BALLANTYNE TRUSTEES LTD v HFK LTD [2020] NZHC 1911

BALLANTYNE TRUSTEES LTD v HFK LTD [2020] NZHC 1911 [31 July 2020]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2015-409-000173[2020] NZHC 1911BETWEEN BALLANTYNE TRUSTEES LIMITED,A N HEAD, B R HEAD, CALMWATERENTERPRISES PTY LIMITED and S BKEUNG as Trustees of the GBR TrustFirst PlaintiffsAND SEBG BOU KEUNGSecond PlaintiffAND HFK LIMITEDFirst DefendantAND KEIRAN ANNE HORNESecond DefendantHearing: 24 July 2020Counsel: M J Tingey for PlaintiffsJ E Eckford for First and Second DefendantsJudgment: 31 July 2020JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 31 July 2020 at 4.00 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:The application[1] In a judgment of 6 May 2016, Associate Judge Osborne ordered that plaintiffsto provide security for costs in two tranches.1 The first tranche was to cover the periodup to the making of trial directions. The defendants now apply for the second tranche.The plaintiffs argue the application is premature and oppressive. They also say the sumsought as security is excessive.Background[2] The events that are the subject of the claim occurred in 2009. The plaintiffsdid not commence the proceeding until 31 March 2015. The plaintiffs plead twocauses of action, namely:2(a) in respect of alleged breaches of duty under s 301 Companies Act 1993(a claim against the second defendant, Ms Horne);(b) a claim in negligence in specified particulars (a claim against Ms Horneand the first defendant).[3] On 6 May 2016, Associate Judge Osborne ordered the plaintiffs give securityof $25,000 (the first tranche) for costs and disbursements incurred to the point whentrial directions are made.3 In respect of steps after trial directions were made, thedefendants' application was adjourned to be brought on five-day's notice for resolutionof any second tranche of security.4 The Judge also ordered the plaintiffs pay the costsof the interlocutory hearing; the quantum of which were fixed in a subsequentjudgment of 24 July 2016.[4] On 2 August 2016, a consent order was made that if the costs were not paid by31 August 2016 the proceeding would be stayed. The costs were not paid by 31 August2016 and the proceeding was stayed, although the costs were paid shortly thereafter.1 Ballantyne Trustees Ltd v HFK Ltd [2016] NZHC 917.2 The plaintiffs were refused leave under s 284 Companies Act 1993 to pursue a third cause of action.3 Ballantyne Trustees Ltd v HFK Ltd, above n 1, at [71].4 At [79].[5] In October 2018, the defendants applied to strike out the proceeding for wantof prosecution. At the first-call of that application, the stay was lifted.[6] On 29 April 2019, Associate Judge Johnston dismissed the strike outapplication but made findings that the plaintiffs' lack of action in pursuit of the claimwas both inordinate and not excusable.5 Nevertheless, he was satisfied the claim couldbe fairly tried. A subsequent application for review of that decision was dismissed.6[7] No further steps were taken by either party until the court gave notice of ateleconference to be held on 25 February 2020. The plaintiffs then sought to have thecase set down for trial. The defendants resisted as discovery issues were unresolved.I directed that any interlocutory applications be filed by 16 March 2020. Nointerlocutory applications were filed although there were further skirmishes betweenthe parties concerning discovery.[8] Following a teleconference on 28 April 2020, I directed that any interlocutoryapplications were to be filed by 28 May 2020 and would be heard on 24 July 2020.The defendants filed this application for a second tranche of security for costs. Theplaintiffs filed no applications.Associate Judge Osborne's reasons[9] Osborne J arrived at his decision to order security for costs as follows:(a) the defendants had satisfied the threshold test for an order that securitybe paid;(b) the proceedings were not in a state that the court could conclude theywere totally without merit;(c) there was no basis to conclude that an order for security would bringthe claim to an end;5 Ballantyne Trustees Ltd v HFK Ltd [2019] NZHC 906 at [21]-[22] and [32].6 Ballantyne Trustees Ltd v HFK Ltd [2019] NZHC 1425 at [26].(d) given the delay in the commencement of the proceeding it would likelybe more complicated and expensive than would have otherwise beenthe case;(e) having regard to the "timely application for security" it was appropriateto deal with a first tranche to cover the period up to the making of trialdirections with the application adjourned for resolution of any secondtranche of security;7(f) most of the steps in the proceeding were likely to involve costsappropriately dealt with on a 2B basis but a 2C award was likely to bemore appropriate at the point the second tranche of security wasordered; and(g) based on anticipated steps in the proceeding 2B scale costs up to theappearance of counsel at the final pre-trial case managementconference totalled $25,199 (rounded to $25,000) and was a "justaward of security by way of first tranche".8The parties' positions[10] The defendants argue there are no changed circumstances since AssociateJudge Osborne issued his judgment, the case is ready for trial and a second tranche ofsecurity is payable. They say the extraordinary length of time the plaintiffs have takento prosecute the claim supports security being provided sooner rather than later. Thedefendants seek further security in the sum of $81,979 comprised of legal costs on a2B basis of $30,114 and disbursements of $51,865. The disbursements are forinstructing experts (see appendix attached).