Bradford v Te Hei

[2022] NZHC 575

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2019-412-000126

[2022] NZHC 575

UNDER

the Property (Relationships) Act 1976

IN THE MATTER OF

an application under s 25(3) for division of property

BETWEEN

JONATHAN LEE BRADFORD

Applicant

AND

REANA GAYE TE HEI

Respondent

Hearing:

On the papers

Counsel:

D J More for the Applicant

L A Andersen QC and J W Clearwater for the Respondent

Judgment:

25 March 2022

JUDGMENT OF NATION J AS TO COSTS

[1]                  In a judgment of 16 December 2021, I decided how the parties should share in the value of the home acquired during a relationship of short duration.1 The claims judgments was given in proceedings under the Property (Relationships) Act 1976 (PRA). Ms Te Hei had also sought orders in the High Court for division of property under the Property Law Act 2007 (PLA) but those proceedings were ultimately stayed.

[2]                  In my judgment, I expressed a tentative view that costs should lie where they fall but the parties have not reached agreement. Ms Te Hei seeks costs on a 2B basis for the PLA proceedings. She refers to the 2B costs for the PRA proceedings but seeks

1      Te Hei v Bradford [2021] NZHC 3485.

BRADFORD v TE HEI [2022] NZHC 575 [25 March 2022]

an increase on those to cover the legal costs she has incurred or might incur. Mr Bradford says costs should lie where they fall but, if a costs order is to be made, he should be awarded costs as the successful party in Ms Te Hei’s proceedings under the PLA and her application for summary judgment.

[3]                  Mr Bradford asked the Court to determine costs without delay. By memorandum, his counsel advised the Court that the parties have reached agreement as to the basis on which Mr Bradford will be able to acquire Ms Te Hei’s interest in the property but indicated that an award of costs could prejudice his ability to do that. In response, through a memorandum from her counsel, Ms Te Hei suggested an order for costs could be made on terms where the amount due would be paid on terms that could be afforded by Mr Bradford.

[4]                  Ms Te Hei argues she was the successful party in the PLA proceedings and, if orders had been made under those proceedings, Ms Te Hei’s entitlement as to the home would have been less than she was entitled to in the PRA proceedings. She also says she was the successful party in those proceedings because, by consent, an order was made for the return of her chattels to her.

[5]                  Ms Te Hei argues that Mr Bradford unreasonably delayed resolution of the PRA proceedings through failing to recognise the way she contributed to the acquisition of the home by being liable on the mortgage, not accepting a Calderbank offer made on 2 July 2019 and not attending a settlement conference when there was an opportunity for such a conference in 2020.

[6]                  Mr Bradford asserts Ms Te Hei was not successful in the PLA proceedings, firstly when she applied for summary judgment. That application failed when the Associate Judge recognised that the PRA probably applied. He also argued that the summary judgment application ignored s 342 of the PLA. Mr Bradford argues that Ms Te Hei should then have abandoned the proceedings under the PLA and should have agreed to have issues resolved in the Family Court under the PRA. Mr Bradford argues that he was successful in the PLA proceedings when, on 23 June 2020, Associate Judge Lester stayed those proceedings pending the determination of the PRA proceedings.

Analysis

[7]                  Both parties adopted fixed positions as to their entitlements when they first separated. They did not engage constructively over the merits of their respective positions to see if there could be a compromise that would lead to an early comprehensive settlement. Soon after the separation, Ms Te Hei’s then legal adviser accepted that the parties’ respective financial contributions to the acquisition of the home was 80 per cent by Mr Bradford and 20 per cent by Ms Te Hei. In that calculation, the then solicitors for both parties did not take into account the contribution Ms Te Hei made by being a party to the mortgage which was essential in acquiring the home. There was also no discussion at the outset as to how the parties’ non-financial contributions to the relationship should be brought into account.

[8]                  After changing advisers, Ms Te Hei’s position was that she was entitled to 50 per cent of the equity in the property as a joint owner. Instead of recognising that, under the PRA, Mr Bradford might be entitled to more than 50 per cent of the equity in the property through the greater financial contribution he had made to the initial cost of the property and the non-financial contributions he had made to the relationship, Ms Te Hei filed proceedings under the PLA.

[9]                  Ms Te Hei began those proceedings with an interlocutory application for an order for summary judgment requiring the property to be sold. In her affidavit in support of that application, she said Mr Bradford was refusing to acknowledge her ownership as “a one half owner of the property”. She also sought orders for possession of certain chattels. In her affidavit, she said ownership of those chattels had never been disputed.

