SIEMER AND ORS V FARDELL, AS EXECUTRIX OF THE ESTATE OF JOHN ROBERT FORTESQUE FARDELL HC AK CIV-2003-404-5782

SIEMER AND ORS V FARDELL, AS EXECUTRIX OF THE ESTATE OF JOHN ROBERT FORTESQUE FARDELL HC AK CIV-2003-404-5782 21 June 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2003-404-5782BETWEEN VINCENT ROSS SIEMER JANE CHAPMAN SIEMER First Plaintiffs AND PARAGON SERVICES LIMITED (IN LIQUIDATION AND RECEIVERSHIP) Second Plaintiff AND KATE FARDELL, AS EXECUTRIX OF THE ESTATE OF JOHN ROBERT FORTESQUE FARDELL Defendant Hearing: 23 March 2010 Counsel: GJ Thwaite for First Plaintiff (Jane Chapman Siemer) No appearance by Vincent Ross Siemer No appearance for Second Plaintiff MC Harris for Defendant BJ Upton for Official Asignee (given leave to withdraw) Judgment: 21 June 2010 at 4.00 p.m.JUDGMENT OF RODNEY HANSEN JThis judgment was delivered by me on 21 June 2010 at 4.00pm, pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar Date: .Solicitors: Gilbert Walker, P O Box 1595, Shortland Street, Auckland for Defendant Simpson Grierson, Private Bag 92518, Auckland for Official Assignee Copy to: Mr Vince Siemer, 27 Clansman Terrace, Gulf Harbour (Fax: 09-428-2521) Mr GJ Thwaite, P O Box 6239, Wellesley Street, Auckland 1141 (for Jane Chapman Siemer) (Fax: 379-8449)Introduction[1] In this proceeding the first plaintiffs (Mr and Mrs Siemer) and a company in which they had an interest (Paragon), sued the late Robert Fardell QC for alleged negligent advice and breach of fiduciary duty in relation to a dispute with the receiver of Paragon. Following Mr Fardell's death, the executrix of his estate has been substituted as defendant. [2] On 2 May 2008, Mr and Mrs Siemer were ordered by Abbott AJ to provide security for costs in the sum of $100,000 by 30 June 2008. Their application for review of that decision was dismissed by John Hansen J on 2 October 2008. An application for special leave to the Court of Appeal was filed but has not been pursued. Mr Siemer has been adjudicated bankrupt. Security has not been provided. [3] The defendant applies for orders:• Striking out Mr Siemer's claim;• Directing Mrs Siemer's claim to be struck out if she does not provide security within 30 days; and• Striking out Paragon's claim.Mr Siemer's claim[4] Mr Siemer was adjudicated bankrupt on 6 November 2008. His cause of action vested in the Official Assignee pursuant to s 42 of the Insolvency Act 1967.1Mr Siemer's claims in this proceeding are not among the rights of actions, generally1 Although the Insolvency Act 2006 came into force on 3 December 2007, the 1967 Act continues to apply because a "past event" in terms of s 444 of the 2006 Act, namely the issue of a bankruptcy notice, had occurred before the commencement of the 2006 Act.personal torts, which do not pass to the Official Assignee. 2 It follows that only the Official Assignee may continue Mr Siemer's claim. [5] By memorandum dated 22 October 2009, the Official Assignee notified the Court that he would take no further steps in the proceedings. He has also determined not to assign Mr Siemer any right to continue the proceeding in his name. Mr Siemer was advised of these decisions by letter dated 25 August 2009. [6] Mr Siemer had the right to apply to the Court to review the decisions under s 86 of the Insolvency Act 1967. He had 21 days from the date of the decision, or such further period as the Court allows, to make the application. [7] By memorandum dated 28 February 2010, Mr Siemer advised the Court that he had been in communication with the Official Assignee regarding "disclaiming of the right to allow him to proceed personally". He said the Official Assignee and their lawyers had not responded other than to state they were considering the request. Mr Siemer continued:The First-named first plaintiff wishes to inform the Court that he is reserving all rights in these proceedings, including a possible challenge to review of any subsequent decision by the Official Assignee and their lawyers which seek to limit the first-named first plaintiff's right in this regard.[8] The Official Assignee advised through counsel that he cannot disclaim the proceedings to Mr Siemer and that this had been communicated to him. He disclosed that on 26 January 2010, Mr Siemer sought reasons for the decisions not to proceed and assign made in August 2009. Reasons were provided in a lengthy letter dated 4 March 2010. [9] Shortly before the hearing the Official Assignee's office was faxed a statement of claim and affidavit by Mr Siemer. It was not clear whether the documents had been filed with the Court. The proceeding number was incomplete. The statement of claim appeared to be incomplete; there was no prayer for relief. And there was no notice of proceeding.2 Paul Heath and Michael Whale (eds) Heath and Whale on Insolvency(online looseleaf ed, LexisNexis) at [4.13], [4.19] and [4.36].