Hawkins v Hawkins

[2021] NZHC 1788

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-553

[2021] NZHC 1788

UNDER

the Trustee Act 1956

IN THE MATTER

of the Heads Trust settled by Deed dated 3 June 2010

BETWEEN

ANGELA MAREE HAWKINS and ST MARTINS TRUSTEE SERVICES LIMITED

Plaintiffs

AND

SAMUEL WILLIAM HAWKINS

First Defendant

continued…2

Hearing:

(Determined on the papers)

Counsel:

G A Cooper and S C Cowan for Plaintiffs

J R Pullar and M P Davis for First Defendant

Judgment:

15 July 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

This judgment was delivered by me on 15 July 2021 at 3.00 pm Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 15 July 2021

HAWKINS v HAWKINS [2021] NZHC 1788 [15 July 2021]

AND

MORHAWK (2017) LIMITED

Second Defendant

AND

ST MARTINS LAW LIMITED

First Third Party

AND

ERROL WILLIAM HAWKINS and DENISE JUNE HAWKINS

Second Third Party

[1]                 On 17 June 2021, I released a judgment dismissing the first defendant’s application for summary judgment (the June 2021 Judgment).1

[2]As in the June 2021 Judgment, I will refer to the parties by their given names.

[3]                 Samuel sought summary judgment on the basis that the Trust, settled by the plaintiffs and first defendant, is a sham. I do not repeat the factual background and the evidence, which is set out in the June 2021 Judgment, suffice to say the application was dismissed because there were significant factual disputes. While I concluded there were some of the indicators of a sham trust present, I noted the inquiry as to whether the Trust was a sham is an intensely factual one, meaning the context of the matters relied on by Samuel was important.

[4]                 In respect of costs, I noted I had not heard from counsel but that in my view there was no reason why costs should not follow the event on a 2B basis. I noted that if counsel could not agree, memoranda should be filed.

[5]                 The plaintiffs now seek costs along with an uplift based on Samuel pursuing what the plaintiffs characterise as an unmeritorious claim for summary judgment given there were significant factual disputes.

[6]                 The ordering of costs at this stage, let alone an uplift, is opposed. Mr Pullar, counsel for Samuel, relies on r 14.8 of the High Court Rules 2016 (the Rules), which deals with costs on interlocutory applications. That rule provides that costs on an

1      Hawkins v Hawkins [2021] NZHC 1440.

opposed interlocutory application should, unless there are special reasons to the contrary, be fixed and become payable when the application is determined. However, r 14.8(3) provides that the rule does not apply to an application for summary judgment. Mr Pullar notes r 14.8 does not distinguish between applications for summary judgment by a plaintiff versus a defendant.

Costs on an unsuccessful defendant’s application for summary judgment

[7]Associate Judge Bell in Nand v Tower Insurance said:2

… While it is the general practice to reserve costs on a plaintiff’s unsuccessful summary  judgment  application,  that  is  not  necessarily  the  case  with     a defendant’s summary judgment application. The court is reluctant to award costs against an unsuccessful plaintiff because of the difficulty in assessing the ultimate merits of the case at the summary judgment stage. In some cases, defences raised at the summary judgment may be shown later to have no foundation. In such cases it would be wrong to award the defendant costs on dismissing the summary judgment application. On the other hand, a defendant is usually able to assess the strength of its case before applying for summary judgment. The usual consequence of costs following the event may apply. That is the case here.

(footnote omitted)

[8]                 Associate Judge Smith referred to the above passage in Little v Warwick, where the Judge confirmed each case will depend on its own facts.3

[9]                 I am satisfied this is an appropriate case for there to be a costs award against the unsuccessful defendant’s application for summary judgment.

[10]              One of the factors that leads me to that conclusion is that prior to the hearing of the summary judgment application, there was a challenge to the admissibility of an affidavit. A Reasons Judgment in respect of the admissibility issue was issued by me on 31 May 2021.4 At the conclusion of that judgment I noted as follows:

[35]      I make one final observation. The application by the first defendant for summary judgment is based on the claim that the Trust is a sham and not a valid Trust and that if there is a trust that it was a resulting trust for the benefit

2      Nand v Tower Insurance [2016] NZHC 1455 at [49].

3      Little v Warwick [2019] NZHC 1622 at [33]; , see also Tandem Group Ltd v ASB Bank Ltd [2021] NZHC 1135 at [8] footnote 11.

