HAURAKI GULF ENHANCEMENT SOCIETY INCORPORATED v AUCKLAND COUNCIL [2015] NZHC 2545

HAURAKI GULF ENHANCEMENT SOCIETY INCORPORATED v AUCKLAND COUNCIL [2015] NZHC 2545 [16 October 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2015-404-1618[2015] NZHC 2545BETWEEN HAURAKI GULF ENHANCEMENTSOCIETY INCORPORATEDPlaintiffAND AUCKLAND COUNCILFirst DefendantAND WAIHEKE GOLF CLUBINCORPORATEDSecond DefendantAND THE MINISTER OF CONSERVATIONThird DefendantHearing: 14 October 2015Appearances: D Bullock for Applicant (Second Defendant in the substantiveproceed)J McBride and P Hall for Respondent (Plaintiff in thesubstantive proceeding)A Ross for Council (Defendant - not participating in theapplication)Judgment: 16 October 2015JUDGMENT OF TOOGOOD J [Application for Security for Costs]This judgment was delivered by me on 16 October 2015 at 11:00 amPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarBackground[1] The plaintiff, the Hauraki Gulf Enhancement Society Incorporated ("the Society") is an incorporated society having approximately 50 members who are, at least according to the Society's rules, obliged to pay an annual subscription of $25.In fact, subscriptions have not been collected for several years and the plaintiff has no assets apart from a few hundred dollars in a bank account. Nevertheless, it has embarked on expensive litigation seeking judicial review of decisions of the predecessor to the Auckland Council and the Waiheke Island Local Board concerning the granting of a lease of reserve land to the Waiheke Golf ClubIncorporated ("the Golf Club") for the purposes of a golf course. The Golf Club plans to expand the existing 9-hole course into an 18-hole course.Issue[2] At issue in this judgment is an application by the Golf Club for an order requiring the Society to pay security for costs in the proceeding. The matter is scheduled for a two-day hearing on 12 November 2015 and, so far as I am aware, the timetabled preparatory steps for the hearing are well advanced.Security for costs – principles[3] A party bringing proceedings in this Court does so in the knowledge that the rules of Court carry with them the prospect that the party will be rendered liable to pay costs.1 Two of the primary principles under the costs rules in Part 14 of the High Court Rules are that the unsuccessful party should pay a contribution to the costs of the successful party,2 and that the objective of the rules is to achieve predictability, consistency and expediency in the fixing and payment of costs.3 Those, and all the other costs principles referred to in the Rules and the relevant cases, are subject to the overriding discretion of the Court.41 See the pertinent remarks of Lord Neuberger, President of the Supreme Court of England and Wales, in Re Nortel GmbH [2013] UKSC 52, [2014] AC 209 at [89].2 High Court Rules r 14.2(a).3 Rule 14.2(g).4 Rule 14.1.[4] In short, however, a plaintiff must expect to pay costs of an amount which is readily ascertainable in the event that the claim fails. The risk of that occurring is one which a litigant ought to take into account in determining whether to embark on the proceeding or, in the case of a defendant, to resist it. In assessing the likely costs of litigation, in the event that the proceeding will not succeed, a plaintiff would be unwise to consider only that party's own legal costs and to ignore the prospect ofhaving to meet the costs of a successful defendant.[5] Rule 5.45 of the High Court Rules recognises that it may be appropriate for the Court to provide a measure of protection to a defendant facing litigation by an overseas plaintiff or a plaintiff who may be unable to pay the defendant's costs if theplaintiff is unsuccessful.5 In such a case, a Judge may order the giving of security for costs if such an order is "just in all the circumstances".6The judicial review application[6] The challenged decisions of the Council or its delegates include the granting of leases to the Golf Club in October 2007 and October 2013. It is the latter agreement, the 2013 lease, which is the principal subject of the challenge.[7] The 2013 lease has been granted subject to the approval of the Minister of Conservation. After significant delay, the Minister informed the Council that she declined to deal with the matter and that the Council must decide whether the consent should be given pursuant to its delegated powers under s 54 of the Reserves Act 1977. Although the Council notified the Golf Club that the decision under the delegated authority was due to be made in early August, the making of that decision has been deferred pending the outcome of this litigation.[8] It is of no small moment to the Golf Club, and those who support the prospect of an 18-hole course on Waiheke Island, that the present stage of the approval process has been reached after something of the order of 25 years of engagement with regulatory and bureaucratic processes. Over that period, the Golf Club's proposals and the 2013 lease have been subjected to scrutiny in the course of5 Rule 5.45(1)(b).6 Rule 5.45(2).a successful resource consent process under the Resource Management Act 1991 and by a Hearing Panel on behalf of the Waiheke Island Local Board.