Johnson v Johnstone
[2012] NZHC 627
•3 April 2012
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2010-488-000108 [2012] NZHC 627
BETWEEN MICHAEL CLARKE JOHNSON Appellant
ANDDUWAINE ROBERT JOHNSTONE First Respondent
ANDTHE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED Second Respondent
Hearing: (On the Papers)
Counsel: R O Parmenter for the Appellant
A B Fairlie and M J Wills for the First Respondent
Judgment: 3 April 2012
JUDGMENT OF DUFFY J [Re Costs]
This judgment was delivered by Justice Duffy on 3 April 2012 at 2.15 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: R O Parmenter P O Box 1052 Shortland Street Auckland 1140 for the Appellant
Solicitors: Thomson Wilson P O Box 1042 (DX AP24512) Whangarei 0140 for the
First Respondent
Copy To: New Zealand Guardian Trust Company Limited P O Box 913 Wellington 6140
JOHNSON v JOHNSTONE and ANOR HC WHA CIV-2010-488-000108 [3 April 2012]
[1] The appellant succeeded in his appeal against a decision of the Family Court awarding the first respondent 60 per cent of a deceased person’s estate under the Family Protection Act 1955. Instead, I awarded the first respondent 20 per cent of the estate, with the balance going to the appellant.
[2] The appellant now seeks costs for the appeal, for the interlocutory application to adduce further evidence in the appeal and for the hearing in the Family Court.
[3] The proceeding in this Court was categorised as 2B in the second schedule of the High Court Rules.
[4] However, the appellant seeks an award of increased costs, on the ground that he made offers to settle without prejudice, save as to costs, which were refused by the first respondent. Secondly, the appellant contends that the need to appeal the decision in the Family Court was brought about, at least in part, by the second respondent not putting his case “frankly, which led to the error by the Family Court Judge”.
[5] The first respondent opposes an award of costs over and above costs calculated on a 2B basis for the appeal to this Court.
[6] It is helpful to set out separately the scale costs that would be awarded for the three events for which the appellant seeks costs. I propose to deal with the scale costs for the appeal, then to look at the costs sought for the other matters, and finally to consider if there should be an increase of the scale costs.
Appeal costs
[7] The costs of the appeal under category 2B are as follows:
High Court Appeal, 19 October 2010
12 Commencement of Appeal 0.5 Days
14 Case Management Conference 0.2 Days
15 Preparation for Appeal 0.5 Days
16 Appearance at Hearing 0.5 Days
Sealing of Judgment 0.2 Days
Total time that can be claimed under category 2B 1.9 Days x $1,880 $3,572
[8] The appellant also seeks disbursements of $2,000 to cover the $400 filing fee for the appeal, the $1,000 setting down fee, and costs of three trips to Whangarei, including one for the settlement conference. I am satisfied that these disbursements are reasonable. I find, therefore, that the appellant is entitled to disbursements of
$2,000.
Application to adduce further evidence
[9] The interlocutory application for which the appellant seeks costs was an application to adduce further evidence, which was unsuccessful. It is rare for a party who is unsuccessful nonetheless to obtain an award of costs. However, in this case, the appellant contends that the application to adduce further evidence was made out of an abundance of caution in circumstances where there was a recognisable gap in the evidence that was before the Family Court and that Court had failed to recognise that it was for the first respondent to fill this gap. The appellant points to the fact that in the appeal, part of his success turned on a finding by this Court that the first respondent had failed to prove aspects of his case. The appellant has always taken the stance that the first respondent had failed to put forward any evidence to support a material aspect of his case. But the appellant then sought to go the further step of showing the Court hearing the appeal that the available evidence went against the first respondent’s case.