[10] After the hearing, Mr Upton for the Official Assignee, filed a memorandum advising that a complete set of documents had been served on the Official Assignee. They seek judicial review of the Official Assignee's decision to decline to assign to Mr Siemer the right to continue the proceeding in his own name. Timetable directions have been made and a two day fixture allocated for 2-3 September 2010. [11] Had matters remained as they were at the time of the hearing, the defendant's case for striking out Mr Siemer's claim would have been compelling. Now that there is a prospect that Mr Siemer may win the right to continue the proceeding, it would be premature to take that step. The appropriate course is to adjourn the defendant's application to strike out his claim until after the judicial review proceeding has been determined.Mrs Siemer's position[12] In seeking an unless order against Mrs Siemer, the defendant relies simply on her failure to comply with an order made almost two years ago and the absence of any explanation for her failure to comply with the order. [13] Mrs Siemer's opposition is on four grounds: a) An order would contravene rights enshrined in international instruments which bind New Zealand; b) An order would involve a breach of the New Zealand Bill of Rights Act 1990 (NZBORA); c) Mrs Siemer has an arguable claim; and d) Mrs Siemer is in the process of applying for legal aid which would affect her liability to pay security. [14] It is convenient to address the first and second grounds together. Both were put on alternative bases – what Mr Thwaite called the high road and the low road.The high road is that r 60 of the High Court Rules (under which the order for security for costs was made) is rendered unlawful by its violation of international and/or domestic human rights obligations. The low road is that, even if the power to order security for costs is legitimate, the order itself is contrary to international and domestic law. Mr Thwaite also acknowledged a third possibility: that the unless order itself would be in breach of international and/or domestic law. [15] Mr Thwaite relied on Articles 10 and 2 of the Universal Declaration of Human Rights. Article 10 relevantly states, "Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations...". Article 2 provides that no distinction in entitlement to such right and freedom or any other right or freedom can be made on the ground of "race...property...or other status". [16] Mr Thwaite also referred to Article 26 of the International Covenant on Civil and Political Rights which relevantly provides:All persons are equal before the law and are entitled without any discrimination to the equal protection of the law ... the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.Under Article 2(1), New Zealand as a State Party, undertook to "...respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights recognised in the Covenant". New Zealand's commitment to the Covenant is affirmed in the preamble to the NZBORA. Although international instruments are not directly incorporated into domestic law, it is assumed, as a matter of statutory interpretation, that insofar as their wording allows, statutes should be read in a way which is consistent with New Zealand's international law obligations. 3[17] The order of Abbott AJ is said to be an exercise of judicial power in terms of s 3 of NZBORA to which s 27(1) applies. It provides:3 Ye v Minister of Immigration [2009] 2 NZLR 596 (CA) at [84]; rev'd on different point [2010] 1 NZLR 104.Right to justiceEvery person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person's rights, obligations, or interests protected or recognised by law.[18] Mr Thwaite submitted that the right to observance of the principles of natural justice includes the right to a hearing. He said the costs order actually or potentially limits that right in that: a) Rule 60 is inconsistent with s 27 and its amendment was ultra viresthe Rules Committee under s 51B of the Judicature Act 1908. b) Neither the rule nor the order for security for costs is a reasonable limit on the right to justice as provided for by s 5 of NZBORA. c) Even if the order under r 60 itself is "inert", the order now sought would breach Mrs Siemer's fundamental rights. [19] I have summarised the grounds on which Mr Thwaite built his argument that the order and any order to enforce it would deny Mrs Siemer her fundamental right to justice. It is unnecessary for me to elaborate or to consider the authorities, many of great antiquity and distinction, on which Mr Thwaite relied. 