Jack v Jack
[2014] NZHC 2502
•13 October 2014
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-4816
CIV-2014-485-2663 [2014] NZHC 2502
UNDER the Property (Relationships) Act 1976 and
the Family Proceedings Act 1980
IN THE MATTER
of an appeal pursuant to s 39 of the
Property (Relationships) Act 1976BETWEEN
JACK Appellant
AND
JACK Respondent
Hearing: 15 September 2014 Counsel:
M W Vickerman and J H Rennie for Appellant
J L Forrest for RespondentJudgment:
13 October 2014
JUDGMENT OF GODDARD J
This judgment was delivered by me on 13 October 2014 at 4.30 pm, pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
William Rennie, Wellington for Appellant
DAC Beachcroft New Zealand, Wellington for Respondent
JACK v JACK [2014] NZHC 2502 [13 October 2014]
Introduction
[1] Judgment in this case was issued on 1 July 2014. In that judgment I upheld Judge Grace’s decision in the Family Court, determining the parties’ entitlements under the Property (Relationships) Act 1976 (the Act). The outcome of both judgments was to confirm Mrs Jack’s entitlement as 70 per cent of the net relationship property pool in existence at the time of separation. An award of compensation to Mr Jack under s 18B of the Act was declined. As a result, Mr Jack became liable for judgment in the sum of $418,954.53.
[2] Mr Jack has filed an application for leave to appeal to the Court of Appeal, an application for stay of execution of judgment pending the appeal to the Court of Appeal being heard, and an appeal against the order of costs made by the Family Court. Costs arising from the appeal to this Court have not yet been determined.
[3] This decision deals with each of these matters in turn.
Appeal against Family Court costs
[4] Judge Grace dealt with the issue of costs in a judgment released on
3 February 2014, in which he awarded costs against Mr Jack on a category 2B basis for preliminary matters and on a 3C basis for the hearing, with an uplift of 50 per cent for all steps in the proceeding. The Judge also certified for second counsel and ordered Mr Jack to pay reasonable disbursements (not including the hearing fee, which was halved between the parties).
[5] An appeal against an award of costs is an appeal against an exercise of discretion. The appellant must show that the Judge erred in law, took into account irrelevant factors, failed to take into account relevant factors or was plainly wrong.1
[6] Mr Jack challenged Judge Grace’s decision to award costs in favour of
Mrs Jack, challenged the categorisation and banding of the proceedings, the uplift of
50 per cent and the certification of junior counsel.
1 May v May [1982] 1 NZFLR 165 (CA); Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
Approach to costs in the Family Court
[7] Section 40 of the Property (Relationships) Act 1976 provides:
40 Costs
Subject to any rules of procedure made for the purposes of this Act, in any proceedings under this Act the Court may make such order as to costs as it thinks fit.
[8] An award of costs in the Family Court is ultimately a matter of discretion. The general principle in relationship property proceedings was formerly that both parties should bear their own costs. The rationale was that the resolution of these disputes benefited both parties and neither should be regarded as the winner or the
loser.2 However, the law has since moved and relationship property disputes are now
treated in a similar manner to civil disputes.3 Rule 207 of the Family Courts Rules
2002 provides that in determining costs the Court may apply certain provisions of the District Courts Rules 2014, including r 14.2 which outlines the following general principles that apply to the determination of costs:4
14.2 Principles applying to determination of costs
The following general principles apply to the determination of costs:
(a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b) an award of costs should reflect the complexity and significance of the proceeding:
(c) costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
…
[9] The current approach is that costs should follow the event, rather than being confined to cases involving misconduct. As Harrison J said in Anderson v Anderson
(a case involving relationship property):5
2 Gerbic v Gerbic (1991) 8 FRNZ 518 (HC) at 542.
3 FS v EJB FC Wanganui FAM-2005-083-268, 13 January 2010.
4 Judge Grace determined costs with reference to the District Courts Rules 2009. The relevant rules are identical in the District Courts Rules 2014.
5 Anderson v Anderson HC New Plymouth CIV-2004-443-25, 16 June 2004 at [33], citing
Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA).
The guiding, indeed overriding, principle for exercising a judicial discretion, whatever the jurisdiction, is that costs follow the event. Misconduct only operates as a disqualifying factor.
The decision to award costs to Mrs Jack
[10] Judge Grace awarded costs to Mrs Jack on the basis that the case was complicated and dealt with complex areas of law requiring counsel to prepare extensive submissions. The Judge also noted that Mrs Jack had made a Calderbank offer that was not accepted. However, the Judge put that to one side because the offer was made just prior to the hearing and was left open only a short time.
