Biggs v Biggs
[2020] NZHC 768
•20 April 2020
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2017-425-000007
[2020] NZHC 768
IN THE MATTER of the Property (Relationships) Act 1976 BETWEEN
SOPHIE ANNABELLE BIGGS
Plaintiff
AND
STEPHEN TIMOTHY BIGGS
First Defendant
AND
STEPHEN TIMOTHY BIGGS as trustee for the TIM BIGGS FAMILY TRUST
Second Defendant
AND
LAGUNA BAY CAPITAL PTY LIMITED
as trustee for the LAGUNA BAY CAPITAL TRADING TRUST
Third Defendant
AND
LB MANAGEMENT PTY LIMITED as
trustee for the LAGUNA BAY CAPITAL MT TRUST
Fourth Defendant
Hearing: 7 February 2020 Counsel:
D Chambers QC for the Plaintiff
M J McCartney QC for the First Defendant
Judgment:
20 April 2020
JUDGMENT OF NATION J
[1] These proceedings have been in train since 2016. A three week hearing is scheduled to begin on 22 June 2020.
BIGGS v BIGGS [2020] NZHC 768 [20 April 2020]
[2] On 23 August 2019, Ms Biggs filed an application for a further interim distribution to her of $1,100,000, supported by a memorandum of counsel and an affidavit from Ms Biggs. Such a payment would have to be made by Mr Biggs but would be on account of whatever share of any ultimate entitlement she is held to have to property in which Mr Biggs or other defendants have an interest. It would be without prejudice to any costs order the Court might ultimately make when the proceedings are resolved.
[3] In an affidavit in support of her application sworn on 23 August 2019, Ms Biggs said she was indebted to her professionals for in excess of some $1 million, being:
(a) legal and accounting costs $976,727;
(b) Gregory Brogan – A$68,007.50; and
(c) Matthew Gwinee – A$15,500 (Australian accountancy costs).
[4] Ms Biggs said in her affidavit that the figure of $1.1 million recognised the Court had previously directed that, from the sale of the Closeburn property, each party would be entitled to an interim distribution of $1.1 million. Mr Biggs has already paid
$400,000 on account of Ms Biggs’ entitlement. Pursuant to orders of the High Court and Court of Appeal, Ms Biggs has to repay that sum to Mr Biggs when she receives that initial distribution of $1.5 million from the sale of Closeburn. She similarly sought this further interim distribution on the basis it would be repaid to Mr Biggs from the $1.5 million Ms Biggs receives from the sale of Closeburn.
[5] In her affidavit, Ms Biggs says she is the primary carer for the parties’ daughter aged six, another child aged one who I infer is the child of Ms Biggs’ current partner and she was due to have another child in the first quarter of 2020. She says she has no independent source of income, is entirely financially dependent on her partner, and her entitlements are completely tied up under these proceedings.
[6] Ms Biggs referred to evidence as to capital sums which Mr Biggs had received or spent during the separation and said, on the basis of that information, he could afford to finance or pay the $1.1 million she was seeking.
[7]Ms Biggs concluded that affidavit by making the submission:
This is a classic case of David versus Goliath. I should be adequately resourced so I can prosecute this litigation. Tim is able to do so. So should I. That is only fair and supports the notion of equality between men and women. The amount sought of $1.1 million is within the parameters of [the High Court] decision of 29 June 2019.
[8] For Ms Biggs, Ms Chambers QC emphasised that further distribution would come out of Ms Biggs’ share of relationship property. She argued there was sufficient equity in the Closeburn property for it to effectively be funded out of her agreed half share in that property. In addition, with reference to comments made by the Court of Appeal, she argued there was a substantial increase in the value of property owned or controlled by Mr Biggs during the relationship and Ms Biggs would have a claim to a share in that increase in value because of her contributions to the relationship while they were together.
