AP v Lucas

[2021] NZHC 2949

NOTE: ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2021-404-1513

[2021] NZHC 2949

BETWEEN

AP

Appellant

AND

COLIN JAMES LUCAS

Respondent

Hearing:

23 September 2021 (Via VMR)

Appearances:

L T Meys for the appellant

P J Stevenson for the respondent S A Grant for the interested party

Judgment:

2 November 2021

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 2 November 2021 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

AP v LUCAS [2021] NZHC 2949 [2 November 2021]

Introduction

[1]    The appellant, Ms P, appeals a costs judgment delivered in a Family Court proceeding.

The substantive proceeding

[2]    In the Family Court proceeding, Ms P sought further and better provision from her late father’s estate under s 4 of the Family Protection Act 1955 (the Act).

[3]    The deceased bequeathed to his widow, Ms L, an apartment, motor vehicle and other personal effects with a value of some $1 million. The deceased and Ms L had met two years before his death. They married a few days before the deceased passed away. Pursuant to an agreement under the Property (Relationships) Act 1976, Ms L was also paid $500,000 upon the deceased’s death.

[4]The deceased left Ms P some chattels of sentimental value, worth around

$10,000. The residue of the estate, then worth about $2.1 million, was left equally to Ms P’s two daughters (the deceased’s granddaughters).

[5]In the Family Court, there were three key issues:

(a)Had the deceased breached his moral duty to make provision for Ms P?

(b)If so, what further provision should be made for Ms P?

(c)From what source should that further provision be made?

[6]    Judge L J Ryan concluded there had been a breach of moral duty. He found that further provision ought to be made in favour of Ms P, but in a way that interfered as little as possible with the intentions of the deceased, particularly in relation to his widow Ms L. The Judge accordingly left the bequests to Ms L unchanged. In relation to the residue of the estate, Judge Ryan ordered that it be divided into thirds, with Ms P and the granddaughters each receiving one-third. This effectively increased Ms P’s share of the estate from around $10,000 to $700,000.

Costs judgment

[7]    After delivery of Judge Ryan’s substantive judgment, the parties made submissions on costs.

[8]    Ms L sought payment of 55 per cent of her actual costs from the residue of the estate. Ms P sought payment of her actual costs of $97,487.59. She sought an order either that Ms L pay 100 per cent of those costs or that Ms L contribute pro-rata to the costs of the estate, the granddaughters and Ms P. The respondent executor took a neutral position on costs.

[9]    In his costs judgment,1 Judge Ryan said Ms P had been successful. He said, referring to Fry v Fry,2 that it was no longer the invariable practice of the Court to order the costs of all parties be met out of the residue of the estate. He noted that any costs award in favour of Ms L from the estate would directly impact on the successful Ms P and her daughters. Also, if Ms P received an award of costs from the estate, that would directly impact the amount available for distribution. He therefore found, referring to the discretion he had in relation to the incidence of costs, that in the overall interests of justice the residuary beneficiaries should not bear any of the costs that had been claimed.

[10]   As to Ms P’s claim for a costs order against Ms L, the Judge said Ms L’s conduct of the proceeding had not greatly increased the costs to the other parties. He said he was a little critical of the volume of evidence filed by Ms L and her late acknowledgment that the deceased had breached his moral duty to Ms P. But those factors did not persuade him that an order for costs should be made against her in favour of Ms P.

[11]The Judge accordingly declined to make any costs order.

1      [P] v Lucas [2021] NZFC 637.

2      Fry v Fry [2016] NZFLR 713 (HC).

Ms P’s appeal

[12]    Ms P appeals Judge Ryan’s costs judgment. She says she should be awarded her actual costs of $97,487.59. Primarily she seeks an order that Ms L contribute to those costs, either as to 100 per cent or by bearing a pro-rata share of the costs (based on the value of Ms L’s bequests). Alternatively, Ms P seeks an order that the estate reimburse her for her actual costs.

[13]   Ms L opposes Ms P’s appeal insofar as Ms P seeks costs from Ms L. The executor opposes the appeal to the extent it would result in any reduction in the amount of the residuary estate. The granddaughters chose not to participate in the appeal.

Submissions

[14]   The starting point of Mr Meys, counsel for Ms P, was that Ms L should have been ordered to pay Ms P’s actual costs. Mr Meys submitted that Ms P’s (and the estate’s and the granddaughters’) costs were greatly increased by Ms L’s conduct of the proceeding. Ms L should have admitted at an early stage that there was a moral breach by the deceased. Instead she did not do so until closing submissions. Mr Meys said Ms L took other inappropriate steps.

