Hardy v Whitcombe

[2017] NZHC 3132

IN THE HIGH COURT OF NEW ZEALAND

DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2017-412-000047 [2017] NZHC 3132

IN THE MATTER

of the estate of RICHARD ANTHONY

REID

BETWEEN

RICHARD MATHESON HARDY AND OTHERS

Plaintiffs

AND

TODD WHITCOMBE Defendant

Appearances:

R Butler for Plaintiffs/Respondents

C S Withnall QC for Defendant/Applicant

Judgment:

14 December 2017

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [costs]

The costs issues

[1]      On 30 October 2017, the Court entered summary judgment for the defendant.1

It directed that the plaintiffs would pay the defendant’s costs and disbursements, but reserved the quantum. The defendant and the plaintiffs have now filed memoranda.

[2]      The defendant says that an order should be made that the plaintiffs pay his costs on an indemnity basis. The costs claimed are for Mr T J Shiels QC, who was originally counsel for the defendant, in the sum of $26,482.56, together with the costs of Mr C

S Withnall QC who appeared for the defendant when Mr Shiels was unable to continue

1      Hardy v Whitcombe [2017] NZHC 2382.

HARDY v WHITCOMBE [2017] NZHC 3132 [14 December 2017]

to act in this case through to the fixture, in the sum of $7,475. As well, the defendant claims his solicitors’ fees of $9,235.

[3]      In the alternative to seeking indemnity costs, counsel says that, from a starting- point of costs on a 2B basis, there should be an increase but counsel does not specify the extent of the increase sought.

The costs hierarchy

[4]      All matters are at the discretion of the Court if they relate to costs of a proceeding.2    Part 14 of the High Court Rules nevertheless recognises three broad categories of costs determination:

(a)      Costs according to scale, arrived at by daily recovery rates3 and time allocations;4

(b)Increased  costs  under r  14.6(3) High  Court  Rules,  which  may be awarded in a number of situations, described by the Court of Appeal in Bradbury v Westpac Banking Corporation as being “where there is a failure by the paying party to act reasonably”.5   An example is where the party pursues an argument which lacks merit;6 and

(c)      Indemnity costs under r 14.6(4) High Court Rules, which may be awarded in a number of situations.   Generally they are awarded, as described by the Court of Appeal in Bradbury, “where a party has behaved either badly or very unreasonably”, for example a breach of

confidence or flagrant misconduct.7

2      Rule 14.1(1) High Court Rules.

3      Pursuant to r 14.4 High Court Rules, under Schedule 2.

4      Pursuant to r 14.5, High Court Rules, under Schedule 3.

5      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

6      Rule 14.6(3)(b)(ii), High Court Rules.

7 At [27].

[5]      In this case, the plaintiffs rely primarily on r 14.6(4)(a) which provides:

(4)      The court may order a party to pay indemnity costs if—

(a)       the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or …

[6]      The defendant says that the plaintiffs’ claim was wholly without merit from the outset.  In the first statement of claim, it was a claim by Richard Hardy only.  He had no standing to bring the proceeding at all.  The relief sought would have brought no benefit to either him or his children.   The pleaded cause of action was plainly untenable.   Correspondence between the parties’ legal advisors and the filing of submissions before the case was heard by the Court put the plaintiffs on notice of the defendant’s view of the merits of his case.  On 23 February 2017, the defendant’s solicitor spelled out what he described as significant hurdles for the case which were ultimately reflected in the judgment of the Court.  Notwithstanding the defendant’s efforts to dissuade the plaintiff from proceeding with a claim, Mr Hardy did so at significant cost to the Estate and thus to the residuary beneficiary. The plaintiff’s adult children were joined as additional plaintiffs.

[7]      The plaintiffs ask the Court to take what their counsel describes as a merciful approach.   The original plaintiff, Mr Hardy, has terminal cancer.   His claim was advanced out of a genuinely held belief on his part that the testator should have made some provision in his will for his step-grandchildren, the children of the plaintiff. Although argued on a number of bases, the underlying basis of the plaintiffs’ initial claim was that the testator and his late wife had had an agreement that they would make and keep in effect mutual wills.  Everything would be left to each other.  When the survivor of them passed away, he or she would make provision by will for the children and grandchildren of the first to die, as well as his or her own.  In the events which occurred the testator’s wife died first, leaving her estate to him.  But before his death many years later, he did not make any provision in his final will for her children or grandchildren.  The ways in which the perceived unfairness of this was brought before the Court are summarised at length in the judgment. Later, in a second amended statement of claim, the plaintiffs added a second cause of action, pleading a secret trust.

