Critchley v Saunders
[2014] NZHC 1113
•23 May 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000005 [2014] NZHC 1113
UNDER the Family Protection Act 1955 IN THE MATTER OF
Appeal against decision of 27 November
2013 on Costs [2013] NZFC 9711BETWEEN
SUZANNE RUTH CRITCHLEY First Appellant
ALFRED ROBERT SAUNDERS Second Appellant
AND
ALMA JEAN SAUNDERS Respondent
Hearing: 20 May 2014 Appearances:
Appellant Saunders in person
W Patterson for RespondentJudgment:
23 May 2014
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 23 May 2014 at 10.30 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
CRITCHLEY & Anor v SAUNDERS [2014] NZHC 1113 [23 May 2014]
Introduction
[1] On 26 February 2010, Judge LJ Ryan issued a reserved decision in a claim brought by a widow, Alma Jean Saunders (Mrs Saunders), under the Family Protection Act 1955 against the trustees and executors of the estate of her late husband, Alfred Robert Saunders (known as Mr Bob Saunders). He found that there had been a breach of moral duty by Mr Bob Saunders to adequately provide for the maintenance and support of his widow. Various orders were made to remedy the breach of moral duty.
[2] In the substantive judgment, Judge Ryan directed that Mrs Saunders’ reasonable costs were to be met by the estate. No orders were made as to the payment of other parties’ costs. Leave was also reserved to any party to apply on 7 days notice for further orders or directions to give better effect to or implement the judgment.
[3] Over three years later, on 24 June 2013, a former trustee and executor of the estate, Mr Bob Saunders’ son, also named Alfred Robert Saunders (known as Mr Rob Saunders), made an application for further directions or orders in respect of costs. On 27 November 2013, Judge Ryan issued a further decision on the issue of costs.
[4] In the costs judgment, Judge Ryan referred to Mr Rob Saunders as applying for an order for costs in his capacity as executor of his father’s estate and as seeking not only reimbursement of all his expenses as a trustee and executor of the estate, but also a contribution towards his legal costs in respect of the Family Protection Act proceeding (in which he took part as a residuary beneficiary).
[5] Judge Ryan first of all determined that he had no jurisdiction to determine whether the costs that Mr Rob Saunders incurred in relation to his duties as executor and trustee should be met in whole or in part from the estate. Judge Ryan continued:
[7] Insofar as costs incurred by Mr Saunders in the Family Protection proceedings are concerned, I made a ruling on the issue of costs and I found that costs should be awarded in favour of the applicant against the estate. Although I did not say so, because it was not argued in front of me, by implication that meant that Mr Saunders, and his co-executor and trustee, Mr
Gambrill, for that matter were not to receive any reimbursement for the costs they incurred as executors and trustees in respect of those proceedings.
[8] In my view, the issue of costs is res judicata and accordingly, cannot be relitigated.
[9] In the event that I am wrong and the doctrine of res judicata does not apply, there is nothing in the argument advanced by Mr Saunders that persuades me that costs should not have followed the event.
[10] For the above reasons, the application by Mr A R Saunders for costs is refused.
[6] Mr Rob Saunders and his sister, Suzanne Ruth Critchley (Mrs Critchley), who is the other residuary beneficiary, now appeal against Judge Ryan’s decision on the issue of costs. They do not seek to disturb the award of costs to Mrs Saunders. Rather they argue that it is fair and just that they, as the residuary beneficiaries, receive their costs on the same basis as Mrs Saunders. They accordingly seek orders that they be reimbursed a total of $167,352.01 from the estate.
Points on appeal
[7] The appellants advance the following points on appeal:
(a) Judge Ryan misdirected himself as to parties and capacity. The issue in the costs decision was a joint application by Mr Rob Saunders and Mrs Critchley for costs as beneficiaries, not an application by Mr Rob Saunders in his capacity as executor and trustee of the estate.
(b)The ruling about Mr Rob Saunders’ costs as trustee must be set aside as the question of trustee costs was not before Judge Ryan and such a ruling was outside Judge Ryan’s jurisdiction.
(c) The issue was not res judicata as the costs of the beneficiaries had not been heard and “without prejudice save as to costs” settlement offers made by the appellants prior to the hearing should be considered.
(d)Judge Ryan had departed from the usual practice as to costs (that costs of all parties are borne by the estate) without explanation.
(e) Mrs Saunders was not the successful party as the will was not altered to provide for additional maintenance and support as she had sought. The breach of moral duty was by the deceased, not the appellants.
