Application for security for costs — liquidation proceedings — impecuniosity — High Court Rules 2016, r 5.48 — Companies Act 1993, s 261 — Highgate on Broadway Limited v Devine [2012] NZHC 2288. The defendant made an application for security for costs against the plaintiff, a company in liquidation, of which the defendant had been a director and shareholder. The liquidator had brought proceedings against the defendant claiming a debt of $40,791.36, based on a reconstruction of the shareholders' current account from company records. The defendant sought security for costs on the basis that if the company was unsuccessful in its claim against him, he would have no prospect of recovering his costs due to the company's acknowledged impecuniosity. The application was based on claims that the information relied upon by the liquidator was unreliable and based on unsupported assumptions, that a true reconciliation of accounts would demonstrate the defendant is actually owed money by the company, and that if a debt based on a shareholder's account could be established then there was nothing to sheet any liability to the defendant as he was not the only shareholder. The Judge noted that the starting point for analysis is High Court Rule 5.48, which provides that where the Court is satisfied there is a reason to believe the plaintiff will be unable to pay the defendant's costs where the plaintiff is unsuccessful, the Court may "if it thinks fit in all the circumstances" order security for costs. If the Judge is satisfied the plaintiff will not be able to meet costs, the Court must strike a balance regarding: (a) The merits of the plaintiff's claim; (b) Whether ordering security would deprive the plaintiff of the capacity to advance a prima facie meritorious claim; (c) Whether the defendant's actions, which are the subject of the cause of action, caused the plaintiff's impecuniosity; (d) The public interest. The Judge considered each of the grounds , concluding that the application rested on the prima facie assessment of the merits of company's claim, determining that this assessment favoured the defendant. However, that assessment was based on the information and analysis provided by the defendant's son, the director and shareholder of the company, that the Liquidator had not yet assessed in a detailed way. The Judge noted that the Liquidator had the ability to obtain records and documents using his statutory powers under the Companies Act , s 261. It was held that, in a preliminary way, the defendant's application for security of costs was made out, subject to the Liquidator taking steps to obtain the relevant documents to assess the bona fides of the defendant's payments. The application was adjorned for the Liquidator to undertake an investigation in terms of s 261. Judgment Date: 7 November 2018.