[9] Ms Chambers pointed out that Mr Biggs had not denied he had the ability to finance the further payment. She submitted Mr Biggs can afford to pay for the costs he incurs in litigation. Ms Biggs needs to be in the same position so there can be a level playing field, particularly so where it can be expected that the costs of a non- owning spouse in pursuing claims and obtaining discovery are likely to be greater than for the property-owning spouse.
[10] Ms Chambers submitted the factors which the Court of Appeal identified as justifying an increase in the interim distribution of $200,000 to $400,000 now justify a further interim distribution of another $1.1 million. Ms Biggs needs funds to complete the litigation. She owes significant amounts to her legal and accounting teams and will have further costs to meet. The Court should not deny a further interim distribution and thereby allow the husband to pressure the wife by denying her an interim distribution of her entitlements.
Mr Biggs’ position
[11] Mr Biggs opposes the application for a further interim distribution on a number of grounds. He has a perception (not accepted by Ms Biggs) that Ms Biggs is incurring excessive costs in the proceedings through the way she is conducting the litigation.
[12] Mr Biggs referred to $760,000 which he has already paid or helped finance which Ms Biggs has had available to fund her costs.1 Mr Biggs considers the amount Ms Biggs has received should have been sufficient to meet the reasonable costs of investigating and resolving Ms Biggs’ claims.
[13] On an assumption that the $760,000 that had been available to Ms Biggs had been used to fund legal expenses and she is currently indebted for legal and accounting costs for a sum in excess of $1 million, he said it appeared her litigation costs were approaching $2 million, which he said was more than double all his litigation costs. Mr Biggs also referred to the cost he incurred in paying the credit facility interest and outgoings on Closeburn during the separation before the property was rented out.
[14] For Mr Biggs, Ms McCartney QC submitted the Court should not proceed on the basis Ms Biggs will inevitably succeed on a claim against any increase in value of separate property during the relationship. The Court of Appeal has identified the ways in which she could have such a claim but noted, for her to have such an entitlement, the Court will have to resolve genuine evidential issues in her favour.
[15] With the parties having been unable to obtain a sale of Closeburn, there is real uncertainty as to when a sale of that property might be achieved and what its value will be. Ms McCartney submitted there is a real risk that the value of Ms Biggs’ share in the equity in that property would not be sufficient to ensure she could account to Mr Biggs from that share for:
(a) sums he might be entitled to on a counterclaim he has filed;
1 Mr Biggs detailed that as comprising: original credit facility for not less than $200,000; payment on 2 December 2016 to assist with costs $30,000; August 2017 Family Court (interim distribution)
$100,000; August 2017 Family Court legal costs $5,000; $5,000 monthly x 6 - $40,000; 8 December 2018 $200,000 (as ordered by the High Court); December 2018 further sum as ordered by the High Court; Court of Appeal $200,000. (Just how the credit facility for $200,000 referred to above will ultimately be brought into account between the parties is still to be determined.)
(b) on account of an order for costs, if it were ultimately to be made in his favour; and
(c) accounting that would be required as already ordered in terms of interim distributions that have been made, and further funds Ms Biggs received during the separation.
[16] Ms McCartney submitted the Court of Appeal did not adjust the finding made earlier in the High Court that the approach and attitude of Ms Biggs and her advisors to the litigation has added significantly to the costs both parties have incurred. The fact Ms Biggs may have exhausted the funds previously available to her in meeting such costs is not a basis for a further distribution. She submitted it would be prejudicial to a fair resolution of the proceedings to require Mr Biggs to fund a further payment to Ms Biggs which, he submitted, would encourage her to pursue novel claims causing significant costs to the other party.
[17] Ms Biggs’ attempt to obtain a further payment of $1.1 million would be an abuse of process, the Court of Appeal having decided in December 2018 that the amount she should then receive on account of legal and accounting costs she would incur in the proceedings should be $400,000, and that the amount each of Ms Biggs and Mr Biggs should receive from the sale of the Closeburn property would initially be $1.5 million, from which she would have to repay the capital sums of $400,000 that Mr Biggs was required to pay on account of her entitlement.