[9] In its statement of claim, the plaintiff alleges:(a) that the public notification for the 2007 lease was inadequate with the consequence that the requirements of the Reserves Act were not met;(b) that the Local Board's decision to approve the 2013 lease was not compliant with s 54 of the Reserves Act;(c) that the Local Board's decision was legally and factually wrong;(d) that the Local Board's decision was improperly motivated, contrary to the Reserves Act;(e) that the Local Board's decision was one that no reasonable board panel could make; and(f) that the Council did not have authority to sign the 2013 leasewith the result on any or all grounds that the 2013 lease is unlawful and void.The parties' positions on security for costs[10] The Council and the Minister of Conservation are defending the plaintiff'sclaims but do not seek security for costs. The Golf Club, as the defendant mostclosely affected by the Court's decision and any costs orders which may be available in the event that the claim fails, has applied for an order for security for costs. Consistently with the mandated approach under r 5.45 of the High Court Rules, it argues, first, that there is reason to believe that the plaintiff will be unable to pay any costs if it is unsuccessful in the proceeding; and, second, that it is just in all the circumstances that the order should be made.[11] The plaintiff does not assert that it would be able to meet any costs order. Sofar the Society's legal fees in the proceeding have been wholly funded by Mr Ronald Walden, the father of Dr Adrian Walden, a biologist whose evidence forms the basis for the plaintiff's opposition to the orders sought.The bona fides of the society[12] Mr Paul Walden, brother of Dr Adrian Walden, is the chair of the Waiheke Island Local Board and a prominent opponent of the extension of the golf course to 18 holes to the extent, at least, that expansion of the course may threaten the ecological integrity of the adjacent wetlands. The Society has refused to disclose the identity of its members, other than Dr Walden and a Mr Jay Clarke, who is a member of the Executive of the Society and who provides administrative assistance as its Secretary.[13] The Golf Club challenges the bona fides of the Society, suggesting that it is really just a front for the members of the Walden family who have been prominent in their opposition to the Golf Club expansion. Dr Walden deposes that the Society'smembers have sought anonymity to avoid personal repercussions on an issue which appears to have roused strong emotional responses both in favour of and against the development plans for the golf course. He documents in his affidavit incidents which would appear to justify those members of the Society who oppose the expansion plans not wishing to state their positions publicly, at this stage at least. Regarding anonymity, Dr Walden says in his affidavit:The principle of anonymity remains a fundamental tenet of the society today. At present we have some 50 members, including myself. The members include ex-councillors, a former government minister and member of parliament, retired Waiheke community leaders, and other persons with a long and active interest in Waiheke and Hauraki Gulf affairs. Members have sat as councillors and hearings committee persons, and submitted to district plans and related social justice bodies. Others are involved in community and environmental matters generally. There are lawyers, school teachers, activists, doctors of philosophy, biologists, engineers, mums and dads, unemployed persons and unemployable persons, to name a few. In short, oursociety's members comprise a good cross-section of the Waiheke and Hauraki Gulf communities.Dr Walden says that the membership list could be disclosed to the Court on a confidential basis if required.[14] There is no proper basis for the Court doubt the bona fides of the concerns of Dr Walden and those who share his views. For present purposes, I am satisfied that there is a group of around 50 people who have demonstrated their support for the aims of the Society by claiming membership. I am not in a position to question whether there has been appropriate authorisation for the issuing of the proceeding in the name of the Society. I note, however, that it does not appear on the evidence that the members have been paying subscriptions for some years. The Golf Club asks the Court to infer that those opponents of the Golf Club's plans, and those who challengethe processes by which the lease arrangements between the Council and the Golf Club have been entered into, are deliberately using the incorporation of the Society, while leaving it devoid of assets, as a shield against orders of costs which might be made against them if they had joined the proceedings as parties personally. I do not draw that inference, but the effect of the present arrangements is that any costs order against the Society would be fruitless.The means available to the parties to pay for the litigation[15] The Society was formed on the application of 15 applicant members, none of whom included members of the Walden family, but Mr Ronald Walden was the solicitor who presented the application. Thus far, Ronald Walden has provided$35,000 to meet the Society's legal costs in the proceeding to date and has apparently indicated that he will provide a further $10,000 to meet the estimated costs of preparation for the hearing and the hearing itself. Neither Mr Walden nor any member of the Society has given any undertaking that they will underwrite theSociety's liability in the event of any costs order being made against it.