W L ACE-KIRKER AND M L BAKER AS TRUSTEES OF THE UTOPIA FAMILY TRUST v J PIPER [2017] NZHC 2827

W L ACE-KIRKER AND M L BAKER AS TRUSTEES OF THE UTOPIA FAMILY TRUST v J PIPER [2017]NZHC 2827 [17 November 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV 2016-404-000500[2017] NZHC 2827BETWEEN WAYNE LIONEL ACE-KIRKER ANDMICHELLE LOUISE BAKER ASTRUSTEES OF THE UTOPIA FAMILYTRUSTPlaintiffAND JAMES PIPERDefendantHearing: 17 November 2017Appearances: K Robinson for the PlaintiffAJB Holmes for the DefendantJudgment: 17 November 2017ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN[1] Issues between the parties concern the plaintiff's engagement of the defendantin about July 2004 to represent Mr Ace-Kirker and obtain IP protection in relation toinventions including locks and locking devices for the transport industry.[2] Ms Denise Tyrer-Harding, a patent attorney, was at that time employed byPipers Patent Attorneys (Pipers), a specialist intellectual property firm. The plaintiffclaims Ms Tyrer-Harding was responsible for acting for Mr Ace-Kirker. The plaintiffpleads that between 2005 and 2006 Ms Tyrer-Harding on behalf of Mr Ace-Kirker asa trustee of the Utopia Family Trust (UFT), filed patent applications in 10 regionsincluding New Zealand, India, Australia, South Africa, USA, Canada, Europe, China,Singapore, and Hong Kong.[3] On or about 26 May 2005 Mr Ace-Kirker assigned his IP rights in relation tothe inventions to the UFT.[4] The plaintiff says that until February 2010 Mr Ace-Kirker on behalf of the UFTpaid all fees owing to the defendant in accordance with the fees agreement – by whichMs Tyrer-Harding was to be the person at all times acting for Mr Ace-Kirker and inrespect of which services fees were recorded in a costing strategy document writtenby Ms Tyrer-Harding on 7 July 2004.[5] On or about 23 February 2010 Ms Tyrer-Harding went on leave and Pipersengaged another employee to complete work during that time for Mr Ace-Kirker. It ispleaded between March and April 2010 Pipers rendered additional invoices totallingapproximately $82,730.88 for work dating back to 1 November 2004. Such invoiceswere, Mr Ace-Kirker says, in breach of the costing strategy and the parties' contractof retainer.[6] Issues arose between the parties. The plaintiff disputed most of the invoicesrendered. Pipers responded that "it would write to all its agents in the relevantcountries advising they no longer acted for Mr Ace-Kirker, and that Pipers would beretaining the files until the outstanding accounts had been paid".[7] Pipers contacted its agents in overseas jurisdictions and, in effect instructedthose agents to close their files and incur no further costs in relation to them. Thoseagents replied inter alia, confirming no further action would be taken and the patentwould lapse.[8] A dispute arose between the parties regarding Mr Ace-Kirker's right to accessPipers' files.[9] In October 2010 Pipers rendered additional invoices to Mr Ace-Kirker totalling$87,393,90 for work dating back to July 2003. In December 2010 Pipers filed a claimin the District Court at Auckland seeking $170,124.78 plus costs and interest, inrespect of the March and October invoices.[10] That proceeding was defended and subsequently the parties entered into asettlement agreement in which all disputes over invoices were resolved. Subsequentlythe plaintiff lost all the international patents, in New Zealand and in other jurisdictions.[11] The plaintiff pleads claims of a breach of contract and in particular, regardingtwo of the obligations it says Pipers had to them as his patent attorneys.[12] The plaintiff also pleaded negligence claiming a breach of duty to exercisereasonable skill and care in the performance of its duties. Finally, it is pleaded Pipersowed the plaintiff fiduciary duties to act in its best interest and in good faith towardsthe plaintiff.[13] By Mr Piper's statement of defence he pleads this proceeding concerns thesame facts and issues raised by the Piper's proceeding under CIV 2010-004-2863regarding which on 16 August 2013 the parties signed an agreement recording theirfull and final settlement in relation to that proceeding. The statement of defence notesthat as part of the settlement on 6 August 2013 Mr Ace-Kirker swore an affidavit as tohis financial means. Mr Piper says that proceeding was discontinued on theunderstanding and belief that the issues which led to the proceeding had been resolved.This proceeding is, he claims, an attempt to reopen those issues and relitigate the facts.It is also claimed the proceeding is an abuse of process and/or is Limitation Act barred.[14] The present application by Mr Piper for security for costs was filed on 14 July2017. It seeks that the plaintiff pays security in the sum of $35,000 and for theproceeding to be stayed pending that payment being made.[15] The application pleads the plaintiff is impecunious and the claims are ofdubious merit.[16] It is claimed neither Mr Ace-Kirker nor UFT would be able to pay costs if itsproceeding was unsuccessful.[17] It is Mr Piper's case that the claim is based on alleged breaches of duty said tohave occurred after the plaintiff's retainer was ended on 25 March 2010. Claims ofalleged breach could not, Mr Piper says, have caused any loss of patents because theplaintiff could maintain his patents and was not prevented from doing so by Mr Piper.[18] It is claimed that the proceeding is just an attempt to reopen issues and relitigatefacts which have been resolved and settled.