refers to the statement of claim and the pleading is that in essence VQHL:(a) under-reported the gross profit until 2016 ([61], [36]–[39]);(b) overcharged the FFE deductions ([61], [40]–[45]).[73] Mr Hollyman submits that the plaintiffs had the requisite knowledge in July2015 when they brought arbitration proceedings against VQHL in which, among othermatters, they sought an audit of the accounts. He then points to [14], [15] and [16] ofthe arbitration proceedings and to the deduction of "all fixed charges". Mr Hollymanalso submits that each monthly statement was discrete and time started to run forlimitation purposes on delivery of the monthly statement.[74] Ms East, on the other hand, submits that the proposition that each monthlystatement was discrete and time started running from delivery of the monthlystatement is incorrect. She submits the lease required VQHL to issue an audited annualstatement showing the items reported in the unaudited monthly statements and that isan effective contractual acknowledgement that the monthly statements wereprovisional only and the information prepared by VQHL would not necessarily beaccurate or complete or able to be relied upon by the recipients until verified by thirdparty under the audit.[75] Ms East submits that the 2015 arbitral proceedings concerned what wasapparent from the face of the monthly statements and other materials available to theplaintiffs at the time. She submits that:(a) The arbitral proceedings did not raise any specific issue with under-reporting of the income statements and the focus of the proceedingswas early payments to third parties and improper deductions that wereapparent on the face of the statements. She submits that if the auditrevealed wider issues, the plaintiffs will at that stage have the necessaryinformation to commence proceedings.(b) Ms East acknowledges the arbitral proceedings did assert that VQHLwas not entitled to the deductions referred to in the statements as "allfixed charges" but it was not clear what was purported to have beendeducted. She submits that further questions arose later as to whetherthe amounts actually deducted as "all fixed charges" were identified inthe statements at all and points to two different versions of the statementissued after the arbitration commenced showing a large discrepancy inrespect of the figures for the "all fixed charges".(c) In relation to the FFE contribution, Ms East submits this was not raisedin the arbitration proceedings and, at 4.11 of Mr Pandey's submissions,the reference to FFE fund is taken out of context.[76] Ms East then refers to the decisions of Stalker v Duncan,52 Coombe vJenkinson,53 and Burmeister v O'Brien,54 which she cites as examples of where theCourt had not accepted that time starts to run until the plaintiffs obtain some kind ofdocumentary evidence or record as to what has happened, such as a title search or anacknowledgement as to whom funds were paid, or a third party evaluation (forexample by a court, lawyer or valuer) of what had in fact occurred.[77] Ms East submits the Court cannot confidently exclude the possibility that theplaintiffs are entitled to rely on the late knowledge protection under s 43A of the FTAand the proceeding is not so clearly time-barred as to be an abuse of process. Inparticular, Ms East refers to:(a) no explanation has been offered for a significant discrepancy, beingVQHL's production of two versions of a monthly statement showing a52 Stalker v Duncan [2020] NZHC 1484.53 Coombe v Jenkinson [2020] NZHC 3178, (2020) 25 PRNZ 530.54 Burmeister v O'Brien [2010] 2 NZLR 395 (HC).discrepancy of over $240,000 for one line item, but the same amountdue to the unit owners in rent;(b) no substantive response has been made to allegations of illegitimatedeductions, under-reporting of income, or failure to pay the FFEcontributions into a separate bank account;(c) no audit has been conducted as required and the defendant hasprevented the plaintiffs' efforts to have the audit conducted.[78] In relation to reliance on the proposal as the basis of a claim under s 9 of theFTA which the plaintiffs claim was misleading as Mr Pandey had no intention ofhonouring the proposal, Ms East submits that the plaintiffs cannot reasonably havebeen expected to know they had suffered the loss before the liquidation of VQHL on6 July 2020 and the re-opening of the hotel in October 2020. Accordingly, that part ofthe claim under the FTA cannot be time-barred.Conclusion on limitation under s 43A of the FTA for s 9 claim[79] In my view the plaintiffs' arguments are not untenable. My views in relationto issues raised in respect of limitation under s 43A of the FTA are:(a) I accept Ms East's argument that each statement issued by VQHL wasnot a discrete action and the statements were only provisional until anaudited annual statement was provided. Clauses 4.4, 4.5 and 4.6 of thelease reinforces this point. I therefore am of the view that it isreasonably arguable that time did not start running in relation to eachof the statements separately at the time of issue.