GREENWELL v SOUTHLAND DHB HC INV CIV-2010-425-168

GREENWELL v SOUTHLAND DHB HC INV CIV-2010-425-168 [10 July 2012]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYCIV-2010-425-168[2012] NZHC 1622BETWEEN CAROLE ANNE GREENWELLPlaintiffAND SOUTHLAND DISTRICT HEALTHBOARDDefendantHearing: 22 May 2012(Heard at Christchurch)Appearances: L McKeown for the plaintiffA K Miller for the defendantJudgment: 10 July 2012JUDGMENT OF CLIFFORD JIntroduction[1] This is an application for security for costs by the defendant the SouthlandDistrict Health Board ("the Health Board").Background[2] The plaintiff, Mrs Carol Greenwell, is suing the Health Board directly for its own negligent acts and omissions, and as vicariously liable for the acts and omissions of various of its employees and agents, in connection with events in early April 2004. At that time Mrs Greenwell was admitted to Southland Hospital ("the Hospital") suffering from severe pain following the implantation of three embryos aspart of an invitro fertilisation programme in late March that year. Mrs Greenwell alleges that by reason of the failure of the Health Board and its staff she suffered and continues to suffer from severe tinnitus, from psychiatric illness and from a numberof related adverse effects. She says that the Hospital and its staff failed to discharge common law and statutory duties to her, in that they did not treat her with reasonable skill and care, and failed to comply with the standards imposed on them by the Codeof Health and Disability Services Consumers' Rights.[3] Mrs Greenwell is claiming general damages of $350,000 and as yet unquantified special damages.1[4] Mrs Greenwell required leave to bring these proceedings because she was out of time. Mrs Greenwell had received legal advice that she was subject to the normal limitation period of six years. In fact under s 4 of the Limitation Act 1950 her action, being in respect of bodily injury, had to be brought within two years from the date on which the cause of action accrued. By reference to that mistaken advice, and because of his assessment that the Health Board had not suffered any material prejudice, Associate Judge Osborne granted Mrs Greenwell leave without opposition from the Health Board.2[5] The Health Board now applies for security for costs against Mrs Greenwell.The parties' positions[6] In essence, the Health Board says that responding to Mrs Greenwell's claim –- which it assesses as having a low prospect of success – will involve considerable legal resources and, by its estimate, a five day hearing, that it is therefore likely that a costs order will, at the end of the day, be made against Mrs Greenwell; and that there is reason to believe Mrs Greenwell may be unable to pay such a costs order. The Health Board would appear to have based its initial assessment of Mrs Greenwell's financial position on material filed in connection with her application for leave to proceed. Therefore, in all the circumstances, it is in the interests of justice that Mrs Greenwell now provides security for costs. The Health Board seeks $30,000 to be lodged as cash, or, in the alternative, the provision of1 I note that at one point the defendant quantified Mrs Greenwell's claim for general damages at$1 million. As I read her statement of claim her three causes of action are pleaded in thealternative and the particulars by reference to which damages are quantified are the same.2 Greenwell v Southland DHB HC Invercargill CIV-2010-425-000168, 19 December 2011.security in that amount. The Health Board bases that claim on estimated scale costs (2B and 2C) of between $50,000 and $90,000. It notes that the actual costs of litigation will be substantially greater than those estimate scale costs. The Health Board asks that Mrs Greenwell's claim be stayed until such security is provided.[7] Mrs Greenwell says that her claim has at least a reasonable prospect of success. Although she admits she is cash poor and unable to give security in cash, she would be able to satisfy a costs order if she is unsuccessful. She refers to her andher husband's overall worth, and in particular to certain properties they own. Moreover, she says the making of an order would prevent her from bringing her claim; that her inability to give security has been brought about wholly or partly bythe Health Board's acts and/or omissions; that the Health Board is insured and therefore unlikely to have to meet its own costs; that the amount sought as security is excessive; and that it is premature in any event