Estate of Andrews
[2022] NZHC 51
•28 January 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1023
[2022] NZHC 51
UNDER Section 140 of the Trusts Act 2019 IN THE MATTER
of the estate of ROBYN MARGARET ANDREWS
AND
IN THE MATTER
of an application by EVAN WILLIAM ANDREWS, RICHARD JOHN ANDREWS and DAVID BRUCE BELL
Applicants
Counsel: A Sorrell and A Borchardt for the Applicants D M O’Neill for Stephen Andrews
B Carter for Evan and Richard Andrews in their personal capacity
Judgment:
28 January 2022
JUDGMENT OF GORDON J
[As to Costs]
This judgment was delivered by me
On 28 January 2022 at 11.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Cambridge Law, Cambridge
Bell Associates, Auckland
Counsel:D M O’Neill, Hamilton A Sorrell, Auckland
B Carter, Auckland
Re Estate of ROBYN MARGARET ANDREWS [2022] NZHC 51 [28 January 2022]
[1]This judgment concerns an application for costs.
[2] On 29 November 2021 I issued a judgment (judgment)1 in the matter of the estate of Robyn Margaret Andrews and its beneficiaries, being her three adult sons Evan, Richard and Stephen Andrews.2 The applicants were Evan, Richard and Mrs Andrews’ former solicitor David Bell, in their capacity as the executors and trustees of Mrs Andrews’ estate (the Trustees). The Trustees sought a direction regarding the proper interpretation of Mrs Andrews’ will or, in the alternative, a correction of the will, pursuant to ss 31 and 32 of the Wills Act 2007 (the Act). The application was opposed by Stephen.
[3] I found in favour of the Trustees, and reserved costs. As the parties have been unable to agree costs, the Trustees now seek an award of costs against Stephen.
[4] The issue for interpretation was whether or not Stephen, as a recently discharged bankrupt, remained liable to repay loans which he and entities associated with him received from his mother during her lifetime. The Trustees submitted that Mrs Andrews intended any outstanding loans to be taken into account at the point her estate was distributed. In opposition, Stephen argued that the loans were no longer due for repayment and should not be deducted from his share of the estate because a bankrupt’s debts are extinguished on discharge.3
[5] In the judgment, I held that Mrs Andrews’ clear intention as the will-maker was to ensure that her three sons benefited from her estate equally and fairly, in light of their different personal circumstances and taking into account significant loans of various values made to each of them in her lifetime.
[6] The issue turned on whether monies Stephen received from his mother were loans or debts for the purposes of the Insolvency Act 2006 and within the meaning of the will. I considered that, while the plain meaning of the word “loans” and the expression “amount outstanding” were not uncertain or ambiguous on their face, when
1 Re Andrews [2021] NZHC 3179.
2 To avoid confusion, I will refer to Mrs Andrews’ three sons by their first names, as I did in the judgment. No disrespect to the parties is intended.
3 Insolvency Act 2006, s 304.
read within the context of the will as a whole, these terms were best understood as a distribution formula by way of an accounting exercise.4
[7] I took the view the words must be read as a proxy for inter vivos gifts rather than as a reference to debts legally due, in order to give effect to the will-maker’s intention. To interpret the words otherwise would have enabled Stephen to benefit in an unequal way, contrary to Mrs Andrews’ express wish. Therefore, I found that on a plain reading of the will, the loans made by Mrs Andrews to Stephen and entities associated with him should be taken into account when calculating his share of his mother’s estate.5
[8] In the event that I was wrong in my conclusion that there was no uncertainty or ambiguity, I then considered the available extrinsic evidence. I found that Mr Bell’s file notes relating to the preparation of Mrs Andrews’ final will disclosed a clear and consistent intention on her part to ensure that all her sons benefitted equally from her estate, once money already received from her was taken into account. In particular, Mr Bell recorded that Mrs Andrews “especially does not want Stephen to receive more (given signs that he will attempt to do so)”.