[18] Ms McCartney submitted Mr Biggs has no ability to fund the further payment because of caveats or notices of claim Ms Biggs has lodged against a Queenstown property purchased by Mr Biggs after separation against which Ms Biggs is not making any claim, a caveat over the Closeburn property for the benefit of her accounting advisors which has precluded further bank finance being obtained against that property, a caveat lodged by Mr Biggs’ Noosa property, and because Mr Biggs and his partner of some four years are committed to a new investment strategy and should not be expected to have to adjust that strategy in a significant way to fund a further interim distribution.
[19] Both counsel addressed me at length on the merits of each party’s position in respect of the substantive proceedings and what Ms Biggs’ entitlement might ultimately be.
The Court of Appeal judgment
[20] Through my judgment in the High Court of 29 June 2018, the parties were to sell the Closeburn property.2 After payment of certain costs associated with the property and all amounts owed to Westpac secured by mortgage over the property, there would be a distribution of $1.5 million to each of the parties but, from that sum, Ms Biggs would have to reimburse Mr Biggs for $200,000 which, in the High Court, I ordered Mr Biggs was to pay by way of interim distribution on account of Ms Biggs’ share of relationship property. I reserved leave to the parties to seek a variation of those orders if and when a sale of Closeburn was achieved and there was certainty as to the price obtained for it and the debt secured over it.
[21]In that judgment I said:3
This is not a case of a husband trying, through attrition, to use his financially advantaged position to pressure a claimant to accept what might be less than a just legal entitlement.
[22] I also referred to the approach which Ms Biggs’ accountant had taken in terms of seeking discovery. I said it had led to an intensely adversarial approach to the resolution of claims, a further deterioration in the parties’ relationship and a raft of interlocutory applications from both parties. I said these had all significantly added to the costs both parties were incurring.
[23] Ms Biggs appealed that judgment to the Court of Appeal. On that appeal, she also sought orders for further discovery and an order that Mr Biggs pay her legal costs under s 40 Property (Relationships) Act 1976 (PRA).
2 Biggs v Biggs [2018] NZHC 1592, [2018] NZFLR 580 (High Court judgment).
3 At [20].
[24] The Court of Appeal comprehensively set out how courts should approach an application for an order under s 40 that a party fund the costs that another party was incurring in pursuing PRA claims.4
[25] The Court noted that, as an alternative to ordering one party to pay the costs of the other party:
[85] Where there is a pool of relationship property available, an interim distribution to the applicant against their pleaded and plausible share offers an alternative to a costs order. It meets the objective of allowing the applicant to fund the proceedings, and it offers several important advantages over a costs order. First, there is in principle no cause for reticence about an interim distribution from property of the parties that happens to be controlled by one of them, still less so where the respondent is using that property to pay their own costs. Second, the applicant is best placed to monitor the behaviour of their agents — the experts and lawyers — and an interim distribution preserves a direct incentive to do so. Third, because that supervisory responsibility remains with the applicant, an interim distribution should eliminate any need for judicial supervision.
(footnotes omitted)
[26] The Court of Appeal held that I had been right to refuse to make an order that Mr Biggs pays Ms Biggs’ costs but for different reasons. The Court said:
[88] We consider that the Judge was right to refuse an order under s 40 in this case, but for different reasons. First, we accept that the wife has a need of funds. She has sworn affidavits deposing to her circumstances, which indicate that she has had cashflow problems, needing to borrow from family. It must be assumed that her claim to a share of separate property may be vindicated, and we accept that valuation and legal costs reasonably associated with the claim will be considerable. The parties’ affairs are complex, justifying the use of skilled advisers. The husband has not acted unreasonably, but he has sometimes resisted discovery only to yield when the wife’s advisers persisted.
