FRIENDS OF MARINELAND OF NEW ZEALAND INCORPORATED V NAPIER CITY COUNCIL HC NAP CIV-2010-441-000825

FRIENDS OF MARINELAND OF NEW ZEALAND INCORPORATED V NAPIER CITY COUNCIL HC NAP CIV-2010-441-000825 29 August 2011IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYCIV-2010-441-000825UNDER the Judicature Amendment Act 1972 andthe Local Government Act 2002IN THE MATTER OF an application for reviewBETWEEN FRIENDS OF MARINELAND OF NEWZEALAND INCORPORATEDApplicantAND NAPIER CITY COUNCILRespondentHearing: 29 August 2011Counsel: P Ross for ApplicantM Lawson for RespondentJudgment: 29 August 2011JUDGMENT OF ASHER JSolicitors/Counsel:P Ross, Station Street Chambers, PO Box 7472, Taradale, Napier.M Lawson, Lawson Robinson, PO Box 45, Napier 4140. Email: mlawson@lawsonrobinson.co.nzIntroduction[1] The applicant, Friends of Marineland of New Zealand Incorporated ("theSociety"), has filed proceedings against the respondent, Napier City Council ("theCouncil"), seeking orders quashing decisions made by the Council in 2008 and 2010that have closed the facility in Napier known as "Marineland". The presentapplication is made by the Council. It submits that because of the Society's failureto comply with procedural directions the claim should be struck out and the Societybe found guilty of contempt of court. Alternatively it seeks an order that the Societyprovide security for costs.[2] Marineland was a marine zoo containing marine mammals. The proceedingwas commenced on 20 December 2010. I am informed from the bar that this followsa battle that has lasted approximately 10 years to prevent the Council closingMarineland. The Society alleges first that the Council's decision to close it was pre-determined and contrary to the principles of the Local Government Act 2002;second, that there was a lack of consultation and a failure to comply in that regardwith Part 6 of the Local Government Act; and third, a failure to take into account allthe relevant criteria.[3] On 13 April 2011 orders were made directing both parties to file and serve averified list of documents by 11 May 2011. They were to complete inspection by25 May 2011. The Council has complied with both orders. The Society did not filea list of documents within the requisite time. This application was made by theCouncil on 27 May 2011. A list of documents was finally provided by the Society on25 June 2011. The Society has still not carried out inspection, although I have beeninformed from the bar that there has been an informal exchange of some of the keydocuments.The strike out application[4] In this application, brought under r 7.48(2) of the High Court Rules, the Council alleges a wilful default on the part of the Society in failing to comply withthe timetable orders, and alleges an element of brinkmanship. It claims that there isprejudice as the issue is sub judice, and Council officers cannot make comment. It claims that steps are being taken to implement the decision to close the facility andclaims that the proceeding is hindering the efficient administration of Councilbusiness and the implementation of its decision.Analysis of strike out application[5] The Court may decide to strike out a pleading if there has been wilful default,1 or serious prejudice to the party affected.2 However, in the ordinary course of events and in the absence of unless orders the consequences of default are not so drastic. As is commented in McGechan on Procedure:3The customary sequence in New Zealand in the event of non-compliance is an application that the claim or defence be struck out, followed by belated compliance or application for adjournment and enlargement of time to enable compliance. When eventual compliance occurs, applications for enforcement generally have been dismissed, with costs to the applicant.[6] This benevolent approach is a consequence of the Court's reluctance todismiss proceedings on grounds unconnected with the merits. There is no reason to depart from that approach in relation to this application. The default has been considerable and the failure to inspect, even down to the present time, is surprising. However, a list of documents was ultimately provided and the time lag, although unacceptable, was not as great as is sometimes seen in this Court. Inspection will undoubtedly be a lengthy and expensive process, assuming legal fees are being charged, and as observed a bundle of key documents has been already provided by the Council.[7] I do not attribute the delay to a wilful desire to abuse the Court process, but rather see it as a reflection of the slender resources of the Society and the difficulties it faces in pursuing a serious proceeding of this type. For this reason I consider the suggestion that the Society has been in contempt as without foundation. No case of irremediable prejudice is made out. The Council, indeed, is proceeding to1 Franklin v Baycorp Holdings Ltd (1990) 4 PRNZ 258 (HC).2 Ship "La Bonita" v Parker Engineering Company Ltd CA123/85, 3 July 19863 McGechan on Procedure (online looseleaf ed. Brookers) at [HR7.48.02](2) quoted with approvalin Lees Trading Co (NZ) Ltd v Loveday HC Christchurch CP 70/96, 3 June 1998 at 10.implement the closure of Marineland, and any delay is prejudicing the Society rather than the Council.