(b) It is true that the arbitration proceedings in 2015 brought by theplaintiffs raised the issue of deduction of all fixed charges. In my viewit is reasonably arguable that at the time of issuing the arbitrationproceedings the plaintiffs were aware that there appeared to be thingswrong with the statements, and in particular the deduction of "all fixedcharges", but, without the benefit of the audit, they could not bereasonably expected to have understood all the issues relating toincome reporting and deductions in respect of the statements. Thesituation is arguably analogous to Coombe v Jenkinson.55 In that casethe plaintiffs might have been put on notice that there was a problemwith the will when they received two legal opinions to the effect that afurther court application might be required, but they did not know ithad been negligently prepared until findings by the High Court weremade. In this instance, the plaintiffs appear to have had knowledge ofproblems with deductions and potentially other inaccuracies with thestatements but arguably did not have sufficient information toconstitute knowledge in relation to the current s 9 FTA claim.(c) In relation to the FFE allegations, I accept Ms East's submission thatthe reference to FFE in Mr Pandey's submissions is taken out of contextand the issue of the FFE deductions and placement of the FFE in aseparate account was not an issue in the 2015 arbitration proceedings.Accordingly, it is reasonably arguable the plaintiffs did not have lateknowledge of the issue relating to the FFE in 2015.(d) In relation to the allegation the proposal was misleading, I again acceptMs East's argument that it is reasonably arguable that the plaintiffscould not have known that the proposal was misleading untilliquidation of VQHL in 2020 and at that point it became apparent thatMr Pandey did not intend to honour his original promises.[80] In conclusion therefore, it is my view that the claim under s 9 of the FTA shouldnot be struck out on the basis of limitation under s 43A of the FTA.(b) Limitation under ss 11 and 14 of the Limitation Act for negligence and dishonestassistance claims[81] Sections 11 and 14 of the Limitation Act, which apply to the claims innegligence and dishonest assistance, collectively provide for a primary limitation55 Coombe v Jenkinson, above n 53.period of six years, and an additional late knowledge period of three years, if theplaintiffs did not know, nor ought reasonably to have known, all of the followingrelevant facts during the primary period:(a) the fact that the act or omission had occurred;(b) the fact the act or omission involved Mr Pandey;(c) the fact the plaintiffs have suffered loss.[82] Mr Hollyman submits that the negligence on the basis of the alleged under-reporting of rental and various monthly rental statements is a money claim unders 12(1) of the Act and is therefore subject to the six year limitation period in s 11 ofthe Limitation Act. He submits that the monthly statements were raised and pleadedby the plaintiffs in the arbitration proceedings and each monthly statement wasdiscrete and accordingly the issue of each monthly statement was a separate action.Consequently, each monthly statement is treated as a separate cause of action, one permonth, throughout the period complained of by the plaintiffs.[83] Mr Hollyman submits that s 11 of the Act is concerned with when the acts onwhich the money claim is based took place, not when the loss was known or ought tohave been known by the plaintiffs. Accordingly, the allegations of negligence inrespect of the rental statements are based on actions that took place six years or morebefore the statement of claim was served on Mr Pandey and is therefore time-barredunder s 11.[84] Ms East, on the other hand, submits that, as with the FTA and discussed at [74]to [77] above, at the time of issue of the arbitration proceedings it is reasonablyarguable that the plaintiffs did not have the requisite knowledge in relation to themonthly statements and the FFE payments to constitute late knowledge for thepurposes of s 14 of the Limitation Act.[85] I have already determined at [80] above that the plaintiffs did not havesufficient late knowledge to trigger the limitation under s 43A of the FTA and a similardetermination applies to late knowledge under s 14 of the Limitation Act.[86] As to the claim of dishonest assistance, Mr Hollyman submits that dishonestassistance is an equitable cause of action and thus falls within the definition of "moneyclaim" under s 12(1) of the Limitation Act. He submits, for the same reasons as theclaim under the FTA is time-barred under s 43A of the FTA and the claim in negligenceis time-barred by the six year limitation period in the Limitation Act, the claim ofdishonest assistance is similarly time-barred under the Limitation Act.