Cartwright v Joseph
[2019] NZHC 1093
•20 May 2019
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2017a-488-000058
[2019] NZHC 1093
BETWEEN CATHERINE DAILE CARTWRIGHT and SARAH BEVERLEY HARRISON
Plaintiffs
AND
NITA WAIRANGI JOSEPH, BARRIE AGAR, BRETT HOGAN and TREVOR
DRAFFIN as trustees and executors of the estate of John Boyd Harrison
Defendants
Hearing: (On the papers) Counsel:
A McDonald and C Rutledge for the Plaintiffs J Robertson for N Joseph
J Golightly for the Executors
Judgment:
20 May 2019
[COSTS] JUDGMENT OF MOORE J
This judgment was delivered by me on 20 May 2019 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar Date:
CARTWRIGHT & ANOR v JOSEPH & ORS [2019] NZHC 1093 [20 May 2019]
Introduction
[1]This is a costs judgment.
[2] John Boyd Harrison, known as Tim, died on 23 September 2016. He was survived by Nita Joseph (“Nita”), his partner of 38 years, and his two children, Catherine Cartwright (“Cathy”) and Sarah Harrison (“Sarah”).
[3] In his will of 17 June 2014, for which probate was granted on 1 December 2016, Tim left the whole of his estate to Nita, should she survive him. The estate was valued at just under $4 million; approximately $92,000 in cash and land valued at $3.8 million. The land consisted of a large block in Pataua South, east of Whangārei.
[4] This property comprised two titles; NA51D/609 (“609”) and NA51D/610 (“610”). 609 was approximately 44 hectares, while 610 spanned approximately 32 hectares. Nita operates a camping ground at the northern tip of 609. This is how she makes her living. The camping ground was located in the most valuable part of 609, which was referred to as “S11/1”.
[5] Cathy and Sarah applied under s 4 of the Family Protection Act 1955 (“the Act”) for provision under the estate. On 11 September 2018 I found Tim had breached his moral duty to Cathy and Sarah.1 I indicated an award of about 10 per cent would be sufficient to remedy the breach, noting any percentage-based division needed to be flexible enough to accommodate the practical considerations involved in making an award out of the estate.2
[6] The parties filed further submissions as to the form of the award. On 6 November 2018 I made the following orders:
(a)The executors are to arrange for the subdivision of 609 by separating the S11/1 area from the residue of the title and amalgamating the residue with title of 610.
1 Cartwright v Joseph [2018] NZHC 2383.
2 At [36].
(b)The executors were permitted to create an easement servient to 609 along the northern boundary of 610, either before or simultaneously with the subdivision of 609.
(c)The executors were responsible for the sale of the amalgamated title and were to distribute the proceeds of sale to the plaintiffs, Cathy and Sarah.
(d)The costs of steps (a)-(c) were to be borne as follows: 80 per cent by the estate, and 20 per cent by the plaintiffs. The plaintiffs were to pay their contribution to the estate upon receipt of invoices relating to the required advice and works.
(e)The costs of constructing the road required to support the subdivision, step (b) above, were deferred until after the 2018-2019 campground summer trading season.
[7]As to the award of costs, I said:
“[19] As noted, the executors have asked that the costs awarded to the plaintiffs be modest, or costs lie where they fall, given the expense the estate will be put to in carrying out the Court’s orders. Cathy and Sarah have asked to be heard separately on the issue of costs.
[20] Given the foregoing, I reserve the question of costs to allow the parties to negotiate and reach agreement, which it is hoped they will be able to do...”
[8]Unfortunately, the parties have been unable to agree as to costs.
Relevant law
[9] The starting point, as always, is that costs are at the discretion of the Court.3 Generally, costs follow the event.4 But the position in respect of family protection cases is somewhat different. The relevant principles were helpfully summarised by Katz J in Ormsby v Van Selm and Courtney J in Mumby v Mumby.5
3 High Court Rules 2016, r 14.1.
4 Rule 14.2(1)(a).
5 Ormsby v Van Selm [2016] NZHC 484 at [5]-[6] and Mumby v Mumby [2016] NZHC 2836 at [7].
[10] There has been a longstanding, though not invariable, practice of ordering the solicitor/client costs of all parties to be paid out of the residue of the estate.6 Reasons for departing from this practice may include the size of the estate and if a costs order would unfairly affect the residuary beneficiary.
[11] At least part of the rationale for this approach is that although proceedings under the Act are civil adversarial claims, in reality the Court’s duty is to stand in the shoes of the deceased to secure the proper discharge of his or her moral duty to qualifying beneficiaries.7 The practice of meeting costs from the estate reflects that purpose. A similar approach to costs is taken in contested will cases, where it is well established that if the litigation originates in the “fault” of the will maker, or there were reasonable grounds for raising issues of execution or testamentary capacity, then costs may properly be paid out of the estate. In other cases the principle that costs should follow the event will generally prevail.8
[12] In recent years there appears to have been an increasing trend towards costs following the event in family protection cases,9 but this is certainly not a uniform practice. As is always the case in costs matters, the overarching consideration must be that any award of costs should do justice between the parties. Ultimately the decision as to the appropriate costs award in any given case will likely depend on a range of factors, including an assessment of the merits of the proceedings and whether they were reasonably brought, the size and circumstances of the estate, the effect of an award on beneficiaries, and the overall conduct of the litigation.
