Halliday v Hannah

[2022] NZHC 3570

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2343

[2022] NZHC 3570

IN THE MATTER

of the Trusts Act 2019 and the Land Transfer Act 2017

BETWEEN

KERRI-ANN MAREE HALLIDAY

Plaintiff

AND

SHANE CHRISTOPHER HANNAH

First Defendant

JASON HANNAH

Second Defendant

Hearing:

On the papers

Counsel:

N Woods for the Plaintiff

M Phillips for the First Defendant
GTB Coleman for the Second Defendant

Judgment:

20 December 2022

COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 20 December 2022 at 3pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Rice Craig, Auckland

Vicki Ammundsen Trust Law Ltd, Auckland Lance Lawson Ltd, Rotorua

HALLIDAY v HANNAH [2022] NZHC 3570 [20 December 2022]

Introduction

[1]    In my decision dated 19 August 2022, I dismissed the plaintiff’s application for summary judgment. I asked the parties to confer and attempt to reach agreement, recording my preliminary view that the defendants were entitled to costs. If agreement could not be reached, memoranda were to be filed.1

[2]Agreement has not been reached and memoranda have now been filed.

[3]    The first defendant seeks an order for increased or indemnity costs against the plaintiff, setting out actual costs and disbursements of $28,521.25, as evidenced by invoices attached to the first defendant’s submissions.

[4]    The second defendant seeks an order for increased costs and disbursements with an uplift of 25 per cent in the amount of $14,939.50 plus disbursements of $160.

[5]    The plaintiff resists costs awards being made now on the basis that costs are usually reserved on unsuccessful summary judgment applications pending a final determination of the proceeding as a whole. Counsel for the plaintiff submits that costs are only awarded against the plaintiff where the Court considers the plaintiff should have realised an application for summary judgment could not possibly be merited.

[6]    I set out the relevant costs principles below before applying them to the circumstances of this case.

Relevant costs principles

[7]    Rule 14.1 of the High Court Rules 2016 confirms that “all matters are at the discretion of the Court if they relate to costs …”. The discretion vested by r 14.1 is wide but must be exercised subject to the general principles in r 14.2. The first principle set out in r 14.2 is that the party who fails with respect to a proceeding or interlocutory application should pay costs to the party who succeeds. Rule 14.8 further provides:

1      Halliday v Hannah [2022] NZHC 2066.

14.8 Costs on Interlocutory Applications

(1)Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—

(a)must be fixed in accordance with these rules when the application is determined; and

(b)become payable when they are fixed.

(2)Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.

(3)This rule does not apply to an application for summary judgment.

[8]    The reason for the summary judgment exclusion in r 14.8 is to encourage the use of the summary judgment procedure to efficiently resolve proceedings. In addition, it recognises that it may be difficult to determine who should pay costs until the litigation is completed,2 and that even an unsuccessful application may ultimately prove beneficial to the parties in efficiently resolving the dispute.3

[9]    Despite this, the Courts have recognised on a number of occasions that it may be appropriate to depart from this approach in particular cases. In Srinagar Limited v Horowhenua District Council, the Court rejected an argument that costs should be reserved, holding that costs should be fixed as there were legal and factual issues which made the case unsuitable for summary judgment and the application should never have been brought.4 Associate Judge Paulsen noted that if, ultimately, the plaintiff succeeded, it would not be on the basis advanced in support of summary judgment as causes of action had been struck out or they had been directed to re-plead so the summary judgment application had not assisted in efficiently resolving the proceeding.5

[10]   In Mason v Dodd, Katz J fixed costs on an unsuccessful application for summary judgment after finding that the negligence claims in that case were unsuitable for summary judgment “by a very wide margin”.6 Katz J held that exceptional circumstances were not necessary in order to justify determining costs

2      NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) per Heron J.

3      Srinagar Limited v Horowhenua District Council [2022] NZHC 1094.

4 At [10].

5 At [11].

6      Mason v Dodd [2020] NZHC 2005 at [2] and [11].

immediately rather than after trial holding that “[w]here it should have been clear to the plaintiff that there was an arguable defence, costs will generally be fixed immediately”.7 Her Honour referred to Vision Aluminium Ltd v McLaughlin where Master Hansen observed that if costs were not awarded against the plaintiff in such circumstances, the Courts would face a flood of unmeritorious summary judgment applications. 8 Katz J went on to hold that:9

The prospect of an immediate award of costs in respect of clearly unmeritorious summary judgment applications incentivises parties to carefully and objectively assess the merits of such applications before bringing them.

[11]   The defendants both rely on the decision of Associate Judge Matthews in Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd10 where his Honour held that where there is a bona fide question of fact that can only be decided at trial, yet the plaintiff embarks on summary judgment proceedings knowing that to be the case, it will be appropriate to fix costs at the time the summary judgment application is determined.11 Associate Judge Matthews awarded costs to the successful party on the basis that it should:12

… have been clear to the plaintiff that there was considerable scope for argument by the very nature of the terms of its claim and that the claim was not suitable for an application for summary judgment.

