CLODE v OLIPHANT [2019] NZHC 297

CLODE v OLIPHANT [2019] NZHC 297 [10 May 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-0647[2019] NZHC 297BETWEEN BRENT DOUGLAS CLODEPlaintiff / Counterclaim DefendantAND DAVID JAMES OLIPHANTFirst Defendant / First Counterclaim PlaintiffAUBURN DEVELOPMENT LIMITEDSecond Defendant / Second CounterclaimPlaintiffRAILSIDE INVESTMENT LIMITEDThird Defendant / Third CounterclaimPlaintiffHearing: 7 May 2019Appearances: Mr Clode in personP J Bedogni for the DefendantsJudgment: 10 May 2019JUDGMENT OF ASSOCIATE JUDGE SMITHThis judgment was delivered by me on 10 May 2019 at 10.30am,pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors / Counsel:Martelli McKegg, AucklandCopy to:B D Clode[1] The defendants apply for an order for security for their costs.Background — Mr Clode's claims[2] Mr Clode is a property developer. He says that, under an agreement he madewith the first defendant (Mr Oliphant), he was entitled to participate in all aspects oftwo residential property developments in Takapuna. The first was the SargesonApartments project in Anzac Street, Takapuna (the Development) owned by thesecond defendant (Auburn), and the second was a planned development at a site ownedby the third defendant (Railside) in Lake Road, Takapuna.[3] In his amended statement of claim dated 20 January 2019, Mr Clode allegesthat he was an unregistered 50 per cent shareholder in Auburn and Railside. The firstdefendant (Mr Oliphant) is the sole director of Auburn and Railside.[4] Mr Clode says that it was he who devised the Development and the proposedRailside development, and he invited Mr Oliphant to be his 50 per cent businesspartner, responsible for raising unfinanced capital. He says that, up until 22 December2017, he had total control of the two developments. After that, he says thatMr Oliphant curtailed his involvement, including his remuneration of $5,000 perweek.[5] Mr Clode responded by filing a proceeding against Auburn and Railside (theshareholder proceeding), seeking to have the share registers for both companiescorrected and to have himself appointed as a director (or alternate director) of Auburnand Railside. The shareholder proceeding was settled by written agreement dated14 March 2018 (the March Agreement).[6] Under the March Agreement, Mr Oliphant remains the sole director andshareholder of Auburn and Railside. Mr Clode discontinued the shareholderproceeding. Clause 3 of the March Agreement provided that Mr Clode would beentitled to 50 per cent of the net profit from the Development once completed, andunder cl 4 Mr Oliphant granted Mr Clode the option to convert that 50 per cent profitshare into a 50 per cent shareholding and directorship of Auburn and Railside (butonly after a lending facility had been fully repaid and the relevant securities released).[7] Clause 8 of the March Agreement provided:[Mr Oliphant] and [Mr Clode] will meet on a weekly basis on an equal footingto review and direct all aspects of the Development, including sales ofapartments, marketing strategies, construction issues and funding matters.Any other issues which arise between meetings and require urgent action shallbe dealt with by telephone or email. The parties shall record their decisionsand discussions in relation to the Development. The directions agreed by[Mr Oliphant] and [Mr Clode] shall be implemented by [Mr Oliphant] and theDevelopment Manager. [Mr Clode] shall not have any direct contact with anyother consultants, financiers, real estate agents, or contractors to the Project.[8] Clause 10 of the March Agreement provided that Mr Clode and Mr Oliphantwould at all times act in good faith towards each other. If they were unable to agreeon a significant issue relating to the Development within a reasonable period, theywould refer the matter to Mr Simon Jones of Foley Hughes Lawyers "fordetermination or guidance".[9] Mr Clode alleges that Mr Oliphant has since adopted a stance of stonewallinghim with respect to the Development, and withholding information from him.Mr Oliphant and Mr Alastair Taylor (the head consultant on the development project)are alleged to have continued to direct all aspects of the Development withoutreference to or agreement with Mr Clode.[10] On 15 March 2018 Mr Clode requested certain information from Mr Oliphant(described by Mr Clode as "essential"), to allow him to appraise the status of theDevelopment and fully participate in directing all aspects of it. There were twoseparate information requests. He says that he received only a partial reply to the firstof his requests, and did not receive a reply to his second request.[11] A meeting was arranged for 27 March 2018, and Mr Clode says thatMr Oliphant agreed at the meeting that he would carry out three urgent tasks:(i) provide an update of the latest sales in the Sargeson Apartments;(ii) issue a project directive to the contract engineer requesting an updatedprogramme from the construction company and a methodology forrecovering lost time; and(iii) provide an update of what issues were outstanding for the full buildingconsent.[12] Mr Clode says that Mr Oliphant did not carry out those tasks, or provide anyresponse or information to Mr Clode.