Jurisich v Harris
[2016] NZHC 1278
•14 June 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-485-605889 [2016] NZHC 1278
IN THE ESTATE OF IHAIA GILLMAN-HARRIS IN THE MATTER
of the Administration Act 1969
BETWEEN
JEANA JURISICH
Caveator
AND
DESMOND HARRIS
Respondent
Hearing: On the papers Counsel:
A G Rowe for caveator
A W Johnson for respondentJudgment:
14 June 2016
JUDGMENT OF KATZ [Costs]
This judgment was delivered by me on 14 June 2016 at 4:00pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Wells & Co, Auckland
Martelli McKegg, Auckland
Copy to: The Public Trust, Auckland
JURISICH v HARRIS [2016] NZHC 1278 [14 June 2016]
Introduction
[1] On 24 March 2016 I delivered a judgment (“Judgment”) in these proceedings in which I upheld Jeana Jurisich’s objection to the appointment of her brother, Desmond Harris, as the administrator of the Will of the parties’ late brother, Ihaia Gillman-Harris.1
[2] Mr Gillman-Harris died intestate. Following his death, Mr Harris applied for letters of administration. Ms Jurisich filed a caveat, objecting to the appointment of Mr Harris as administrator. As is the usual practice, an order nisi was made in respect of Mr Harris’ application. Ms Jurisich’s caveat application was set down for hearing, in order for her to “show cause” why the order nisi should not be made absolute.
[3] Following the show cause hearing I discharged the order nisi and appointed the Public Trust as temporary administrator of the deceased’s estate. I concluded that it was no longer appropriate for Mr Harris to continue in the role of administrator as he had shown, at best, poor judgment in relation to significant distributions he had made or (in some cases) attempted to make on the eve of the court hearing. He had also paid himself an “administrator fee” of $10,000 from the estate, without the approval of the court or his fellow beneficiaries. I concluded that Mr Harris had a limited understanding of aspects of his role and the legal obligations of an administrator. Further, he had failed to seek legal advice when such advice was clearly called for.
[4] Ms Jurisich now seeks costs of $21,821.00 from Mr Harris in respect of her successful caveat application. She also seeks an order that those costs be met from Mr Harris’ share of the deceased’s estate. Ms Jurisich claims 2B costs for the period up to 2 February 2016, when she made an offer to settle the proceedings. She seeks an indemnity costs award for the costs she incurred after 2 February 2016.
[5] Mr Harris submits that the issue of costs should be reserved until all administration issues are fully resolved. In the alternative, he submits that costs should be determined pursuant to the scale set out in the High Court Rules, that any award of costs against him should be met by the estate, and that his own costs should also be met by the estate.
[6] Against this background, the key issues I must determine are:
(a) Should costs issues be reserved until administration issues relating to the estate are fully resolved?
(b)Should costs be awarded out of the estate or against the parties personally?
(c) What is Ms Jurisich’s entitlement to costs for the period up to her settlement offer of 2 February 2016?
(d) What is Ms Jurisich’s entitlement to costs for the period following her
settlement offer of 2 February 2016? [7] I will consider each issue in turn.
Should costs be reserved until administration issues relating to the estate are fully resolved?
[8] Mr Johnson, counsel for Mr Harris, submitted that the Court did not make a determination that Mr Harris is unfit to be administrator, but merely that a serious question was raised. He categorises the Court’s decision as akin to finding that an arguable case exists after a summary judgment hearing, and that the standard position in such circumstances is to reserve costs until the proceeding is fully resolved.2 He submits that the extensive evidence filed will be relevant to any subsequent application for probate in solemn form.
[9] I do not accept that submission. In the Judgment I concluded that it was no longer appropriate for Mr Harris to continue in his role as administrator, including on a provisional or interim basis. The order nisi was discharged. As a result there will be no final hearing to determine Mr Harris’ suitability. That issue has been determined, in effect, on a summary basis. The issue of Mr Harris’ suitability is no longer before the Court. The present case is therefore more analogous to a successful summary judgment application rather than an unsuccessful one. The Judgment finally determined Mr Harris’ prospects of being appointed as administrator. Costs should follow that event.