(f) It was just and fair that the appellants be reimbursed for their costs for opposing Mrs Saunders’ application on the same basis as Mrs Saunders, now that the estate is in funds following the sale of its major asset, a rural property in Pukekohe.
Submissions for appellants
[8] The appellants submit that they considered appealing aspects of the substantive judgment when it was released, but decided not to because they had successfully resisted Mrs Saunders’ claims for more provision from the will. She did not get what she asked for, namely, unlimited resort to capital and an increase from a third to a half of the estate. Although various machinery orders were made, which may be claimed as a “win” by Mrs Saunders, these orders were not opposed by the appellants.
[9] The appellants submit that the financial and emotional impact of the legal action on them has been immense. They submit they strove to resolve the substantive claim by offering to fund mediation (which was not taken up) and by making “without prejudice save as to costs” settlement offers prior to the hearing. The appellants also submit that while it may be contended that, as residuary beneficiaries, they will receive their costs from the distribution of the estate on Mrs Saunders’ demise, Mrs Saunders is only slightly older than Mrs Critchley, so Mrs Critchley may never see the funds in her lifetime. There is also no certainty that the estate will be preserved and the funds will be available.
Submissions for respondent
[10] Counsel for the respondent agrees that the appeal is to be determined on the basis that the appellants seek their costs as beneficiaries directed to be served. Counsel submits that while the Judge reserved leave for the parties to come back, this was only to enable any party to seek further orders or directions to give better
effect to the substantive judgment. No costs order was made in favour of the appellants and their only remedy was then to appeal, not to go back to the Judge.
[11] Counsel submits that the Judge’s decision that Mrs Saunders costs be met by the estate as a whole meant that she personally met one third of those costs as she was to receive one third of the estate in terms of the will. He submits that the appeal should be dismissed with costs in favour of Mrs Saunders.
Approach on appeal
[12] An appeal against a costs order is an appeal against the exercise of a discretion. The approach adopted by the Court of Appeal in May v May1 applies:
An appellant must show that the Judge acted on a wrong principle; or that he failed to take into account some relevant matter or that he took account of some irrelevant matter or that he was plainly wrong.
[13] The Family Protection Act says nothing about costs. Therefore s 207 of the Family Court Rules 2002 applies and District Court Rules 4.2-4.12 are applicable to costs decisions with all necessary modifications. Under Rule 4.2(a) costs are to follow the event.
Discussion
[14] Judge Ryan may have misdirected himself as to the capacity through which Mr Rob Saunders was seeking costs. However, this did not, in my view, materially affect his decision. In my view, Judge Ryan’s purported decision about Mr Rob Saunders’ costs as trustee does not need to be set aside as the better view is that he did not make any decision on such costs. His Honour correctly stated that he had no jurisdiction. I am also of the view that by ordering that Mrs Saunders’ costs were to be met by the estate, Judge Ryan in effect found that no other costs were to be met. The fact that Mr Rob Saunders’ former counsel may have expressed an intention to make an application that his costs be met from the estate does not alter the fact that
Judge Ryan had already decided that he was not entitled to his costs.
1 May v May (1982) 1 NZFLR 165 (CA) at 170.
[15] In my view, the res judicata claim is not an issue as Judge Ryan made a decision on costs in the substantive decision, from which an appeal lies. As to the settlement offers made by the appellants, I am of the view that they do not disqualify Mrs Saunders from receiving her costs from the estate. The appellants’ former counsel in fact wrote to counsel for Mrs Saunders on 20 July 2010 as follows:
It will not be contended that [Mrs Saunders] is prevented from seeking costs because she got less than was offered under a Calderbank offer.
[16] Instead, the appellants put forward the settlement offers as evidence that they acted reasonably throughout the proceeding and as being a factor in determining whether or not they are entitled to have their costs paid by the estate as well.
[17] In particular, Mr Rob Saunders submits that if Mrs Saunders had accepted their proposal dated 13 June 2008, everyone would be much better off as he had guaranteed the sale of the rural property in Pukekohe for the sum of $880,000 on or before 30 November 2011. However, Mrs Saunders points to an unconditional offer to purchase the property for the sum of $1.35 million with a settlement date of 5
September 2008, which Mr Rob Saunders, as executor, refused to accept.
