Edmonds v Edmonds
[2023] NZHC 1680
•30 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-893
[2023] NZHC 1680
BETWEEN DAVID IAN EDMONDS
Applicant
AND
DAVID IAN EDMONDS, SHERYL
LOUISE EDMONDS and GM LEGAL TRUSTEE LIMITED
First Respondent
AND
SHERYL LOUISE EDMONDS
First Third Party
AND
MICHAEL ROY EDMONDS AND PATRICIA ALICE EDMONDS
Interested Parties
Hearing: On the papers Counsel/ Representation:
J E M Connell for Applicant
G A Ireland for Second Respondent
Judgment:
30 June 2023
JUDGMENT OF JOHNSTONE J
[Re: Costs]
This judgment was delivered by me on 30 June 2023 at 4.30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Connell & Connell, Auckland McVeagh Fleming, Auckland
EDMONDS v EDMONDS [2023] NZHC 1680 [30 June 2023]
Introduction
[1] David Edmonds and Sheryl Edmonds were married. They are now dividing their assets. To that end, Mr Edmonds brought an originating application for directions as to the division of their family trust’s assets. The proceeding was set down for substantive hearing before me on 28 February 2023. Just prior to the hearing commencing, the parties entered a settlement agreement. The substantive proceeding was disposed of by consent order. The terms of the settlement agreement reserved the parties’ entitlements to seek costs.
[2] The parties have now each applied for costs, both describing themselves as having succeeded. Mr Edmonds applies for standard 2B scale costs — in total,
$19,153.50 — and asks this Court to impose an uplift of 50 per cent. Ms Edmonds applies for:
(a)indemnity costs of $75,653.53; or
(b)a mixture of scale and indemnity costs amounting to $47,076.12; or
(c)a 75 per cent uplift for on standard scale costs, $22,623.80 and $14,340, respectively.
[3]The issues that must be decided are:
(a)Can the Court identify a winner?
(b)If so, are scale, increased or indemnity costs appropriate?
Background and parties’ positions
[4]There were three applications before the Court:
(a)Mr Edmonds’ application for leave to commence proceedings by originating application;
(b)Mr Edmonds’ originating application for resettlement, partition, and sale of the trust property; and
(c)Ms Edmonds’ application for referral to alternative dispute resolution (ADR).
[5]The opposing parties in each instance opposed the other parties’ application(s).
[6] There were several issues and disagreements at play. The primary issue was how to deal with main trust asset, this being the family home at 8 Shamrock Lane, Te Atatu. Both parties appear from early on to have agreed that the house should be sold, but that was about as far as any agreement went. Ms Edmonds’ position appeared to be that she would not consent to the sale of the house unless two subsidiary and related issues were addressed: the status of a loan/gift provided by her mother; and her liability to meet a judgment debt.1 Ms Edmonds argued that her mother had provided her a loan to assist with the purchase of the house, the corollary being that if it was a gift, and not a loan, the funds would have been mixed marital funds and, therefore, relationship property. She also argued that she was not solely liable for the judgment debt against her, and that Mr Edmonds was a co-debtor. The judgment debt in question arose from a contractual debt owed by Mr and Ms Edmonds jointly to Michael Edmonds, Mr Edmonds’ father. By way of an undefended summary judgment application, Michael Edmonds elected to pursue the contractual debt against Ms Edmonds only. Ms Edmonds’ view, and that of her counsel, was that these issues were related to relationship property of the parties, and that Mr Edmonds bringing an originating application for division of the trust property was misguided and “inappropriate”. To resolve the impasse, Ms Edmonds sought the Court’s assistance by bringing an application for referral to alternative dispute resolution (ADR).
[7] Mr Edmonds’ general position on the impugned debts is that they are separate and unrelated to the resettlement and partition of the trust assets. Instead, the debts are relevant only to relationship property proceedings. To that end, Mr Edmonds
1 Just prior to the hearing commencing there appear to be only two remaining conditions of Ms Edmonds. Earlier there was a dispute as the value of an occupation licence concerning Mr Edmonds’ parents but that was apparently resolved.
initiated the originating application for resettlement. Mr Edmonds’ positions on the subsidiary issues were:
(a)Ms Edmonds had deposed, and effectively conceded, the money received from her mother was a gift; and
(b)the judgment debt was only against Ms Edmonds, and not Mr Edmonds.
