Emery v Thorn
[2018] NZHC 3164
•4 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000389
[2018] NZHC 3164
UNDER The Declaratory Judgments Act 1908 and Property (Relationships) Act 1976 BETWEEN
ELIZABETH EMERY by her Litigation Guardian, DAVID DOMINIC RICE
Plaintiff
AND
LEO HAROLD THORN
First Defendant
TONY JOHN THORN
Second Defendant
Hearing: On the papers Judgment:
4 December 2018
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Tuesday, 4 December 2018 at 12.00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:Kiely Thompson Caisley, Auckland for the Plaintiff Ryan Law, Te Aroha for the First and Second Defendants
Counsel: A Gilchrist, Auckland for the Plaintiff
D J Taylor, Hamilton for the First and Second Defendants
EMERY v THORN [2018] NZHC 3164 [4 December 2018]
Introduction
[1] The plaintiff, Ms Elizabeth Emery, applies for an order her actual and reasonable costs should be met from the estate. This application follows settlement. The order sought in the substantive proceedings was made by consent. The defendants oppose and say costs should lie where they fall.
Background
[2]Ms Sheryl Thorn died intestate on 16 September 2014.
[3] Ms Elizabeth Emery applied to this Court for a declaration (“declaration proceedings”) she was living together with Ms Thorn in a de facto relationship at the time of her death.1 This was necessary to determine Ms Emery’s application for letters of administration. Per r 27.35 of the High Court Rules 2016, de facto partners have priority above children in determining applications for letters of administration.
[4] Ms Emery now suffers from several conditions. She lacks the capacity to manage her own affairs. On 14 March 2018, shortly after the statement of claim was filed, Courtney J appointed Ms Emery’s solicitor as her litigation guardian.2
[5] Mr Leo Thorn and Mr Tony Thorn, the defendants and Ms Thorn’s sons, opposed Ms Emery’s application. One or both of them had separately applied for letters of administration. They did not accept Ms Emery was in a de facto relationship with Ms Thorn at the time of her death. Rather, they contended the relationship ended six or seven years before Ms Thorn’s passing.
[6] The parties settled before a statement of defence was filed. The Court made the declaration sought by Ms Emery by consent.3 The defendant(s) also agreed to withdraw their application for letters of administration and to consent to the appointment of Mr Philip Allen, a solicitor from Pukekohe, as independent administrator of Ms Thorn’s estate.
1 Property (Relationships) Act 1976, s 2D.
2 Emery v Thorn [2018] NZHC 436.
3 Emery v Thorn HC Auckland CIV-2018-404-389, 10 October 2018 (Minute of Paul Davison J).
[7] A property, and the associated mortgage, is relevant to the dispute between the parties. Ms Thorn and Ms Emery jointly purchased a property in Papakura many years ago—in the 1980s. It was their family home. The property was mortgaged through BNZ. The parties’ positions are:
(a)Ms Emery says she provided the equity for the property. The mortgage, on the other hand, represents Ms Thorn’s contribution. Ms Emery now says it was accepted the debt was relationship debt. This is because they were in a de facto relationship and the property was the family home. A conclusion of relationship debt logically follows.
(b)The defendants say Ms Emery always asserted the mortgage was the responsibility of Ms Thorn alone. Ms Emery did not accept it was relationship debt.
[8] While not in issue in the declaration proceedings, the disagreement about the property contributed to the expenses incurred. The defendants cite it as a central reason for their opposition. I expand on this in the discussion below.
Application
[9] The plaintiff, through her counsel, argues her actual and reasonable costs should be recovered from the estate. This is because the outcome reflects the position she adopted all along. The defendants now accept Ms Emery was in a de facto relationship with Ms Thorn at the time of her death. And as mentioned, a declaration was made to that effect.
[10] The costs sought extend beyond ordinary litigation costs. The claim includes costs incurred in initial attempts to obtain the letters of administration, the doctor’s costs for assessing Ms Emery, litigation costs in relation to the declaration proceedings, costs incurred in pursuit of settlement and disbursements. The costs claimed total $44,142 (including GST):
(a)$28,000 for time and disbursements while current counsel has been engaged. This includes the sealing fee and medical examination of Ms Emery.
(b)$14,881 for solicitors’ fees.
(c)$1,261 for disbursements paid by the solicitor.
[11] Ms Emery says the defendants should also receive their actual and reasonable costs from the estate. This is notwithstanding her argument the defendants delayed matters. She says if the defendants accepted the existence of the relationship in 2015, the matter would have been resolved then. It is also accepted some delay is attributable to Ms Emery’s incapacity.
Opposition
[12] The defendants oppose the application for costs. They say costs should lie where they fall.
[13] The defendants submit the plaintiff adopted an unreasonable position which led to the proceedings. This is because the plaintiff denied the existence of a relationship debt at the same time as asserting her right to be administratrix of the deceased’s estate. They also did not want someone with a conflict of interest to administer the estate.
The law
[14] Counsel for the plaintiff did not refer to any authority. Counsel for the defendants’ authorities were limited to general propositions of unreasonable behaviour rebutting an entitlement to costs. Notwithstanding, the parties are seemingly agreed on principle. The battleground is instead whether the plaintiff’s conduct was reasonable.
