Broadhurst v Broadhurst

[2016] NZHC 3102

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-000441 [2016] NZHC 3102

BETWEEN

JACQUELINE HELEN BROADHURST

Applicant

AND

MARK HARTLEY BROADHURST First Respondent

AND

MAUREEN BROADHURST AND ALAN BROWN

Second Respondents

AND

ORCHID LTD Third Respondent

AND

CHERUB CHOIR LTD Fourth Respondent

AND

LEMON LTD Fifth Respondent

AND

GARDENIA LTD Sixth Respondent

Contd…

Hearing:	14 December 2016
Appearances:	T Rainey for Applicant K P McDonald for First and Second Respondents R J Collis for Third to Ninth Respondents A Steele for non-party Mr R Smith
Judgment:	16 December 2016

RESERVED JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie

On 16 December 2016 at 2.00pm Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

BROADHURST v BROADHURST [2016] NZHC 3102 [16 December 2016]

AND

HARTLEY INVESTMENTS LTD

Seventh Respondent

AND

IN THE PARK LTD Eighth Respondent

AND

MINT ADVISORS TRUSTEES-BRUTUS LTD and 12A TRUSTEE CO LTD

Ninth Respondents

Solicitors:

Rainey Law, Auckland

Kevin McDonald & Associates, Takapuna
Martelli McKegg, Auckland

Counsel:

R J Collis, Auckland

Introduction

[1]      The first and second respondents seek costs against the applicant’s previous solicitor, Mr Rod Smith, either on an indemnity basis, or in such an amount as the Court shall order.   Costs are sought because of Mr Smith’s repeated failures to comply with various timetable orders. This resulted in a 12 day fixture, due to commence on 7 November 2016, being adjourned.

[2]      The proceeding has recently settled as between the parties.   It has not yet been discontinued.  It has been adjourned to 24 April 2017 so that the settlement can be completed.

[3]      Costs have been resolved between the respondents and the applicant.   The respondents were, however, granted leave by the Court to pursue a costs application against Mr Smith personally.

Factual background

[4]      Mr Smith acted for the applicant from the outset, and in October 2010 he commenced the proceedings in the Family Court.

[5]      Mr and Mrs Broadhurst had been in a relationship.  It commenced in about

1993 and they married in 1995.   They separated in 2010 and their marriage was dissolved in 2014.  Through the proceedings they were seeking to untangle complex property dealings in which they had been involved during their relationship.

[6]      The proceedings were transferred to this Court in March 2015 by order of Judge J H Walker.1   It is noteworthy that one of the concerns raised by Judge Walker was the inability of the District Court to enforce compliance and the lack of case

management of the file.

1      Broadhurst v Broadhurst [2015] NZDC 1531.

[7]      The proceedings became subject to case management in this Court from the outset. Associate Judge Bell made a series of orders designed to get the matter ready for a prompt hearing.2

[8]      Mr Smith immediately breached the timetable directions made by this Court. He was directed to file a statement of claim in this Court within 10 days from 13

March 2015.  He did not do so.  The statement of claim was not filed until 25 May

2015.   Mr Smith also breached numerous other orders of this Court.   By way of example, on 5 June 2015, Mr Smith was ordered to file an application to join other parties, he had indicated he wished to join to the proceedings, by 3 July 2015.3   He failed to do so by that date. Associate Judge Bell was critical of this.4    He did not regard  an  explanation  proffered  by Mr Smith  as  being sufficient  to  explain  his

lengthy delay.

[9]      By  way  of  further  example,  Mr  Smith  repeatedly  maintained  that  the respondents had failed to provide adequate discovery.  He did not, however, take any formal steps to advance this assertion by formally seeking further and better discovery.   He was ordered by the Court to file a memorandum setting out his concerns by 23 October 2015.5   He did not file anything by that date.  Belatedly, on 6

November 2015, Mr Smith filed a memorandum seeking a telephone conference to

deal with discovery.  On 10 November 2015, Bell AJ declined to order a telephone

conference, stating that Mr Smith had “missed the bus”.6

[10]     The respondents considered that the applicant was taking undue time to get her  case  ready  for  hearing.    This  concern  was  relayed  to  Doogue AJ,  and  he commented, in a judgment issued on 9 February 2016, as follows:7

[39] I appreciate the very real concerns that the [respondents] have about the unacceptably long period of time that has been taken for the [applicant] to get [her] case ready for Court. In my view, those concerns are best addressed by firm case management directions following up on the orders that have already been made to date and also the allocation of a trial date.

