BETWEEN JONATHAN BERNARD CLEARY AND ALLAN GOLDMANPlaintiffAND JENNIFER ELIZABETH SELLEN

[2005] NZHC 1846

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2004-485-2148

BETWEENJONATHAN BERNARD CLEARY AND ALLAN GOLDMAN

Plaintiff

AND  JENNIFER ELIZABETH SELLEN

Defendant

Hearing:         15 March 2005 Appearances:  M.G. Gazley for Plaintiffs

R.P. Harley for Defendant Judgment:  16 March 2005 at 4.00pm

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

Introduction

[1]Before me are applications for costs by both the defendant, and the plaintiffs.

[2]        The matter before this Court was an application by the plaintiffs pursuant to s140 Property Law Act 1952 for an order for the sale of a property at 40 Rangiora Avenue, Wellington (“the property”). The plaintiffs together with the defendant  were registered proprietors of this property in their capacity as trustees of The Gaelic Connection/Sellen Cleary Family Trust.

[3]        The plaintiffs sought summary judgment against the defendant. In a  judgment I issued in this matter on 2 December 2004, summary judgment was refused, and costs were reserved.

JONATHAN BERNARD CLEARY AND ALLAN GOLDMAN V JENNIFER ELIZABETH SELLEN HC WN CIV-2004-485-2148 16 March 2005

[4]        These matters arose out of a matrimonial property dispute following the separation in May 2002 of the first-named plaintiff Mr Cleary and the defendant Ms Sellen.

[5]        The property concerned, which I understand was their former matrimonial home, is owned by the Trust. It is presently occupied by the defendant and certain children of the marriage.

[6]        Extant proceedings between Mr Cleary and Ms Sellen in the Family Court relating to the division of all their matrimonial property (including issues concerning the property) are presently awaiting a decision following a recent hearing in that Court.

[7]        In the meantime, on 17 February 2005 counsel for the plaintiffs wrote to this Court indicating that this proceeding in the High Court “is no longer necessary”. Effectively, as I see it, this amounted to a discontinuance of this proceeding.

[8]        The issue of costs in this Court, however, remains outstanding. In this 17 February 2005 letter, counsel for the plaintiffs noted that the plaintiffs wished to be heard on the question of costs. Both Mr Gazley for the plaintiffs and Ms Harley for the defendant have made written and oral submissions before me on costs.

[9]        In those submissions, counsel for the defendant contends that as the successful party in the High Court proceeding, the defendant is entitled to costs, and these are sought on an indemnity basis. This claim totals $18,752.50 plus disbursements. The calculation of this amount represents a claim for 12.5 days at

$1,500 per day, as set out in schedules provided by counsel for the defendant, together with total disbursements of $1,505.00.

[10]      In turn, counsel for the plaintiffs argues that as this case is an unusual one where the merits of dealing with the property issues between the parties lie with the plaintiffs, therefore the plaintiffs, despite discontinuing in the High Court, should themselves be entitled to an award of costs from the defendant.

My Decision

[11]      The starting point here must be that the plaintiffs have effectively chosen to discontinue these proceedings.

[12]      In terms of Rule 476C, the usual position is that a plaintiff discontinuing a proceeding is liable for the defendant’s costs.

[13]Rule 476C states:

Unless the defendant otherwise agrees, or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[14]      And as to the level of costs to be awarded on a discontinuance, McGechan on Procedure at paragraph HR476C.03 states:

HR476C.03 Actual costs and the scale

Before the High Court Amendment Rules 1999 came into force on 1 January 2000, the Court had shown a readiness to override the 1985 scale and take into account the defendant’s actual costs when fixing costs on discontinuance. This was because the old scale did not adequately recognise the costs of preparation. That is not the case with the new Schedules 2 and
3. Subject always to the Judge’s overriding discretion under r46, there now seems to be no reason why costs under r476 should not be fixed in accordance with Schedules 2 and 3.

[15]      Rule 47 sets out the principles applying to determination of costs by this Court. As to this, Rule 47(a) states:

The following general principles apply to the determination of costs;

(a)    The party who fails with respect to a proceeding on an interlocutory application should pay costs to the party who succeeds.

[16]      In Commerce Commission v Southern Cross Medical Care Society [2004] 1 NZLR 491, the Court of Appeal described this R.47(a) principle as:

…a presumption that in the absence of particular reasons to the contrary, costs will follow the event.

[17]      Applying these principles to the present case, it is clear to me that costs here should follow the event in the normal way.

[18]      In my view, the bringing of this proceeding for an order for sale under s140 Property Law Act 1952 by only two of the three trustees of The Gaelic Connection/Sellen Cleary Family Trust was inappropriate.

