THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INCORPORATION v THE MINISTER FOR LAND INFORMATION [2020] NZHC 1104

THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INCORPORATION v THEMINISTER FOR LAND INFORMATION [2020] NZHC 1104 [25 May 2020]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2019-485-563[2020] NZHC 1104BETWEEN THE NEW ZEALAND DEMOCRATICPARTY FOR SOCIAL CREDITINCORPORATIONApplicantAND THE MINISTER FOR LANDINFORMATIONFirst RespondentTHE MINISTER OF FINANCESecond RespondentWESTLAND DAIRY COMPANYLIMITEDThird RespondentHONG KONG JINGANG TRADEHOLDING COMPANY LIMITEDFourth RespondentHearing: 13 February 2020Appearances: R A Kirkness and S W Fletcher for ApplicantN C Anderson and S J Jensen for First and Second RespondentsS V McKechnie and J C Dickson for Third and FourthRespondentsJudgment: 25 May 2020JUDGMENT OF CLARK JIntroduction[1] The New Zealand Democratic Party for Social Credit Inc (the party orSocial Credit) has filed an application for judicial review of a decision made by theOverseas Investment Office.[2] The third and fourth respondents, respectively Westland Dairy Co Ltd(Westland) and Hongkong Jingang Trade Holding Co Ltd (Jingang) have applied forsecurity for costs. The application is made under r 5.45 of the High Court Rules 2016.The particular grounds on which Westland and Jingang each seek an order for securityfor costs in the sum of $20,000 are that:(a) There is reason to believe that Social Credit will be unable to payWestland and Jingang's costs if Social Credit is unsuccessful in thisproceeding;(b) Despite requests, Social Credit has failed to provide evidence of itsfinancial position sufficient to establish that it will be able to meet acosts award;(c) Media reports and Social Credit's "Give a Little Page" suggest thatSocial Credit needs to raise funds to meet the costs of the litigation;(d) Social Credit has declared in its annual party donations that it hasreceived no qualifying donations or loans for at least the last five years;(e) It is just in all the circumstances to provide security for costs; and(f) Social Credit was not directly affected by the decision and appears tohave brought this proceeding to further its political agenda and profile.[3] Social Credit opposes the application primarily on the basis that:(a) Westland and Jingang have not shown that Social Credit isimpecunious, which is a precondition for obtaining security underr 5,45; and(b) An order for security would be inappropriate given the significantpublic interest in this proceeding.Legal principles[4] Rules 5.45 of the High Court Rules governs the security for costs regime. AJudge may order the giving of security for costs if the Judge considers it is just in allthe circumstances having been satisfied:(a) that a plaintiff—(i) is resident out of New Zealand; or(ii) is a corporation incorporated outside New Zealand; or(iii) is a subsidiary (within the meaning of section 5 of theCompanies Act 1993) of a corporation incorporated outsideNew Zealand; or(b) that there is reason to believe that a plaintiff will be unable to pay thecosts of the defendant if the plaintiff is unsuccessful in the plaintiff'sproceeding.[5] Thus, if the plaintiff does not come within (a)(i)–(iii) there are essentially tworequirements to be met. First, the applicant must show there is a reason to believe thata plaintiff will be unable to pay the costs of the defendant. Second, the Judge mustconsider it "just in all the circumstances" to order the giving of security of costs.[6] The decision to order security for costs and the quantum of any securityordered are discretionary matters. The discretion is not to be fettered by constructing"principles" from the facts of previous cases.1[7] Being broad, the discretion may be exercised to require security even if to doso would prevent a plaintiff from pursing a claim.2 That said, a genuine plaintiff is notlightly to be denied access to the court.3 In Lee v Lee the Court of Appeal confirmedthe position summarised in the earlier Court of Appeal decision in A S McLachlan Ltdv MEL Network Ltd4[15] The rule itself contemplates an order for security where the plaintiffwill be unable to meet an adverse award of costs. That must be taken as1 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14], cited inAndrew Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at[HR5.45.01].2 Lee v Lee [2019] NZCA 345 at [20].3 At [20].4 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).contemplating also that an order for substantial security may, in effect, preventthe plaintiff from pursuing the claim. An order having that effect should bemade only after careful consideration and in a case in which the claim haslittle chance of success. Access to the Courts for a genuine plaintiff is notlightly to be denied.[16] Of course, the interests of defendants must also be weighed. Theymust be protected against being drawn into unjustified litigation, particularlywhere it is over-complicated and unnecessarily protracted.First threshold requirement: "unable to pay the costs"?