2      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 13 March 2015.

3      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 5 June 2016.

4      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 15 September 2015.

5      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 2 October 2015.

6      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 10 November 2015.

7      Broadhurst v Broadhurst [2016] NZHC 85.

To this end a conference was held on 15 April 2016, and a timetable was put in place.8     Mr Smith was required to file any further interlocutory applications on behalf of the applicant on or before 13 May 2016.   He was required to serve the applicant’s briefs of evidence by 31 August 2016.  The proceeding was set down for a hearing over 12 days, commencing at 10am on 7 November 2016.

[11]     No interlocutory applications were filed.  Nor were the applicant’s briefs of

evidence served by 31 August 2016.

[12]     On 12 September 2016, the solicitor for the first and second respondents filed a  memorandum  seeking  an  urgent  telephone  conference  to  address  Mr  Smith’s failure to serve his client’s briefs of evidence.   Mr Smith responded with a memorandum dated 13 September 2016.   He apologised for what he called “the slippage” with the timetable.  He proposed a revised timetable.  He also complained yet again that the respondents had still not supplied all relevant documentation.  The suggestion  was  made that  it  was  the respondents’ failure to  supply all  relevant documentation which had caused the delay.

[13]     Heath J issued a minute on 15 September 2016.  In that minute he recorded that “[t]ime has come for all parties to face up to the need to resolve this proceeding at  the  hearing  on  7  November  2016”.    He  noted  Mr  Smith’s  advice  that  the applicant’s briefs of evidence would be served on or before 23 September 2016.  He recorded that that delay was unacceptable and that it put preparation for the hearing in jeopardy.  He directed the Registrar to set the proceeding down for a further case management conference on Tuesday 27 September 2016, and noted that he expected to be told at that telephone conference that the applicant’s briefs of evidence had been served.

[14]     Mr Smith did not serve the applicant’s briefs by 23 September 2016.

[15]     On 26 September 2016, the first and second respondents’ counsel filed a

further memorandum.   That  memorandum  recorded  that  he had  endeavoured  to contact Mr Smith, but that he had received no response from him.

8      Broadhurst v Broadhurst HC Auckland CIV-2015-404-441, 15 April 2016.

[16]     Mr Smith filed a memorandum on the same day.   In that memorandum he recorded  that  the  applicant’s  briefs  had  taken  much  longer  to  prepare  than anticipated.  Again, he asserted that much of the delay had been caused by a lack of discovery and/or cooperation by the first and second respondents.  He advised that the applicant’s briefs were expected to be completed by 3 October 2016.

[17]     There was a face to face conference on 27 September 2016 before Courtney J.   Mr Smith and his client did not appear.   Courtney J directed that a telephone conference be convened the following day and noted that she expected both Mr Smith and the applicant to attend. A telephone conference was held before the Judge on 28 September 2016.  At this conference, Mr Smith again blamed the delays in filing the applicant’s briefs on the first and second respondents’ non compliance with discovery obligations.  Counsel for the first and second respondents pointed out to the Judge that Mr Smith had failed to pursue an application for further and better discovery, despite having been given ample chances by the Court to do so.  Albeit reluctantly, Courtney J made revised timetabling orders.  Mr Smith was ordered to serve the applicant’s briefs of evidence by 5pm on 4 October 2016.

[18]     Mr Smith did not serve the applicant’s briefs by this revised date.

[19]     On 5 October 2016, the solicitor for the first and second respondents filed a further memorandum seeking an urgent telephone conference, and the matter was set down for a telephone conference on 12 October 2016.

[20]     On 11 October 2016, counsel for the first and second respondents filed a further memorandum noting that Mr Smith had not provided any explanation for his failure to comply with the Court’s timetabling orders, that it was the third time that Court orders in relation to the serving of briefs had been breached, and pointing out that the first and second respondents were incurring significant and unnecessary legal costs as a result.  Unless orders were sought.