[10] I also note that an award of costs following the resolution of caveat proceedings is expressly contemplated by s 61(d) of the Administration Act 1969, which allows for an order for discharge of an order nisi to be made with or without costs, as may be just, and that those costs can be paid out of the estate. Given Ms Jurisich has incurred significant costs in relation to a proceeding in which she was ultimately successful, it is just for a costs award to be made now, rather than the matter being reserved for an indeterminate length of time.
Should costs be met by the estate or by the parties personally?
[11] Mr Harris argued that, given that Mr Gillman-Harris died intestate, proceedings were a necessary step in the finalisation of the administration of his estate. It necessarily follows, he submitted, that the legal costs associated with the administration of the estate should be met by the estate.
[12] The judgment of Stringer J in Re Paterson is the leading authority for costs principles in probate proceedings generally:3
The Court has a general discretion as to costs in all actions and proceedings before it, but there are certain well-established principles upon which that discretion should be exercised in cases of contested wills. They are as follows:
(i) If the litigation originates in the fault of the testator - eg, by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life – or of those interested in the residue, the costs may properly be paid out of the estate.
3 Re Paterson (Deceased) [1924] NZLR 441 (SC) at 442-443.
(ii) If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.
(iii) Unless the circumstances of the case are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail …
[13] Obviously, in this case, the “fault” of the deceased in not making a will meant that someone had to apply to the Court to be appointed as administrator of his estate. If that person had been a suitable appointee, then it would have been appropriate for their costs to have been met out of the estate. The difficulty in this case, however, is that the person who applied for appointment as the administrator proved to be unsuitable for the role. Further, Mr Harris strenuously resisted the suggestion (made by both the Court and the caveator) that the impasse be resolved by the appointment of a neutral administrator such as the Public Trust.
[14] The reasons for Mr Harris’ somewhat intransigent pursuit of his application to be appointed administrator, in the face of opposition from at least two of his siblings, is not entirely clear. In all the circumstances, however, the costs that have been incurred in relation to Mr Harris’ unsuccessful application cannot be attributed to the “fault” of the deceased. Rather, they are costs that were in large part incurred due to poor decision making by Mr Harris, including his decision to persist with his application in the face of objections from his siblings and concerns being raised, not without foundation, as to his suitability.
[15] In such circumstances Mr Harris should bear at least some of the financial consequences of his poor decision-making, rather than have his siblings in effect bear those costs, particularly given the modest size of the estate. There is no reason why the other beneficiaries should be forced to fund Mr Harris’ hard fought but ultimately unsuccessful application to be appointed administrator. In my view Mr Harris should meet his own costs as well as at least some of Ms Jurisich’s costs.
[16] I am not persuaded, however, that the Court should order that any costs award against Mr Harris should be paid directly from his share of the estate. The
reason advanced for this request is that Mr Harris has previously been bankrupted and, further, has failed to put his financial position before the court. Ms Jurisich is concerned that he will try and avoid payment of any costs award if it is not deducted from his share of the estate. That may well be a legitimate concern. The difficulty, however, is that the order sought conflates two separate processes. The first is the determination of an appropriate award of costs. The second is the subsequent enforcement of that award.
[17] If Mr Harris fails to pay any costs awarded against him then the appropriate course would be for Ms Jurisich to seek to enforce her costs award, utilising the options available under Part 17 of the High Court Rules if necessary. It is not appropriate in my view for subsequent enforcement steps to, in effect, be built into the costs award itself. Further, if Mr Harris does have solvency issues, as suggested by Ms Jurisich, there is a risk that incorporating enforcement processes directly into the costs award could prefer Ms Jurisich, to the prejudice of other creditors.
What quantum of costs should be awarded for the period up to 2 February
2016?
[18] Ms Jurisich seeks costs on the usual basis up until 2 February 2016 and indemnity costs from that date forward.
[19] The relevance of the 2 February 2016 date is that Ms Jurisich made a without prejudice except as to costs offer to Mr Harris on that date. In particular, Ms Jurisich proposed that the parties request that the Court appoint a neutral third party (such as the Public Trust) as administrator and order that the costs of the proceedings be borne by the estate. Mr Harris rejected that proposal.
