Coleman v Chalklen
[2017] NZHC 1204
•2 June 2017
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-91 [2017] NZHC 1204
UNDER the Declaratory Judgments Act 1908 IN THE MATTER OF
the estate of Dorothy Farrington
BETWEEN
ADRIAN JAMES COLEMAN Applicant
AND
DAWN LOIS CHALKLEN & OTHERS Respondents
On thePapers: Counsel:
D J OʼConnor and J C Heaphy for Applicant
M J Wenley and J F McDowell for RespondentsJudgment:
2 June 2017
JUDGMENT OF CLARK J (COSTS)
Introduction
[1] In my judgment of 22 December 2016 I made a declaration as to the construction of a clause in the will of the late Dorothy Farrington.1 The clause bequeathed the residuary estate. I held that the clause was properly construed as leaving the residue of the testator’s estate to the named beneficiary (Allan, the son of the testator’s sister) and the four children of Dawn Chalklen who is one of the respondents.2
[2] I expressed the preliminary view that the reasonable costs incurred by the applicant in bringing the application, and by both the applicant and Ms Chalklen in
being represented at the hearing, should be paid out of the share of the residue
1 Coleman v Chalklen [2016] NZHC 3178.
2 At [40].
COLEMAN v CHALKLEN & OTHERS [2017] NZHC 1204 [2 June 2017]
available to the four children of Ms Chalklen.3 I invited memoranda if the parties took a different view.
[3] Agreement has not been reached. In fact a total of seven memoranda have been filed.
[4] The applicant seeks actual costs in the sum of $74,712.50 (excluding GST
and disbursements) to be paid out of the estate of the four children of Ms Chalklen.
[5] The respondents dispute the reasonableness of the applicant’s costs. They
seek costs on a 2B basis in respect of all parties.
Issues
[6] There are two issues:
(a) Are all of the applicant’s costs recoverable?
(b)Should the residuary estate meet all recoverable costs or should some of the costs be paid only from the residue available to the four children of Ms Chalklen?
Submissions
Applicant
[7] Mr Coleman, the applicant for the declaration, is the sole surviving executor and trustee of the will. The sum of $74,712.50 which he seeks is broken down as follows:
(a) Mr O’Connor’s fees as counsel of $61,312.50 based on an hourly rate of $375; and
(b) Mr Heaphy’s fees as instructing solicitor of $13,400 based on an
hourly rate of $300.
[8] Mr O’Connor attached to his memorandum of submissions daily timesheets and invoice narrations for the periods 30 September 2015 to 25 May 2016, covered by the costs claim. There was no similar supporting documentation relating to Mr Heaphy’s costs as he does not have a formal time recording system.4
Respondents
[9] Mr Wenley, counsel for the respondents, submitted that the costs sought by the applicant were unreasonable: the conduct of the case by the applicant resulted in unnecessary and unreasonable costs in that there was unnecessary cross-examination of Ms Chalklen; it was unnecessary that the applicant be represented by two counsel; and the stance that the will was void for uncertainty was not upheld by the Court.
[10] On Mr Wenley’s calculation, when divided by the appropriate daily recovery rate under sch 2 of the High Court Rules 2016, the sum claimed by the applicant reflected 40.53 hearing days. It is said that this demonstrates the disproportionate nature of the applicant’s costs relative to scale costs. The respondents suggest an award of costs to the applicant on a 2B basis uplifted by 50 per cent to reflect the costs of and incidental to the originating application. The respondents accept that the costs of the applicant should be uplifted by 50 per cent to take account of the additional work in identifying and arranging service of the numerous persons directed to be served. The respondents say the applicant’s costs should be paid out of the whole of the residuary estate.
[11] The respondents calculate their costs as $11,483.00, comprising costs on a
2B basis ($11,373.00) plus a court filing fee of $110.00. Because the respondents are resident in Australia and their costs are zero rated a fee of $11,373.00 including GST works out to be $9,890.00 exclusive of GST. Accordingly the respondents seek costs of $9,800.00 plus the court filing fee of $110.00 to be paid out of the residue available to the four children of Ms Chalklen.