[21]     At the telephone conference on 12 October 2016, Mr Smith asserted, for the first time, that the applicant’s failure to serve her briefs of evidence was due to a medical issue that he, Mr Smith, suffered from.  That explanation had not previously

been advanced by Mr Smith in any earlier communications, either to the Court or to counsel.

[22]     Heath J accepted the proceeding could not then be made ready for trial by 7

November 2016.  He noted Mr Smith’s advice that there were medical reasons which impacted on his ability to deal with the issues that had arisen, and he directed that Mr Smith file and serve a memorandum by midday on 13 October 2016 specifying those medical reasons.  He noted that that memorandum might be relevant to the issue of costs.   Heath J vacated the trial, and directed the matter be set down for hearing commencing on 12 June 2017.  The Judge also noted that Mr Smith accepted that there might be grounds for an application that he pay wasted costs in respect of the adjournment.  The Judge indicated that an order for costs should be made against either the applicant or Mr Smith on a 2B basis, and that an uplift might be required. He noted that the medical information to be made available might have a bearing on this issue. He put in place a timetable for the filing of costs applications.

[23]     Mr Smith did not comply with the Judge’s direction to file a memorandum detailing the medical conditions he asserted he was suffering from.   The first and second respondents proceeded to make an application for costs, supported by an affidavit from Mr Broadhurst.  Mr Collis, for the third to ninth respondents, did not make a formal application for costs.  Rather, he filed a brief memorandum, advising that his clients were also seeking costs for legal fees incurred for the period commencing from around 15 April 2016, through to the date that the hearing was vacated.

[24]     As I have noted, the proceedings subsequently settled, following a mediation held on 11 November 2016.  By this stage, Mr Smith was no longer acting for the applicant.

Submissions

[25]     Mr McDonald, on behalf of the first and second respondents, submitted that Mr Smith has not adduced any proper evidence to support his allegation that he suffered from a mental condition at the relevant time.  He noted inconsistencies in the various reasons which Mr Smith advanced for his failure to comply with those

timetable orders.  He noted that Mr Smith initially alleged that his failure was due to insufficient discovery by the respondents, and that it was only very late in the day that Mr Smith alleged there were medical reasons for his failure.  He referred to the consequences of Mr Smith’s failure, both for Mr Broadhurst personally, and also for the  Court  system.    He  referred  to  the  various  costs  which  Mr  Broadhurst  has incurred.  Those costs amount to $13,620 plus GST for the period 1 August 2016 to

25 October 2016, as well as the payment of an expert’s fee for preparing a brief in anticipation for trial in the sum of $8,875 plus GST.  He argued that these costs were, in the event, wasted costs.   He accepted that some of the work undertaken by the expert was able to be used in the context of the settlement negotiations, and he accepted that a 50 per cent reduction in the expert’s fee would be appropriate.  He sought  either  indemnity  costs  or  increased  costs  in  such  amount  as  the  Court considers appropriate.

[26]     As noted, Mr Collis filed only a brief memorandum.  It was not supported by any affidavit evidence. Annexed to that brief was an invoice which Mr Collis sent to his clients for his attendances to the end of September, in the sum of $3,240 plus GST, and a disbursement of $97.20.  No other detail was given by Mr Collis.  Nor

did he file an application for costs.9

[27]     Mr Steele for Mr Smith proffered Mr Smith’s apologies to Mr Broadhurst, to the other respondents, to counsel and to the Court.  He accept that an award of costs should be made against Mr Smith, and suggested that that award should be in the sum of $4,906, being costs calculated on a 2B basis.   He resisted any award of increased or indemnity costs.  He referred to an affidavit filed by Mr Smith, in which Mr Smith endeavoured to explain why he had breached the various timetables put in place by the Court.  He argued that Mr Smith’s medical condition effectively “crept up from behind” to debilitate him, and meant that he was ineffective in the final stages of litigation.  He accepted that it could well be argued that Mr Smith ought to

have faced his disabilities earlier, but noted that Mr Smith at the time still believed

9      Mr Steele, for Mr Smith, had not appreciated that the third to ninth respondents were also seeking costs.  I gave him the opportunity to seek instructions from his client.  Mr Steele took advantage of that opportunity.  He then advised that his client wished to deal with all matters at the one hearing, and did not wish to adjourn to give Mr Steele/Mr Smith the opportunity to respond specifically to Mr Collis’ memorandum.

that he could attend to his client’s instructions.  He denied that Mr Smith consciously or wilfully breached his duties to the Court or that he abused the Court’s processes. He noted that the fixture was abandoned approximately a month before the trial date, and queried whether or not the costs claimed by the respondents were in fact totally wasted.