[11] Ms Rennie, on behalf of Mr Jack, submitted that in the absence of a finding of misconduct, costs should appropriately lie where they fall. Alternatively, she submitted, any award of costs in favour of Mrs Jack should be halved to reflect the fact that both parties were partially successful.
[12] In support, Ms Rennie suggested that the Family Court had placed excessive weight on Mrs Jack’s success in relation to her s 15 claim and Mr Jack’s s 18B claim without taking into account the issues resolved in favour of Mr Jack; the time involved with each of those issues and the overall balance of success; and failure in respect of various issues. She highlighted Mr Jack’s success in relation to the order for sale of the Whangamata property; the classification of various assets and debts; the order for some compensation; and the refusal to grant ongoing maintenance.
[13] Contrary to Ms Rennie’s submission, an award of costs is not contingent on a finding of misconduct. Nor is it contingent on the complexity of the case or the need for extensive submissions. Those matters are relevant to categorisation and uplift. As set out above, the general approach is that costs follow the event and in this case, as the successful party, Mrs Jack is entitled to costs.
[14] The approach where the party claiming costs has been only partially successful, or where each party has had similar success, was outlined by the Court of
Appeal in Packing In Ltd (in liq) v Chilcott:6
6 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
[5] In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.
[15] In the present case, it cannot be said that in broad terms each party had similar success. Judge Grace plainly took the view that Mrs Jack was ultimately successful based on the resolution of issues in the hearing before him. Having reviewed those same issues I reach the same conclusion. The most significant matters in the case were Mrs Jack’s economic disparity claim and Mr Jack’s s 18B compensation claim. Mrs Jack’s economic disparity claim was successful, and she was largely successful in resisting Mr Jack’s claim for compensation for
post-separation payments.7 Mr Jack’s success in relation to maintenance and the
classification of various assets was secondary to those matters and does not justify an order that the costs awarded against Mr Jack be halved.
[16] For the sake of completeness, I note that Ms Forrest, for the respondent, disputed the Judge’s treatment of her client’s Calderbank offer. I accept however the Judge’s assessment of that offer and accordingly do not take it into account in determining costs.
Categorisation
[17] Judge Grace classified the proceedings as category 3, due to the “complexity of the matters in issue and the complexity of the relevant law”.8 Ms Rennie submitted that the proceedings were of only average complexity, requiring counsel of average skill and experience and therefore did not warrant a category 3 classification. She argued that the evidence, the facts in issue and the legal issues were not complex. In response, Ms Forrest submitted that the approach taken in
determining causation and quantum was both novel and complex and required
counsel of special skill and experience.
7 Mr Jack was compensated for capital mortgage repayments made after separation.
8 Jack v Jack [2014] NZFC 647 at [6].
[18] I am satisfied that the hearing was sufficiently complex to justify classifying it as category 3. The extensive nature of the submissions filed on both sides and the nature of their content reflected the expert knowledge applied in litigating these difficult proceedings to the high standard required. In particular, consideration of the enhancement of Mr Jack’s income earning ability at both the causation and quantum stage of the s 15 assessment required the expertise and competence of senior counsel in this difficult area of the law.
Banding
[19] Judge Grace categorised costs relating to the hearing as band C. Band C is appropriate if a comparatively large amount of time is considered reasonable. Band B is appropriate where a normal amount of time for a particular step is considered reasonable. The amended table of costs submitted by Ms Rennie did not appear to dispute the allocation of five days for preparation (band C). In any event I am satisfied that the allocation of a comparatively large amount of time (five days) is reasonable for the same reasons outlined above. Band B would allow for just
2.2 days preparation, which would not be reasonable in this case.
The uplift of 50 per cent
[20] Judge Grace rejected Mrs Jack’s application for indemnity costs, finding that:
[20] There is no suggestion that the respondent acted vexatiously, frivolously, improperly, or unnecessarily in defending these proceedings… I do not consider that the grounds set out in Rule 47C(4) can be made out in this case and indemnity costs therefore would not be appropriate.
[21] Instead, the Judge awarded a 50 per cent increase in costs on the basis that the requirements of r 47C(3)(a) were met. That rule provides:
…
(3) The Court may order a party to pay increased costs if –
(a) the nature of the proceeding or the step in the proceeding is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
…
[22] I am satisfied that the decision to apply an uplift of 50 per cent to all steps in the proceeding was plainly wrong. The hearing is categorised as 3C but the remaining steps in the proceeding are categorised as 2B. It cannot therefore be said that the time required for those steps would substantially exceed the time allocated under band C, when band B has already been imposed.