to make an order for security covering costs for trial. At the moment, at most Mrs Greenwell should be ordered to provide security by way of a charging order, and then for a considerably lesser amount than that sought by the Health Board.Relevant legal principles[8] Under r 5.45 of the High Court Rules a Judge may, if he or she thinks it just in all the circumstances, order the giving of security for costs where there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if theplaintiff is unsuccessful in the plaintiff's proceeding. There are, therefore, twostages to the inquiry. The first stage is to determine whether or not the threshold test, namely that there is reason to believe a plaintiff will be unable to pay, has been passed. What is required is credible, that is believable, evidence of surrounding circumstances from which it may be inferred that a plaintiff when liable to pay costs will be unable to pay.3 As summarised in Totara Investments Limited v Abooth Limited:4It is clear ... that an applicant does not have to prove inability to pay in the normal civil sense, and that in the absence of direct evidence, it can be3 Totara Investments Limited v Abooth Limited HC Auckland CIV-2007-404-990, 4 March 2009.4 At [28].sufficient to adduce evidence of surrounding circumstances from which an inference of inability to pay can reasonably be drawn.[9] In terms of the type of evidence that may raise the necessary inference, inFetherston v AMI Insurance Limited the High Court noted that it is not necessarily a simple question of comparing the estimated value of the plaintiff's assets against thelikely award of costs.5 Rather, what is required is a realistic, commonsense "broadoverall assessment of the situation".6[10] Once that threshold test has been met, the decision as to whether or not to order security is a discretionary one that is to be made on the basis of all the circumstances of the particular case. Relevant factors include the need to balance the rights of the parties including access to the courts for a genuine plaintiff;7 an appropriate measure of protection for a defendant against a plaintiff's inability to paycosts;8 the merits of the plaintiff's claim;9 the reasons for the plaintiff's financialhardship;10 and events that may be relevant that have occurred during the course of the litigation.11[11] Once the Court concludes that the discretion should be exercised in favour of a defendant, the question of the quantum of security is also a matter for discretion. Finally, Courts will generally order a stay until security for costs that has been ordered is provided.12Mrs Greenwell's financial position[12] Mrs Greenwell filed an affidavit outlining, amongst other things, her currentfinancial position. She admitted to being essentially "cash poor" at the present time.Moreover it would be near impossible (if not impossible) for her to pay any order for5 Fetherston v AMI Insurance Limited HC Christchurch CP144/00, 3 August 2001.6 At [46].7 See A S McLachlan Limited v MEL Network Limited (2002) 16 PRNZ 747 (CA) at [15]-[16] andTotara Investments at [40].8 See Hamilton v Papakura District Court (1997) 11 PRNZ 333 (HC) at 337-338.9 See Bell-Booth Group Limited v Attorney-General (1986) 1 PRNZ 457 (HC), 461 and TotaraInvestments at [46].10 See Bell-Booth Limited at 461 and Davy v Howell (1993) 7 PRNZ 141 (HC) at 145.11 See Meates v Taylor (1992) 5 PRNZ 524 (CA).12 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at[HR5.45.11].security for costs, particularly at the level sought by the Health Board. She said, however, that she had interests in a number of properties the equity in which, combined with income earned from her and her husband's optometry business,meant that she would be in a position to satisfy a costs order if her claim was ultimately unsuccessful. She outlined details of properties owned and moneys owing as set out in the table below:Property CapitalValuationAmount owingon mortgage89 Black Road, Otatara(owned by A J & C A Greenwell)$455,000 $0147 Gala Street, Invercargill(Greenwell Apartments Limited)$435,000 $320,00060 Windsor Street, Invercargill(A J & C A Greenwell)$215,000 $190,000327 Frankton Road, Queenstown(Greenwell Apartments Limited)$495,000 $845,500$1,600,000 $1,355,500She pointed particularly to the equity in the two properties registered in her and herhusband's name, Black Road, Otatara and Windsor Street, Invercargill, of approximately $480,000. Moreover, she argued that although the capital valuation of 327 Frankton Road was $495,000, she estimated that it would realise a market value in the region of $600,000 to $650,000.