Gough v Strahl
[2014] NZHC 1038
•16 May 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2012-485-1574 [2014] NZHC 1038
BETWEEN HARCOURT DAVID GOUGH
Plaintiff
AND
JOHN RUSSELL STRAHL First Defendant
AVENAL BERYL ELIZABETH MCKINNON
Second Defendant
CIV-2012-485-2027
BETWEEN AVENAL BERYL ELIZABETH MCKINNON
Plaintiff
ANDJOHN RUSSELL STRAHL First Defendant
HARCOURT DAVID GOUGH Second Defendant
Hearing: On the papers Counsel:
N W Ingram QC and M T Kyriak for Mr Gough
R J B Fowler QC for Mr Strahl
J W A Johnson and H T Shaw for Mrs McKinnonJudgment:
16 May 2014
COSTS JUDGMENT OF MACKENZIE J
I direct that the delivery time of this judgment is
3.30 pm on the 16th day of May 2014.
Solicitors: Kyriak Law, Auckland, for Mr Gough
DLA Phillips Fox, Wellington, for Mr Strahl
Wynn Williams Lawyers, Christchurch, for Mrs McKinnon
GOUGH v STRAHL [2014] NZHC 1038 [16 May 2014]
[1] In my judgment delivered on 29 November 2013 I reserved costs and invited memoranda if the parties were unable to agree.1 The parties have been unable agree and memoranda have now been submitted.
[2] There are two proceedings, described in [10] and [11] of my judgment.
[3] I deal first with the proceeding described in [10] (the first proceeding). Mr Strahl seeks costs, on a 2B basis, against Harcourt on that proceeding.2
Mr Ingram QC for Harcourt submits that the first proceeding should be dealt with as a case falling within the first or second class of cases referred to in Re Buckton and submits that the full costs of all parties should be met from the O T Gough Family Trust.3 Avenal does not seek separate costs on the first proceeding. She supports Mr Strahl’s submission that there should be an award of costs in his favour against Harcourt.
[4] This proceeding does not fall within the first class of cases mentioned by Kekewich J in Re Buckton in which the costs of all parties will ordinarily be paid out of the trust fund. The three classes are:
(a) proceedings by trustees to determine a question about the administration of a trust; and
(b) proceedings by a beneficiary for a similar purpose; and
(c) proceedings by a beneficiary making a claim adverse to other beneficiaries.
[5] The first proceeding falls clearly within the third class, namely an application by a beneficiary making a claim adverse to other beneficiaries. My reasons for that categorisation of the claim emerge clearly from the background, as described in my judgment. The proceeding did not arise from any difficulty of construction of the
trust deed which would have justified an application by the trustee. It was a step
1 Gough v Strahl [2013] NZHC 3184.
2 In this judgment I again refer to the Gough family members by their Christian names, for convenience and clarity, and I intend no disrespect in doing so.
3 Re Buckton [1907] 2 Ch 406 at 414-415.
taken by Harcourt to pursue his interests. This is not a case where all parties had a common interest in ascertaining the correct interpretation of the trust deed. It is adversarial litigation.
[6] In those circumstances, I consider it appropriate to apply the costs principles set out in r 14.2 of the High Court Rules, rather than the specific provision in r 14.6(4)(c). I treat Harcourt as an unsuccessful party in the first proceeding. I need not elaborate on my reasons for taking that view. They appear sufficiently in the judgment. There was no sufficient basis for a concern that the trustee might have acted in a way which was in conflict with a reasonably arguable view of the meaning of the trust deed, in relation to the appointment of the trustees, or the proposed distribution to Avenal, to justify treating this as a case where costs should be paid from the fund.
[7] I am not aware whether Mr Strahl has the right under the trust deed to recover all his costs from the trust fund. If he does, then any costs recovered by him in that way will in effect be borne by all beneficiaries. Whether or not Mr Strahl is able to recover his total costs in this way, Harcourt, as the unsuccessful party on the first proceeding, must pay scale costs to Mr Strahl, reducing to that extent the claim on the trust fund.
