GOLLAN V THE TRUSTEES IN THE ESTATE OF LUDERS HC HAM CIV-2011-419-225

GOLLAN V THE TRUSTEES IN THE ESTATE OF LUDERS HC HAM CIV-2011-419-225 30 June 2011IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV-2011-419-225BETWEEN JAMES PATRICK GOLLANAppellantAND THE TRUSTEES IN THE ESTATE OFIRENE IVY MAUDE LUDERSRespondentsHearing: 15 June 2011(Heard at Hamilton)Appearances: Appellant in PersonD O'Neill for RespondentsJudgment: 30 June 2011 at 10:00 AMJUDGMENT OF TOOGOOD JThis judgment was delivered by me on 30 June 2011 at 10:00 amPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarJ Gollan, 30 Brookfield Street, Hamilton: belamyrox@xnet.co.nzJ Mills, Innes Dean, Palmerston North: info@innesdean.co.nzCopy:DM O‟Neill, Hamilton: David.Oneill@nzbarrister.com[1] The appellant appealed against an order of the Family Court, dated 9 February 2011, striking out an application made by him for orders under the Law Reform (Testamentary Promises) Act 1949 on the grounds that he had failed to pay $8,000 by way of security for costs, as ordered by the Court. After hearing from Mr Gollan and counsel for the respondents, I adjourned the appeal part-heard on terms.[2] In a Minute issued immediately following the hearing, I indicated that I was inclined to allow the appeal but would defer coming to a final view until after Mr Gollan had been given an opportunity to comply with a costs order made by Lang J on 6 May 2011, and any further order as to costs which I might make.[3] After receiving a memorandum from Mr O‟Neill, and Mr Gollan having had an opportunity (which he declined) to make submissions as to costs, I ruled that notwithstanding the outcome of the appeal, Mr Gollan should make a contribution tothe respondents‟ costs. I ordered him to pay the sum of $1,316.00 by way of costs, part of which would be satisfied by an amount which he had paid into Court pursuant to an order made by Allan J on 23 March 2011.[4] Mr O‟Neill has filed a memorandum confirming that Mr Gollan has now paid all of the costs ordered by this Court.[5] Although I had discussed my tentative views on the merits of Mr Gollan‟sappeal in my Minute of 15 June 2011, it is now appropriate to deliver a judgment which largely adopts those reasons.[6] It is neither necessary nor desirable to say much about the substantive proceedings brought by Mr Gollan in the Family Court. It is sufficient to record that, at the time of the order for security for costs which led to the striking out of the proceeding, Mr Gollan had a claim for further provision from the estate of his late mother. The respondents are the trustees of the estate.The Family Court's order for security for costs[7] After hearing argument from Mr O‟Neill and Mr Gollan on the respondents‟application for security for costs, the Family Court Judge delivered a reserved decision on 4 November 2010. She considered that there were clear indications that Mr Gollan‟s application for future provision from his mother‟s estate had no prospect of success, but was mindful that a security for costs order should not be imposed in a way that would deny an applicant an opportunity to be heard.[8] The Judge agreed with Mr O‟Neill‟s estimate of a two-day hearing and hisassessment of the respondents‟ costs at in excess of $12,000.00. She ordered payment of $8,000.00.[9] At the time of making the order, the Family Court Judge noted that should Mr Gollan fail to give security, the proceedings may be dismissed for want of prosecution. Regrettably, in hindsight, she did not then fix a date by which Mr Gollan should comply with the order.[10] On 24 November 2010, a court officer wrote to Mr Gollan indicating to him that it was proposed that the Registrar would review the file on 13 December 2010 to confirm that payment of the costs ordered by the Judge had been made. The letter warned Mr Gollan that, if the costs had not been received by that date, the matter was to be referred to the Judge for directions. Mr Gollan was asked to provide written submissions, by 4:00 pm on the day prior to the review date, of his proposals for how the case should be progressed.[11] Mr O‟Neill filed and served a memorandum on behalf of the respondent,dated 9 December 2010, informing the Court that, as at the date of the memorandum, security for costs had not been paid. He submitted that the Court had the power tomake an "unless" order whereby Mr Gollan, "having had plenty of time to raise the funds", could be allowed seven days (that is until 20 December 2010) to lodge the money with the Court, failing which the proceedings would be struck out. Mr O‟Neill indicated to the Court that he would wish to be heard on the question ofcosts, but said that that could wait until such time as Mr Gollan either met the order for security for costs or the proceedings were struck out.[12] Mr Gollan did not take any formal step in the proceeding after receiving Mr O‟Neill‟s memorandum, and he did not pay the security into the Court.[13] On 21 January 2011, the Family Court Judge made an order in the following terms:Unless Mr Gollan makes payment of the security for costs (as directed on 28/10/10) within 7 days (by 28/01/2011), then the file is to be referred to me to consider:a) Striking out the application; andb) Costs[14] It would seem the Judge was in error in referring to the order for security for costs as having been made on 28 October 2010, but nothing turns on that because theMinute containing the "unless" order made it clear that Mr Gollan had until 28 January 2011 to make the payment. Although the Judge indicated that she would"consider" striking out the application in the event of payment not being made, the likelihood that the substantive proceedings would be struck out in default of payment is implicit.