Khan v Knox

[2023] NZHC 681

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2022-419-1

[2023] NZHC 681

IN THE MATTER

of an originating application under Part 19 High Court Rules 2016

IN THE MATTER

of an application to validate a Will

IN THE MATTER

of the Estate of Adrienne Judith Elizabeth Peacock

BETWEEN

JAMAHL SEAN KHAN and JOHN PEACOCK

Applicants

AND

SARAH KNOX, MURRAY DOWNS and SALEEM PAUL KHAN

Respondents

Judgment:

(On the papers)

30 March 2023

COSTS JUDGMENT OF BREWER J

This judgment was delivered by me on 30 March 2023 at 3.30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Clark and Brown (Hamilton) for Applicants

Grayson Clements (Hamilton) for Respondent Saleem Khan McCaw Lewis (Hamilton) for the Estate

C Murray Earl (Hamilton) for minor children

Niemand Peebles Hoult (Hamilton) for minor grandchildren

KHAN v KNOX [2023] NZHC 681 [30 March 2023]

Introduction

[1]This is a costs judgment.

[2]Following my substantive judgment1 the applicants and respondent seek costs.

[3]        The case concerned the validity of a Will of Ms Adrienne Judith Elizabeth Peacock. The applicants were Mr Jamahl Khan,  one of  Ms Peacock’s  sons,  and  Mr John Peacock, Ms Peacock’s ex-husband. The respondent was Ms Peacock’s other son, Mr Saleem Paul Khan (who has changed his name to Samuel Jay Steel so I will refer to him as “Mr Steel”).

[4]        In my judgment, I dismissed the application. I was “not satisfied, on the balance of probabilities, that either or both of the 2016 draft Will and the 2017 document represent Ms Peacock’s testamentary intentions at the time of her death.”

[5]        Before me now are several memoranda as to costs. First, Mr Steel as the successful party claims costs against the applicants on an indemnity basis and in the alternative standard 2B scale costs. Second, Mr Khan seeks costs against the estate on an indemnity basis and in the alternative standard 2B scale costs. The applicants oppose Mr Steel’s claim they should be liable for his costs. Third, the estate’s lawyers make submissions on the law. Finally, the grandchildren’s counsel submits that their legal fees should be paid by the estate. No party takes issue with the grandchildren’s costs being paid by the estate.

Submissions for the applicants

[6]        Mr O’Neill submits that the estate should indemnify Mr Khan’s costs in bringing the application. Mr O’Neill submits that Mr Peacock is an applicant in name only. The thrust of the submissions is that Mr Khan should be indemnified by the estate because the steps he took to bring the application and put before the Court the draft Wills was a reasonable and responsible step. In effect, the application was in the interests of the estate despite the fact that Mr Khan would have personally benefitted from the 2017 document being recognised as an effective Will.

1      Khan v Knox [2022] NZHC 2577.

[7]        Mr O’Neill submits it would be unfair for Mr Khan to be liable to pay any costs award of another party.

Submissions for the respondents

[8]        Ms Schwikkard submits Mr Steel’s costs should be paid by either the applicants or by the estate. Ms Schwikkard disagrees with Mr O’Neill’s submission that Mr Peacock should not be liable for costs. Mr Peacock took positive steps to bring the application and was, contrary to Mr O’Neill’s submission, intimately involved in the proceedings. As Mr Khan is the other applicant, he should also be held liable. Moreover, Mr Khan would have personally benefitted from the application had the Court recognised the 2017 document as an effective Will.

[9]Ms Schwikkard submits the applicants should pay indemnity costs.

[10]      In the alternative, Mr Steel applies for his costs to be paid by the estate. He submits that if the Court is not prepared to award indemnity costs, then 2B scale costs would be appropriate.

[11]      Ms Schwikkard submits that Mr Khan should not be indemnified by the estate for his costs.

Counsel for the grandchildren

[12]      Mr Earl, for Grace and Zane William Khan, submits his costs should be payable by the estate. He seeks costs of $15,089.38.

[13]      Similarly Mr Niemand, for Kaylee and Adria Tracey Khan, submits his costs should also be indemnified by the estate. He seeks costs of $8,292.00.

[14]      Mr Shore, for the estate, in discussing the submissions of the parties accepts that as Messrs Earl and Niemand were court-appointed counsel they should be entitled to costs from the estate.2

2      Re Estate of Ashworth [2021 NZHC 3210 at [30(c)].

Discussion

[15]      The starting point is that costs follow the event. The party who fails should pay costs to the party who succeeds.3 As the successful party, Mr Steel is presumptively entitled to costs.

[16]      Costs for cases involving estates, however, have their own established legal principles. A leading authority on estates and probate matters generally is Re Patterson (deceased) in which Stringer J sets out the following principles:4

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 follow:

(i)If the litigation originates in the fault of the testator – e.g., 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.