[8] The second proceeding is the proceeding commenced by Avenal. The issue as to costs in this proceeding is between Harcourt and Avenal alone.
[9] The first issue I address is Mr Ingram’s submission that costs should not be determined at this stage because the judgment was an interim one and there is the possibility of further proceedings. It is not appropriate to defer fixing costs. My interim judgment determined the issues as far as it was possible to resolve those on the proceedings as presently constituted. The reasons for issuing the judgment as an interim one are set out in [72] and [73] of the judgment. I adopted that course to simplify the steps needed to resolve any consequential issues about the payment to Avenal of her share. That is not a sufficient basis to defer fixing costs for the proceedings to date.
[10] The only matter substantively unresolved by my judgment is the issue whether Harcourt is a beneficiary. For the reasons given in my judgment, there will have to be a substantial recasting of the present proceeding, or a new proceeding, to resolve that issue. It did not occupy significant time at the hearing. In these circumstances, I consider it appropriate to fix costs on the second proceeding without reference to that issue. Costs can be fixed on that issue when it is determined.
[11] Mr Ingram submits, as alternatives, that costs on the second proceeding should be treated as follows:
(a) Harcourt should be awarded costs on a 2B basis as Avenal did not succeed in respect of most aspects of that proceeding; or
(b) each party should bear their own costs; or
(c) the proceeding should be classified as a Re Buckton class 2 proceeding, with all costs paid out of the trust fund.
[12] Mr Johnson for Avenal submits that she should receive an award of costs, as being wholly successful in the proceeding. She seeks increased costs, to elevate the award to a sch 3 band C basis under Part 14 of the High Court Rules.
[13] In claiming that Avenal was unsuccessful, Mr Ingram notes that Avenal sought six specific orders, based on four causes of action. He submits that Avenal did not obtain the orders sought pursuant to the first and second causes of action, rather those were dealt with by direction of the Court under the first proceeding.
[14] The first two causes of action relate to Avenal’s claim to a distribution of her share. The substantive outcome is that Avenal is entitled to have her share distributed to her. The judgment does not give any directions as to the way in which that finding is to be carried out. Mr Ingram’s submissions relate to the form, rather than the substance, of the relief. In substance, Avenal was successful on those causes of action, to an extent that she is to be treated as the successful party under r 14.2(a).
[15] The third cause of action relates to Avenal’s claim that Harcourt is not a beneficiary. As I have said, that cause of action should not affect the present calculation of costs.
[16] The fourth cause of action relates to the appointment of trustees. In fixing costs, I again have regard to the substantive outcome rather than the formal orders made (or not made) to give effect to that outcome. Harcourt was unsuccessful in his bid to have the two persons proposed by him appointed as trustees, so long as Avenal is a beneficiary. I consider that he is to be treated, as between himself and Avenal, as the unsuccessful party on that issue.
[17] For these reasons, I consider that for the present purposes Avenal is to be treated as wholly successful and Harcourt wholly unsuccessful in the second proceeding, for the purposes of r 14.2(a). This was an adversarial proceeding not falling within either of the first two categories in re Buckton. I therefore reject the three propositions advanced for Harcourt at [11].
[18] I accept the submission of counsel for Avenal that she should be awarded costs as the successful party. I do not consider that any reduction in costs otherwise payable to Avenal should be made on account of such limited success as Harcourt may be assessed as having achieved. The appropriate scale (subject to the question of increased costs), is category 2. I assess band B as appropriate for all steps.
[19] Avenal claims increased costs. Such costs may be awarded if any of the circumstances in r 14.6(3) is present. Mr Johnson submits that there are three factors which justify an increased award:
(a) the failure of Harcourt to accept numerous settlement offers;
(b) the continuation by Harcourt in circumstances where there was little
chance of success against Avenal’s call for distribution; and
(c) the conduct of the proceeding by Harcourt in a way which added to the cost involved.