Applicable Principles
[12] Costs are at the discretion of the Court.5 Rule 14.2 of the High Court Rules sets out the general principles to be applied in the exercise of that discretion. The party who fails with respect to a proceeding should pay costs to the party who succeeds.6
[13] Pursuant to r 14.6(4)(c), the Court may order a party to pay indemnity costs if the costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund and the party claiming costs has acted reasonably in the proceeding.
[14] A party will be a necessary party to a proceeding affecting the fund in two classes of cases:7
(a) The applicants are the trustees of a will or settlement who ask the court to construe the instrument of trust for their guidance, and in order to ascertain the interests of the beneficiaries, or else ask to have determined some question that has arisen in the administration of the trust.
(b)The application is made by some of the beneficiaries, by reason of some difficulty of construction, or administration, which would have justified an application by the trustees, and is not made by them only because, for some reason or other, a different course has been deemed more convenient.
[15] To be eligible for an indemnity costs award under r 14.6(4)(c) an applicant must also establish that he or she has acted reasonably in the proceeding. This
5 High Court Rules 2016, r 14.1.
6 Rule 14.2(a).
7 Re Buckton (1907) 2 Ch 406 at 415 cited in Waitara Leaseholders Association Inc v New
Plymouth District Council (2005) 1 NZTR 15–013 (HC) at [16] per Harrison J.
involves an assessment of the conduct of the litigation8 and whether the applicant has acted reasonably in incurring the costs sought.9
[16] Even where the requirements of r 14.6(4)(c) are satisfied, the Court retains a residuary discretion as to whether to order payment on an indemnity basis.10 The practice of awarding costs out of the estate on a solicitor-client basis is only a factor.11 Other factors include the circumstances of the estate and the effect of an award on beneficiaries.12
Assessment
[17] The application was made by the sole surviving executor and trustee of the will. It sought the Court’s interpretation of a term in the will bequeathing the residue of the estate. In terms of r 14.6(4)(c), I consider the application was made by a party necessary to a proceeding affecting the fund.
[18] The next question is whether the applicant has acted reasonably in the proceeding. Although in his costs submissions counsel criticised the cross- examination of Ms Chalken the cross-examination was helpful to me in my determination of the issue at hand. I also accept that a significant amount of work was required by Mr O’Connor in serving the numerous parties involved in the proceeding. I do not consider these costs to have been unreasonably incurred.
[19] That said my assessment of the total costs claimed does not proceed on an assessment of the reasonableness of the costs claimed but rather, as is open to me, the impact on the estate of an award in the amount sought.
[20] In family protection proceedings the courts are cautious about awarding costs
8 Wightman v Public Trust [2015] NZHC 1091 at [21].
9 Re O’Donoghue [1998] 1 NZLR 116 (HC) at 122.
10 Waitara Leaseholders Association Inc v New Plymouth District Council, above n 7, at [13].11 Wightman v Public Trust, above n 8, at [21].
12 At [21].
out of the estate where the estate is small and the costs award will have a substantial effect on the beneficiaries.13 I consider the same principle is applicable to a proceeding such as this in which it was necessary in the interests of the beneficiaries to obtain a declaration as to the meaning of a clause that otherwise would be declared void for uncertainty. To award the full amount claimed would have unduly harsh consequences for the beneficiaries for whose benefit the application was
brought. The estate is small. The net fund received by the estate’s previous
solicitors was $199,043.08, with the addition of $6,587.55 in interest to 31
December 2016. Before the applicant’s legal costs were debited, the total fund comprised $205,630.63. The applicant’s costs represent almost 40 per cent of the estate. The costs are disproportionate to the size of the estate.