[87] Ms East makes the same submission in respect of dishonest assistance as inrelation to the negligence claim, that the plaintiffs did not have late knowledge unders 14 at the time the arbitration proceedings were issued in 2015.Conclusion on limitation under ss 11 and 14 of the Limitation Act for negligence anddishonest assistance claims[88] In my view, the same analysis as is set out above in relation to the plaintiff'sstate of knowledge relating to the FTA claim applies to the plaintiffs' state ofknowledge in relation to the negligence claim and dishonest assistance claim.Accordingly, I am of the view that the plaintiffs' argument is not untenable and it isreasonably arguable in relation to both of these claims that the plaintiffs did not havelate knowledge in 2015 and accordingly these claims are not time-barred by theLimitation Act.(c) Reasonably arguable breach of s 9 of the FTA[89] Mr Hollyman summarises the plaintiffs' allegations of breach of s 9 of the FTAbased on the October 2011 proposal as "promises and representations which in thecircumstances were misleading" because:(a) the placement of VQHL into liquidation in May 2020;(b) a new hotel was established in the building in September 2020, to theexclusion of the plaintiffs;(c) the leases would have had a further 11 years to run.[90] Mr Hollyman submits that it is highly relevant that subsequent to the 2011conduct, VQHL and the plaintiffs entered into negotiated contracts which regulatedtheir relationship and entered into commercial activity based on those contracts. Hesubmits the plaintiffs' arbitral proceedings were based on those contracts and in suchcircumstances the 2011 email and proposal fades into background insignificance.[91] Mr Hollyman also submits that as regards the claim that Mr Pandey has beenoperating a hotel to the exclusion of the plaintiffs, the Court has already held theplaintiffs excluded themselves and that factual conclusion was reached by Gordon Jin parallel proceedings between the plaintiffs and the new hotel companies.56[92] Finally, Mr Hollyman submits that the FTA does not enforce promises but onlyprohibits misleading or deceptive conduct.[93] Ms East on the other hand submits there is ample authority for the propositionthat a promise that Mr Pandey had no intention of honouring can be misleading anddeceptive.57 Ms East submits that Mr Pandey's intention when making the proposalis a matter for trial, with the benefit of discovery. She points to the events detailed inMr Lip's affidavit which call into doubt Mr Pandey's intentions when making theproposal — specifically referring to the promised transparency that never eventuatedas VQHL never complied with its obligation to provide audited statements; opposedand delayed the arbitration proceedings seeking an audit; failed to comply with aconsent order for an audit; put VQHL into liquidation two years later; profit forecastswere missed by considerable margins; the plaintiffs commenced arbitrationproceedings and during that time over half the residential units were purchased byMr Pandey's interests for a fraction of their original value.5856 Een v Body Corporate 384911 [2021] NZHC 729 at [40].57 Martel v Auckland City [2012] NZHC 241; Gunton v Aviation Classics Ltd [2004] 3 NZLR 836(HC); GSE Group Ltd v Walters Supplies Ltd HC Auckland CIV-2005-404-3045, 16 July 2008;McKeown Group Ltd v Russell (2010) 13 TCLR 1 (HC); Philip Moore v Surridge [2018] NZHC562; Yan v Mainzeal Property and Construction Ltd (in liq) [2021] NZCA 99.58 Affidavit of Bin Mohamed Lip, above n 11.[94] Ms East submits that it is reasonably arguable that Mr Pandey had no intentionof honouring the promises in the proposal and accordingly this matter should be takento trial with the benefit of discovery.[95] As to the submission by Mr Pandey that the subsequent entry into a contractualrelationship between the plaintiffs and VQHL meant that the proposal faded intoinsignificance and accordingly the FTA could not apply, Ms East submits that it is awell-established principle that a person is liable under the FTA despite acting for acompany. She relies on the Court of Appeal decision in Body Corporate 202254 vTaylor where, she submits, the Court of Appeal dismissed a similar argument that theperson did not need to be acting on their own account and that it was sufficient thatthe conduct was undertaken as agent for another business or a company.59Conclusion on reasonably arguable breach of s 9 of the FTA[96] In my view, having regard to the matters raised by Ms East in relation to theconduct of Mr Pandey since the proposal was made in 2011, it is reasonably arguableby the plaintiffs that there is a breach of s 9 of the FTA. Mr Pandey's conduct needsto be examined at trial as to whether the plaintiffs can establish misleading or deceptiveconduct following discovery and evidence at trial.