TOTARA INVESTMENTS LIMITED V ABOOTH LIMITED & ANOR HC AK CIV 2007-404-000990

TOTARA INVESTMENTS LIMITED V ABOOTH LIMITED & ANOR HC AK CIV 2007-404-000990 4 March 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2007-404-000990BETWEEN TOTARA INVESTMENTS LIMITED Plaintiff AND ABOOTH LIMITED First Defendant AND OTHER DEFENDANTS as set out in Schedules A and B attached to the statement of claim Second to one hundred and twenty first defendants Hearing: 26-27 November 2007 Counsel: C T Walker and N C Khouri for plaintiff P J Dale for Investor Group defendants F A Darlow for Lee Salmon Long defendants M H Morrison and K F Stolberger for Lowndes Jordan defendants A C Challis for first third parties R G Simpson and B A Ng for second third party Judgment: 4 March 2009 at 5:15pmJUDGMENT OF ASSOCIATE JUDGE ABBOTTThis judgment was delivered by me on 4 March 2009 at 5:15pm, pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy RegistrarSolicitors: Gilbert Walker, PO Box 1595, Auckland 1140 Grove Darlow, PO Box 2882, Auckland 1140 Lee Salmon Long, PO Box 2026, Auckland1010 Lowndes Jordan, PO Box 5966, Auckland 1141 McElroys, PO Box 835, Auckland 1140 Bell Gully, PO Box 4199, Auckland 1140 Counsel: P J Dale, Barrister, PO Box 130, Auckland 1010AND ROWAN JOHN CHAPMAN, GEOFFREY DONALD CAMPBELL WALKER, TERENCE FRANCIS MCGRATH, MARTIN VICTOR RICHARDSON AND TIMOTHY JOSEPH GOLDFINCH First Third Parties AND RUSSELL MCVEAGH Second Third Party AND HARTLEY CLENDON VINCENT First Fourth Party AND JOHN MILES KENRICK BROWN AND PATRICK HOWARD CASTLE Second Fourth Parties AND KEVIN ANDREW SCHWASS Third Fourth PartyIntroduction and overview[1] The plaintiff Totara Investments Limited (Totara) sues as assignee of the interests of lenders under term loan agreements. It alleges that each of the 121 defendants entered into one or more loan agreements with the assignors Bank of New York International Bank of Geneva (BNYIMBG) or Armour Fidelity Limited (AFL). The sums sought from the various defendants total approximately $197,775,000. [2] The loan agreements were part of an investment scheme into which the defendants entered at differing times between 1995 and 1997. Totara is associated with the promoters of the schemes and most of the companies through which the schemes were implemented (not including BNYIMBG). [3] The defendants deny liability under the loan agreements on various grounds, including that no agreements were in fact entered into with the alleged assignors, no money was advanced, the agreed process for effecting the loans was not followed, and the loan agreements have not been validly assigned. [4] The defendants have divided into three groups. The majority, for convenience, are collectively called the investor group. Two small groups of defendants, again for convenience, are collectively described by reference to the law firms representing them as the Lowndes Jordan defendants and the Lee Salmon Long defendants. The shareholders of the Lowndes Jordan defendants are members of the chartered accountancy firm Gosling Chapman, which was involved in establishing the investment schemes and marketing them to their clients (the majority of the investor group were their clients). The Lee Salmon Long defendants have joined the Gosling Chapman partners and solicitors instructed to review the investors' contractual obligations (Russell McVeagh) as third parties. Russell McVeagh has joined directors of certain of the investor companies as fourth parties.[5] The investor group and the Lowndes Jordan defendants have applied for security for costs. The investor group have not proceeded with their application, having reached an agreement with Totara. The Lowndes Jordan defendants seek an order that Totara give security for $300,000. Totara opposes that application on the grounds both that the applicants had not established that there is reason to believe Totara is unable to pay costs, and that the merits are so strongly in favour of it that the Court should exercise its discretion not to grant the security. [6] The investor group and, the Lowndes Jordan defendants (supported by the third parties) also seek an order that the proceeding be given a category 3 classification for cost purposes having regard to its complexity. This is also opposed by Totara.Background[7] The defendants are all loss attributing qualifying companies (LAQCs) for taxation purposes. They were incorporated with $100 capital specifically for the purpose of investing in either of two investment schemes (known as the Digi-Tech Investment Scheme and the NZIL Investment Scheme). The schemes involved the acquisition of shares in one or other of two highly speculative companies, Digi-Tech Communications Limited and New Zealand Investments Limited. The transactions were structured with a view to providing tax advantages to high earning individuals through their shareholding in the investor LAQCs. [8] The schemes were promoted by a merchant banker Milloy Reid Tong & Company Limited (MRT) (subsequently renamed Milloy Reid Wong & Company Limited (MRW)). The principals of MRT/MRW, Mr J A Reid and Mr H Milloy, are the directors and ultimate beneficial owners of the vendor companies N-Tech Limited and St Lucia Investments Limited. [9] The investment schemes arose out of an approach by MRT to Gosling Chapman. MRT's initial proposal was revised with input from Gosling Chapman to follow the structure of a previous investment scheme that Gosling Chapman had introduced to its clients.[10] The schemes had several components: a) First, the investor agreed to purchase the shares under a long term agreement which required the investor to pay a deposit, modest annual instalments (1%) towards the purchase price, and the majority of the purchase price after ten years. b) Secondly, the investor had the ability to take out a "loss of profits" insurance policy against the risk that the shares did not reach a target value set at a level approximating the purchase price by the time the last (and major) instalment was due. c) Thirdly, the investor was able to borrow the majority (96%) of the substantial premium payable for the insurance policy. These loans were intended to be non-recourse for the investors. The investors agreed to assign their rights to complete the share purchase and benefits of the insurance policy to the lender in return for the lender's promise not to sue if the securities did not cover the amount of the loan. [11] As proposed to investors, the schemes appeared to offer no (or low) risk investments with significant tax advantages: a) The investors exposure appeared to be limited to their initial cash payments for the deposit under the share purchase agreement and their contribution (4%) towards the insurance premium, plus the small annual instalments payable under the share purchase agreement pending the ultimate settlement. b) This outlay was expected to be more than offset by the intended tax advantage to the shareholders of the investor companies, namely tax deductibility for the total premium in the first year.c) Although the overall tax effectiveness was uncertain (there was a prospect that proceeds of the insurance policy could be taxable in the hands of the investors), the schemes allowed the investors to walk away, leaving the policy with the lender, if it was not worth their while to complete the purchase. [12] The defendants entered into the share purchase agreements, the insurance contracts and the loan agreements between 1995 and 1997. The investments took place in five stages (tranches) in the Digi-Tech scheme and three in the NZIL scheme. At that point the investors knew that the insurance cover and loans were being arranged overseas, but had not been given detail as to how that was to happen. The loan agreements named the lender as Bank of New York – Inter Maritime Bank, Geneva (BNYIMBG). Totara says the BNYIMBG entered into these loan agreements as fiduciary agent for the true lender Asian Growth Fund Limited (AGFL), a Hong Kong company associated with the scheme. The loan agreements made provision