Chambers v New Zealand Guardian Trust Company Limited

[2024] NZHC 1219

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2021-442-36

[2024] NZHC 1219

UNDER

the equitable jurisdiction, Law Reform (Testamentary Promises) Act 1949 and Family Protection Act 1955

IN THE MATTER

of the estate of DENIS EDWIN CHAMBERS

BETWEEN

CINDY MARY CHAMBERS

Plaintiff

AND

THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED

Defendant

LYNETTE ANN CHAMBERS

Interested Party

Hearing:

On the Papers

Court:

J C Ironside and S W Sansom for Plaintiff A R Gilchrist for Defendant

G D Pearson for Interested Party

Judgment:

16 May 2024

JUDGMENT OF McQUEEN J

[Costs]

[1]    In a judgment dated 7 August 2023 (the first judgment), I upheld the claim by Ms Cindy Chambers (Cindy) under the Law Reform (Testamentary Promises) Act 1949 (the TPA) and in the alternative, her claim based on a common intention constructive trust.1 I was satisfied she is entitled to the shares held by her late father (Denis Chambers) in each of Chambers and Jackett Ltd (CJL) and Chambers and

1      Chambers v The New Zealand Guardian Trust Co Ltd [2023] NZHC 2084 at [112] and [150].

CHAMBERS v THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED [2024] NZHC 1219 [16 May 2024]

Jackett Equipment Ltd (CJEL) (or jointly, the companies), subject to a requirement to provide an income to Mrs Lynette Chambers (Lynette) during her lifetime.2

[2]    In the first judgment I concluded that there should be an opportunity to make submissions in relation to the implementation of relief, and I outlined some possible approaches.3 I recorded that costs were reserved to be dealt with once the implementation of relief was determined either by agreement between the parties or by order of the Court.4

[3]    Counsel filed submissions to have the implementation of relief determined. In my further judgment dated 20 December 2023 (the second judgment) I ordered that:5

(a)Cindy is to execute a Declaration of Acknowledgement of Liability;

(b)Lynette is to transfer all shares in the companies on the execution of the Declaration of Acknowledgement of Liability;

(c)leave was reserved for the parties to seek further orders of the Court (if required) in relation to a 10 per cent share in the annual net profits of CJL over the period between the death of Denis and 30 June 2024;

(d)costs were reserved to be dealt with on the papers if agreement could not be reached by the parties.6

[4]    Lynette has appealed against the first and second judgments. While an order for stay of the proceedings pending determination of the appeal has been made by consent and on the condition that the appeal is pursued with reasonable diligence, costs in this Court remain to be determined.7

2 At [152].

3      At [153]–[157].

4 At [162].

5      Chambers v The New Zealand Guardian Trust Co Ltd (No 2) [2023] NZHC 3826 at [28].

6 At [29].

7      Chambers v The New Zealand Guardian Trust Co Ltd HC Nelson CIV-2021-442-36, 5 March 2024 (Minute of Grice J).

[5]    Counsel for Cindy and Lynette have each filed a memorandum as to costs. No memorandum has been filed for the New Zealand Guardian Trust Company Limited (Guardian Trust).

Parties’ positions

[6]    Mr Ironside, counsel for Cindy, seeks costs against Lynette on a 2B basis, an allowance for second counsel and an uplift of 30 per cent. Mr Ironside submits that Cindy is entitled to increased costs because of the settlement offers she made, which Lynette did not accept, but essentially mirrored the relief granted by this Court. Cindy seeks a costs award of $53,595.75 (which includes $41,227.50 of scale costs plus

$12,368.25, being a 30 per cent uplift) together with disbursements of $7,873.20.

[7]    Mr Pearson, counsel for Lynette, accepts that a 2B basis and allowance for second counsel is appropriate but submits scale costs should amount to $33,101.50. Mr Pearson disputes the inclusion of certain items in the assessment of scale costs.

[8]    Mr Pearson also opposes the award of increased costs and submits that Lynette did not unreasonably reject a settlement offer made without prejudice except as to costs. He argues that Cindy was never willing to negotiate over receiving less than approximately 90 per cent of Denis’ estate, subject to a modest annuity. Mr Pearson says that the increased costs claim is predicated on it being unreasonable not to accept that proposal, but Lynette was entitled to take the position that was not an acceptable outcome. He submits that parties are not entitled to increased costs simply because they succeed.

[9]    Mr Pearson also submits that Lynette should not be liable for more than 50 per cent of the plaintiff’s costs when she argued the same position as Guardian Trust, and yet no costs have been sought against Guardian Trust.