[15] Mr Gollan did not make any payment.[16] In a Minute dated 9 February 2011, the Judge made the order striking out the substantive proceeding, in the following terms:Payment for security for costs has not as at 9 February 2011, been paid.Mr Gollan was directed to do so on 28 October 2010. On 21 January 2011 I gave him a further 7 days to comply.I am satisfied Mr Gollan has had a generous timeframe in which to pay the Court security for costs.Accordingly his application is now struck out.Any application for costs should be filed within 14 days.[17] The respondents applied promptly for costs in the proceedings to the date of the strike out on a 2B basis, but sought increased costs under r 4.6. A total of $10,575.00 was sought. Mr Gollan did not make any representations as to costs. In a considered judgment, the Judge weighed the relevant factors and awarded costs of $5,000 against Mr Gollan. Notably, she referred to the fact that, instead of promptly advising the Court that he was unable to pay the money into Court as security for costs, Mr Gollan "simply sat back and did nothing."The respondents' opposition[18] The respondents opposed Mr Gollan‟s appeal against the orders striking out the claim and for costs. Mr O‟Neill filed helpful written submissions. He suggestedthat the appellant‟s criticisms of the Family Court‟s decision dealt only with the merits of the order for security for costs and issues related to the merits of the substantive proceeding. He submitted that the issue for this Court on appeal is whether the Family Court Judge was correct in exercising her discretion to strike out the appellant‟s claim for failure to pay the security in a timely way, and pay itbetween receipt of the Minute of 21 January 2011 and 28 January 2011.[19] Counsel submitted, relying on Crow v Calvista Australia Pty Ltd,1 that the appeal must be dismissed unless the appellant could show that, in exercising her discretion, the Family Court Judge:(a) acted on a wrong principle;(b) failed to take into account a relevant matter;(c) took an irrelevant matter into account; or(d) plainly got it wrong.[20] As to the first of these matters, Mr O‟Neill submitted that the Judge wasentitled to regulate the Court‟s business. He noted that the appellant had not1 Crow v Calvista Australia Pty Ltd HC Auckland CIV-2010-404-2295, 8 September 2010, Potter J.complied with the order of the Court; and that the appellant had failed to heed three separate warnings that his claim was in danger of being struck out. He further submitted that the Judge had not failed to take a relevant matter into account, saying that everything that could be said for the appellant had been said, and that there is nothing now pointed to by the appellant which could possibly have affected the exercise of discretion by the Judge. Further, he said that there was nothing to indicate that the Judge took an irrelevant matter into account, the position being simply that Mr Gollan was warned that his proceedings were in danger of being struck out if he failed to abide the order of the Court and that was what happened. Although Mr Gollan may have requested an extension of the time to pay to 7 February 2011, the extension had not been granted and he had not paid the money into Court when it became available. Mr O‟Neill argued that the appellant is the author of his own misfortune.Discussion[21] Pursuant to an order of Allan J made on 23 March 2011, Mr Gollan has now paid $8,000 into the Family Court.[22] It is not difficult to have sympathy for the respondents‟ position. The conduct of the Family Court proceedings had been characterised, as the Family Court Judge noted in her judgment ordering payment of security for costs, by procedural irregularity and default on Mr Gollan‟s part. He had been granted indulgences by the Family Court. The estate is not large and a great deal of time and money had been wasted unnecessarily. But the matter is not as straightforward as the Family Court Judge believed it to be.[23] Mr Gollan said in his Notice of Appeal filed on 23 February 2011 that the„unless‟ order was not communicated to him until he received a copy of the order on26 January 2011, two days before the expiry of the seven-day time limit. He said that he contacted the Court and asked if the date for payment could be extended to 7 February 2011. He explained that that was the date on which the Crown had proposed to make a substantial payment to him, to settle disbursements on anunrelated matter (CIV-2009-419-000943), which amount would have been sufficient to make the payment.[24] The common bundle of documents contains a copy of an email from a Court officer to Mr Gollan dated 2 February 2011 saying "I can not ask as (sic) a Judge to change their directions." Mr O‟Neill properly acknowledges that it was open to infer from this that a request for extension of time had been made, but it is clear that Mr O‟Neill was not privy to any exchanges between Mr Gollan and the Court staff.