Sainsbury Logan & Williams v Bell

[2014] NZHC 221

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2009-091-197 [2014] NZHC 221

BETWEEN  SAINSBURY LOGAN & WILLIAMS Plaintiff

ANDROBERT ARTHUR BELL Defendant

Hearing:                   18 February 2014

Counsel:                  I J Law for Plaintiff

R A Bell (in person) Judgment:   19 February 2014

JUDGMENT OF WILLIAMS J

[1]      The plaintiff law firm sues the defendant to recover unpaid legal fees in a sum somewhat less than $3,900.  The defendant counterclaims pursuing 14 causes of action in contract and negligence.  The overall value of those counterclaims is of the order of $1.3 million.

[2]      The plaintiff now seeks an order for security for costs as provided by r 5.45 of the High Court Rules.  The plaintiff points to bankruptcy proceedings issued by a judgment creditor, BDO Manawatu Limited.  This, the plaintiff says, means that it appears the counterclaimant will be unable to pay the plaintiff ’s costs in the event that the counterclaims fail.   That threshold test in the rule being met, the plaintiff argued that it is ‘just’ to impose security for costs.

[3]      For two reasons, I do not consider that such an order can be justified.  The first is factual. At the end of the hearing before me, Mr Bell produced an affidavit in relation to his “claimed impecuniosity”.  The affidavit attached evidence from five

bank  accounts  currently  containing  funds  in  New  Zealand,  Australian  and  US

SAINSBURY LOGAN & WILLIAMS v BELL [2014] NZHC 221 [19 February 2014]

dollars.  The cumulative total of these funds (in New Zealand dollars) is $815,658. The annexed account documents suggested that these liquid funds had been  on deposit  in  these  accounts  since  last  year.    The  funds  all  seemed  to  be  held  in Mr Bell’s personal name.

[4]      It must follow that the threshold requirement in r 5.45 is not met.

[5]      Even if that were not so, I would not have been minded to make the order sought.   In Oceania Furniture Limited v Debonaire Products Limited,1  Clifford J took the view as a general proposition, that “whereas security for costs may be ordered  on  what  is  in  substance an  independent  counterclaim,  they will  not  be ordered where the counterclaim is in effect a defence to the plaintiff’s claim.”2

[6]      A number of the heads of counterclaim are loss of chance actions in contract and tort.  These are too remote from the original claim by Sainsbury Logan to be treated as, in substance, a defence to it.  The first and eighth causes of action are different however.  They claim $188,000 in wasted litigation expenditure because, Mr Bell argues, Sainsbury Logan failed to advise him until the day of trial that an aspect of the claim upon which he relied, lacked merit.  Those heads of claim are indeed defences in substance.  They essentially say that Mr Bell is not liable to pay the $3,900 in outstanding fees because, in breach of legal duty, Sainsbury Logan failed to prosecute the litigation competently.

[7]      Mr Law for the plaintiff, invited me to make an order for security for costs in respect of other causes of action even if that analysis was correct with respect to the first and eight causes of action.  I would not be minded to do that even if there was a real suspicion that Mr Bell is impecunious.  I must still be satisfied that making such an award is just in the circumstances.   In my view the marginal advantage to this proceeding in imposing security for costs on those matters would not have been sufficient to make such orders just in any event.   I of course express no view

whatever on the merits of the counterclaims.  My focus is on their character only.

1  Oceania Furniture Limited v Debonaire Products Limited HC WN CIV-2008-485-1701, 24 April

2009.

2 At [9].

[8]      The application is dismissed accordingly.

[9]      That leaves timetabling matters now to be dealt with.  There is a firm four day  fixture  to  commence  on  31 March  2014.    There  have,  until  now,  been  no timetabling orders and while the plaintiff has circulated its pro forma evidence with respect to the small debt claims, Mr Bell has circulated no evidence in respect of his expansive counterclaims.

[10]     Mr Law accepts that there is no prospect of this matter being in a position to proceed on the fixture date.   That is unfortunate.   It is a circumstance which, on reflection, could have been avoided.   Nonetheless, the parties are of the view that time could usefully be taken up during those four days in a settlement conference before an Associate Judge.  I am advised that an Associate Judge is available.  I now set down the matter for a judicial settlement conference to commence at 10am on

31 March accordingly.

[11]     The parties will exchange statements covering primary fact evidence.  Only two statements are necessary at this stage – those of Mr McFarlane and Mr Bell – Mr Bell’s   is   to   be   provided   to   the   plaintiff   by  Wednesday  19 March   and Mr McFarlane’s by Wednesday 26 March.

[12]     Costs are reserved.

Williams J

Solicitors:

DLA Phillips Fox, Auckland

cc: Mr R A Bell