4      Hawkins v Hawkins [2021] NZHC 1248 at [35]-[36].

of Errol and Denise and that the Trust property was applied as Errol and Denise directed.

[36]      I emphasise I heard no submissions in relation to the first defendant’s application. However, my first reaction is that the matters relied on by the first defendant turn on factual matters which are in dispute.   Counsel for   the first defendant may well be alive to this issue and have charted a path that navigates past the factual disputes, but I mention this issue so that counsel for the applicant is aware that it will have to be confronted on this issue at the hearing of the application.

[11]              Another difficulty for Samuel in his summary judgment application was that if the Trust was a sham then he was a party to its creation and to the actions taken by the apparent trustees of which he was one. As a result of those actions, Samuel, or at least his company, ended up with substantial assets. How Samuel would be able to benefit from his participation in the sham was not explained in the course of the summary judgment, notwithstanding such being put in issue.

[12]              The defendants’ memorandum of costs does not directly confront the issue of the application being pursued in the face of disputed evidence. Mr Pullar refers to the late filing of the evidence of Mr Marshall, the director of the second-named plaintiff, which Mr Pullar says was a material factor in creating the factual disputes. I accept that Mr Marshall’s evidence added to the number of factual disputes, but it was not the straw that broke the camel’s back in terms of whether the application was likely to succeed or not.

[13]              The remainder of the items raised by Mr Pullar in response to the plaintiffs’ submissions are really focused at the quantum of the plaintiff’s claim for costs.

[14]              There is merit in Mr Pullar’s submission that the protracted history of the application  for  summary  judgment  does  not   warrant  double   allowances   for the preparation of bundles or submissions. Samuel’s application for summary judgment was originally scheduled for hearing on 6 May 2020. The parties jointly consented to that hearing being adjourned to allow the parties to attend mediation. Mr Pullar submits that costs for the preparation of the 6 May 2021 hearing, which did not occur by mutual consent, should lie where they fall. I agree.

[15]              That there were some of the indicators of the existence of a sham trust present in this case was not of itself enough to justify Samuel’s application for summary judgment.   Arguability is  not the test for a defendant’s summary judgment.   For     a defendant’s summary judgment to succeed the Court must be left without any real doubt or uncertainty that none of the causes of action pleaded can succeed.   In         a summary judgment context, it is a high threshold to meet to ask the Court to resolve a factual dispute on the basis that the Court need not uncritically accept evidence that is inherently lacking in credibility or is inconsistent with undisputed contemporary documents or is inherently improbable.

[16]              Accordingly, as I have said, I am satisfied that Samuel should meet the costs of the application on a 2B basis. There should be only one allocation for steps 24 and 25 for the reasons I have referred to above.

[17]              I allow for second counsel as second counsel did present submissions and each party considered the proceeding warranted second counsel.

[18]              I decline any uplift. I do so because of the late filing of Mr Marshall’s evidence and because the plaintiffs were unsuccessful in their challenge to the admissibility of the affidavit of Ms Clinch. Declining an uplift is also intended to resolve costs in respect of the admissibility argument.

[19]              At the end of the day, the defendants were on notice that the Court had concerns about the factual disputes disclosed in the papers, albeit without the benefit of submissions. The defendant’s pursuit of an application for summary judgment in the face of a factual dispute warranted costs in Tandem Group Ltd v ASB Bank.5  Here it is not the case that the only factual dispute arose as a result of Mr Marshall’s affidavit coming in late in the piece. In a real sense, the plaintiffs’ costs in dealing with the application for summary judgment were wasted. The factual disputes remain and will need to be dealt with at trial.

5      Tandem Group Ltd v ASB Bank, above n [3].

[20]              In these circumstances, I am satisfied costs should follow the event on a 2B basis, with allowance for second counsel and only one allocation for steps 24 and 25. I order accordingly.

[21]              I note Mr Shamy is yet to respond to para [63] of my judgment other than to advise that due to other commitments his response would be delayed by a fortnight. Any memorandum addressing para [63] is to be filed within five working days of the date of this judgment.

Associate Judge Lester

Solicitors:

Taylor Shaw, Christchurch Cavell Leitch, Christchurch