[25] A search of the Family Court file has revealed a number of emails which passed between Mr Gollan and members of the Registry staff, only some of which had been copied to Mr O‟Neill. The file also contains no indication that the Family Court Judge was aware of these exchanges when she made the „unless‟ order on21 January 2011 and, more significantly, when she struck out the proceedings. The comment in the costs judgment that Mr Gollan "simply sat back and did nothing"confirms the Judge‟s lack of knowledge.Informal steps taken by Mr Gollan as to payment of security for costs[26] On the day after he received, by email, a copy of the Family Court‟s decisionas to payment of security for costs, Mr Gollan sent an email to a Deputy Registrar of the Court, asking by when did the costs have to be paid and what the appeal period was for that decision. There is no evidence that he received a response.[27] On 10 December 2010, the day after he received by email a copy of Mr O‟Neill‟s memorandum requesting the making of an „unless‟ order, Mr Gollan sent an email to Mr O‟Neill‟s assistant, who had forwarded the memorandum, as follows:There was no date specified as to the date that payment for costs were to be paid. Costs will be paid prior to 7 February 2011. This is in line with a large payment that the Crown has to make to the Plaintiff and is in plenty of time for the April set down.James GollanThat response was copied to the Family Court Registry. There is no indication on the Court file that Mr Gollan received any response from either a member of the Court staff or Mr O‟Neill‟s assistant, but none may have been called for.[28] The next recorded event, however, is that on 25 January 2011, the Court sent Mr O‟Neill and Mr Gollan by email the Judge‟s Minute of 21 January ostensibly giving Mr Gollan seven days to make the security payment. Mr Gollan responded immediately saying that the copy of the Minute had been received that morning giving him only three days to comply. He said he was going to appeal the decisionplus file an application to have the respondents‟ defence struck out. He said that the"application" on the 21st was ex parte and that he knew absolutely nothing about it.[29] That was not accurate because Mr Gollan had received Mr O‟Neill‟s memorandum which led to the making of the „unless‟ order. This position wasexplained to Mr Gollan in an email sent to him by a Court officer at 1:35 pm on 25 January 2011, referring him to Mr O‟Neill‟s submissions of 13 December 2010 and explaining that the Judge had made directions accordingly. Mr Gollan immediately replied in the following terms:Dear ...I had discussed this matter with you and had suggested the 7th February as the payment date. I am preparing an application to have Managhs action struck out as it lacks merit. managh had nothing to do with the deceased fot (sic) 7 years prior to her death and there is no conviction for a fraud in australia that her honour referred to when She decided to impose the costs. Managhs affidavits are false and deliberately misleading. Can you ask Her Honour to extend that date to 7th February. That was the date that I had organised the payment for (Emphasis added)[30] The exchange of emails on 25 January 2011 between Mr Gollan and the Court officer were not copied to Mr O‟Neill.[31] There does not appear to have been any acknowledgement of Mr Gollan‟srequest for an extension of time, until the email which appears in the common bundle dated 2 February 2011 in which the Court officer said simply that she could not ask a Judge to change their directions.[32] There is nothing on the Court file to indicate that the request for an extension had been put before the Judge and the file shows only that, on 7 February 2011, the Court officer forwarded the file to the Judge with the note:I refer you to your direction of 21 January 2011.No payment for security of Costs has been made to date.[33] It may well be that the file had been retained by the Court officer until 7 February 2011, notwithstanding the expiry of the time limit in the „unless‟ order,consistently with Mr Gollan‟s indication that he would make payment on that date. Nevertheless, I am satisfied that when the Judge issued her Minute on 9 February 2011, she was not aware of the material facts that Mr Gollan expected to have funds in hand to satisfy the order, and that he had sought an extension of time accordingly.[34] I have not overlooked the fact that, although he may have received the funds as anticipated, Mr Gollan did not then immediately pay the security. When I questioned him about this, he said that he fully acknowledged that he should have taken formal steps to seek an extension of time, and that he should have made an attempt to pay the money into Court when it arrived on 7 February. He said, however, that he was confused and uncertain as to what to do, given that his request for an extension had been dismissed by the Court officer in her email to him of 2 February 2011.[35] If the circumstances had been simply those which it appears the Family Court Judge believed them to be when she struck out the proceedings, I may have had little hesitation in accepting Mr O‟Neill‟s submission that this Court should not interfere with the exercise of the Judge‟s discretion. But the Judge was not fully informed as to the facts. It may have been that yet another indulgence would have been granted to Mr Gollan if his request on 25 January 2011, for an extension to 7 February 2011, had been referred to the Judge then.