[10]              In the statement of claim filed at the same time, Ms Te Hei sought an order for the sale of the property and the division of the net proceeds, after payment of the mortgage and costs of sale, equally between Ms Te Hei and Mr Bradford.

[11]              In his notice of opposition, Mr Bradford referred to provisions of the PRA relevant to relationships of short duration. In his affidavit Mr Bradford referred to financial contributions to the acquisition of the property and the outgoings that were paid. He indicated he was willing to settle on a 80/20 basis. As to chattels, he said

not all the chattels Ms Te Hei claimed were her separate property but said he was “perfectly happy” to deal with her chattels as she wished.

[12]              On the hearing of the application for summary judgment, an order was made for Ms Te Hei to have possession of the various chattels she wanted at that time. I do not consider proceedings under the PLA had been necessary for Ms Te Hei to have issues over possession of those chattels resolved.

[13]              I am satisfied PLA proceedings were issued in an attempt to obtain an immediate judgment on the basis Ms Te Hei was entitled to a 50 per cent share in the property without having to engage in any assessment of her entitlement in accordance with both parties’ contributions to the relationship in terms of the PRA.

[14]              A hearing of the summary judgment application was necessary because Ms Te Hei argued that her entitlement should be determined in accordance with the PLA rather than the PRA.

[15]              Associate Judge Johnston referred to s 14A of the PRA as to the circumstances in which the PRA applies.2 He said the critical point was that judgment as to whether the applicant for a division has made a substantial contribution to the de facto relationship and whether failure to make an order under the PRA would result in serious injustice, and any subsequent assessment of the parties’ rights and obligations under the PRA were matters within the exclusive jurisdiction of the Family Court.

[16]              The Associate Judge said, on that basis alone, Ms Te Hei could not establish that Mr Bradford had no arguable defence to the first cause of action. He also held that under the provisions of ss 339(2)(d) and 342 of the PLA, before making any order for sale and division of proceeds, Mr Bradford was at least entitled to have an opportunity to contend that he should be compensated for his greater contribution to the original acquisition of the property and his greater contribution to the payment of principal and interest on the loan. In discussing that, the Judge said the Family Court was perfectly well equipped to make the necessary assessment as to those matters and others that Ms Te Hei might consider relevant.

2      Te Hei v Bradford [2019] NZHC 371.

[17]              By the time the application for summary judgment was heard, Mr Bradford had filed PRA proceedings in the Family Court but not an application for leave to issue such proceedings. He filed such an application after the Associate Judge issued his judgment on the summary judgment application.

[18]At the end of his judgment, Associate Judge Johnston said:3

However, if either party wishes to apply to the Family Court for an order that the division of the parties’ relationship property should be determined pursuant to the Property (Relationships) Act, and expand the scope of the debate so as to include an assessment of their overall contributions to the relationship – as opposed to the former home - then it would appear to me to be a waste of the parties’ time and resources to litigate the matter in this Court, and the obvious course is for one of the parties to make the necessary application to the Family Court.

[19]              I consider Mr Bradford was the successful party on the application for summary judgment. The Judge reserved costs but there was no indication he did that because he expected the PLA proceedings to continue and for costs to be determined once the PLA proceedings had been finally determined. I infer, with what he said in his judgment, that he expected that would be the end of those proceedings and the parties’ respective claims would be dealt with in the Family Court and under the PRA.

[20]              Ms Te Hei however continued with the PLA proceedings in the High Court. Faced with that and noting the delays the parties thought there would be in having matters dealt with in the Family Court, the parties agreed to transfer the PRA proceedings to the High Court, but Ms Te Hei still sought to have claims determined under the PLA. This ultimately led to further delays and the costs both parties incurred in having Associate Judge Lester determine Mr Bradford’s application for leave to bring an application under the PRA, with counsel for Ms Te Hei contending such leave should not be granted because there would be no injustice to Mr Bradford if matters were to be determined under the PLA.

[21]              After hearing submissions, Associate Judge Lester stayed the PLA proceedings pending the resolution of PRA proceedings.4 He concluded he was satisfied that

3 At [28].

4      Bradford v Te Hei [2020] NZHC 1418.

leaving Mr Bradford (but also Ms Te Hei) without the ability to have all their contributions to the relationship taken into account in the division of their property would result in a serious injustice.

