FCT Trustee Limited v Meredith
[2024] NZHC 1142
•9 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-002357
[2024] NZHC 1142
UNDER the Property (Relationship) Act 1976,
the Land Transfer Act 2017, the High Court Rules and the Trusts Act 2019
BETWEEN
FCT TRUSTEE LIMITED as trustee of the FLYING CROSS TRUST
First Applicant
GLENN MICHAEL SOROKA
Second Applicant
AND
LOUISE CLARE MEREDITH
First Respondent
GLENN MICHAEL SOROKA and
PETER RAYMOND KERR as trustees of PAKAU 1 TRUST
Second Respondents
On the papers Counsel:
Second Applicant in person
A P Wooding for First Respondent
E C Gellert for Liquidators of Flying Cross Trust Ltd (in liq) R J Reeves for Secure Funding Ltd
Judgment:
9 May 2024
COSTS JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 9 May 2024 at 12:30 pm pursuant to r 11.5 of the High Court Rules 2016.
Counsel/Solicitors: McVeagh Fleming, Auckland Lowndes Jordan, Auckland Copy to: G N Soroka
Registrar/Deputy Registrar
……………………………..
FCT TRUSTEE LTD v MEREDITH [2024] NZHC 1142 [9 May 2024]
[1] In my judgment dated 22 November 2023, I dismissed the application by FCT Trustee Ltd (FCTTee Ltd), as trustee of the Flying Cross Trust (FCT), and Glenn Soroka for orders varying and replacing the terms of a Tomlin Order and a Freezing Order made by consent (the Consent Orders) in proceedings over a property at 58 Old Barn Road, Papakura (the Property).1
[2] As set out in the Substantive Judgment, the Property had been the family home of Mr Soroka, the settlor of the FCT, his former partner, Louise Meredith, and their son. The registered proprietor of the Property is the Flying Cross Trust Ltd (in liquidation) (FCT Ltd) by virtue of it having previously been the trustee of the FCT.2
[3] The application was opposed by Ms Meredith, the liquidators of FCT Ltd and Secure Funding Ltd.
[4] As explained in the Substantive Judgment, while framed as an application to vary and replace the terms of the Consent Orders, in substance, the application sought to vary the terms of the Settlement Agreement, which was appended as a schedule to the Tomlin Order.
[5] While brought in the names of FCTTee Ltd and Mr Soroka, Mr Soroka was the only active applicant in the proceeding, which he brought after Venning J dismissed a previous application by Mr Soroka, as settlor of the FCT, to vary the Consent Orders and for related declarations.3 In the Substantive Judgment, I also held that Mr Soroka could not represent FCTTee Ltd in this proceeding going forward.4
[6] In the Dismissal Judgment, Venning J held that, because Mr Soroka was not a party to the proceeding in which the Consent Orders were made, there was no basis for him to apply, in his personal capacity, to vary those Orders.5 Venning J also held that the variations Mr Soroka sought were of a completely different nature from the arrangements set out in the Settlement Agreement and went well beyond
1 FCT Trustee Ltd v Meredith [2023] NZHC 3318 [Substantive Judgment].
2 At [1].
3 Soroka v Meredith [2023] NZHC 2510 [Dismissal Judgment].
4 Substantive Judgment, above n 1, at [94].
5 Dismissal Judgment, above n 3, at [26]–[27].
implementation of the Agreement.6 Venning J further noted that, even if Mr Soroka had the power to appoint a new trustee to the FCT, such appointment would not address the downstream consequences of the change in trustee or the situation of FCT Ltd as registered owner of the Property. He also noted that any new trustee would take the Property subject to the rights of FCT Ltd’s liquidators, including rights of indemnity and subrogation.7
[7] Despite that guidance from Venning J, following the Dismissal Judgment, Mr Soroka purported to remove FCT Ltd as trustee of the FCT and to appoint FCTTee Ltd as the new trustee of the FCT, and to vest all real and personal property then subject to the trusts in the FCT trust deed in the new trustee.
[8] For the reasons set out in the Substantive Judgment, I held that the Court did not have the power to make the orders sought in the application and, in particular, did not have the power to substantially re-write the terms of the Settlement Agreement.8 I also held that the evidence adduced by Mr Soroka fell well short of establishing that Mr Soroka and FCT Ltd had been subject to illegitimate pressure and that such illegitimate pressure compelled them to enter into the Settlement Agreement, as alleged by Mr Soroka.9
[9] I held that Ms Meredith and the liquidators were entitled to costs and stated that, ordinarily I would have awarded costs on a 2B basis. However, as requested by counsel for Ms Meredith, I reserved leave to Ms Meredith and the liquidators to seek an order for increased or indemnity costs if they wished and set a timetable for the filing of memoranda, including by Mr Soroka.10
[10] Counsel for Ms Meredith filed a memorandum seeking costs on a 2B basis in the amount of $15,296.00 but with an uplift of 50 per cent (to $22,944.00) because, it is submitted, Mr Soroka acted vexatiously and frivolously in pursuing a meritless
6 At [29]–[32].
7 At [41]–[44].
8 Substantive Judgment, above n 1, at [98]–[113].
9 At [108]–[111].
10 At [123]–[126].
application. Ms Meredith also seeks disbursements of $160 for fees for filing a notice of opposition and sealing the judgment.
[11] Counsel for the liquidators filed a memorandum seeking costs on a 2B basis in the amount of $14,818.00, while noting that, in their view, there are good grounds for increased costs.11 They also seek disbursements of $50 for sealing the judgment.
[12]Mr Soroka has not filed any memorandum in reply.
Grounds advanced for increased costs
[13] Counsel for Ms Meredith submit that increased costs should be ordered because the manner in which Mr Soroka pursued his application significantly increased the attendances required and because the application was meritless.
