Eru v MacRae

[2025] NZHC 2385

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2025-485-000192

[2025] NZHC 2385

UNDER

Section 21 of the Administration Act 1969

IN THE MATTER OF

an Application for removal of administrator

BETWEEN

LESLEY ANNE ERU

First Applicant

JOANNE CAROL CUNNINGHAM
Second Applicant

AND

NEIL DESMOND MACRAE

Respondent

Hearing:	(On the papers)
Counsel:	K A Lomas for First and Second Applicants P F Dalkie for Respondent
Judgment:	21 August 2025

JUDGMENT OF LA HOOD J

(Costs)

[1]                 Lesley Eru and Joanna Cunningham (the applicants) seek indemnity costs against Neil Macrae (the respondent), or in the alternative, increased costs, as well as costs on their costs application.

[2]                 The application raises the issue of the extent to which conduct prior to the commencement of a proceeding can bear on costs.

ERU v MACRAE [2025] NZHC 2385 [21 August 2025]

Background

[3]                 Carol Worsley (the deceased) died intestate on 8 February 2021. She was the wife of the respondent, who was initially responsible for the administration of the estate, and the mother of the applicants. The parties are the beneficiaries of the deceased’s estate.

[4]                 The applicants’ evidence is that the administration of the estate has been unreasonably slow, and there has been a persistent lack of transparency and communication by the respondent. It took three years before letters of administration were sought by the respondent, and more than four years for progress to occur. During this time, the respondent declined to have one of the applicants appointed as the administrator.

[5]                 The applicants made an application to replace the respondent as the administrator of the estate on 20 March 2025. The respondent almost immediately consented to his removal. No statement of defence or notice of opposition was filed and the final orders were made by consent.1

Legal principles

[6]                 The overarching principle of costs determinations is that they are at the discretion of the Court.2 A party who fails in respect of a proceeding is to pay costs to the party who succeeds3 and an award of costs should reflect the complexity and significance of the proceeding.4

[7]                 Under r 14.6(3)(b)(ii) and (d) of the High Court Rules 2016, the Court may award increased costs against a party that “has contributed unnecessarily to the time or expense of the proceeding or a step in the proceeding” by “taking or pursuing an unnecessary step or an argument that lacks merit”, or if “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.”

1      Eru v Macrae HC Wellington CIV-2025-485-192, 16 June 2025 [Oral Minute of Churchman J].

2      High Court Rules 2016, r 14.1.

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

4      High Court Rules 2016, r 14.2(1)(b).

[8]                 Under r 14.6(4)(a) and (f), the Court may award indemnity costs against a party that “has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding”, or if “some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.” The Court of Appeal in Bradbury v Westpac Banking Corporation held increased costs may be awarded where a party has failed to “act reasonably”.5 The Court reinforced that indemnity costs “are exceptional and require exceptionally bad behaviour” which is “flagrant”.6

Parties’ positions

[9]                 The applicants seek indemnity costs of $37,323.14 on the basis that the proceedings should not have been required and were a culmination of years of the respondent’s flagrant and persistent refusal to carry out duties of an administrator, while simultaneously refusing the appointment of another. In the alternative, the applicants seek increased costs on the same grounds of at least 75 per cent of actual costs, being $27,992.36. They additionally seek the costs of their costs application. They seek an order that the costs awarded be met from the respondent’s share of the proceeds of the estate before the balance is distributed.

[10]              The respondent submits that his conduct prior to the proceeding is irrelevant to costs. He notes that the applicants accept that he moved quickly once proceedings were filed. He says the time he took in correspondence prior to the proceeding was not deliberate or “nefarious”, and was because “he is a bit slow moving, and it all took time.” The respondent says scale 2B costs should be awarded against him.

Decision

[11]              The applicants have provided two High Court decisions where indemnity costs were ordered following the replacement of an administrator due to their failure to take any action. While both cases involved opposition to the replacement of an

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

6 At [28].

administrator in the course of the proceedings, the Court also referred to pre- proceedings conduct.

[12]              In Ward v Ward, the defendant attempted to defend the application to have him removed as an administrator.7 The Judge awarded indemnity costs on the basis of the defendant’s seriously improper conduct, which included defending the application when there was no chance of success and unreasonably preventing the estates being properly advanced for years.8 However, unlike the present case, the defendant actively defended the application, including filing evidence, making unsubstantiated allegations of fraud and improper conduct against the applicant, and “wilfully disregard[ing] the facts and evidence presented by the plaintiff and known law regarding the duties of trustees/executors in pursuing his defence.”

[13]              In Sloots v Sloots, the defendant also opposed the application.9 The Court awarded indemnity costs, primarily referring to the defendant’s conduct that pre-dated the proceeding:

[12] Given the highly dysfunctional relationship between  the  administrators, it was inevitable that the plaintiff’s application would be granted. The statement of defence confirmed the existence of the dysfunctional relationship yet opposed the application. The plaintiff and her legal advisers, before commencing this proceeding, had made repeated and reasonable efforts to avoid litigation but were met with occasional responses from the defendant which only served to confirm the need to have this Court make orders. The defendant was expressly put on notice that the plaintiff, if having to commence this proceeding, was likely to incur significant legal costs which she would seek to recover.

