WALKER v FORBES [2017] NZHC 1212

WALKER v FORBES [2017] NZHC 1212

Because the plaintiffs cannot meet adverse costs without third-party funding and the litigation funder (SPF/LPF) stands to commercially profit, the court exercised its discretion to require substantial security for costs. The merits were treated as largely neutral but did not outweigh the policy that a commercial funder should bear a significant share of the defendants' cost risk; offers of a parent company guarantee were insufficient. The court ordered global security of NZD 2,630,000 for defendants other than Henderson, NZD 150,000 for Henderson, and NZD 450,000 for expert costs (part of global figure), with staged deadlines for provision.

Citation
[2017] NZHC 1212
Parties
First Plaintiff (liquidator): Robert Bruce Walker; First Plaintiff (liquidator): John Marshall Scutter; Second Plaintiff: Property Ventures Limited (in liquidation); Third Plaintiff: Five Mile Holdings Limited (in receivership and in liquidation); Fourth Plaintiff: Cashel Ventures Limited; Fifth Plaintiff: Tay Ventures Limited (in receivership and in liquidation); Sixth Plaintiff: Livingspace Properties Limited (in receivership and in liquidation); Seventh Plaintiff: Beechnest Ventures Limited (in liquidation); Eighth Plaintiff: Tuam Ventures Limited (in receivership and in liquidation); Ninth Plaintiff: Castle Street Ventures Limited (in receivership and in liquidation); Tenth Plaintiff: Lichfield Ventures Limited (in receivership and in liquidation); Eleventh Plaintiff: 92 Lichfield Limited (in receivership and in liquidation); Twelfth Plaintiff: St Asaph Ventures Limited (in liquidation); Thirteenth Plaintiff: Montecristo Construction Company Limited (in liquidation); First Defendant: Austin John Forbes; Second Defendant: Alister Spedding Johnston; Third Defendant: Gordon Lewis Hansen; Fourth Defendant (bankrupt): David Ian Henderson; Fifth Defendant: Adolf de Roos; Sixth Defendant: Daniel James Godden; Seventh Defendant: PricewaterhouseCoopers (PwC) (sued as a firm); Third Party: VERO Liability Insurance
Court
High Court
Jurisdiction
New Zealand
Judgment Date
6 June 2017
Procedural Posture
Companies Act 1993 Liquidation and Director/auditor Claims; Interlocutory Application for Security for Costs / Interlocutory Application for Security for Costs Prior to 12 Week Trial (application Decided)
Outcome
Application for security for costs granted; substantial global security ordered from plaintiffs (litigation funder exposure rejected as sole solution). No stay ordered at this stage.
Legal Topics
Security for Costs, Litigation Funding, Directors' Duties, Auditor Negligence, Trading While Insolvent, Banning Order S383
Company Law Insolvency Civil Procedure Professional Negligence Commercial Litigation Security for Costs Litigation Funding Directors' Duties +3 more

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Parties

Robert Bruce Walker

First Plaintiff (liquidator)

John Marshall Scutter

First Plaintiff (liquidator)

Property Ventures Limited (in liquidation)

Second Plaintiff

Five Mile Holdings Limited (in receivership and in liquidation)

Third Plaintiff

Cashel Ventures Limited

Fourth Plaintiff

Tay Ventures Limited (in receivership and in liquidation)

Fifth Plaintiff

Livingspace Properties Limited (in receivership and in liquidation)

Sixth Plaintiff

Beechnest Ventures Limited (in liquidation)

Seventh Plaintiff

Tuam Ventures Limited (in receivership and in liquidation)

Eighth Plaintiff

Castle Street Ventures Limited (in receivership and in liquidation)

Ninth Plaintiff

Lichfield Ventures Limited (in receivership and in liquidation)

Tenth Plaintiff

92 Lichfield Limited (in receivership and in liquidation)

Eleventh Plaintiff

St Asaph Ventures Limited (in liquidation)

Twelfth Plaintiff

Montecristo Construction Company Limited (in liquidation)

Thirteenth Plaintiff

Austin John Forbes

First Defendant

Alister Spedding Johnston

Second Defendant

Gordon Lewis Hansen

Third Defendant

David Ian Henderson

Fourth Defendant (bankrupt)

Adolf de Roos

Fifth Defendant

Daniel James Godden

Sixth Defendant

PricewaterhouseCoopers (PwC) (sued as a firm)

Seventh Defendant

VERO Liability Insurance

Third Party

Procedural Posture

Companies Act 1993 Liquidation and Director/auditor Claims; Interlocutory Application for Security for Costs / Interlocutory Application for Security for Costs Prior to 12 Week Trial (application Decided)

Legal Issues

  1. 1 Whether there is reason to believe plaintiffs will be unable to pay defendants' costs if unsuccessful
  2. 2 How the court should exercise its discretion under High Court Rules r 5.45
  3. 3 What quantum and form of security is appropriate and timing for provision

Ratio Decidendi

Because the plaintiffs cannot meet adverse costs without third-party funding and the litigation funder (SPF/LPF) stands to commercially profit, the court exercised its discretion to require substantial security for costs. The merits were treated as largely neutral but did not outweigh the policy that a commercial funder should bear a significant share of the defendants' cost risk; offers of a parent company guarantee were insufficient. The court ordered global security of NZD 2,630,000 for defendants other than Henderson, NZD 150,000 for Henderson, and NZD 450,000 for expert costs (part of global figure), with staged deadlines for provision.

Court Disposition

Application for security for costs granted; substantial global security ordered from plaintiffs (litigation funder exposure rejected as sole solution). No stay ordered at this stage.

Orders

  • Plaintiffs to provide security for costs and expert witness expenses of defendants other than Mr Henderson in the global sum of 2630000 NZD.
  • Plaintiffs to provide security for Mr Henderson's costs in the sum of 150000 NZD.