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MBf Bank Ltd v Fonua [2004] TOLawRp 63; [2005] Tonga LR 25 (25 March 2004)

IN THE LAND COURT OF TONGA
Land Court, Nuku'alofa

LA 11/2003

MBf Bank Ltd

V

Fonua anor

Ward CJ
26 February 2004; 25 March 2004

Civil procedure – application for security for costs – by plaintiff – application refused

The plaintiff sought a declaration of its right to land in respect of which it held a mortgage. The mortgagor defaulted and absconded so the plaintiffs took action to obtain possession of the property. However, the first defendant claimed to be the present lessee of the land and took possession of it thereby prompting the need for action. The plaintiff applied for security for costs against the first defendant. Counsel for the plaintiff accepted it was unusual for the plaintiff to make such an application but suggested the court may properly make such an order in circumstances such as are found in this case. He suggested that, although the Bank was the plaintiff, it was forced to defend its position in relation to the leased property by the unlawful acts of the defendant and therefore found itself in the position of a reluctant plaintiff. The defendant submitted that the rule limited such an order to payment by a plaintiff of the likely costs of the defendant.

Held:

1. It may well be that the actions of the first defendant forced the plaintiff to protect its interests by bringing this action but that did not place it in the position of a defendant. Many actions that sought civil remedies in court were based on an alleged infringement of the rights of the party that brought the action and were brought as the only way to protect those rights. If the plaintiff's argument in this case was correct, anyone who brought such a case could claim to have been forced into the position of a plaintiff thus allowing him to seek security as if he was a defendant.

2. An intended plaintiff must take the defendant as he found him and must determine the value of pursuing him before bringing the action. The application was refused with costs to the first defendant in any event.

Rules considered:

Land Court Rules 1991

Supreme Court Rules 1991

Counsel for plaintiff : Mr Afeaki
Counsel for defendants : Mr Niu

Ruling

The plaintiff seeks a declaration of its right to land in respect of which it held a mortgage. The mortgagor defaulted and absconded so the plaintiffs took action to obtain possession of the property. However, the first defendant claims to be the present lessee of the land and has taken possession of it thereby prompting the need for this action.

The plaintiff has now applied for security for costs against the first defendant. Counsel for the plaintiff accepts it is unusual for the plaintiff to make such an application but suggests the court may properly make such an order in circumstances such as are found in this case. He suggests that, although the Bank is the plaintiff, it has been forced to defend its position in relation to the leased property by the unlawful acts of the defendant and therefore finds itself in the position of a reluctant plaintiff. The Land Court Rules 1991, make no provision for payment of security for costs but, by Order 2 rule 2, the procedure set out in the Supreme Court Rules shall apply.

The circumstances in which such an order may be made under the latter Rules are set out in Order 17, rule 1:

"Rule 1. Where on the application of a defendant to any proceeding it appears to the Court that:

(i) the plaintiff is ordinarily resident out of the jurisdiction, or

(ii) the plaintiff may be unable to pay the costs of the defendant if ordered to do so, or

(iii) the plaintiff has not disclosed his true address to the Court,

the Court may, if having regard to all the circumstances of the case it thinks just to do so, order that the action be stayed until the plaintiff gives security for the defendant's costs of the action in such sum and in such manner as the Court may determine."

Rule 2 provides only for variation of an order once made. The wording of that rule clearly limits such an order to payment by a plaintiff of the likely costs of the defendant. Mr Niu, for the first defendant, submits that is an end of the matter in this case.

Mr Afeaki, for the plaintiff, submits that the plaintiff is de facto acting as a defendant. It had no choice but to act by filing a claim because the first defendant had taken the law into his own hands and unlawfully entered into possession of the land.

The plaintiff was, he suggests, forced to use the sword of the law as a shield to protect its rights.

When the original application was lodged it was supported by an affidavit from the Head of Credit Operations from the plaintiff bank in which she deposed to her belief that the first defendant was resident in New Zealand and that it was not he who was occupying the property but his relatives.

When the application for security for costs was first filed, the court set a chambers hearing for 20 February 2004 but that was altered to 26 February when counsel for the plaintiff, who is normally resident in New Zealand, was in difficulty over the first date as the result of a clash of fixtures.

On 19 February 2004, the first defendant filed written submissions in opposition and the application was heard in chambers. I reserved my ruling on the application until 18 March 2004 but, on 11 March 2004 the plaintiff filed further submissions in support of its application. No formal application for leave was made but the submissions requested leave in these terms:

"3. Counsel was somewhat surprised that at Chambers, His Honour called for submissions on the matter of the present application. This is because Counsel had filed a Notice of Motion for a hearing in the belief that His Honour was going to set the matter down for a hearing with evidence and cross-examination if necessary of the Plaintiff's witness, Mrs Hala'api'api, and of any other witnesses, such as the First Defendant.

4. ....

5. Counsel also notes that His Honour believed that some further investigation of the matter was warranted and therefore deferred ruling on the matter until 18 March 2004.

6. Therefore in the circumstances at Chambers on 26 February, Counsel was not prepared to make full submissions and therefore seeks the Court's leave to accept these supplementary submissions in support of the Application and the Affidavit to be filed in support hereof."

