Johns v Johns HC Auckland CIV 2000-404-5101
[2007] NZHC 2031
•23 August 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2000-404-5101
BETWEEN S H C JOHNS Plaintiff
ANDL R JOHNS AND C C HOLLOWAY First Defendants
ANDL R JOHNS Second Defendant
Hearing: Determination of costs upon the papers
Judgment: 23 August 2007 at 4:30 pm
JUDGMENT OF ASHER J (COSTS)
This judgment was delivered by me on 23 August 2007 at 4:30 pm pursuant to Rule 540(4) of the High Court Rules
………………………………………..
Registrar/Deputy Registrar
………………………………………..
Date
Solicitors:
Rennie Cox, PO Box 6647 Auckland
Anthony Thomas Lawyers, PO Box 4166 Auckland
Copy:
Ailsa Duffy QC, PO Box 4341 Shortland Street AucklandGJ Judd QC, William Martin Chambers, 152 Anzac Ave Auckland
DRI Gay, PO Box 717 Auckland
S H C JOHNS V L R JOHNS AND C C HOLLOWAY AND ANOR HC AK CIV 2000-404-5101 23 August
2007
Table of Contents
Paragraph Number
Introduction [1] Principles to be applied [6] Are there exceptional circumstances? [8] The Calderbank letter [9]
The effect on Mr LR Johns’ health [17]
The conduct of the proceedings [19]
The merits of the claim [21]
Conclusion as to whether there are exceptional circumstances
[23]
Result [31]
Introduction
[1] On 17 April 2007 I made an order dismissing the plaintiff’s claim in these proceedings for want of appearance at the trial. A five-day hearing of the plaintiff’s case had been due to commence on that day. I had heard an adjournment application on the previous day. After full argument I declined to grant the adjournment. The defendants in this application seek costs on the substantive proceedings.
[2] Those proceedings concern the actions of Mr LR Johns, the plaintiff’s father, and Mr CC Holloway, who were trustees of the LR Johns Family Trust. The Trust owned various property and shareholding interests. The plaintiff alleged that from
1967 onwards, Mr LR Johns and Mr Holloway acted in breach of trust to the detriment of the beneficiaries. The plaintiff also alleged that Mr LR Johns in his personal capacity breached fiduciary obligations with regard to his son.
[3] The plaintiff, Mr SCH Johns, was receiving legal aid during the course of the proceedings. Section 40(1) of the Legal Services Act 2000 (“the Act”) provided at the relevant time as follows:
40 Liability of aided person for costs
(1)Subject to subsection (2), if a person (in this section, the aided person) receives legal aid for civil proceedings, the aided person’s liability under an order for costs made against him or her with respect to the proceedings must not exceed the amount (if any) that is a reasonable one for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
[4] The defendants, while accepting that s 40(1) applied, rely on s 40(2) of the
Act which provided at the relevant time:
40 Liability of aided person for costs
…
(2)Except in exceptional circumstances, the amount that the aided person is liable to pay under any such order for costs must not exceed the amount of the contribution that the aided person is required to make under section 15(1).
[emphasis added]
[5] The defendants submit that the Court should find that there are exceptional circumstances in relation to this proceeding. They rely on a number of matters to which I will refer. The plaintiff opposes the making of any order, save an order equal to his initial contribution to legal aid of $50.00. He asserts that he is impecunious and unable to meet any award of costs and denies that there are any exceptional circumstances.
Principles to be applied
[6] Section 40 of the Act offers no guideline as to what constitutes “exceptional circumstances”. Hammond J commented in Awa v Independent News Auckland Limited (No. 2) [1996] 2 NZLR 184 at 186:
… it is apparent from the decisions to date under this provision that no intrinsic test for "exceptional circumstances” has been evolved by our Courts. Indeed it is hard to see how there could be such a test. The facts of each case are so diverse that both this Court, and the Court of Appeal, have approached each application in a quite fact specific way.
The word “exceptional” in itself has a clear meaning. It must be something distinctly out of the ordinary which warrants the Court departing from the rule set out in s 40(2).
[7] Those who have been granted legal aid will have received it because they do not have available funds to meet the costs of Court proceedings. The relevance of the means of the parties is referred to as a general consideration in s 40(1), and those means remain relevant even if there are exceptional circumstances. Orders for costs against legally aided persons with no or small net assets may be of little value to the other party, and can have a particularly punitive aspect if the legally aided person’s financial position is such that an order for costs may result in their insolvency and bankruptcy. Thus, the fact that there are exceptional circumstances is not the end of the matter, and the Court in deciding the amount of an award of costs must consider the means of the parties before fixing a figure. It has been held that a consideration of circumstances such as the party’s assets and income can be relevant when the party is on legal aid: Marston v Lane HC HAM CIV 2003-419-0315
15 September 2004, Paterson J. This factor was recognised by a $2,000 order in Barrett v Te Runanga O Ngati Pu Incorporated HC HAM CP52/00 16 April 2002, Chambers J.