4 There are insuperable obstacles in the way of an attack on the legitimacy of the rule itself and all arguments ultimately founder when the undisputed right to justice is applied to the facts. (I leave to one side the question quite properly raised by Mr Harris as to whether these matters should be considered at all at this stage.) [20] In Reefdale Investments Limited v Commissioner of Inland Revenue,MacKenzie J explained why the attack on r 60 itself cannot succeed. 5 He was also confronted with an argument that r 60 was unconstitutional and invalid and a breach of s 27 of NZBORA. MacKenzie J succinctly explained why the legitimacy of the rule is unassailable:4 They included extracts from the Old Testament, The Annals of Tacitus, The Institutes of Justinian and Statutes of Westminster the First (1275) and the Magna Carta5 Reefdale Investments Limited v Commissioner of Inland Revenue (2004) 21 NZTC 18,683.[4] I can deal with those submissions quite shortly. As to the validity of Rule 60, the High Court Rules are given statutory force by s 51 of the Judicature Act 1908 (as substituted by the Judicature Amendment Act (No 2) 1985). Section 51(1) provides that the practice and procedure of the Court in all civil proceedings shall be regulated by the High Court Rules. The High Court Rules replaced their predecessor, the Code of Civil Procedure, as Schedule 2 to the Judicature Act. That Act also provides for the procedure by which the High Court Rules can be amended. The Rules Committee is established, and power to make rules is conferred on the Governor-General in Council with the concurrence of the Chief Justice and two or more members of the Rules Committee. The Rules may be printed and published as if they were Regulations. [5] That method of making and amending the Rules creates what is something of a hybrid between primary and secondary legislation. The Rules as originally enacted in the Schedule to the Judicature Amendment Act 1985 have the force of statute. Amendments to the Rules are a special form of delegated legislation and are subject to compliance with the procedural requirements of the legislation, and to the usual requirement, for subordinate legislation, that the content of the Rules must be consistent with the statutory authority. Rule 60(1), which was substituted for the original by the High Court Amendment Rules 1991, is in the second category. [6] Mr Cullen submits that such an important change as the original Rule 60(1), which is a reversal of the common law position that an impecunious plaintiff should not be deprived of access to the courts by being required to give security, should not have been made in this manner. I am of the clear view that that submission cannot affect the validity of the High Court Rules in general, or of rule 60 in particular. This Court cannot examine the processes which Parliament has seen fit to adopt in enacting legislation. That is a matter within the province of Parliament. The Rules have been given, by Parliament, the effect of legislation, and this Court must apply the Rules on that basis. Further, this method of enacting legislation has been the traditional method adopted for the Rules governing the procedures in this Court, and a similar mechanism applied to give force to the former Code of Civil Procedure. [7] Mr Cullen submits that Rule 60 should be interpreted and applied so as to comply with s 27 of the New Zealand Bill of Rights Act 1990, and that this requires that a plaintiff not be deprived of access to the Court by an order for costs which the plaintiff cannot meet. It is well established that that is a consideration which the Court must take into account in deciding whether or not to order security. I discuss this aspect later. It is not a basis for holding that Rule 60 is invalid.[21] A Court considering an application for security for costs will always be mindful of the risk of denying a deserving plaintiff the ability to pursue his or her claim. That concern was expressly adverted to by Abbott AJ. After carefully reviewing the claim against Mr Fardell, he concluded at [48] that "the Siemers' case on both causes of action is not strong". In considering other factors which bear onthe exercise of his discretion, he first examined whether an order for security could prevent the Siemers from pursing their claim. He said:[50] An order for substantial security may have the effect of preventing a plaintiff from pursuing a claim. It will be made therefore only after careful consideration and in a case where a claim has little chance of success. It must also be balanced against the interest of a defendant who is entitled to protection from unjustified litigation, particularly litigation that is overly complicated or unnecessarily protracted: A S McLauglin Ltd v MEL Network Ltd at paras [15] and [16].He continued:[51] There is no evidence from the Siemers that the effect of an order that they provide substantial security would be that they could not continue the proceeding. To the contrary, the comments by Mr Siemer in his submission to the Supreme Court suggest that he has the assets, but prefers to put them out of reach of the defendant. I do not consider this to be a factor against making an order.