[8] The applicant for security for costs is not expected to produce conclusive proofof the plaintiff's financial position or inability to pay. But "there should be credible(that is, believable) evidence of surrounding circumstances from which it mayreasonably be inferred that the [party] will be unable to pay costs."5 If there is nodirect evidence available, it may be sufficient to adduce evidence of surroundingcircumstances from which an inference of inability to pay can reasonably be drawn.6Parties' submissions[9] Westland and Jingang contend that Social Credit has failed to provide evidenceof its financial position sufficient to establish it will be in a position to meet any costsaward. They argue that from two financial statements, there is an "apparent trend" ofSocial Credit recording operating losses. Westland and Jingang also claim that variousmedia reports, a "Give a Little" page and the fact that Social Credit has not receivedany donations for the last five years all suggest Social Credit is impecunious.7[10] Social Credit's position is that Westland and Jingang have failed to satisfy the"unable to pay" threshold. Mr Kirkness, counsel for Social Credit, made the followingsubmissions:(a) The 2017 financial year was an election year and it is unsurprising theparty recorded an operating loss.5 Concorde Enterprises Limited v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at519; New Zealand Kiwi Fruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209at 211.6 Totara Investments v Abooth Ltd HC Auckland CIV-2007-404-990, 4 March 2009 at [28].7 The media reports either mention the fact that Social Credit is seeking financial assistance or hasset up a 'Give a Little" page.(b) The donations received by Social Credit did not need to be declaredunder electoral law.(c) Give a Little pages are a common method of funding public interestlitigation and indicate nothing about their ability to pay costs.(d) The media reports simply noted that Social Credit did not have theresources to lodge an interim injunction against a complex commercialtransaction three days after it was announced. This does not establishanything about Social Credit's ability to pay costs on judicial review.(e) Christopher Leitch, the leader of the Social Credit party, has deposedthat Social Credit can meet an adverse costs award against it and thatthere is around $100,000 in member funds available that could be usedto meet such an order.Analysis[11] Mr Leitch's evidence is that:If Social Credit is unsuccessful in these proceedings and the Court makes anaward of costs against it Social Credit would pay those costs. I have no reasonto believe that Social Credit would be unable to meet a costs award against it.[12] Mr Leitch has exhibited to his affidavit a copy of Social Credit's statement offinancial performance and statement of financial position as at 31 December 2017.The statements show operating deficits in 2016 (of $60,000) and in 2017 (of$123,000). Accumulated funds dropped from $233,000 in 2016 to $109,000 in 2017.Ms McKechnie, counsel for the third and fourth respondents, submitted the evidenceSocial Credit has provided is not sufficient to alleviate Westland's and Jingang'sconcerns about its ability to meet a costs award. Ms McKechnie referred to thecircumstances leading to the making of the application. In particular:(a) On 28 July 2019 Social Credit stated in a media release that it did nothave the "financial and legal resources to lodge an [injunction]application before the takeover date of August 1st" and soughtdonations from the public.(b) Social Credit set up a "Give a Little page to procure funds for thelitigation. As at 8 November 2019, the page recorded donations of$350. From the bar, Ms McKechnie advised that as at 12 February2020, the day before the hearing, the Give a Little page reflecteddonations of approximately $450.(c) Social Credit's annual party donations and loans returns for the last fiveyears indicate Social Credit has received no qualifying donations overthat period.(d) A solicitor's letter was sent to Social Credit's solicitors on behalf ofWestland and Jingang on 29 October 2019. It appeared to Westland andJingang that the application for judicial review was ill-conceived andbrought primarily for political gain. Social Credit was invited towithdraw its proceeding on the basis it was said it lacked substantivemerit. Further, the letter recorded Westland and Jingang's "seriousconcerns regarding Social Credit's asset position and ability to meetany costs award against it".(e) Although Social Credit's solicitors were instructed to send an email tothe Crown Law Office confirming Social Credit would "honour" anycosts award made against it and has the means to do "so", thatinstruction gave no comfort to Westland and Jingang. Further, it wasnoted that under s 13 of the Incorporated Societies Act 1908,Social Credit's members had no liability for obligations incurred bySocial Credit.