[97] Accordingly, I am of the view that the plaintiffs' claim should not be struck outon that basis.(d) Reasonably arguable duty of care in negligence[98] Mr Hollyman submitted that [64] and [65] of the statement of claim plead thatthe 2011 email and proposal are sufficient to establish a duty of care based on theassumption of responsibility to the plaintiffs. He submits that the words in the emailfall well short of making any statements or assume any responsibility and secondlythe plaintiffs subsequently moved to a contractual relationship with VQHL whichdisplaced any duty of care in negligence. He submits that a duty of care in negligencewill not arise when a party has had the opportunity to protect itself by requiring a59 Body Corporate 202254 v Taylor, above n 16.promise or guarantee from another party and relies on Rolls-Royce New Zealand Ltdv Carter Holt Harvey Ltd.60[99] Mr Hollyman submits that the courts are dubious where there are claims that acompany director is personally liable where the plaintiffs have contracted with thecompany. He submits that to allow such a claim would wholly undermine the basis ofthe separate corporate personality. Mr Hollyman refers to Trevor Ivory Ltd v Andersonand sets out at [4.30] of his submissions the components of the Court of Appeal'sreasons for finding that Mr Ivory was not liable as a director.61 Mr Hollyman alsorefers to the decision of Body Corporate 202254 v Taylor,62 where he submits theCourt of Appeal held that there was a presumption against a duty of care and there hasto be evidence that the director was doing something other than acting on behalf of thecompany. He submits in the present case there is nothing in the 2011 email andproposal that suggests Mr Pandey was taking personal responsibility and that theplaintiffs transacted with the company, VQHL.[100] Finally, Mr Hollyman submits that the pleading is not that the statements in theemail and proposal were negligent; it is that Mr Pandey assumed responsibility for:(a) the accuracy of the monthly statements to be issued by VQHL; and(b) the continuation of the hotel until 2031.[101] Mr Hollyman submits this pleading would make Mr Pandey a guarantor for themonthly statements and the continuation of the hotel until 2031 regardless ofsubsequent events, and this is an extraordinary suggestion.[102] Ms East on the other hand submits that the particular actions of Mr Pandey insending the proposal to the plaintiffs, which was unsolicited and went directly fromMr Pandey to the plaintiffs, and as set out at [33] of her submissions, demonstrate thatit is at least arguable that Mr Pandey assumed responsibility for an arrangement:60 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, above n 14.61 Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA).62 Body Corporate 202254 v Taylor, above n 59.(a) which would deliver the plaintiffs what they were owed after the hoteloperating costs came out;(b) that was transparent;(c) that would be give the plaintiffs some certainty in terms of theirparticipation in an Accor hotel going forward.[103] Ms East also points to further communications from Mr Pandey to the plaintiffsand their representatives that followed the proposal which is referred to in Mr Lip'sreply affidavit.63 Ms East submits that the proposition is not that Mr Pandey is aguarantor of VQHL's obligations, but that Mr Pandey was obliged to take care to paythe plaintiffs what they were owed and to be transparent about that, and not to unfairlyexclude them from the commercial arrangements which he was proposing in theproposal.[104] As to the argument put forward by Mr Hollyman that the subsequentcontractual relationship between the plaintiffs and VQHL displaced any duty of carein negligence and his reliance on the decision in Rolls-Royce, Ms East submits that theRolls-Royce decision does not stand for the proposition that a tortious duty of care innegligence is generally displaced by contractual duties. As to the Rolls-Royce case,Ms East submits that the present case is distinguishable because they are notendeavouring to enforce obligations between parties other than themselves.64[105] Ms East submits that in any event the Court of Appeal recognised that a causeof action for negligent misstatement pre-contract could co-exist with subsequentseparate contractual claims.63 Reply affidavit of Bin Mohamed Lip sworn 31 January 2023.64 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, above n 1460, at [66]. In the Rolls-Roycecase, Carter Holt had contracted with the Electricity Corporation (which became Genesis) todeliver a co-generation plant. Genesis subsequently contracted with Rolls-Royce to design,construct and commission the plant and the plant was alleged to be defective. Carter Holt issuedproceedings against Genesis for breach of contract and against Rolls-Royce for negligence. CarterHolt pleaded that Rolls-Royce had breached its duty of care to perform its contractual obligationswith Genesis. The Court rejected the claim on the basis there is no duty in tort to take reasonablecare to perform a contract because such duty is contractual nature and could not be owed to a thirdparty to the contract.