Analysis

[28]     It is well recognised that the Court has jurisdiction to order a party, whose default has caused a fixture to be vacated, to pay wasted costs incurred by the other parties to the litigation.10   As is noted in McGechan on Procedure,11   the jurisdiction is an exception to the usual rule that costs follow the event, because there has been no event. Wasted costs are not specifically provided for in the rules.

[29]     The rationale for the jurisdiction is twofold:

(a)      to compensate the other party or parties not in default for wasted costs, including disbursements and the fees of expert witnesses; and

(b)to impose a sanction on the defaulting party, in an effort to avoid future wastage of costs and judicial and Court resources, and inconvenience to other parties awaiting fixtures in the Court.12

[30]     There can be no dispute as to where responsibility lies in the present case. The fixture set down for 7 November 2016 had to be vacated because of Mr Smith’s failure to serve the applicant’s briefs of evidence in accordance with timetables put in place by the Court.  Mr Smith had put the applicant in the position where she was unable to go to trial.   Further, Mr Smith was guilty of multiple defaults, over a lengthy period.  Mr Broadhurst and the other respondents were exposed to the threat of  proceedings  over  a  very  lengthy  period  –  some  six  and  a  half  years.    The

respondents incurred costs in anticipation of trial, and those costs, or at least a

10     Jeffreys v Morgenstern [2013] NZHC 1361 at [31].

11     Andrew  Beck  and  others  McGechan  on  Procedure  (online  looseleaf  ed,  Brookers)  at

[HRPt14.16A].

12     Marley New Zealand Ltd v Skellerup Rubber Services Ltd [2013] NZHC 3040 at [11]; Jeffreys v Morgenstern, above n 10 at [31]; Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2004-404-6608, 23 May 2008 at [10].

proportion of them, must properly be payable to the respondents.  What is in issue is quantum.

[31]     Mr Smith has filed an affidavit.  He deposes that in 2003 he caught what he thought was the flu, but that subsequently he was diagnosed with meningococcal disease, and placed in intensive care at Auckland Hospital.  He said that, following his release from hospital, he continued to experience an “occasional inability” to concentrate, as well as tiredness and headaches, and that only in 2011 did he come to understand that those symptoms might be related to the fact that he caught meningococcal disease in 2003.  He said that, at relevant times, he had fluctuating concentration levels, and that when the time came to complete the applicant’s evidence, his concentration levels had dropped to new lows.   He asserted that he never consciously or wilfully intended to breach the Court’s directions or abuse the Court’s processes.  He said that he honestly believed that he could get the case ready for trial, but that he under-estimated his disability and over-estimated his mental ability to carry out the tasks necessary to do so.

[32]     Annexed to Mr Smith’s affidavit is a medical report.  The report, however, is

not from a doctor.  Rather, it is from a cognitive behavioural/psychological therapist.

[33]     I regret that I am not particularly impressed by Mr Smith’s explanation or by the report he has annexed to his affidavit.  It is noteworthy that Mr Smith failed to comply with the direction given by Heath J on 12 October 2016. The explanation for the claimed medical condition was not given until 1 December 2016.  Moreover, the claimed medical condition is largely self reported. The report annexed to Mr Smith’s affidavit is not from a doctor, but from a therapist.  The therapist has not seen Mr Smith since 2011.  Mr Smith has ignored advice given to him by the therapist at that stage to seek professional assistance.

[34]     I accept that Mr Smith may have been suffering from the after effects of meningococcal disease, and that this may have meant that, on occasions, he was unable to concentrate, and that he suffered from tiredness and headaches.   The difficulty, however, is that the Court had been given precious little information in relation to these matters.