Are there exceptional circumstances?
[8] It is necessary then to consider each alleged circumstance relied on by the defendants, and then to consider whether on an overview there are exceptional circumstances.
The Calderbank letter
[9] On 5 April 2007, four days before the hearing, the defendants made a Calderbank offer of $150,000 to be paid to the LR Johns Family Trust in full and final settlement to the plaintiff. The defendants were at pains to deny liability, but noted the pending costs of a five-day trial. The offer was made subject to the written acceptance of the settlement by the other final beneficiaries of the Trust that was the subject of the proceedings.
[10] Calderbank offers are expressly permitted by r 48G of the High Court Rules. The relevance of Calderbank offers to costs is that if a party makes an offer that turns out to be more beneficial than the judgment ultimately achieved by the offeree party, the offeror party may claim costs as if it has been successful in the litigation. Generally, a Calderbank offer, to be effective, has to be clear and unambiguous: Concrete Structures (NZ) Ltd v Palmer HC AK CIV-2004-463-825 7 April 2005
Courtney J. A failure to accept a timely Calderbank offer cannot be automatically regarded as an exceptional circumstance under s 40(2), but it may signify unreasonableness, which is relevant in a finding of exceptional circumstances.
[11] A conditional offer can be ineffective as a Calderbank offer because it does not give the offeree party a proposal, the simple acceptance or rejection of which can conclude the litigation. However, the condition in the 5 April offer that the other beneficiaries consent was easily satisfied as the other beneficiaries were the
plaintiff’s sisters and they had taken no steps in the litigation. It can be seen as no more than a logical precaution that would be unlikely to delay acceptance.
[12] The plaintiff submits that the Calderbank offer was ineffective because it was not made to Mr SHC Johns personally but to the Trust. However, the orders sought by the plaintiff were for the first defendant trustees to make good the losses suffered to the Trust, and for an account of the administration of the Trust assets by the trustees. The offer was properly made on the basis that any payment would be to the Trust.
[13] I conclude, therefore, that the conditions of the letter of 5 April 2007 did not preclude it from being a Calderbank offer, capable of prompt acceptance.
[14] It is usually necessary when a party seeks to rely on a Calderbank offer to determine the benefit or value of the likely judgment to which the offeree party was entitled at the time of the offer: Rapana v McBride Cars Ltd [2007] HC DUN CIV
2007-412-118 1 May 2007, Asher J. That is not possible here because the plaintiff has failed not as a consequence of a hearing and the judgment on the merits, but rather because he has not appeared. However, this does not mean that an earlier offer to settle has no significance. It may, if it had offered the plaintiff a reasonable way out of a proceeding without the incurring of further costs for either side, still be relevant to costs because its non-acceptance, forcing the defendants to further work, could be seen as unreasonable.
[15] What makes this Calderbank offer of less relevance is that it was made very late, only ten days before the proceedings were to be heard. The application for an adjournment was made on 10 April 2007, so the offer applied and could have saved costs for the short period between 3 April 2007 and 10 or at the latest 16 April 2007, when the adjournment application was refused. There is no evidence as to the costs incurred in that short time. The defendants submit that the total sum that could have been saved, as noted on the plaintiff’s figures, cannot be calculated because the plaintiff has not given details of his actual costs. I accept that this is so. This Calderbank offer was of limited relevance to costs, because the costs that could have been saved by the acceptance of the offer were not great.
[16] A failure to accept even a timely Calderbank offer cannot be automatically regarded as an exceptional circumstance under s 40(2). In this particular situation I do not consider that the Calderbank letter in itself constitutes an extraordinary circumstance. However, it is relevant in the more general consideration of exceptional circumstances that some limited costs could have been saved if the Calderbank offer had been accepted.
The effect on Mr LR Johns’ health
[17] The defendants referred to the effect of litigation upon the plaintiff’s father, Mr LR Johns. His health had started to deteriorate from the year when he received the first letter from his son alleging a breach of trust. Mr LR Johns’ health has steadily deteriorated since, to the extent that he is now quite unable to give evidence, or have a full enjoyment of life.
[18] I have already accepted that the litigation is highly stressful and unpleasant for the parties involved. It has not been proven that Mr LR Johns’ severe health problems, although they began in the year when these proceedings were commenced, were themselves directly caused by the litigation. Litigation is generally stressful and unpleasant and family litigation particularly so. I am not able to assume that the fact that the plaintiff sued his father, and undoubtedly caused him and the family great unhappiness and stress, constitutes an exceptional circumstance.