[13] Mr Clode says that Mr Oliphant has acted in breach of the March Agreementin the respects referred to above. On 3 April 2018 Mr Clode formally required thatAuburn not alter its position, apply any funds, create liabilities, or make any payments,without his consent. He also required full disclosure of all Auburn and Railsidedocuments and affairs be delivered to him by 5 April 2018. If those demands werenot met, he would apply for an injunction.[14] Mr Clode says that he received no reply to his 3 April 2018 email, and that theDevelopment continued to progress without his input or agreement. He says that hehas been given very little information about the financial affairs of Auburn, Railside,or the Development, and has not been allowed any input into sales of apartments,marketing strategies, construction issues, or funding matters. He contends that neitherMr Oliphant nor Mr Taylor has any experience in a development of the scale of theSargeson Apartments, and that their "unilateral decision-making" is damaging theproject's viability.[15] Mr Clode pleads that Mr Oliphant has breached the March Agreement, and thatthe breaches have caused him significant damages in the loss of his share of the netproceeds from the Development. He claims damages in a sum to be quantified priorto trial, together with remuneration of $5,000 per week during the Development term.He also seeks interest and costs.The defendants' statement of defence and counterclaim[16] In their defence, the defendants deny that Mr Clode had total control of theDevelopment and the proposed Lake Road development up until 22 December 2017.They say that Auburn engaged a company called Synergy Management Ltd (Synergy)to provide development services for the development, and Mr Clode was the soledirector of Synergy. They allege that Synergy was unable to perform its role, and itprovided incorrect advice to Auburn and Mr Oliphant. The Synergy contract wasterminated, and Synergy has since been removed from the Companies Register.[17] The defendants admit the March Agreement, and they admit that Mr Clodediscontinued the shareholder proceeding as a result of the March Agreement.[18] The defendants deny that there is any contractual obligation betweenMr Oliphant and Mr Clode for the payment of the remuneration sought by Mr Clode.They also deny that the March Agreement required that Mr Clode be treated "as adirector", or that it required that Mr Oliphant reach agreement with Mr Clode.[19] The defendants admit the two information requests pleaded by Mr Clode, butthey deny that they failed to respond. In respect of the first request, they say thatMr Clode has either received the information sought or that there was nothingavailable in written form to give him. One of the items was said to be still beingreviewed by the engineer, and it has since been issued. In respect of another requesteditem, the defendants say that "no directive was issued in relation to [the item inquestion]". They say that Mr Clode has been provided with the information sought inhis second request.[20] In respect of Mr Clode's allegations that Mr Oliphant failed to complete thethree "urgent tasks" agreed at the meeting on 27 March 2018, they say that the taskswere in fact performed.[21] The defendants deny that Mr Clode had any right to direct the affairs of Auburnand Railside under the March Agreement, and they generally deny Mr Clode's otherallegations. They plead affirmatively that they have taken no steps to erode the parties'profit share from the Development.[22] The defendants also pleaded two counterclaims. First, Auburn pleads thatunder an oral agreement between Auburn and Mr Clode, it advanced Mr Clode$427,804.25 between 17 September 2015 and 22 December 2017. It says that nopayments have been received by it, and that the $427,804.25 is due and owing byMr Clode to Auburn.[23] The defendants also pleaded a second counterclaim, regarding certain fencepanels allegedly converted by Mr Clode. However, this counterclaim is no longer inissue: on 28 February 2019 Associate Judge Bell directed that it be heard in theDisputes Tribunal.No defence to Auburn's counterclaim[24] Mr Clode has not filed a statement of defence to Auburn's counterclaim for the$427,804.25 plus interest and costs.Mr Clode's application for an injunction[25] On 11 April 2018 Mr Clode applied for an interlocutory injunction restrainingthe defendants from taking further steps in the Development. The application wassubsequently amended to seek a mandatory interim order that the defendants performtheir obligations under the March Agreement.[26] The application for the mandatory interim order was refused by Palmer J in ajudgment given on 15 June 2018.1[27] Palmer J referred to Mr Clode's allegations as referred to above, and then notedthat Mr Oliphant disputed aspects of Mr Clode's account. His Honour recordedMr Oliphant's evidence that lenders to the developments had expressly required thatMr Clode not have any equitable interest in the project, due to what was referred to ashis questionable reputation in the property development industry. For that reason,Mr Clode never held full control of the Lake Road development.