[15]   Mr Meys’ alternative submission was that Ms P’s costs should be paid from the estate. The Judge’s only reason for refusing to order the estate to pay Ms P’s costs was that it was undesirable for the residuary beneficiaries to bear any of the costs. Mr Meys said the Judge did not take into account the size of the estate and that the granddaughters could reasonably expect to benefit from the award made to their mother.

[16]   Ms Grant, for Ms L, submitted Ms L had not failed with respect to the proceeding. Ms P had sought an order that any award to her be taken in part from the bequests to Ms L. Ms L had successfully resisted that order. As a matter of general principle there was therefore no basis for ordering Ms L to pay costs to Ms P. In any event, Ms Grant rejected the criticism of Ms L’s conduct of the proceeding.

[17]    Ms Stevenson, for the executor, submitted the Family Court had an absolute discretion as to costs and had exercised it so that none of the residuary beneficiaries were burdened by a costs order. Ms Stevenson supported the Judge’s decision not to order that Ms P’s costs be payable from the estate.

Decision

Scope of review of costs appeals

[18]   Mr Meys did not address the scope of appellate review of a costs decision. Ms Grant did. She referred me to the recent Court of Appeal decision Kinney v Pardington.3 In that judgment, the Court confirmed that questions of costs are ultimately a matter of discretion. The trial judge is uniquely placed to assess costs. An appellate Court should not interfere with a costs award unless satisfied the Judge acted on a wrong principle, failed to take account of some relevant matter, factored in an irrelevant matter or was plainly wrong.4

[19]   The issues on this appeal are whether Judge Ryan erred, in the way I have just described, (i) in declining to order that Ms L pay all or some of Ms P’s costs and/or

(ii) in declining to order that Ms P’s costs be paid from the estate.

Did the Judge err in declining to order that Ms L pay costs?

[20]   Mr Meys’ submissions on this issue were focussed on what he said was Ms L’s unreasonable and inappropriate conduct of the litigation. His written submissions were critical of various steps taken by Ms L. He said that Judge Ryan had accepted that Ms L had conducted the litigation inappropriately. But, Mr Meys submitted, the Judge had applied the wrong legal test when saying that Ms L’s conduct of the proceeding did not “greatly increase” the parties’ costs. Mr Meys said the correct test, under r 14.6 of the District Court Rules 2014,5 was whether Ms L’s conduct had “contributed unnecessarily” to the time or expense of the proceeding.

3      Kinney v Pardington [2021] NZCA 174.

4      Kinney v Pardington [2021] NZCA 174 at [1], citing Shirley v Wairarapa District Health Board

[2006] NZSC 63, [2006] 3 NZLR 523 at [15].

5      Rule 14.6 is the same as r 14.6 of the High Court Rules 2016. It applies by virtue of r 207(2) of the Family Court Rules 2002.

[21]   With respect, Mr Meys’ submissions did not engage sufficiently with an important first step. Rule 14.6 allows the Court to increase the costs “otherwise payable” under the rules, or to order that the costs payable are indemnity costs. Before the Court engages with r 14.6 it is first necessary to consider what costs would be “otherwise payable”. That requires consideration of the general principles that apply to the determination of costs.

[22]   The fundamental general principle, in r 14.2, is that “the party who fails with respect to a proceeding … should pay costs to the party who succeeds”. Mr Meys referred to r 14.2 and said that Ms P was successful. However, he did not explain how Ms P was successful as against Ms L or, more to the point, how Ms L had “failed”.

[23]   I agree that Ms P was successful, but only in part. She did not succeed as against Ms L. Ms L did not “fail” with respect to the proceeding. Ms L was successful in repelling Ms P’s attempt to have the award come in part from the bequests made to Ms L. Ms P’s lack of success in that regard is reflected in her appealing Judge Ryan’s substantive decision, including on the ground the Judge erred in not ordering that the award come in part from Ms L’s bequests.6

[24]   In those circumstances, there is no basis on which it would be appropriate to order costs against Ms L in favour of Ms P. There was therefore no error in the Judge’s decision to decline to make such a costs order.