[106] In response to Mr Hollyman's argument that the claim against Mr Pandeypersonally undermines the basis of the separate corporate personality that the plaintiffscontracted with (that is, VQHL), and the reference by Mr Hollyman to the Trevor Ivoryand Body Corporate 202254 decisions, Ms East submits that these decisions highlightthe significance of the facts and context in deciding whether there has been anassumption of personal responsibility by the director. Ms East submits that in both ofthose cases, a full finding of facts had been conducted whereas by contrast in a numberof interlocutory judgments the Court has declined to strike claims on the basis thatthere ought to be an opportunity for further evidence as to the extent of the director'spersonal involvement.[107] Ms East submits that on analysis of the decision in Body Corporate 202254and the decision in DB Breweries v Domain Name,65 it is clear that while it will nodoubt not be easy to sheet home liability to the director personally, the Court'sapproach is that it depends on all the facts and there is clear authority for theproposition that where a tort is procured or directed by a director of the company, thedirector may be personally liable for the tort.66 Accordingly, the success or otherwiseof the claim against the director will depend on the facts established at the trial.[108] Ms East submits that like the position in Body Corporate 202254, a lot willturn not only on the plaintiffs' evidence, but on what may be obtained in discovery,given the information imbalance which presently exists between the parties, andaccordingly the issue should be allowed to go to trial so it can be tested with the benefitof the full set of facts.[109] Finally, Ms East submits that some of the actions complained of againstMr Pandey could not have been performed by him as director of VQHL such as:• the liquidation of VQHL, which could only have been done by shareholderresolution;65 DB Breweries v Domain Name Co Ltd (2001) 52 IPR 280.66 At [17].• procurement of the participation of other Pandey-related entities in thehotel operation, which VQHL had no entitlement to demand; and• his exclusion of the plaintiffs from the new operation.[110] Ms East submits Mr Pandey also made representations as to his personalexperience, relationships and expertise.Conclusion on reasonably arguable duty of care in negligence[111] In my view the plaintiffs' claim is not untenable. The issue of whetherMr Pandey assumed responsibility for ensuring that the plaintiffs were paid what theywere owed and the statements produced by VQHL were reflective of what wasproposed by Mr Pandey to the plaintiffs is reasonably arguable and needs to be testedin evidence. Detailed evidence of discussions between Mr Pandey and the plaintiffsleading up to launch of the Sofitel hotel operation need to be examined at trial.[112] With respect to Mr Pandey's personal liability versus the liability of VQHL,my view is that again the plaintiffs' claims are not untenable and, as has been submittedby Ms East, this issue requires a full examination of the facts and the actions taken byMr Pandey personally in relation to dealings with the plaintiffs.[113] I am of the view therefore that the plaintiffs' claim for negligence againstMr Pandey should not be struck out.(e) Reasonably arguable trust and breach of trust for dishonest assistance claim[114] Mr Hollyman submits that liability for dishonest assistance requires thefollowing elements:(a) the existence of a trust or a fiduciary duty;(b) a breach of that trust or fiduciary duty, by a trustee or a fiduciary, thatresults in a loss;(c) assistance by the defendant in the breach of trust or fiduciary duty;(d) dishonesty on the part of the defendant.[115] Mr Hollyman references two decisions, Westpac New Zealand Ltd v MAP andAssociates Ltd,67 and Sandman v MacKay,68 as setting out similar formulations of whatdishonesty in the context of dishonest assistance requires.[116] Dealing with these criteria, Mr Hollyman submits, first, that no trust arisesunder the terms of the lease to VQHL. He makes the following points in support ofthis argument:(a) The lease entitled VQHL to make a deduction from each month's hotelrevenue, which VQHL was entitled to expend as of right on fixtures,fittings, and equipment.