[28] While the interim injunction application was unsuccessful, Palmer Jconsidered there was a serious question to be tried in the substantive proceeding. HisHonour considered that there was force in Mr Clode's submission that cl 8 of theMarch Agreement required him to have input into the direction of the project, and tohave some level of information to enable that (although he was not to have directcontact with others involved in the development). His Honour noted that Mr Oliphant1 Clode v Oliphant [2018] NZHC 1442.had provided evidence that he gave Mr Clode at least some of the informationrequested, but not all of it.[29] Palmer J considered that it was likely that Mr Clode had "been frozen out of asignificant decision-making role", and that there might be a live issue over the legalinterpretation of Mr Clode's rights under the March Agreement.[30] Palmer J found against Mr Clode on balance of convenience grounds,primarily on the basis that there would be a serious risk to the Development if theorder sought by Mr Clode were granted. The evidence was that Mr Clode had becomeseriously unpopular in the property development industry, and Palmer J consideredthat there would be a serious risk of the lender putting the Development intoreceivership if the interim order sought were made. In the Judge's view, the damagelikely to be caused to Auburn and Railside in that event would outweigh any damageMr Clode might suffer if his remedies for breach were confined to his claim fordamages.[31] Palmer J noted that, while it might be difficult for Mr Clode to demonstratewhat difference his involvement in the project would make, and that difficulty raiseda question about the adequacy of damages as a remedy, it also raised a question aboutthe likelihood of Mr Clode's claims ultimately succeeding.2[32] Palmer J also expressed a lack of confidence in Mr Clode's undertaking as todamages. His Honour said:3If the Development fails, a concern which [Mr Clode] and Mr Oliphant share,[Mr Clode's] profit from it may not be a source of funds. [Mr Clode] does notpersonally hold a bank account and [Synergy] is no more. Worryingly,[Mr Clode] did not provide evidence in reply to Mr Oliphant's evidence onthese points.The defendants' application for security for costs and Mr Clode's opposition[33] The defendants apply under r 5.45 of the High Court Rules for security for theircosts in such sum and in such manner as the Court considers just. They ask for an2 At [29].3 At [30].order that Mr Clode pay the security ordered into Court, and that all further steps inthe proceeding be stayed until he has done so.[34] Mr Clode filed a notice of opposition and a supporting affidavit on 30 April2019.[35] Mr Clode opposes the application on a number of grounds. First, he says thathe is likely to be successful in proving that the defendants breached the MarchAgreement. He refers to the following passage from the judgment of Palmer J on hisapplication for mandatory interim orders:4[26] I consider there is a serious question to be tried here in the substantiveproceeding, if Mr Clode wishes to pursue it and it seems likely thatMr Clode has been frozen out of a significant decision-making role. So theremay be a live issue of the legal interpretation of Mr Clode's rights under the[March Agreement].[36] Mr Clode then says that if he is unsuccessful in this proceeding he will be ableto pay the defendants' costs. He has done that previously when costs awards weremade against him in June and July of 2018 in the total sum of $17,807.34. He has alsopaid a costs award of approximately $300,000 made against him in an unsuccessfulproceeding he commenced against Michael Grant Sullivan and others. Mr Clodeasserts that he has a personal bank account, and has two operational companies withbank accounts. He says that he is currently developing a significant apartment projectin Milford. The cashflow from the Milford development is said to be "notinsignificant, but is confidential particularly given the defendants having already runinterference in [Mr Clode's] businesses".[37] Mr Clode says that the defendants have failed to pay the remuneration requiredby cl 8 of the March Agreement. On the other hand, the defendants' own legalexpenses have been paid by Auburn as a party to the March Agreement, withoutMr Clode's approval (that approval being required by cl 8 of the March Agreement).4 Clode v Oliphant, above n 1, at [26].[38] Mr Clode says that he is entitled to 50 per cent of the profits from theDevelopment, which on the defendants' evidence will be in excess of $500,000 —more than enough to meet any costs award in the defendants' favour.[39] In the event that the Court decides to award security, Mr Clode says that thesecurity should be fixed at no more than $5,000 for each day of the trial. Thedefendants consider that the trial will last three days, so any security for costs shouldnot be more than $15,000, and should be paid in instalments.Applications for security for costs — legal principles[40] Rule 5.45 of the High Court Rules materially provides:5.45 Order for security of costs(1) Subclause (2) applies if a Judge is satisfied, on the application of adefendant,—(b) that there is reason to believe that a plaintiff will be unable topay the costs of the defendant if the plaintiff is unsuccessfulin the plaintiff's proceeding.