(29 November 2024)

Home | Databases | WorldLII | Search | Feedback High Court of New Zealand Decisions You are here:   NZLII >> Databases >> High Court of New Zealand Decisions >> 2024 >> [2024] NZHC 3600 Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help Flooks v Cooper Aitken Limited [2024] NZHC 3600 (29 November 2024) Last Updated: 9 December 2024 IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE CIV-2023-419-287 [2024] NZHC 3600 BETWEEN TRACEY MAY FLOOKS Plaintiff AND COOPER AITKEN LIMITED Defendant Hearing: 7 October 2024 Appearances: B Gustafson for the Plaintiff M Russell and J Ryan for the Defendant Judgment: 29 November 2024 JUDGMENT OF ASSOCIATE JUDGE SUSSOCK This judgment was delivered by me on 29 November 2024 at 4 pm pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar Solicitors: Speakman Law, Auckland FLOOKS v COOPER AITKEN LTD [2024] NZHC 3600 [29 November 2024] Introduction [1] The defendant has applied for security for costs in the amount of $30,000 on the grounds that the plaintiff is not resident in New Zealand. [2] A security for costs award is available where the party bringing the claim is either impecunious or is resident out of New Zealand. Once that threshold has been met, the court has a wide discretion including not to make an order if to do so would put an end to an otherwise meritorious claim. Staged orders for security are common. [3] The plaintiff opposes any security for costs order on the basis that the case law establishes that if a person is resident outside of New Zealand but has realisable assets inside New Zealand to satisfy an adverse costs award, then security will not be ordered. [4] The statement of claim records that the plaintiff lives in Cannes, France. However, she explains in her affidavit that she is currently living there to support her daughter’s tennis career, describing herself as born and bred in New Zealand. The plaintiff deposes that she owns an apartment in Parnell, Auckland in her personal name and annexes to her affidavit a current rates valuation recording the capital value as $920,000. The plaintiff’s evidence is that there is a $190,000 loan secured by a mortgage over the property so there is sufficient equity to meet any costs award. [5] I set out the background and the relevant legal principles below before considering whether a security for costs order ought to be made. Background [6] The plaintiff, Tracey Flooks (Tracey), 1 her mother (Kay), her sister (Mandy), her brother (Trevor) and now retired accountant (Barrie Price) were all appointed executives of the estate of her father, the late Kevin Flooks. Kay, Mandy, Trevor, Tracey, and Debra (the sister of Tracey, Mandy and Trevor) are also beneficiaries of the estate. I refer to the parties involved by their first names to avoid confusion but intend no disrespect in doing so. [7] For some years prior to 2014, Barrie Price and Barrie Price & Associates (BPA) provided accountancy services to various members of the Flooks family and entities related to them. [8] In 2014, the defendant, Cooper Aiken, purchased the client list but not the business of BPA. Since 2014, Cooper Aiken has provided tax and financial reporting services to various of the Flooks’ entities. Cooper Aiken submits that its first engagement for any of the Flooks’ entities was in 2014, after it had purchased BPA’s client list. After that acquisition, Barrie Price worked for Cooper Aiken as an employee for 12 months. When Barrie Price retired, his and BPA’s uncatalogued client records remained in Cooper Aiken’s storage facility. [9] Counsel for the defendant explains that there has been a longstanding dispute amongst the Flooks family, which it is submitted provides important context to the current proceeding. Counsel refers to the judgment in Oaklane Dairy Ltd v Flooks for the factual background. 2 [10] As recorded in that proceeding, in 2008, Trevor and his wife purchased a farm from Kevin and Kay which operated as Oaklane Dairy Ltd (Oaklane). The purchase was financed partly through a loan from Kevin and Kay. After Kevin’s death, the loan was repaid, and Oaklane required the administrators to discharge the mortgage so it could be removed from the title. Of the administrators, only Tracey opposed the mortgage being discharged, on the basis of her concern that the estate might still be owed sums due under the mortgage. [11] Oaklane brought proceedings against the administrators (including Tracey) and against Tracey personally, in which the judge found that the sums had been repaid in full and made a declaration to that effect. The administrators were ordered to pay Oaklane costs. Subsequently, the judge awarded Oaklane and Kay (for the administrators) increased costs against Tracey on the basis that although Tracey’s initial challenge to repayment of the mortgage was justified, that justification became harder to maintain in the face of evidence from Kay confirming the oral variations to 2 Oaklane Dairy Ltd v Flooks [2023] NZHC 1852. the mortgage. 