[9] In the alternative, I also considered the application for correction of the will pursuant to s 31(b) of the Act. The Court of Appeal decision Wilson v Davidson indicates that if the words used are capable of bearing an interpretation which gives effect to the will-maker’s intention there will be no need for correction.6 Following this approach, I concluded that correction was unnecessary in this case, given the above findings as to interpretation.7
[10]I then made the following direction:8
Loans expressed in the Will of Robyn Andrews dated 22 March 2017 (the Will) to be due by Stephen and/or entities associated with him are correctly brought to account (together with costs incurred by Mrs Andrews in respect of loan defaults and management) in calculating the net amount due to him (i.e. to the Andrews-Runnymede Trust) from the estate notwithstanding
4 At [42]-[46].
5 At [45]-[48].
6 Wilson v Davidson [2017] NZCA 468 at [33].
7 At [79]-[81].
8 At [82].
Stephen’s discharge from bankruptcy on 15 March 2020. Stephen’s bankruptcy and later discharge from bankruptcy have no effect on the terms of the Will.
Costs sought
[11] The Trustees seek orders awarding a total of $19,684.94 costs against Stephen made up as follows:
(a)2B scale costs of $16,013.00;
(b)Disbursements of $2,907.14; and
(c)A 20 per cent uplift of $764.80 in relation to steps taken after a Calderbank offer was declined by Stephen.
[12] In response, Mr O’Neill counsel for Stephen submits that the appropriate award is $18,322.64 made up as follows:
(a)2B scale costs of $15,415.50; and
(b)Disbursements of $2,907.14.
[13] Stephen accepts the calculation of costs set out by the Trustees and annexed to their costs memorandum, with the exception of the time allocation for the hearing which Stephen contends occupied 75 per cent of a day (rather than one full day as sought). The cost for an appearance at the hearing would therefore be $1,792.50 (rather than $2,390). Disbursements are accepted as sought.
[14] As to the Calderbank offer, Stephen says that his failure to accept the offer was reasonable. Therefore, he submits that an uplift on costs arising on steps taken after the offer was declined should not be awarded in this case.
Discussion
[15] The items claimed in the schedule annexed to the Trustees’ submissions for steps taken in relation to the proceedings are all properly claimed. The categorisation
of the proceeding as 2B is appropriate and not disputed by Stephen. Disbursements for court fees, transcription costs, attendance for swearing an affidavit, courier costs, printing and binding all fall within r 14.12 of the High Court Rules 2016 (HCR). These costs are properly claimed and are not in dispute.
[16]The Trustees seek $19,684.94 in total costs. Stephen contends that a total of
$18,322.64 is appropriate. The difference is a mere $1,362.30. The parties dispute
(a) the amount due for counsel’s appearance at the hearing and (b) whether an uplift is appropriate under Calderbank offer principles.
[17] The HCR set the time allocation for an appearance by counsel at an originating application hearing as the time occupied by the hearing measured in quarter days.9 Mr O’Neill is correct in his submission that the hearing occupied three “quarter days”. I therefore accept that the correct figure for this appearance is 75 per cent of the daily rate. This warrants a deduction of $597.50 from the full day rate sought by the Trustees.
[18] The Trustees seek a 20 per cent uplift on three steps taken after 3 November 2021, when their settlement offer expired. The steps are appearance by principal counsel at the hearing on 10 November 2021, filing a memorandum on 16 November 2021, and sealing the judgment. The memorandum was provided in response to a post hearing minute I issued on 12 November 2021, in which I requested confirmation of the status of two companies and a trust which had received loans from Mrs Andrews.
[19] Rule 14.6 of the HCR provides that the court may order increased costs in relation to any step in the proceeding where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by failing, without reasonable justification, to accept an offer of settlement.10 The court has a broad discretion to assess whether failure to accept a settlement offer was reasonable at the time the offer was declined. This assessment may take into account the offer itself, its timing and size, the reasonable expectations of the party who refused the offer, and
9 High Court Rules 2016, sch 3, cl 42.
10 High Court Rules, r.14.6(3)(b)(v).
whether the parties were in a position to assess the merits of the offer at the time it was received.11
[20]The offer may take the form prescribed by r 14.10, which provides:
14.10 Written offers without prejudice except as to costs
(1)A party to a proceeding may make a written offer to another party at any time that
(a)is expressly stated to be without prejudice except as to costs; and
(b)relates to an issue in the proceeding.