[18] I am of the view that it has not been shown that Mrs Saunders acted
unreasonably in declining on legal advice the appellants’ proposal dated 13 June
2008. I also note that the estate has already been burdened by the payment of
$172,840.98 in legal fees of one sort or another, while the further legal fees sought of
$167,352.01 seem to me to be out of proportion to the overall value of the estate.
[19] I am also of the view that in not ordering that the costs of all parties be paid out of the estate, Judge Ryan did not fall into error. While ordering that costs of all parties be paid out of the estate may have been the traditional practice, it is not the invariable practice and “parties who are sui juris and active contestants in family protection litigation generally should expect costs to follow the event”.2 The appellants were active contestants. Counsel for Mr Rob Saunders concluded his
written submissions in the Family Court thus “Neither of his [Mr Bob Saunders’]
2 Brookers Family Law – Family Property at FC207.02; re Miller (Costs) [2001] FRNZ 459 (HC)
at 461.
two children deserve to have their inheritances taken from them by requests for money for living expenses or legal fees by a person who would appear not to have learned the discipline of living within her means”. Judge Ryan described such criticism as patronising and rejected it.
[20] In my view, Judge Ryan also did not err by finding Mrs Saunders was the successful party. It was within his discretion to do so. Mrs Saunders was the successful party as she received a declaration that Mr Bob Saunders had breached his moral duty to make adequate provision in his will for her proper maintenance and support. In the context of the High Court Rules, the leading case on determining
which party failed is Packing In Ltd (In Liquidation) v Chilcott.3 The Court of
Appeal stated: 4
Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step and the extent to which that step succeeded or failed.
[21] A realistic appraisal of the end result shows that Ms Saunders was successful. Although Mr Rob Saunders submits he and his sister, as residuary beneficiaries, were successful in resisting Mrs Saunders’ claim that she should receive one half of the estate rather than one third and that she should have recourse to capital if required for her maintenance, there were two significant orders made by Judge Ryan that materially improved her position. Firstly, Mrs Saunders did not have to utilise her share of the estate to purchase a replacement property and, secondly, that any loan from the estate utilised by her to purchase a replacement property would be interest free. It can therefore be described as a “win” for her.
[22] Finally, Mr Rob Saunders referred to the issue of justice and fairness. In that regard, time should be taken to assess the impact on the estate and the adequacy of the provision for Mrs Saunders if all costs are met out of the estate at this stage. Mrs Saunders’ costs in the Family Protection Act proceeding were $61,769.50. The
costs to the appellants totalled $167,352.01.
3 Packing In Ltd (In Liquidation) v Chilcott (2003) 16 PRNZ 869 (CA).
4 At [6].
[23] Mrs Saunders is entitled to a third of the residue of the estate, so when the estate paid her costs of $61,769.50 she contributed $20,590 of her own money to those costs. She is also entitled to the income from the remaining two thirds of the residue of the estate so has also forgone income on the sum of $41,180.
[24] The Public Trust has provided counsel for Mrs Saunders with an update as to the estate’s financial position. On the Public Trust figures (taking the claim of Mr Rob Saunders for professional fees at its present amount), Mrs Saunders’ share of the estate is $233,844 while the two thirds residue is $467,681, of which $310,000 has been lent to her interest free in terms of the will.
[25] If an order was made that the appellants’ costs were also to be met out of the estate, Mrs Saunders would contribute a further $55,780 of her own money and would forego income on the sum of $111,568. Therefore, if the appellants’ costs were paid now out of the estate, the two thirds residue of the estate would comprise the $310,000 interest free loan and cash of $46,119 from which, Mr Rob Saunders acknowledged, little income would be produced.
[26] Mr Rob Saunders concluded his oral submissions to me by stating that while it was very harsh for Mrs Saunders to face the consequences of the legal actions she took, that is the fair thing to do. With respect, I disagree. Payment of the appellants’ costs out of the estate now would, in my view, substantially alter the balance sought to be struck by Judge Ryan and leave Mrs Saunders without adequate capital funds for her maintenance. It is important also to remember that the appellants are to receive the two thirds residue of the estate upon Mrs Saunders’ demise, and, accordingly, they will then be able to recoup their legal costs. In other words, the payment of their legal costs is only deferred, not denied altogether.
Decision
[27] The appellants have failed to show that Judge Ryan acted on a wrong principle; or that he failed to take into account some relevant matter or that he took account of some irrelevant matter or that he was plainly wrong. The appeal is accordingly dismissed. Costs are payable to Mrs Saunders on a 2B basis in respect of this appeal.
……………………………….
Woolford J