Discussion

[10]   All matters of costs are at the discretion of the court.8 The general principles which apply to the determination of costs include that costs follow the event, and that

8      High Court Rules 2016, r 14.1.

the determination of costs should be predictable and expeditious.9 The overriding consideration when exercising the discretion to award costs is that the costs award ought to do justice between the parties.10

[11]   I accept the position agreed between counsel  that  an  award of costs  on  a 2B basis is appropriate, together with an allowance for second counsel. I turn to consider first the disputed aspects of scale costs and then whether increased costs are appropriate.

Contested items

[12]   Mr Ironside has claimed an additional item 11 of sch 3 of the High Court Rules 2016 (the Rules), for filing a memorandum in anticipation of a subsequent case management conference on 13 September 2022. This second item 11 is not included in Mr Pearson’s schedule of accepted costs, but Mr Pearson does not address the point in his memorandum. In any event, a joint memorandum was filed for that case management conference, resulting in directions being made by consent and the call of the matter being vacated. I consider that costs for this memorandum are appropriately claimed.

[13]   Mr Pearson submits that items 30, 31 and 32 of sch 3 of the Rules in relation to affidavit hearings should be substituted by items 33, 33A and 33B in relation to witness hearings. The significance of claiming under items 30 and 32 is that, for band B proceedings, two days may be claimed for the first hearing day and one day for the second hearing day. By contrast, under items 33 and 33B, only one day may be claimed for both the first and second hearing days. This has a substantial effect on the calculation of costs.

[14]   This proceeding appears to have been commenced under pt 18 of the Rules. It certainly progressed on the basis that affidavit evidence would be filed, and that cross- examination would occur as required. As a result, a timetable for the filing of witness briefs was specifically not sought. Ultimately, only Lynette and Cindy were cross-

9      Rules 14.2(1)(a) and 14.2(1)(g).

10     Packing In Ltd (In Liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5] per Tipping J.

examined at trial but affidavits from several other persons were also filed, referred to by counsel, and relied on by me in my judgments.

[15]   The headings in sch 3 of the Rules of “affidavit hearing” in relation to items 30, 31 and 32 and “witness hearing” in relation to items 33, 33A and 33B are in my view simply factual descriptions. It is therefore unsurprising that, as Mr Pearson submitted, no authority is to be found in relation to the definition of those terms.

[16]   Mr Pearson referred me to Roe v University of Auckland.11 Roe is a costs decision in an application for judicial review where Fitzgerald J reduced the daily allowance for step 32 from two days to one day because the University conceded a legal point at the hearing. There was no relevant concession by Cindy of a legal point in the present case. I do not find Roe of assistance in resolving which steps are properly applied.

[17]   I conclude that items 30, 31 and 32 from sch 3 of the Rules sensibly apply to the present case.

[18]   The hearing before me took only one and a half days, as against the four days set down. This occurred in large part because there was no cross-examination of witnesses other than Cindy and Lynette. Cindy only claims under items 30 and 32 in relation to the first and second hearing days and I consider this appropriate.

[19]   This means that, pending my consideration of whether increased costs should be awarded, I assess costs on a scale basis to be $41,227.50, as outlined in schedule 1 to Mr Ironside’s memorandum.

Increased costs claim

[20]The more significant issue is whether an uplift of costs is appropriate.

[21]   The Court may make an order for increased costs. Rule 14.6 of the Rules provides, relevantly:

11     Roe v University of Auckland [2021] NZHC 1331.

14.6     Increased costs and indemnity costs

…

(3)      The court may order a party to pay increased costs if—

…

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

…

(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

…

[22]   The costs regime is premised on the basis that parties succeed and fail. A departure from the standard award of costs should be discouraged unless there is a clear basis for such departure in accordance with the Rules.12 The threshold for a departure under r 14.6(3)(b) is unreasonable conduct by the party opposing costs.13 A party seeking increased costs bears the onus of persuading the Court that such an award is justified.14 Each case is necessarily fact specific, and the assessment of the extent of any increase can be impacted by a number of factors.15

[23]   Mr Ironside submits that Cindy is entitled to increased costs because Lynette failed without reasonable justification to accept either of the two offers of settlement made or to engage constructively in settlement discussions. He emphasises that the settlement offers exceed or closely mirror the relief granted by the Court. Mr Ironside submits that there were two relevant occasions where Cindy made settlement offers to Lynette.

