Farquharson v Farquharson
[2021] NZHC 1241
•31 May 2021
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2020-463-000035
[2021] NZHC 1241
IN THE MATTER Of The Family Protection Act 1955 BETWEEN
DAVID KAHAWAI FARQUHARSON
Appellant
AND
OPAL ADA MARIE FARQUHARSON AS ADMINISTRATOR IN THE ESTATE OF IAN CHARLES FARQUHARSON
Respondent
Hearing: On the papers Appearances:
J R Hosking for Appellant R D Clark for Respondent
Judgment:
31 May 2021
JUDGMENT OF PAUL DAVISON J
[Re: Costs]
This judgment was delivered by me on 31 May 2021 at 2:15 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Anderson Creagh Lai, Auckland Lewis Lawyers, Cambridge
FARQUHARSON v FARQUHARSON COSTS JUDGMENT [2021] NZHC 1241 [31 May 2021]
Background
[1] By my judgment delivered on 19 February 2021 I reversed a decision of the Family Court and awarded Mr David Farquharson (the appellant) 46 per cent of his father’s estate under the Family Protection Act 1955 (the “FPA”).1 The appellant now applies for an award of costs against the respondent, Ms Opal Farqharson who is his mother.
[2] The appellant seeks a 50 per cent uplift on 2B scale costs in recognition of the respondent having rejected several Calderbank offers.2 He also seeks indemnity costs or alternatively, costs on a 3C scale basis, alleging that the respondent’s conduct of the proceedings prolonged and aggravated them.
[3] The respondent accepts that costs may be awarded to the appellant given that his appeal was successful. She does not oppose the proposed 2B costs sought by the appellant. The respondent does however, oppose an award of increased or indemnity costs.
[4] Counsel for the appellant has included the costs relating to the Family Court proceedings in the appellant’s claim for costs in this Court.3 On 18 March 2020, Judge J F Munro declined to make any costs decision prior to the determination of the appeal.4 Mr Farquharson has succeeded on appeal and is entitled to costs in the Family Court.5 However, the measure of costs in the Family Court is a matter appropriately dealt with in that court.
Costs
[5] Counsel for the appellant has summarised the costs sought by Mr Farquharson relating to the High Court appeal in the table below:
1 Farquharson v Farquharson [2021] NZHC 222. At [65]-[66], Mr Farquharson is awarded
$200,000, along with a Great Wall motor vehicle valued at $13,500 and electronic equipment valued at $2,500.
2 See Calderbank v Calderbank [1975] 3 All ER 333 (EWCA).
3 Counsel has also included copying of the bundle for the Family Court as a disbursement.
4 Farquharson v Farquharson [2020] NZFC 1103.
5 See for example Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [13].
Costs in the High Court Step
Description
Time allocation
(2B)
Costs (2B)
Time allocation
(3C)
Costs (3C)
52
Commencing appeal
1.00
$2,390
3.00
$10,590
54
Case
management
0.80
$1,912
0.80
$2,824
55
Preparation of
Case on Appeal
1.00
$2,390
2.00
$7,060
56
Preparation of written
submissions
3.00
$7,170
6.00
$21,180
57
Appearance at hearing
0.75
$1,792.50
0.75
$2,647.50
Total costs on a 2B basis
$15,654.50
Increased costs on a 2B basis (50%)
$23,481.75
Total costs on a 3C basis
$44,301.50
Disbursements in the High Court Description of disbursement
Cost
Copying of case on appeal (735 pages at 20 cents per page)
$147
Copying of bundle of authorities (1035 pages at 20 cents per page)
$207
Mileage for travel to settlement conference (420 kilometres at 72 cents per kilometre)
$302.40
Total disbursements
$656.40
Appellant’s submissions
[6] The appellant submits that he should be awarded a 50 per cent uplift on 2B scale costs as he made Calderbank offers to settle, which the respondent rejected before losing the appeal.6
[7] The appellant further submits that costs should be awarded on an indemnity basis from the estate. The appellant notes that the respondent is not only the sole executor of the estate, but that she is also a beneficiary. The appellant says that the respondent’s conduct in defending the appellant’s claim to protect her interests as a beneficiary, has prolonged and aggravated the course of the proceedings. Accordingly he says indemnity costs are justified. Alternatively, costs could be awarded on a 3C scale basis, applying Wightman v Public Trust7 and AB v RT.8
6 High Court Rules 2016, r 14.6(3)(b)(v).
7 Wightman v Public Trust [2015] NZHC 1091.
8 AB v RT [2016] NZHC 1399.
Respondent’s submissions
[8] The respondent accepts that the appellant’s appeal having been successful, costs in his favour are to follow. The respondent submits however, that the Court should not award either increased or indemnity costs because of the special circumstances of the case. Counsel for the respondent notes that Ms Farquharson is elderly, in poor health, and may require full-time care in future. She is not in a position to meet the direction that Mr Farquharson be paid $200,000 from the estate and also the further increased costs claimed. The respondent submits that her continued occupation of her present residence at Walnut Place may be disturbed, and that other family members who rely upon her for financial support will be prejudicially affected.