[13]As was summarised by Whata J in Wightman v Public Trust:
“[19] …the practice of the Court to award costs on a solicitor client basis out of the estate is not universal and is subject to the proper application of rule 14 governing costs….
6 Wood Luxford v Wood [2013] NZSC 153, [2014] 1 NZLR 451; Paewai-Kohe v Paewai [2014] NZHC 3137; Public Trust v Bristow-Brown [2014] NZHC 2497; Woodward v Smith [2009] NZCA 215; Keelan v Peach CA81/02, 12 May 2003; Re Allardice (1909) 29 NZLR 959 (CA); Re Williamson [1954] NZLR 288 (CA).
7 Wightman v Public Trust [2015] NZHC 1091 at [22].
8 Re Paterson (Deceased) [1924] NZLR 441 (SC) at 442-443.
9 See for example Fisher v Kirby [2012] NZCA 310, [2013] NZFLR 463; Barker v Barker HC Auckland CIV-2006-404-181, 7 December 2006; TB v JB [2014] NZHC 1478, [2015] NZFLR 9; Brain v Harwood [2014] NZHC 2067; Fry v Fry [2015] NZHC 2716; and Wightman v Public Trust.
[20] …the Court is now more cautious about awarding [such] costs out of the estate, particularly where the estate is small, the costs award will have a substantial effect on beneficiaries and or there is some other disqualifying feature that makes payment out of the estate inappropriate…
[21] … the longstanding practice of awarding costs out of the estate on a solicitor client basis is a relevant factor to be taken into account is determining whether costs should be paid out of the estate and on what basis. This is consistent with the driving principle of the costs regime that any costs award should be predictable and expeditious. But whether an award of this nature should be adopted in any given case will depend (as it does already) on the circumstances of the estate, the effect of an award on beneficiaries, and the conduct of the litigation.”
[14]I propose to adopt the same approach.
The parties’ positions as to costs
Cathy and Sarah
[15] Cathy and Sarah seek the actual costs they incurred in the course of the proceeding, as well as disbursements, to be paid out of the estate. These total
$102,538.14. Cathy and Sarah say that the estate is large enough to absorb the payment of these costs. It is further submitted that Nita has the benefit of continued income from the camping ground and in any case has no dependents to provide for.
[16] In terms of the defendants’ conduct in the proceeding, Cathy and Sarah say that they were left with no choice but to institute the proceedings. Various correspondence between the parties has been provided to the Court which they say reveals this.
[17] According to Cathy and Sarah, the parties met in October 2016 to seek an amicable solution in the wake of Tim’s death. Cathy and Sarah were told that their claim appeared to be unfounded and were advised to seek legal advice.
[18] On 21 November 2016, Cathy and Sarah’s then-counsel wrote to the defendants setting out their claim and indicating a “strong” desire for an amicable settlement. Probate was granted on 1 December 2016. Cathy and Sarah provided more information to the defendants on 9 December 2016 and requested a round-table meeting on 19 January 2017. Despite ongoing correspondence between the parties in February and March 2017, no meeting eventuated. Cathy and Sarah say that “the
continued demands [by the defendants] for additional financial statements, draft affidavits, and further valuations forestalled the round-table meeting”. They say that this prevented the claim from being resolved in a timely and cost-effective manner.
[19] On 15 March 2017, Cathy and Sarah were informed that the estate could be distributed from 1 May 2017. Given the lack of response from the estate to all attempts by Cathy and Sarah to initiate discussions and reach a settlement, they say they were left with no option but to immediately commence proceedings. Despite this, they still indicated a desire to engage in mediation.
[20] The parties attempted to reach settlement between November 2017 and May 2018 but were unsuccessful.
[21] In terms of the overall justice of the situation, Cathy and Sarah say that if an award of costs is not made to them, the Court’s award in their favour will largely be eroded.
Nita
[22] Nita’s position is that costs should lie where they fall. She says that the correspondence between the parties discloses two things:
(a)first, that she offered to transfer a section of the property to Cathy and Sarah; and
(b)secondly, that Cathy and Sarah each sought payment of 40 per cent of Jim’s notional half share of the estate (so in essence a total of 20 per cent each), totalling $760,000.
[23] The final orders of the Court reflected a middle ground: that is, payment to Cathy and Sarah of 10 per cent of the estate each. Nita says that accordingly, neither she nor the plaintiffs were successful. It is on that basis that costs should lie where they fall.