for nomination of a substitute lender. Armour Fidelity Limited (a company incorporated in the Bahamas) (AFL) was nominated as the lender for the later (4 th and 5th ) tranches of the Digi-Tech scheme and for the tranches of the NZIL scheme. [13] Regrettably, the schemes did not work out as originally proposed. The anticipated tax advantages did not eventuate. The transactions were examined by the Inland Revenue Department. It emerged that the insurance and loan arrangements were effected by circular paper transactions through an agent in Hong Kong, using "transferable certificates of deposit" (TCDs) as promissory notes, rather than by actual money transfers. The investors' cash contributions towards the premiums were used to pay fees of various persons involved in the design and implementation of the schemes. The Inland Revenue Department eventually formed the view that the structure amounted to tax avoidance. [14] Investors stopped paying instalments on the purchase price, and started questioning aspects of the investment scheme. Some cancelled their share purchase agreements on the grounds of misrepresentation. The vendors of the sharesresponded by cancelling the share purchase agreements for actual or anticipatory breach. [15] Gosling Chapman laid a complaint with the Serious Fraud Office, saying that it and its investor clients had been deceived into believing they were dealing with a substantial insurer and substantial lender, and were unaware of the circularity of funding. Mr Reid and three other individuals associated with the scheme were prosecuted on charges of conspiracy to defraud the investors and the Commissioner of Inland Revenue. They were acquitted after a lengthy trial in which the nature of the schemes were examined in depth in the judgment of the trial judge, Fogarty J who made findings as to the nature of the schemes as summarised in paragraphs [10] and [11] above. [16] In 2005, following the dismissal of the prosecution, the vendor companies, N-Tech and St Lucia, issued proceedings against all investor companies for alleged breach of the share purchase agreements (the N-Tech proceeding). This proceeding has been consolidated with the N-Tech proceeding since hearing of these applications. [17] On 2 February 2007, AFL and Totara entered into an agreement for Totara to purchase debts due to AFL under the loan agreements. The purchase price was US$12,419 together with a defined share of amounts that Totara recovered. The same day they signed a deed under which AFL assigned its rights under the loan agreement to Totara. [18] On 15 February 2007, AGFL and Totara similarly entered into an agreement for Totara to purchase the debt due to AGFL (or BNYIMBG as AGFL's fiduciary agent) and a deed of assignment of these debts. The agreement and deed were identical to those between AFL and Totara, save for the cash component of the purchase price which was US$12,546. [19] In this proceeding, Totara seeks to recover the purported advances under the assigned loan agreements.The Lowndes Jordan defendants[20] The Lowndes Jordan defendants comprise Fickling Limited (23rd defendant), Kinu Limited (34th defendant), Parrish Limited (52 nd defendant), Ricfin Limited (60 thdefendant) and Otitori Investments Limited (107 th defendant). The first four named invested in one or more of five investment tranches of the Digi-Tech scheme. The last named invested in the first of the three investment tranches of the NZIL scheme. Fickling and Parrish are alleged to have entered into loan agreements with BNYIMBG, Kinu, Ricfin and Otiotori with AFL. The claims against them total $12,657,000.The application for security for costs[21] The Lowndes Jordan defendants' application was brought under the forerunner to r 5.45(1)(b) of the High Court Rules which came into force on 1 February 2009 (superseding the previous r 60(1)(b)). There is no material difference between the rules. It is common ground that the Lowndes Jordan defendants must satisfy the Court that there is reason to believe Totara will be unable to pay their costs if it is unsuccessful, and that the Court then has a general discretion whether or not to award security and as to the quantum of any award. [22] The Lowndes Jordan defendants acknowledge that there is little direct evidence as to Totara's financial position but says that the evidence that is available, and the inferences capable of being drawn from it, are sufficient to give the Court "reason to believe". They contend that the merits of the case favour them, and that the complexity and potential costs justify security in the sum of $60,000 each (for a total of $300,000) up to completion of discovery, and potentially a further award in respect of subsequent costs. [23] Totara argues that the application should be dismissed. It says that the Lowndes Jordan defendants have not established reason to believe that it cannot pay their costs. It contends that the limited information relied on by the defendants does not provide evidence of Totara's ability to pay. It says that the facts from which the Court has been invited to draw inferences are historic (most relate to the period 1998to 2000) and do not help the Court to decide Totara's ability to pay now. Totara also takes issue with the probative value of the Lowndes Jordan defendants' evidence. In the alternative, it says that in the circumstances of the case the Court should exercise its discretion to decline an order.General principles[24] The need for an applicant to provide "reason to believe" that the plaintiff is unable to pay has been recognised in many cases as a threshold test. It is also well accepted that once satisfied as to that threshold requirement, the Court has a very broad discretion. This can be seen from the classic exposition of the approach that the Court must take in the Court of Appeal's decision in A S McLachlan v MEL Network Limited (2002) 16 PRNZ 747 at paras [13] and [14]:[13] Rule 60(1)(b) High Court rules provides that where the Court is satisfied, on the application of a defendant, that there is reason to believe that the plaintiff will be unable to pay costs if unsuccessful, "the Court may, if it thinks fit in all the circumstances, order the giving of security for costs". Whether or not to order security and, if so, the quantum are discretionary. They are matters for the Judge if he or she thinks fit in all the circumstances. The discretion is not to be fettered by constructing "principles" from the facts of previous cases. [14] While collections of authorities such as that in the judgment of Master Williams in Nikau Holdings Ltd v Bank of New Zealand (1992) 5 PRNZ 430, can be of assistance, they cannot substitute for a careful assessment of the circumstances of the particular case. It is not a matter of going through a check list of so-called principles. That creates a risk that a factor accorded weight in a particular case will be given disproportionate weight, or even treated as a requirement for the making or refusing of an order, in quite different circumstances.Is there reason to believe Totara will be unable to pay costs[25] Before turning to consider the evidence on which the Lowndes Jordan defendants rely, some comment is needed on the nature of the exercise the Court must undertake in answering the threshold question. [26] In Concorde Enterprises Limited v Anthony Motors (Hutt) Limited (No. 2) [1977] 1 NZLR 516 approach the question as follows (at p 519):There can no doubt that the onus under the section rests on the applicant, that is, the defendant. By the very nature of the application, however, the defendant cannot be expected to produce anything very conclusive in the way of proof. It has no access at this stage to the plaintiff's books of account or other records, and can do not more than point to the surrounding circumstances. In the majority of cases it is found that the plaintiff is inliquidation or receivership which has an obvious significance of its own. But that is not always the case, and it is not the case here. I think that what the statute contemplates is that there should be credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the company will be unable to pay the costs. This does not, of course, amount to proof that the company will, in fact, be unable to pay them.