Issues
[9]The issues are:
(a)whether indemnity costs should be awarded;
(b)whether costs should be awarded on a 3C scale basis; and
(c)if not, whether an uplift on scale costs should be applied.
Should indemnity costs be awarded?
[10] The Court has a general discretion as to costs.9 This includes making an award for increased costs or indemnity costs.10 Relevantly, the justification for doing so is that the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step or steps in it, or that 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.11
[11] Previously a frequently adopted approach to costs in FPA claims was the making of an order that the solicitor/client costs of all parties were payable out of the
9 High Court Rules 2016, r 14.1.
10 Rule 14.6(1).
11 Rules 14.6(3)(b) and (d).
estate.12 The rationale for this approach is that although proceedings under the FPA are civil adversarial claims, in reality the Court's duty is to stand in the shoes of the deceased to secure the proper discharge of their moral duty to qualifying beneficiaries.13
[12] However in recent years the trend has shifted towards costs orders being made following the event in such cases.14 In Wightman v Public Trust, Whata J described the present approach to costs for FPA claims as follows:15
[19] … the practice of the Court to award costs on a solicitor client basis out of the estate is not universal and is subject to the proper application of rule 14 governing costs…
[20] … the Court is now more cautious about awarding costs out of the estate, particularly where the estate is small, the costs award will have a substantial effect on beneficiaries and or there is some other disqualifying feature that makes payment out of the estate inappropriate. But I do not think we have reached the point where the practice can be ignored, given its recent application (for example) by the Supreme Court.
[21] … the longstanding practice of awarding costs out of the estate on a solicitor client basis is a relevant factor to be taken into account [in] determining whether costs should be paid out of the estate and on what basis. This is consistent with the driving principle of the costs regime that any costs award should be predictable and expeditious. But whether an award of this nature should be adopted in any given case will depend (as it does already) on the circumstances of the estate, the effect of an award on beneficiaries, and the conduct of the litigation.
(Footnotes omitted)
[13] The merits of the proceeding and whether they were reasonably brought is also a relevant consideration.16
[14] The appellant submits that indemnity costs are appropriate in this case. Mr Farquharson was the deceased’s only child and the basis for his claim under the FPA was obvious. Further, the respondent’s conduct in her capacity as executor of the
12 See for example Wood Luxford v Wood [2013] NZSC 153, [2014] 1 NZLR 451; Paewai-Kohe v Paewai [2014] NZHC 3137; Public Trust v Bristow-Brown [2014] NZHC 2497; Woodward v Smith [2009] NZCA 215; and Cartwright v Joseph [2019] NZHC 1093.
13 Ormsby v Van Selm [2016] NZHC 484 at [5].
14 See for example TB v JB [2014] NZHC 1478, [2015] NZFLR 9; Brain v Harwood [2014] NZHC 2067; Fry v Fry [2015] NZHC 2716; and Wightman v Public Trust [2015] NZHC 1091.
15 Wightman v Public Trust [2015] NZHC 1091.
16 Ormsby v Van Selm [2016] NZHC 484 at [6].
estate was significantly influenced by her concern to protect her own personal interests as a beneficiary. She prioritised her status as an affected beneficiary by refusing settlement offers, failing to provide information, and debiting legal fees for counsel acting for her personally from the funds held by the estate. In contrast, Mr Farquharson paid for his own legal fees personally.
[15] The appellant’s submissions focus upon and emphasise the merits of his claim in the proceeding and conduct of the litigation. Both of these factors support an award of indemnity costs. I further add that Ms Farquharson rejected a Calderbank offer to settle for a sum that would have placed her in a better position than the result of the litigation (being approximately half of what Mr Farquharson was awarded on appeal). This offer is detailed at [26]. Consistency with the longstanding approach of full indemnity costs being awarded out of the estate in FPA claims, and the fact that the respondent has already debited her own counsel’s fees from the estate funds, support the making of an award of indemnity costs in the appellant’s favour.
[16] Nevertheless, the circumstances of the estate and the effect of an award on beneficiaries are factors which tell against the making of an award of indemnity costs. The respondent’s counsel submits that Ms Farquharson is unable to meet the direction that Mr Farquharson be paid $200,000 out of the estate as well as an award of indemnity costs. Such a costs order would be likely to affect her continued occupation of the Walnut Place property in which she has lived since the deceased’s death. In the course of determining the appeal I expressed the view that it would be inappropriate if the outcome of the appellant’s FPA claim had this result.17
[17] It is difficult to ascertain the amount of the indemnity costs incurred for the High Court appeal (as opposed to the Family Court proceeding). The costs as set out in the appellant’s memorandum are summarised in the following table:
17 Farquharson v Farquharson [2021] NZHC 222 at [64].
Indemnity costs Anderson Creagh Lai
$37,150
Jo Hosking Barrister from 2019 (FC hearing and HC appeal)
$33,977.78
Total
$71,127.78
[18]The total balance of the deceased’s estate as at 15 September 2020 was
$472,147.16.18 A statement of the balance of the deceased’s estate dated 23 February 2021 states that the remaining cash balance of the estate is now $117,455.96.19 Ms Farquharson’s legal costs of $72,765 have been withdrawn from the estate over the course of the proceedings. The non-cash assets of the estate include the Walnut Place property, valued at $270,000, and the personal property retained by Mr Farquharson.