[8] Thus, the application to strike out and for contempt orders is dismissed.Security for costs[9] The Council can be forgiven for entertaining feelings of frustration at the slow progress of the proceeding to date. I have already commented on the failure to inspect. There are also no affidavits as yet filed, although no timetable orders were made in that regard. However, it could have been expected when orders were sought that would constitute a major reversal of a Council policy in the process of being implemented, that an applicant would pursue such claims with diligence and urgency.[10] As I have indicated the failure to do so may reflect the limited resources of the Society. The accounts of the Society have been annexed and show a very limited income of $1,493.28 in the year ended June 2010 and an excess of income over expenditure of $180.66. The assets show two bank accounts with funds totalling $4,310.61. These accounts are what could be expected from a Society of what hasbeen described in the affidavit of a member Susan McDonald as "200 families as members". Ms McDonald asserts that the Society is a public interest bodyrepresenting a "sizeable number" of Napier residents.[11] The Society does not contest the proposition that on its present balance sheet it would be unable to meet an adverse award of costs in the proceedings. There is, therefore, jurisdiction to make an order for security for costs under r 5.45 of the High Court Rules. The Court nevertheless has a discretion as to whether an order should be made.[12] Both Mr Lawson for the Council and Mr Ross for the Society agree that costs on a 2B scale for a two-day hearing would come to between $32,000 and $35,000. Mr Lawson submits that the appropriate amount for security should be a little lessthan $30,000. Mr Ross submits that if an order is made it should be in the vicinity of $2,000 or $3,000.Amount of security[13] It was made clear by the Court of Appeal in A S McLachlan Ltd v MEL Network Ltd that there is no checklist or simple formula for decisions on security for costs.4 The amount of security is not necessarily to be fixed by reference to the scale.5 The Court must make an assessment of what is just in the particular circumstances of the case.[14] The members of the Society are part of a section of the Napier community that believes that it is in the interests of the city and its residents that the marine zoo be retained. These proceedings are brought by a group in the public interest, as they perceive it, rather than for any profit motive. I have been informed that their campaign has been conducted at a political level for some years.[15] If an order is made that is too great it may be beyond the ability of those involved in the Society to come up with that sum. This may lead to the proceedings being abandoned. An order having that effect should be made only after a careful consideration, and the merits of the claim will be relevant in that consideration.6Such a consequence may not be in the public interest. As was stated in Ratepayers and Residents Action Association Inc v Auckland City Council:7 there is a risk that, if the security for costs remains as high as has beenfixed, the Association may be prevented for economic reasons from recourse to the Courts to test whether the Council is acting within the scope of its statutory powers.[16] Rule 14.7(e) of the High Court Rules provides that the court may refuse orreduce costs if "the proceeding concerned a matter of public interest, and the party4 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [14].5 At [27].6 At [15].7 Ratepayers and Residents Action Association Inc v Auckland City Council [1986] 1 NZLR 746(CA) at 753.opposing costs acted reasonably in the conduct of the proceeding." If such a factor is relevant in awarding costs, it is relevant in assessing security for those costs.[17] There is a public interest in ensuring that local authorities act lawfully. As was observed in Ratepayers and Residents Action Association Inc v Auckland City Council:8It seems entirely consistent with the policy considerations, thatconsiderations of public interest - both in the narrow sense of interest to the large body of ratepayers in the Council's district and the wider sense of ensuring that local authorities observe the law - should be taken into account in deciding whether to order security to be given and, if so, in what amount.However, there is no rule or principle that a different approach to security for costs will be taken to public interest claims. It will always come down to an assessment of all the particular circumstances.