Brown v Sweeney

[2023] NZHC 1049

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-002663

[2023] NZHC 1049

UNDER

the Property Law Act 2007

IN THE MATTER

of an application on notice for orders of sale of properties pursuant to s 339 of the Property Law Act 2007

BETWEEN

DAVID JOHN BROWN

First Plaintiff

AND

TEDDY TRUSTEES LIMITED

Second Plaintiff

AND

DANA MAUREEN ANNE SWEENEY

Defendant

Hearing:

24 April 2023

Appearances:

D W Grove for the Plaintiffs

P J Stevenson for the Defendant

Judgment:

4 May 2023

JUDGMENT OF TAHANA J

(Distribution of funds and costs)

This judgment was delivered by me on 4 May 2023 at 4.00pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Vodanovich Law Ltd, Auckland D Grove, Auckland

Sellar Bone & Partners, Auckland P J Stevenson, Barrister, Auckland

BROWN v SWEENEY (Distribution of funds and costs) [2023] NZHC 1049 [4 May 2023]

Introduction

[1]                 Mr David Brown and Teddy Trustees Ltd (Teddy Trust) (together, the plaintiffs) apply for distribution of funds from the sale of six properties. The funds are held in the trust account of Carson Fox Legal.

[2]                 Ms Dana Sweeney, the defendant and daughter of Mr Brown, applies for orders to the effect that Teddy Trust is estopped from recovering penalty interest in relation to a mortgage dated 29 January 2004 (the mortgage).

[3]                 At the hearing, the parties agreed that Ms Sweeney’s application could be resolved by allocating 50 per cent of the penalty interest to each of Ms Sweeney and the plaintiffs. I make orders accordingly.

[4]The outstanding issues between the parties are:

(a)Whether the plaintiffs are entitled to a credit of $19,897.00 for remediation expenditure in relation to 26B Sefton Ave, Grey Lynn.

(b)Whether Ms Sweeney should be liable for all the expert’s costs.

(c)Whether the plaintiffs are entitled to costs on a 2B basis for the proceeding, the application for distribution, and Ms Sweeney’s application in relation to penalty interest.

[5]                 Mr Matthew Kemp has prepared an expert accounting report recommending a distribution of funds as between the parties. That report includes a credit to the plaintiffs for remediation expenditure in the amount of $19,897.00.

Remediation costs

[6]                 The amount of $19,897.00 is taken from a statement from the solicitors for the Teddy Trust, Foy & Halse. Mr Halse wrote to Ms Sweeney on 9 October 2014 informing her that:

You wanted to know why you haven’t had any help with 28B. With respect,  I attach a schedule of payments that have been paid on your behalf from my trust account. We have paid $19,896.83 either to you personally or to a builder as requested. We have also paid $23,846.44 to your barrister.

[7]                 The attached statement referred to in the above letter is entitled “DRUG OFFENCES” and specifies a payment of $10,744.22 to Ms Sweeney and a payment of $9,152.61 to ECR Trading Ltd. It is accepted that the payment to ECR Trading Ltd relates to remediation costs.

[8]                 It is unclear how the amount of $10,744.22 has been calculated. A copy of the trust ledger for Foy & Halse has been provided to the Court. In cross-examination, Mr Kemp confirmed that he had not been provided with any evidence that the

$10,744.22 was for remediation expenses. Mr Kemp also accepted in cross- examination that if the Court was not satisfied that the plaintiffs had established that the $10,744.22 was for remediation costs, then only $9,152.61 should be credited to Mr Brown.

[9]It was open to the plaintiffs to file evidence to establish that the amount of

$10,744.22 was attributable to remedial costs. Mr Halse filed an affidavit in relation to penalty interest but did not respond to the issue of remediation costs. There is no evidence other than the trust ledger and Mr Halse’s covering letter. The trust ledger does not include a single amount of $10,744.22 nor do the entries for the amounts debited indicate whether they relate to remediation costs.

[10]              In these circumstances, I am not satisfied that the plaintiffs have established that the $10,744.22 relates to remediation costs. The plaintiffs are therefore only entitled to a credit of $9,152.61.

Expert’s costs

[11]The expert was appointed by consent of both parties.