[22]              I am satisfied, looking at what happened in the PLA proceedings, Mr Bradford was the successful party in those proceedings.

[23]              On a 2B basis, Ms Te Hei had sought costs for the PLA proceedings of $15,164. Mr Bradford sought costs on a 2B basis for the period to 31 July 2019 of $17,171 and for costs for attendances from 1 August 2019 at the new daily rate, including costs for preparing the memorandum as to costs, of $6,575. The total claim for costs and disbursements was $23,981.84.

[24]              Ms Te Hei says the amount claimed for the period to 31 July 2019 wrongly included a claim for 2.5 days for the preparation of Mr Bradford’s affidavit filed in the PLA proceedings. I agree with that submission. Costs for preparing an affidavit in opposition to an application for summary judgment would normally be dealt with through the allowance in the second schedule of 0.6 days for filing an opposition to an interlocutory application.

[25]              Ms Te Hei, through Mr Andersen, also disputed any liability for costs as to the hearing on 11 June 2020 before Associate Judge Lester. Mr Andersen submitted that, in looking at the cash contributions, Associate Judge Lester did not take into account the contribution that each made by assuming joint liability for the mortgage, rejected the authority of H v O and accepted an argument on behalf of Mr Bradford that the mortgage should not be taken into account.5

[26]              I reject that criticism or that it would be a basis for not treating Mr Bradford as having been successful on the issues that were argued before Associate Judge Lester. Associate Judge Lester noted that s 14A was concerned with contributions to the de facto relationship, not only contributions to a specific item of property. He said it was in respect of that issue he was satisfied the PRA proceedings should proceed.

5      H v O HC Auckland CIV-2008-404-1891, 9 June 2008.

[27]              The Judge did refer to the parties’ initial contributions to the purchase of the property without mentioning the way they were both parties to the mortgage but, in referring to those contributions, he said he was referring only to the contributions the parties made to the equity they had in the property on purchase. Nowhere in his judgment did he say that Ms Te Hei’s contribution, through being a party to the mortgage, was to be disregarded. He acknowledged that Ms Te Hei, through her counsel, had realistically recognised that Mr Bradford’s contributions to the purchase were substantial. Associate Judge Lester said “[s]ubstantiality does not require that a party’s contribution be greater than the other party’s contribution to the relationship”.6

[28]              In determining that proceedings should be resolved under the PRA, Associate Judge Lester commented that this would enable both Ms Te Hei and Mr Bradford to have “all their contributions to the relationship taken into account in the division of their property”.7

[29]              Were Mr Bradford to be awarded costs as to the PLA proceedings on a 2B basis, excluding any allowance for costs on the costs memorandum he would be entitled to claim, the amount Mr Bradford would be entitled to would be some

$17,215.

[30]              Mr Andersen also argued that, had Mr Bradford agreed to entitlements being determined under the PLA on 6 June 2019, at the time he filed his amended application to have the proceedings heard under the PRA, the value of Ms Te Hei’s entitlement from the property would have been some $2,000 less than it would have been as calculated under the PRA. I do not consider that such an analysis, even if correct on the figures put forward, means that, in some way, Mr Bradford acted unreasonably in wanting to have proceedings determined under the PRA rather than the PLA. There was no agreed value for the property at the time Ms Te Hei’s solicitor made a proposal for settlement in a letter of 2 July 2019.

[31]              The parties were not able to resolve matters because Ms Te Hei insisted she was entitled to a 50 per cent share of the property. Mr Bradford was saying her share

6      Bradford v Te Hei, above n 4, at [21].

7 At [25].

should be just 20 per cent. As both Associate Judges indicated, there would have been a serious injustice if Mr Bradford could not have all his contributions to the relationship considered in determining what his entitlement should be. It was only with the Court’s ultimate judgment in the PRA proceedings that the appropriate apportionment was 60/40 in favour of Mr Bradford.

[32]              Ms Te Hei says costs on a 2B basis for the PLA proceedings would be $15,164 and $26,290 for the PRA proceedings.

[33]Ms Te Hei however seeks total costs of $51,946.85, calculated at:

(a)        scale costs for the PLA proceedings amounting to $15,164;

(b)       full costs for the PRA proceedings (including the value of her solicitor’s time of $7,762) being $30,331.66;

(c)        disbursements of 4,951.19; and

(d)       an additional award of costs of $1,500 for preparation of the memorandum as to costs which counsel says reflects approximately half of the costs involved in its preparation.