[27] The difficulty that an applicant has in producing anything conclusive by way of proof was picked up in New Zealand Kiwifruit Marketing Board v Maheatataka Coolpak Limited (1993) 7 PRNZ 209. In this case Thomas J referred to, and I infer accepted, the approach taken by Quillam J in Concorde in the following passage (at p 211):"The learned Judge sought credible evidence of surrounding circumstances from which it might reasonably be inferred that the company would be unable to pay the costs."[28] NZ Kiwi Fruit Marketing Board is perhaps better known for its finding that there must be some evidential foundation or indication to support "reason to believe" before the Court is justified in drawing an adverse inference from a plaintiff's failure to respond to a request to furnish details of its financial position (a matter I will address shortly). However it is clear from both Concorde Enterprises Limited andNZ Kiwifruit Marketing Board that an applicant does not have to prove inability to pay in the normal civil sense, and that in the absence of direct evidence, it can be sufficient to adduce evidence of surrounding circumstances from which an inference of inability to pay can reasonably be drawn. I turn to consider the evidence.Discussion security for costs[29] Mr G D Walker, a director of the fifty-second defendant, Parrish Limited (one of the Lowndes Jordan defendants), has filed several affidavits in support of the application. He has also formally produced, by way of background, an affidavitsworn and filed in support of an application for security for costs in the related N- Tech proceeding. [30] This evidence shows that Totara is one of several companies related by way of directorship or shareholding to the interests of the directors of MRT/MRW, Mr Reid and Mr Milloy. Mr Walker lists the companies in a schedule to the Lowndes Jordan defendants' statement of defence. The related companies include N-Tech and St Lucia (vendors of the shares under the schemes), and Digi-Tech and NZIL (the companies whose shares were being sold). Mr Walker also contends that Mr Reid is the ultimate beneficial owner of AFL (one of the lenders), and is a director of a company which is one of the corporate directors of AGFL (for which BNYIMBG claims it was acting as fiduciary lender). [31] The specific evidence which the Lowndes Jordan defendants say gives reason to believe Totara will be unable to pay costs can be broken down into the following: a) First, Totara's limited capital base. It was incorporated in March 1996 with a share capital of $1,000. There have been no increases of share capital since then; b) Secondly, Totara's only known activities have been to acquire and hold shares in Escalator Advertising Limited (EAL) (one of two start up companies put into the NZIL scheme) and to enter into the debt factoring arrangements which underlie the assignments of the loan agreements on which Totara now sues. An information memorandum prepared for the marketing of the NZIL scheme contained a relationship chart showing that Totara was to acquire 65 million shares (or 65% of the total shareholding) in EAL. A newspaper report of the sale of these shares in late 1999 or early 2000, for a nominal $1 consideration, has not been challenged or explained by Totara; and c) Thirdly, a lack of any financial base for Totara's parent NZIL (a share capital of only $750, a trading loss for its only income producing asset prior to its sale in 1999), and an absence of any apparent assets in itsgrandparent St Lucia, coupled with Totara's relationship to the companies involved in the scheme and associated with Mr Reid. Mr Walker contended that the Court could infer from this evidence that Totara was a shell company, used merely as a vehicle to recover the loans. [32] Counsel for Totara submitted that the Court should reject all of this "evidence": a) He acknowledged Totara's limited capital base, but submitted that told the Court nothing about Totara's ability to pay from sources other than shareholder capital; b) He said that the disposal of the shares in EAL also did not inform the Court one way or another on any other assets that Totara had at that time, or more relevantly as at the date of the application. He noted that the defendants had provided no evidential basis for Mr Walker's statement that the acquisition of the shares in EAL and entry into the debt factoring arrangements were Totara's only activity in recent years; c) He argued that the financial position of NZIL and St Lucia was irrelevant but, notwithstanding that, such evidence as there was of their financial position was not only out of date but also incomplete; d) He submitted that criticisms in 1998 and 1999 of NZIL's performance, in correspondence from the accountant for one of the investors, should be viewed with scepticism. The parties were by that time in dispute, and it was in the investors' interests to criticise the performance to justify delay or compromise of a payment then due; e) He challenged Mr Walker's assertion that Totara had no material net worth or independent means following sale of the EAL shares. He pointed to the reference in the report of the sale to it being part of anoffset arrangement. He also challenged Mr Walker's reliance on information as to the negligible value of EAL shares, obtained from a director of one of the other Lowndes Jordan defendants who independently held shares in EAL. He said that the other directors could have provided direct evidence on the point, and that Mr Walker's evidence should be disregarded in the absence of such direct evidence; and f) He submitted that the defendants had simply failed to establish reason to believe. [33] There is no doubt that the direct evidence is very limited. I accept that each of the matters on which the defendants rely are open to the criticisms advanced by counsel for Totara. However, I do not accept that that necessarily means that the defendants have not crossed the threshold. I must still consider those matters (and the criticisms) in light of the nature of the claim and the surrounding circumstances. [34] The following factors satisfy me that there is reason to believe Totara will be unable to pay costs if unsuccessful: a) It is unquestionable that both Totara and its parent NZIL have only a nominal capital base. This suggests that they needed to borrow to acquire the assets that were put into them as part of the investments schemes (the 65 million shares in EAL which went into Totara, and the 80% of the ordinary shares in Fruehauf Pacific Limited and 65% of ordinary shares in Euston Holdings Limited which went into NZIL); b) It is apparent from the NZIL information memorandum that the shareholding in Fruehauf was intended to provide an operating income during the development of EAL's and Euston's products, and that the prospect of substantial increase in value of NZIL's assets would only come from significant commercial success of those unproven products;c) Totara does not dispute that the shares in EAL were sold for nominal consideration of $1 in mid to late 1999. The newspaper article produced by the defendants refers to the transaction as an "offset deal". Although it is not known if this was related to the original purchase (and hence, potentially, debt in relation to that purchase) the best scenario for Totara would appear to be that the offset cleared any debt. The result is the disposal of the only known asset; d) The ability of NZIL, to support Totara in any other activity seems unlikely. It was formed as a vehicle for the investment scheme. For that reason it is reasonable to infer that the only assets that went into it were those disclosed to investors. It had no share capital from which to fund the acquisition of the shares in Fruehauf Pacific Limited or Euston Holdings Limited. It is