[18] The merits are undoubtedly relevant. A clearly weak case is less likely to warrant any discount on the security that might otherwise be ordered. Here, as will often be the case, it is not possible to form a clear view on the strength of theSociety's case. The statement of claim is, however, singularly lacking in particularity. The references to the Local Government Act are general and no breach of any specific section or other legal requirement is discernible. It is not obvious that the case has merit.[19] It is also relevant to take into account the unsatisfactory performance of the Society in relation to the orders made to date. The fact that there has been non- compliance and no vigorous pursuit of what, if there is a sound claim, could be expected to have been urgently pursued, may be a reflection of the merits.[20] Thus, while these proceedings are brought by a group who intend to act in the public interest, I consider that in the circumstances some order that is more thannominal must be made. There are 200 "families as members". If each of them wasrequired to pay $50, and did so, the sum raised would be $10,000. Ultimately,8 At 754.whether security of costs can be given will turn on the will and commitment of those persons who are members of the Society.[21] The final decision as to amount, while taking into account all these factors, has to an extent to be intuitive. It cannot be reached by the application of a strict line of reasoning. The costs likely to be ordered if the Society fails, the nature of the claim and its apparent strength or lack of strength, and the conduct of the proceeding to date, persuades me that an order of some significance should be made. I am mindful that an order that is too high may prove just too greater a hurdle to be crossed and lead to the abandonment of the case. I am also sensitive to the fact that these proceedings are brought by a group of persons who perceive themselves as acting in the public good and who stand to gain no monetary reward. Nevertheless, if the members of the Society wish the application to proceed they have to accept that there will be a cost and the position of the Council as respondent, and its legitimate wish to be protected for costs if the proceeding goes to trial and fails, must be recognised.[22] In the end I have decided that the appropriate figure for security for costs is $12,000.Timetable matters[23] Under r 5.45(3)(b) of the High Court Rules a proceeding may be stayed until the sum directed is paid or security for that sum given. I think some time limits need to be imposed to give the Council an opportunity to apply to strike out the proceeding if a sum is not paid within a certain period. It is fair to give the Council an opportunity to seek some finality. A reasonable period to be allowed for the raising of the $12,000 is three months. I do not intend to dictate the consequences of a failure to pay within that time, but I leave it open to the Council to make an application if the sum is not paid by then.[24] I also impose a direction requiring the Society to file its affidavits within four weeks of payment of the sum directed or provision of security for costs, with the Council having a further five weeks in which to file its affidavits. This will providea certain time frame for future action. Presumably upon giving security the parties will then be seeking a fixture.Result(a) The application for stay and contempt orders is dismissed.(b) Security for costs is ordered. The applicant is to pay the sum of $12,000 into court, or give to the satisfaction of the Registrar security for that sum, within three months of today's date.(c) The proceeding is stayed until that sum is paid or that security given.(d) The applicant is to file its affidavits in support within four weeks of the date on which that sum is paid or security given.(e) The respondent is to file its affidavits in reply within a further five weeks.Costs of this application[25] It has been the applicant's fault that there has been non-compliance with the timetable directions. The Council's frustration is understandable and it has succeeded in its application for security for costs.[26] Mr Ross submits that costs should be reserved while Mr Lawson submits that full costs on a 2B scale should be awarded for today's hearing.[27] I am not prepared to reserve costs. Rule 14.2(a) is explicit that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds. I am, however, mindful of the fact that this is a proceeding concerning a matter of public interest. I am also mindful of the fact that the Council sought contempt orders when the facts did not, in my view, indicate anything that might justify such a response from the Court.[28] The costs at scale would be approximately $3,000. In the circumstances, I order the applicant to pay costs of $1,500 to the respondent...Asher J