K v K

[2023] NZHC 1020

NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

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IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2022-443-48 CIV-2022-443-47

[2023] NZHC 1020

UNDER	The Property (Relationships) Act 1976 and the Family Proceedings Act 1980
IN THE MATTER OF	an appeal against the decision of the Family Court
BETWEEN	Mrs K Applicant
AND	Mr K Respondent

On the Papers
Appearances:	B M Burke for the Applicant Respondent in person
Judgment:	2 May 2023

JUDGMENT OF GWYN J

(Costs)

Introduction

[1]    On 28 November 2022 I gave judgment on Mrs K’s application for an order under s 182 of the Family Proceedings Act 1980 (FPA).1

1      K v K [2022] NZHC 3123 [judgment].

K v K [2023] NZHC 1020 [2 May 2023]

[2]    I made an order pursuant to s 182 of the FPA varying the Trust Deed of a Trust settled by the parties jointly, to enable an equal division of the Trust’s assets between the parties, subject to certain specified adjustments in the applicant’s favour.

[3]    I also made an order removing the respondent as trustee of the Trust, pursuant to s 112 of the Trusts Act 2019, and vested all Trust property in the applicant and the independent trustee.

[4]    Ancillary orders were directed at the sale of Trust property and steps necessary to effect the sale.

[5]    I directed that the parties were to file any submissions in respect of costs within 14 days of the judgment, to be determined on the papers.

[6]    Counsel for Mrs K sought an extension to that date and in accordance with the extension filed her submissions on 19 December 2022. Unfortunately, Ms Burke’s submissions were not referred to me until 15 February 2023. No submissions have been received from Mr K.

Background

[7]    The proceedings between the parties commenced in the Family Court as relationship property proceedings, subsequently amended to include the application pursuant to s 182 of the FPA. The proceedings were transferred to the High Court on 25 July 2022. In both the Family Court and the High Court, the proceedings followed a somewhat tortuous process, which is set out in the judgment.2

[8]    The applicant seeks costs in respect of both the Family Court and High Court proceedings, on the basis that they have been one continuous proceeding.

2      At [5]–[26].

The law

[9]    Counsel for Mrs K helpfully sets out the relevant provisions under each of the Property (Relationships) Act 1976 (PRA), the FPA, the Family Court Rules 20023 and the High Court Rules 2016 (Rules).

[10]   Ms Burke submits that this is an appropriate case for an increased costs award pursuant to r 14.6(3) of the Rules. Counsel submits that an appropriate uplift on 2B costs is at least 50 per cent.

Categorisation of the proceedings and time allocations

[11]   Counsel submits that, there being no separate scale of costs for proceedings in the Family Court, costs should be awarded on  a  2B  basis  in  accordance  with  schs 4 and 5 of the District Court Rules 2014 in relation to the proceedings that took place in the Family Court. Those proceedings that have subsequently occurred in the High Court should be on a 2B basis in accordance with schs 2 and 3 of the Rules.

[12]   Costs on a 2B basis are not sought for the work undertaken for Mrs K at the time when she was legally aided, at the commencement of the PRA proceedings, through until January 2022. Counsel does not have details of all Mrs K’s legal aid charges which encompass the PRA proceedings and proceedings filed under the Care of Children Act 2004 and Family Violence Act 2018. Mrs K’s legal aid claims amounted to $26,668.62 inclusive of GST. She has a charge of $9,533 to pay to Legal Aid. Counsel understands this amount relates to the PRA proceedings but has not been able to confirm this. Mrs K will have to refund this amount to Legal Aid at the conclusion of the proceedings.

[13]   Mrs K’s actual legal costs (including GST and disbursements) from 31 January 2022 are $59,505.70.

3      The Court has a discretion to determine costs under r 207 of the Family Court Rules 2002.  As    r 207(2) notes, in exercising that discretion, the Court can apply the principles set down in rr 14.2–

14.12 of the District Court Rules 2014.

Relevant law

[14]   In JKW v NDW,4 Judge Johnston held that (consistent with r 14.2 of the District Court Rules), the relevant principles in considering costs generally include:

(a)The object of the legislation.

(b)The outcome of the proceedings. As a general principle a party who fails with respect to their position should pay costs to the successful party.

(c)The complexity or otherwise of the matters in issue.

(d)The way in which the parties and their legal advisors conducted the proceedings.

(e)Whether proceedings were made unnecessarily complex or protracted because of stalling tactics or procedural ploys adopted by a party.

(f)The means of the parties.