a reasonable inference that the acquisitions were funded by debt. The evidence of operating losses leading to the sale of the shareholding for a nominal $1 is 1999 suggests, again, that at best NZIL cleared any acquisition debt. NZIL continues to hold shares in Euston, but as Fruehauf was to provide the income to develop Euston's battery technology it seems likely that development was put on hold. I also note that Mr Milloy did not challenge or even comment on a statement by the accountant for one of the investors in February 2000 that there appeared to be no economical potential for the technology; e) The overall conclusion to be drawn is that Totara and NZIL were dependent on borrowing to acquire their assets, and there is a possibility at least that some of that borrowing has not yet been repaid. It is noteworthy that Mr Reid has sworn three affidavits in opposition in this proceeding but not contested these assertions of fact. He is not required to do so, but the consequence of failing to do so is that the evidence stands unchallenged; f) The fact that Totara agreed to pay in the order of US$25,000 for the assignment of the loan contract does not assist one way or the other.Such information as is available suggests a likelihood of the money being borrowed, but even if there is no debt component, the asset will have no value if Totara does not succeed; and g) This limited information gains some strength, in my view, from the circumstances of the litigation. Fogarty J commented in his judgments on the Serious Fraud Office prosecutions on the highly speculative nature of the investments schemes and the fact that they were tax rather than commercially driven. Most of the corporate entities involved appear to have been created for the purposes of the schemes. Certainly there is nothing to suggest that Totara had any life apart from them. The commercial probability is that this has continued to be the case. N-Tech and St Lucia cancelled the share purchase agreements in 2001. The fact that they took no steps until June 2006 is understandable in that Mr Reid's attention was no doubt focused on his successful defence of the Serious Fraud Office prosecution. In my view it is likely that all activity in the companies was put on hold until Mr Reid could see his way clear. This view is supported by the fact that both AFL and AGFL were removed from their respective company registers (AFL in April 2003 and AGFL in December 2005) and were not reinstated until December 2006 and February 2007 respectively. I note that Mr Reid has not given evidence of any other activity of Totara in his affidavits in opposition. [35] In coming to this view I have put to one side evidence of the financial position of St Lucia. The defendants invited me to take into account the existence of a general security over that company's assets in favour of another "Reid interest", and the fact that there was no land registered in St Lucia's name. Quite apart from the point raised by counsel for Totara that St Lucia's position was irrelevant, the existence of a general security does not tell anything about an ability to pay costs:Concorde. Similarly, the absence of any land holding is a neutral factor. [36] Counsel for the Lowndes Jordan defendants also invited me to draw an adverse inference from the fact that Totara had reached an agreement in thisproceeding with the investor group and with other defendants in the N-Tech proceeding over provision of security. Such an inference is available. However, without more detail being available as to the source of the payment it seems to be a neutral factor (counsel for the investor group invited me to treat it in this way). On the one hand it suggests acceptance that the threshold test could be met, and on the other hand it indicates an ability to pay and a wish to have the proceeding move ahead. I do not have the information before me to take this point further. [37] The last matter to be addressed is the Lowndes Jordan defendants' submission that I should draw an adverse inference from Totara's failure to respond to requests for evidence of its ability to meet costs. It is firmly established that such an inference can only be drawn where the applicant has established an evidential basis. The following passages from the judgment in NZ Kiwifruit Marketing Boardare apposite (at pages 212 and 213):The question is always whether it is appropriate to draw an adverse inference against the plaintiff because of his or her silence as to their financial position. Whether it is appropriate is a question which can only be determined having regard to the material before the Court in each case. I consider that the question whether it is appropriate to treat the absence of any evidence by the plaintiff in response to an insubstantial challenge to his or her means by the defendant is to be determined by having regard to the character of litigation generally. For the rule to apply, therefore, I believe that something more is required before it can be said that there is "reason to believe" that the plaintiff will be unable to pay the successful defendant's Court costs. The plaintiff must be outside the usual run of plaintiffs. It follows that it is not enough for the defendant to challenge the plaintiff's ability to pay costs and then seek security for those costs relying upon the plaintiff's refusal or failure to furnish details of his financial position. There must be some evidential foundation in indication to support the charge that there is reason to believe that the plaintiff will be unable to pay costs before the Court is justified in drawing an adverse inference from the absence of a positive response from the plaintiff.[38] I have set out above the factors which have persuaded me that the circumstances of this case put Totara "outside the usual run of plaintiffs". In the circumstances of this case I consider that it was appropriate for Mr Reid to respondto the defendants' requests. Although the failure to do so is not a compelling factor, it is a matter which I take into account.Should the Court exercise its discretion?[39] Counsel accepted that the Court has a wide discretion on whether or not to order security. Although the Court will have regard to factors which regularly arise, the discretion will be exercised in accordance with the circumstances of the case. In this case counsel focused their argument on the respective merits of the cases, although counsel for the Lowndes Jordan defendants also referred generally to the need to balance the interests of the parties. I will address that point first, before moving on to discuss merits and any other matters in this case relevant to the exercise of the discretion.Balancing of interests[40] The Court has to keep in mind, in deciding whether or not to award security, that an order (particularly a substantial one) could prevent a plaintiff from pursuing a legitimate case. The counter-balancing interest is a defendant's interest not to be put to a potentially unrecoverable cost in defending uncertain or unjustified litigation. The Court's approach to this exercise can be found in the oft quoted passage from the Court of Appeal's decision in A S McLachlan Limited at paras [15] and [16]:[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied. [16] Of course, the interest of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.