[14] With respect to Mr Soroka’s conduct of the proceeding, counsel note the following:
(a)Mr Soroka’s initial affidavit in support was excessively large — 36 pages with 424 pages of annexures.
(b)Mr Soroka’s pleadings and written and oral submissions raised irrelevant matters, lacked clarity and were highly repetitive. They contained baseless and meritless attacks on Ms Meredith and her counsel.
(c)Mr Soroka’s affidavit in reply failed to comply with Muir J’s direction in the minute issued after the application had been called at the Duty Judge List on 18 October 2023. That minute directed that Mr Soroka should focus only on the issues necessary to determine the applications and not the parties’ generally disputatious history.12 The affidavit
11 The reason for the difference between the two sums sought is that counsel for Ms Meredith appeared at a first call of the application on 18 October 2023.
12 FCT Trustee Ltd v Meredith HC Auckland CIV-2023-404-2357, 18 October 2023 (Minute of Muir J) at [11(e)].
presented new evidence, was excessively large at 124 pages and contained abusive and repetitive material.
(d)Mr Soroka filed a further affidavit without leave two days before the hearing. The affidavit contained exhibits said to have been missing from the initial affidavit as well as new material, some of which dated back to 2014.
[15] With regard to the merits of the application, counsel submit that, in the course of argument, Mr Soroka substantially changed the grounds said to support the application. Whereas the application was initially framed as an attempt to refinance the Property to avoid a mortgagee sale, when it became clear that there was no available offer for refinancing, Mr Soroka attempted to use the application to secure outcomes that he had been unable to secure in the application dismissed by Venning J.
Applicable principles on costs
[16] As stated by the Supreme Court in Manukau Golf Club Inc v Shoye Venture Ltd and by the Court of Appeal in Bradbury v Westpac Banking Corp, and as reflected in the High Court Rules 2016 (the Rules), it is a fundamental principle that costs follow the event.13
[17] While all matters relating to costs are at the discretion of the Court,14 that general discretion is qualified by the specific costs rules in the Rules and is exercisable only in situations not contemplated or not fairly recognised by the Rules. Ordinarily, the loser pays the winner’s costs according to the scale set out in the Rules.15 The scale reflects the complexity and significance of the proceeding and is assessed at two- thirds of the daily rate considered reasonable in relation to the proceeding.16
13 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8]; Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [6]; High Court Rules 2016, r 14.2(1)(a).
14 High Court Rules 2016, r 14.1(1).
15 Rule 14.2(1)(a).16 Bradbury v Westpac Banking Corporation, above n 13, at [6]; Rule 14.2(1)(d).
[18] In the circumstances provided for under r 14.6(3) and (4), the Court may either make an order for increased costs or an order for indemnity costs.
[19] Under r 14.6(3), the Court may order a party to pay increased costs if the party “has contributed unnecessarily to the time or expense of the proceeding” by, for example, “taking or pursuing an unnecessary step or an argument that lacks merit”.17
[20] Under r 14.6(4), the Court may order a party to pay indemnity costs if the party has “acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding”.18
[21] In Bradbury, the Court of Appeal summarised the circumstances where scale costs, increased costs and indemnity costs might be ordered as follows:19
(a)standard scale applies by default where cause is not shown to depart from it;
(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and
(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[22] In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal held that, where a party has contributed unreasonably to the time or expense of the proceeding or a step in the proceeding, the Court’s normal response should be to provide an uplift on scale costs to what the Rules contemplate a reasonable fee for that step to be.20 It also held that an increase of 50 per cent on scale costs should grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated under the bands.21
17 High Court Rules, r 14.6(3)(b)(ii).
18 Rule 14.6(4)(a).
19 Bradbury v Westpac Banking Corporation, above n 13, at [27].
20 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46].
21 At [47].
Analysis
[23] I accept that, largely for the reasons identified by Ms Meredith’s counsel, Mr Soroka’s conduct of the proceeding did unnecessarily increase the costs incurred by the other parties. That is particularly so for Ms Meredith, who bore the brunt of responding to the full range of issues raised by Mr Soroka. In addition, Ms Meredith’s conduct and the conduct of her counsel were inappropriately impugned by Mr Soroka in a misguided effort to justify major changes to the Settlement Agreement.
[24] While some latitude can be accorded to Mr Soroka because he was representing himself, it is clear that he failed to follow the clear directions given by Muir J and introduced material that was argumentative and irrelevant. He also sought to put in evidence, two days before the hearing and without leave, material that he could well have produced when filing his initial affidavit.
[25] Mr Soroka’s application was without merit. As a matter of law, it had no prospect of succeeding. Moreover, in bringing this application, Mr Soroka was looking to achieve the same result that Venning J had held was not available to him. The application was also brought without regard to the clear guidance from Venning J that the appointment of a new trustee for the FCT would not achieve the result that Mr Soroka was looking to achieve.
[26] In all of these respects, Mr Soroka put Ms Meredith and the liquidators of FCT Ltd to unnecessary cost.
[27] Accordingly, I am satisfied that an uplift of 50 per cent on Ms Meredith’s scale costs is appropriate.
[28] While an increase on the liquidators’ costs would also be warranted, because the liquidators have not sought an increase, I do not consider that it would be appropriate to order any uplift.
Orders
[29] I order Mr Soroka to pay costs to Ms Meredith and the liquidators of FCT Ltd as follows:
(a)Mr Soroka is to pay Ms Meredith costs of $22,944.00 plus disbursements of $160.00; and
(b)Mr Soroka is to pay the liquidators of FCT Ltd costs of $14,818.00 plus disbursements of $50.00.
G J van Bohemen J
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