Bacon v Bacon
[2022] NZHC 3441
•15 December 2022
ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PARTIES. IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-118
[2022] NZHC 3441
BETWEEN ANNE BACON
Applicant
AND
STEVEN BACON
Respondent
Hearing: 8, 11, 15-17 November 2021; 8 December 2021 Counsel:
P F Dalkie for the Applicant
M L Greenhough and C M McCracken for the Respondent
Judgment:
15 December 2022
JUDGMENT OF GWYN J
(Costs)
Solicitors:
DLA Piper, Wellington
McDonald Law Limited, Auckland
BACON v BACON [2022] NZHC 3441 [15 December 2022]
[1] The substantive hearing of this matter occurred on 8, 11 and 15-17 November 2021 and 8 December 2021. I issued judgment on 31 August 2022.1
[2] I invited submissions from the parties on costs and have received the respondent’s submissions dated 14 September 2022, submissions for the applicant, dated 28 September 2022 and a further memorandum in reply on behalf of the respondent dated 30 September 2022.
Background
[3] The applicant and the respondent were married in 1992 and separated in December 2014. Four related proceedings arising out of their separation were set down for hearing together in this Court.
[4] As recorded in the judgment, the issues in three of the proceedings were resolved by way of consent orders dated 8 December 2012, leaving for resolution by the Court part of the applicant’s application under the Property (Relationships) Act 1976 (PRA), in CIV-2021-485-118. The PRA proceeding originated in the Family Court, commencing on 21 December 2017, and on 25 February 2021 was transferred by consent to this Court.
[5] Following resolution of the three related proceedings, the specific issue that remained to be determined concerned whether advances, totalling $3.6 million, made between 2002 and 2010 by the respondent’s family trust (the Trust) constituted a relationship debt.
[6] The respondent’s case was that the advances from the Trust were loans, repayable on demand, and that the sum of $3.6 million was a relationship debt within the terms of the PRA. The applicant submitted that the advances were not loans, as there was no expectation of repayment. The applicant denied that there was a genuine debt and, alternatively, that any debt was not a relationship debt.
1 Bacon v Bacon [2022] NZHC 2202 (the judgment).
Judgment
[7] In the judgment, I first concluded that the nature of the Trust and the relationship of the parties did not, as a general principle, preclude some or all of the advances being properly characterised as loans.2
[8] Accordingly, the judgment then went on to scrutinise each of the six categories of advances to determine whether they amounted to relationship debts. The judgment concluded that four categories, amounting to $2,128,628.96 in total, did constitute relationship debts.
Submissions
For the respondent
[9] The respondent seeks costs on a scale 2B basis, together with reasonable disbursements, in a total sum of $83,426 plus disbursements of $50.
[10] Counsel for the respondent submits that it is appropriate that the costs award from the date of the transfer of the PRA proceeding to the High Court be determined under the High Court Rules 2016 (the Rules), rather than by reference to the amount that would have been recovered in the District Court (rule 14.13 of the Rules). Counsel says that is appropriate because of:
(a)The amount of the claim. Here, the effective quantum of the award made in the judgment is $1,064,314.48.
(b)The proceeding was properly transferred to the High Court so that it could be case managed and heard together with the three related proceedings that were within the High Court’s jurisdiction, all of which stemmed from the parties’ separation.
(c)The parties were encouraged to consider transfer of the Family Court proceeding to this Court by Associate Judge Johnston.
2 At [78].
(d)While it was necessary to do so, hearing this proceeding together with the related proceedings (which could only be heard in the High Court) complicated what was otherwise a proceeding of moderate complexity.
[11] Counsel for the respondent submits that he was the successful party in this proceeding, the judgment determining that $2,128,628.96 of the $3,600,000 advances in issue were relationship debts. As a consequence, the applicant must pay to the respondent half of that amount, $1,064,314.48.
[12]The respondent seeks allowance for second counsel for two days.
[13] The respondent also seeks costs for an additional step for preparation of the costs submissions now before me, because of what counsel says was the applicant’s failure to genuinely consider the costs issue within the timeframe directed by the Court.
For the applicant
[14] The applicant agrees that the appropriate scale is 2B (and the lower District Court scale when the proceeding was in the Family Court). The applicant does not address the claim for an allowance for the respondent’s second counsel.
[15] However, the applicant submits that the respondent was only partially successful in the proceeding and there should be a consequent reduction in costs awarded, in terms of r 14.7(d) and (g) of the Rules.
[16]That submission has two parts. First, the respondent sought a total of
$3,600,000, but the amount of the judgment in his favour was $2,128,628.96. In percentage terms, the recovery was 59 per cent.
[17] The applicant submits that the respondent’s claim was made up of discrete amounts of money, each of which was claimed to be a loan and each of which had its own particular set of facts. Counsel submits that means that each item comprised in the $3.6 million claim did not depend on the success or failure of any other item. Consistent with that, they were dealt with as individual amounts or items in the
evidence. The respondent’s claim on certain items failed. Accordingly, it is not appropriate to adopt a blanket response of giving costs to the respondent. Mr Dalkie relies in that respect on the Court of Appeal decision in Weaver v Auckland Council,3 where the time spent on unsuccessful arguments resulted in a costs reduction of 50 per cent. Mr Dalkie also relies on Taylor v Roper,4 where the Court apportioned costs on a time taken basis.
[18] Second, counsel for the applicant submits that the case involved a concerted attack against the applicant by the respondent’s lawyers. Counsel says that was inappropriate; throughout the proceedings the applicant acted on legal advice and such an attack was irrelevant and wasted the Court’s time.
[19] The applicant submits that the amount of the costs claimed by the respondent should be reduced by 50 per cent.
