Jackson v Jackson
[2017] NZHC 2506
•13 October 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-000084 [2017] NZHC 2506
IN THE MATTER of the estate of Ivy Jackson BETWEEN
RAYMOND BARRY JACKSON as administrator of the estate of Ivy Jackson Plaintiff
AND
RAYMOND BARRY JACKSON Second Plaintiff
AND
STEPHEN JAMES JACKSON First Defendant
AND
LINDA MARGARET JACKSON Second Defendant
AND
METRO LAW Third Defendant
Hearing: 18 September 2017 Appearances:
R Butler and K Zhang for the Plaintiff (Respondent) No appearance for the First Defendant
No appearance for the Second Defendant
P J Napier for the Third Defendant (Applicant)Judgment:
13 October 2017
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 13 October 2017 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
JACKSON v JACKSON [2017] NZHC 2506 [13 October 2017]
Introduction
[1] The third defendant applies for orders that the plaintiff provides security for its costs and that proceedings be stayed until such security is given.
[2] The third defendant is the law firm, Metro Law. It acted for the late Ivy Jackson, in making eleventh-hour changes to her affairs in the year before her passing on 6 April 2015. Those changes substantially benefitted Ivy’s son, Stephen, who is the first defendant. But the changes disadvantaged Stephen’s only surviving sibling, Raymond, who is the plaintiff in the proceeding.
[3] At issue is whether Raymond would be unable to pay Metro Law’s costs should its defence be successful; and if so, whether or not it would be just in all the circumstances for the Court to exercise its discretion to order the giving of security.
The background
[4] Mrs Ivy Jackson died on 6 April 2015 aged 91. Her husband died before her, on 7 October 2014. The couple have two living children: Raymond (the plaintiff) and Stephen (the first defendant). Linda (the second defendant) is Stephen’s wife. There was also a daughter, Andrea, who died on 15 March 2015.
[5] Raymond was appointed administrator of Mrs Jackson’s estate pursuant to an order nisi issued by Toogood J on 27 July 2016. The order called on Stephen and Linda as the executors named in Mrs Jackson’s 2016 will to demonstrate why the administration of her estate should not be granted to Raymond under s 19 of the Administration Act 1969.1 No such steps were taken by Stephen and Linda within the time allowed, and the order became absolute.
Thirteenth hour changes to Mrs Jackson’s affairs
[6] Raymond commenced this proceeding in January 2016 out of concern with changes that Mrs Jackson made to her affairs in the final year of her life — changes
1 The proceeding was filed under Jackson v Jackson [2016] NZHC 1723.
that were strongly in favour of Stephen. Metro Law was heavily involved. Raymond says the changes were brought about quite suddenly following Mrs Jackson’s discharge from hospital in January 2014. He describes events as follows:
(a) Mrs Jackson met with Metro Law for the first time on 13 January
2014, the first working day after Mrs Jackson was discharged from hospital following her stroke. The meeting occurred on Stephen’s introduction.
(b) Metro Law set about preparing enduring powers of attorney and a new
Will for Mrs Jackson.
(c) Within two working days of Mrs Jackson’s discharge, Metro Law had advised her on the enduring powers of attorney (one for her property and one for her welfare) and attended on her when she executed them. The documents gave Stephen full powers over her property and welfare. Metro Law had also attended on Mrs Jackson to execute her new will, and that will heavily favoured Stephen.
(d)Within hours of being given the powers of attorney Stephen exercised the property power of attorney to enter into an unconditional agreement with a third party for the sale of Mrs Jackson’s home for $669,996. The home was Mrs Jackson’s major asset, and where she and husband had lived since 1976. Stephen instructed Metro Law to act on the sale.
[7] Raymond says the combined effect of these changes was serious. Stephen
was able to take charge of Mrs Jackson’s affairs and then use his position to:
(a) Sell the house when there was no need to.
(b)Cause the net proceeds of sale to fall into and inflate the residue of Mrs Jackson’s estate, knowing that the will left the residue solely and entirely to himself and his wife. This is said to have defeated Mrs
Jackson’s primary intention expressed in the Will, that is, to leave the
house to the three children.