[13] At the hearing I enquired whether Mr and Mrs Greenwell had given any personal guarantees with respect to Greenwell Apartments' borrowings. That would, of course, give their bank creditors direct access (albeit as unsecured creditors) to the equity in the Black Road and Windsor Street properties. On 13 June 2012 Mrs Greenwood provided a second affidavit: in that affidavit she confirmed that she and her husband had given personal guarantees in respect of Greenwell Apartments'borrowings. She also advised that the Black Road, Otatara property had recently sold for $439,000, with settlement due on 27 July 2012.[14] Mrs Greenwell has admitted that she is "cash poor". She has provided noconcrete evidence as to the profitability, or otherwise, of her and her husband'soptometry business. She says that it remains profitable, but just not as profitable as she and her husband had claimed. It is therefore difficult to assess her assertion that the income from that business, when combined with the equity in the properties referred to, mean she would be able to satisfy a costs order. I therefore think her financial position must be assessed essentially by reference to the value of those properties, and the debts owing on them.[15] When the overall position of the capital valuations of those properties and the amounts owing (including indirectly by Mr and Mrs Greenwell on their personal covenant as guarantors) is considered, there is but narrow equity taken overall (some $245,000 as opposed to a registered capital valuation of $1.6 million). Moreover, it is not in my view irrelevant that the Black Road, Otatara property recently sold for less than its capital valuation. I take little comfort from Mrs Greenwell's assertionthat the Frankton Road property is worth considerably more than its capital valuation: in the absence of a fresh valuation, such an assertion needs to be taken with a grain of salt given current market conditions.[16] I therefore think that the threshold test, namely that assessed realistically and applying commonsense, an inference of an inability to pay costs should they be awarded in the future, after what may have already been a quite expensive legal case for Mr and Mrs Greenwell, can reasonably be drawn.[17] Turning to matters of discretion, I do not think making an appropriate award for security at the moment will prevent Mrs Greenwell pursuing this case. In her recent affidavit she refers to reserving an appropriate part of the proceeds of the sale of Black Road for the payment of costs. As regards the merits of Mrs Greenwell'sclaim, it is difficult but not impossible to assess those at the moment. But, realistically, I do not think this will be an easy claim to win. Mrs Greenwell says that her financial position has to an extent been caused by the injuries she has suffered. But again, sheeting home responsibility for that outcome to the Health Board is difficult at this point in time. I do not think anything has happened in thecourse of the litigation to date that counts one way or the other as regards the discretionary question I must decide.[18] Having regard to all these matters, I am satisfied that I should exercise my discretion by ordering that Mrs Greenwell provide, by way of a charging order, security for costs.[19] I now consider the question of quantum. I accept Mrs Greenwell'ssubmissions that, at this point, it is premature to order that security for costs be provided by reference to some estimate of the total costs to the hearing. Rather, I think a modest provision of security is satisfactory at the present time to enable discovery and other matters to proceed. I therefore order the provision, in the manner outlined above, of security for costs in the amount of $7,500. Mrs Greenwell has indicated an ability to put aside, out of the proceeds of sale of Black Road, an amount of cash on account of legal costs, irrespective of whether the Greenwells decide to buy another property. It may be, therefore, that Mrs Greenwell would be in a position to provide $7,500 security by way of a cash payment to the Court. That will be a matter for her. This order is limited to her providing security by a charging order, or some other form of arrangement – other than the lodgement of cash – considered appropriate by the Registrar."Clifford J"Solicitors:Johnston Lawrence, Wellington for the plaintiff (lisa@johnlaw.co.nz)Buddle Findlay, Wellington for the defendant (anita.miller@buddlefindlay.com)