Gallo v Sultan
[2021] NZHC 2310
•3 September 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-409-000280
[2021] NZHC 2310
BETWEEN MICHAEL ROSS GALLO
Applicant
AND
NADIA SULTAN
Respondent
Hearing: On the papers Counsel:
A N Riches for Applicant O T Alpers for Respondent
(Submissions for Respondent filed by Mr R A Peters)
Judgment:
3 September 2021
COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 3 September 2021 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
GALLO v SULTAN [2021] NZHC 2310 [3 September 2021]
Background
[1] The applicant, Mr Gallo, applied for an order that his notice of claim of interest pursuant to s 42(2) of the Property (Relationships) Act 1976 lodged against the title to a property registered in the name of his wife, Ms Sultan, not lapse. The application was filed following receipt of a notice from the Registrar-General of Land that Ms Sultan had applied to lapse the notice of claim of interest.
[2] Mr Gallo’s application was opposed by Ms Sultan and timetabling directions were made for the filing of evidence and submissions and for a defended hearing on 31 August 2021. It was only upon receipt of submissions filed for Ms Sultan on 25 August 2021 that an indication was given that she would withdraw her opposition to the application. By that stage Mr Gallo had filed two substantive affidavits, a bundle of relevant documents for the hearing and detailed legal submissions with authorities.
[3] I directed counsel to confer to see if some agreement to resolve the application could be reached. On 27 August 2021, Mr Gallo’s counsel, Mr Riches, advised that following discussion between counsel agreement had been reached, save in relation to costs.
[4] On 31 August 2021, there was a hearing at which I made an order by consent that Mr Gallo’s notice of claim of interest shall not lapse.1 In relation to the outstanding issue of costs, Mr Alpers advised that on 30 August 2021 Ms Sultan had made application for legal aid. I understand the first indication that was given to Mr Riches that such an application had been made was at 6.59 pm on 30 August 2021 in an email from Ms Sultan’s counsel, Mr Peters. On the basis Ms Sultan had applied for legal aid, Mr Alpers submitted that no order for costs should be made against her.
[5] In light of this unexpected development, I made a direction that counsel were to file any further submissions they wished to make concerning the implications of Ms Sultan’s application for legal aid upon her liability for costs. Those submissions were received on 1 September 2021.
1 Gallo v Sultan [2021] NZHC 2286.
[6] Ms Sultan argues costs should lie where they fall. Her counsel’s submission confirms that Ms Sultan’s application for legal aid was lodged on the morning of 30 August 2021 and no grant has been made. Counsel submits that it would be contrary to s 45 of the Legal Services Act 2011 to award costs against Ms Sultan. This is because, it is argued, no order for costs may be made against an aided person unless there are exceptional circumstances and even then an aided person’s liability for costs must not exceed an amount that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all of the parties. It is submitted Ms Sultan does not have the means to pay an award of costs. Reference was made to actions said to have been taken by Mr Gallo which have led to Ms Sultan receiving a demand from the Inland Revenue Department for payment of $5,063 and forced her to apply for a parenting order.
[7]The starting point is s 45 of the Legal Services Act 2011 which provides:
45 Liability of aided person for costs
(1)If an aided person receives legal aid for civil proceedings, that person’s liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
(2)No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.
(3)In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a) any conduct that causes the other party to incur unnecessary cost:
(b) any failure to comply with the procedural rules and orders of the court:
(c) any misleading or deceitful conduct:
(d) any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f) any other conduct that abuses the processes of the court.
…
(5)If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person’s liability.
…
[8]Pursuant to s 4 of the Act the term aided person:
(1)means a person who is granted legal aid under this Act or the former Act; and
includes-
(i)a person who is granted legal aid on an interim basis;
(ii)a person whose grant of legal aid has been withdrawn under section 30.
[9] In B v A, Wylie J analysed the statutory immunity from costs provided under s 45(2) of the Act.2 There, in a judgment of 20 March 2020, Wylie J held that party B was successful and entitled to reasonable costs and disbursements. He expressed a preliminary view that costs should be fixed on a 2B basis. Subsequently, the unsuccessful party received a grant of legal aid and submitted he had an immunity from a costs award. It was argued the immunity was not affected by the timing of the grant and there were no exceptional circumstances which justified an award of costs being made. Wylie J did not accept those submissions and said as follows:
[13] … Section 45(2) affords immunity against costs to “an aided person”. Pursuant to s 4, an aided person is a person who is granted legal aid. A person only becomes an aided person once a grant is made. There is nothing in s 45 to suggest that once a grant is made, immunity is conferred retrospectively. Rather, when a grant is made in civil proceedings, there is then an obligation to notify every other party and the Registrar of the relevant court. The obligation to notify arises on the grant of legal aid – not the date of application. Various decisions as to the conduct of proceedings will be based on whether the other party is legally aided. As has been observed by Judge Spear in the District Court, a party to civil proceedings might conceivably spend considerable resources pursuing a claim against a person believed not to be legally aided only to find at some later stage that the other party has protection from costs by the operation of s 45(2). I agree with the Judge that if the intention of the legislature in respect of s 45(2) was for the immunity to apply