[11] As far as the experts' fees are concerned, the defendants have had "preliminarydiscussions" with a proposed accountancy expert, Jeffrey Meltzer, who has provideda fee estimate. There is also an allowance for a valuer in "an abundance of caution".There is no fee estimate from a valuer. There is also no claim for costs of counsels'7 Ballantyne Trustees Ltd v HFK Ltd, above n 1, at [71].8 At [75].appearance at trial as the defendants consider this should be sought when there is aclearer idea of the length of the trial.[12] The plaintiffs accept that at some stage a second tranche of security will berequired. They argue this application is premature because the first tranche was inrespect of all steps up to the final pre-trial case management conference and this hasnot been conducted. They also contend there are issues concerning discovery thatshould be resolved before the case is set down.[13] The amount of security sought is excessive, the plaintiffs argue, as:(a) not all steps identified by Associate Judge Osborne in calculating theamount of the first tranche have in fact been taken;(b) the defendants have failed to provide evidence that their actual costsexceed the first tranche;(c) in calculating the second tranche the defendants are claiming for stepsthat will not be taken;(d) the court is not in a position to conclude that defendants will need tocall expert witnesses; and(e) the fee estimates for expert witnesses are not reasonable.[14] Finally, the plaintiffs argue that in exercising its discretion the court shouldtake into account the defendants are acting oppressively because this application is anattempt to stymie the plaintiffs' claim.DiscussionIs the application premature?[15] The application is not premature. The plaintiffs' submission is based on a mis-reading of Associate Judge Osborne's judgment. The first tranche was to cover theperiod up to the making of trial directions. The case is ready for trial directions to bemade. The plaintiffs have previously sought to have the case set down and Mr Tingeyadvised me he supports such directions being made as the plaintiffs wish to get on withthe claim. While the Associate Judge also used the terms "final pre-trial casemanagement conference" and "final case management conference" these plainlyreferred to the case management conference at which trial directions were made.9[16] In so far as the plaintiffs have any concerns that discovery issues are unresolvedthey have not made any interlocutory applications despite me directing that anyinterlocutory applications be filed in minutes of 24 February 2020 and 28 April 2020.Furthermore, there is no indication that the plaintiffs intend to make any suchapplication.The defendants' actual costs[17] Mr Tingey's argument is that if the defendants' actual costs to date do notexceed the amount of the first tranche this should be taken into account in determiningthe amount of the second tranche. The defendants' solicitors have providedconfirmation the defendants' actual legal costs, excluding any costs relating to theplaintiffs' application for leave under s 284 of the Companies Act 1993, theunsuccessful application to strike out and the application for review (all of which aresubject to separate costs orders), exceed $25,000. This argument therefore falls away.Are the amounts claimed excessive?[18] Mr Tingey argues that allowances made by Associate Judge Osborne for filingcase management memoranda and conferences exceed what has occurred and thismust be taken into account when considering the quantum of the second tranche. Myreview of the file indicates that this submission is incorrect.[19] In any event, I do not accept the submission in principle. Associate JudgeOsborne could not foresee what steps would be taken in the proceeding. He made an9 At [73] and [75].assessment of likely steps "for security purposes".10 The first tranche was to cover allsteps up to the making of the trial directions regardless of what those steps might be.[20] There are however two meritorious arguments advanced for the plaintiffs. Thefirst is in relation to experts' fees. In respect of Mr Meltzer, his fee estimate iscontained in a letter of 11 May 2020. Mr Meltzer provides a fee estimate of $40,000plus GST but states that he has not seen any documentation, nor the statement of claimand that he understands he will be required to review approximately 6,500 documents.The contents of that letter casts doubt on evidence provided for the defendants, in anaffidavit of Emily Grace Duncan, that Mr Meltzer's fee estimate is "based on hisknowledge of the case". His letter suggests he has no such knowledge.