(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.
[21] The Trustees presented a settlement offer to Stephen on 22 October 2021, five days before submissions were due. The offer was open for acceptance until 4 pm on 3 November 2021, being seven days prior to the scheduled hearing. The offer was made in writing and expressly stated “Without prejudice save as to costs”.
[22] The offer briefly outlined the Trustees’ view that their application would succeed and proposed orders by consent directing the Trustees that Stephen’s bankruptcy was not relevant to their calculation of the distribution owed to the Trust from his mother’s estate. In other words, the offer asked Stephen to accept that the Trustees would succeed in full. In return, the Trustees offered to pay Stephen’s reasonable actual legal costs and disbursements. The proposed terms of settlement included the following:
The Trustees offer settlement of their proceeding by consent orders in the High Court. Those orders would direct the Trustees that the bankruptcy of Stephen is not relevant to their calculation of any distribution from the Estate to Andrews-Runnymede Trust.
They would also appoint new independent trustee or trustees to Andrews Runnymede Trust and from the Estate pay Stephen’s reasonable actual legal costs and disbursements excluding those of Mr Parsons and the agreed costs of the strike out application.
The reason for the explicit exclusion of Mr Parsons’ costs is that the expenditure has been determined to be not relevant to this particular proceeding.
11 Samson v Mourant [2016] NZHC 1119 at [44]; Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
[23] On the day the offer was received, Stephen’s solicitors clarified the intended effect of the consent orders, by a letter of reply. The Trustee’s solicitors immediately confirmed that the intended effect was to ensure that the distribution of the estate proceeded as initially proposed by the Trustees, following the deduction of money loaned by Mrs Andrews to Stephen and other associated costs. Any ambiguity in relation to this aspect of the offer was thereby clarified promptly and prior to Stephen’s decision not to accept.
[24] As the judgment made orders for directions in favour of the Trustees against Stephen, it is evident that Stephen now finds himself worse off than if he had accepted the offer. Firstly, the Trustees would have paid Stephen’s actual legal costs and disbursements as a term of the agreement. Secondly, settlement prior to the hearing would have avoided the time and expense of the hearing and the necessary steps which followed, being costs which Stephen must now pay to the Trustees.
[25] However, whether or not a party’s failure to accept an offer was reasonable must be assessed at the time of rejection, not against the subsequent result.12 In my view, Stephen’s decision was reasonable at the time the offer was declined. Acceptance would have amounted to a complete capitulation. In particular, the amount claimed by the estate (as loans and associated costs) was still in dispute at the time of the offer and, as the Court understands, is still in dispute. The amount to be deducted was not an issue in the proceeding, and no evidence was heard on this point. However, the Court understands that the Trustees’ expert estimate suggests a figure close to $1m, while Stephen’s expert, Mr Parsons, suggests a much lesser amount. The letter of offer did not acknowledge that the amount outstanding was still in dispute. Nor did it set a figure on the amount, or suggest a mechanism by which the amount was to be calculated. Submissions on costs made by Mr O’Neill indicate that Stephen believed that accepting the offer would have meant consenting to a deduction in the vicinity of $1m. That is an available interpretation of the Trustees’ settlement offer. Given the disparity between the parties’ estimates of the amount outstanding, and the lack of clarity as to the amount to be deducted by the Trustees at the time the
12 New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548, 19 August 2010 at [36]-[37].
offer was made, Stephen’s decision to decline the offer was reasonable in the circumstances.
[26]For these reasons I consider that an uplift is not appropriate in this case.
Result
[27] I award costs and disbursements against Stephen in favour the Trustees totalling $18,322.64, being:
(a)$15,415.50 in standard 2B costs; and
(b)$2,907.14 in disbursements.
Gordon J
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