Discussion
[20] The starting point is that costs are at the discretion of the Court, but that discretion is guided by the general principle set out in r 14.2 of the Rules:
14.2 Principles applying to determination of costs
(1)The following general principles apply to the determination of costs:
(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b)an award of costs should reflect the complexity and significance of the proceeding:
(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d)an appropriate daily recovery rate should normally be two- thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually
3 Weaver v Auckland Council [2017] NZCA 330 at [26]. Affirmed by the Court of Appeal in
Bathurst Resources Limited v L&M Coal Holdings Limited [2021] NZCA 684 at [25].
4 Taylor v Roper [2019] NZHC 16 at [17].
spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f)an award of costs should not exceed the costs incurred by the party claiming costs:
(g)so far as possible the determination of costs should be predictable and expeditious.
(2)Despite subclause (1)(f), costs for legal professional services provided in relation to a proceeding may be awarded to a party under this Part even though the services are provided under a conditional fee agreement.
(3)In subclause (2), conditional fee agreement means an agreement under which a party to a proceeding and a person who provides legal professional services agree that the party to the proceeding is liable for payment of some or all of the person’s fees and expenses depending on the outcome of the proceeding.
[21]The applicant relies on r 14.7(d) and (g) which provide:
14.7 Refusal of, or reduction in, costs
Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if—
…
(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; or
…
(g)some other reason exists which justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.
[22] I address first the assertion that the respondent’s case involved a concerted attack on the applicant – whether that in fact occurred and, if so, whether it is relevant to the determination of costs.
[23] As the respondent’s cost submissions in reply note, the parties’ evidence and opening submissions were prepared and filed on the basis that all four of the related proceedings were for hearing starting 8 November 2021. Consent orders settling the other three proceedings were not finalised until 10 November 2021. References to previous judgments and/or costs orders which were critical of the applicant may have
been relevant to the other, settled proceedings. The respondent says those references are not relied on in seeking costs.
[24] That is not to say that matters of credibility – of both parties – were not relevant to this proceeding.5 For example, the applicant invited the Court to find that the respondent had been secretive and not open and honest with her.6 Indeed, the applicant’s whole case was premised on the position that the arrangements between the respondent and the Trust were a sham,7 and that the advances were recorded as loans to avoid the payment of gift duty.8 Ultimately, I preferred the evidence of the respondent.9
[25] I am not persuaded that the case for the respondent, as it was advanced in the substantive hearing before me, did involve what counsel refers to as “[applicant]- bashing”, as distinct from challenges by both parties to the other’s credibility. I conclude that it is not appropriate to reduce any costs payable to the respondent on that account.
[26] I turn to the applicant’s second submission that the respondent was only partially successful. Looked at in the round, the respondent was the successful party, although the applicant did resist the respondent’s claim in respect of some specific categories of debt. Success on more limited terms is still success.10 There is no reason to depart from the general rule that the party who fails with respect to a proceeding should pay costs to the party who succeeds.
[27] It is correct that the parties’ cases involved evidence and submissions in relation to each of the categories of advances, and whether they were in fact loans, including those categories on which the respondent did not succeed. However, much of the case proceeded on the more general, prior argument advanced by the applicant that because of the nature of the Trust and the family relationships, as a matter of
5 For example, the judgment, above n 1, at [78].
6 At [74].
7 At [65].
8 At [43] and [69].
9 At [78].
10 Weaver v Auckland Council, above n 3, at [26].
principle, the advances could not be loans creating a genuine debt.11 In addition, there was argument as to whether any debt, if established, was as a matter of law a relationship debt.
[28] Other than the parties’ own testimony, the supporting evidence was not extensive. The applicant relied primarily on her recollection of events, rather than any documentary evidence. I accept, however, that the legal submissions on behalf of the applicant did analyse the individual transactions in considerable detail.12
[29] It is a finely balanced call whether the unsuccessful aspects of the claim can be said to have “significantly” increased the applicant’s costs, as required by r 14.7(d). Ultimately, I am persuaded that some reduction is required. Estimating the time and cost that the applicant was put to as a result of the unsuccessful aspects of the claim is not a precise science. I do not accept that the 50 per cent sought by the respondent is appropriate but, in the round, I conclude that a 15 per cent reduction from the amount sought is appropriate.
Miscellaneous matters
[30] Mr Dalkie points out what appears to be a duplicate entry in the respondent’s costs schedule, for $717.000 being appearance at a case management conference on 12 April 2021. This point is not addressed in the reply submissions of counsel for the respondent, from which I infer that it is a duplication and $717.00 should be deducted from the amount sought.
[31] As noted at [13] above, the respondent seeks an additional allowance for the filing of costs submissions because the applicant failed to engage on costs in a timely way. Costs may be awarded in respect of an application for costs.13 However, I have concluded that in this case an award is not appropriate. While counsel for the applicant did not engage in a discussion about costs with the respondent’s counsel (and was somewhat discourteous in refusing to do so), it seems to me from the substantive costs
11 The judgment, above n 1, at [39]–[45] and [50]–[78].
12 At [76].
13 See for example Auckland Regional Council v Arrigato Investments Ltd (2002) 16 PRNZ 217 (HC); and Gibson v Official Assignee of New Zealand [2015] NZHC 3200 at [14] and footnote 12.
submissions ultimately advanced for the applicant that it would have been necessary for the Court to deal with the respondent’s application on a contested basis, in any event.
Orders
[32] I direct that the applicant is to pay to the respondent the costs and disbursements set out in the schedule attached to the respondent’s submissions of 14 September 2022 with the following deductions:
(a)Duplicate entry of $717.00 for 12/04/2021 (step 13)
(b) $1,195.00 (step 36).
(c) 15 per cent of the resulting balance.
[33] The applicant is directed to amend the costs and disbursements schedule accordingly and file it for certification by the Registrar.
Gwyn J
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