[12]   The plaintiff submits Emmons Developments is distinguishable as the case related to a claim by the plaintiff under an insurance policy following damage to three buildings in the Christchurch earthquakes and the application for summary judgment was clouded by issues of set-off and substantial factual disputes regarding quantification of loss. The plaintiff says further that both Mason v Dodd and Srinagar Ltd v Horowhenua District Council can also be distinguished. The first because it related to a claim in negligence, which are often not suitable for summary judgment,

7      Mason v Dodd, above n 6, at [10].

8      Vision Aluminium Ltd v McLaughlan HC Christchurch CP123/90, 8 June 1990.

9      Mason v Dodd, above n 6, at [10].

10     Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd [2016] NZHC 1244.

11 At [9].

12 At [13].

and the second because the application for summary judgment was accompanied by an application to strike out five causes of action which was successful.

[13]   It is clear from these cases that for costs to be fixed now the plaintiff ought to have known that summary judgment was not appropriate. I set out the background facts and my findings below to determine whether that is the case here.

Should costs be reserved until after substantive hearing in this case?

[14]   The plaintiff applied for summary judgment of her claim seeking an order for sale of a property and for equal division of the sale proceeds between the plaintiff and the second defendant. The second defendant was the plaintiff’s former relationship partner and the father to her two children.

[15]   The relationship between the plaintiff and the first defendant ended in 2012. The plaintiff’s solicitor sent a letter to the second defendant’s solicitor seeking to divide their relationship property pool in June 2012 and proposing that the second defendant pay $12,200 to the plaintiff together with provision of a small number of specific items.

[16]   The second defendant’s solicitor replied acknowledging that, because of the length of their relationship, the vast majority of the property would be legally defined as relationship property and that they therefore had equal ownership of all such assets and equal liability for any debts. After setting out the assets and debts, the letter concluded by saying “rather than there being any equity which can be split between the parties, it appears … there is a very substantial deficit”. The letter invited the plaintiff’s lawyer to take further instructions and come back to the second defendant with the plaintiff’s further suggestions as to settlement of the property issues. The plaintiff did not respond to this letter. No division of relationship property therefore occurred then or has occurred since.

[17]   The plaintiff is bringing her claim on the basis of a deed of bare trust entered into in 2010 by which the first defendant, the second defendant’s brother, held the plaintiff’s half share of the property on a bare trust. In 2021, the first defendant transferred his interest in the property to the second defendant. It is not in dispute that

the transfer was without the consent of the plaintiff. The first and second defendants however had legal advice in relation to the transfer.

[18]   The defendants rely on the wording of the deed of bare trust itself to submit that the Deed does not anticipate that the Trust would continue when the parties were living apart, with no provision for the allocation of post separation contributions or how the net proceeds of sale or refinancing should be determined in the event of separation. Furthermore, they submit the trust deed permits the first defendant, as trustee, in the absence of instruction from the beneficiary to act as he sees fit, subject only to compliance with certain recitals with no requirement for the trustee to obtain or even seek instructions.

[19]   I held that there was a reasonably arguable defence that there was no breach of trust or that even if there was, the first defendant ought not to be liable.13 I further held that it was reasonably arguable that there was no power to order a sale under the trust deed or pursuant to the rule in Saunders v Vautier.14 In any event I held that even if there were a power to order a sale, it was not appropriate to order it on a summary judgment basis.15 The application for summary judgment was therefore declined.16

[20]   In my decision I recorded my preliminary view that the defendants were entitled to costs.17 That comment was made having found it difficult to follow the plaintiff’s arguments particularly as to the basis for ordering the relief sought which included an order for sale of the property. Whichever route was taken to reach that point, it appeared to require exercises of discretion on matters on which there were significant factual and legal disputes. I considered therefore that there were considerable difficulties with the plaintiff’s application for summary judgment.

[21]   However, having considered the costs submissions of the parties, by a relatively fine margin, I am not convinced that it is appropriate to order costs against the plaintiff at this stage as this case may not be in the class of case where the plaintiff

13     Halliday v Hannah, above 1, at [54].

14     At [65] and [66], citing Saunders v Vautier (1841) 4 Beav 115, 49 ER 282.

15 At [70].

16 At [73].

17 At [74].

ought to have realised summary judgment was not appropriate. This is particularly in circumstances where the defendants rely on legal advice in respect of the transfer of the property from the first to second defendant but have not disclosed that advice. The deficiencies in the plaintiff’s summary judgment application that may have warranted a costs award at this stage of the proceeding may be explained by evidence in the substantive proceeding.

[22]   In addition, the application may have assisted in refining the issues between the parties.

[23]   Ultimately, the Judge who hears the substantive proceeding will be in the best position, after hearing all of the evidence, to determine how costs should be awarded in respect of the summary judgment application. I therefore reserve costs on the summary judgment application for determination following the substantive proceeding.

[24]   Counsel for the plaintiff seeks a costs order in respect of the costs memorandum filed. I am not prepared to make such an award as the question whether to reserve costs was finely balanced so costs on the costs application itself ought to lie where they fall.

Result

[25]   Costs on the plaintiff’s application for summary judgment are reserved until after determination of the substantive proceeding.

Associate Judge Sussock