(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.

….

[17]      The approach in Re Patterson (deceased) is now partly reflected in r 14.6(4)(c) of the High Court Rules 2016:5

The court may order a party to pay indemnity costs if—

…

3      High Court Rules 2016, r 14.2(1)(a).

4      Re Patterson (deceased) [1924] NZLR 441 (SC) at 442-3, as cited in Ireland v Grant [2016] NZHC 2752; Loosley v Powell [2018] NZCA 73; and Crawford v Phillips [2018] NZCA 351.

5      Waitara Leaseholders Association Inc v New Plymouth DC HC New Plymouth CIV-2004-443- 162, 20 December 2005 at [16]. Harrison J ruled that the predecessor rule to r 14.6(4)(c) was “drafted to recognise the first two categories of cases identified in Re Buckton” [1907] 2 Ch 406. In light of similarity between Re Patterson and Re Buckton I conclude that that r 14.6(4)(c) should also apply in Re Patterson costs decisions.

(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

[18]      The application falls into the first category in Re Patterson. At the time of her death Ms Peacock left a Will in regular form made in 2005 (which clearly did not represent her testamentary intentions at the time of her death) and three Wills in electronic form, all marked “Draft”.  Two  were made in 2014, and one was dated   20 September 2016. In addition, Ms Peacock left a handwritten document, signed by her, which on its face was a testamentary instrument but which applied only to her house. Accordingly, there was a reasonable ambiguity as to what document, or combination of them, represented Ms Peacock’s testamentary intentions at the time of her death. Or whether any of them did.

[19]      Ms Peacock died unexpectedly, but in terms of Re Patterson she was at fault for creating ambiguity as to her testamentary intentions. Therefore, all costs should be payable out of the estate.

[20]      I will address the submission that as Mr Khan would have personally benefited from the recognition of the 2017 Will he should be precluded from getting costs. Had this been a dispute about a trust I would have been inclined to accept this point because Mr Khan’s claim could have been treated as “hostile”.6 Despite the similarities between trusts and estates the law of costs treats them differently. There is no good reason for me to depart from the position in Re Patterson.

[21]      However, I cannot just make a general order granting costs for Mr Khan or Mr Steel. The learned authors of McGechan on Procedure state:7

Indemnity costs are determined with reference to actual costs, but may be less if the court considers the actual costs are unreasonably high. Costs are reasonably incurred if a reasonable observer would expect those costs be incurred. They are calculated, not from the costs rules, but from a “reasonable allocation of actual costs”, based on the appropriate time taken, the significance and complexity of the work, and a median hourly rate reasonably applicable: Bradbury v Westpac Banking Corp (2009) 18 PRNZ 859 (HC) at

[204] and [209]. Specific items of expenditure found unreasonable are excluded or reduced.

6      See Woodward v Smith [2014] NZHC 407, [2014] 3 NZLR 525 at [23]–[29].

7      Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR14.6.03(2)(a)].

It is incorrect in law for the Court to assess reasonableness solely by a comparison of costs charged against sum at stake – the Court must have regard to the kind of analysis in Bradbury in order to satisfy itself that the costs were “reasonably incurred”: Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494, at [62].

Before granting any award of costs I must be satisfied that the costs sought are reasonable. The appropriate methodology is to:8

(a)determine whether a particular item of expenditure is reasonably incurred;

(b)fix what would be a reasonable allocation of actual costs, measured by reference to an appropriate time taken and allowing for the significance and complexity of the category of work; and

(c)quantify the costs by reference to a median hourly rate reasonably applicable to it.

[22]      Neither Mr Khan nor Mr Steel provided me with the necessary details in their memoranda. Accordingly, by Minute dated 28 February 2023, I directed Messrs Khan and Steel to file memoranda as to the costs claimed, setting out each step and the cost of each step. I now have their memoranda.

[23]      Mr Khan seeks costs and disbursements totalling $58,988.47. I am satisfied the sum claimed is reasonable.

[24]      Mr Steel seeks costs and disbursements totalling $64,437.85. I am satisfied the sum claimed is reasonable.

Result

[25]I order that the estate of Ms Peacock pay the costs of the parties as follows:

(a)$15,089.38 for Mr Earl’s costs incurred on behalf of Grace and Zane William;

8      Bradbury v Westpac Banking Corp (2009) 18 PRNZ 859 (HC) at [209].

(b)$8,292.00 for Mr Niemand’s costs incurred on behalf of Kaylee and Adria Tracey Khan;

(c)$58,988.47 for Mr Khan’s costs; and

(d)$64,437.85 for Mr Steel’s costs.

Brewer J