[34]              Mr Andersen QC’s actual costs in the PRA proceedings were $22,569.66 with disbursements of $167.65.

[35]Counsel says:

Mr Clearwater has recorded time of 40 hours from the time he first took instructions on 17 September 2017 which if charged at $300 an hour would be

$13,800 including GST, 22.5 hours of that is after the PRA proceedings were issued by Mr Bradford, amounting to $7.762 [sic] including GST.

[36]              I note that Ms Te Hei continued with the PLA proceedings after Mr Bradford began PRA proceedings. In the PLA proceedings, Mr Andersen’s instructing solicitor was Mr Clearwater. It is therefore not clear to me that Mr Clearwater’s recorded time after Mr Bradford filed PRA proceedings would all relate to the PRA proceedings.

[37]              I note also that Mr Andersen refers to a value of Mr Clearwater’s time which if charged would, at $300 an hour, have been $13,800 including GST. In his memorandum, Mr Andersen said Mr Clearwater has agreed to only charge an amount that is recovered by way of costs (if any) after payment of all other costs and disbursements from any sum awarded.

[38]              The Court thus has no clear indication as to the actual amount Mr Clearwater will charge by way of costs (if any). One of the principles to be applied in considering costs is that an award of costs should not exceed the costs incurred by the party claiming costs.8

[39]              Ms Te Hei is also seeking costs based on the daily rate and with the time allowances referred to in the High Court Rules 2016. Authority indicates that it can be appropriate to treat costs awards in relationship property proceedings in the same way as ordinary civil proceedings, applying the High Court Rules and schedule.9 Rule

14.13 says:

Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District Court if the proceeding could have been brought there, unless the court otherwise directs.

[40]              The parties here did agree to the transfer of Mr Bradford’s PRA proceedings from the Family Court to the High Court but that was only necessary because Ms Te Hei was continuing with her PLA proceedings in the High Court. But for that, these proceedings should have been dealt with in the Family Court. The daily recovery rate from 1 August 2019 for proceedings in the District Court was and is significantly less than for the High Court:

District Court - $1,910 per day; High Court - $2,390 per day.

8      High Court Rules 2016, r 14.2(f).

9      Thompson v Public Trust [2014] NZHC 2434 at [2].

[41]Applying the High Court 2B scale, I note the amount claimed for legal costs is

$26,290 compared to a total amount claimed for Mr Clearwater’s time and Mr Andersen’s actual costs of $30,331.66.

[42]              The amount claimed for the PRA proceedings includes allowances for two days for preparation and appearance on the application to have proceedings heard under the PRA. Ms Te Hei opposed that application and was unsuccessful. With the amounts claimed for those two steps taken out, the amount Ms Te Hei would be seeking is to be $21,510 plus disbursements of $4,773.96.

[43]              Those disbursements include $1,600 for the filing fee for the PLA proceedings on which Ms Te Hei was unsuccessful. $1,419.69 was for accommodation costs in Dunedin and airfares for Ms Te Hei, her solicitor and Ms Te Hei’s mother to travel to the hearing of the PRA proceedings in Dunedin. Mr Clearwater was the instructing solicitor and was based in Takapuna. Although I accept it would have been reassuring for Ms Te Hei to have Mr Clearwater at the hearing, given the nature of the proceedings, I do not consider it was necessary for Mr Clearwater to be there. I note Ms Te Hei is not seeking costs for second counsel.

[44]              Likewise, while it was understandable that Ms Te Hei wanted her mother to be with her for support, I do not consider her travel and accommodation expenses in Dunedin should properly be recoverable as disbursements reasonably incurred in the proceedings.

[45]              The disbursements also included $1,300 for two valuations obtained on 18 January 2021 and 24 September 2021. Mr Bradford also obtained two valuations at different stages of the proceedings which should have been of assistance to both parties in attempting to resolve the difference over their positions. It is likely the costs Mr Bradford incurred in this regard were approximately the same as Ms Te Hei’s costs.