I find this a remarkable statement. This was an interlocutory application and the opposition of the first defendant was based on a submission of law. It would only be in a most exceptional case that the court would seek to hear live evidence on such a matter. Counsel's duty is to attend any court hearing prepared to deal with the case in whatever manner the court wishes. The date of this hearing had been changed to allow counsel to attend from New Zealand, as he did. If he considered that the chambers hearing was simply to set a date to hear evidence, it was surprising that he should have considered it necessary or justified to attend in person. I find it equally remarkable what when the court stated that the ruling would be reserved, it was interpreted by counsel as demonstrating a belief that the court felt some further investigation of the factual matter was warranted.

If counsel is not properly prepared for a hearing, the court will not usually allow further time. However, in view of counsel's frank admission that he had misunderstood the procedures here in Tonga, I have read his further submission and the further affidavit in support. I have not sought further submissions from Mr Niu as I regard this decision as one of law and it is clear Mr Niu fully understood the basis of that submission by the plaintiff and was prepared to answer it on 26 February.

Mr Afeaki submits that the affidavits filed by the plaintiff show that, in terms of O17 r 1, the plaintiff has demonstrated that the first defendant has fallen foul of paragraphs (i) and (iii). In terms of paragraph (iii), Mr Afeaki submits that the first defendant "has not disclosed his true address to the Court, and appears to maintain that he is of Nuku'alofa, Kingdom of Tonga".

I find it difficult to understand how he can place the responsibility for that on the first defendant. The statement of claim described the first defendant in the title as "Paula Fonua of Nuku'alofa, Kingdom of Tonga" and, in paragraph 2, stated, "the first defendant is Mr Paula Fonua of Nuku'alofa". The defence continued, properly, to use the same title for the action and went on to admit the second paragraph. Presumably, at the time the writ was filed, the plaintiff intended to prove that fact if it had not been admitted by the first defendant.

Yet the plaintiff's second submissions for security for costs has an altered title in which the first defendant is described as "Paula Fonua of Auckland, New Zealand".

There has been no application to make such an amendment and it is a most unfortunate step for counsel to have taken without leave especially when it relates directly to one of the matters in dispute.

However, as I have already stated, the determination of this application is one of law first and foremost. It is only if I find that the Rules give me the power to accede to the plaintiffs application that I shall need to consider the evidence of the first defendant's circumstances or the merits of the claim -with which the second submission deals in some detail and which is not a matter for this stage in the proceedings.

Mr Afeaki frankly admits that the wording of O17 r 1 only gives the right to apply for security for costs to a defendant but he submits that the terms of O23 of the English Rules in force prior to 1998 should apply. Our O 17 is expressed in similar terms and was clearly derived from it. It is appropriate to set it out O 23 rr 1 and 2 in full:

"1. (1) Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court –

(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2) that the plaintiff's address is not stated in the writ or other originating process or is incorrectly stated therein, or

(d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation, then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just.

(2) The Court shall not require a plaintiff to give security by reason only of paragraph (1) (c) if he satisfies the Court that the failure to state his address or the mis-statement thereof was made innocently and without intention to deceive.

(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as references to the person (howsoever described on the record) who is in the position of plaintiff or defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.

2. Where an order is made requiring any party to give security for costs, the security shall be given in such manner, at such time, and on such terms (if any) as the Court may direct."

By O 2 r 2 (2) of the Supreme Court Rules in Tonga:

"(2) Where there is no provision in these rules the rules of procedure for the time being in England shall apply." The rules of procedure in England for the time being are the 1998 Civil Procedure Rules where security for costs is dealt with in rr 25.12 – 21.15. Much of the procedure there is similar to the previous order but there is no equivalent to O 23 r 1 (3).

However, Mr Afeaki relies on the terms of O 23 rule 1 (3) and not the present English rules although, surprisingly perhaps, he asks the court, when interpreting O 23, to apply the principles stated in r 1.1 of the 1998 rules under the heading "The overriding objective".

He states that his researches have not revealed why or when the wording of O 17 was changed from the original English O 23 and asks the court to accept that O 23 r 1 (3) should therefore apply.

I disagree. It is perfectly clear that the Tongan Rules were drafted in 1991 and, as has been stated, were based on the English rules. O 2 r 2 (2) is a saving provision to cover any area where our Rules are silent. A comparison of the wording of the English O23 and the Tongan O17 shows that the wording was modified presumably to suit the conditions here. As part of such a redrafting, I have no doubt the omission of r 1 (3) was deliberate. There is provision in our rules for security for costs and there is no reason therefore to invoke the saving of O 2 r 2 (2).

At the same time, it is always open to the court here to consider the rules from which the Tongan Rules were derived in order to decide the meaning or application of our rules and I have considered the English authorities relating to O 23 r 1 (3). I only add that, had I considered r 1 (3) did apply in Tonga, I would still have refused this application as the English authorities do not support the granting of an order in a case such as this The thrust of the plaintiff's application is that this is a case in which the plaintiff is effectively the defendant but was forced into the position of plaintiff in order to preserve its rights to the property in question. It may well be that the actions of the first defendant forced the plaintiff to protect its interests by bringing this action but that does not place it in the position of a defendant. Many and possibly the majority of actions seeking civil remedies in court are based on an alleged infringement of the rights of the party bringing the action and are brought as the only way to protect those rights. If the plaintiff's argument in this case is correct, anyone bringing such a case could claim to have been forced into the position of a plaintiff thus allowing him to seek security as if he was a defendant.

Any person contemplating pursuing an action in court must consider the means and substance of the person he is suing. He takes the defendant as he finds him and must determine the value of pursuing him before bringing the action.

The application is refused with costs to the first defendant in any event.