(c) Use the property power of attorney to take significant amounts of the cash proceeds of sale from Mrs Jackson’s bank account straight after the sale and up until she died. Indeed, when Mrs Jackson died
15 months later, her bank account had been depleted and most of the sale proceeds paid by Stephen to himself and his wife. Less than
$100,000 of the proceeds remained in her account at the time of her death.
(d)Control her estate for his own and his wife’s benefit by taking yet further funds up until July 2016, when the Court ordered their replacement as executors under the 2016 will.
Raymond’s claim
[8] Raymond sues Metro Law on the basis that it should have done more to safeguard Mrs Jackson and her estate against abuse by Stephen who was (Raymond says) looking out for his own interests and not hers. His claim is framed in both negligence and breach of contract. The essence of it is contained at paras [85]-[86] of his statement of claim, which reads as follows:
85. In breach of the terms of the retainer, [Metro Law]:
a. Failed to explain the meaning and effect of [the enduring Powers of
Attorney] to the Testatrix;
b.Failed to explain the meaning of effect of the Metro Law [Will] to the Testatrix;
c. Failed to protect and promote the Testatrix’s interests.
86. As a consequence of the third defendant’s breaches of retainer:
a. The first defendant obtained effective control over the Testatrix’s
affairs and property;
b. The first defendant was able to, and did, deplete the Testatrix’s
estate.
Legal framework
[9] Metro Law’s application for security is made in reliance on rule 5.45(1)(b), which provides for the circumstances in which a Judge may order a plaintiff to give security for the defendant’s costs. In Highgate on Broadway Ltd v Devine, Kos J states that there are three key questions at issue in a security for costs application:2
(a) Is there reason to believe the plaintiff will be unable to meet an award of costs against it?
(b) Is it appropriate for an order for security for costs to be made? (c) How much security is appropriate?
[10] The first question represents a jurisdictional threshold. When answering this question, the Court is to bear in mind that neither side has the onus. The correct approach is to ask whether there is credible evidence that the plaintiff will be unable to pay costs order if his claim fails and the defendant successfully defends it. The court will not order a plaintiff to give security unless there is credible evidence for the belief that he suffers an inability (as opposed to an unwillingness) to pay such costs.
[11] The second question concerns the exercise of the court’s discretion. The court considers whether it is just to order security for costs in all the circumstances: r 5.42(2). The final question, that relating to the quantum, is also a matter for the Court’s discretion.
Can Raymond meet a costs award made against him?
[12] It is not in dispute that if costs are ordered in favour of Metro Law, they will be assessed on a 2B basis and amount to around $59,000 (inclusive of disbursements). The issue is whether Raymond will be able to pay costs in this
magnitude, either in his personal capacity or in reliance on an indemnity he has his wife gave in their capacity as trustees.
Does Raymond personally have the resources to pay?
[13] The plaintiff sets out a number of reasons why he says he would be able to pay costs in the magnitude:
(a) He is solvent and has never been adjudicated bankrupt.
(b)His family home at 165 Gray Road, Kamo is owned by a family trust, for which he and his wife are the trustees and primary beneficiaries. The house does not have a mortgage, and it is currently valued at
$495,000.
(c) He is a retiree in receipt of a pension, and he has sufficient savings to enable him to pay ongoing legal fees including an adverse costs award. His wife also works. He puts his savings at about $24,000 and he also points to debts owed to him by other parties in the earlier litigation concerning Mrs Jackson’s estate.
[14] Counsel for the defendant disputes the adequacy of the plaintiff’s ability to pay costs. He submits there is no independent evidence the plaintiff has any assets of substance; and no basis for placing any confidence in his claim to have an indemnity. He therefore characterises the position as equivalent to that in
Whangape Developments Ltd v Parker, where I said:3
However, there is nothing of substance in his evidence that demonstrates that he has the cash he claims, or that his chattels are worth what he claims or anything approaching that worth.
[15] Counsel for the plaintiff counters that Metro Law is jumping to conclusions when it has simply not done enough to make enquiries about Mr Jackson’s financial position. Indeed, all Metro Law has done is to ask Raymond, via email dated
17 March 2017, to “provide details of how Ray Jackson could meet an adverse costs
award?” Counsel says Raymond has therefore provided all the information asked of him.