[89] Second, the Court should not seek to discourage the wife from prosecuting her claim as she sees fit by leaving her in a position of relative disadvantage. So far as the Judge took a contrary view, we consider that he was wrong. However, we have explained at [85] above that an interim distribution is sometimes a better way to meet an applicant’s need for funding. This is such a case. There is available a substantial pool of relationship property, in the form of the relationship home, that can fund an interim distribution and meet the wife’s costs. On a conservative basis, her relationship property claim extends to not less than half the home’s net worth.
[90] Third, the Court was provided with no budget or proposed cap on costs. The sum payable under a costs order should be both reasonable in the circumstances and ascertainable. The order sought was open-ended, which
4 Biggs v Biggs [2018] NZCA 546, [2018] NZFLR 854 at [77]-[85] (Court of Appeal judgment).
would confer considerable discretion on the wife and her advisers. Perhaps there are cases in which that is a permissible course, but this is not one of them.
(footnotes omitted)
[27] The Court of Appeal then went on to consider the orders I had made for an interim distribution, deciding, as I had done, it was appropriate to make such an order which would be a payment on account of Ms Biggs’ share in agreed relationship property, that, is the value of Closeburn. The Court held however that, in ordering a payment of $200,000, I had been too conservative. The Court said:
[96] Turning to the merits, we accept Ms Chambers’ submission that the Judge’s approach to the interim payment sought was too conservative. The wife has a credible claim to an interest in the husband’s separate property, she is in need of funds for the litigation, and the payment will be set off against the interim distribution to the wife from the pending sale of the home, so protecting the husband’s position. The sole reason to take a conservative approach to an interim distribution is that it must be funded in the short term, pending sale of the house, from property that the husband says is separate.
[28] The Court increased the sum to be paid to $400,000, with that sum to be reimbursed to Mr Biggs when the house proceeds were available.
[29] The Court of Appeal said they had not been persuaded that I had been wrong in concluding there was no evidence in this case of Mr Biggs seeking to prevent Ms Biggs from pursuing litigation to a conclusion “by a process of financial attrition”. The Court of Appeal said that their conclusion in this regard had significant implications for the further discovery sought and also for the costs application.5 The Court was also critical of the way Ms Biggs’ accountants had initially pursued discovery.
Determination
[30] I accept, even with the difficulties the parties have encountered in trying to sell Closeburn, it is likely that Ms Biggs’ ultimate share of agreed relationship property and any entitlement she might have as to a share of Mr Biggs’ separate property will exceed the amount she might have to repay to Mr Biggs on account of the distribution
5 At [45].
she has already received, other capital made available to her during the separation and the further distribution she is seeking.
[31] I do however weigh in the balance that there is no certainty as to this. Ms Biggs will have to satisfy the Court, both evidentially and legally, that she has an entitlement as against trust property and Mr Biggs’ separate property. There is uncertainty as to what will be obtained from the sale of Closeburn and when such a sale will be achieved. Closeburn has been on the market since late 2017. This application for a further distribution has been made because it has not been possible to sell that property.
[32] A significant factor for the Court of Appeal in increasing the interim distribution from $200,000 to $400,000 was that the payment could be made in the context of a “pending sale of the home” which meant there was “available a substantial pool of relationship property, in the form of the relationship home, that can fund that interim distribution and meet the wife’s costs”.6
[33] Because of the difficulties the parties encountered in selling Closeburn, it cannot be said now that the sale is pending, nor can it be said the equity in that property will inevitably provide a substantial fund from which Ms Biggs would be able to refund to Mr Biggs any amount he might have to pay by way of a further interim distribution.
[34] The value of her entitlement as against Closeburn will be clear only through the sale of that property. Ms Biggs’ entitlement as to trust-owned property or an increase in Mr Biggs’ separate property will become clear after the trial of these proceedings. That is scheduled for June 2020. In the context of these proceedings, there will not be a significant delay until the Court is in a position to fully assess the strength of Ms Biggs’ claims and the value of her entitlements in respect of those.