[20] Courts have a wide discretion in determining issues of costs, albeit that discretion is qualified by the specific costs rules set out in the High Court Rules.4
The overriding consideration is that the costs award ought to do justice between the
parties.5 The general principle is that costs will be awarded to the successful party.
4 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7].
5 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
In this case it is clear that Ms Jurisich was the successful party and I am satisfied that it is in the interests of justice that she be awarded costs.
[21] The parties agreed that 2B scale costs are appropriate for the period prior to
2 February 2016. I share that view. The proceeding is of average complexity, requiring counsel of skill and experience considered average in the High Court. Each step in the proceeding involved the normal amount of time. Schedule 3 of the High Court Rules does not, however, provide a specific time allocation for caveat proceedings in the administration context. Under r 14.5 the time allocations must accordingly be determined by analogy with that schedule.
[22] The parties differ as to the appropriate analogy. The steps taken by Ms Jurisich prior to 2 February 2016 amounted to initiating the caveat proceeding, preparing supporting affidavits and preparation for and attendances at two call-over hearings before Faire J. Both parties accept that a sum of $892 is appropriate for the two Court appearances and associated preparation under either item 39 or item 12.
[23] Ms Jurisich analogises the proceeding with either an originating application or ordinary civil proceedings. Mr Harris submits that it is more akin to a defended interlocutory application. The difference lies in the appropriate allocation for filing the application and affidavits. If it is treated as an interlocutory application item 22 provides for a 0.6 day allocation ($1,338) for filing an interlocutory application. For an originating application, item 37 allows for two days for filing an application and supporting affidavits ($4,460). For a full civil hearing, item 30 – preparation of briefs or affidavits - allows a 2.5 day allocation, totalling $5,575.
[24] There is very limited authority on the appropriate analogy to be drawn.6 The proceeding was more complex than a routine interlocutory application. It required comprehensive affidavit evidence, but Schedule 3 does not make any separate allowance for the preparation of affidavit evidence in support of interlocutory
applications. On the other hand, I do not think that an analogy with general civil
6 The issue was not discussed by Gendall J in Tavendale v Hargreaves [2013] NZHC 2990. In Lam v Low HC Auckland CIV-2007-404-005140, 12 February 2009 the application for administration process generally was treated as an ordinary civil proceeding, and the caveat appears to have been analogised as the filing of a notice of opposition.
proceedings is apt. The caveat proceedings were fairly narrow in focus and no cross-examination of witnesses was required.
[25] In my view the closest analogy, on the particular facts of this case, is an originating application. Item 37 allows a two day allocation for filing an originating application and supporting affidavits. On that basis, Ms Jurisich is entitled to costs for the period prior to 2 February 2016 (calculated on a 2B scale basis) in the sum of
$5,352.
What is Ms Jurisich’s entitlement to costs for the period after 2 February 2016?
[26] Ms Jurisich seeks indemnity costs for the period after 2 February 2016, on the basis of the without prejudice except as to costs offer I have referred to above. That offer predicted that the likely outcome of the “show cause” hearing would be that the Court would refuse to make absolute the order nisi and would instead require Mr Harris to prove in solemn form. It suggested that the proceedings be resolved on the following basis:
7 In an effort to settle the dispute over the caveat, Ms Jurisich hereby proposes and offers on a Calderbank basis… a compromise of the dispute arising from [the caveat and the order nisi] having the terms set out below.
7.1 The parties complete and file a joint consent memorandum which:
(a) Notifies the Court that Mr Harris thereby withdraws his application for letters of administration of the estate of Ihaia Gillman-Harris (“the Estate”) and that there are no issues as to costs between the parties;
(b) Asks the Court to make an order pursuant to section 6 of the Administration Act 1969 in respect of the Estate granting to the Public Trust letters of administration without will attached;
(c) Seeks an order of the Court that:
(i) the legal costs incurred by Ms Jurisich in relation to the dispute shall be paid by the Estate;
(ii) the legal costs incurred by Mr Harris in relation to the dispute shall be paid by the Estate;
(iii) Mr Harris and Ms Jurisich shall be reimbursed the amounts of the invoices issued to them by their respective solicitors when the Public Trust is provided with copies of the solicitor’s invoices.