[14]              The Court also referred to subsequent conduct in the proceeding, which “reinforce[d] the unnecessary, vexatious and improper nature of the defendant’s defence including much (ultimately irrelevant) focus on [unsubstantiated] historical grievances against the plaintiff.”10

[15]              In Hong Kong & Shanghai Banking Corporation Ltd v Rick Dees Ltd, the High Court imposed increased costs after the respondent did not consent to a caveat

7      Ward v Ward HC Wellington CIV-2010-485-695, 10 December 2010.

8      At [8]–[9].

9      Sloots v Sloots [2020] NZHC 2318.

10 At [13].

being removed (without any basis), necessitating an application to the Court, and then took no steps in the proceeding.11 The Court rejected that any increase was warranted due to the respondent contributing unnecessarily to the costs of the proceeding because the respondent took no steps in the proceeding.12 However, the Court held that there was a basis to increase costs under the general rule allowing increased costs for “some other reason”:13

[19] … In my view, the respondent has exhibited a degree of intransigence over the matter. It is apparent from the affidavit of John Ray Kennedy sworn and filed in support of the application, that there has been a history of disputes between the parties. I infer that, faced with the inevitability that the caveat would be extinguished, the respondent decided it would do nothing to assist. Whilst that would have been appropriate if the caveat had lapsed automatically on presentation of the transfer for registration, the applicant made it clear to the respondent two weeks before this application was filed that the caveat would not lapse automatically. In my view, the respondent’s intransigence in light of that information does justify an order for increased costs.

[16]              Despite these cases where pre-proceedings conduct has been referred to as relevant to increased and indemnity costs, the authors of McGechan on Procedure suggest that pre-proceedings conduct has not been accepted as a basis for an award of indemnity costs or increased costs, citing Paper Reclaim and Re Keast.14

[17]                  In Paper Reclaim, the Court of Appeal held the allegedly wrongful pre- proceeding conduct should have been the subject of a separate claim for damages for breach of contract.15 I consider that decision is authority for the proposition that increased costs cannot be used as a means of compensating a party for conduct not directly connected to the proceedings for which damages is the appropriate remedy. In my view, this is distinguishable from the situation where a party’s unreasonable pre- proceedings conduct has necessitated the issuing of proceedings that would not otherwise have been required. That was the position in Hong Kong & Shanghai Banking Corporation Ltd and I consider it is the position in this case.

11     Hong Kong & Shanghai Banking Corporation Ltd v Rick Dees Ltd HC Auckland CIV-2006-404- 5278, 21 September 2006.

12     Then required under r 48C(3)(b) and now required under r 14.6(3)(b).

13     Then available under r 48C(3)(d) and now available under r 14.6(3)(d).

14 Jessica Gorman McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR14.1.04]; Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [147] and [160] (decision upheld: Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169 (SC) at [40]–[41]); and Re Keast [2015] NZHC 1505 at [7].

15 Paper Reclaim, above n 14, at [160].

[18]              Paper Reclaim was relied on by the Hight Court in Re Keast to preclude costs relating to pre-proceedings conduct.16 However, the Court did not refer to Hong Kong & Shanghai Banking Corporation Ltd and did not draw a distinction between conduct for which a separate claim in damages is the appropriate remedy and conduct that has necessitated the issuing of proceedings that would not otherwise have been required.

[19]              I accept the applicants’ submissions that the respondent’s unreasonable conduct has necessitated proceedings that would not otherwise have been required, and that the applicants have acted reasonably. I therefore consider increased costs are warranted. However, the respondent’s conduct has not been so exceptionally bad as to warrant indemnity costs. The respondent did not oppose the proceedings, and moved quickly once proceedings commenced, as the applicants acknowledge. I consider an uplift of 50 per cent of scale costs is warranted, in line with Hong Kong & Shanghai Banking Corporation Ltd.17

[20]              I should also make it clear that the costs for which an increase can be claimed must relate to the costs of preparing, issuing and completing the proceedings, rather than the costs of the protracted attempts to get the respondent to comply with his obligations prior to the decision to issue proceedings. I am satisfied, based on the invoices provided by the applicants, that the below costs award does not exceed the actual costs of preparing, issuing and completing the proceedings.

[21]              The parties have provided different calculations of 2B costs. The applicants’ memorandum   dated   30   June   2025   calculates   2B   costs   as    $10,277.00 (plus disbursements of $973.29). The respondent’s memorandum dated 8 July provides a calculation of $9,082.00 (plus disbursements of $1,038.29) but contains no submissions as to why his calculation should be preferred. The items claimed by the applicants appear correct (and possibly generous to the respondent).

[22]              I therefore order a 50 per cent increase in the 2B costs of $10,277.00, being a total of $15,415.50, plus disbursements of $973.29. I further order that those costs are

16     Re Keast, above n 14, at [7].

17     Hong Kong & Shanghai Banking Corporation Ltd, above n 11, at [20].

to be met from the respondent’s share of the proceeds of the deceased’s estate before the balance is distributed.

[23]              Costs on a costs application will usually only be awarded in specific circumstances, such as where a party is shown to be wholly successful in its costs claim, or where a party fails to accept or engage with a reasonable offer to agree or settle costs without the determination of the court.¹⁸ As I have determined the appropriate measure of costs falls between the positions of the parties, I do not consider this is an appropriate case to make a further order for costs on the costs application.

La Hood J

Solicitors:

Braun Bond and Lomas, Hamilton for First and Second Applicants McDonald Law, Auckland for Respondent

18     See Osborne v Speedway New Zealand Incorporated [2025] NZHC 858 at [14].