Bristow v Smith

[2014] NZHC 474

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-002181 [2014] NZHC 474

BETWEEN  TIMOTHY JAMES BRISTOW Applicant

ANDSTEPHEN JOSEPH SMITH, MICHAEL JOHN FRENCH, SUSAN PATRICIA SHORE, FLORENCE JILL ERRIDGE, LOUISE HAMILTON, BARNABAS ERNEST BRISTOW

Respondents

Appearances:           Dealt with on the papers: G M Brodie for Applicant D M Lester for B Bristow

Judgment:                14 March 2014

JUDGMENT OF GENDALL J AS TO COSTS

Background

[1]      On 30 October 2013 I gave judgment in this proceeding on an interlocutory application to determine a preliminary question.

[2]      The preliminary question determined in that application was whether this Court had jurisdiction to direct that any provision which may ultimately be made for the applicant in this proceeding Timothy James Bristow (Timothy) under the Law Reform (Testamentary Promises) Act 1949 could be satisfied from funds that would otherwise be paid to the last named respondent, his brother Barnabas Ernest Bristow, (Barnabas) as a “creditor” of the estate of their late mother the deceased, in  a situation where the debt owing to Barnabas would exhaust the value of the assets in

the estate.

BRISTOW v SMITH [2014] NZHC 474 [14 March 2014]

[3]      On this application Mr Brodie appeared for Timothy and Mr Lester appeared for Barnabas.  There was no appearance for the respondent executors who indicated they would simply abide the decision of the Court.

[4]      The sole remaining asset in the estate of Timothy and Barnabas’ mother is a

50% shareholding in a company Sproxton Farm Limited which owns a farm property at Ashley Gorge.  The remaining 50% shareholding in this company is being held by Timothy’s interests.  Timothy says he and his wife alone have been responsible for farming and improving the Ashley Gorge property for many years.

[5]      In separate proceedings issued by Barnabas in this Court in October 2001 bringing  a  claim  in  contract  against  his  late  mother’s  estate  for  breach  by  the deceased of an obligation contained in a deed to leave the estate’s Sproxton Farm Limited shares to Barnabas, he succeeded.   Judgment was entered in his favour against the estate for $350,402.24.

[6]      That damages award in Barnabas’ favour reflects the value of the shares that the deceased had covenanted to leave to him and therefore, with the shares being the only  remaining  asset  in  the  estate,  that  judgment  obtained  by  Barnabas  would exhaust the estate.

[7]      As I have noted, the claim by Timothy in the present proceeding was brought under the Law Reform (Testamentary Promises) Act 1949.  Given that the judgment noted above obtained by Barnabas would exhaust the estate assets, continuation of Timothy’s  Testamentary  Promises  claim  would  only  make  sense  if  generally speaking the Court could direct that the incidence of Timothy’s claim either under the Testamentary Promises Act or otherwise should be borne by Barnabas as  a creditor of the estate.   Otherwise, Barnabas as a creditor would receive the entire estate in payment of his judgment debt leaving nothing in the estate to be dealt with through testamentary disposition either pursuant to the deceased’s will or as varied pursuant to orders under the Testamentary Promises Act or otherwise.

[8]      It is the position of Barnabas that nothing in the Testamentary Promises Act or otherwise creates a jurisdiction permitting a direction that the burden of any award

which might ultimately be made in Timothy’s favour is to fall on Barnabas as a creditor.  Thus it is claimed that the position of Barnabas here as a creditor renders any claims by Timothy under the Testamentary Promises Act or otherwise redundant as  there  would  be  nothing  left  in  the  estate.    It  is  this  legal  issue  which  was considered as a preliminary issue and it was the subject of my 30 October 2013 judgment.  Effectively that judgment found in favour of Timothy’s position with the proceeding continuing.   My answer to the preliminary question was confirmed at para [45] of the judgment as follows:

[45]      To conclude, and in answer to the preliminary question raised at [2], for the reasons outlined above, my conclusion is that this Court does have jurisdiction to direct that any provision made for Timothy under the Testamentary Promises legislation here could be satisfied from funds that would otherwise be paid by the executors of the estate to Barnabas as a creditor.