(b) The lease does not state that the FFE fund was held on trust nor that thebeneficiaries of the trust were the plaintiffs. While the lease does statea requirement for funds deducted with respect to the FFE to bedeposited in a discrete bank account, it does not provide that doing sois a pre-condition of VQHL deducting or expending FFE funds.(c) As the lease is expressed, the requirement for a separate bank accountcan only be read as for informational/accounting purposes and breachis no more than a breach of contract.[117] Mr Hollyman submits there is no basis on which Mr Pandey is said to haveassisted. He submits that the plaintiffs merely rely on Mr Pandey's position as adirector of VQHL and the processing of the FFE funds to a distinct bank account wasanother operational obligation of VQHL under the lease and Mr Pandey had nopersonal involvement.[118] Next, Mr Hollyman submits there is no loss for the reason that the FFE fundsare not held on trust for the plaintiffs and they are an entitlement of VQHL as of right.67 Westpac New Zealand Ltd v MAP and Associates Ltd [2011] NZSC 89, [2011] 3 NZLR 751.68 Sandman v MacKay [2019] NZSC 41, [2019] 1 NZLR 519.He submits that the definition of the FFE makes it clear that the FFE funds are forexpenditure on the hotel at a base rate of 4 per cent and the amount is simply deductedas a portion of the operating profit. Mr Hollyman submits that these arrangements arecommercial and do not give rise to an equitable trust relationship and any breach ofthem may be actioned as a breach of contract but not as a breach of trust. There is noloss which is required as a component of dishonest assistance as noted above.[119] Ms East, on the other hand, submits that it is clear under cl 5.2 of the lease thatFFE contribution is to be held in a separate account. Failure to do this is a breach oftrust and these funds were not additional money to be allocated as VQHL saw fit as,but for the requirements to hold this money as an FFE contribution, it would haveformed part of the monies payable to the plaintiffs as rental. She submits that MrPandey as a director of VQHL assisted in the breach of trust as he knew that VQHLwas in breach of trust and this was not a transaction in which he could honestlyparticipate.[120] Ms East relies on the decisions in Bethell v Papanui Properties Ltd and recentlyRe STA Travel (NZ) Limited (In Liquidation).69 She submits the principles which canbe extracted from these decisions are:(a) It is not necessary for the word "trust" to be used in order to find a trust.A trust may be inferred from the commercial context and therelationship between the relevant parties.(b) The existence of a commercial contractual arrangement is not a barrierto finding a trust. Instead, the extent of fiduciary duties is determinedby the implied and express terms of the contract, by the commercialcontext and by the nature of the tasks a party has committed toundertake.(c) In cases of money transferred, the key question is whether the intentionof the parties, objectively ascertained, for the funds to become the69 Bethell v Papanui Properties Limited, above n 26; Re Webb [2022] NZHC 1398.property of the recipient, including whether it was intended to be at therecipient's free disposal to be used as part of its cash flow.[121] Applying these principles in the present case, Ms East submits that it isreasonably arguable that the circumstances exist for an implied express trust in respectof the FFE contributions because:(a) the lease was clear that VQHL would act responsibly to place themonies received from the hotel into a specific account for the specificpurpose of repairing, maintaining and refurbishing hotel units or partsof the common property used in the hotel operation;(b) as part of this arrangement, VQHL was required to account to theplaintiffs for the above money — to keep matters transparent becausethe money deducted would otherwise have been payable to theplaintiffs;(c) on any objective assessment, it was not the parties' intention that thesefunds were at the free disposal of VQHL and cl 5.5 of the lease saysquite the opposite.[122] As to the argument put forward by Mr Hollyman that Mr Pandey did not assistin relation to any breach of trust and it is not enough to rely on his position as directorof VQHL, and he had no personal involvement in processing the FFE fund, Ms Eastsubmits that there is existing case law to the contrary, and refers to the decisions ofRoyal Brunei Airlines Sdn Bhd v Tan,70 Whitford Properties (In Liquidation) v Bruce,71and Eden Refuge Trust v Hohepa,72 as examples of where the defendant was a directorof the company in breach of trust and was held liable for dishonest assistance forcausing or permitting the company to use money knowing it was not authorised to doso.70 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC).71 Whitford Properties (in liq) v Bruce [2017] NZHC 625.72 Eden Refuge Trust v Hohepa [2011] 1 NZLR 197 (HC).