De Gregorio v Surridge

[2019] NZHC 2842

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2017-485-602870

[2019] NZHC 2842

UNDER

the Administration Act 1969

IN THE MATTER

of the Estate of Wilbur Surridge

BETWEEN

NUNZIO DE GREGORIO

Plaintiff

AND

ANNE JOSEPHINE SURRIDGE

First Defendant

PAUL HOUSTON SURRIDGE

Second Defendant

CIV-2018-485-65

BETWEEN

MARION JOAN PEARSON

Plaintiff

AND

DAVID VANCE AS TEMPORARY ADMINISTRATOR OF THE ESTATE OF WILBUR GEORGE SURRIDGE

Defendant

Hearing:

On the papers

Counsel:

No appearance for Plaintiff (CIV-2017-485-602870)

C T Patterson for First Defendant (CIV-2017-485-602870) S J Iorns for Second Defendant (CIV-2017-485-602870) N Levy for Plaintiff (CIV-2018-485-65)

L C A Farmer and D R Green for Defendant (CIV-2018-485-65)

Judgment:

5 November 2019

JUDGMENT OF CLARK J (COSTS)

DE GREGORIO v SURRIDGE [2019] NZHC 2842 [5 November 2019]

Introduction

[1]    This consolidated proceeding concerned the estate of Lofty Surridge (Lofty). It included challenges to the validity of a will executed by Lofty on 21 January 2014 (the 2014 will), both for lack of testamentary capacity and undue influence. The plaintiff, Mr de Gregorio, was named as executor under the 2014 will but did not take part in the substantive hearing.  The  main  contestants  were  Lofty’s  only  son,  Paul Surridge (Paul), and one of his daughters, Anne Surridge (Anne). Lofty’s other daughters, Jane, Judith and Josephine did not take active  roles  in  the  litigation. Paul was the proponent of the 2014, while Anne opposed it.

[2]    The other aspects to the proceeding were a claim brought by Anne and her son under the Family Protection Act 1955 and a claim brought by Marion Pearson, Paul’s wife, attempting to revive a deed of assignment in her favour that Lofty had executed contemporaneous with the 2014 will.

[3]    On 29 July 2019, I issued my decision upholding Anne’s challenges to the validity of the 2014 will on both grounds, I dismissed Ms Pearson’s claim as an abuse of process and I did not find it necessary to address the Family Protection Act claim.1 Lofty had executed an earlier will dated 16 October 2000 (the 2000 will). I granted probate of the 2000 will to Mr Vance, who I had earlier appointed as temporary administrator of the estate.2

[4]    I invited the parties to confer on the matter of costs. If they could not reach agreement, Anne, as the successfully party, was to file a memorandum seeking costs. The parties have been unable to agree, and I am now in receipt of four memoranda: one from Anne, one from Paul, another from Anne in reply, and one from Mr Vance. Mr de Gregorio has not filed a memorandum.

1      de Gregorio v Surridge [2019] NZHC 1802.

2      de Gregorio v Surridge [2017] NZHC 2061.

Legal principles

[5]    Costs are at the Court’s discretion but generally follow the event.3 The courts have, however, developed bespoke principles to deal with costs arising from proceedings concerning certain disputes over a will. There are occasions in which it is appropriate to award costs from the estate rather than against any party to the proceeding. These principles were articulated by Stringer J in Re Paterson (Deceased):4

(i)If the litigation originates in the fault of the testator—eg by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life—or of those interested in the residue the costs may properly be paid out of the estate.

(ii)If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.

(iii)Unless the circumstances of the case are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail.

[6]    The approach in Re Paterson (Deceased) has recently been upheld by the Court of Appeal in Crawford v Phillips and Loosley v Powell.5 It is also reflected to an extent in r 14.6(4)(c) of the High Court Rules 2016, which provides:

(4)       The court may order a party to pay indemnity costs if—

…

(c) 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

…

[7]    In Waitara Leaseholders Association Inc v New Plymouth District Court, Harrison J observed that r 14.6(4)(c) was designed to reflect the first two categories of cases identified in Re Buckton.6  In Re Buckton, the High Court of England and Wales

3      High Court Rules 2016,  rr  14.1  and 14.2(1)(a); and  Shirley v Wairarapa District Health Board

[2006] NZSC 63, [2006] 3 NZLR 523 at [19].