(2) A Judge may, if the Judge thinks it is just in all the circumstances,order the giving of security for costs.(3) An order under subclause (2)—(a) requires the plaintiff or plaintiffs against whom the order ismade to give security for costs as directed for a sum that theJudge considers sufficient—(i) by paying that sum into court; or(ii) by giving, to the satisfaction of the Judge or theRegistrar, security for that sum; and(b) may stay the proceeding until the sum is paid or the securitygiven.(5) A Judge may make an order under subclause (2) even if the defendanthas taken a step in the proceeding before applying for security.[41] An applicant for security for costs must persuade the Court that there is reasonto believe that the plaintiff will be unable to pay the defendant's costs if the plaintiff isunsuccessful at trial. Once the Court is satisfied on that threshold issue, its discretionwhether to make an order for security or not, and if an order for security is made theamount of that security, is unfettered – there is no formal checklist of principles to beapplied.5[42] Once the threshold test is met, the Court's task is to balance the interests of theparties. That balancing exercise may include an assessment of the merits of theplaintiff's claim, but an assessment of the merits of the dispute at an interlocutory stagewill usually only give the Court an impression – in most cases it will not be possibleto form a view of the merits. An order for security which may have the effect ofpreventing a plaintiff from pursuing its claim will normally only be made after carefulconsideration, and in a case in which the claim has little chance of success. Access tothe Courts for a genuine plaintiff is not lightly to be denied.6[43] On the question of how much evidence will be required for a defendant to meetthe threshold test of showing that the plaintiff will be unable to pay costs, there shouldat least be credible evidence of surrounding circumstances from which it mayreasonably be inferred that the plaintiff will be unable to pay the costs. This does notmean that the defendant has to prove that the plaintiff will in fact be unable to pay thecosts.7[44] In Highgate on Broadway, Kós J observed that one of the theoreticaljustifications for ordering security is that there may be an injustice to a defendant ifthe claimant would otherwise be effectively immune from a costs order.8 Delay by thedefendant in making the application is a factor which may tell against the making ofan order.9 However, the overriding and most important consideration is "how shouldthe respective interests of the parties best be balanced?"105 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].6 At [15].7 Concorde Enterprises Limited v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (HC), at519.8 Highgate on Broadway v Devine [2012] NZHC 2288 at [20]; [2013] NZAR 1017.9 At [23(c)].10 At [24(c)].[45] Security may be ordered to cover a defendant's witnesses' expenses. InCamelot Hotel Ltd v Square Holdings Ltd,11 $120,000 was ordered to be paid by wayof security, and that sum included a figure for expert witness fees based on the Court'sgeneral impression and experience.Evidence for the defendants[46] Mr Oliphant provided an affidavit in support. He referred to the followingmatters:(i) Mr Clode has said that he does not hold a personal bank account.(ii) Mr Clode has previously been bankrupted, and has previously beeninvolved in a bankruptcy proceeding.(iii) Mr Clode is a lay litigant.(iv) Auburn's previous funding of Mr Clode's legal expenses.(v) Enforcement of costs award.(vi) The merits of the case favour the defendants.[47] On the issue of Mr Clode not having a bank account, Mr Oliphant relied on anaffidavit sworn by Mr Clode on 16 May 2018 in this proceeding in support of hisapplication for the mandatory interim order. At paragraph 21 of the affidavit,Mr Clode said (with reference to the Sargeson Apartments) that he designed everyapartment and drove the design and construction team, and that he built the basementbefore CMP Construction Ltd was engaged to complete the building contract.Mr Clode said that Synergy had no contractual arrangement or any influence over thework that he undertook on the development, and Synergy was struck off theCompanies Register on 17 March 2017. Mr Clode went on to say: "I simply usedSynergy because it had a bank account and I did not".11 Camelot Hotel Ltd v Square Holdings Ltd [2016] NZHC 82.[48] Mr Oliphant then deposed that Mr Clode was adjudicated bankrupt on12 February 2009. Prior to that date, 31 companies with which Mr Clode had beenassociated had been put into liquidation. Mr Oliphant referred to various news mediareports about the debt situation of Mr Clode or his companies, going back as far asAugust 2002.