[8] Consistent with this position, Mr Edmonds viewed Ms Edmonds’ efforts to block or delay the sale and resettlement of the trust property pending resolution of the subsidiary issues as misguided and “self-serving”. Mr Edmonds also took issue with Ms Edmonds continuing to live in the trust property and not meeting maintenance expenses. Further, the application for ADR was unhelpful and added unnecessary expense.
[9] Each party also attempted to settle the litigation.2 Mr Edmonds was the first to offer settlement. His offer excluded any provision for Ms Edmonds’ debts, and sought his legal fees be met by the trust. Ms Edmonds also made a settlement offer. Her offer sought that her debt to her mother be recognised, and that Mr Edmonds pay half of the judgment debt to his father.
[10] Ultimately, the parties settled. The terms of the settlement resolved some of these issues, providing for :
(a)Agreement on the sale of the Shamrock property, and the process to be followed for the sale.
(b)Provision for resettlement of the trust property and payment of related expenses.
2 Mr Edmonds’ first offer was expressed to be made “without prejudice”, with no exception in the event of a costs dispute. Subsequent offers were made “without prejudice save as to costs”. The first offer has been provided to the Court without objection. I take it there has been a mutual waiver of privilege, either implicit in the approach to privilege taken in the subsequent offers, or otherwise.
(c)Ms Edmonds to meet rates and mortgage payments while she remains in occupation of the property.
(d)The judgment debt to Mr Edmonds’ father to be paid equally from the family trust out of the proceeds of the sale of the property. However, Mr Edmonds reserves the right to apply to the Family Court for ultimate determination of liability of the judgment debt.
(e)Each party reserves costs.
[11] The parties’ present positions reflect their positions at the time the discontinued applications were still on foot. Each considers themselves the victor of the litigation and blames the other for unnecessary applications. Ms Edmonds submits that the originating application was unnecessary, and that the settlement was most similar to her offered terms. Mr Edmonds submits that the application for ADR was unnecessary, and further that his original offer to settle was substantially similar to the ultimate settlement.
Legal Principles
[12] The starting point is that costs are at the Court’s discretion.3 Although the discretion is wide, it is not unfettered. Rule 14.2 of the High Court Rules 2016 sets out the general principles and includes “the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds”.
Rule 15.23
[13] The default rule for a discontinuance is that the plaintiff must pay the defendant’s costs. Rule 15.23 provides:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
3 High Court Rules 2016, r 14.1.
[14]In FM Custodians Ltd v Pati, Associate Judge Abbott said of r 15.23:4
[10] The presumption may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.5
[11] The Court is not limited in the factors that can be taken into account when considering whether the presumption is displaced, but the following are matters which are taken into consideration:
(a)As the general rule the Court will not consider the merits of the respective cases (unless they are so obvious that they should influence the costs issue).6
(b)The Court will consider the reasonableness of the stance of both parties in the proceeding (whether it was reasonable for the plaintiff to bring and continue the proceeding, and for the defendant to oppose and continue to oppose it, up to the point of discontinuance).7
(c)Conduct prior to the commencement of the proceeding may be relevant (for example, if any conduct by a defendant has precipitated the litigation), as may be the reason for discontinuing (for example, where a change of circumstances has made the proceedings unnecessary).8
[12] The Court’s general discretion in relation to costs9 can also override the general principles in relation to discontinuance.10
[15]That approach is generally consistent with that applied in other cases.11
[16] However, in instances where discontinuance or consent orders follow settlement, settlement is regarded as a reason to depart from the default rule, and to decide the case on usual costs principles.12 Where a settlement agreement is silent as to costs, the Courts will generally infer that the settlement agreement concludes all
4 FM Custodians Ltd v Pati [2012] NZHC 1902.
5 North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 188; and Kroma Colour Prints Ltd v Tridonicatoato NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12].
6 North Shore City Council, above n 5, at 186; and Kroma Colour Prints Ltd, above n 5.
7 North Shore City Council above n 5, at 187; and Kroma Colour Prints Ltd, above n 5.
8 Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, quoted in North Shore City Council, above 5, at 187. See also McGechan on Procedure (looseleaf ed, Brookers) at [HR15.23.01], cited in Vector Gas Ltd v Todd Petroleum Mining Co Ltd HC Wellington CIV-2004-485-1753, 7 December 2010.
9 High Court Rules, r 14.1.
10 Oggi Advertising Ltd v McKenzie (1998) 12 PRNZ 535 (HC) at 536; and Kroma Colour Prints Ltd, above n 5.
11 See, for example Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [20]–[24].
12 Laura O’Gorman (ed) Sim’s Court Practice (online ed, LexisNexis) at [HCR14.2.6] and [HCR15.23.5].
matters, including costs.13 However, as the parties have expressly reserved the right to seek costs the Court must consider their applications.