[35] This is not a situation where an interim distribution is required to ensure Ms Biggs can prosecute her claims with the support of senior counsel and the expert witnesses she has depended upon.
6 Court of Appeal judgment, above n 4, at [89] and [96].
[36] There will be cases where a party without property in their name may need a distribution on account of their ultimate entitlement to ensure they have adequate legal representation but, on the evidence made available to me, I cannot find this is the situation with Ms Biggs.
[37] In November 2018, the Court of Appeal decided Ms Biggs was entitled to a payment on account of her share of property in the sum of $400,000 to enable her to meet her costs. That sum was awarded on her application filed in February 2017 for an interim distribution of $400,000 on grounds including that:
1. the plaintiff needs a capital payment to fund her legal, accounting and expert expenses in regard to this proceeding, and to provide her with some capital for the period of the proceedings; and
2. the legal, forensic accounting and expert costs for the application are a necessity.
[38] I conclude, from both the evidence of Ms Biggs and the submissions on her behalf, that this distribution is sought so Ms Biggs can pay her advisors outstanding costs. It is not now required for her to meet her living costs or to assist her in re- establishing herself after the marriage breakdown.
[39] It has never been suggested in any evidence before the Court that continuing professional assistance for Ms Biggs would be conditional on either her accountants or lawyers having their costs paid as the work progressed. The evidence from Ms Biggs was that she had not paid anything towards her legal or accounting costs since December 2018. Since then, Ms Biggs’ advisors have continued to do what was required of them with the proceedings. All evidence that had been required for trial had been prepared. Counsel must have addressed all the legal and evidential issues in considerable detail so as to be fully prepared for the judicial settlement conference that took place in 2019.
[40] I accept the complications of this case warranted the engagement of senior counsel and skilled account advice just as the Court of Appeal observed. It is understandable that Ms Biggs’ costs exceed those of Mr Biggs. Nevertheless, the amount currently outstanding for legal and accounting costs seems extraordinarily
high. There is no evidence as to just what period these costs relate to, or the rate and basis on which those costs have been fixed.
[41] The only evidence the Court has to that comes from an affidavit which Ms Biggs filed in the Family Court at Invercargill early in the proceedings when she first sought a payment to assist with legal costs.
[42] In an affidavit of 15 March 2017, Ms Biggs said she had been advised that her costs to the conclusion of the case, including valuation and forensic accountant costs, could be up to $500,000. Her rates for Ms Chambers QC are $1,250 per hour plus GST and Mr Eggleston are $310 per hour plus GST in 2017.
[43] There has also been evidence in connection with confidentiality undertakings that indicated a number of people in Mr Lyne’s office were working on evidence and forensic investigations connected with these proceedings.
[44] The Court can only assume that fees have accrued on a time basis where all work done in connection with the proceedings is charged on a time basis at high rates, certainly well in excess of the rates on which costs awards are usually made by the Court. It is thus understandable that Ms Biggs’ advisors have been prepared to invest a significant amount of time and resources in the proceedings in the expectation that, in their judgment, ultimately, with what Ms Biggs recovers, their costs will be paid in full.
[45] The accountants also have security for what will be due to them. They have a caveat over the Closeburn property, no doubt to secure the indebtedness Ms Biggs has to them on account of costs.
[46] Closeburn is owned in Ms Biggs’ name. Despite agreement that Closeburn is relationship property and that Ms Biggs thus has a relationship property interest in it, Ms Biggs agreed to her accountants taking security over that property to the extent that enabled the accountants to register a caveat against the title to that property. In that way, Ms Biggs was able to access and utilise relationship property which she owned in her own name. That has been of significant benefit to her. In that sense, it
was not correct of her to say in her affidavit that her entitlement under the PRA is totally under the control of Mr Biggs.