[24]   The first settlement offer arose on 3 August 2022, when Cindy proposed a settlement where she would pay Lynette an annuity of $45,000 for her lifetime following a transfer of the company shares to Cindy, and not pursue the Family Protection Act claim (the FPA claim). Cindy asked whether, “if this offer is not

12     Lepionka & Company Investments Ltd v Gibson Sheat [2023] NZHC 2745 at [3].

13     Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

14     Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27].

15     Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].

acceptable”, Lynette would attend mediation. On 18 August 2022, Lynette declined to enter mediation on the basis it was clear that Cindy was not prepared to mediate over the exclusion of the company shares from the estate. In these circumstances, Lynette’s position was that it was necessary to proceed to a hearing as soon as possible.

[25]   The second settlement offer arose on 10 February 2023, when Cindy offered a settlement on the basis that one half of the shares owned by Denis in the companies be transferred to Cindy with Lynette retaining the remaining half of Denis’ shares for her lifetime (the shares to then pass to Cindy upon Lynette’s death). The FPA claim would not be pursued. Lynette rejected this offer on 3 March 2023, on the basis that it was indistinguishable from the earlier offer and amounted to an invitation to concede the claim in whole. It was noted there had been no dividends since Denis’ death and given the attitudes of the other company shareholders, Lynette could not expect any dividends or other value from the life interest of the shares.

[26]   There was some further email correspondence between counsel in March 2023 along similar lines.

[27]   Both offers reflect Cindy’s position that Denis intended her to hold his shares in the companies. Cindy’s understanding of events and of Denis’ intentions was set out in her affidavit and supported by a further seven affidavits from family members and others involved in the business.

[28]   The essential difference between the offers was that in the first, Lynette would give up the shares but retain an income from the companies during her lifetime, while in the second Lynette would hold half of Denis’ shares in the companies during her lifetime. That offer did not include an annual payment to Lynette, but likely assumed that dividends would be payable. Both offers abandoned the FPA claim. Both offers also proposed mediation or discussions between counsel in relation to settlement.

[29]   I consider that both offers were reasonable as far as they went. They were made in the context of a closely held family business and given the evidence already filed for Cindy before the first offer was made (together with an indication that one more affidavit would be filed, to similar effect), were clear as to the case advanced by Cindy.

Both offers conceded the FPA claim. The second offer noted that it was made as Cindy’s lawyers were “about to embark on detailed preparations for trial”.

[30]But it is important to consider two aspects of the offers.

[31]   First, I do not regard conceding the FPA claim to be significant. In the first judgment I said:16

Given my conclusions above, it is not necessary to express a final view on Cindy’s claim pursuant to the Family Protection Act. I nonetheless observe that a claim under the Family Protection Act does not sit well with the factual circumstances established. Had it been necessary to determine whether Denis had fulfilled his moral duty of provision to his only child, I consider it likely that he provided adequately for Cindy. While the provision of the half interest in the Family Home to Cindy is residual, when it accrues, it is a significant provision. Cindy also owns her own home worth approximately $1 million, subject to a small mortgage of about $50,000, and has her existing shares in the companies, which are worth approximately $500,000. My tentative view is that any further award to Cindy would not be justified based on need or recognition, as established in the caselaw.

[32]   Thus, the offers were in reality a reiteration of the statement of claim without any meaningful concession. The critical issue related to the claims made under the TPA or through a constructive trust, in order to establish Cindy’s contention that the shares in the companies were rightfully hers, and no potential concession was raised in this context.

[33]   Second, the offers were not in terms on which they could be immediately accepted.17 As is apparent from my judgments, implementation of relief raised several issues. These would have needed to be resolved between the parties, were a settlement to have been completed.

[34]   This element of uncertainty in the offers necessarily required further discussion between the parties. Lynette’s counsel, Mr Pearson, clearly identified that mediation or other settlement steps were only sensible in Lynette’s view if Cindy was prepared to move from her stated position that she was entitled to the entirety of the company shares. Although expressing ongoing interest in mediation or other settlement

16     Chambers v The New Zealand Guardian Trust Co Ltd, above n 1, at [151].

17     Singh v Body Corporate 207650 [2024] NZCA 150.

discussions, Cindy’s counsel provided no reassurance on this point. As Mr Pearson submits, this created a situation where there was no room to negotiate, and the matter had to proceed to trial. While Cindy may in fact have made concessions during mediation or settlement discussions, had they ensued, I do not consider that Lynette can be criticised for not participating in further settlement activities in these circumstances.