[17] There is a divergence in High Court authority as to the applicability of r 15.23 in the context of settled litigation.14 The first view is that the usual principles arising in connection with r 15.23, deriving from FM Custodians Ltd v Pati and other relevant authorities, apply, and that settlement is just one factor favouring departure from the default rule.15 The second view is that the discontinuance under r 15.23 means “unilateral discontinuance” and, therefore, where parties settle litigation r 15.23 has no application whatsoever. The latter approach is best summarised by Hinton J in Lendrum v Northern Presbytery:
[25] The first question is whether r 15.23 is in fact engaged. The provision, as noted, states that a discontinuing plaintiff must, unless the Court otherwise orders, or the defendant otherwise agrees, “pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.”
[26] The Reverend, adopting the language of McKenzie J in Nga v Pauatahanui GS Ltd,16 says that this was not a unilateral discontinuance, but rather that his discontinuance was the formal mechanism by which the settlement reached between the parties during the hearing was given effect. I take this submission to be that, despite the plain language of r 15.23 appearing to apply to all discontinuances, the presumption under that rule should not apply where the discontinuance was not unilateral.
[27] That is certainly the outcome suggested by Nga. There, shortly before the hearing, counsel filed a joint memorandum advising the parties had agreed on terms obviating the need for a hearing and proposing consent orders to dispose of the proceeding. The Judge endorsed the memorandum “orders by consent accordingly”. Costs were reserved. The respondent then sought costs on the basis the claim had been dismissed, relying on r 15.23 and claiming it was to be treated as the successful party. The applicants opposed the award of costs. The Judge said:
13 Emslie v Buchanan (1907) 26 NZLR 1308 (HC); and Baycity New Zealand Ltd v Uttinger HC Auckland CIV-2004-404-3404, 4 May 2007 at [7].
14 I note only two divergent views, but there may be more. Authority predating the current rules regime arguably suggests a different approach: see for example, Royal Forest and Bird Protection Society Inc v Auckland Regional HC Auckland M1902-SW99, 21 June 2001; and Body Corporate 81381 v Trebe NZ Ltd (in liq) HC Wellington, CIV-2003-485–332, 10 September 2003.
15 Reyes v Gallagher Family Investments Ltd [2022] NZHC 896 at [18]–[24], citing Jessica Gorman and others McGechan on Procedure (online ed, Brookers) at [HR15.23.01] (citing Kroma Colour Prints Ltd v Tridonicatoato NZ Ltd, above ; FM Custodians Ltd v Pati, above n4; and Opus International Consultants Ltd v Colac Bay Vision Ltd, above n 11, at [20]–[24]); and Body Corporate 388915 v Hbs Pandora Prop Ltd [2020] NZHC 2720 at [4]–[9], citing FM Custodians Ltd v Pati, above n4, Body Corporate 81,381 v Trebe NZ Ltd (in liq), above n 14, and Janes v Benney (No 2) [2019] NZHC 2719.
16 Nga v Pauatahanui GS Ltd [2014] NZHC 3397.
[6] Rule 15.23 is not applicable. That rule applies to a unilateral discontinuance by the plaintiff. That is not the case here. The applicants’ proceedings were dismissed by a consent order. It is often the case, when litigation is settled, that the formal mechanism used to dispose of the proceedings is a discontinuance, or a consent order dismissing the proceedings. When those mechanisms are used, it is not generally appropriate to treat the party whose proceeding is discontinued or dismissed as an unsuccessful party, for costs purposes. The parties should, if costs are in issue, resolve those as part of the settlement.
[28] That decision is not binding on this Court as a matter of authority. However, it appears McKenzie J’s view, at least as to the non-application of r 15.23, is consistent with that taken by other Judges of this Court.17 Given the desirability of the award of costs being predictable and expeditious,18 I will not depart from this apparent trend of authority absent some good reason to the contrary. I see no such reason and none has been advanced in submissions.
[18] The approach taken in Nga v Pauatahanui GS Ltd has since been followed in a handful of other decisions of this Court.19
[19] Justice Hinton was reluctant to depart from the apparent trend of authority absent some good reason. It might be argued that the fact the approach in Nga requires a particular, non-literal interpretation of “discontinuance” so that it is confined to “unilateral discontinuance” only amounts to a good reason. Indeed, in Nga, McKenzie J did not explicitly advance reasons in favour of the confined interpretation. Instead, the Court adopted the interpretation so as to achieve consistency with the English and Welsh courts’ approach.