[41] Totara has not said that it cannot or will not pursue this claim if a substantial award of costs was made. Nevertheless, that must clearly be a possibility if the award is substantial. As against that, Totara has elected to purchase these loans, andembark on this litigation. That is clearly a decision made by Mr Reid, and no doubt he will commit his resources to the litigation if he has confidence in it. However, it is self-evident that unless there is an order for security, support from the Reid interests is unlikely to extend to meeting defendants' costs if Totara is unsuccessful. [42] I take into account that Totara has acquired the rights under the loan agreements for a total sum just under US$25,000. It has chosen to sue all 121 defendants together, and is seeking to recover a sum in the order of $197,000,000. [43] The Lowndes Jordan defendants claim they have been victims of deception and misrepresentation in relation to key components of the schemes (as to there being an independent and substantial lender and an independent and substantial insurer). Whether they genuinely expected the schemes to have a commercial viability, or whether the commercial viability was a bonus over the tax advantages that were being sought, may still be a consideration in the case, notwithstanding the clear view of Fogarty J in the criminal prosecutions that the schemes were tax driven. Whichever it is the defendants will be put to substantial costs in defending the claims and, if they prove their allegations, may well have a defence to the claims. [44] Counsel for Totara submitted that I should regard this application as tactical, having regard to the relationship between the Lowndes Jordan defendants and the Gosling Chapman partners. I do see a distinction between these defendants and the investor group by reason of the Gosling Chapman knowledge of the schemes but that does not necessarily mean that these defendants cannot succeed at all, so as to make the application tactical. [45] This balancing of interests inevitably brings in considerations of the respective merits of the claim, to which I will turn next. However, I consider that the fact that Totara is related to other parties to the schemes and has voluntarily acquired these debts and chosen to pursue them is a factor in favour of the exercise of the discretion.Merits[46] The Court will endeavour to weigh the merits of the claim, whilst recognising that there is a limit as to what it can find at an interlocutory stage: A S McLachlan Limited at para [21]: At best, in such a complex matter, assessment at the interlocutory stage can be no more than impression and cannot be a definite indicator of the ultimate outcome after trial.[47] Totara's case is that these are simple claims under properly assigned loan agreements. [48] The Lowndes Jordan defendants argue that it is far from a straightforward claim. They have raised serious allegations of deception and misrepresentation in relation to the structure of the schemes which will need to be considered against a complex background of international commercial entities. The principal matters of alleged deception or misrepresentation are: a) That the lender in each of the schemes was an independent bank of substance (and that the insurer was similarly an entity of substance). The defendants say the BNYIMBG would have been such a lender but the alleged fiduciary arrangement between BNYIMBG and AGFL (in respect of the first three tranches of the Digi-Tech scheme) and the substitution of AFL as lender, coupled with the use of TCDs which were not binding on the lender until the funds came back to it (the circular transaction), completely altered their understanding of the structure of the scheme and effectively undermined its effectiveness; and b) That there was a lack of disclosure of AGFL as a principal lender in respect of the first three tranches of the Digi-Tech scheme, of the temporary involvement of another Reid interest, Mei Shing Trading Limited, as lender in the first tranche of the Digi-Tech scheme, and of the lack of substance and independence in respect of both AGFL/Mei Shing Trading Limited) and AFL.[49] The defendants argue that the following defences are available as a consequence of the alleged deceptions and misrepresentations: i) Loan agreements were not entered into; ii) Alternatively, loan funds were not in fact advanced; and iii) As a further alternative, loan funds were not advanced as agreed (and to their detriment). [50] The defendants also say that they have a defence based on invalidity of the assignments. Totara pleads that it has received a valid assignment from BNYIMBG or AFL. The defendants contend that: a) Totara is unable to show that it has a valid assignment from BNYIMBG (the only assignment documents are from AGFL and the relationship between BNYIMBG and AGFL has not yet been fully explained or proven by documents); and b) Although evidence has been produced of an assignment from AFL to Totara, the nomination of AFL as a substitute lender was invalid (because it was not a lender of similar substance to BNYIMBG) and has not created any binding obligations between AFL and the defendants. [51] It is clear from the documents before the Court that BNYIMBG was put forward by the promoters of the scheme as the lender, and a lender of substance. It is also apparent from the documents that BNYIMBG and AGFL were in discussions about a fiduciary lending arrangement at least two months before the drawdown of the first tranche under the Digi-Tech scheme, under which BNYIMBG was to have no risk. [52] There is a dispute as to whether Gosling Chapman knew of this proposed fiduciary arrangement. Mr Reid says that he told Mr Russel of Gosling Chapman in March 1995 (prior to drawdown of the first Digi-Tech tranche). He has also givenevidence that Gosling Chapman was aware of the temporary lending arrangement in respect of the first Digi-Tech tranche. He says that he told Mr Russel that BNYIMBG was not in a position to make the loans for the first Digi-Tech tranche prior to 31 March 1995 and that Mr Russel told him that the investors in that tranche had to have a drawdown before 31 March and Mr Reid should take such steps as were needed to effect that. To that extent, Totara would say that at least Gosling Chapman, and hence the Lowndes Jordan defendants, knew of the introduction of Mei Shing Trading Limited as a temporary lender. [53] The defendants also say that the insurance arrangements were similarly lacking in substance, referring to findings to that effect by Fogarty J in the prosecution. Totara answers this by pointing to the fact that certificates of insurance were issued, and a Gosling Chapman partner (Mr McGrath) visited the Netherlands office of the insurer and Fogarty J's finding (para [177] of the acquittal judgment) that the Gosling Chapman partners had notice of the close relationship between the insurer and the bank, and thus that there would be a circular transaction between the two paper companies. [54] The defendants rely heavily on the fact that BNYIMBG did not sign loan agreements until some time after the alleged advances. Totara's response is that it has explained the circumstances of the first tranche (the need for the temporary lender), and acknowledges that documents for the second and third Digi-Tech tranches could have been entered into later but says that timing of execution was not critical as it was clear that there was an agreement in place. [55] The defendants place considerable weight on the circular transactions with the TCDs, and the fact that they were not signed before they returned to the original issuer (whether that was BNYIMBG or AFL). As against that, Totara argues that the defendants (or more particularly Gosling Chapman), knew of the circularity of the transactions. It contends that the circularity did not alter the fact of the advance. In that respect Totara has produced evidence that the various loans were recorded in the books of the lenders or their agents.