[36] While properly acknowledging that to be so, Mr O‟Neill suggested that ifMr Gollan had paid the money into Court on 7 February 2011 as he had said, the Judge would not have made the order two days later. That submission, however,overlooks the fact that Mr Gollan‟s request for an extension of time was made, albeitinformally, to the Court officer before the expiry of the 28 January 2011 deadline and had been rebuffed.Applicable principles for striking out proceedings on grounds of non-payment of security for costs[37] The order requiring Mr Gollan to pay $8,000 into Court by way of securityfor the respondents‟ costs was made by the Family Court Judge under r 4.20 of the District Courts Rules 2009, which applied to the proceedings by virtue of r 207B Family Courts Rules 2002. Mr Gollan did not appeal against that order.[38] A Family Court Judge is entitled to give any directions he or she thinks proper for regulating the Court‟s business.2 A Family Court Judge is also empowered to deal with matters not expressly provided for in the Family Court Rules (or District Courts Rules) in such manner as the Judge may decide in light of the purpose of the Rules.3 The Judge made the "unless" order requiring Mr Gollan to comply with the order for security on the basis that the claim might be struck out if the order was not complied with.[39] The usual sanction in respect of an order for payment of security is for the Court to make an order staying the proceedings pending payment, as is expressly provided for in r 4.20.4(b) District Courts Rules. Striking out a claim altogether on the grounds that there has been a failure to comply with an order for payment of security for costs is not a step which should be taken lightly.[40] Cases decided under the equivalent provisions of the High Court Rules,4indicate that the following principles should be applied where the High Court is considering dismissal of a proceeding, in the exercise of that Court‟s inherentjurisdiction, if a plaintiff fails to provide security for costs as ordered:2 Family Courts Rules 2002, r 16(1).3 Family Courts Rules 2002, r 15(1)(b).4 Jagwar Holdings Ltd v Fullers Corp Ltd (1991) 4 PRNZ 577; J & T Christie Ltd (In Rec) v WestpacMerchant Finance Ltd HC Dunedin CP128/91, 17 April 1997.(a) a reasonable opportunity to comply should be given, with the Court generally fixing the time for compliance;(b) an "unless" order may be made,5 and the Court may strike out the proceeding if the plaintiff has failed to provide security within the time allowed, or within a reasonable time;(c) if the defendant cannot establish the more general ground of failure to prosecute the proceeding (under r 15.2 HCR), a proceeding should only be dismissed if non-compliance is "intentional and contumelious"; and(d) generally, the proceeding will only be dismissed if its continuation would involve substantial prejudice to the defendant.Decision[41] It is highly probable, in my view, that, applying similar principles, the Family Court Judge would have allowed Mr Gollan a further indulgence to comply with the order for security, if she had been informed of his communications with the Court as to his ability to pay and his request for a relatively short extension of time.[42] I am satisfied that it is open to me to conclude that the Judge was unaware of material facts at the time she exercised her discretion to strike out the proceeding. I am in a position, therefore, to come to my own view as to whether the Family Court proceeding should be permitted to continue.[43] In consider that there is a real possibility of a miscarriage of justice if theappeal is not allowed. Since Mr Gollan has now paid the ordered amount of securityinto the Family Court, and has paid the costs on the appeal, the respondents are in noworse position than that in which they would have been if Mr Gollan had paid thesecurity sum into Court in February. Reinstating the Family Court proceeding would5 Lloyd v National Mutual Life Association of Australasia Ltd HC Auckland CIV-2002-404-1705,27 February 2004.remove the risk of injustice to Mr Gollan while not creating another injustice to the respondents.[44] The appeal is allowed, with the consequence that the orders of the Family Court striking out Mr Gollan‟s proceeding and ordering him to pay costs are setaside.[45] Mr O‟Neill indicated that, because of the way matters developed in the Family Court after the making of the order for payment of security, the respondents made no application to that Court for costs on the application for security. This Court has no jurisdiction to deal with that matter. It may be raised with the Family Court in the course of the reinstated proceedings.[46] I do not think it is appropriate to record in this judgment the observations I made at [45] of my Minute of 15 June 2011 about Mr Gollan‟s future conduct in the Family Court proceeding. They are not material to the disposition of the appeal. Nevertheless, they may be of significance to the Family Court and the parties in the future. I direct that, if it has not already been done, a copy of my Minute of 15 June 2011 should be sent to the Family Court with a copy of this judgment.[47] I make no further order for costs on the appeal.................................................. Toogood J