[23] In relation to the hearing itself, I am not satisfied that the time required would substantially exceed the five days allocated under band C, especially given the allowance for senior counsel with special expertise and skill.
The certification of junior counsel
[24] Judge Grace certified for second counsel “because of the substantial amount of documentary evidence that was required”.9 Ms Rennie disputed this, submitting that the bundle of documents consisted of three bound volumes and junior counsel had taken no active role in the proceeding. I accept that submission. The case did not involve a significant amount of documentary evidence and the complexity of the hearing is properly accounted for by the awarding of costs for counsel of experience
and expertise and by allowing a comparatively significant amount of time for preparation.
Disbursements
[25] The following disbursements are disputed: first, the costs of preparation of the expert witness ($2,067.70) and the attendance of the expert witness by video link ($2,227.00); second, the cost of Mrs Jack’s counsel’s air fares ($566.00); and third, the cost of photocopying ($820.00).
[26] Prior to the High Court hearing on 15 September 2014 Mr Jack filed a memorandum to the Family Court seeking resolution of the disbursements. During the High Court hearing the Court was invited by both parties to deal with the issue of disbursements (as part of the appeal against the Family Court costs decision). Ms
Forrest filed a memorandum outlining her client’s position on 16 September 2014.
9 At [15].
[27] The matter of disbursements was then somewhat unexpectedly determined by
Judge Grace, in a minute dated 24 September 2014. In a memorandum dated 2
October 2014, Ms Forrest advised that she had not filed a memorandum in the Family Court relating to disbursements because she had anticipated the issues would be dealt with as part of the costs appeal. As Judge Grace did not have the benefit of Ms Forrest’s memorandum, the appropriate course of action is to review the minute in light of those submissions.
[28] Judge Grace disallowed the costs of the video link, as the unavailability of the particular witness had only been raised one week before the hearing and arrangements should have been made to take the witness’s evidence before he departed overseas. Although he did not place any weight on the evidence of the expert witness in reaching his substantive decision, Judge Grace approved half of the preparation costs on the basis Mrs Jack was entitled to seek expert advice in the preparation of her case. Ms Forrest’s submissions on this issue simply set out the services performed by the expert witness and attached invoices for the costs incurred. I am satisfied this does not require amendment to the reasonable result ordered by Judge Grace.
[29] The Judge also determined that the cost of disbursements for air fares should lie where they fell. Ms Forrest asserted they should be paid by Mr Jack. I am satisfied that the Judge’s determination on this aspect should stand.
[30] In relation to photocopying, the Judge approved the costs of two bundles of documents, amounting to $192.80. That amount was ordered to be shared equally between the parties. Two further bundles were not approved, as the documents comprising those are generally distributed between parties as a courtesy.
[31] Ms Forrest advised that Mrs Jack had been invoiced $916 for four bundles, for the photocopying of bundles of authorities relied on by the appellant and for the binding of the volumes of documents. I am satisfied that the cost of the binding of two volumes should be added to the final sum halved between the parties. The remaining costs should lie where they fall.
Result
[32] The classification of the hearing as 3C is upheld. The remaining steps in the proceeding are classified as 2B. The uplift of 50 per cent and the certification of junior counsel are quashed.
[33] Ms Forrest sought an order for Mr Jack to pay five per cent interest on costs from the date of the Family Court decision to the date of payment. Given the significant delays in resolving the issue of costs I am satisfied that is appropriate.
Costs in the High Court
[34] Mrs Jack is entitled to costs. The issues involved concern categorisation of each step in the proceeding, whether an uplift is appropriate and whether there should be certification for second counsel. Ms Forrest submitted that 3C costs were appropriate with an uplift of 50 per cent, as such an award would reflect both the complexity and significance of the proceeding and the appearance of senior counsel for both parties. She advised that Mrs Jack had incurred legal costs well in excess of this amount. In her written submissions Ms Forrest accepted that a 2B categorisation would be appropriate for Mrs Jack cross-appeal relating to maintenance.
[35] In response, Ms Rennie submitted that the proceedings were of average complexity and had not required a significant amount of time for any particular step. She accepted that the costs of the contingent cross appeal brought by Mrs Jack should be subsumed within the overall categorisation of costs of 2B.
[36] Mrs Jack is entitled to claim costs for the following steps:
Step 10 Preparation for case management conference
Step 53 Commencement of response to appeal
Step 56 Preparation of written submissions
Step 57 Appearance at hearing for principal counsel
[37] For the same reasons given in relation to the appeal against costs, costs in relation to steps 56 and 57 will be classified as category 3. I am satisfied that the
time allocated under band B for step 56 is reasonable. Costs in relation to the contingent cross appeal are subsumed within this award. No uplift is justified.