[123] Ms East submits that in the present case Mr Pandey personally approached andmarketed the arrangement to the plaintiffs prior to incorporation of VQHL; six daysafter doing so, VQHL was incorporated with Mr Pandey as director and soleshareholder; and Mr Pandey continued to liaise directly with the plaintiffs after theincorporation of VQHL, for example, by sending profit forecasts to the plaintiffs inJanuary 2012.[124] Ms East submits this is reasonably arguable and the plaintiffs are entitled totest the point, including by way of discovery on these issues.[125] As to the assertion there can be no loss because the FFE funds are not held ontrust for the plaintiffs but are an entitlement of VQHL, Ms East reiterated the assertionsthat the FFE fund is not an entitlement of VQHL, but rather VQHL holds it on trustfor a specific purpose and the law is clear that an equitable trust relationship canco-exist with a commercial relationship (referring to the decisions in Bethell and RoyalBrunei Airlines).Conclusion on reasonably arguable trust and breach of trust for dishonest assistanceclaim[126] In my view, the plaintiff's claim is not untenable and it is reasonably arguablethat the FFE funds were held on an implied express trust for the purposes ofmaintenance of the fittings, fixtures and furniture etc in the hotel as set out in the lease.This is reinforced by the obligation to place the funds in a separate account, and in myview it is arguable that VQHL did not have an entitlement to expend these funds as itwished, but that they were held for the specific purpose of the FFE fund.[127] As to Mr Pandey's dishonest assistance, in my view the plaintiffs' claim is notuntenable. It is reasonably arguable that as sole shareholder and director of VQHL atthe time, reinforced by Mr Pandey's personal involvement in events leading up toestablishment of the Sofitel hotel operation and his continued direct involvement withthe plaintiffs after VQHL was incorporated, that he participated in dishonest assistancein breach of trust by VQHL.[128] Accordingly, the claim in this respect should not be struck out.Analysis of security for costs[129] I deal now with the questions set out at [69] as to whether security for costsshould be ordered against the plaintiffs.Has Mr Pandey satisfied the Court of the threshold under r 5.45(1)?[130] There is no dispute the plaintiffs reside outside New Zealand for the purposesof r 5.45(1)(a)(i). Consequently the jurisdiction to award security for costs isestablished. The next issue to be considered is whether the Court should exercise itsdiscretion to award security for costs.How should the Court exercise its discretion under r 5.45(2)?[131] Mr Hollyman submits that with respect to whether or not the plaintiff will beable to pay costs, it is sufficient to present evidence as to surrounding circumstancesfrom which an inference of an inability to pay can reasonably be drawn. He refers tothe decision in Totara Investments Ltd v Abooth Ltd.73 Mr Hollyman submits that theinability does not need to be proved on the probabilities, and all that is required is "areason to believe" that the plaintiff will not be able to meet a costs award.74Mr Hollyman submits that the defendant cannot be expected to prove the plaintiffs'inability to pay costs, given that the defendant does not (generally) have access to theplaintiff's private financial detail. When a defendant has pointed to surroundingcircumstances that call the ability to pay costs into question, and also the plaintiffpositively asserts their ability to pay costs, the Court is entitled to draw an adverseinference from the plaintiff's failure to then produce evidence of their ability to paycosts. Mr Hollyman relies on the decision in Colbart Limited v Eastpack Limited &Others.75[132] Mr Hollyman submits that evidence that would support the plaintiffs' ability tomeet an eventual costs award includes evidence of current income, assets currentlyheld, current liabilities, financial obligations between now and when the plaintiffs73 Totara Investments Ltd v Abooth Ltd HC Auckland, CIV-2007-404-990, 4 March 2009.74 Nioon Ltd v Tower Insurance Ltd [2016] NZCA 66, (2016) 23 PRNZ 135 at [18].75 Colbart Limited v Eastpack Limited & Others [2012] NZHC 2175.would become liable to pay costs, and how those obligations would be met. He pointsout that little or no information has been provided by the plaintiffs in this respect.[133] As to the plaintiffs owning property in New Zealand, Mr Hollyman submitsthat the two plaintiffs own only one unit in the hotel building and it has no realisablevalue.