[16] It is true that a court will not impose security for costs simply because the plaintiff has been silent as to its financial position.4 Indeed, even if there some evidential basis to support the belief that a costs order would not be met, the court will not order security for costs unless the person is:5
… outside the usual run of plaintiffs … it is not enough for the defendant to challenge the plaintiff’s ability to pay costs and then seek security, relying on the plaintiff’s failure or refusal to furnish details of its financial position.
[17] However, I do not consider this a case about a silent plaintiff or a plaintiff who has not been questioned adequately about his assets. The plaintiff has candidly set out his asset position, and he himself acknowledges that he needs to rely on an indemnity from his family trust if he is to meet a costs order. I turn to that question now.
Can Raymond rely on the indemnity?
[18] The plaintiff places heavy reliance on an indemnity which he says he and his wife will stand by in their capacity as trustees in the event of an adverse costs award. He says they are agreed that they will indemnify him so he can pay any costs award.
[19] This indemnity is apparently found in a statement from Mr Jackson’s barrister
in an email of 5 April 2017 in the following terms:
Further to my email below, I have taken instructions and can confirm that the trustees of Mr Jackson’s family trust (Ray Jackson and his wife Lynee), which owns their home in Kamo, will indemnify Ray Jackson in the event of an adverse costs award in these proceedings.
[20] I agree with counsel for the defendant that this does not provide credible evidence to rebut what clearly appears to be an inability to pay security for costs
from the plaintiff’s own resources.
4 NZ Kiwifruit Marketing Board v Maheataka (1993) 7 PRNZ 209 at 212 and 213.
5 At 213. See also at 211.
[21] Mr Jackson relies essentially on an unenforceable and revocable promise. The promise is one Mr Jackson could not enforce against his co-trustee, or should the trustees change, against new trustees. Moreover, it is entirely speculative as to whether both he and his wife will maintain their promise when and if costs are awarded.
[22] In sum, I am satisfied there is credible evidence from which it may reasonably be inferred that the plaintiff will be unable to pay any such order.6 The jurisdictional threshold for making an order for security has therefore been met.
Is it appropriate for an order for security for costs to be made?
[23] There is no suggestion that if security is ordered, Mr Jackson could not advance his claim; indeed, that is not the basis for his opposition. His opposition is essentially based on the contention that he is an ordinary plaintiff with a prima facie meritorious claim, and he should not be confronted with unreasonable barriers in pursuing that claim and any costs and should not therefore have to put up security.
[24] Metro Law relies on only one factor — the merits of the claim. Counsel for Metro Law posits that the rest of the considerations that the Court habitually looks at are of no real relevance in this case.
[25] As to the merits, counsel for Metro Law submits that its expert evidence is to be preferred:
(a) Mr Haynes, a senior practitioner, has given evidence as an expert for Metro Law to the effect that the firm’s advice met the requisite standards when carrying out its retainer.
(b)Though Ms Ammundsen also gives evidence as an expert for the plaintiff, and her evidence is to the opposite effect, Mr Haynes’ evidence should be preferred because of his superior
experience.
6 Sharda Holdings Ltd v Gasoline Services Ltd HC Auckland CIV-2008-004-539, 13 November
2009 at [6] cited in Highgate on Broadway Ltd v Devine at [7].
[26] Counsel for Metro Law also argues that the plaintiff’s case will almost
certainly fail on causation because:
(a) There is no evidence from which the court could make a finding on the balance of probabilities that Mrs Jackson would not have executed an enduring power of attorney appointing Stephen as her attorney, or that she would not have completed a will in the terms that she did.
(b)Even if the Metro Law Will is not a valid will, then on the balance of probabilities a 2013 Will in largely the same terms would have been declared valid pursuant to s 14 of the Wills Act 2007.
[27] Counsel for the plaintiff essentially makes three points in response:
(a) At best for Metro Law, all that can be said is that there is a clash between the legal experts. That clash of evidence can only be resolved at trial. Moreover, as Metro Law have not applied for strike out or summary judgment, it is not credible to suggest the present case has
‘little prospect of success’. Materially, the 2016 will is irrational in the way that it deals with the home and the residue.