[16] It is often the case, where proceedings are issued by those concerned with environmental issues arising in respect of a commercial development, that an incorporated society purportedly representing public interest concerns challenges the actions of a developer having a purely pecuniary interest in a commercial development. There is no doubt that there is a commercial element to the GolfClub's plans in that the expansion of the course to an 18-hole course will provide an incentive for further development, may increase membership, and may enhance the Golf Club's assets. But the golf course is a recreational facility which is available tothe Waiheke community generally, not just to its members, and the further development has the potential to provide an attractive addition to the recreational facilities available to the inhabitants of, and visitors to, the Island. The Club claims widespread public support on the Island for its expansion plans. In that sense, therefore, the Club also legitimately claims to be acting in the public interest.[17] The Golf Club itself is not abundantly resourced. In the year ended 30 September 2014, its total income from trading activities, member subscriptions, green fees and other sources, including commercial sponsorship, was $230,933 resulting in a surplus for the year of $58,502. Retained earnings, including the surplus for the 2014 year, total $351,522. The cost to the Club of this proceeding can be expected to at least match, if not exceed, the costs which the plaintiff expects to pay its solicitors and counsel. It is likely to consume any surplus which the Club may have generated in the 2015 financial year. It is evident, therefore, that while the Golf Club is markedly better resourced than the Society, the cost of this litigation is a burden which the Club cannot easily afford and that it will erode the resources available to fund the development if the plaintiff's challenge fails and the Council approves the lease.The balancing exercise[18] As Mr McBride properly acknowledged on behalf of the Society, the Court is required in such circumstances to achieve an appropriate balance between a position which might prevent the Society from pursuing what it regards as a legitimate challenge to the way in which the Council has dealt with the lease issue and the environmental concerns related to it, and the legitimate interests of the Golf Club in pursuing a development which it has had in mind for over 25 years.77 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [15]–[16].[19] I turn, therefore, to consider, as part of the balancing exercise:(a) the merits of the plaintiff's claim and the prospects of success;(b) the plaintiff's delay in bringing the judicial review proceedings;(c) the public interest in the proceedings; and(d) the ability of the Society to obtain third party funding for security for costs.The merits of the plaintiff's case[20] I expressed to counsel at the hearing my frustration with what I regard as an excessive amount of information provided by the parties in respect of this application. An application for an order for security for costs is not a vehicle for parties to litigate the substantive issues in the proceeding with a view to persuading the Court that a plaintiff's claim is either bound to succeed or inevitably destined to fail. In this case, to the extent that it was necessary to enable the Court to form an impression of the prospects the plaintiff will succeed, the parties could have summarised their respective positions far more succinctly.[21] In his written submissions on behalf of the Society, Mr McBride submitted that, "the merits of [the Society's] claim are overwhelmingly in its favour." At the hearing, counsel expressed himself as being "very confident" that his client would be successful. Those are bold statements for counsel to make in any proceeding, particularly in an application for judicial review where the granting of relief is very much within the discretion of the Court.8[22] It is neither necessary nor appropriate for me to address in any detail the merits of the plaintiff's case. It is sufficient to say that, as Mr Bullock conceded, the plaintiff's case is sufficiently arguable to the extent that a strike-out application could not succeed. It is also arguable, however, that the deficiencies in the process for the granting of the leases upon which the Society relies are not necessarily8 Judicature Amendment Act 1972, s 4(3).deficiencies which, if proved, would justify a declaration that the 2013 lease is invalid. Further, there is a credible argument that the Society's concerns for thepreservation of the wetlands adjacent to the area covered by the lease, which form a substantial basis for its opposition to the 2013 lease, have been addressed appropriately through the resource consent procedure.Plaintiff's delay in bringing the judicial review proceedings[23] The Golf Club complains that the Society first threatened to issue proceedings challenging the validity of the 2013 lease in March 2014, but then did nothing until it became aware that the Council was planning to address the question of approval of the lease in early August this year. The defendant says that the timing of the proceeding was intended to frustrate the approval of the lease. It argues that such delay should count against the Society in terms of discretionary relief in the substantive proceeding, such that the Society should not be permitted to proceed to a hearing without providing some security for the risk that it will be ordered to pay costs to the defendants. Delay in the issuing of the proceedings may be a mattergoing to the exercise of the Court's discretion in granting relief in the substantiveproceeding. I do not think in this case, however, that it is a factor which influences the decision as to payment of security for costs.Public interest[24] The real question to be determined is whether it would be fair, balancing the interests of both parties, to require the Society to provide security for costs in circumstances where it has at