[19] It follows that the estate does not have sufficient cash to pay Mr Farquharson’s FPA award without Ms Farquharson selling the Walnut Place property. The appellant submits that this is an unfortunate reality of litigation. However, in my view it would be unduly harsh for this to be compounded by Ms Farquharson also having to meet an award of indemnity costs.20 Inevitably, she would have to find a new place to live with what money remains leftover. She is presently living off her entitlement as a beneficiary of the estate, and her sole income is her National Superannuation of
$22,900 per annum. Mr Farquharson will receive a significant portion of the estate and will not be prejudiced to any significant degree if indemnity costs are not awarded.
[20] Here the respondent has already indemnified herself for all of her personal legal fees by arranging for them to be paid for out of the estate. Although the financial
18 At [53]. This figure does not count Ms Farquharson’s counsel’s fees as a liability of the estate.
19 This figure includes Ms Farquharson’s counsel’s fees. Excluding them would yield a value of
$190,221 (rounded).
20 However, for completeness I note that the respondent received the benefit of a relationship property settlement with the appellant’s late father Ian, pursuant to which she retained a house in Opotiki. See: Farquharson v Farquharson [2021] NZHC 222 at [14].
consequences of the manner in which the respondent has conducted the proceedings and incurred substantial legal fees in doing so are of her own making, in the circumstances I do not consider this to be an appropriate case in which to make an order for indemnity costs.
Should costs be awarded on a 3C scale basis?
[21] The appellant submits in the alternative that costs should be awarded on a 3C scale basis. Wightman v Public Trust and AB v RT were cited as authority for doing so.
[22] In Wightman v Public Trust, Whata J awarded costs on a 3C scale basis to five grandchildren who each received an award of $150,000 out of their grandfather’s estate, which was in the order of $11,500,000.21 His Honour did so to avoid unfairly transferring the burden of the other party’s adversarial approach to the grandchildren.22 However, the actual costs incurred by the grandchildren were 1.8 times the quantum of 3C scale costs.23 The proceedings were therefore more complex than the present case, in which 3C scale costs are similar to the actual costs incurred by Mr Farquharson.
[23] In AB v RT, Brown J followed Wightman v Public Trust in awarding 3C scale costs to a daughter who successfully received an award of $335,000 from her mother’s estate, which was worth approximately $2,400,000.24 Brown J considered that the daughter’s actual costs and disbursements of $136,433.70 would substantially erode the amount of the court’s award if she received only 2B scale costs of $35,838.25 Accordingly, 3C scale costs of $110,763 (not including disbursements) were awarded.26
[24] Both Wightman v Public Trust and AB v RT involved estates which were of significantly greater value than the present case. 3C scale costs were far less
21 Wightman v Public Trust [2015] NZHC 1091 at [1] and [25].
22 At [25].
23 At [23(e)].
24 AB v RT [2016] NZHC 1399.
25 At [6].
26 At [15].
prejudicial to the respondents in those cases, as they represented a smaller portion of the estate to which they had an entitlement, as compared with Ms Farquharson. In the present case, an award of 3C scale costs would be close to the amount of an award of indemnity costs. They do not reflect the complexity of the proceeding and such a costs award would cause undue hardship to Ms Farquharson. It follows, in my view, that that 3C scale costs are inappropriate, and I accordingly find that costs should be awarded here on a 2B scale basis.
Should an uplift on scale costs be applied?
[25] The appellant submits that a 50 per cent uplift on 2B scale costs should be awarded for the reasons previously discussed. Specifically, the appellant submits that as he made Calderbank offers to Ms Farquharson which she rejected, increased costs under r 14.6(3)(b)(v) of the High Court Rules are therefore appropriate.
[26] I agree with the appellant. There were several settlement offers made and exchanged between the parties. The Calderbank offers presented in the earlier stages of negotiations were for amounts well removed from the actual figure finally determined by the Court. Mr Farquharson’s final Calderbank offer to Ms Farquharson made on 29 October 2018, would if accepted have placed her in a better position than she is presently in. That offer was that Mr Farquharson would receive $100,000 plus the property and money that he had already received and had retained. On appeal, Mr Farquharson was awarded approximately twice that figure. Her rejection of the settlement offer was without any reasonable justification and unnecessarily contributed to the time and expense of the proceeding. It resulted in two years of Family Court and High Court proceedings to ascertain Mr Farquharson’s entitlement. Ms Farquharson’s conduct as detailed at [14]-[15] supports this finding. I note that Ms Farquharson may encounter difficulty paying the costs order, including having to sell the Walnut Place property. Nevertheless in my view an order for increased costs strikes the correct balance between recognising the cost incurred by Mr Farquharson in remedying his deceased father’s breach of moral duty, and avoiding undue prejudice to Ms Farquharson.
Result and costs order
[27] I accordingly order that the respondent pay the appellant increased costs calculated on a 2B scale basis uplifted by 50 per cent of $23,481.75, together with disbursements of $656.40, to be met from the assets of the estate.
Paul Davison J
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