3 The Judge concluded that in the circumstances Tracey ought to personally bear the costs awarded after the date that evidence was provided. [12] In 2023, Tracey commenced these proceedings and proceedings against her father’s solicitors, Miller Poulgrain, in her capacity as both beneficiary and executor at that stage of Kevin Flooks’ will. [13] The proceedings arise from the allegation that since Kevin Flooks’ death in August 2020, the other executors administered the estate without the agreement of Tracey in circumstances where the executors and administrators of an estate are required to act unanimously. [14] In April 2024, the executors were replaced by an independent executor, Henry Brandts-Giesen, by court order. [15] Tracey says that until the appointment of Mr Brandts-Giesen, Cooper Aitken was purporting to carry out work for the executors of the estate, including Tracey, and seemed to be billing Kay on behalf of the estate for that work despite Tracey not having agreed as executor for Cooper Aitken to undertake any work. [16] Tracey submits there is also a question as to who truly benefitted from Cooper Aitken attendances with Tracey having little idea of what Cooper Aitken was doing and not having instructed Cooper Aitken to attend to work on matters relating to the estate or indeed on any other matter. [17] Tracey pleads that Cooper Aitken also provides accountancy services for Kay, Trevor and Mandy and their respective entities and advised Kevin when he was alive. Tracey has concerns about potential conflicts between Cooper Aitken’s role as accountant for Kevin, Trevor, Kay and Mandy and its role as accounting advisor to the estate. As a result of those concerns, Tracey sought copies of documents in Cooper Aitken’s possession relating to work for the estate. Cooper Aitken said in reply it would only supply these records if Tracey paid for Cooper Aitken’s staff time and attendances in providing them. 3 Oaklane Dairy Ltd v Flooks [2023] NZHC 3223. [18] Counsel for Tracey submits that her concerns about Cooper Aitken purporting to act for all of the executors without her authority, its failure to supply information and acting in a potential conflict lead to the issue of this proceeding. [19] By contrast, the defendants’ submit that Tracey commenced these proceedings only after refusing to agree to meet the costs of Cooper Aitken in manually searching boxes held in storage to identify and copy the demanded documents. [20] Relevantly to Tracey’s claim, on 7 August 2024, Mr Brandts-Giesen confirmed that in his view Cooper Aitken was not retained by the executors on behalf of the estate. He advised Tracey however that he would not be assuming the plaintiff’s position as the current executor against Cooper Aitken in this proceeding. Tracey is therefore continuing this action as beneficiary only (although presumably the claim will relate to the period when she was an executor). [21] At the time of this hearing, it was not clear whether Cooper Aitken would sue the estate for the fees they claimed to have incurred as accountants for the executors between August 2020 and April 2024. Security for costs principles [22] Rule 5.45 of the High Court Rules provides: 5.45 Order for security of costs (1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,— (a) that a plaintiff— (i) is resident out of New Zealand; or ... (b) that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding. (2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs. (3) An order under subclause (2)— (a) requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient— (i) by paying that sum into court; or (ii) by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and (b) may stay the proceeding until the sum is paid or the security given. ... [23] An application under r 5.45 involves the Court addressing the following questions: 4 (a) Has the applicant satisfied the court of the threshold under r 5.45(1)? (b) How should the court exercise its discretion under r 5.45(2)? (c) What amount should security for costs be fixed at? (d) Should a stay be ordered? [24] The Court of Appeal in McLachlan Ltd v MEL Network Ltd cautioned with respect to the discretion under r 5.45: 5 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. Has the applicant satisfied the court of the threshold under r 5.45(1)? [25] The statement of claim filed by the plaintiff sets out her address as being Cannes, France. In addition, Tracey’s evidence in the affidavit filed in support of her opposition is: My husband and I are currently in Cannes as our daughter is pursuing a tennis career and is currently training there. I am a New Zealander 4 Busch v Zion Wildlife Gardens (in rec and in liq) [2012] NZHC 17 at [2] . 