[35]     The claimed medical condition was not put forward as an explanation until very late in the day.   Earlier, Mr Smith had blamed the respondents for failing to comply with their discovery obligations.  I am left with the distinct impression that Mr Smith has been less than frank in his explanations to the Court.  Moreover, the failure to serve the applicant’s briefs was not a one off failure; it was repeated and it followed on from a host of other timetable breaches.  I do not place any great store in Mr Smith’s assertions that he was suffering from an adverse medical condition.

[36]     Costs calculated on a 2B basis equate to $4,906.

[37]     Mr  Broadhurst  has  incurred  costs  totalling  $13,620  plus  GST  over  the

relevant period, and incurred an expert’s fee of $8,875 plus GST.

[38]     While indemnity costs are sought, I am not persuaded it is appropriate to grant indemnity costs.   Indemnity costs can be appropriate where particular misconduct has caused a loss of time to the Court and to other parties.13    There is, however, force in Mr Steele’s argument that the fixture was vacated almost a month prior to trial.  As a result, Court time was not wasted.  Alternative fixtures were able to be allocated to the responsible Judge.   Further, the hearing was re-scheduled to June 2017.  Had that hearing proceeded, costs incurred between August and October

2015 would not have been wasted in their totality, because ultimately the work done could have been used when the re-scheduled hearing was held.   In the event, the matter settled, but that of itself is not directly relevant, except that I suspect that the work done to get ready for hearing by the first and second respondents must have assisted in the settlement negotiations.  This was acknowledged by Mr McDonald, because he accepted that the expert’s report was able to be used – at least in part.

[39]     The issue becomes whether or not I should make an award of increased costs because of Mr Smith’s defaults.  The leading authority in this regard is the decision of the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.14     The following

principles emerged from that decision:

13     Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

14     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

(a)      The correct way to approach an award of increased costs is not to award a percentage of actual costs, but to establish the scale costs and order an uplift if appropriate.

(b)The first step is to categorise the proceedings in terms of the relevant rules, and determine the appropriate time band.

(c)      If the factors identified in the rules apply, the normal response will be to order for an uplift on scale costs.

(d)      The uplift should not usually exceed 50 per cent of scale costs.

[40]     In the present case, the appropriate scale is 2B.  There was no dispute as to this from the parties.  Considering the factors relevant to an award of increased costs set out in r 14.6(3), it is clear that Mr Smith’s conduct has contributed unnecessarily to the expense of the proceeding. An uplift in scale costs is appropriate.

[41]     Mr Smith has contributed to expenses incurred by the respondents in the anticipation that the matter would proceed to hearing in November 2016. The fixture date was fast approaching.   It was to be expected that the respondents would be preparing.   Necessarily they required the applicant’s evidence before they could complete their preparation, but they had to commence preparation.   Mr Smith’s response  to  the  Court’s  directions  was  unsatisfactory,  and  it  has  not  been satisfactorily explained. An increase of 50 per cent on scale costs is appropriate.

[42]     It was also to be expected that the respondents would need to obtain expert evidence.    Mr  Smith  had  signalled  to  the  Court  on  various  occasions  that  the applicant was proposing to call expert evidence.  While, in part, the expert’s report has been able to be used in other contexts, I accept the first and second respondents’ assertion that part of the costs incurred were incurred unnecessarily.  A contribution of 50 per cent to the expert’s costs is, in my view, reasonable.

[43]     I award the first and second respondents scale costs of $4,906.  I uplift those scale costs by 50 per cent, to make a total costs award of $7,359.  In addition, I direct

that Mr Smith is to pay 50 per cent of the expert’s fee – namely $4,437.50 plus GST, a total sum of $5,103.12.  It follows that the total award of costs and disbursements against Mr Smith in favour of the first and second respondents jointly is $12,462.12.

[44]    Turning to the third to ninth respondents, I have been given very little information in regard to the costs incurred by them.  Mr Collis understandably took a backseat role to the role taken by the first and second respondents.  He did not file detailed memoranda for the various conferences.   Precisely what work was undertaken in the period April 2016 to October 2016 is unclear, although I accept that Mr Collis did have to attend the numerous conferences held to address Mr

Smith’s defaults.  I award the third to ninth respondents jointly the sum of $1,750.00.

Wylie J