[10] I can understand why the appellant wanted to adduce the further evidence. If evidence is available to support one party’s stance, many counsel, who acted for that party, would prefer to put that evidence forward, rather than rely on a legal argument that the burden of proof rested on the other party and that in the absence of evidence
from that party, the other party had failed to prove his case. Nonetheless, the decision to make the application was something the appellant chose to do in circumstances where the Court was not persuaded that the test for admitting fresh evidence on appeal had been met. The vindication in the judgment on appeal of the appellant’s stance was partly in respect of the legal argument he relied on regarding the first respondent’s failure to prove his case, rather than evidence that proved the appellant to be factually correct. Whilst I have sympathy for the appellant’s position, I can see no proper basis for departing from the well-settled principle that costs follow the event. Accordingly, I consider that the appellant is not entitled to recover costs for the unsuccessful interlocutory application it brought to adduce fresh evidence on appeal.
[11] The first respondent did not seek costs for the interlocutory hearing. When he dismissed the application, Heath J reserved costs. Under category 2B, the costs for the interlocutory application would come to $1,900, being 1.1 days, of which
0.60 days were at the former rate of $1,600 per day, and 0.50 days at the current rate of $1,880 per day.
[12] I see no reason why the first respondent should not be entitled to an award of these costs. The general rule is that costs follow the event, and I see no reason for a departure from that rule, given the approach I have taken to other aspects of awarding costs in this case. I find, therefore, that the first respondent is entitled to costs of $1,900 for his successful opposition to the appellant’s interlocutory application.
Family Court costs
[13] The appellant submits that it would not be unreasonable or unfair to award him the sum of $10,000, plus disbursements, in respect of the Family Court hearing. He points to the amount of effort required to both prepare and run the case in the Family Court, the fact that he had offered the first respondent 33 per cent before the Family Court hearing when, as has been shown on appeal, all the first respondent has been found to be entitled to is 20 per cent of the estate, and finally, he submits that
the first respondent failed to put his case frankly, which led to the error by the
Family Court Judge in awarding the first respondent 60 per cent of the estate.
[14] I accept the appellant’s argument that in circumstances where an offer of
33 per cent had been made, and where the first respondent had failed to put forward sound evidence to support his case for financial need, the matter should not have proceeded to a hearing in the Family Court. The appellant has referred to authority in the Family Court where that Court has recognised that in Family Protection Act cases, for public policy reasons, it is important that parties appreciate that if they lose, they may be required to make a reasonable contribution to the other party’s costs. In R v R [2005] NZFLR 461, Judge Callinicos summarised the principal considerations in the exercise of that Court’s wide discretion on Court costs as:
1. The outcome of the proceedings;
2. The matters in issue;
3.The way in which the parties (and their legal advisors) have conducted the proceedings;
4.Where the proceedings were made unnecessarily complex and protracted because of stalling tactics or procedural ploys by a party;
5. The means of the parties;
6. The actual costs incurred by the parties;
7. The overall interests of justice.
[15] It is noteworthy that in the Family Court, in support of a costs application, the first respondent submitted that the legal principles to be gleaned from R v R were that:
1. The Court’s powers as to costs are unlimited;
2.Where further costs in the proceeding could have been avoided, had one party accepted a reasonable offer to settle … the Court can increase costs against that party;
3.The way the parties (and their legal advisers) conduct proceedings has a bearing on any costs award;
4.Parties who are sui juris and active contestants in family protection litigation generally should expect costs to follow the event (Re Miller (dec'd), Brown v Harrop HC Auckland M60 SDD00,
4 April 2001).
[16] The submissions were made at a time when the first respondent was the successful party and sought costs from the appellant.
[17] For public policy reasons, it is important that plaintiffs in Family Protection Act cases appreciate that if they lose, they may be required to make a reasonable contribution to the other party’s costs. Given the expense of litigation for the parties and the pressure on Court hearing time, parties need to be discouraged from pursuing claims that can be readily satisfied by settlement offers. Had the first respondent accepted the 33 per cent he was offered before the Family Court hearing, the need for hearing time in that Court and in this Court would have been avoided.
[18] The first respondent submits that costs should not be awarded in this matter, as he had to bring the application in order to receive any recognition as the testator’s only child. Whilst it is true that the testator did not recognise the first respondent in his will, the appellant was prepared to give the first respondent some measure of recognition through the offer of 33 per cent of the estate to him.
