Davey v Cardinali

[2023] NZHC 2782

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2021-463-33

[2023] NZHC 2782

BETWEEN

HOWARD ADRIAN DAVEY

Plaintiff

AND

MYRA ANNE CARDINALI and ARLENE

RENEE LUANNA DAVEY as executors and trustees of the ESTATE OF HOWARD ALBERT DAVEY

First Defendants

MYRA ANNE CARDINALI and ARLENE

RENEE LUANNA DAVEY as executors and trustees of the ESTATE OF KATHLEEN DAVEY

Second Defendants

ARLENE RENEE LUANNA DAVEY
Third Defendant

MYRA ANNE CARDINALI

Fourth Defendant

Judgment:

(On the papers)

5 October 2023

JUDGMENT OF BREWER J

(Costs)

This judgment was delivered by me on 5 October 2023 at 11 am pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Braun Bond & Lomas (Hamilton) for First and Second Defendants Cowan Law (Auckland) for Third and Fourth Defendants

DAVEY v CARDINALI [2023] NZHC 2782 [5 October 2023]

Introduction

[1]This is a costs judgment.

[2]        Howard Adrian Davey, the plaintiff, is the son of Howard Albert Davey and Kathleen Davey, both deceased. The defendants, Myra Cardinali and Arlene Davey, are the sisters of the plaintiff and the children of Mr Davey Senior and Mrs Davey. The defendants are the executrixes and trustees of their parents’ estates (the Estates).

[3]        The plaintiff brought proceedings against the defendants both personally and in their capacity as executrixes of the Estates. The plaintiff applied for an injunction restraining any further distributions of the Estates so that there could be proper determination of his quantum meruit claim and claims under the Law Reform (Testamentary Promises) Act 1949 and Family Protection Act 1955. Justice Campbell eventually struck out the proceedings after the plaintiff failed to comply with his “unless order” to fix various deficiencies with his filings.1 The Judge directed that the defendants were entitled to costs and if costs could not be agreed that the parties were to file costs memoranda. No such agreement has been reached and the defendants have filed memoranda. The plaintiff has not filed any costs memorandum and has now missed the filing deadline.

[4]        The defendants, as executrixes and trustees of the Estates, seek costs against Mr Davey on a mixed 2B and 2C basis and with a 30 per cent uplift. However, they accept this measure of costs would exceed their actual costs and reduce their final claimed amount accordingly.

[5]        The defendants also seek costs in their personal capacities. They seek an award on a 2B basis and with an uplift of 25 per cent. They also ask the Court to make a further order that the costs award should be directly payable from the plaintiff’s interest in the Estates.

Defendants’ submissions as executrixes and trustees

[6]Mr Bond makes three primary submissions:

1      Davey v Cardinali HC Rotorua CIV-2021-463-33, 29 May 2023.

(a)first, the proceeding should, in part, be classified as 2C as the plaintiff’s filings and discovery resulted in unusually time-consuming work;

(b)second, the plaintiff refused a settlement offer to discontinue the proceeding on a no issue as to costs basis, save for the defendants being indemnified by the Estates;2 and

(c)third, the plaintiff unreasonably did not comply with judicial directions, specifically in relation to timetabling and documents.3

Classification of proceedings

[7]        Mr Bond elaborates on the classification of the proceedings. He refers to several examples of counsel being required to spend a comparatively large amount of time:

(a)the statement of claim was 29 pages, and the amended statement of claim was 41 pages (excluding cover pages);

(b)the far-reaching allegations and extensive discovery resulted in:

(i)105 pages of documents for the plaintiff;4

(ii)308 pages of documents for the first and second defendants;5 and

(iii)380 pages of documents for the third defendant;6 and

(c)a request for further disclosure including 50 additional categories of documents, resulting in a supplementary round of discovery.