[49] Mr Oliphant then provided evidence of a bankruptcy adjudication applicationfiled in this Court against Mr Clode in July 2018 by Michael Grant Sullivan andDuthco Trustees (Sullivan) Ltd as trustees of the Sullivan Family Trust No 1 (theSullivan Trust). The Sullivan Trust's debt was $38,767.27, being the amount of a finalorder obtained in this Court on 7 October 2016. Mr Clode was said to have failed tocomply with a bankruptcy notice issued by the Sullivan Trust on 8 June 2018.Mr Oliphant, Auburn, and Railside filed a notice of appearance in support in thatadjudication application, relying on costs judgments totalling $17,646.63 made againstMr Clode on 15 June 2018 and 16 July 2018.[50] Mr Oliphant said that, just before the bankruptcy adjudication application wascalled, the costs owing to Mr Oliphant, Auburn and Railside were paid.[51] Mr Oliphant referred to the fact that Mr Clode is representing himself in thisproceeding, noting that Auburn has already advanced Mr Clode $217,060.90 to paylegal costs relating to proceedings in which Auburn was not involved. Formal demandfor repayment of that advance has been made in the present proceeding.[52] Mr Oliphant said he had no knowledge of Mr Clode's current residentialaddress, or whether he owns any personal property that could be charged and sold tomeet a costs award. Mr Clode has nominated 402 Lake Road, Takapuna as his addressfor service in this proceeding (and also the address for service of his two activecompanies registered on the New Zealand Companies Register, Metro PropertyHoldings Ltd and Metro Property Milford Ltd), but in November 2017 the property at402 Lake Road was partially destroyed by fire, and Railside is no longer the owner ofthe property. Mr Oliphant said that, to his knowledge, 402 Lake Road is currentlyused as a car park.[53] Mr Oliphant said that he is aware of Mr Clode being involved in onedevelopment on the North Shore, approximately 3 kilometres away from the SargesonApartments.[54] On the substantive merits of the case, Mr Oliphant referred to the judgment ofPalmer J on the application for mandatory interim orders. He also noted that althoughit has been one year since Mr Clode filed his first statement of claim, he has not yetprovided particulars of his claimed loss, and how that loss can be compensated withdamages.[55] Mr Oliphant also said that the defendants have taken no steps to erode theparties' profit share from the Development, saying that to do so would be against theirown self-interest.[56] Mr Oliphant also said that Mr Clode had served a statutory demand on Auburnclaiming allegedly outstanding development fees. Prior to the hearing of anapplication to set the statutory demand aside, Mr Clode settled with Auburn, and acosts order was made.[57] In the foregoing circumstances, Mr Oliphant expressed concern overMr Clode's ability to meet any order for costs that might be made against him. Hereferred to another recent proceeding in which Mr Clode has been ordered to pay$42,500 security for the defendants' costs.12[58] Mr Oliphant said that the defendants expect to retain an independent expert toadvise on Mr Clode's loss of profit claim. Mr White of Hussey & Co has beenapproached to give an indication of likely costs, and on 8 March 2019 he provided arough estimate of $20,000 – $30,000 plus GST. Mr White noted that it was difficultto be too definitive given the fact that base information and issues were not yetavailable.12 Clode v Sullivan & Ors [2015] NZHC 2364.Mr Clode's evidence[59] In response to the defendants' criticism of Mr Clode's failure to provideparticulars of his damages claim, Mr Clode said that he has not had adequate accessto documents in the defendants' possession that he will need to properly formulate hisclaims. He also noted that the timetable orders made by Associate Judge Bell on28 February 2019 did not require him to take further steps before the defendants'security for costs application was heard and determined.[60] On the merits, Mr Clode referred to the judgment of Palmer J on theapplication for mandatory interim orders, and in particular to the judge's finding thatMr Clode had shown that there was a serious question for trial.[61] Mr Clode stated that, in the event he loses at trial, he can pay the defendants'costs (as he did last year when he paid the $17,807.34 to the defendants). Heconfirmed that he had also paid approximately $300,000 that he was ordered to pay inthe proceeding he had brought against the Sullivan Trust.[62] Mr Clode confirmed that he has a personal bank account, and that he iscurrently developing a significant apartment project in Milford.[63] Mr Clode referred to his claimed entitlements under the March Agreement,including his remuneration claim and his claim to 50 per cent of the profits from theDevelopment.Discussions and conclusions[64] I am satisfied that the defendants have met the threshold requirement ofshowing that there is reason to believe that Mr Clode will be unable to pay the costsof the defendants if he is unsuccessful in the proceeding.