[19] The offer to settle made on 3 November 2009 before the Family Court hearing on 19 January 2010 takes this case outside of the general rule to which W M Paterson referred in Law of Family Protection and Testamentary Promises (3rd ed) at 306 that costs are met out of the estate. I consider, as was recognised in R v R, that there are sound public policy reasons for encouraging parties to take a responsible stance in Family Protection Act proceedings. Where settlement offers are made that exceed amounts ultimately obtained, the inference naturally follows that the unsuccessful party has been unreasonable in his or her pursuit of the stance that he or she had adopted. The 33 per cent offer was 13 per cent over what the first respondent ultimately obtained. This was in circumstances where the first respondent had failed to put forward a strong case to support his claim. I consider the paucity of evidence he relied on should have been known to him from the outset. I consider that this is an occasion where the unsuccessful party has failed to make a realistic assessment of his prospects of success. I am satisfied, therefore, that the
arguments on which the appellant relied for an award of costs in the Family Court are sound.
[20] I consider that the sum of $10,000, plus disbursements, is a reasonable award that fairly reflects the costs incurred by the appellant in maintaining a stance that was ultimately vindicated in this Court. It follows that I find the appellant is entitled to costs in the Family Court of $10,000, plus reasonable disbursements. Those disbursements should cover Court fees, travel costs and accommodation of counsel.
An award of increased costs on the appeal
[21] The appellant seeks increased costs on two grounds:
(a) On 6 July 2010, before the appeal hearing, the appellant made an offer without prejudice, save as to costs, in the sum of 40 per cent of the estate, which was twice the ultimate award;
(b)The first respondent was not totally frank about his financial position, and this led to the Family Court making an error, which led to the first respondent being awarded more than he was entitled to.
[22] Rule 14.10 of the High Court Rules provides for written offers to settle without prejudice, except as to costs. Rule 14.11 permits the Court considering making an award of costs to take into account offers without prejudice, except as to costs, that are in excess of the value or benefit of the judgment obtained by the other party.
[23] The Court may order a party to pay increased costs under r 14.6(3)(v) if the other party has failed without reasonable justification to accept an offer of settlement made under r 14.10.
[24] The correct approach to an application for increased costs is that set out in Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]-[48]. The steps are as follows:
(i) Categorise the proceeding under r 14.3;
(ii)Work out a reasonable time for each step in the proceeding under r 14.5;
(iii)As part of the step (ii) exercise, a party can, under r 14.6(3)(a), apply for extra time for a particular step (this does not apply here); and
(iv)At this point, the applicant for costs should step back and look at the costs award to which it could be entitled. If it considers it can argue for additional costs under r 14.6(3)(b), it should do so, but any increase above 50 per cent on the costs produced by steps (i) and (ii) is unlikely, given that the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.
[25] In Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27], the Court of Appeal stated that: “increased costs may be ordered where there is a failure by the paying party to act reasonably”.
[26] The settlement offer of 40 per cent made prior to the appeal hearing was unreasonably refused. It was clear from the evidence the first respondent had filed in the Family Court that he had not made out a proper evidential foundation to support his claim. I am not prepared to find that he was less than frank with the Family Court, but I do consider that, for whatever reason (including accidental oversight or carelessness), he failed to provide the proper evidential basis for the claim that he made. This should have been apparent when he was assessing his chances on the appeal. In terms of existing authority, the settlement offer of 40 per cent was generous. In all the circumstances, I can only conclude that the refusal to accept it was unreasonable. It follows that the appellant has made out his argument for an award of increased costs. I am satisfied that the increase should be no greater than 50 per cent of the scale costs, which comes to $1,786. It follows, therefore, that the appellant is entitled to costs for the appeal hearing of $5,358.
Result
[27] The appellant is awarded costs as follows:
(a) Increased costs for the appeal hearing in the sum of $5,358, plus
$2,000 disbursements;
(b)The application for costs for the interlocutory application to adduce further evidence is declined; and
(c) The appellant is entitled to costs in the sum of $10,000, plus disbursements, for the Family Court hearing.
[28] The first respondent is awarded costs of $1,900 for his successful opposition
to the appellant’s interlocutory application to adduce further evidence.
Duffy J
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