[27] Mr Rowe, counsel for Ms Jurisich, submitted that the offer accurately predicted the outcome of the judgment, was entirely appropriate at the time, was a realistic offer involving real consideration and was an offer that should have been accepted. He submitted that the refusal to agree was “grossly unreasonable” and that Mr Harris should therefore be ordered to pay costs from the time of the offer on an indemnity basis, totaling $15,821. The fact that the order nisi was discharged, he submitted, shows that Ms Jurisich’s concerns were well founded.
[28] Mr Johnson, on the other hand, submitted that any costs award for the period after 2 February 2016 should be on a 2B scale basis. If the proceedings are seen as analogous to an interlocutory application, the costs entitlement would be $5,575.00 for the preparation of written submissions and two half day appearances at defended hearings, on 15 February 2016 and 18 February 2016. An award of indemnity costs was said to be inappropriate because, in essence, Ms Jurisich’s offer was not a reasonable one. It required Mr Harris to abandon his application altogether and he would have been precluded from continuing with his application in solemn form, even though that is the Court outcome that Ms Jurisich suggested was most likely. Mr Johnson also submitted that the offer would have been rejected by those siblings who supported Mr Harris’ appointment as administrator and did not want to incur the costs of a professional administrator.
[29] Rule 14.6 governs increased or indemnity costs. The entitlement to increased or indemnity costs is at the Court’s discretion.7 Rule 14.6(3)(b)(v) provides that the failure to accept a settlement offer may justify increased costs where the failure to accept it is “without reasonable justification”. This puts the focus on the conduct of the recipient of the offer, and whether that contributed unnecessarily to the time or
expense of the proceeding or a step in it.8 The assessment of whether increased costs
7 Junior Farms Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 25,754 (HC).
8 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA); Perkins v Purea HC Auckland
CIV-2007-404-375, 29 October 2008; TFAC Ltd v David HC Auckland CIV-2006-404-3984,
5 March 2008; BFMG Ltd v Speirs [2014] NZHC 3361.
should be awarded, and the extent of any increase, can be impacted by a number of factors.9
[30] Indemnity costs can be imposed for a failure to accept a settlement offer where that failure amounts to the party vexatiously, frivolously, improperly or unnecessarily continuing or defending a proceeding or a step in a proceeding. This would only be appropriate where the party has behaved either badly or very unreasonably, or where their actions involve “flagrant” misconduct.10
[31] I do not think indemnity costs are appropriate in this case. It was not “grossly unreasonable” for Mr Harris to reject Ms Jurisich’s offer at the time it was made. Ms Jurisich’s prediction that the likely outcome of the Court proceedings was that Mr Harris would have to prove his application in solemn form was well founded, even though (due to subsequent events) the order nisi was in fact discharged and Mr Harris was not given the opportunity to proceed with his application by way of solemn form. Ms Jurisich’s offer, however, required Mr Harris to withdraw his application in its entirety. Viewed at the time of the offer, Mr Harris’ refusal to do so cannot be said to have been so unreasonable as to attract an award of indemnity costs.
[32] In my view, however, a modest increase in costs for the period following
2 February 2016 is appropriate. Ms Jurisich raised legitimate concerns regarding Mr Harris’ suitability as administrator. Mr Harris should have appreciated that, in light of the matters raised, it was likely that his order nisi would not be made absolute and he would need to proceed by way of an application in solemn form. The estate is a fairly modest one (about $150,000) and is to be divided between ten beneficiaries. A pragmatic and realistic approach to the administration of the estate was required in order to avoid legal costs being incurred that were entirely disproportionate. Ms Jurisich’s suggestion that a neutral third party administrator be appointed was a sensible and practical one. If accepted, it would have avoided a protracted and expensive dispute over whether Mr Harris was a suitable appointee to
the administrator role.
9 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
10 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
[33] Indeed, the suggestion that the Public Trust be appointed appears to have originally come from the Court. In a minute of 1 December 2015 Faire J adjourned the caveat application specifically to give both sides the opportunity to consider whether, in the circumstances, the best way forward would be the appointment of the Public Trust to administer the estate. He expressly warned the parties that they had to be very careful as the costs of the proceedings may simply not be justified when it came to the likely result.