[65] My starting point in reaching that view is that at the hearing of a security forcosts application by the Sullivan Trust against Mr Clode and Synergy on 14 September2015 in Clode & Synergy Management Ltd v Sullivan & Ors, Mr Clode and Synergyconceded that there was then reason to believe that they would be unable to pay thedefendants' costs if they did not succeed at trial.13[66] While that acknowledgement related to the position as at September 2015, itappears that Mr Clode was also unable to pay his debts as they fell due in 2018. Thebankruptcy adjudication proceeding commenced by the Sullivan Trust shows thatMr Clode committed an act of bankruptcy in June of that year, and Mr Oliphant'sevidence also establishes that costs of approximately $17,500 owing to the defendantsbased on judgments given in June and July 2018 were not paid to the defendants untilthe eve of the 11 October 2018 hearing of the adjudication application.[67] The next matter is that Mr Clode said in his affidavit sworn in support of hisapplication in this proceeding for the mandatory interim orders, that he did not have abank account. While he says that he has one now, the fact that he apparently had nobank account when he swore that affidavit on 21 May 2018 is consistent with a pictureof apparent insolvency in 2018.[68] Against that background, I think it was incumbent on Mr Clode to providesome evidence on this application to show that his financial position has improved. Inmy view he has not done that. He has referred to the development in which he iscurrently involved at Milford, but provided no confirmation that he is developing thisproperty personally (or whether it is being developed by one of his companies). If (asone would expect) the development is being undertaken by a limited liability company,the company will be the party deriving the profit, not Mr Clode. In the absence of anydetails of other debts or liabilities of any development company which may beundertaking the Milford project, it is not possible to conclude that Mr Clode has avaluable personal asset in the Milford development. Nor is it possible to form anyview of the likely profitability of the Milford development: Mr Clode has declined toprovide financial details, citing confidentiality considerations.13 That concession was recorded by Peters J in her judgment in Clode v Sullivan & Ors, above n 12,at [3].[69] Mr Clode referred to his interest in the Development, and to evidence given inan affidavit filed by Mr Oliphant in this proceeding on 4 May 2018. In that affidavit,Mr Oliphant said:21. Assuming that the Development is completed on the completion date, Ianticipate that the Development will return an approximate pre-tax profit of$1-2 million. Therefore, approximately, Mr Clode would receive pre-tax$500,000.22. However, if there are delays, [Auburn] and I are personally liable forpenalty interest to the Lender of $500,000 per month, which will affect theavailable profit for distribution.23. In addition, I dispute Mr Clode's claim that he has suffered loss. Mr Clodehas not been instrumental in the delivery of the Development. Instead, he hasbeen obstructive. Based on my working experience with Mr Clode, it is myposition that he cannot work constructively with other contractors on site anddeliver the cost savings required for additional profitability. To the contrary,I believe that he has cost the Development money.[70] While Mr Oliphant did state in that affidavit that Mr Clode would likelyreceive approximately $500,000 from the Development (pre-tax) if the Developmentwere completed on the completion date, the after-tax amount Mr Clode would belikely to receive would still be significantly less than Auburn's undefendedcounterclaim against him, which is for the sum of $427,804.25. And Mr Clode's sharewould be reduced further if Auburn and Mr Oliphant were subjected to the penaltiespayable to the Lender if the Development is not completed on time. I note in thatregard that Mr Clode said on 21 May 2018 that the Development was "clearly2 months behind its scheduled completion date which is a serious problem".14[71] Finally, on the threshold question of ability to meet a costs award, Mr Clodehas provided no details of his assets and liabilities, and it appears that he does notpresently have readily available cash with which he could meet a costs award. He toldme at the hearing that if the Court were to award security in the sum of $67,000 soughtby the defendants, 15 "that would definitely delay me moving the case forward". Theclear implication of that is that Mr Clode does not presently have significant liquidassets.14 Affidavit of Mr Clode 21 May 2018, at 27.15 The figure of $67,000 security sought for the defendants was calculated on the basis of 75 per centof 2B costs, based on a 3 day trial, plus witnesses' expenses of $30,000.[72] For all of those reasons, I am satisfied that the defendants have met ther 5.45(1)(b) test: there is reason to believe that Mr Clode will be unable to pay thecosts of the defendants if he is unsuccessful in his claims.