[56] The defendants question whether BNYIMBG has ever signed a fiduciary agreement with AGFL (a document signed by AGLF has been produced but Totara is still waiting for a Swiss bank that is the successor to BNYIMBG – Bank Hapoalim (Switzerland) Limited - to advise whether or not it holds a copy signed by BNYIMBG. Totara contends that it does not need the executed fiduciary agreement to prove the arrangement. The defendants says that they may well be a matter for Swiss law, and that at this point there is no evidence of an assignment from BNYIMBG to Totara (as already mentioned, the assignment document in respect of the first three tranches of the Digi-Tech loan is from AGFL to Totara). [57] The merits may well vary between different tranches. Defences advanced in respect of the first Digi-Tech tranche (involving BNYIMBG) may not be available in respect of later tranches involving AFL. For example, Totara notes that the defendants do not contest that AFL signed the loan agreements in respect of the fourth and fifth Digi-Tech tranches and the NZIL tranches. The defendants limit their defences in respect of the AFL loan agreements to the contention that AFL was neither a lender of substance nor an independent party, and was not validly nominated as substitute lender. They rely on comments by Fogarty J in his costs judgment following the prosecution to the effect that there was "plenty of evidence of deceptive correspondence" by which Mr Reid was going to considerable lengths to hide his ultimate ownership and control of the whole structure (at para [36]). [58] Finally, as already said, the Lowndes Jordan defendants are in a different category to the investor group generally. It seems likely that they will be found to have a greater knowledge of the structure of the schemes. However, that is not to say that they will not be able to show they were misled by some of the matters they are advancing. [59] It will be readily apparent from the summary of arguments just given that this is not a case of a straight-forward recovery of money under loan agreements. Counsel for both parties took me through the evidence in support of their respective propositions in detail. I am not in a position, however, to come to any firm conclusions one way or the other in the various arguments. There may well be further documents bearing on these issues (discovery was not complete at the time ofthe application). It is almost certain that there will need to be extensive oral evidence about many of these issues. [60] Although many of the same facts were traversed in the SFO prosecution, the findings in that case will not bind the parties to this proceeding. The issues are different, and different findings of facts in relation to them are possible. There will need to be legal argument on a number of the issues. [61] In summary, I can only say at this stage that the outcome of Totara's claim is uncertain at least. There must be a clear risk of costs against it.Other factors[62] Counsel for the Lowndes Jordan defendants also submitted that this was not a case where Totara could claim that impecuniosity resulted from the defendants' actions, or that there was any basis for declining to order security on the grounds of delay. Neither aspect was advanced by counsel for Totara. Neither aspect is a factor in my decision.Conclusion[63] Weighing the various matters to which I have referred I come to the view that this is an appropriate case for the Court to exercise its discretion and award security for costs.Quantum[64] Again it is well established that the quantum of security is a matter for the Court's discretion, to be decided in the circumstances of the case: A S McLachlan at para [13]. [65] At the time of filing their application the Lowndes Jordan defendants sought a total of $300,000, or $60,000 per defendant, up to completion of discovery. At thehearing counsel varied that and sought security up to the time of setting down. I take that to mean, in practical terms, to the completion of the interlocutory steps. The defendants argue that this sum is justified having regard to: a) The claim against them of $12,657,000 in the context of the overall claim for $197,775,000 sought from all 121 defendants. b) The factual and legal complexity occasioned by Totara's decision to sue all defendants in one proceeding, notwithstanding that it has separate claims against them with differing circumstances and documentation as between the various tranches and potentially different personal circumstances affecting each defendant. c) An exclusive jurisdiction clause in the loan agreements which stipulates that they to be governed by and construed in accordance with Swiss law. They say that this will require evidence as to the status and effect of the loan agreements (taking into account the various matters being raised by the defendants) according to Swiss law. There may also be costs associated with seeking relevant documentation from bank Hapoalim (Switzerland) Limited. d) The size of the discovery process, given that the issues have already been the subject of a five week criminal trial involving many witnesses and volumes of documents, as well as separate investigations and dispute proceedings involving the Inland Revenue Department and many of the defendants. e) The likelihood of a very lengthy trial (although that is more a matter for further security in due course). f) The probable costs payable if Totara is unsuccessful (which will also be influenced by a further element of this application, namely the appropriate cost category for the proceeding).[66] Counsel for Totara submitted that the amounts sought were excessive. He argued that an appropriate starting point would be the assessment made for security in the related N-Tech proceeding where allowance was made for overlap or community of interest (Norfolk Trustee Company Limited v Tattersfield Securities Limited HC AK CIV 2004-404-3668, 30 March 2005, Priestley J), and an assessment was made on costs for discovery on a group basis with allowance for additional examination of each defendant's position. Counsel also submitted that security should take into account the sum ordered in the N-Tech proceeding up to completion of discovery (as the scope of discovery was largely the same) and should extend up to setting down. He submitted that this warranted a further figure of approximately $20,000. [67] There can be no doubt that Totara's decision to sue all defendants in the one proceeding adds complexity to the management of the case. On the other hand, it also allows defendants with common or overlapping interests to join together and share costs, at least to the extent of the common or overlapping interests. [68] I accept readily that there will be a very substantial amount of documentation to review in relation to the establishment of the schemes and the dealings between a range of parties both in New Zealand and overseas, the steps taken in the implementation of the schemes (again both here in New Zealand and overseas), the issues that arose leading to cancellation of the share purchase agreements, and events since then leading to the assignments to Totara. I accept that there may also be discovery issues relating to BNYIMBG (although the information to date suggests that any reluctance to provide documents may stem from practical issues such as locating documents rather than an unwillingness to assist or resistance on a matter of principle). [69] I am also conscious that there will be a degree of overlap (particularly in relation to discovery) with work already undertaken in the N-Tech proceeding. Allowance is needed for the fact that that discovery is likely to have been largely completed, and discovery in this proceeding will focus on documents specifically related to issues in connection with the loan agreements rather than the extensive backgrounds to the scheme. Having said that, I anticipate that there will still be a lotof work involved in identifying and extracting further documents specifically related to the loan agreements and the issues in this proceeding. [70] Counsel for the Lowndes Jordan defendants submitted that as these five defendants were owned or controlled by different combinations of existing or former partners of Gosling Chapman they had joined in a common defence and instructed their present solicitors. He submitted, and I accept, that the role of Gosling Chapman in these schemes and the aftermath of them, and the relationship between Gosling Chapman's partners and these defendants, puts these defendants into a different position to the investor group. I accept that in practical terms it is not realistic to expect these defendants to join in with the defences of the other defendants. [71] Counsel for the Lowndes Jordan