[34] I again raised the possibility of the proceedings being resolved by the appointment of the Public Trust at the outset of the caveat hearing (as recorded in my Minute of 15 February 2016). I referred in particular to the likely costs and delay associated with the proceedings (particularly if the outcome was that Mr Harris’ application was ordered to proceed in solemn form), the relatively modest nature of the estate and the significant number of beneficiaries. The matter was briefly adjourned, to 18 February 2016, to see if a resolution could be reached. Mr Harris was not willing, however, to accede to the appointment of a neutral third party administrator. An alternative “in principle” agreement that Mr Harris and Ms Jurisich jointly administer the estate was not supported by the other beneficiaries.
[35] Obviously, given that these proceedings fall within the Court’s probate jurisdiction, it was not open to Mr Harris and Ms Jurisich to simply “settle” matters between themselves. Any settlement required Court approval. The offer put forward by Ms Jurisich, however, represented a constructive way forward, initially suggested by Faire J, which would likely have resolved matters without significant further costs being incurred. It is likely that the Court would have been inclined to appoint the
Public Trust, with the Public Trust’s consent, in all the circumstances of this case.11
[36] Given the divisions between the siblings, the expenses and delays of litigation, and the modest size of the estate, Ms Jurisich’s 2 February 2016 settlement proposal was a reasonable and sensible one. Mr Harris was in a position to undertake a realistic and informed assessment of the offer, given the comprehensive
affidavit evidence that had been filed by that date. It should have been clear to him
11 See Baird v Fisher [2014] NZHC 1347; Re Dickens (1912) 32 NZLR 374 (CA); Re Catherine
Robinson [1936] NZLR s 3 (CA); Re Craig (1911) 30 NZLR 1212 (SC); Re Wallace (1908)
10 GLR 331 (SC).
from the evidence that had been filed that the order nisi was unlikely to be made absolute and that his application would likely need to proceed by way of solemn form, incurring further expense and delay.
[37] Taking all of these matters into account, it is my view that 2B scale costs should be increased by 25 per cent for the period subsequent to the 2 February 2016 offer being made.
[38] For the reasons outlined above, I have concluded that the most appropriate analogy for costs purposes is that of an originating application. On that basis the appropriate 2B scale costs comprise $3,345 for the preparation of written submissions (item 40 - 1.5 days), preparation of a bundle for hearing (0.6 days - $1,338), and counsel’s appearances at the hearings on 15 and 18 February
2016 (one day in total - $2,230).
[39] I also note that two further affidavits were prepared by Ms Jurisich on
10 February and 17 February. The first was filed in response to an affidavit from Mr Harris. The latter was filed in response to Mr Harris’ attempts to distribute a significant proportion of the estate before the hearing. A further half day allocation is appropriate for the preparation of those affidavits ($1,115). The total scale costs on a 2B scale basis, for the period following 2 February 2016, is accordingly $8,028. With a 25 per cent uplift, the appropriate costs award for the period is $10,035.
[40] This results in a total costs award against Mr Harris of $15,387. Ms Jurisich’s total invoiced costs are $30,343.21. However she only seeks to recover $21,821.00 of this sum. That is $6,434 more than she is entitled to receive from Mr Harris. In my view it is appropriate that the difference be met by the estate. Ms Jurisich has spent a significant sum of money on her caveat proceedings. She was ultimately vindicated, albeit not necessarily for the reasons raised in her affidavit evidence. In my view it is reasonable in all the circumstances for her to recover the full amount of costs that she seeks.
Result
[41] I order that:
(a) Mr Harris is ordered to meet Ms Jurisich’s costs in the sum of
$15,387. This comprises costs of $5,352, (2B scale costs prior to
2 February 2016), and $10,035 (2B scale costs with a 25 per cent uplift for the period after 2 February 2016). Those costs are payable by Mr Harris personally and are not to be met by the estate.
(b) Mr Harris’ application for an order that his own legal costs be met out
of the estate is declined.
(c) The estate is to meet Ms Jurisich’s costs in the sum of $6,434.
Katz J
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