[19]      In my judgment with respect to the summary judgment application dated 2 December 2004 at paragraph 35 I stated:

[35] Taking into account this need for the trustees to act unanimously,  I  take the view that in terms of s140(1) the plaintiffs here can not be said to be entitled to at least a one half share in the co-owned property. The property is held as a whole for the ultimate beneficiaries’ benefit by all three trustees in that capacity. Bearing in mind the duty of the parties as trustees to act unanimously, I find that the plaintiffs being only two of the three trustees of the Trust cannot be said to be “interested to the extent of one moiety or upwards” in the property in terms of the requirements of s140(1). The property is a trust property. The trustees must act in concert in the interests of the beneficiaries. In the words of Nicholson J. in Norton v Smyth, there can be no doubt here that “…there is a tenable basis for a beneficial interest in the property different than the registered interest…” held by the trustees, and therefore “…it is necessary and appropriate to decide what those interests are before applying the provisions of s140”. That has not happened here.

[20]      It follows, therefore, that I reject the suggestion from counsel for the plaintiffs that the merits here have always been with the plaintiffs, in that the dispute over all the matrimonial property of Mr Cleary and Ms Sellen, including the trust property, had to be disposed of by a court of law, and the plaintiffs present High Court proceedings were properly brought.

[21]      As I see it, even if the appropriate forum for dealing with the property was the High Court, then the plaintiffs’ application under s140 Property Law Act 1952 was misplaced.

[22]      With regard to the suggestion by counsel for the plaintiffs that it was the mischief and antics on the part of the defendant herself which resulted in the plaintiffs’ need to bring the current High Court proceeding, I can only comment that there is nothing of substance before the Court to support this contention in any way.

[23]      The plaintiffs maintain that the defendant in some way altered her position in the Family Court proceedings, and it was this altered stance which is significant here.

[24]      I fail to see the relevance or importance of that to the proceeding in this Court, even if it were to be the case. It does not, in any event, avoid the fact that the plaintiffs present Property Law Act proceeding was significantly defective and that, if at all, the plaintiffs should have proceeded here under the Trustee Act. This was acknowledged before me by Mr Gazley for the plaintiffs, and as I see it, it is in any event fatal to arguments on the part of the plaintiffs that they should not be liable for costs with respect to their unsuccessful High Court action.

[25]      That said, I am satisfied that an award of costs here should be made in favour of the defendant in the normal way.

[26]      It follows from this, that the plaintiffs’ application for costs against the defendant here obviously must fail.

[27]      As to the quantum of the award of costs to be made to the defendant, Ms Harley for the defendant endeavoured to urge upon me that an award of actual or indemnity costs should be made here.

[28]      Ms Harley properly acknowledged before me, however, that in terms of Rule 47, a successful party should normally receive as a fair contribution two thirds of the costs deemed by the Rules to be reasonable, having regard to the complexity and significance of the case and the time reasonably required to be taken – Glaister v Amalgamated Dairies Ltd (CA99/03, 1 March 2004). This is provided for in Rule 47(d) and as to this, McGechan on Procedure at paragraph HR47.01 states:

In subsection (d) the emphasis is on reasonable, as opposed to actual, costs.

[29]      Situations in which a Court may, however, order a party to pay increased costs or indemnity costs, are provided for in R48C.

[30]      That Rule 48C lists most of the situations or factors that have emerged from cases decided under the previous Rules to justify permitting increased or indemnity costs – see McGechan, paragraph HR48C.01.

[31]      Before me Ms Harley for the defendant did not address specifically and in any detail where in the requirements under Rule 48C her claim for increased or indemnity costs might satisfactorily fit.

[32]      Some suggestion is made, however, that the plaintiffs in bringing this High Court proceeding have acted in a manner that could be seen as “vexatious, frivolous, improper, or unnecessary” in terms of Rule 48C(4). In this regard, the decision in Re Chiswell (HC Auckland, 13 September 1999, M770-IM99, Nicholson J) where indemnity costs were awarded in the case of a trustee acting selfishly, oppressively and unreasonably, and inexcusably delaying the sale and distribution of trust assets was made, may have some relevance here. On the basis of the material before this Court, however, I am unable to find with any degree of certainty that the plaintiffs in bringing this proceeding have acted in that manner.

[33]      That said, and taking into account the circumstances surrounding this matter, I am of the view that this is not an appropriate case for an award of actual or indemnity costs to the defendant.

[34]      Scale costs are therefore awarded to the defendant against the plaintiffs for all matters up to the discontinuance of this proceeding upon a category 2B basis, together with disbursements as fixed by the Registrar.

[35]      Counsel are to agree as to the appropriate time allocations and amount for such 2B costs here, but in the event of disagreement, appropriate memoranda are to

be filed and I will decide the quantum calculation issue on the basis of the material filed.

Associate Judge D.I. Gendall

Delivered aton 16 March 2005.

Solicitors:

M.G. Gazley, Solicitor, Wellington for Plaintiffs Russell McVeagh, Wellington for Defendant