2      High Court Rules 2016, r 14.6(3)(i).

3      Rule 14.6(3)(b)(v).

4      Howard Adrian Davey Affidavit of documents for the Plaintiff (14 April 2022).

5      Arlene Renee Lu-ana Davey-Disterbeck Affidavit of Documents for the First and Second Defendants (Sworn 14 April 2022).

6      Arlene Renee Lu-ana Davey-Disterbeck Affidavit of Documents for the Third Defendants (Sworn 14 April 2022).

[8]        Mr Bond submits that the volume of documents resulted in a comparatively large volume of work, in particular for:

(a)step 2 — commencement of defence;

(b)step 9 — pleading in response to amended pleading; and

(c)step 20 — list of documents on discovery.

[9]The total amount claimed under all steps is $139,337.00.

Settlement offer

[10]      Mr Bond refers to a settlement offer on 15 November 2021 from all defendants sent to the plaintiff which proposed to settle matters on a no costs basis. The offer set out in a detailed manner the deficiencies with the plaintiff’s claim and his low prospect of success. Mr Bond submits the offer was reasonable and would have avoided further costs for all parties. Failure to accept this offer should be a ground to uplift the costs award.

Failure to comply with directions

[11]      Mr Bond refers to the various different directions from the Court to the plaintiff which were not followed, which includes:

(a)a Minute from Lang J on 10 May 2022;

(b)a Minute from Associate Judge Taylor on 8 March 2023; and

(c)a Minute from Campbell J on 9 May 2023.

[12]      The failure to comply with these directions directly contributed to the time and expense incurred. For example, Mr Bond refers to receiving documents in a disorganised and incomprehensible manner, such as envelopes, boxes and memory sticks containing documents sent without explanation.

[13]      Mr Bond submits that an uplift of 30 per cent is warranted to account for the failure to accept the reasonable settlement offer and the failure to comply with directions.  Applying the uplift to steps after 24 November 2021 results in a figure of

$175,258.70 with disbursements of $3,439.67. However, counsel acknowledges that the actual costs amount to $136,636.78 and submits that those costs should be payable.

Defendants in their personal capacities

[14]      Mr Cowan’s submissions cover much of the same ground as Mr Bond’s. He similarly submits that costs should be increased because of the failure to follow directions and to accept a reasonable settlement offer. He further submits that the plaintiff unreasonably declined to participate in alternative dispute resolution. In his submission, the conduct mandates at least a 25 per cent uplift, which brings the standard 2B calculation of $34,894 to $43,617.50. Mr Cowan seek a further order that the costs are to be directly deducted from the plaintiff’s interests in the Estates, which amount to $59,059.01.7 Disbursements of $2616.60 are sought.

Legal Principles

[15]      The starting point is that costs follow the event. The party who fails should pay costs to the party who succeeds.8 As the successful parties, the defendants are presumptively entitled to costs.

Time categorisation

[16]Rule 14.5 provides:

(1)For the purposes of rule 14.2(1)(c), a reasonable time for a step is—

(a)the time specified for it in Schedule 3; or

(b)a time determined by analogy with that schedule, if Schedule 3 does not apply; or

(c)the time assessed as likely to be required for the particular step, if no analogy can usefully be made.

7      The plaintiff is entitled to a one-sixth share of the $166,901.43 that remains in the Howard Davey Senior estate’s trust account ledger frozen by Court order. That amounts to $27,816.90. The plaintiff is entitled to a one-seventh share of the $204,694.77 that remains in the Howard Davey Senior estate’s trust account ledger frozen by Court order. That amounts to $29,242.11.

8      High Court Rules 2016, r 14.2(1)(a).

(2)A determination of what is a reasonable time for a step under subclause (1) must be made by reference—

(a)to band A, if a comparatively small amount of time is considered reasonable; or

(b)to band B, if a normal amount of time is considered reasonable; or

(c)to band C, if a comparatively large amount of time for the particular step is considered reasonable.