2 B v A [2020] NZHC 765.
retrospectively, either from the commencement of the proceedings or the time of application for the grant of legal aid, it would have been a simple matter to have so specified. The legislature has not so specified and to construe s 45(2) as having such retrospective effect could well create injustice for a successful party who has conducted his or her proceedings assuming that the other party was not legally aided. (footnotes omitted)
[10] Applied to the present case, Ms Sultan is not an aided person for the purposes of the Legal Services Act. The fact she has applied for legal aid provides her with no immunity from costs. Furthermore, even if a grant of legal aid was to be made that would not provide her with an immunity in respect of any order for costs that had already been made against her.
[11] It is not therefore necessary to deal with Mr Peter’s alternative submissions that there are no exceptional circumstances justifying the making of an order for costs for the purposes of s 45(2) of the Act.
[12] I turn then to consider whether Mr Gallo should be awarded costs and in what amount. The principles in relation to costs are well-established. They include that all matters of costs are discretionary but the discretion must be exercised on a principled basis.3 The determination of costs, so far as possible, should be both predictable and expeditious.4 The party who has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.5 Generally, costs awards should reflect the complexity and significance of the proceeding and be assessed by applying the appropriate daily rate to the time considered reasonable for each step required in relation to the proceeding.6
[13] There is no doubt that Mr Gallo has been completely successful and has obtained the order that he sought. Having considered the papers filed in the proceeding, albeit without having heard oral submissions from counsel, it appears to me that result was inevitable. Mr Gallo is entitled to his costs and the only issue concerns the amount.
3 High Court Rules 2016, r 14.1(1).
4 Rule 14.2(1)(g).
5 Rule 14.2(1)(a) and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 2 NZLR 523 at [19].
6 Rule 14.2(b) and (c).
[14] In respect to this there are three matters to consider. First, is the categorisation of the proceeding. Second, is that Mr Gallo claims an uplift on costs for steps taken after 23 July 2021. The third matter concerns r 14.13 of the High Court Rules.
[15] This proceeding was one of average complexity and appropriately classified on a category 2 basis.
[16] The claim for an uplift on scale costs relies upon an open letter dated 23 July 2021 from Mr Gallo’s lawyers to Ms Sultan’s lawyers. It sets out the merits of the case in detail and proposed that Ms Sultan accept an order sustaining Mr Gallo’s notice of claim and pay costs on a 2B basis failing which she might face a claim for increased costs. No response was received to that letter. Mr Gallo submits Ms Sultan continued to pursue a meritless opposition to the application and should pay increased costs accordingly.
[17] Pursuant to r 14.6 the Court may increase costs otherwise payable to a party. The circumstances in which it may do so include if a party contributes unnecessarily to the time and expense of the proceeding by pursuing arguments that lack merit7 or more generally:8
some other reason exists which justifies the court making an order for increased costs despite the principle that determination of costs should be predictable and expeditious.
[18] There is no explanation for why Ms Sultan’s lawyers did not reply to the letter of 23 July 2021. The letter set out the position clearly and correctly reflects the fact that Ms Sultan’s position lacked merit. It was known to Ms Sultan’s lawyers that if the matter was not resolved Mr Gallo would be put to considerable cost in complying with the Court’s directions and preparing for the hearing. There is no explanation why it was only once all those costs had been incurred that they advised that Ms Sultan did not maintain her opposition. The lack of merit in her position, her failure to respond to the letter of 23 July 2021 and the lateness of her advice that she would withdraw her opposition justify an increased award of costs. I consider a 10 per cent increase is sufficient.
7 Rule 14.6(3)(b)(ii).
8 Rule 14.6(3)(c).
[19]The third matter concerns r 14.13 which provides:
Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements the plaintiff would have recovered in the District Court if the proceeding could have been brought there, unless the court otherwise directs.
[20] This application could have been made in the District Court, Family Court or in the High Court.9 There is no explanation why it was not filed in the District Court. In those circumstances I consider that costs should be awarded on the District Court’s scale.10
Result
[21] Mr Gallo is awarded costs of the proceeding which are to be calculated on a category 2B basis in accordance with schedules 4 and 5 of the District Court Rules. There shall be an uplift of 10 per cent for the steps taken in the proceeding after 23 July 2021. Mr Gallo is to submit to the Court a memorandum setting out the amounts claimed for approval before an order is sealed.
O G Paulsen Associate Judge
Solicitors:
Saunders & Co, Christchurch
Alpers & Co – Northwest Law Office, Christchurch
9 Property (Relationships) Act 1976, s 42(3)(a).
10 District Court Rules, schedules 4 and 5.
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