[35]   I am reinforced in this view by two other matters. The first is that Lynette had an initial reasonable expectation that she was entitled to Denis’ residual estate as set out in his 2007 will for which probate was granted.18 The claims made by Cindy in equity and under the TPA are deeply factual in nature. Cindy filed detailed evidence as to what Denis intended and said, in support of her claim. Lynette’s evidence meant there were significant factual conflicts which this Court had to determine. I consider that the nature of these claims was such that it was not unreasonable for Lynette to seek resolution by the Court despite the fact she was ultimately unsuccessful in defending the claim.

[36]   The second is that it is offers from the plaintiff that are at issue here. This Court has previously commented on the different nature of offers made by successful plaintiffs and successful defendants:19

[59]      Offers made by successful plaintiffs are in a different category from offers made by unsuccessful defendants that exceed what the plaintiff is entitled to. The latter category is subject to separate rules in rr 14.10 and 14.11 which contemplate that a defendant offering more than the plaintiff is entitled to get costs from the point of the offer. That rationale does not arise in the rejection of offers made by the plaintiffs. A defendant who defends a proceeding is putting the plaintiff to the cost of it, and normally no increased costs are caused because the defendant does not accept an offer to settle for less than is claimed.

[60]      The principle in r 14.6(3)(b)(v) recognises, however, there will be situations where the refusal to settle can demonstrate that the party is acting without reasonable justification, and causing unnecessary expense to the claiming party. It has a similar rationale to the other uplift grounds in r 14.6. A plaintiff may offer to accept less than it is entitled to try and convince an obdurate defendant not to put the parties to the cost of a trial, and the failure to accept such an offer may justify an uplift.

18     Chambers v The New Zealand Guardian Trust Co Ltd, above n 1, at [12]–[16].

19     Mainzeal Property and Construction Ltd (in liq) v Yan (No 2) [2019] NZHC 1637 at [59]–[60].

[37]   I conclude then that Lynette did not act unreasonably in relation to the settlement offers and this is not an appropriate case in which to award increased costs. Given this, it is not necessary for me to address other arguments made by Mr Pearson as to the detailed approach to assessing increased costs.20

Costs against Guardian Trust

[38]   Mr Pearson points out that Cindy has not claimed costs against Guardian Trust and submits that the burden of costs should be borne equally by the parties who argued the same position. He says that the determination of costs should be adjusted accordingly, in effect so that Lynette is only liable for half of any costs awarded in favour of Cindy.

[39]   The Guardian Trust is the executor and trustee of Denis’ estate under his will. The Guardian Trust was a party to the proceedings and appropriately indicated that, although making submissions to assist the Court, it took a neutral stance to the proceedings.21 I do not agree that Guardian Trust argued the same position as advanced by Lynette. I accept that it can fairly be said that counsel for Guardian Trust addressed some legal and factual matters that he considered were relevant to the Court’s decision and might be said to favour Lynette, but this is not the same as arguing the same position as Lynette. The fundamental dispute in the proceeding was plainly between Cindy and Lynette.

[40]   I do not consider it would be appropriate to reduce the costs payable by Lynette on this basis.

Disbursements

[41]   Disbursements are claimed as set out in the third schedule to Mr Ironside’s memorandum. Mr Pearson did not raise any concerns about disbursements in his memorandum.

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

21     Irvine v Public Trustee [1989] 1 NZLR 67.

[42]   I have reviewed the disbursements claimed. I approve the filing and scheduling fees specified in items 1 to 3 in the schedule. Item 4 relates to hearing fees and the amount sought assumes four hearing days. As already mentioned, the hearing in fact took one and a half days. I approve hearing fees for one and a half days, amounting to

$1,280, in accordance with item 19 of the High Court Fees Regulations 2013.

[43]   The remaining items claimed in the schedule are respectively described as “Preparation and photocopying of casebook 1 – SLS electronic casebook management”, “Casebook 2 – SLS electronic casebook management”, and Binding Bundle” and the amount claimed is in total over $2,000. I am not presently willing to approve these items as I do not have sufficient information to be sure that they meet the requirements of r 14.12(2) of the Rules. I direct the Registrar to consider the claim for these items, in accordance with r 14.12(4).

Result

[44]   I order Lynette to pay Cindy’s costs in the sum of $41,227.50. I also order Lynette to pay Cindy’s disbursements (relating to items 1 to 4 in in the third schedule to Mr Ironside’s memorandum) in the sum of $2,660. I direct the Registrar to consider Cindy’s claim for further disbursements in accordance with r 14.12(4).

McQueen J

Solicitors:

Richmond Law, Nelson for Plaintiff

Perpetual Guardian, Wellington for Defendant Legal Focus, Nelson for Interested Party