The conduct of the proceedings
[19] The defendants in their submissions emphasised the plaintiff’s delays in progressing the proceedings to trial, describing them as “gross”. I set out the conduct of the proceedings in my judgment of 16 April 2007, HC AK CIV-2000-
404-5101. In that judgment I referred to criticisms that had previously been made in two judgments of the plaintiff’s conduct of the proceedings. His conduct was described as obstinate and the history regrettable. I consider that there has been a long history of procedural fault on the plaintiff’s part. He has shown a disregard for Court orders and directions, and a complete insensitivity to both the need to bring the litigation to a conclusion and the effect that litigation has had on the defendants.
[20] For the reasons that I have already set out in my earlier judgment I consider that the plaintiff has not shown the reasonable behaviour that is expected of litigants. Indeed, he has shown an exceptional disregard for orders and directions and the need to bring litigation to a conclusion. I consider that this is a relevant matter to take into account in considering whether there are exceptional circumstances.
The merits of the claim
[21] While acknowledging that the merits of the proceedings were difficult to assess as there had been no trial and the evidence had not been tested, the defendants submitted that the claim was weak. It is very difficult to assess the merits of the claim without having heard any evidence. It can be said, however, that the files do not disclose any hard evidence supportive of the plaintiff’s claim of breach of trust. The material available indicates that it would have been difficult for the plaintiff to have succeeded in pursuing a claim for events that had occurred so long ago. However, I do not propose taking this into account as a relevant factor in assessing exceptional circumstances. I consider that it would be unfair to do so given the Court’s inability to assess the merits in any principled way. I do note that the Court of Appeal allowed an appeal against a strike out decision in relation to the claim, although it did not consider the detailed merits: Johns v Johns & Holloway CA108/03 31 March 2004.
[22] I do not, however, consider that the fact that a Calderbank Bank offer was made of $150,000 indicates that the claim had any particular merit, and it is understandable that such an offer was made in an attempt to conclude longstanding expensive litigation, irrespective of the merits.
Conclusion as to whether there are exceptional circumstances
[23] I consider that the long history of breaches of the Court orders and timetable directions culminating in the unsuccessful adjournment request has been of such severity as to constitute an exceptional circumstance. Although the refusal of Calderbank offer would not have been enough on its own in the particular circumstances to have constituted an exceptional circumstance, the refusal to accept
the offer contributes to my general conclusion that there are exceptional circumstances in this case.
[24] Section 40 of the Legal Services Act has been amended by s 28 of the Legal Services Amendment Act 2006. Section 40(3) now sets out matters that the Court may take account of in determining whether there are exceptional circumstances. The list of factors is not exclusive. While s 40(3) does not apply to the exercise I have conducted I note that the new s 40(3) includes as factors:
(a) Any conduct that causes the other party to incur unnecessary cost;
(b)any failure to comply with the procedural rules and orders of the court;
…
(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution;
(f) any other conduct that abuses the processes of the court.
[25] I consider that if the new section had applied, it would have been relevant to have considered the extensive procedural delays and failure to follow timetable directions that I have already referred to, and that I would have reached the same conclusion applying the new section as I have reached in any event.
[26] However, any order made must be tempered by the reality of Mr SHC Johns’ apparent financial position. The financial position of a party is not normally of relevance in determining costs orders. However, as I have sated, there is an overriding consideration referred to in s 40(1) of the Act not to make a costs order that exceeds the amount (if any) that is reasonable for the aided person to pay, having regard to all the circumstances including the means of the parties.
[27] Mr SHC Johns has filed an unchallenged affidavit in which he discloses that he is a sickness beneficiary. He has some assets but he also has substantial debt, which may exceed those assets. I am not prepared to make an order against Mr SHC Johns which is unrealistic and which will only serve to send him into
bankruptcy. Any order made under s 40(2) must be tempered by a recognition of the reality of the “aided” person’s financial position.
[28] I have concluded that because of Mr SHC Johns’ financial circumstances only a very modest costs order can be justified. In his particular financial circumstances, the order will be that he pay $3,000 to the defendants.
[29] I accept that from the defendants’ point of view that the order can only be seen as tokenism in financial terms. However, it is a real reflection of the fact that the procedural conduct of these proceedings has been unacceptable.
[30] The defendants ask that I should make a direction under s 40(3) of the Legal Services Act 2000. This is in the circumstances appropriate. I certify that had the case not been subject to s 40 I would have ordered the plaintiff to pay costs on the basis of category 2B plus disbursements. This would have included full preparation for trial.
Result
[31] I order that the plaintiff pay the defendants costs of $3,000. I make no order for the payment of disbursements.
[32] There will be no costs order in relation to this particular application, as no exceptional circumstances arise.
……………………… Asher J
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