[46]              Ms Te Hei referred to a Calderbank offer made through her solicitors of 2 July 2019, subject to verification of the current market value of the property and the Westpac mortgage balance. Ms Te Hei suggested settlement should be on the basis financial contributions to the acquisition of the property were 42.86 per cent by Ms Te

Hei and 57.14 per cent by Mr Bradford. That apportionment was proposed on the basis that, through assuming liability under the mortgage, the parties’ contribution in respect of the mortgage was equal and, in that regard, referred to the authority of H v

O.10   The letter should have put Mr Bradford and his advisers on notice that he could

well find it difficult to ultimately obtain an 80/20 apportionment of entitlements. Nevertheless, the offer was not in terms which were better than the result ultimately obtained in a substantive sense.

[47]              The proposal was made on the basis that, on the authority of H v O, the assumption of joint liability on the mortgage was to be treated as an equal contribution each had made to the cost of the property. As discussed in the ultimate judgment, H v O was not authority for the proposition that the assumption of joint liability on a mortgage always had to be assessed as an equal contribution to the relationship so as to be a contribution equivalent to half the amount borrowed.11

[48]              In the High Court PLA proceedings, costs on the summary judgment application had been reserved. Ms Te Hei’s solicitor also asserted in the letter that, had the proceedings reached a final decision, it was likely Mr Bradford would have been unsuccessful. Although the solicitor did not seek some allowance for this, Mr Bradford could reasonably have disagreed with that statement.

[49]              For Mr Bradford, Mr More referred to s 40 of the PRA. It provides “[s]ubject to any rules of procedure made for the purposes of this Act, in any proceedings under this Act the court may make such order as to costs as it thinks fit”.

[50]              Mr More said he was not aware of any rules of procedure dealing with costs under the PRA. He submitted, because of s 4A of the PRA, the costs schedule of the High Court Rules does not apply, unless the Court incorporates the schedule as part of any order for costs.

[51]              Even though the High Court Rules and schedule as to costs were not made under the PRA, it would be appropriate to apply the High Court Rules and possibly

10     H v O, above n 5.

11     Te Hei v Bradford, above n 1, at [41].

the High Court schedule, but potentially the District Court schedule as an appropriate proxy to calculate an appropriate costs award if an award were to be made.12

[52]              Ms Te Hei says she should be awarded costs because Mr Bradford unreasonably refused to take advantage of a potential judicial settlement conference that could have been available in 2020.

[53]              Participation in such a conference might well have helped to bring about a resolution. It is possible that, with some input from an Associate Judge, Ms Te Hei might have been willing to modify her position that, as a joint owner of the property, she was entitled to a 50 per cent share of the property, and the assumption of a joint liability on the mortgage had to be treated as an equal financial contribution to the relationship to the extent of half the mortgage. Mr Bradford might have been willing to move from his position that Mr Te Hei was entitled to only a 20 per cent share of the property. That can however only be speculation.

[54]              With experienced counsel involved outside a judicial settlement conference there remained the opportunity for frank and informal discussion between counsel as to the merits of each party’s position and the risks each party faced. There is no suggestion that attempts were made to resolve matters in such a manner after June 2020 or that only one party refused to engage with the other in that way.

[55]              I consider that, with more constructive dialogue and engagement between the parties and their advisers, it should have been possible to resolve these proceedings much earlier than happened. They both must take some responsibility for this. Ultimately, however, they have benefited. The home remained in their ownership, maintained by Mr Bradford. It increased significantly in value over the separation. They are both to benefit from that increase in value, sharing in that value on the basis the Court has found to be appropriate in accordance with the principles and scheme of the PRA. The increase in value will compensate them both somewhat for the costs they have incurred in the proceedings. The delay in resolving matters does mean that, if Ms Te Hei is to purchase another home, she will have to do so on the current market.

12     See Thompson v Public Trust, above n 9; and Campbell v Goldie [2019] NZHC 1573, [2019] NZFLR 125 at [47].

In that sense, she has lost the benefit of purchasing a property some years ago. That detriment is however matched by the detriment for Mr Bradford in having to pay Ms Te Hei much more than he would have had to several years ago if he had been willing to settle on the basis considered appropriate by the Court.

[56]              Consistent with the tentative view I expressed in my substantive judgment, I consider that, in the particular circumstances of this case, it is appropriate that each party bear their costs as they have fallen. Neither party is required to pay costs to the other.

[57]              Both parties are also to bear their own costs in relation to the memorandum filed over costs.

Solicitors:

L A Andersen QC, Barrister, Dunedin

Clearwater & Associates Solicitors, Auckland D J More, Barrister, Dunedin.