[17]      The categorisation of a proceeding under r 14.3 usually applies throughout the proceeding. I consider that the proceeding is properly categorised as 2.9

[18]      The determination of what is a reasonable time under r 14.5(2) is to be done on a step-by-step basis. The party applying for a band other than band B must demonstrate why departure from the standard band is necessary.10 The Court must undertake an objective analysis of what is a reasonable time taken for each step, not the actual time taken. The complexity of the proceeding can be relevant to both the determination of the category and what is a reasonable time for each step.11 However, the length of submissions or other documents “should not be determinative of, or even a usual touchstone, for the appropriate banding”.12 If the complexity is such that the time reasonably required to complete a step exceeds the allowance in band C, the Court may order increased costs under r 14.6(3)(a).13

[19]      In determining whether a step would reasonably require a large amount of time the Court will look to:14

(a)the scope of facts that are material to the issue;

9      I note that Muir J seemingly approved the parties’ agreement that the proceedings are 2B in nature.

Davey v Cardinali HC Rotorua CIV-2021-463-33, 23 November 2021.

10 Paper Reclaim Ltd v Aotearoa International Ltd (2007) 18 PRNZ 743, [2007] NZCA 544; Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400; and Beach Road Preservation Society v Whangarei District Council (2001) 16 PRNZ 13 (HC).

11 Mary Moodie Family Trust Board v Attorney-General [2016] NZHC 755.

12     Body Corporate 207624 v Grimshaw & Co [2022] NZHC 2421 at [26], citing Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [16].

13     Kidd v Heeren [2015] NZHC 3191.

14     TSB Bank Ltd v Dollimore (No 2) [2016] NZHC 253 at [8]; and Commissioner of Police v Salter

[2021] NZHC 2164 at [10].

(b)the degree of difficulty in identifying the law relevant to the issue; and

(c)the number and complexity of the arguments by both sides applying the law to the facts.

Increased costs

[20]      Rule 14.6 provides for orders to pay increased costs. Various circumstances in which the Court may make such orders are listed at r 14.6(3). Of these, the defendants emphasise that the Court may make an order for increased costs against a party who has contributed unnecessarily to the time or expense of the proceeding by:

(a)failing to comply with the rules or with a direction of the Court;15 or

(b)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding;16 or

(c)where some other reason exists which justifies the Court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.17

[21]      The threshold for such a departure is unreasonable conduct by the party opposing costs.18 That conduct must be in relation to the proceeding, not after or before it was commenced.19 Uplift will be justified to the extent the failure to act reasonably contributed to the time or expense of the proceeding.20 The party seeking increased costs bears the onus of convincing the Court they are justified.21 The Court will not award increased costs based solely on the making of a “walk away” settlement offer.22

15     Rule 14.6(3)(b)(i).

16     Rule 14.6(3)(b)(v).

17     Rule 14.6(3)(d).

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

19     See Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].

20     Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

21     Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.

22     Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342 at [26].

[22]      When making an order for increased costs the Court uplifts from scale, rather than awarding a percentage of actual costs.23 This is usually calculated on a step-by- step basis. However, where they are awarded because an argument lacked merit and was inherently unlikely to succeed, increased costs apply to all steps.24

Discussion

[23]      The costs sought here raise a number of issues given that the plaintiff brought proceedings that appear to possess little merit and then conducted them in a manner that has been frustrating and time-consuming for the defendants.

[24]      The first issue is whether particular steps should be treated as 2C. I am not satisfied that they should be.

[25]      First, I do not regard the volume of documents in this case as being sufficient to categorise the relevant steps as band C. The disorganised and confusing nature of the filings are possible grounds for a band C categorisation but, ultimately, the threshold is not crossed.