Discussion
[24] Against that background and having reviewed the relevant authorities, it seems to me that costs should not lie where they fall. That is simply the nature of a costs award in family protection proceedings. As has been said, in determining costs it is still the duty of the Court to stand in the shoes of the deceased to secure the proper discharge of his or her moral duty to qualifying beneficiaries. In doing so, the matter boils down to whether the Court should award Cathy and Sarah indemnity costs or scale costs. No exceptional circumstances justifying the Court to do otherwise have been brought to my attention.
[25] Whata J was faced with a similar decision in Wightman and it is from his well- reasoned judgment that I take guidance. In Wightman the testator breached his moral duty to his five claimant grandchildren. The proceeding was opposed by Mr Wightman, another grandchild. But for the distribution to the other five grandchildren, he stood to receive the entirety of the residual estate. A sum of $150,000 was awarded to each of the five claimant grandchildren from an estate estimated to be in the order of $11.5 million.
[26] Whata J opted to award the claimants scale costs, paid out of the estate, rather than indemnity costs. In doing so, he made the following observations:10
(a)the plaintiffs had been granted leave to commence the proceedings out of time and thus been granted an indulgence;
(b)each was awarded a substantial sum out of the estate;
(c)the estate was large and could bear the award of costs, but the primary effect of such an award would be carried by the residuary beneficiary;
(d)the settlement offer made by the claimants was unrealistic (a more moderate starting point might have avoided litigation);
10 At [23].
(e)the claimants’ actual costs were 1.8 times greater than a 3C scale award; and
(f)a full indemnity award would shift the comparative inefficiency in the presentation of the claimants’ case to the residual beneficiary.
[27] Undertaking my own analysis, I also reach the view that scale costs are appropriate in this case.
[28] As I noted in my substantive judgment, an award of 15 per cent in cases of this type sits very much at the higher end the Courts have considered appropriate.11 Cathy and Sarah initially sought 20 per cent each. This was the stance they took prior to the proceedings and the demand upon which their various offers of settlement were centred. As my judgment reflected, this stance was overly ambitious. I do not think the defendants’ refusal to meet this demand could be regarded as unreasonable.
[29] As for the various delays caused by the defendants in the correspondence leading up to the issuing of proceedings, I do not think these protracted the matter to a significant extent such as to make indemnity costs appropriate. Cathy and Sarah say that it was these delays which forced their hand and prompted them to issue proceedings. But equally, it was the failure to agree as to a potential settlement after proceedings were brought that failed to avert the imminent litigation and a large portion of the costs incurred by the parties. In part, this was brought about by Cathy and Sarah’s stance in the settlement negotiations, which appears to have been unwavering. In the end, each was awarded a substantial sum from the estate. The estate is large, but not so large it could bear the increased burden of Cathy and Sarah’s actual legal costs without any substantial effect. It is also relevant that the entirety of that added burden would be carried by Nita, whose interests as a beneficiary must be borne in mind. I consider that an award of indemnity costs would result in unfairness to her in her capacity as the residual beneficiary, whose livelihood is still tied up in her late partner’s estate. It is also relevant that overall she took a reasonable stance throughout the proceedings, making sensible concessions where appropriate.
11 At [36].
[30] In these circumstances, I consider that scale costs are the appropriate award for the plaintiffs, to be paid out of the estate.
Result
[31] The plaintiffs are entitled to costs on a 2B basis. The sums are to be paid out of the estate.
Further clarification
[32]In their memorandum as to costs, Cathy and Sarah said:
“6. There also appears to be some uncertainty about the costs to be borne by the estate in connection with the subdivision and sale of the balance of 609 and 610. The plaintiffs understand that Counsel for the estate has suggested that the estate would only be responsible for 80% of the subdivision costs, with the balance of 20% to be met by the plaintiffs and 100% of any sale costs (such as legal and real estate fees) to be met by the plaintiffs. This would significantly erode the award made to the plaintiffs and we request your Honour to confirm that all subdivision and sale costs are to be met 80% by the estate and 20% by the plaintiffs, to avoid further dispute when the subdivided land is eventually sold.”
[33]In my judgment of 6 November 2018 I said:
“[18] Accordingly, I make the following orders:
(a)The executors are to arrange for the subdivision of NA51D/609 by separating the S11/1 area from the residue of the title, and amalgamating the residue with title of NA51D/610.
(b)The executors may create an easement servient to NA51D/609 along the northern boundary of NA51D/610 adjacent to Mahanga Road, of sufficient width to host a legal vested road, either before or simultaneously with the subdivision of 609.
(c)The executors are responsible for the sale of the amalgamated title, and are to distribute the proceeds of sale to the plaintiffs, Cathy and Sarah.
(d)The costs of steps (a)-(c) are to be borne as follows: 80 per cent by the estate, and 20 per cent by the plaintiffs. The plaintiffs are to pay their contribution to the estate upon receipt of invoices relating to the required advice and works.”
(Emphasis added)
[34] The plain reading of these orders is clear. The estate is to bear 80 per cent of the sale costs of the amalgamated title.
Moore J
Solicitors:
Ms McDonald, Auckland Ms Rutledge, Auckland Ms Robertson, Auckland
Marsden Woods Inskip Smith, Whangarei
3
10
0