[21] The applicant’s costs are six times the amount claimed by the respondents; and three times any award of scale costs even if the uplift of 50 per cent conceded by the respondents is applied. The comparative costs provide an objective reference point as to the fairness of the costs sought as the respondents engaged on all key issues,14 although of course the burden of serving interested parties fell only upon the applicant.
[22] I consider it is necessary to reduce the amount sought so that the costs award reflects a more reasonable or proportionate relationship between the costs to be paid and the value of the estate. A reduction by approximately 30 per cent both compensates for the added burden of attendances in bringing the application and also alleviates the substantial impact on the beneficiaries of an award in the amount sought. A 30 per cent reduction reduces the sum of $61,312.50 to $42,920.00.
[23] Mr Heaphy does not use a formal time recording mechanism. His invoices specify little more than that they are for “professional services including all attendances”. The largest of Mr Heaphy’s invoices, dated 8 October 2015, is “for the
12 month period following Luscombe Legal’s receipt of the files” from the estate’s
previous solicitors. The only invoice expressly linked to Mr Heaphy’s participation
13 Wightman v Public Trust, above n 8, at [20] citing TB v JB [2014] NZHC 1478 [2015] NZFLR 9; Bones v Wright [2013] NZHC 2093; Kirby v Sims HC Wellington CIV-2010-485-794,
22 December 2011.
14 At [23(e)].
in the proceeding is the final invoice, which states “including assisting Mr O’Connor at the full day hearing”. I accept the applicant’s submission that Mr Heaphy’s presence at the proceeding was not unreasonable. Mr Heaphy acts for the applicant in relation to the administration of the estate and the applicant instructed Mr Heaphy to attend the hearing as there may have been questions about the administration of the estate. Mr Heaphy assisted counsel and the Court during the hearing.
[24] The Court must only allow costs if they were incurred in relation to the proceeding.15 Costs incurred by the executor while fulfilling general duties as executor and trustee are not to be claimed from the Court. They must be sought from the estate separately.16 In the absence of time recordings which more accurately allow analysis of what work the solicitors completed, it is difficult to isolate and identify specific costs related to the proceeding as opposed to attendances relating to the administration of the estate.17
[25] Mr O’Connor’s invoices show that he shouldered the preparation. He drafted and filed the originating application and supporting affidavits, arranged service on the parties, prepared written submissions and the bundle for the hearing. Mr O’Connor appeared at the 10 December 2015 first mentions hearing before Smith AJ. Mr Heaphy has produced no evidence as to his attendances and the way in which his invoices relate to the proceeding. Mr Heaphy has not established that his costs were connected to the litigation. I therefore propose to award only those costs that are unambiguously related to the proceeding namely, $2,100 reflecting Mr Heaphy’s attendance at the full-day hearing at a rate of $300 per hour.
[26] The applicant’s costs should be charged against the whole of the residue. Mr Allan McKenzie’s position was never in dispute. He is named as a beneficiary in the will and was not involved in the proceeding. And the costs of the respondents
should be charged against the residue available to the four children of Mrs Chalklen.
15 Boyd v Connolly [2016] NZHC 2070 at [34].
16 At [35].
17 At [42].
Result
[27] The respondent’s actual costs were less than scale costs. They are entitled to
be indemnified by the estate for actual costs incurred ($9,800.00 plus
$110 disbursements).
[28] The applicant is entitled to be paid the Court AVL facility disbursement ($741.12) and $2,100 for Mr Heaphy’s attendance at the proceeding. This is not intended to preclude the applicant ultimately claiming the balance of costs incurred while reasonably acting for the estate. But those costs must be sought from the estate not from an award of costs by the Court.
[29] In respect of Mr O’Connor’s fee the applicant is entitled to the sum of
$42,919.50.
[30] The applicant’s costs are to be paid out of the residuary estate. The respondents’ costs are to be paid from the residue available to the four children of Mrs Chalklen.
[31] Orders are made accordingly.
Karen Clark J
Solicitors:
Luscombe Legal, Hastings for Applicant
Willis Toomey Robinson Scannell Hardy, Napier for Respondents
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