[8]      This is the context of the submissions now made for the plaintiffs in relation to costs.  They say that their claims were made in good faith, out of a strong sense of fairness and familial connection, and that it was reasonable for the plaintiffs to feel let down in all the circumstances of the case.  It is also said that the case was brought to a hearing without any delay or inappropriate procedural conduct.  It was all over and done within a matter of five months.  The Court is urged to find that, although the presumption that costs should follow the event is widely applied, costs are at the discretion of the Court.  The plaintiffs note that r 14.7(g) High Court Rules, provides that, despite the preceding rules which provide for the categories and scales of costs, the Court may refuse to make an order for costs (or may reduce the costs otherwise payable) if:

some other reason exists which justifies the Court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.

[9]      The plaintiffs ask the Court to order that costs lie where they fall on the basis that this would be a just outcome in all the circumstances, including the way the testator and his late wife intended that their assets should be distributed.

[10]     In the alternative, the plaintiffs say that scale costs would be appropriate.

[11]     Turning to matters of more detail, they say that costs should not be awarded for the filing of a statement of defence as it was not necessary given the application for summary judgment. They observe that well over half of Mr Shiels’ fee, and at least part of the fee for Mr Whitcombe, appear to be for attendances prior to the claim being filed. The plaintiffs note by way of comparison that the indemnity costs sought by the defendant amount to $43,000, whereas invoices rendered to the plaintiffs since the claim was filed amount to $16,695, including GST, filing fees, travel costs and expenses.  The plaintiffs also say that, although a third statement of claim was filed and served just before the hearing, changes in this document did not result in any additional costs to the defendant.  The late joinder of the second to fourth plaintiffs had been raised in correspondence before the claim was filed.  The change in relation to the relief sought, from orders in relation to the validity of the testator’s will to a declaration of a constructive trust, was also “well telegraphed” and in fact brought to

the notice of the defendant when the plaintiffs filed their notice of opposition to the defendant’s application.

Discussion

[12]     This was not a case in which the plaintiffs acted vexatiously, frivolously or improperly in terms of r 14.6(4)(a) High Court Rules.  The plaintiffs’ case did not involve flagrant misconduct nor did they pursue the claim “very unreasonably”, to adopt the Court of Appeal’s terminology in Bradbury.8

[13]     The plaintiffs’ case was based on evidence of mutual understandings reached between the testator and Mr Hardy’s mother.  I found that the evidence established arguably that there always had been an agreement between those two (and Mr Hardy) that the grandchildren were to be looked after and that the survivor of them would do that.9  Where the plaintiffs’ case failed was through the lack of any evidence of express commitments of the nature required to base a case on mutual wills and the lack of intention to create an enforceable (secret) trust obligation (as against a moral or family obligation).10

[14]     Those features of the case lend greater weight to Mr Withnall’s alternative request for increased costs, Mr Withnall submitting:

The whole proceeding lacked merit at the outset.  The plaintiff attempted to keep it alive by filing amended pleadings, which likewise lacked merit, failed to accept the arguments which [were set] out to it in detail, failed to accept the offer to settle by discontinuing without an order for costs.

[15]     Mr Withnall referred to a written offer made on behalf of the defendant at an early point in the proceeding by which the defendant offered not to seek costs if the plaintiff withdrew his proceeding within seven days.

[16]     I am satisfied that the defendant is entitled to increased costs in this case. The plaintiffs’ claims, both in terms of the initial cause of action under the doctrine of

mutual wills and the additional cause of action based on a secret trust, lacked legal

8      Bradbury v Westpac Banking Corporation, above n 5, at [27].

9      Hardy v Whitcombe, above n 1, at [42].

10     Hardy v Whitcombe, above n 1, at [73].

merit. The claims could not be sustained on the plaintiffs’ evidence, even accepting it at its highest as required in the summary judgment context.  That said, the evidence filed clearly suggested that the testator and Mr Hardy’s mother, in relation to their testamentary provision, had embraced a concept of moral or family obligation, notwithstanding that the Court found that it fell short of legally enforceable commitment.11

[17]     An uplift of 25 per cent above a scale 2B award will appropriately reflect the defendant’s entitlement to increased costs.

[18]     The Court would not be justified in excluding an item for the statement of defence.  A defendant is entitled under r 12.10 High Court Rules to plead its case through  a  statement  of  defence. As  observed  by  the  authors  of  McGechan  on Procedure, “a statement of defence may help to crystallise the nature of the defence

…” in the summary judgment context.12

[19]     The filing of the defence was an appropriate step in this case.  It is included as a recoverable item.

Order

[20]     I order that the plaintiffs pay to the defendant the costs of the proceeding on an increased costs basis, calculated by reference to a 2B13 award with an uplift of 25 per cent, together with disbursements to be fixed by the Registrar.

Associate Judge Osborne

Solicitors:

Ross Holmes Lawyers, Auckland

Counsel: R Butler, Auckland

O’Neill Devereaux, Dunedin

Counsel: C S Withnall QC, Dunedin

11     Hardy v Whitcombe, above n 1, at [73].

12     A C Beck and others  McGechan on Procedure (online looseleaf ed, Thomson Reuters) at

[HR12.10.01].

13     High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).