4      Re Paterson (Deceased) [1924] NZLR 441 at 442–443.

5      Crawford v Phillips [2018] NZCA 351; and Loosley v Powell [2018] NZCA 73.

6      Re Buckton [1907] 2 Ch 406.

identified three categories of cases, closely aligned with the principles later identified by Stringer J in Re Paterson (Deceased):7

(a)Applications by 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 ask to have some question determined that has arisen in the administration of the trusts, have their solicitor/client costs paid out of the estate.

(b)Applications by beneficiaries made by reason of some difficulty of construction, or administration that would have justified an application by the trustees are treated the same way. The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate as a whole.

(c)Applications by beneficiaries who make a claim adverse to other beneficiaries that strictly falls within the description of litigation. When it is clear the court is determining rights between adverse litigants, the unsuccessful party must bear the costs of all other parties brought before the Court.

[8]    Drawing the threads together, there are two related decisions to be reached: should the estate or the parties bear costs and how are costs to be calculated? These choices do not necessarily go hand in hand. There are several recent cases in which courts have awarded scale costs to be paid from an estate.8 There are also other cases where costs have been apportioned between the estate and the losing party.9 The correct approach will depend on the particular circumstances of each case, but a key consideration will be the extent to which parties were acting in their own interests as opposed to seeking to clarify matters for the benefit of all beneficiaries of the estate.

7      At 414–415.

8      See Loosley v Powell, above n 5; and Mumby v Mumby [2016] NZHC 2836 at [16] and [31].

9      McFadzean v Moleta [2013] NZHC 2694 at [20].

Positions of the parties

[9]    Anne seeks an award of scale 2B costs uplifted by 50 per cent against Paul, totalling $109,613.25, and, by way of contribution towards actual costs, a further

$50,000 to be paid from the estate. As Mr Patterson explained this result is slightly less than indemnity costs for Anne to recognise that she received a degree of personal benefit from the stance she took in the proceedings. The rationale for dividing costs between the estate and Paul is that Paul was the primary antagonist, so it is just to award costs against him, and those costs should be uplifted to reflect his conduct both giving rise to the proceeding and during the proceeding, yet Anne still ought to be entitled to a degree of indemnity, which she can only receive from the estate.

[10]   Mr Paterson also refers to two Calderbank letters which, he submits warrant an increase in the costs payable by Paul. The first of these letters, dated 24 October 2017, offered to settle the litigation on essentially the same terms as my judgment. All five children were to share equally in the estate with the settlement deed being implemented, Mr Vance continuing as administrator of the estate and the deed of assignment recognised as void. The letter also demanded that Anne have her reasonable legal costs paid out of the estate. The second letter dated 14 June 2018 offered to settle on slightly more favourable terms to Paul. Probate would be granted on the 2014 will, although it would be altered such that Anne would receive 15 per cent of the estate, while her siblings would have reduced interests of 21.125 per cent each. Mr Vance would replace Mr de Gregorio as administrator and Anne would be paid $100,000 in legal costs from the estate.

[11]   Paul accepts he is unlikely to have his costs paid out of the estate, but he opposes the structure of costs sought by Anne. Mr Iorns submits a fair way of dealing with costs would be for Anne to be paid scale costs or reasonable costs from the estate. He also submits Mr de Gregorio should have his reasonable costs paid from the estate for the period during which he was involved in the litigation. Mr Iorns also refers to correspondence following Anne’s second Calderbank letter demonstrating Paul engaged  in  a   genuine   attempt   to   settle   the   litigation.   Paul   also   disputes 15 disbursements referred to by Anne as “office services fee”.

[12]Mr de Gregorio has not himself sought costs.

[13]   Mr Vance has not sought costs either but made helpful submissions on the appropriate costs orders to be made as between Anne and Paul. Mr Vance’s position is that Anne should have her costs paid out of the estate but on a scale basis. Paul should bear his own costs. Mr Vance also suggests that a reduction in costs might be appropriate to reflect the “gross hostility” within the family during the proceeding. He says the acrimony might have increased litigation costs and significantly reduced the prospect of settlement.