[15] Almost 100 years ago, in Re Paterson (deceased), Stringer J addressed costs in the context of contested wills.4 The Judge said:5
The Court has a general discretion as to costs in all actions and proceedings before it, but there are certain well-established principles upon which that discretion should be exercised in cases of contested wills. They are as follows:
(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.
[16] Despite the passage of time, these principles remain sound. The Court of Appeal recently confirmed the approach to costs in proceedings involving contested wills is “regarded as settled by the statement of Stringer J in Re Paterson”.6
[17] The current case does not concern a contested will—Ms Thorn died intestate. But I consider the circumstances are sufficiently analogous.7 There is a claim for costs to be paid out of the estate. Instead of the usual approach under the High Court Rules, in its overriding discretion, this Court applies the principles as stated in Re Paterson. The focus should be on the extent to which the costs are attributable to Ms Thorn’s failure to leave a will and whether the parties acted reasonably.
Discussion
[18] I am satisfied the plaintiff’s actual and reasonable costs should be reimbursed from the estate. This is because of five reasons.
4 Re Paterson (deceased) [1924] NZLR 441 (SC).
5 At 442–443.
6 Loosley v Powell [2018] NZCA 73 at [6]. See also Crawford v Phillips [2018] NZCA 351 at [6]– [8].
7 See Jurisich v Harris [2016] NZHC 1278 at [12]–[13].
[19] First, the dispute originated in Ms Thorn’s failure to leave a will. If she had, it would not have been necessary for the parties to apply for letters of administration. And it follows it would not have been necessary for Ms Emery to commence the declaration proceedings. The debt issue would likely have been of less significance too, if any.
[20] Second, it was reasonable for Ms Emery to pursue letters of administration. Per r 27.35 of the High Court Rules, she was entitled to priority. This is because, as everyone now accepts, she was in a de facto relationship with Ms Thorn at the time of her passing.
[21] Third, the central issue was whether Ms Emery and Ms Thorn were in a de facto relationship. The correspondence produced by the parties supports this conclusion. That was the only issue in the declaration proceedings. The statement of claim makes no reference to the mortgage. If anything, the statement of claim supports the argument the mortgage was relationship debt. Rather, the declaration was sought to obtain priority under r 27.35. It was necessary to apply for a declaration because the defendant(s) denied the existence of the de facto relationship in their application for letters of administration. Ultimately, the plaintiff prevailed. She did not act unreasonably in pursuing the declaration, nor in otherwise asserting the existence of the relationship.
[22] Fourth, in my view, the mortgage debt is still relevant to the costs application. This is because the plaintiff is seeking costs in relation to the wider dispute between the parties. The debt is important background information.
[23] According to the defendants, the debt explains their conduct. They point out the plaintiff’s solicitors asserted in 2015 that the estate should pay the entire debt before it is divided. That position is, however, inconsistent with the debt being relationship debt. The plaintiff’s lawyer should have recognised this then, as her counsel now does.
[24] The defendants accordingly viewed the debt issue as intertwined with Ms Emery’s claim. They did not want Ms Emery making decisions about the estate
when her interests were aligned with the course suggested by her lawyer in 2015. They say she had a conflict of interest. They also objected because the suggested approach decreased the residue of the estate. Less would be available for distribution if the entire debt is paid first. This is an understandable objection. But it was not necessary for the defendants to deny the existence of a de facto relationship. They could have pursued the conflict of interest argument separately and the issue about the treatment of the debt could have been resolved later, when the administrator decided how to deal with the debt.
[25] The plaintiff says that was not the position throughout. Later correspondence, in 2016, from plaintiff’s current counsel suggests the issue regarding the debt would be “academic” if the existence of the de facto relationship were accepted. The focus in other correspondence was on the existence of the de facto relationship too. If the defendants accepted its existence, I am satisfied resolution on the debt issue would likely have followed. Or the defendants would have had a claim later if the administrator did not treat the debt properly.
[26] Overall, in my view, the plaintiff’s conduct does not rebut her entitlement to costs. It should be kept in the mind the disagreement ultimately links back to Ms Thorn’s failure to leave a will.
[27] Fifth, I do not consider there is merit in defendants’ suggestion the plaintiff should have offered earlier to appoint an independent person as administrator. They say this would have led to settlement. While that has turned out to be the result, it is because of Ms Emery’s incapacity. It does not follow the plaintiff’s conduct was unreasonable in not suggesting that, especially given the defendants refused to accept the plaintiff’s position regarding the de facto relationship. It was, of course, also open to the defendants to make such an offer. They did not.
[28] As regards the defendants’ costs, I make no order. The defendants have not sought costs. In any event, I am satisfied their opposition to the de facto relationship claim would substantially weaken any claim to costs.
Conclusion
[29] The plaintiff’s actual and reasonable costs should be reimbursed from the estate. However, the plaintiff has provided insufficient details for this Court to assess whether all costs were reasonably incurred and reasonable in amount. I encourage the parties to reach agreement on this point.
[30] If the parties cannot agree, the plaintiff is to file a memorandum (no more than three pages) itemising the costs and the reasons for them by 31 January 2019. Invoices should be attached. The defendants are to file a reply memorandum (no more than three pages) by 14 February 2019. The matter will then be determined on the papers.
Woolford J
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