[9]      My 30 October 2013 judgment went on to note that irrespective of matters relating  to  that  preliminary  question,  a  draft  amended  statement  of  claim  was intended to be filed for Timothy to provide several alternative legal bases for his claim against the deceased’s estate.   These included claims in breach of contract, constructive trust and the like.

[10]     But in any event as I have noted, the preliminary question in this application was determined effectively in Timothy’s favour and the propositions advanced on behalf of Barnabas were rejected.

[11]     At  para [50]  of my 30  October 2013  judgment  I reserved  costs  on  that application.  I indicated then that, if counsel were unable to agree on that question, they could file memoranda sequentially which were to be referred to me, and in the absence of either party indicating they wished to be heard on the issue, I would decide costs on the preliminary question application based on the material then before the Court.

[12]     Counsel have advised that they have been  unable to agree on  costs and memoranda have now been filed by Mr Brodie for Timothy and Mr Lester for Barnabas.

[13]     Essentially Mr Brodie for Timothy argues that he should be entitled to costs on this interlocutory application having been the successful party.   Mr Lester for Barnabas opposes this and submits that costs should remain reserved until the final outcome of the substantive proceeding here is known.

The approach/principles to be adopted

[14]     Under r 14.1 High Court Rules, costs are at the discretion of the Court.  The general principles applying to costs are set out at r 14.2 which provides at r 14.2(a) that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.

[15]     Special rules relating to interlocutory applications are provided for at r 14.8 as follows:

14.8     Costs on interlocutory applications

(1)       Costs  on  an  opposed  interlocutory  application,  unless  there  are special reasons to the contrary,—

(a)      must  be  fixed  in  accordance  with  these  rules  when  the application is determined; and

(b)      become payable when they are fixed.

(2)       Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.

(3)      This rule does not apply to an application for summary judgment.

[16]     In my view the standard approach that the party who is unsuccessful should pay costs to the successful party should apply in this case.  I do not see any reason to depart from that approach.

[17]     Rules exist in relation to refusing and/or reducing costs in r 14.7 as follows:

14.7     Refusal of, or reduction in, costs

Despite rules 14.2 to14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if—

(a)       the nature of the proceeding or the step in a proceeding is such that the time required by the party claiming costs would be substantially less than the time allocated under band A; or

(b)       the  property  or  interests  at  stake  in  the  proceeding  were  of exceptionally low value; or

(c)       the issues at stake were of little significance; or

(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

(e)       the proceeding concerned a matter of public interest, and the party opposing costs acted reasonably in the conduct of the proceeding; or

(f)       the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)       failing to comply with these rules or a direction of the court;

or

(ii)      taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)     failing, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument; or

(iv)      failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)       failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; 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.

[18]     But, I do not consider here that any of those factors in r 14.7 are applicable to the current case.

Barnabas’ position on costs

[19]     Barnabas as I have noted suggests that costs here should remain reserved until the outcome of the substantive proceeding is known.  On this, Mr Lester for Barnabas contended that although the resolution of the preliminary issue was in Timothy’s favour, this did not necessarily mean that he will have substantive success

in this proceeding and it was therefore appropriate that costs should remain reserved until such time as the final merits of the substantive matter could be determined. Reference was also made to the fact an amended pleading was planned to be filed now on behalf of Timothy which Mr Lester noted was raised for the first time only in Mr Brodie’s submissions filed for the interlocutory application hearing itself.

[20]     Alternatively, Mr Lester contended that if the Court here was minded to award costs on the interlocutory application at this stage, these should be fixed on a category 2B scale basis and be payable from the deceased’s estate given the situation that the parties Barnabas and Timothy find themselves in which Mr Lester says is purely as a result of the circumstances left by the deceased.