[26]      Second, the claimed scale costs, even before any uplift, exceed the actual costs of the first and second defendants. Rules 14(1)(d) and 14(1)(f) make clear that costs “should normally be two-thirds of the daily rate considered reasonable” and “should not exceed the costs incurred by the party claiming costs”. This Court has previously accepted “a regime providing for less than full costs recovery is intended in part to balance access to justice against the interests of the successful party who might otherwise end up ‘seriously out of pocket in terms of its litigation costs’”.25 I accept it would have been time-consuming and costly to sort through the plaintiff’s documents but the fact that the 2C claimed costs exceed the actual costs incurred is a strong indication that band C is not appropriate.26

23 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [40].

24 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636 at [52]; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434, (2017) 15 NZELR 398 at [57].

25 Green v Police [2019] NZHC 1019 at [15], citing Robert Osborne and others McGechan on Procedure (online ed, Thomson Reuters) at [HR14.2.01(4)].

26 Counsel have listed the invoices and tallied the actual costs. The invoices are not attached. It is unclear the actual hours worked and the hourly rate. I accept that it is possible that the hours worked may have been comparable to what is expected under band C and that actual costs are comparable to 2C because the hourly rate was low or below-market rate.

[27]      Third, a factor that could favour band C is “the scope of facts that are material to the issue”. However, I do not consider that this factor is sufficiently engaged. I accept there were many documents to sort through and the statement of claim was cumbersome, but in the scheme of modern litigation the number of documents cannot be regarded as occupying a “comparatively large amount of time”.

[28]      Accordingly, I consider 2B is appropriate for all steps and this leads to scale costs of $51,146. In relation to the third and fourth defendants, I accept that the 2B costs claimed are appropriate.

[29]      The next issue is whether an increase on costs is appropriate. Both parties claim an increase for the failure to accept a settlement offer and failure to follow Court directions. Regarding the former, I am not satisfied that it warrants increased costs. The settlement offer was a “walk away” offer. I will reproduce it:

41.That being said, the estate, the executors and Mr Davey are being put to costs which will soon ramp up significantly. As such, our clients make the following proposal:

a.The proceedings are discontinued on a no issue as to costs basis;

b.Mr Davey, Ms Cardinali and Ms Davey will all bear their own costs;

c.The costs of the Estates (BBL costs) will be reimbursed to Ms Davey and Ms Cardinali from the Estates prior to distribution; and

d.The balance of the Estates, less any final administrative costs, will be distributed in accordance with the Wills.

42.For the avoidance of doubt, this proposal is also made by Ms Davey and Ms Cardinali in their personal capacities and this letter is written with joint instruction from their personal lawyers, Doug Cowan Barristers & Solicitors.

[30]      The offer’s only benefit to the plaintiff was that the defendants would not seek costs against him. Further, he would have to accept the first and second defendants’ costs would be indemnified by the Estates, which would reduce the amount he might receive from the Estates. The Court of Appeal has been clear that a “walk away” offer is an insufficient reason to increase costs. The learned authors of The Law of Costs in New Zealand opine that a “walk away” offer may warrant an increase if there was “a

clear and complete defence (such as an immunity) or where there is some obvious procedural defect, such as the wrong party having been sued”.27 In this case, despite the deficiencies in the plaintiff’s claim and his low prospects of success, the “walk away” offer is not a reason for an uplift. Assuming that the plaintiff’s claim was so hopeless that refusing to accept a “walk away” offer would be unreasonable, it would still be more appropriate in this case to consider increased or indemnity costs because the claim was hopeless rather than the failure to accept an offer. However, in circumstances where a proceeding has been struck out for procedural failings and there has been no hearing to determine the merits of the case, such as here, it is not appropriate to award an uplift for increased costs unless the successful party has pleaded this ground and provided clear evidence of inherent defects. That is not the case here. Therefore, I am not satisfied that an increase can be made for the failure to accept the settlement offer, nor on the basis that it was a hopeless case.