[14]   Ms Pearson acknowledges she will be required to pay costs to Anne. She accepts the $5,352 figure calculated by Anne for the filing of documents and suggests she should pay 10 per cent of Anne’s preparation and appearance costs for the substantive hearing, accounting for the relatively minor role her claim played in the consolidated proceeding. Ms Levy submits that increased or indemnity costs are not warranted because Anne acknowledged the settlement deed was conditional upon proper ratification by a property manager appointed by the Family Court. In terms of disbursements, Ms Pearson accepts the filing fee of $103.30 is payable and it might be appropriate for her to share in the travel costs for the substantive hearing, but also disputes the office service fees.

Discussion

[15]   My clear view is that this is an inappropriate case for any party’s costs to be paid from the estate. While the validity of the 2014 will had to be determined one way or another, neither Paul nor Anne can legitimately claim to have been acting in the interests of the estate as a whole. This proceeding was the definition of adversarial litigation. The parties levelled countless accusations at one another and produced copious amounts of evidence in attempts to malign the character of the other. The palpable acrimony undeniably and disproportionately escalated costs.

[16]   Furthermore, to award costs from the estate would negatively impact on Lofty’s other children who took neutral, or less adversarial stances. It would be unjust to require them to bear the cost of the hostility between Paul and Anne. Accordingly,

I propose to order Paul to pay Anne’s costs personally. Those costs will be calculated on a scale 2B basis. Anne accepts indemnity costs against Paul are not warranted.

[17]   As to whether there should be an uplift, there are three issues to consider: the Calderbank letters, Paul’s conduct during the proceeding and Paul’s conduct giving rise to the proceeding. In terms of the Calderbank letters, Anne does not seek indemnity costs pursuant to r 14.10. The question therefore is whether Paul failed without reasonable justification to accept the offers of settlement.10 That question must be assessed at the time the offers were made.11

[18]   Although ultimately Anne was successful, and the judgment accords entirely with her initial offer of settlement, I accept Mr Iorns submission that this was not a case where Paul’s position was so clearly untenable (prior to trial) that it did not warrant testing before a court. Although in hindsight the result might appear obvious, I bear in mind it was only reached after a thorough examination of the evidence, including evidence from several expert witnesses, over the course of a six-day hearing. In those circumstances, I am unwilling to conclude that Paul’s refusals of the settlement offers by Anne were without reasonable justification.

[19]   Furthermore, it appears from the correspondence Mr Iorns draws to my attention that the parties engaged in protracted settlement negotiations following Anne’s second offer of settlement on 14 June 2018. After a counter-offer from Paul, it seems the parties almost reached the point of executing a deed of family arrangement on 9 July 2019, but for various reasons this did not eventuate. Those circumstances further suggest Paul did not refuse the second settlement offer without reasonable justification. At that time, it appears all parties engaged in a genuine (but ultimately unsuccessful) attempt to arrive at a negotiated resolution of the proceeding.

[20]   For the same reasons outlined at [18], it would not be appropriate to award increased costs against Paul on the basis of his involvement in the drafting and execution of the three documents that were the subject of the proceeding. The

10     High Court Rules 2016, r 14.6(3)(b)(v).

11     Samson v Mourant [2016] NZHC 1119 at [44].

significance of his role really only became evident as a result of detailed examination of all the evidence.

[21]   My view is that it would be also inappropriate to award an uplift in costs on the basis of Paul’s behaviour during the proceeding. As I have already highlighted, the entire proceeding was mired with acrimony and much of the evidence and submissions from both sides amounted to irrelevant and unhelpful attempts at personal attacks on the character of the opposing side. I consider an uplift in favour of any party is unwarranted.