(g)The actual costs incurred by the parties.

(h)The overall interests of justice.

[15]   In Jack v Jack, Goddard J considered the approach to be taken to costs in proceedings involving both the PRA and the FPA:5

[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.

4      JKW v NDW [2011] NZFLR 721 at [20].

5      Jack v Jack [2014] NZHC 2502 at [7]–[9] (footnotes omitted).

[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. However, the law has since moved and relationship property disputes are now treated in a similar manner to civil disputes. 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:

14.2Principles 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):

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.

[16]   In Holdfast NZ Ltd v Selleys Pty Ltd,6 the Court of Appeal dealt with increased costs. The High Court had awarded increased costs according to a percentage of actual costs. The costs award was four times over scale. The Court of Appeal held the previous Court’s approach was “fundamentally wrong”7 and that when awarding increased costs, the correct approach is to categorise the proceeding; identify a reasonable time for each step; consider whether there are grounds for awarding increased costs; and when there are such grounds, uplifting from the scale.8 The Court

6      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

7 At [37].

8      At [43]–[46].

noted that an uplift of 50 per cent is usually the maximum uplift, but exceptional circumstances may justify higher uplifts.9 The current rules for ordering increased costs are set out in r 14.6 of the Rules.10

[17]   And in Wayne Graham Realty Ltd v Brook,11 where the respondent had originally advised that she would accept an offer of $30,000 for joint settlement of her property which would also entail discontinuance of proceedings, but subsequently declined to accept this sum, until an application for strike out of proceedings. The respondent’s lawyer had not advised that a binding settlement for the $30,000 had been reached on the respondent’s behalf. The appeal against the District Court decision awarding 2B costs to the appellant was successful because the appellant was not given a proper opportunity to provide the District Court with evidence and submissions regarding increased or indemnity costs. Justice Dunningham gave a 100 per cent uplift on 2B costs because the costs, including the uplift were less than the appellant’s actual costs; the appellant’s legal costs reasonably included the protracted attempts to progress the settlement which in the appellant’s view had already been reached; the scale costs did not fairly reflect the additional cost incurred by the appellant prompted by the respondent’s stance; the respondent was on notice that her stance would prompt the appellant to apply for increased or indemnity costs; and the respondent’s stance was unreasonable.12

Grounds for increased costs in this case

[18]   The applicant says that increased costs are appropriate in this case because the respondent significantly prolonged the proceedings and inflated the associated costs by failing to engage with Court directions.

[19]   Mrs K had attempted to resolve relationship property matters soon after separation, which occurred on 7 October 2017, through direct communication, but this was unsuccessful. Subsequently, Mrs K instructed counsel to facilitate

9      At [46]–[48].

10     See [44]–[48]: The governing rule at the time Holdfast NZ Ltd v Selleys Pty Ltd was decided was r 48C(3) in sch 2 of the Judicature Act 1908.

11     Wayne Graham Realty Ltd v Brook [2016] NZHC 1135.

12 At [53].

communications and filed an application for orders under the PRA on 23 September 2020.

[20]   Mr K did not defend the PRA proceeding. A formal proof hearing was scheduled for 10 November 2020.

[21]   In the event the formal proof hearing took place on 19 January 2021. Mr K attended in person and agreed to the directions sought by Mrs K for valuation of the parties’ assets, including assets held in the Trust. On that basis, directions were made for valuations of the assets and the matter was set down for a judicial settlement conference.

[22]   Despite having agreed to the directions, Mr K failed to cooperate with the valuation process. Mrs K was forced to proceed with obtaining valuations on her own.

[23]   The judicial settlement conference was held on 18 May 2021 and agreement was reached. Mr K was to seek to refinance the parties’ properties in order to pay Mrs K the sum of $455,000. Mr K failed to obtain financing within the 28-day period he was given. Judge Harrison granted Mr K an additional 14 days to do so, noting that if financing had not been sought proceedings would be issued in the High Court. Mr K again failed to obtain financing.

[24]   At a case management review on 11 October 2021, Mr K advised he was unable to obtain finance. The matter was adjourned for a further month to monitor settlement.

[25]   At a subsequent case management review on 11 November 2021,  the  Deputy Registrar of the Family Court advised that Mr K had written to the Court to advise he was trying to obtain finance with Heartland Bank. No further correspondence was received from Mr K.

[26]   As a consequence, no progress was made from the time of the settlement conference on 18 May 2021 through until 9 February 2022 when Mrs K’s new counsel

filed an on-notice application under s 182 of the FPA and an application to consolidate the proceedings.