defendants has provided a schedule of estimated costs for one defendant calculated on a category 3 daily rate and a C time banding. The calculation commences with allowance for preparation and filing of a statement of defence, and includes provision for one amended pleading and interrogatories in addition to the usual items for discovery. It anticipates up to seven interlocutory applications as well as a number of case management conferences. On that basis it is said that scale costs would amount to $185,452.50, plus disbursements (filing fees) of $3,180. Counsel has also set out a table for estimated actual costs of $350,500. These calculations assume an identical claim against each of the five defendants, in which case a separate costs award in favour of each would be unlikely. However, counsel makes the point that the defendants' positions are not identical in that the four defendants in the Digi-Tech scheme are sued in respect of either the first or the second to fourth tranches, and one defendant is sued in respect of the NZIL scheme. He submits that some further provision would be justified in considering separate issues arising under those differing claims. [72] I accept that potential scale costs (and, in some circumstances, potential actual costs) can be taken into account in the exercise of the discretion. However, such calculations are only a guide, and one of the factors that can be taken into account. I did not understand counsel to argue otherwise.[73] Not surprisingly, counsel for the Lowndes Jordan defendants has claimed for every likely interlocutory step. It is possible, but by no means certain, that all of the itemised steps will be required. This litigation has been fought strenuously. Nevertheless I consider it is unlikely that a total of seven applications would be brought and argued. The time allowance for applications on the defendants' calculation is 40.75 days on a band C time allocation. The scale costs would drop back significantly if only three applications were argued (and I would have thought that this would be closer to the mark than the seven projected). C time banding may also not be appropriate for each application. That would have to be assessed in respect of each application. This uncertainty of prediction is no doubt a reason for scale costs being a guide only. [74] The second factor which influences potential scale costs considerably is the cost category. The defendants say that I should assess likely scale costs using a category 3 daily rate rather than the standard category 2. I have still to address the argument on recategorisation, but see that as being more relevant to the trial stage of this proceeding. For the purposes of forming a view on a potential scale costs for this interlocutory stage I consider that the complexity lies more in the number of parties and the potential for different individual positions and the management of defences, rather than complexity of legal issues. This factual complexity, which in my view is far greater for the investor group than the comparatively small Lowndes Jordan defendant group, can in my view be adequately dealt with by assessing potential costs on a C time band. Taking that approach, and discounting for a lesser number of applications, some of which may not warrant C banding, I consider that potential scale costs for a defendant to complete the interlocutory phase more likely to be in the order of $80,000 - $90,000. [75] I do not overlook the possibility of costs of obtaining opinion on Swiss law in relation to the position and liability of BNYIMBG. Whilst accepting the submission of counsel for Totara that this is more likely to be a significant cost in trial preparation rather than in the interlocutory stage, and noting that there are no estimates of the cost required, I can still anticipate that there will be both a time factor involved for briefing of Swiss lawyers, and costs in obtaining at least preliminary advice to guide the defendants in the preparation of their case.[76] I also take into account the following factors: a) There are likely to be some cost savings available to the Lowndes Jordan defendants by virtue of being part of a wider defendant group with a commonality of interest. b) Although the Lowndes Jordan defendants have slightly differing positions in respect of the tranches of their individual investments, the majority of the issues will again be common. I do not see their costs as being the equivalent of three separate defendants as suggested by their counsel. c) There is clearly some duplication with the (now consolidated) N-Tech proceeding. Much of the discovery is likely to have been undertaken in that proceeding. The only element in this proceeding which, to my knowledge, is new is the fiduciary lender issue. d) The knowledge of the principals of the Lowndes Jordan defendants (the Gosling Chapman partners) will greatly assist their solicitors and counsel in the preparation of their defences. e) Issues as between defendants and third parties, or between third and fourth parties, may well have been factored into the defendants' calculation of scale costs (particularly in relation to applications) but are not necessarily or wholly matters which should be visited on a plaintiff. f) The key difference between the application for security in the N-Tech proceeding and in this proceeding is the very substantial and particularised statement of defence filed by the Lowndes Jordan defendants. Although that defence very helpfully points up the range and complexity of legal and factual issues, it also demonstrates the point I have already made that these defendants, by virtue of their knowledge, are in far better position that other defendants inassembling and analysing the information in these interlocutory phases. g) By reason of the knowledge of their principals, the merits of the defences of the Lowndes Jordan defendants appear to be weaker than those of the investor group, thus putting these defendants in a slightly different risk category in relation to costs.Decision[77] Weighing all of these matters, I consider that an appropriate sum, additional to the security ordered in the N-Tech proceeding, is a total of $75,000. I order Totara to pay further security for these five Lowndes Jordan defendants in the total sum of $75,000 (or $15,000 each). I direct that Totara make payment within 21 days or such further time as the Court may allow on application by Totara. [78] The Lowndes Jordan defendants sought an order that the proceeding be stayed until any security is provided. As the proceeding has been continuing in the regrettably long time that it has taken to deliver this judgment, I do not consider a stay to be appropriate without taking into account what has taken place since the hearing. I reserve leave for the Lowndes Jordan defendants to bring this aspect of the application back before the Court if the security is not paid as directed.Recategorisation[79] At the first case management conference on 17 April 2007 the proceeding was given a category 2 classification for the purposes of costs. The investor group has applied for reclassification as category 3. That application is supported by the Lowndes Jordan defendants and by the third parties. It is opposed by Totara. [80] The issue of categorisation is now covered by r 14.3 of the High Court Rules (previously r 48).[81] Rule 14.3(2) provides:14.3 Categorisation of proceedings(2) The court may at any time determine in advance a proceeding's category, which applies to all subsequent determinations of costs in the proceeding, unless there are special reasons to the contrary.