[19] Mr Holmes, counsel for Mr Piper refers to the decision of Associate Judge Bellwhen on 21 February 2017 His Honour heard Mr Piper's application for summaryjudgment in relation to this proceeding. By that application, Mr Piper alleged, interalia:(a) The claim was barred by terms of their 2013 agreement; and it was anabuse of process;(b) That the UFT trustees did not have any standing to sue;(c) That he did not breach any professional duties because the retainerterminated at the end of March 2010; and(d) The plaintiff did not suffer any loss, Mr Ace-Kirker having had theopportunity to maintain his patents and was not prevented from doingso.[20] Associate Judge Bell indicated that while the claim was weak, it was notsufficiently weak enough to allow the entry of summary judgment on defence.[21] By their memoranda counsel have again, in length, addressed claims ofstrength and weakness. In the Court's assessment, there is little by those assessmentsthat persuades this Court to any other conclusion than that reached by His HonourJudge Bell. It follows that the Court's primary focus here should be upon otherelements routinely addressed by security for costs applications.Principles[22] Security may be ordered if:(a) There are reasons to believe a plaintiff is unable to pay the costs of thedefendant if the plaintiff is unsuccessful in its proceeding (HCR 5.45(1)(b)); and(b) The Judge thinks it is just in all the circumstances (HCR 5.45(2)).(c) If the Court considers security should be ordered then the Judge shoulddirect how that be provided, and whether the proceeding ought to bestayed until it is provided.Reason to believe plaintiff will be unable to pay costs if unsuccessful[23] The applicant needs to provide evidence of a plaintiff's inability to pay costs.It is not a matter that requires proof but rather that there is very good reason to thatsecurity should be ordered.[24] Mr Robinson for the plaintiff submits there is no evidence of an inability topay costs. Mr Ace-Kirker has not and has never been bankrupted and has not defaultedon payment of amounts owing to anyone. He is not in receipt of legal aid nor a partyto any litigation funding agreement. He has financed this litigation thus far. He hasnot defaulted in previous costs orders. There is no evidence he is disposing of assets.[25] Although Mr Ace-Kirker is presently unable to pay security if ordered in theamount claimed, the Court should not, counsel submits, accept that Mr Ace-Kirkerwill not be able to pay the costs award at some time in the future.[26] Counsel submits an award of security is likely to impact on Mr Ace-Kirker'sability to fund this proceeding and this would cause a denial of access to justice.[27] Counsel submits the Court's exercise of discretion involves a balancing ofcompeting interests. That an award of costs might cause difficulties for Mr Ace-Kirkerin pursuing this proceeding.Considerations[28] There is credible evidence that the plaintiff trust would not be able to pay costsif unsuccessful. Affidavit evidence from Ms Tyrer-Harding and Mr Ace-Kirkerconfirms the trust has no assets or income and, that the trust is in "a poor financialposition". Although the trust pleads that Mr Ace-Kirker assigned his IP rights to thetrust, Mr Ace-Kirker's evidence deposes that no money or property was ever creditedto the trust and, that all intellectual property remained in his name, and that the trustmerely had a right to rewards from the intellectual property, and that there had beenno rewards.[29] Nor, does it appear Mr Ace-Kirker has assets in his trust's proceeding. Hedescribes himself as a beneficiary. In 2013 he stated his assets totalled $9,500 and thathe was receiving a benefit from WINZ in respect of a back injury. His affidavit inopposition to the security for costs application confirms he would presently be unableto pay security for costs.[30] These applications contemplate a balancing exercise being undertaken. Theclaim appears to face pleadings and evidence issues and in that regard claims of lossof chance offer a significant challenge. In issue is:(a) Whether the plaintiff held any rights to receive any future income fromthe patents; and(b) Whether Mr Piper caused the impecuniousity of Mr Ace-Kirker.Clearly if he did then it would be unjust for security to be awarded.[31] Mr Ace-Kirker thinks Pipers' actions contributed to his present financialsituation – that it was a direct cause of the loss of patents and the patent applicationfor various inventions that would have allowed Mr Ace-Kirker exclusivity regardingthose and the ability to earn money from the IP. In addition, it is claimed Pipers'actions prevented him from earning potentially considerable amounts of money andthat his job prospects had also been affected.Conclusion[32] At best, for present purposes, the Court considers any assessment of prospectsof success is far from clear.[33] The acceptable evidence is that the plaintiff is presently unable and, in theabsence of evidence to show otherwise, can therefore be treated as being unable to paylitigation costs if unsuccessful.[34] In the Court's view it is appropriate to award security for costs.[35] Mr Holmes for Mr Piper calculates that costs on a 2B basis, and estimating thata six-day trial would be required, would be no less than $51,000. The defendantrequests security be lodged in the sum of $35,000.[36] Mr Robinson for the plaintiff suggests that if security is ordered that it beprovided for in tranches with the first tranche covering through to the end of thediscovery phase. In counsel's estimate on a 2B basis that sum would be $18,000.[37] The Court agrees that security be fixed in the sum of $35,000 and that this beprovided in tranches.[38] The first tranche requires the sum of $15,000 to be paid into Court and to beheld on interest bearing deposit. Until paid, this proceeding will be stayed.[39] The balance of $20,000 is to be paid by the close of pleadings date.Costs[40] These are fixed on a 2B basis and shall be payable at the conclusion of thisproceeding.Associate Judge Christiansen