[13] Ms McKechnie submitted that Mr Leitch's "uncorroborated statement" thatSocial Credit would pay an award of costs made against it is of little probative valuewhen no grounds have been put forward to support his assertion.[14] Initially, I was unconvinced by the financial performance statement as atDecember 2017. As against Mr Kirkness's submission that it showed Social Credithad significant cash assets available to it, I queried whether that remained the positionas at February 2020. There was a basis for querying the position because, to the extentthat a trend can be discerned from a comparison of only two years' statements, thetrend suggested a diminution in assets. As Ms McKechnie had queried, how wouldone know that trend had not continued?[15] Ultimately, I am satisfied that there is sufficient evidence from which I am ableto infer that in the event Social Credit is unsuccessful in its application for judicialreview, and is ordered to pay costs, it will pay those costs.[16] In relation to Social Credit's public plea for donations Mr Kirkness submittedthere is a distinction between looking for a stream of funding to initiate court actionand complying with court orders. I accept that submission. Social Credit publicisedthat it needed not just financial but legal and other resources to initiate court action in2019. Ultimately, it did not apply for the injunction that Westland and Jingang argueshould have been applied for. Significantly, Mr Leitch has sworn that if costs areawarded against Social Credit then Social Credit "would pay those costs". And he hasfurther sworn he has no reason to believe Social Credit would be unable to meet acosts award against it. That deposition is not to be lightly ignored. While it does nothave the legal force of an undertaking to the Court it is to be seen in the same light asits instructions to its solicitors in 6 November 2019 to counsel for all respondents that"it will honour any costs award made against it and has the means to do so".[17] The acknowledgement of an obligation to comply with court orders, combinedwith holding assets in the sum of approximately $100,000 as at the end ofDecember 2017 provides a sufficient evidential basis from which I infer Social Creditwill, and will be able to, pay any costs award against it. Mr Kirkness suggested thatthe downward trend in cash assets was arguably a reflection of the party's electionyear expenditure. That may very well be but, it is a matter of speculation. Mr Leitchhimself provided no such explanation nor any explanation at all."Just" in all the circumstances?[18] I have found that the impecuniosity threshold is not met but even if it were Iwould not consider it to be just in all the circumstances to order the giving of securityfor costs. My reasons are primarily threefold.[19] First, although it is argued on behalf of Westland and Jingang that theapplication for judicial review asserts errors in the decision-making that are of a"technical nature" and that, therefore, the chances of success are remote I take adifferent view of the pleadings. The succinct 12-page statement of claim pleads threegrounds of review. Under the first ground Social Credit pleads that the OverseasInvestment Office failed to apply the correct test under the Overseas Investment Act2005 when reaching its decision on Jingang's application for consent to acquire 100per cent of the shares in Westland, and a declaration of unlawfulness and invalidity issought. The second ground of review seeks similar relief in respect of the samedecision although on different grounds. And the third ground of review challenges theexercise of delegated power by the chief executive of Land Information New Zealand.[20] The Court is required to do no more than form an impression of the merits ofthe claim.8 It is not necessary therefore that I attempt to assess the prospects of successof each of the grounds of review. Rather, the focus should be whether:9a prima facie case can be established that [Social Credit's] claim isunmeritorious a prima facie lack of merit will be weighed in the balance;the less apparently meritorious then the more likely the security is.[21] I find it difficult to assess the statement of claim even from the point of viewof a prima facie lack of merit. As I understand it, the core of the case concerns thestatus of the Rolleston Milk Processing Plant which is on more than five hectares offarmland said to be used exclusively for agricultural purposes. The application beforethe Overseas Investment Office involved the acquisition of the Rolleston MilkProcessing Plant's land. Social Credit says its land satisfies the definition of"farmland" under the Overseas Investment Act, is therefore "sensitive land" for the8 Highgate on Broadway Ltd v Devine [2012] NZHC 2288; [2013] NZAR 1017 at [22](c).9 At [22](c).purposes of the Act and therefore the "benefit to New Zealand" test had to be appliedto the decision but was not.