5 McLachlan Ltd v MEL Network Ltd [2002] NZCA 215 ; (2002) 16 PRNZ 747 (CA) at [13] . born and bred and my home was the Piggery Cottage until Trevor took possession of it. [26] There is no question that the threshold test is therefore met as Ms Tracey’s own evidence is that she is currently resident in France. How should the Court exercise its discretion under r 5.45(2)? [27] As set out above, Tracey’s evidence is that she owns an apartment on the Strand in Parnell, Auckland for which she has attached the rates valuation recording the capital value as $920,000. Tracey deposes that there is a $190,000 loan secured by a mortgage over the property and so there is significant equity. Tracey’s evidence is that the property is in her personal name. [28] In addition, Tracey says that she is owed a debt from her father’s estate of $200,000 plus she is entitled to receive 29 per cent of the balance of the estate. She says the estate has a value of at least $4.3 million. [29] Tracey submits therefore that she has significant assets within the New Zealand jurisdiction and a security for costs order ought not to be made. [30] McGechan on Procedure records that: 6 Security will not be ordered from an overseas resident who owns substantial property in New Zealand providing it is of a permanent nature, not easily removable from the country, and not under threat or subject to enforcement procedures... [31] The key asset is the property on the Strand in Parnell as this is a current asset and is of a permanent nature. On the evidence before the Court, the available equity in this property is approximately $700,000. Even if the rating valuation is generous, there appears to be sufficient equity to meet any costs award. Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HHR5.45.06(3)], citing Neely v Attorney-General [1984] 2 NZLR 636 (CA); Jalfox Pty Ltd v Motel Association of New Zealand Inc [1984] 2 NZLR 647 (HC); and Bolton v New Zealand Insurance Co Ltd [1993] NZHC 1145 ; (1993) 7 PRNZ 71 (HC). [32] Counsel for the defendant submits that this property could be further encumbered or sold so should not be relied on. Tracey’s counsel says in response that this is a possibility with any plaintiff. The usual plaintiff however will be resident in New Zealand so such steps would not reduce the ability to enforce any costs’ award. [33] Counsel for the defendant further submits that it is important to read on in Neely v Attorney-General , one of the cases cited in McGechan above, as to the types of assets that are substantial property. [34] The assets in issue in Neely were five aircraft which had recently been flown out of the jurisdiction. McMullin J discussed with approval the decision in Clarke v Barber where an order for security had been made in a case where the plaintiff lived abroad but rented a premises in London at 200 pounds per annum and had stock there to the extent of 850 pounds per annum. 7 In that case, the property was not found to be sufficient as the lease had almost run out and the property might be made away with long before the litigation was finished. [35] In my view, the Court of Appeal in Neely clearly held that if there were sufficient assets of a permanent nature within the jurisdiction then a security for costs order ought not to be made and that the ownership of the Parnell apartment would have been substantial property in the Court of Appeal’s view. Other cases have since followed that approach, as referred to in the McGechan on Procedure extract above. There appears no basis for not doing so here. [36] The defendant’s evidence that she owns an apartment in Parnell in her personal name worth approximately $920,000 over which there is a $190,000 loan secured by a mortgage is not disputed. I am therefore satisfied that there is no basis to grant the defendant’s application for security for costs. [37] However, as the reason why a security for costs order is not appropriate in this case relies on ownership of the Parnell apartment and there being sufficient equity in it to meet any costs award, I include a direction below that the plaintiff file and serve a memorandum if she intends to dispose of her personal interest in the property or 7 Clarke v Barber (1890) 6 TLR 256. otherwise encumber the property so that less than $100,000 equity remains. Leave is reserved to the defendant to reapply if that occurs. A similar approach was taken in Feng v Sea Tx Property Ltd although an undertaking was required in that case. 8 I consider a direction ought to be sufficient, particularly as this approach was not discussed at the hearing. Result and orders [38] The defendant’s application for security for costs is declined. [39] I direct that the plaintiff file and serve a memorandum at least four weeks prior to taking steps to dispose of her personal interest in the property located in Parnell, Auckland or to encumber it so that there is less than $100,000 equity remaining. [40] Leave is reserved for the defendant to reapply for security of costs if the plaintiff files the memorandum as directed above. Costs [41] I ask the parties to confer and only if agreement cannot be reached to file memoranda, on behalf of the plaintiff by 20 December 2024 and the defendant by 24 January 2024 . Associate Judge Sussock 8 Feng v Sea Tx Property Ltd [2020] NZHC 1276. 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