[31]      Turning to failure to comply with Court directions, I am satisfied that an uplift is warranted. The plaintiff missed deadlines,28 sought discovery beyond what was reasonably necessary,29 and failed to amend documents after being specifically instructed to do so,30 which ultimately resulted in his proceedings being struck out. Justice Campbell’s Minute sets out some of the major failures to follow direction or proper procedure, which are:

(a)filing an amended statement of claim, which was incorrectly formatted, reserved the right to “later revisit and resubmit”, and accompanied by other documents that were either schedules to the statement of claim or evidence;

(b)filing “affidavit evidence” which was unsworn;

(c)filing further affidavit evidence, which contained no content and was accompanied by 228 unidentified documents; and

(d)failing to file and/or serve the same documents.

27     David Bullock and Tim Mullins The Law of Costs in New Zealand (Lexis Nexis, Wellington, 2022) at [3.13].

28     Davey v Cardinali HC Rotorua CIV-2021-463-33, 15 February 2022 at [4].

29     Davey v Cardinali HC Rotorua CIV-2021-463-33, 17 December 2021 at [4].

30     Davey v Cardinali HC Rotorua CIV-2021-463-33, 9 May 2023.

[32]      The uplifts should be calculated on a step-by-step basis, except where the arguments lacked merit or were inherently unlikely to succeed. The defendants have not identified what steps have been adversely impacted by the plaintiff’s failures. Instead Mr Bond, for the first and second defendants, submitted that an uplift for both failure to accept a reasonable settlement offer and failure to follow directions should be applied from the steps incurred after 24 November 2021. Mr Cowan, for the third and fourth defendants, sought an uplift on the entirety of the scale costs. Without particulars on the specific impacts on the steps claimed, I must be cautious.

[33]      Reviewing the various minutes in this proceeding, I am satisfied that an uplift should only apply to the steps following the 8 March 2023 case management conference before Associate Judge Taylor. The failure to follow directions at this point was markedly more egregious than earlier in the proceeding. I consider that all the subsequent steps were impacted by the plaintiff’s failure to follow direction and procedure. I consider a 20 per cent uplift is appropriate for these steps.

[34]      Finally, I do not agree the failure to participate in alternative dispute resolution is sufficient to warrant an uplift. While parties should avail themselves of alternative dispute resolution it is not generally a ground for uplift.

[35]      The final issue is whether the Court should make an order that the costs owing to the third and fourth defendants should be directly payable from the plaintiff’s interest in the Estates. Mr Cowan does not refer me to any authority on jurisdiction to make such an order. I have found two cases in which this Court did make similar orders.31 However, in neither case did the Judge provide detailed reasons for making the order. I shall look at first principles.

[36]      The implicit reason why the third and fourth defendants seek the order is that they have concerns about the impecuniosity of the plaintiff. The settlement offer, dated 15 November 2021, expresses these concerns and intimates that the defendants were contemplating making an order for security of costs. The question is whether those concerns justify the making of the order.

31     Re Christie HC Invercargill A64/85, 22 March 1988 at 15; and Sayes v Sayes [2014] NZHC 720 at [80]

[37]      My conclusion is that they do not. I accept that in the context of estate and trust litigation it might seem practical and straightforward to deduct a costs award from the losing party’s interest in the estate or trust. But that would have the effect of making the successful party a preferential creditor. Where the concern is impecuniosity of the losing party, an order that costs should be paid directly from the losing party’s interest could directly disadvantage other creditors. In this case (although the same people in different capacities) the first and second defendants also have a costs award which no doubt they will want to enforce or otherwise claim from the Estates since they acted as executrixes and trustees.

Result

[38]I make the following orders:

(a)the plaintiff is to pay the first and second defendants:

(i)standard 2B scale costs of $51,146;

(ii)20 per cent uplift for steps after 9 March 2023 of $3,585; and

(iii)disbursements of $3,439.67;

(b)the plaintiff is to pay the third and fourth defendants:

(i)standard 2B scale costs of $34,894;

(ii)20 per cent uplift for steps after 9 March 2023 of $3298.20; and

(iii)disbursements of $2,612.60.

Brewer J