[20] This litigation is but another stage in a long running family dispute over the administration of the family’s interest in the substantial assets which they have inherited through the initial efforts of their grandfather in establishing the business which still forms the major part of those assets. It is not appropriate for the Court to become embroiled in that family dispute by forming a view as to the merits of the positions taken by the parties in the wider dispute. I focus solely on the parties’ conduct in relation to the present proceedings, from the time they have been instituted, without regard to the factors which may have motivated those proceedings. I express no view as to the reasonableness of the actions of the parties in commencing or defending the second proceeding, or the reasonableness of the stance of any party about the matters raised in the second proceeding.
[21] A failure, without reasonable justification, to accept an offer to settle the litigation provides a basis for an award of increased costs under r 14.6(3)(b)(v). In this case, there were several issues, to a large extent interlinked. The litigation was not readily amenable to settlement, in that any settlement offer was necessarily quite complex. The correspondence on which counsel for Avenal relied as settlement offers reflects the multifaceted nature of the issues. The first letter relied on, dated
15 August 2012, was in essence an invitation to Harcourt to accept Avenal’s position. The final letter in the correspondence, dated 29 October 2013, also proposed acceptance of the substance of Avenal’s claims, and required certain undertakings from Harcourt and the other beneficiaries. The intermediate correspondence was similar in nature. A failure to accede to an invitation to drop a claim entirely will not ordinarily be treated as an unreasonable failure to settle. Even if it can be said that Avenal has substantially achieved a similar level of success to that which would have resulted from a resolution such as she proposed, I do not consider that the circumstances are such as to justify an award of increased costs under r 14.6(3)(b)(v).
[22] Under r 14.6(3)(b)(ii), increased costs may be awarded if the party concerned has contributed unnecessarily to the time or expense of the proceeding by making or pursuing an unnecessary step or an argument that lacks merit. I consider the second and third factors relied on by Mr Johnson under that rule.
[23] The ordinary consequence of advancing an unsuccessful claim or defence is an adverse award of scale costs. An important principle, expressed in r 14.6(3)(d), is that the determination of costs should be predictable and expeditious. That principle would not be promoted if it was routinely necessary to embark on a further analysis of the overall position taken by the unsuccessful party, to decide whether that position was unmeritorious. An award above scale because of an overall lack of merit is, in general terms, justified only in an obvious case, which falls to be considered under r 14.6(4)(a) for indemnity costs. This is not such a case. The appropriate focus under r 14.6(3)(b)(ii) in this case is on whether any position taken in the interlocutory phases has unnecessarily increased the costs incurred by Avenal. The award of scale costs includes an allowance for all interlocutory applications and hearings. Costs were not fixed on any interlocutory application when that application was decided. My perusal of the file does not indicate that there are any applications for which an award of increased costs is justified by the factors referred to in that rule. I do not propose to discuss in detail the matters relied on by Mr Johnson in support of his submission that Harcourt’s conduct has been unreasonable. This has been bitterly fought litigation, with firm positions taken on both sides. For the reasons I have given at [20], I do not venture into an examination of the way this litigation has been contested. I consider that a broader approach is appropriate in this case. Adopting that broader approach, I have reached the view that Harcourt’s conduct in respect of the proceedings does not justify an award of increased costs.
[24] The result is that I award costs in favour of Mr Strahl against Harcourt in the sum of $34,626.00 plus disbursements of $966.80. I award costs in favour of Avenal against Harcourt, on a 2B basis, in the sum of $48,954. That has been calculated in accordance with the steps in the schedule of costs annexed to Mr Johnson’s
memorandum dated 3 February 2014, but with the time allowance adjusted to band B and the rate adjusted to category 2. I also award the disbursements claimed in that schedule, in the sum of $3,696.20.
“A D MacKenzie J”
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