(b)Metro Law has contributed to its own costs by unnecessarily obstructing settlement between the plaintiffs and fourth defendant; seeking unnecessarily formalised discovery; objecting to the proceedings being set down for trial; and refusing to engage in any case management discussion. Metro Law cannot take steps which increase the costs of the proceedings and then expect the plaintiff to meet those costs.
(c) The costs are not likely to be significant anyway — the trial begins on
7 May 2018, discovery is complete, and most of the briefs of evidence are in because comprehensive affidavits have been filed by both parties. No further interlocutories are anticipated.
[28] I agree with counsel for the plaintiff that the clash between experts is best resolved at trial. I also agree that the Metro Law Will reads as an irrational document in the way that it deals with the home and the residue. This feature of the will is all the more odd because the home was sold contemporaneously with the signing of that will. The intention to leave the home to all three children appears to clash with the intention to leave the residue to one of them. Mrs Jackson cannot fulfil both intentions at the same time.
[29] In my assessment this irrational feature of the will cannot simply be swept away on the basis of Mr Haynes’s evidence. His evidence recognises that there is an apparent internal conflict in the will, and posits possible explanations, but that leaves unanswered questions that are appropriately considered by the Court at trial.
[30] The will raises real questions as to the adequacy of Metro Law’s advice. Did Metro Law really adequately explain the effect and implications of the will? How likely is it that a testatrix, equipped with an adequate explanation, would make such a will? Would such a testatrix choose at one and the same time to make conflicting dispositions – leave her house to her three children but not leave substantially intact proceeds of sale to them?
[31] The plaintiff’s case is not however without difficulty. I accept that counsel for the defendant raises a very real question about this. He points out the plaintiff’s claim seeks to validate the 2013 will, which is not so different. The essential difference relates not to the apparently irrational conflict, but to a provision that states that proper provision has been made for the children during their lifetime.
[32] The questions about conflicting intentions and causation are not questions that are readily answered in the context of the present application, but they do highlight that there are strengths and weaknesses on both sides.
[33] In the circumstances I am satisfied that it is appropriate that the plaintiff should be ordered to provide security to ensure that there is some measure of compensation immediately available to Metro Law if it is successful in its defence.
[34] As I have noted, there is no indication that such an order would place the plaintiff in a position where he would be unable to pursue his claim.
How much should be given by way of security?
[35] The defendant seeks security for costs of approximately $59,000, calculated as follows:
(a) It estimates that the costs on a 2B basis would be in the sum of
$38,133 (for 17.1 days at $2230 per day).
(b) On top of this there is also the filing fee for filing a Statement of
Defence of $110 (x 3) and legal experts’ fees of at least $20,000.
[36] Counsel for the defendant notes that in Highgate,7 Kos J awarded security for costs in the full amount of the 2B costs calculated. However, that was a case where the assessment of scale costs was very modest and there was no argument as to quantum.
[37] I accept that what is required here is a balancing exercise to ensure, on the one hand, that a reasonable measure of comfort is provided to Metro Law, but on the other hand that the burden of security is not so great as to become a positive disincentive to a plaintiff whose case is at least arguable.
[38] I am satisfied in the circumstances that an order for security for costs in the sum of $25,000 would be appropriate.
Result
[39] The plaintiff is ordered to give security for costs to the value of $25,000 to the satisfaction of the Registrar. Such security is to be provided within 15 working days of the date of this judgment, failing which the proceeding will be stayed
pending further order.
7 Highgate on Broadway Ltd v Devine, above n 2.
[40] Leave is reserved in the event that further orders are required.
[41] As costs follow the event under the statutory costs regime, the plaintiff is to pay 2B costs on the application for security plus disbursements as fixed by the Registrar. The plaintiff may, at his election, provide increased security sufficient to
cover the award of costs and disbursements.
Associate Judge Sargisson
Solicitors:
Keegan Alexander, Auckland
Corban Revell, Auckland
P Napier, Auckland
R Holmes, Auckland
R Butler, Auckland
0