Application for leave to appeal to the Court of Appeal
[38] The application for leave to appeal challenges various aspects of the High Court judgment. In relation to the decision not to award compensation under s 18B, Mr Jack seeks to challenge: whether the post-separation payments were post- separation contributions under s 18B; whether post-separation payments should have been linked to the quantum of the s 15 award; whether Mr Jack was entitled to compensation; and if so, the quantum.
[39] In relation to the decision to uphold the award of 70 per cent of the relationship property to Mrs Jack, Mr Jack seeks to challenge: whether the disparity in income and living standards between the parties was caused by the division of functions within their relationship; whether the award of 70 per cent of the parties’ relationship property was just compensation; and, if so, whether the award should have been halved.
[40] Section 67 of the Judicature Act 1908 provides that the judgment of the High Court is final, unless leave to appeal is obtained. The test for granting leave to appeal is set out in the judgment of the Court of Appeal in Waller v Hider:10
The appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost of the further appeal. … the guiding principle must be the interests of justice.
…
When the disputed matter is entirely or largely a question of fact the task of the applicant under s 67 is harder. An issue of fact in a matter falling within the jurisdiction of an inferior Court will seldom be of public importance … Even then, however, leave cannot be anticipated if the applicant is seeking to disturb concurrent findings of fact in the lower Courts.
[41] Ms Forrest submitted that the test is not met in this case, arguing that the judgments from which it is sought to appeal involve either concurrent findings of
fact or the exercise of judicial discretion. She submitted that the decisions are based on facts that are not substantially disputed and that clearly favour Mrs Jack.
[42] I take a different view. Mr Jack is not seeking to disturb concurrent findings of fact. Rather, he is seeking clarification of the law and a determination as to whether it has been applied correctly.11 Each of the proposed grounds of appeal is capable of serious argument and involves both public and private interests of sufficient importance to outweigh the cost of a further appeal, notwithstanding the higher standard that applies to an appeal against the exercise of a discretion. I am satisfied that the application for leave to appeal should be granted.
Application for stay of execution of judgment
[43] Mr Jack is required to pay to Mrs Jack a cash adjustment of $99,668.44 and
$319,286.09 (being half of the sale proceeds of the Whangamata property). The sale proceeds are currently held in a trust account and are accruing interest at 3.1 per cent per annum. A further $100,940.04 is held in a bank account.
Principles
[44] The relevant principles are well settled. Rule 20.10 of the High Court Rules provides:
20.10 Stay of proceedings
(1) An appeal does not operate as a stay –
(a) of the proceedings appealed against; or
(b) of enforcement of any judgment or order appealed against. (2) Despite subclause (1), the decision-maker or the court may, on
application, do any 1 or more of the following pending
determination of an appeal:
(a) order a stay of proceedings in relation to the decision appealed against:
(b) order a stay of enforcement of any judgment or order appealed against:
(c) grant any interim relief.
(3) An order made or relief granted under subclause (2) may—
(a) relate to enforcement of the whole of a judgment or order or to a particular form of enforcement:
(b) be subject to any conditions for the giving of security the decision-maker or the court thinks just.
[45] An application for stay requires the Court to balance the competing rights of the party who has obtained judgment against the need to preserve the appellant’s position in the event that the appeal succeeds. The purpose of this rule is to ensure that, when an appeal comes to be heard, the appellate court is able to do justice between the parties. Where a defendant appeals in good faith, with a genuine chance of success, the plaintiff ’s entitlement to the remedy provided for in a judgment is not
certain until the appeal has been disposed of.12
[46] The relevant factors were affirmed by the Court of Appeal in Keung v GBR Investments Ltd in relation to r 12(3) of the Court of Appeal (Civil) Rules 2005 (which deals with stays of execution of a High Court judgment by either the High Court or the Court of Appeal):13
The stay application is brought under r 12(3) of the Court of Appeal (Civil) Rules 2005. In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between the successful litigant’s rights to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:
(a) Whether the appeal may be rendered nugatory by the lack of a stay;
(b) The bona fides of the applicant as to the prosecution of the appeal;
(c) Whether the successful party will be injuriously affected by the stay;
(d) The effect on third parties;
(e) The novelty and importance of questions involved; (f) The public interest in the proceeding; and
12 New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13].
13 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].
(g) The overall balance of convenience.
That list does not include the apparent strength of the appeal but that has been treated as an additional factor.