[134] Ms East, on the other hand, submits that the plaintiffs maintain they are in aposition to meet any adverse costs award that may be made against them. She submitsthey own property in New Zealand, namely the title to their unit in the complex whichwas purchased for $499,000 in 2006 and which is unencumbered.[135] Ms East points to the fact the plaintiffs sue on behalf of and with the consentof other unit owners in the building, and this group is the same group that has broughtrelated proceedings against the body corporate in the complex and four othercompanies of which Mr Pandey is a director.76 Ms East argues that the sameconsiderations which led the Court to decline to order security for costs in Een applyin the present case.[136] As to Mr Hollyman's argument that the Court is entitled to draw an adverseinference from the plaintiffs' failure to produce evidence of their ability to pay costs,Ms East responds as follows:(a) the plaintiffs are not making a bare assertion on ability to pay with noevidence as to their financial position as they had given evidence of realproperty owned in New Zealand which is identical to property thedefendant's interests have recently purchased for at least $150,000 perunit;(b) in relation to Mr Pandey's reliance on the decision in Colbart Limited,77it does not go as far as Mr Pandey suggests; the security for costs rule76 Een v Body Corporate 383911 [2022] NZHC 852.77 Above, n 75.does not suggest that security for costs may be obtained simply becausethe other party has been silent as to its financial position.78Failure or omission to provide proof has not necessarily been seen as fatal. Ms Eastsubmits that a similar position should be arrived at to the position arrived at by theCourt in the Een judgment.79[137] In relation to the conduct of Mr Pandey, she submits that the plaintiffs can pointto similar conduct to that in the Een decision, namely that Mr Pandey, in under-reporting the hotel profit so as to deprive the plaintiffs of rental income, putting VQHLinto liquidation, and commencing a new hotel operation excluding the plaintiffs, wasconduct designed to injure the plaintiffs' interests and it is inappropriate in thecircumstances for security for costs to be ordered.Conclusion on the order for security for costs[138] In my view, an order for security for costs is not appropriate in the presentcircumstances. While the threshold under r 5.45(1) is met and the Court hasjurisdiction to order security, the plaintiffs have valuable property in New Zealandavailable to meet a costs award. There is no history of unpaid costs awards against theplaintiffs. In addition, while it is fully acknowledged there is no evidence of thisbefore the Court, as the plaintiffs sue on behalf of the representatives of the otherowners of units in the complex, similar to the plaintiffs in the Een litigation, it wouldnot be unreasonable to expect that there may be arrangements in place between theplaintiffs and the remaining members of the group for support for costs in respect ofthe litigation from the other members of the group on whose behalf the plaintiffs aresuing.Result[139] As a result of the conclusions I have reached at [67], [79], [80], [88], [96], [97],[111]–[113], [126]–[128] and [138]:78 Above n 75, at [32].79 Above n 76.(a) In respect of the application for a more explicit statement of claim, theorders should be made as set out in Schedule A.(b) The application to strike out elements of the plaintiffs' statement ofclaim should be dismissed.(c) The application to require security for costs from the plaintiffs shouldbe dismissed.Orders[140] I make the following orders:(a) In respect of Mr Pandey's application for a more explicit statement ofclaim/further particulars, I make the orders set out in the Schedule Aattached to this judgment. The plaintiffs are to file an amendedstatement of claim within 14 working days of the date of this judgment.(b) Mr Pandey's application to strike out parts of the plaintiffs' statementof claim is dismissed.(c) Mr Pandey's application requiring the plaintiffs to provide security forcosts is dismissed.Costs[141] The plaintiffs have been successful in opposing Mr Pandey's application tostrike out elements of the statement of claim and his application for an order grantingsecurity for costs. In relation to the application for a more explicit statement of claim,each party has had partial success.[142] Counsel are directed to endeavour to agree costs within 20 working days of thedate of this judgment. Failing agreement, counsel for the plaintiffs is to submit amemorandum as to costs (not exceeding five pages) within 10 working days after theexpiry of the 20 working day period, and counsel for Mr Pandey is to submit amemorandum in reply (not exceeding five page), within five working days of receiptof counsel for the plaintiffs' memorandum. Costs will be then determined on thepapers...Associate Judge Taylor