[22] The observations of Abbott AJ highlight a pervading fallacy in the arguments mounted on behalf of Mrs Siemer by Mr Thwaite. That is the assumption that the order for security against Mr and Mrs Siemer, and any attempt to enforce it, will deny them their day in Court. That was not the position Mr and Mrs Siemer presented to Abbott AJ and the evidence before me clearly indicates otherwise. [23] In an affidavit sworn in support of the application to review Abbott AJ's decision, Mrs Siemer deposed that she and her husband had "significant assets" in the United States but they "are almost entirely tied up in property and long-term securities". In his judgment dismissing the application to review, John Hansen J noted at [7] that in written submissions to the Supreme Court Mr Siemer had stated that he had moved assets with a view to re-establishing himself in the United States. [24] Mr and Mrs Siemer appear to have arranged their financial affairs so as to avoid exposure to claims in New Zealand. They are not unable to meet the order for security; they have chosen not to. [25] The interests of justice run both ways. The defendant's rights must also be considered. They include not only the entitlement to a measure of protection againstthe costs incurred in defending an unsuccessful claim but the right to have the claim determined as expeditiously and as inexpensively as practicable. [26] These rights have been seriously compromised by the way the claim has proceeded to date. There are no less than six costs orders made against Mr and Mrs Siemer in this proceeding which remain outstanding. They include costs awarded against them on the application for security for costs and the unsuccessful application for review and awards by both the Court of Appeal and the Supreme Court. The defendant has every right to be concerned about her ability to recover costs if successful. [27] The proceeding was filed in 2003. It has been dogged by delays. Abbott AJ said at [52] that Mr and Mrs Siemer have exercised their right to represent themselves, but had done so in a way which has delayed the proceeding and increased its cost. He noted that three trial dates have had to be abandoned. I note that no steps have been taken in the proceeding since the application for special leave to appeal was filed on 14 November 2008. [28] In his written submissions, Mr Thwaite indicates that Mrs Siemer has applied or is applying for legal aid. There is no evidence that the application has been lodged and past experience would indicate that little reliance can be placed on statements of intent. On 8 May 2009, a solicitor representing Mrs Siemer advised the defendant's solicitors that an application for legal aid had been prepared and would be lodged "shortly". The defendant's solicitors have enquired periodically of the Legal Services Agency as to whether an application for legal aid had been received on behalf of either Mr Siemer or Mrs Siemer in respect of this proceeding. On 6 November 2009, the Legal Services Agency advised that no application had been received. [29] I am satisfied that an "unless" order is called for. Mrs Siemer has had eighteen months to comply with the order made by Abbott AJ. There is no reasonable excuse for her failure to do so. It is totally unjust for the defendant to be required to continue to defend the claim without the security ordered.Paragon Services Limited[30] Paragon was struck off the Companies Register on 22 June 2009 after its liquidation and receivership were terminated. It is unable to maintain a claim.Result[31] The defendant's application for Mr Siemer's claim to be struck out is adjourned for mention in the Duty Judge List on 16 September 2010. [32] The claim by Mrs Siemer is to be struck out and the defendant has leave to seal orders to that effect without further recourse to the Court unless, within 30 days, she provides security for costs in the sum of $100,000, as ordered by this Court on 2 May 2008. [33] The claim by Paragon Services Limited (In Liquidation and In Receivership) is struck out. [34] Mrs Siemer must pay the defendant's costs of and incidental to the application on a category 2 band B basis.