[47] In an appeal against judgment for a sum of money, the general approach is for an order staying execution to be granted upon payment by the defendant to the plaintiff of the judgment sum in return for security for payment.14 The principles underpinning this approach were outlined in the decision of Williams J in McLeod v New Zealand Pine Co Ltd:15
The judgment of Lord Justice Bowen in The Annot Lyle 11 PD 114, seems to show what the principle is. He says:
There is no reason why we should make a practice of depriving a successful litigant of the fruits of his litigation and locking up funds to which prima facie he is entitled for a long time because they are secured by the bail bond. We cannot assume that it is a matter of small importance to a successful party to go without his damages for a long time.
The right of plaintiff in the present case is an absolute right to have his money at once. The right of defendants is the right of appeal, and the right in some way or other to have it made certain by this Court that that appeal shall not be fruitless. The duty of this Court is, I think, to reconcile as far as possible the conflicting rights of the plaintiff and the defendants. The way to do that is to follow the English cases, and to say that an order staying proceedings shall be made on payment by the defendants to the plaintiff of the money in question, the plaintiff giving security for the repayment.
Submissions
[48] The application for stay in this case is advanced on several grounds. The first is that Mr Jack has made a bona fide application for leave to appeal and undertakes to prosecute it with expedition. Second, it is argued that the appeal has merit and involves important and novel questions. Finally, and most importantly, it is argued that there is a risk the appeal will be rendered nugatory if a stay is refused. In particular, Mr Vickerman highlighted that Mrs Jack is unable or unwilling to provide security if payment out of the judgment sum is made and expressed concern that, should the appeal succeed, she will be unable or unwilling to repay the money or
will transfer the money to her daughter overseas. In such a situation, Mr Jack would
14 Contributory Mortgage Nominees Ltd v Harris Road No 10 Ltd (2006) 22 NZTC 19,752 (HC)
at [8].
15 McLeod v New Zealand Pine Co Ltd (1892) 11 NZLR 493 (SC) at 494–495.
be required to undertake enforcement action to recover the funds. Mr Jack accepts however that he will not be directly prejudiced by a refusal to grant the stay.
[49] In response, Ms Forrest highlighted the length of time since the parties separated and submitted that Mrs Jack would be able to repay any amount which might eventually be payable, should the appeal succeed. She pointed out that Mrs Jack no longer receives maintenance and would be injuriously affected by a stay. Ms Forrest further argued that Mr Jack has enjoyed the use and benefit of substantial relationship property assets since separation.
Analysis
[50] On balance, I am satisfied that the general approach to money judgments should be applied here. While the length of time that this matter has taken to progress through the Courts has no doubt taken its toll on both parties, Mrs Jack has been unable to point to compelling reasons against granting a stay beyond the presumption that she ought to be able to enjoy the fruits of the judgment.
[51] The pursuit of an appeal is clearly genuine and the issues raised by the grounds of appeal are finely balanced. Most importantly, there is a real risk that the appeal would be rendered nugatory if a stay were refused and Mr Jack was subsequently successful in the Court of Appeal. It must be recognised that Mrs Jack has limited income and her only known asset is a half share in residential property. That property is worth approximately $904,000 and is currently subject to a mortgage of approximately $654,000. According to the LINZ View Instrument Details, ANZ Bank’s priority sum over the property is $1,356,000 plus interest. In such circumstances, an assurance that the money can and will be repaid following a successful appeal is insufficient. Adequate security must be provided.
[52] Ms Forrest’s submission that Mr Jack has enjoyed the use and benefit of substantial relationship property assets since separation does not alter that view. The only asset relevant to this application is the amount of the judgment sum. Three quarters of that sum is currently held in a solicitor’s trust account. The remainder is deposited in a bank. Mr Jack is therefore not in reality enjoying the benefit of this money.
[53] The application for stay is granted.
[54] In the event that the application for leave to appeal and application for stay were successful, Mrs Jack requested that Mr Jack be directed to pay the balance of the Family Court judgment, interest on that amount, the costs awarded by the Family Court and any costs awarded by the High Court in relation to the appeal into the trust account. As noted above, $319,286.09 is already held in the trust account and is accruing interest at 3.1 per cent per annum and a further $100,940.04 is held in a bank account.
[55] The bank account yields a higher interest rate than the trust account and does not incur a professional fee. As the eventual successor in this litigation will be entitled to interest at five per cent per annum until the date of payment, it is reasonable that the costs awarded thus far be paid into the bank account rather than into the trust account. Mr Jack is to provide an undertaking that these sums will be retained in the bank account pending determination of the appeal to the Court of Appeal.
Costs
[56] Costs relating to application for leave to appeal and costs relating to application for stay are awarded to Mr Jack on a 2B scale. Costs relating to the remaining matters are to lie where they fall.
Goddard J
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