least an arguable case and is plainly unable to meet a costs award from its present resources. The Court is always reluctant to stifle a claim by a plaintiff acting out of genuine concern on a matter affecting the public interest (as the plaintiff is in this case).9 In a finely balanced case, access to justice considerations will often prevail over the protection of defendants from being forced into litigation without any prospect of recovery of costs if the claim fails.109 See, for example, Ratepayers' and Residents' Association Inc v Auckland City Council [1986] 1 NZLR 746 (CA); Save Happy Valley Coalition Inc v Minister of Conservation HC Wellington CIV-2006-485-1634, 18 September 2006; Conway v Attorney-General [2015] NZHC 1651.10 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3]; A S McLachlan Ltd v MEL Network Ltd, above n 7, at [15]–[16]; Highgate on Broadway Ltd v Devine [2012] NZHC[25] In the present case, however, the public interest is not exclusively represented by the views of the plaintiff. I have already acknowledged that there is a real sense in which the Golf Club is also an advocate for the interested public. Furthermore, the evidence indicates that, whatever arguments the plaintiff may have about the procedure which has been followed by the Council in getting to the stage of obtaining approval of the lease, there is a good argument that the principal issuesdriving the Society's opposition have been well ventilated in public forums, before the Local Board's hearing panel and in the resource consent process.The prospect of third party funding[26] Mr McBride recognised the reality that the Court would be required to adopt a balanced approach by suggesting that, although the Society had no ability to meet any costs award as presently resourced, a modest sum of $2,500-$3,000 couldarguably be found amongst the Society's members or its supporters. The prospect ofthird party funding from persons not having an obligation to contribute is often a factor justifying an order for security against an impecunious plaintiff, where the third party can be shown to have a pecuniary interest in the outcome.11 That is not the case here, but to decline to order the provision of security by a plaintiff who meets the qualifying criteria in s 5.45(1)(b) merely because they meet the criteria would be to negate the purpose of the rule altogether.[27] In the course of the hearing, counsel agreed that the second defendant'sentitlement to costs, assuming the claim failed completely, would likely be in the vicinity of $25,000-$30,000. Security of $3,000 would represent a very modest proportion of the costs which would be likely to be awarded according to scale calculated on a Category 2B basis.Outcome of the balancing test[28] Balancing all of the considerations, I do not think a contribution of only $3,000 adequately recognises the impact of this proceeding on the Golf Club in circumstances where it is the actions and decisions of the Council, and not the Club,2288, [2013] NZAR 1017 at [23].11 See, for example, Combined Industrial Services Ltd (in liq) v Dewar [2015] NZHC 1924 at [50].which are under attack. I do not apprehend there to be any argument that the Golf Club has done anything other than adopt a proper course, over a long period of time, in pursuit of the legitimate aim of developing its facilities. The Golf Club is entitled to know that, if the Society's claim fails, it will receive at least partial recovery of the expense of its successful defence to the proceeding.[29] It is reasonable to assume that any impecunious plaintiff seeking additional resources to meet the cost of litigation will have a better prospect of engendering support to comply with an order for security for costs than it would to meet a costs order in the event its claim fails. The Society has given no indication that it would expect to be able to find additional funds to comply with a costs order.[30] I consider that the least amount which the Society should reasonably be required to secure in advance of the hearing, to protect the Golf Club's legitimateright to seek a costs contribution in the event that the proceeding fails, is $12,500 or around half of the costs award which would be made.Decision[31] The timetable order made by Katz J on 6 August 2015 provided for filing and service of the plaintiff's evidence by 18 September 2015. I assume that the timetable has been complied with in that respect. The defendants' evidence is to be filed and served by today, with the plaintiff's reply evidence being due by23 October 2015.[32] I fix the overall amount of security for costs at $12,500, payment of which shall be made into Court or otherwise secured to the satisfaction of the Registrar by30 October 2015. In the event that the sum ordered is not paid or secured on or before the due date, the proceedings shall be stayed until payment is made.[33] In case it should be thought by members of the Society that a stay of the proceeding will have the effect of preventing the Council from pursuing its proposed course of considering whether to approve the 2013 lease, the Society should beaware that it would be open to the Court to strike out the proceeding all together rather than merely hold it in abeyance.12[34] Costs on the application for security for costs are reserved for further memoranda if required...Toogood J12 See the principles set out in Jagwar Holdings Ltd v Fullers Corp Ltd (1991) 4 PRNZ 577 (HC);J & T Christie Ltd (in rec) v Westpac Merchant Finance Ltd HC Dunedin CP128/91, 17 April 1997 that govern dismissal of a proceeding if the plaintiff fails to provide the security provided.