[73] Turning to the exercise of my discretion, I note first that this is not a case wherethe plaintiff is saying that an order for security at the level sought by the defendantscould not be met, and would thus bring the proceeding to an end. Mr Clode says onlythat he would be delayed in prosecuting his claims if security were awarded at thefigure sought by the defendants. Nor is this a case where Mr Clode has contended (atleast directly) that any inability to meet an award of costs has been caused orcontributed to by the defendants. Mr Clode does say that he has been deprived ofremuneration of $5,000 per week since 22 December 2017, but the defendants denythere was any contractual obligation between Auburn and Mr Clode for payment ofthat remuneration, and there is insufficient evidence for the Court to reach anyconclusion on the point. In any event, any impecuniosity of Mr Clode appears to havearisen from other causes, including unsuccessful litigation ventures in which he hasbeen involved.[74] I do not consider that the defendants have been guilty of undue delay in filingtheir application for security for costs. The defendants advised Mr Clode and theCourt in counsel's conference memorandum dated 26 February 2019 that anapplication for security for costs was in the course of preparation, and the applicationwas filed on 8 March 2019, in accordance with the Court's direction made on28 February 2019. By 26 February 2019 the proceeding had been on foot for less than11 months, and Mr Clode had filed an amended statement of claim on 22 January2019. Discovery and inspection have not yet been completed, and the case has not yetbeen allocated a fixture date. In my view there is no issue of delay such as mightweigh against the defendants in the exercise of the Court's discretion.[75] The principal issue to be considered in the exercise of the discretion, as notedby Mr Clode in his submissions, is the merits of Mr Clode's case. Mr Clode reliesstrongly on the judgment of Palmer J, and in particular the judge's view that: there is force in Mr Clode's submissions that [clause 8 of the MarchAgreement] requires him to have input into the direction of the project and tohave some level of information to enable that. [Counsel for the defendants]acknowledged as much in argument Mr Oliphant has provided evidencethat he has provided Mr Clode with at least some of the information requested,but not all of it, and it seems likely that Mr Clode has been frozen out of asignificant decision-making role. So there may be a live issue of the legalinterpretation of Mr Clode's rights under the [March Agreement].[76] Mr Bedogni submitted that there is no merit in Mr Clode's claim forremuneration at $5,000 per week during the term of the Development. In hissubmission the closest arrangement that would recognise any contractual relationshipin relation to fees, was made by Auburn with Synergy, not Mr Clode. Synergy wasremoved from the Companies Register on 15 March 2017.[77] On Mr Clode's claim for damages to be quantified prior to trial, Mr Bedognisubmitted that Mr Clode will need to establish at trial that the defendants havebreached their obligations under the March Agreement, and that the breach has erodedMr Clode's 50 per cent profit share. Even if a Court determined that the defendantswere in breach of their obligations, Mr Clode would have to point to particular losseshe had suffered. There would be no loss suffered if the Development is completedcompetently and effectively (without Mr Clode's involvement), and the 50 per cent ofnet profit is duly paid to him.[78] I accept that, as far as it is possible to say on the limited evidence before me,the merits appear to favour Mr Clode on his claim that he has been shut out of theDevelopment. In his amended statement of claim he alleges failure by Mr Oliphant toprovide him with full disclosure of the affairs of Auburn and Railside, and not allowinghim to co-direct all aspects of the Development on an equal footing, and he says thatthose matters constituted breaches of the March Agreement. The findings of Palmer J,including the finding that it seemed likely that Mr Clode had been frozen out of asignificant decision-making role, provide support for the damages claim based onMr Oliphant's alleged refusal to let Mr Clode participate in the project.[79] Apart from the claim for the remuneration at the rate of $5,000 per week, thematters raised by Mr Bedogni appear to relate primarily to the quantum of Mr Clode'sclaims, rather than the liability of the defendants (or some of them) for breach ofcontract.[80] To succeed at trial on the claim of breach of contract by being prevented fromparticipating in the direction of the project on an equal footing, Mr Clode will not haveto prove that he has suffered damage as a result of the alleged breach. Proof of damageis not a requirement in a claim for breach of contract, and even if there is no damage,a plaintiff who establishes breach will be entitled to nominal damages. A plaintiff whorecovers nominal damages would not normally be expected to pay the defendant'scosts, but that may not always be the case. For example, where the defendant hasmade a "without prejudice except as to costs" offer before trial which was for anamount greater than the amount recovered by the plaintiff at trial, the Court hasjurisdiction to order the plaintiff to pay the defendant's costs in respect of the periodafter the defendant's offer was made.16[81] I have no evidence before me that the defendants have yet made an offer toMr Clode on a "without prejudice except as to costs" basis, and I have no means ofassessing when any such offer might be made, or if one is made, whether it would befor an amount greater than any damages award Mr Clode might obtain at trial.