Timothy’s position on costs

[21]     So far as Timothy’s position on costs here is concerned, Mr Brodie submitted that as Timothy had effectively succeeded in the present application (which itself had the potential to determine the outcome of the substantive litigation), he should be entitled to costs in the normal way in terms of r 14.8 High Court Rules.  Mr Brodie noted that the estate in this case is comparatively modest and the only real beneficiaries now, given that all cash held by the estate has been exhausted in legal fees, are Timothy and Barnabas.  This means that the real dispute here is as between the two of them and the burden of any costs will necessarily fall on them as the case may be.

[22]     Timothy’s position is that it was Barnabas who chose to bring the application to determine the preliminary question and it involved significant preparation, time and expense on the part of Timothy which would not otherwise have been incurred. It  is  suggested  therefore that  there is  no  reason  why,  given  Barnabas  has  been unsuccessful on this application, Timothy should not be awarded costs as is the usual case in the hearing of an interlocutory application, irrespective of the final outcome of the proceedings.

[23]     Finally, Mr Brodie for Timothy confirmed also  that, if  costs were to  be awarded  here,  they  should  be  assessed  on  a  category  2B  scale  basis  with  a calculation of 3.4 days at $1990 per day equating to a total of $6766.  The details of

this outline as I see it appear to be in order and there seemed to be no disagreement on the part of Mr Lester to these calculations.

Discussion and my decision

[24]     As noted above, the starting point with respect to awards of costs on any interlocutory application other than a summary judgment application is set out at r 14.8 High Court Rules noted at paragraph [15] above.

[25]     On this, the Court of Appeal in Chapman & Ors v Badon Limited1 addressed this issue and noted at para [12]:

…Apart from applications for summary judgment, the general approach to costs in respect of interlocutory applications is that they are dealt with at the time the applications are determined rather than being held over until the outcome of the proceedings is known [r 14.8 High Court Rules].   This reflects the fact that the merits of particular applications and the merits of the substantive proceedings are different matters.   So it is in this case.   Other developments have rendered the fifth cause of action redundant.   But that does  not  mean  that  the  appellants’  strike  out  application  was  properly brought or that their appeal would have succeeded.  Assessing that would require consideration of the merits of the appeal, which we are in no position to undertake.

[26]     In the present case, I am also of the view that the merits of the  present application to determine the preliminary question and the merits of the substantive proceeding itself may well prove to be different.  Timothy has effectively succeeded in the preliminary question application.   As I see the position, no special reasons exist why the usual position outlined in r 14.8 that costs on an interlocutory application are fixed and paid when the application is determined should not apply here.

[27]     I find therefore that, as  the successful party on the present interlocutory application, Timothy should have an award of costs here.

[28]     And in my view it is not appropriate in this case for those costs to be paid to

Timothy to come out of the estate for two reasons.

1      Chapman & Ors v Badon Limited [2010] NZCA 613

[29]     First,  the  essential  dispute  here  is  between  Barnabas  and Timothy.    The administrators of the estate took no part in the present application.  It was pursued by Barnabas.   It required Timothy to expend time and effort in successfully opposing the application.   Barnabas was unsuccessful and as I see it, he should meet those costs personally.

[30]     Secondly, and in any event, the cash assets of the estate have already been consumed in legal fees.  The only asset remaining represents the 50% shareholding in  Sproxton  Farm  Limited  which  is  essentially  the  subject  of  the  dispute  here between the parties.

Conclusion

[31]   For all the reasons outlined above, I now order that Barnabas, as the unsuccessful party in this application to determine the preliminary question, is to pay to Timothy costs on that application calculated on a category 2B scale basis amounting to $6766.

...................................................

Gendall J

Solicitors:

Geoff Brodie, Christchurch

Dale Lester, Christchurch