[47] There has been no evidence provided as to the terms of the security agreement Ms Biggs reached with her accountants. I do not assume Ms Biggs will have to pay interest on outstanding costs to her accountant. That may well be because, as the Court well knows is often the case with this sort of litigation, the professional advisors may anticipate that, even with a delay in the payment of costs, they will be adequately remunerated through the rate at which they are able to charge out all work for all the time allocated to the client without discount on either a time or a fee basis.
[48] This is thus not a case where a further distribution, to the extent she seeks, is needed to ensure Ms Biggs “receives the reasonable and necessary legal and accounting advice she requires to resolve her claims on an adequately informed basis”. The reality is that this interim distribution is sought to ensure her professional advisors can be paid for work they have already done. These are costs which, at least with the accountants, they have security for.
[49] The Court of Appeal agreed with earlier assessments made by both me and Davidson J that this was not a case of a husband seeking to prevent his wife from pursuing a litigation to a conclusion “by a process of financial attrition”.
[50] Ms Chambers argued again that a further interim payment was justified in the same way as was ordered in SM v LFTB with the interim distribution which a husband was required to make there.7 In that case, the wife was not seeking a second substantial interim distribution. Both Davidson J and myself in the High Court, and the Court of Appeal, have said Mr Biggs’ conduct in this case cannot be equated with that of the husband in SM v LFTB.
[51] I accept that Mr Biggs would probably be able to, either personally or through entities with which he is connected, raise the finance he would require to make the further interim distribution Ms Biggs seeks. But it is self-evident that there would be a significant cost to him in doing this. It would also likely require security to be given
7 SM v LFTB [2013] NZHC 1056.
over property which is either not owned by him or which is potentially his separate property.
[52] Much of the wealth against which Ms Biggs makes a claim is held in trust so the trustees would have to agree to a distribution to that wealth being used to fund the payment Ms Biggs seeks from Mr Biggs.
[53]The Court of Appeal did increase the earlier distribution from $200,000 to
$400,000 but nevertheless stated that the fact an interim distribution must be funded in the short term from property that the husband says is separate was a reason for taking a conservative approach.
[54] That reason must be of greater weight in all the present circumstances and when unusually the Court is being asked to order a second interim distribution.
[55] Ms Biggs says there is substantial equity in the Closeburn property, sufficient for more than her half-share interest in that property, against which the further payment would be made. That property cannot however be used to finance the payment Ms Biggs seeks because there is the caveat over it for the benefit of Ms Biggs’ accountants.
[56] The Court must also recognise the reality that this payment would now have to be made at a time of considerable economic uncertainty which is likely to have had a significant impact on the value of the assets against which would have to be utilised in some way to make the further interim distribution.
[57] Although the current lockdown to deal with the COVID-19 virus may have a temporary impact on court proceedings, at this stage, with a full trial scheduled for June 2020, it is unlikely there will be a significant delay until trial and Ms Biggs’ entitlement is fully determined. There may have to be a reassessment of current values but, despite this, much of the preparation for trial will already have been completed.
[58] The Court of Appeal said, in the context of what was anticipated to be funding in just the short term, pending the sale of the house, one reason for taking a conservative approach was that an interim distribution would have to be funded from
property that the husband says is separate. That was not reason enough for the Court of Appeal to leave the interim distribution at $200,000. They increased the interim distribution to $400,000. However, in all the current circumstances, for the reasons set out above, it is a reason for not requiring a second interim distribution for a sum approaching three times what the Court of Appeal ordered in November 2018.
[59] For all those reasons, Ms Biggs’ application for a further interim distribution of $1.1 million is declined.
[60] In his notice of opposition, Mr Biggs asked for the application to be declined and for an award of costs in his favour. Despite the principle that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds, in the circumstances of this case, it is appropriate that the costs issues in connection with this application be determined after trial.
Solicitors:
DAT Chambers QC, Barrister, Auckland MJ McCartney QC, Barrister, Auckland JF Anderson QC, Barrister, Auckland
EM Eggleston, Barrister, Tauranga City Law, Auckland.