[25]   For completeness, I record that all counsel referred me to authorities to the effect that costs principles are somewhat different in family protection cases.7 In such cases there has been a longstanding, though not invariable, practice of ordering indemnity costs of all parties to be paid from the residue of the estate. In recent years there has been an increasing trend (though not a uniform practice) towards costs following the event. Ms P was asking for costs to follow the event as against Ms L. The problem for Ms P is that Ms L did not fail.

6      That appeal was dismissed: AP v Lucas [2021] NZHC 1017.

7      The principles applying to costs in family protection cases were summarised by Moore J in

Cartwright v Joseph [2019] NZHC 1093.

Did the Judge err in declining to order that Ms P’s costs be paid from the estate?

[26]   The longstanding practice to which I have referred above is relevant to whether the Judge erred in not ordering that Ms P’s costs be paid from the estate. In Wightman v Public Trust,8 Whata J explained that at least part of the rationale for this practice is that although family protection proceedings are civil adversarial claims, the Court’s duty in such proceedings is to stand in the shoes of the deceased to secure the proper discharge of her or his moral duty to qualifying beneficiaries. The practice of the estate meeting costs reflects that.

[27]   As noted, this practice is not invariable. It is subject to the proper application of general costs principles.9 The overarching consideration is that any award of costs should do justice between the parties.10 Nonetheless, the longstanding practice of awarding costs out of the estate on an indemnity basis is a relevant factor to be taken into account in determining whether costs should be paid out of the estate and in what amount.11

[28]   In Wightman v Public Trust, Whata J explained that the Court may be more cautious in awarding indemnity costs out of the estate “where the estate is small, the costs award will have a substantial effect on beneficiaries and or there is some other disqualifying feature that makes payment out of the estate inappropriate”.12

[29]   Mr Meys submitted that Judge Ryan did not explain his reasoning for refusing to award costs to Ms P from the estate, other than in this passage:

[12] I have come to the conclusion that exercising the absolute discretion that I have in relation to the incidence of costs, I find that the overall interests of justice require that it is undesirable for the residual beneficiaries to bear any of the costs which have been claimed.

[30]   Mr Meys submitted that in reaching this conclusion the Judge failed to take account of relevant considerations. First, the residual estate was of a reasonable size, some $2.1 million. Secondly, and as the Judge had recognised in his substantive

8      Wightman v Public Trust [2015] NZHC 1091.

9      Wightman v Public Trust [2015] NZHC 1091 at [13].

10     Cartwright v Joseph [2019] NZHC 1093 at [12].

11     Wightman v Public Trust [2015] NZHC 1091 at [21].

12     Wightman v Public Trust [2015] NZHC 1091 at [20].

decision, there was no reason to assume that anything awarded to Ms P would not filter down to her daughters in due course. Thirdly, the effect of the Judge’s substantive decision was that each of Ms P and her two daughters would receive one-third of the residual estate. The effect of the costs decision was that Ms P would effectively receive considerably less than her daughters.

[31]   In my view, and with respect, the Judge did fail to take account of some relevant factors. First, he did not take into account the longstanding practice that the estate bear these costs or the rationale for that practice. Ms P had succeeded in her claim that the testator had breached his moral duty. That pointed to the estate bearing her costs. Secondly, he did not take into account the size of the estate. In my view the estate is of a sufficient size to bear Ms P’s claim for costs. Having the estate bear her costs will not significantly affect the residuary beneficiaries. That is reinforced by the third relevant matter that the Judge did not take into account, that any award to Ms P is likely to filter down to her daughters in due course. This meant that the effect on the daughters of a relatively modest costs award would likely be even less than it usually would be.

[32]   Taking those relevant matters into account, together with Ms P’s success as against the estate, in my view the overall just outcome is that Ms P’s costs should be paid from the estate, on an indemnity basis. I am satisfied that the costs claimed,

$97,487.59, are reasonable.

Costs of this appeal

[33]   Ms L is entitled to costs from Ms P on the appeal. Ms P is entitled to costs from the estate on the appeal. To be clear, however, Ms P is not entitled to be reimbursed from the estate for her costs liability to Ms L on the appeal.

[34]   If the parties cannot agree costs, memoranda may be filed: Ms L by 12 November 2021; Ms P by 17 November 2021; the estate by 22 November 2021. Each memorandum is to be no longer than two pages.

Result

[35]The appeal is allowed. The estate is to pay costs of $97,487.59 to Ms P.

[36]   Ms L is entitled to costs from Ms P on the appeal. Ms P is entitled to costs from the estate on the appeal.

Campbell J