[20] But, in my view, overall justice favours continuation of the Nga approach. This is because the presumption arising under r 15.23 is “strong”.20 Yet in many cases involving settlement, it will make little sense to assume the plaintiff should be responsible to meet other parties’ costs. In my view, the distinctly different context arising in cases of settlement, rather than unilateral discontinuance, means that application of the presumption might disincentivise settlement, or operate as an
17 See Kroma Colour Prints Ltd v Tridonicatco NZ Ltd, above n 5; FM Custodians Ltd v Pati, above n 4, at [10]–[12]; Opus International Consultants Ltd v Colac Bay Vision, above 11, at [20]–[24]; and Yarrall v Earthquake Commission [2016] NZCA 517, (2016) 23 PRNZ 765 at [12].
18 High Court Rules, r 14.2(1)(g).
19 Patel v Macleod [2017] NZHC 990; Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932; Edmonds v Holland [2021] NZHC 504; Byrne v Rose [2017] NZHC 2886; Hobson Views Ltd v Hayward [2020] NZHC 395; and Li v Xie [2022] NZHC 2471.
20 Body Corporate 388915 v Hbs Pandora Prop Ltd, above n 15, at [13].
unnecessary and unhelpful legal barrier to the Court’s discretion in achieving just outcomes.
[21] The question remains: if r 15.23 does not apply, how should costs be dealt with? The following principles are applicable in determining costs following settlement:21
(a)The court has the power to make a costs order when the substantive proceedings have been resolved without trial, but the parties have not agreed on costs. There is no tradition of “no order as to costs” merely because a dispute has been settled, except as to costs. That said, if it is not possible for the Judge to say what the likely outcome would have been, that in itself is a possible order.
(b)The overriding objective is to do justice between the parties without incurring unnecessary court time and consequent additional costs.
(c)At each end of the spectrum will be cases where the merits and the likely successful party will be obvious. In between, to differing degrees, there will be cases that are less clear. How far the court will be prepared to inquire into the unresolved substantive issues will depend on the circumstances of the case.
(d)In the absence of a good reason to make any other order, the fall-back position is to make no order as to costs.
Increased costs
[22] The Court may order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by, among other things:
21 Nga v Pauatahanui Gs Ltd, above n16, at [8].
(a)taking or pursuing an unnecessary step or an argument that lacks merit;22 or
(b)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument.23
Indemnity costs
[23] Indemnity costs are provided for in r 14.6 and may relevantly be ordered where:24
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or …
Issue one – identifiable winner?
[24] Each party advances the same argument: that the final settlement demonstrates their victory over the other party. I do not agree.
[25] Mr Edmonds claims he was the first to offer settlement and that the final settlement only had minor differences. Ms Edmonds argues her amendments to the original settlement were essentially accepted into the final agreement.
[26] Ms Edmonds is broadly correct. However, while she did achieve her goal of having Mr Edmonds, via trust proceeds from the sale of Shamrock Property, meet his half of the judgment liability, Mr Edmonds reserved his right to bring proceedings in the Family Court to effectively dispute the validity of the concession.
[27] Ultimately, what is clear is that it is as yet entirely unclear which party succeeded as a consequence of the final settlement agreement. This point favours costs being allowed to lie where they fall.
[28] Further, each party objects to the applications brought by the other. They both argue that the applications were inappropriate and wasted resources. I do not consider
22 Rule 14.6(3)(b)(ii).
23 Rule 14.6(3)(b)(iii).
24 Rule 14.6(4)(a).
it possible to weigh these arguments to a nicety in the course of this costs dispute. The parties are, in essence, asking the Court to evaluate how it would have handled the applications, in other words, to decide their merits. For example, Ms Edmonds submits that Mr Edmonds’ originating application cut across the jurisdiction of the Property (Relationships) Act 1976. The Court will not decide such matters without the aid of substantive submissions and hearing. This too favours costs lying where they fall.
[29] In conclusion, I do not consider there has been an identifiable winner of this proceeding. On that basis, it is appropriate to allow the parties’ costs to lie where they fall.
[30] There is accordingly no need to consider the issue of scale, increased or indemnity costs.
Result
[31]The parties’ respective applications for costs are dismissed.
Johnstone J
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