[82] Counsel for the second third party submitted that the Court, when fixing categorisation of a proceeding, must consider a range of factors including: a) Whether the case is out of ordinary run of High Court litigation, with the length of hearing likely to reflect complexity of the issues; b) Whether there are conceptually difficult issues of law and fact; c) Whether there is a considerable amount of money involved; and d) Whether the case has considerable public significance and the commercial community has a significant interest in it. In support of these propositions he referred to Bage Investments Limited v Commissioner of Inland Revenue (2000) 14 PRNZ 300; Scottwood Charitable Trust v Bank of New Zealand (HC HAM M159/92; M160/92; CP12/95; CP13/95, 15 November 2001, Morris J) and Vela Fishing Limited v Commissioner of Inland Revenue (2000) 19 NZTC 15, 997). As there is no challenge from other counsel to these principles, I adopt them for this application. [83] It was common ground that the parties seeking reclassification have to demonstrate special reasons for changing an earlier classification. [84] Category 3 classification is given for proceedings which, because of their complexity or significance, require counsel to have special skill and experience in the High Court (r 14.3(1)). Counsel for the investor group submitted that there were several factors in this proceeding which warranted the overview of senior counsel, and which amounted to special reasons for changing the initial category 2classification (which anticipates a proceeding of average complexity requiring counsel of skill and experience considered average in the High Court). [85] All counsel in support of the application agreed with the submission that the case warranted senior counsel overview and direction. The factors advanced by counsel for the defendants were: a) The amount involved, as a consequence of joinder of all defendants into the one proceeding, but the potentially different position of each of the defendants (the claims arise out of agreements with defendants individually); b) The factual complexity of the transactions; and c) Difficult legal issues arising out of the circular and artificial nature of the transactions (and the consequences in terms of tax avoidance), the complication of having to construe the agreements in accordance with Swiss law (and potentially other conflict of law issues arising through involvement of parties in other jurisdictions), and the complicating effect of the fiduciary lending arrangement between BNYIMBG and AGFL. [86] Counsel for the third parties identified as further factors applicable to their clients the significance of the claim (the prospect that defendants would seek to recover the total of the individual defendants' claims from them and reputational issues) and the additional complexity added by the overlay of the third and fourth party claims (for negligence and breach of directors duties respectively). In particular, counsel for the second third party (Russell McVeagh) submitted that this was a cynical proceeding by a "stranger" plaintiff (Totara as assignee) which appeared merely to be targeting the third parties as "deep pockets" given that the defendants were all $100 LAQCs. He submitted that liquidation of any investor companies was unlikely to see an end to the claims. The liquidator of one LAQC is still suing the third parties. He submitted that there was an argument that both the directors of the LAQCs and any liquidators would be in breach of duty not to do so.[87] Counsel for Totara submitted that the claims, including the underlying third and fourth party claims, when analysed, were not particularly complex. He agreed that the matters raised by the defendants/third parties were really time rather than complexity issues. He said these could be addressed on a case by case basis by a C banding. [88] Counsel for Totara also argued that it was not appropriate to think of this as a tax case (which tend, due to their complexity, to be given a category 3 classification), and that the better analogy was with a leaky building claim. He submitted that the conflicts of laws issues being posed by the defendants and third parties were not raised on the pleadings and should be disregarded, at least at this point. He submitted that the better approach was to leave the category 2 classification to stand, and review the appropriateness of a category 3 classification as and when proper circumstances arose. [89] There is a case, in my view, for reclassification to category 3, once past the interlocutory stages. I form this view based on the following: a) The case is complex factually, legally and logistically. Although a lot of work has already been done to identify and explain the various transactions comprising the investment schemes, that has largely been done in the SFO prosecutions and the parties to this proceeding have not had on opportunity to put their case on a number of the matters addressed in the judgments in that case. In particular the circumstances of individual defendants have not been examined. b) Whilst accepting that this is not "a tax case" it nevertheless involves consideration of commercial structures and transactions which are seen to give the complexity warranting category 3 classification in tax cases. In particular, the Court will need to consider the purpose and effect of the schemes, both in principle and in fact, and come to conclusions as to the impermissible circularity of funds which eliminated the intended tax benefits.c) I do not accept that the appropriate analogy is with leaky building cases. They tend to deal with well-known issues and roles. d) It seems likely that there will be difficult issues of conflict of laws at some point, given the provision for the agreements to be governed by Swiss law, and it may be necessary to consider the effect of the claimed deception and misrepresentation of New Zealand investors by reference to Swiss law. It also seems likely that the nature and actions of other foreign entities, crossing jurisdictions, will have to be taken into account. e) Further factual and legal complexity is introduced by the issues over the fiduciary arrangements between BNYIMBG and AGFL, and by the circumstances of the assignments to Totara. f) Whilst each of the aspects of case, when considered independently, may not necessarily warrant the specialised skill or experience of category 3, the combination of all of them in the one proceeding does in my view warrant that higher level of skill and experience, particularly as the case is prepared for trial. g) The logistics of managing a multi-party, multi-level case, with substantial inter-relationship between the various parties, also warrants the higher level of skill and experience. h) The proceeding warrants the overview and direction of senior counsel taking into account all of these factors. i) Counsel for the defendants/third parties estimate that the length of time that will be required to hear this proceeding is likely to be in the order of six weeks. I accept that this is a factor pointing towards the need for special skill and experience (in the management of a lengthy trial).j) Although not compelling, I also consider that there is likely to be a general public interest in a proceeding such as this in these economic times. [90] Counsel for Totara invited me to treat this as an appropriate category 2 classification because it would still be possible to reclassify particular stages as category 3. The converse can of course apply if I reclassify as category 3. That general categorisation does not stop the Court treating a particular step (for example, a straightforward discovery application) as requiring counsel of only average skill and experience. In my view that is the more appropriate course in this case. [91] Both sides invited me to treat the position of the other as tactical. I am sure that there are some tactical considerations involved, but I do not see this as a basis for deciding the matter one way or the other. [92] I am satisfied that special reasons exist, and that the proceeding should be reclassified generally as category 3 for the purposes of r 14.3 of the High Court Rules.Costs[93] Counsel ask that costs of this application be reserved, and addressed following issue of my decision. Counsel are to file memoranda (or preferably a joint memorandum) with proposals for dealing with costs. ____________________Associate Judge Abbott