[12]              The plaintiffs claim that the expert’s costs should be paid by Ms Sweeney. The plaintiffs submit that had Ms Sweeney responsibly accounted for expenses and kept financial records, the appointment of the expert would be unnecessary. They say that

the expert was required to spend considerable time preparing his reports because of the state of the financial records for the properties.

[13]              The properties were owned jointly by the parties, but Ms Sweeney was responsible for financial records. The plaintiffs have received 50 per cent of the benefit of the capital gains in the properties without any responsibility for the financial records relevant to the property.

[14]              At the hearing, the expert, Mr Kemp, confirmed that Ms Sweeney had cooperated throughout and provided documents and authority when this was required.

[15]              The appointment of the expert has assisted both parties and the Court in narrowing the issues and determining how to distribute the funds. I consider it appropriate that the expert’s costs are shared equally between the parties to reflect their respective interests in the properties.

Costs of the proceeding

[16]              The plaintiffs submit that Ms Sweeney should pay the costs of the proceeding on a 2B basis. Ms Sweeney submits that costs should lie where they fall.

[17]              The plaintiffs say that the  proceedings  were  only  necessary  because  of  Ms Sweeney’s failure to respond to correspondence in late 2017. At that time, Property Law Act 2007 notices had been issued by Westpac and it was necessary for the properties to be sold urgently. The plaintiffs say as they have succeeded in having the properties sold, they should therefore be awarded costs on a 2B basis.

[18]              There have been two substantive applications that have been determined by the Court and costs awarded against Ms Sweeney. To the extent that contested issues have been determined by the Court, cost awards have been made.

[19]              In 2016, there was correspondence between Ms Sweeney’s solicitors and the plaintiffs’ solicitors indicating that Ms Sweeney was willing to sell the properties. Ms Sweeney has maintained throughout the proceeding that she wished to remain in her home at 28A Sefton Ave, Grey Lynn, and wished to purchase Mr Brown’s share of

that property. She needed the other properties to be sold first so that she was aware of the amount of funds available to her to be able to purchase Mr Brown’s share of the 28A Sefton Ave property. Mr Brown did not accept Ms Sweeney’s proposal to buy his share of the property.

[20]              The position of Ms Sweeney is not unreasonable in circumstances where the 28A Sefton Ave property was her home, and she was willing to pay Mr Brown for his share (subject to affordability). To the extent that that issue had to be resolved, it was determined in my previous judgment1 and costs were awarded against Ms Sweeney.

[21]              In these circumstances, I do not consider it appropriate to award additional costs of the proceeding to the plaintiffs.

Costs of the applications

[22]              In terms of Ms Sweeney’s application regarding penalty interest, the plaintiffs refer to a previous offer to split the penalty interest, 50 per cent each between       Ms Sweeney and Mr Brown. That was the ultimate resolution of the application. This suggests that costs should be awarded to the plaintiffs.

[23]              In terms of the plaintiffs’ application for distribution of the funds, Ms Sweeney has been successful in that I consider the expert’s costs be shared equally between the parties. Ms Sweeney has also been successful in reducing the remediation costs allocated to the plaintiffs by $10,744.22.

[24]              In these circumstances, where each party has been successful on one application, I am not satisfied that it is appropriate to make a costs award in favour of the plaintiffs. Costs should lie where they fall.

Result

[25]I make the following orders:

1      Brown v Sweeney [2022] NZHC 1553.

(a)The further invoices of Mr Kemp received by the Court on 3 May 2023 for work up to and including the hearing of the applications are to be paid from the funds held on trust prior to any distribution to the parties;

(b)The allocation of distribution funds is to be in accordance with Schedule One of Mr Kemp’s affidavit dated 20 April 2023, subject to the following adjustments:

(i)The plaintiffs are only entitled to a credit of $9,152.61 for remediation costs; and

(ii)The penalty interest is to be credited 50 per cent each as between the plaintiffs on the one hand, and Ms Sweeney on the other;

(c)The expert’s costs are to be borne equally between the plaintiffs on the one hand, and Ms Sweeney on the other;

(d)Costs of the two applications determined at the hearing and costs of the proceeding are to lie where they fall.

Tahana J