[22] Under the second ground of review Social Credit pleads there was a failure toconsider whether the land was "farmland" and therefore whether it was "non-urbanland" (both of which are defined in the Act) and consequently whether the land is"sensitive" under the Act — which it is if the land is, or includes "non-urban land".10[23] I can say little more about the merits beyond observing that the statement ofclaim raises arguable questions of statutory interpretation and whether the OverseasInvestment Office applied the proper test and whether, if it did not, relief is likely tobe granted.[24] As Ms McKechnie submitted relief is discretionary. Westland and Jingang willbear the burden of providing evidence relevant to the exercise of the Court's discretion.Ms McKechnie further submitted it would be difficult, if not impossible, for thescheme of arrangement11 which received shareholder approval in the requisitemajorities consent under the Act and under the Overseas Investment Regulations 2005and court approval.12 Ms McKechnie is undoubtedly correct to emphasise thedifficulties (at the least) in attempting to unwind the scheme so many months — if nota year by the time the judicial review application is determined — after the schemehas been implemented. Unwinding the scheme would involve, at the least:(a) recovering payments made by Jingang to approximately333 shareholder farmers who received over $250m in total on 1 August2019; and(b) returning the shares in Westland to the farmer shareholders with theunderlying assets in unchanged form, several months after the businesswas handed to Jingang.10 Overseas Investment Act 2005 sch 1, pt 1.11 Under the scheme of arrangement Jingang agreed to acquire 100 per cent of the shares in Westlandfor $3.41 cash per share. The scheme of arrangement was under pt 15 of the Companies Act 1993.12 Re Westland Co-Operative Dairy Co Ltd [2019] NZHC 1683.[25] I was initially persuaded to the view that the merits of the application forreview turned on what I saw as the remote prospect of relief being granted. Thepotential impact on Westland and Jingang of the Overseas Investment Office's consentbeing quashed is significant and, as Ms McKechnie submitted, likely to be "vastlydisproportionate" to the alleged error. This will be a factor in the Court's considerationof relief.[26] But as Mr Kirkness submitted submissions are yet to be made in the High Courton relief. A declaration of unlawfulness would be regarded by Social Credit as asuccessful outcome. Mr Kirkness also submitted that if the decision were set aside forunlawfulness it would most likely be remitted back in order to be made properly.[27] A further consideration in the assessment of the interests of justice is whetherthe litigation serves any "public interest". Ms McKechnie challenged Social Credit'smotivation in bringing the claim. She drew the Court's attention to Social Credit'slong-held policy of opposing foreign takeovers and the sale of land into overseasownership. She submitted there is a political motive to Social Credit's application forjudicial review which appears to be part of a wider political platform. FollowingSocial Credit's filing of its judicial review proceeding Stuff reported Mr Leitch assaying a ministerial directive to the Overseas Investment Office in November 2017clearly set out criteria on how applications under the Act should be considered.We want to see New Zealanders reaping the benefit of that world leadershipin the primary sector, not overseas shareholders.There's a tidal wave of applications from overseas entities that want to snapup the best agricultural land and agricultural and horticultural businesses thatNew Zealand has, so we are taking a stand on the issue.[28] I take counsel's point but as I indicated at the time, even if the institution ofproceedings is politically motivated, in the sense that Social Credit has a policyinterest in the application of the Act, I can only make my assessment of whether anypublic interest is served by the litigation, by reference to the statement of claim.Social Credit has standing to bring the proceeding. It is not a "mere busybody engagedon a fruitless exercise".13 There is a public interest in having the issues raised by the13 Ratepayers and Residents Action Association Inc v Auckland City Council [1986] 1 NZLR 746,at 753.claim heard and determined and, as the Court of Appeal stated in the Ratepayersdecision, that must be a factor for consideration in deciding whether to order securityand if so, what sum should be fixed.14Result[29] Accordingly, the application for security for costs is dismissed.[30] Having succeeded in its opposition to the interlocutory application SocialCredit, the third and fourth respondents are to pay Social Credit's costs which I awardon a 2B basis. The Crown did not seek security and although counsel appeared, nowritten submissions were filed._____________________________Karen Clark JSolicitors:Woods Fletcher, Wellington for ApplicantCrown Law Office, Wellington for First and Second RespondentsSimpson Grierson for Third and Fourth Respondents14 At 750.