[82] The matters identified by Palmer J that appear to favour Mr Clode on the meritsdo not appear to apply to his claim for remuneration at the rate of $5,000 per week.The claim appears to be based on a contract allegedly made at some time before22 December 2017, and it appears to be a different cause of action from the claimbased on alleged breach of the March Agreement. It may be that any fees contract wasmade with Synergy, as the defendants contend, and if that is so Mr Clode wouldpresumably have no good claim for the remuneration.[83] At this stage the precise basis for the remuneration claim has not been properlypleaded, and nor is the amount of the claim clear (for example, when is the entitlementto receive remuneration of $5,000 per week said to have commenced?).[84] I note also that Mr Clode is representing himself in this claim, and if thatremains the position there would be no prospect of costs (other than disbursements)16 High Court Rules 2016, rr 14.10 and 14.11being awarded in his favour if he succeeds at trial on one or both of his causes ofaction.17[85] Weighing all those considerations as best I can, I am satisfied that an order forsecurity should be made, but at a more modest level than that proposed by Mr Bedogni.[86] The bulk of the attendances listed by Mr Bedogni in the 2B costs calculationsattached to his written submissions appear to relate to time likely to be spent dealingwith Mr Clode's unquantified claim for damages for breach of the March Agreement,where the argument for security for costs is not so strong. It seems likely that verymuch less time will be required to address the discrete issue of the claim relating tothe unpaid remuneration. Also, it appears that the anticipated expert's costs, estimatedat $30,000, will be concerned substantially (if not entirely) with the damages claim forbreach of the March Agreement. Nor do I consider it appropriate in assessing theamount of security to take into account Auburn's counterclaim. It was Auburn's owndecision to bring the counterclaim, and it cannot be said (in respect of thecounterclaim) that Auburn has been compelled to come to Court to respond to theclaim of an impecunious plaintiff.[87] I think the remuneration claim issue should be able to be dealt with in, say, oneday of trial time, and it will only account for a relatively modest proportion of the timerequired to be spent on such tasks as inspection of documents, preparation of briefs,preparation of issues, and general preparation for the hearing. Nonetheless,Mr Clode's claim for $5,000 per week is substantial, and the defendants are in my viewentitled to resource their defence to that part of the claim at a level reasonableconsistent with its magnitude.[88] In my view the parties' interests can best be balanced by making an order forsecurity for costs, but limited to the sum of $25,000, to be paid in two equal instalmentsof $12,500. I make an order accordingly. The first tranche of $12,500 is to be paidwithin 30 working days of the date of this judgment. The second tranche of $12,500is to be paid not later than 30 working days after the close of pleadings date. In theevent either payment is not paid by those dates, the defendants may apply by17 McGuire v Secretary for Justice [2018], NZSC 116 at [55] and [88].memorandum for an order staying the proceeding pending payment of the unpaidamount.[89] The defendant is to post the security by paying the $25,000 into any solicitor'strust account on which the parties may agree in writing, but if they are unable to agreeon a solicitor's trust account within 20 working days of the date of this judgment, thesecurity amounts are to be paid into Court. The security is to remain in the solicitor'strust account (or in Court as the case may be) pending further order of the Court orany earlier written agreement between the parties as to its disbursement.[90] The defendants have been successful in obtaining a security for costs order,and in accordance with r 14.8 I am required to fix costs on this application unless thereare special reasons to the contrary. There are no special reasons in this case, and asthe substantially successful parties the defendants are entitled to an award of costs.18While I have not been satisfied that security should be provided to the full extentsought by the defendants, they have nevertheless sufficiently shown that there isreason to believe that Mr Clode might not be able to pay their costs if he isunsuccessful at trial, and the discretionary considerations favour the making of anorder. In my view 2B costs are appropriate on the application. I make an order in thedefendants' favour accordingly, with disbursements to be fixed by the Registrar.Associate Judge Smith18 Under r 14.2(1)(a) of the High Court Rules 2016, the party who fails with respect to aninterlocutory application should generally pay costs to the party who succeeds.