[27]   Mr K was contacted by the Family Court but took no steps to facilitate service. Service was eventually effected by a process server and an affidavit of service filed. Mr K did not file a notice of defence to the FPA application and again took no formal steps. A formal proof hearing for the FPA application was held on 24 May 2022. Mr K did not attend. Because of Covid restrictions, Mrs K was unable to give proper evidence via remote link.

[28]   Mr K filed a handwritten affidavit with the Hawera Family Court on 22 July 2022. He did not file a notice of defence to any of the proceedings.

[29]   A short cause hearing was set down for 28 July 2022 but was vacated because the Court was unable to facilitate the appointment of senior Lawyer for Child and counsel to assist the Court in time for reports to  be  filed  prior  to  the hearing. Judge Harrison raised a question as to jurisdiction and an application to transfer the matter to the High Court was then made. The application was granted and the proceedings were transferred.

[30]   Mr K was clearly advised that costs would be sought by Mrs K. He took no steps until  just  prior to  the High Court hearing before me, when he  telephoned   Ms Burke’s firm in an attempt to arrange a meeting, but then subsequently advised he no longer sought a meeting. He was at that point warned about an application to have him removed as a trustee and of costs being claimed against him.

[31]   In counsel’s submission, Mr K was able to effectively stall the progress of the proceeding without any detriment to himself. He had control of the majority of the parties’ and the Trust’s assets. He remained living in the family home, was fully employed in the parties’ business and was in receipt and control of the income from the businesses.

[32]   Mrs K, on the other hand, had to move in with her mother as she could not find affordable accommodation for herself and her children. She was forced to find

alternative employment when Mr K continued to approach her at work, despite there being a protection order in place.

[33]   Mrs K found work as a part-time cleaner but has had to rely on a benefit to support herself and some of the parties’ children, post-separation. She has continued to operate as bookkeeper for the parties’ business on a part time basis and receives a small wage for doing so.

[34]   Counsel notes that the matter was not unusually complex at the outset and the parties could have resolved the division of their property amicably by agreeing that the Trust property could be included in their relationship property pool. The complexity arose when Mr K chose not to engage in the process, leaving Mrs K no choice but to progress matters to the High Court, given that the majority of their assets were owned in the family Trust.

[35]   Against the background of that history, counsel submits an uplift of 50 per cent would be sufficient to compensate Mrs K for a large portion of her legal fees.

Discussion

[36]   As I noted in the judgment,13 Mr K had failed or been unwilling to act on previous Court directions, or on his own proposals.

[37]   I also noted, in relation to the application to remove Mr K as a trustee, that Mr K had acknowledged he had not always participated fully in the proceedings or acted on Court directions or agreements made, in a timely way.14 Mr K said he “does not do email”. It is plain that this has been a barrier in communication between the parties.

[38]   As I also recorded, Mr K had failed to properly fulfil his obligations as a trustee.15 I was not persuaded at the time of the hearing that Mr K would fully engage with his responsibilities as a trustee. I noted that Mr K’s lack of technical proficiency

13     Judgment, above n 1, at [93].

14 At [102].

15 At [103].

had become a convenient excuse for not engaging. He had failed to put his position in writing in advance of the hearing. That meant that both Mrs K and the Court came to the hearing without being fully aware of Mr K’s position.16

Conclusion

[39]   I consider that there are grounds for an increased award of costs against Mr K. Mr K contributed unnecessarily to the time and expense involved in the proceedings, by his repeated failures to comply with directions of the Court or to act on his own commitments to the Court and to Mrs K.17 As Judge Johnston put it in JKW v NDW,18 the proceedings here were made unnecessarily complex and protracted because of Mr K’s “stalling tactics”.

[40]   The practical consequence of Mr K’s action or inaction, over an extended period of time, was that while he was able to continue to enjoy the benefit of the parties’ assets, including the family home and businesses, Mrs K was left in a dire financial situation.

Outcome

[41]   Mrs K is entitled to 2B costs, calculated according to the Family Court Rules for the Family Court part of the proceedings and the High  Court  Rules  for the  High Court proceedings, with a 50 per cent uplift, plus disbursements.

Gwyn J

Solicitors:

Connect Legal, New Plymouth

Copy to:
Mr K

16 At [104].

17     District Court Rules, r 14.6, as referred to in Family Court Rules, r 207(2)(e).

18     JKW v NDW, above n 4, at [20].