[21] Whilst I accept it is usual for security for experts' fees to be sought on the basisof fee estimates, I am not able to conclude Mr Meltzer has any useful evidence to give,that he is likely to be called as a witness or that his fee estimate is sufficiently reliableto form the basis for payment of security.[22] As far as the expert valuer is concerned, there is no fee estimate provided at alland Ms Eckford could not cogently explain why an expert valuer is necessary.[23] It appears likely that the defendants will be required to call at least one expertwitness, but I would not be justified in making any allowance for this at the presenttime on the state of the evidence. I will adopt the approach suggested by Mr Tingeyin his written submission to require the defendants to provide further evidence.[24] Second, in the defendants' calculation of the second tranche there are costsclaims for filing memoranda for case management conferences and appearances atcase management conferences totalling more than $5,000. There should be no needfor such conferences and those claims are disallowed. However, the claim for a pre-trial conference is appropriate.10 At [73].Is the defendants' application oppressive?[25] Mr Tingey referred to the strike out application and the review. He argued thedefendants have shown an unreasonable attitude on procedural issues and had failedto provide evidence to support this application. He referred to excessive amountsbeing sought as security. Despite this, I do not accept Mr Tingey's submission thisapplication is an attempt by the defendants to stymie the claim. The defendants' strikeout application and review were reasonable to pursue although unsuccessful. Therehave been considerable delays by the plaintiffs which the court has found wereinordinate and not excusable.[26] There is nothing oppressive in the defendants seeking security for costs inreliance upon a judgment of the court made in their favour. In so far as the evidencethe defendants have provided is unsatisfactory, this will be reflected in the ordersmade.[27] The argument that the defendants have sought excessive security may in timebe cast in a different light if and when the defendants provide further evidence inrelation to experts' fees.The amount of the second tranche[28] Associate Judge Osborne considered it appropriate to fix security on a 2Bbasis, while noting that for preparation to trial a 2C award was likely to be moreappropriate. Mr Tingey did not raise any matters that leads me to depart from theapproach taken by Associate Judge Osborne. To the contrary, the delays in progressingthe case reinforce the need for what the Judge referred to as the defendants' legitimateinterest in obtaining a full measure of protection for their costs.11 I intend to adopt theAssociate Judge's approach.[29] For security purposes I allow the items sought by the defendants for the pre-trial conference, preparation of briefs/list of issues/common bundle and preparation11 At [66](e).for hearing totalling $25,095 (rounded to $25,000). In other respects I do not allowthe claims at this time.Result[30] I make the following orders:(a) The plaintiffs shall within 10 working days of this case being set downfor hearing give further security for the costs of this proceeding in thesum of $25,000 to the satisfaction of the Registrar (the second tranche).I expect that the case will be set down at the next teleconference.(b) Except as provided in (d) below, the second tranche is to be providedas security for costs between the setting down of the case for hearingup to and including the pre-trial conference.(c) In the event that the second tranche is not provided as ordered theproceeding shall be stayed until further order of the court.(d) I reserve leave for the defendant to apply for further security for costsin relation to experts' fees and counsels' appearances at the trial.[31] My preliminary view is that both parties have had a degree of success on thisapplication and costs should lie where they fall but if parties disagree they may submitmemoranda of no more than five pages within 14 days.[32] There shall be a teleconference at 3pm on 26 August 2020 to make directionsfor trial. Counsel are to confer and submit preferably a joint memorandum (or separatememoranda if they cannot agree) addressing all schedule 5 High Court Rules mattersno later than 24 August 2020._______________________O G PaulsenAssociate JudgeSolicitors:Ronald W Angland & Son, Leeston, CanterburyParker Cowan, QueenstownAppendix - schedule for further security for costsItem Description Time Amount $11 Filing memorandum for case managementconference (0.4 x 3)1.2 2,868.0013 Appearance at case management conferences (0.3 x 3) 0.9 2,151.0015 Pretrial conference 0.5 1,195.00Preparation of briefs, list of issues, authorities andagreeing common bundle for witness hearing 5.0 11,950.0033(b) Preparation for hearing 5.0 11,950.00TOTAL 12.6 $30,114.00Disbursements:Jeffery Meltzer, expert accountant $40,000.00Expert valuer $5,000.00Courier and other incidental costs $100.00 $45,100.00Plus GST at 15% $6,765.00Total $51,865.00