[22]   In terms of Paul’s costs, I agree he should be left to cover these himself. Quite apart from the fact I have concluded this is not an appropriate proceeding for costs to paid from the estate, it would be unusual for an unsuccessful party to have costs paid from the estate in circumstances where that party was found to have been involved in executing the invalidated will.12

[23]   In relation to Ms Pearson, there is no question of Anne’s costs being paid out of the estate as Ms Pearson’s claim did not involve the 2014 will. Both parties accept scale 2B costs are appropriate. I agree with the calculations advanced by Ms Levy. However, I take the view Anne is entitled to increased costs against Ms Pearson on the basis her entire case was directed towards undoing an earlier settlement to which she had agreed. As I found, this was an abuse of process.13 Frankly, this should have been obvious to Ms Pearson all along. The focus in evidence and argument on the ratification of the settlement deed by a property manager was a distraction. That requirement only related to Lofty’s obligations under the settlement deed, not the validity of the deed as a whole. Ms Pearson’s obligations under the settlement deed were never in question. An uplift of 50 per cent is warranted as Ms Pearson contributed unnecessarily to the time and expense of the proceeding by pursuing an argument that lacked merit.14

12     Harris v Taylor [2016] NZHC 483.

13     de Gregorio v Surridge, above n 1, at [148]–[152].

14     High Court Rules 2016, r 14.6(3)(b)(ii). Compare Baker v Waimakuku Whanau Trust Board Inc

HC Napier CIV-2010-441-581, 13 October 2011 at [20].

[24]   I agree with Ms Levy an appropriate estimate for the proportion of time taken by Ms Pearson’s claim is 10 per cent. Accordingly, liability for the $6,690 for preparation for hearing and the $11,150 for attendance at hearing will be split between Paul and Ms Pearson. Paul will pay 90 per cent, being $6,021 and $10,035 respectively, while Ms Pearson will pay 10 per cent, being $669 and $1,115 respectively. That puts 2B costs (before uplift) for Ms Pearson at $7,136.

[25]   In terms of disbursements, I accept the objection by Paul and Ms Pearson to payment of the office service fees. A disbursement can only be claimed if it is “specific to the conduct of the proceeding”.15 In Opus International Consultants Ltd v Colac Bay Vision Ltd, this Court disallowed a “service fee” charged by a firm of solicitors on the basis it was a uniform charge that did not reflect actual disbursements used for the proceeding and it was not, therefore, “specific to the conduct of the proceeding”.16 The office service fees claimed in this case are similar. There are 15 instances of the fee, each for the exact same amount of $45. As I have been provided with no information about the fee I cannot be satisfied the expense was specific to the conduct of the proceeding. Accordingly, I disallow the office service fees.

[26]   Ms Pearson should also be responsible for 10 per cent of disbursements relating to travel expenses for the substantive hearing, including transport and accommodation. On my calculation, those expenses total $2,628.89. Accordingly, Paul is responsible for $2,366, while Ms Pearson is responsible for $262.89. The only other disbursement pertaining to Ms Pearson’s claim is invoice 11371, which is a $103.30 filing fee for Anne’s statement of defence to Ms Pearson’s claim and a $6.34 fee for couriering it to Wellington.

[27]   Finally, I see no reason to award costs to Mr de Gregorio who has not sought costs. While Mr Iorns advocates on Mr de Gregorio’s behalf, submitting he did not ask to be named executor and ultimately adopted a neutral position before renouncing probate on 16 October 2018, there is also merit to Mr Patterson’s submission that  Mr de Gregorio initially (and quite untenably) attempted to defend his position as executor of the estate and ought to have withdrawn at a much earlier stage. While

15     Rule 14.12(2)(b).

16     Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 2702 at [7].

Mr de Gregorio was in the position of a trustee, and would ordinarily be entitled to have his reasonable costs paid from the estate if he conducted himself reasonably, it is fair to say his position was compromised from the outset for the reasons outlined in my  judgment  appointing  Mr  Vance  as  temporary  administrator.17  Given  that   Mr de Gregorio has not himself sought costs, and his involvement in the proceeding was minimal in any event, I make no order as to his costs.

Result

[28]Paul is to pay Anne costs of $64,601.50 plus disbursements of $31,784.59.

[29]Ms Pearson is to pay Anne increased costs of $10,704 plus disbursements of

$372.53.

[30]All other parties’ costs are to lie where they fall.

Karen Clark J

Solicitors:

kplegal Ltd, Auckland for First Defendant (CIV-2017-485-602870) PH Surridge, Paremata for Second Defendant (CIV-2017-485-602870) Ord Legal, Wellington for Plaintiff (CIV-2018-485-65)

Meredith Connell, Auckland for Defendant (CIV-2018-485-65)

17     de Gregorio v Surridge, above n 2.