Lusty v Thorburn

[2019] NZHC 2945

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-002593

[2019] NZHC 2945

UNDER

the Contract and Commercial Law Act 2017 and the Declaratory Judgments Act 1908

IN THE MATTER

of an application for specific performance

BETWEEN

AILEEN BERYL LUSTY, RONALD HUNT LUSTY and WARWICK JAMES ROLAND

BROWNE as executors of the Estate of Kenneth Richard Lusty

Plaintiffs

AND

CRAIG MAXWELL THORBURN and

CARLY EVE THORBURN as trustees of the THORBURN TRUST

Defendants

Hearing:	Determined on the Papers
Counsel:	M J Matthew for Plaintiffs A A H Low for Defendants
Judgment:	12 November 2019

COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 12 November 2019 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

Rennie Cox, Auckland
Alexandra Low & Associates, Auckland

LUSTY and BROWNE as executors of the Estate of Kenneth Richard Lusty v C M THORBURN and C E

THORBURN as trustees of the THORBURN TRUST Costs Judgment [2019] NZHC 2945 [12 November 2019]

Introduction

[1]    In a written judgment of 14 October 2019, I dismissed the plaintiffs’ application for summary judgment. I expressed a preliminary view that costs should be reserved but allowed memoranda to be filed if either party sought costs. The defendants have applied for costs on a 2B basis. The plaintiffs argue that costs should be reserved pending the hearing of the substantive proceeding.

The defendants’ submissions on costs

[2]    For the defendants, Ms Low acknowledges that costs on a plaintiff’s unsuccessful application for summary judgment will generally be reserved.1 She argues, however, that in exceptional cases costs may be awarded against a plaintiff at this stage, and, that this is such a case because:

(a)prior to the commencement of the proceeding, the defendants had indicated their willingness to seek directions on the principal issue arising between the parties, which Ms Low identifies as whether the defendants could grant a lease in perpetuity on the terms demised;

(b)the defendants waited for three years for a response to that proposal from the plaintiffs, but the plaintiffs then elected to file summary judgment proceedings;

(c)the plaintiffs refused to accept settlement offers without justification; and

(d)the costs of defending the summary judgment application have exhausted the resources of the Thorburn Trust and the trustees may not be able to defend the substantive proceeding.

1      NZI Bank Ltd v Philpott [1990] 2 NZLR 403.

Discussion

[3]    In NZI Bank Ltd v Philpott, Heron J held that the question of costs on summary judgment applications should be approached on broad principles and said:2

Whilst a defendant may be regarded as successful in one sense in resisting an application for summary judgment, it is of course not a final determination in the proceeding itself. If ultimately the plaintiff does succeed it seems to us in the general run of cases that the defendant should pay for both proceedings, the Court paying particular attention to the reasons why the plaintiff was unsuccessful in the first case. If those reasons include some question of fault on the part of the plaintiff then it may be appropriate to reduce or even eliminate an entitlement to costs for that part of the proceedings so far as the plaintiff is concerned. Where, however, the defendant has raised defences which cannot by their nature be resolved at a summary judgment application but ultimately turn out to have no basis, then costs on both sets of proceedings belong to the plaintiff.

[4]And, at 406-407 Heron J said:

The introduction of the summary judgment procedure has accelerated the passage of commercial litigation through the Courts and promoted earlier settlement of disputes. As a result it has proved of considerable benefit to the commercial community and others. We agree with Mr O’Brien that the risk of a large order for costs would act as a deterrent to plaintiffs to use this quick and effective means of obtaining relief where at the outset, in any event, there seems no defence to the claim. In the exceptional cases involving abuses of the procedure then, as with all abuse of the process of the Court, an order for costs can be made against plaintiffs at the summary judgment stage.

[5]    Ms Low attempts to bring the defendants’ application for costs within these principles by arguing that the plaintiffs brought their application erroneously and unreasonably. Her primary submission is that the plaintiffs should have adopted the defendants’ suggestion to seek directions/declarations from the Court rather than summary judgment. I note in this regard, that Ms Low wrote to the plaintiffs’ solicitors on 14 September 2018 suggesting that proceedings could be brought under s 66 of the Trustee Act 1956 or under the Declaratory Judgments Act 1908. She acknowledged that there would need to be discussion between the parties as to “how the issues can be shaped in an honest and forthright manner” and that “[a]ll breach issues will need to be aired….”

2      NZI Bank Ltd v Philpott, above n 1, at 405.

[6]    I am unable to accept Ms Low’s submission because the dispute between the plaintiffs and the defendants is clearly not one that could appropriately be resolved on an application under s 66 of the Trustee Act 1956 or under the Declaratory Judgments Act 1908.

[7]    Applications under s 66 are not suitable to determine questions of substance or importance involving factual disputes or allegations of breach of trust, as is the case here.3

[8]    As far as the Declaratory Judgments Act 1908 is concerned, in Mandic v The Cornwall Park Trust Board (Inc), Elias CJ said:4

The jurisdiction under the Declaratory Judgments Act enables anyone whose conduct or rights depend on the effect or meaning of an instrument, including an agreement, to obtain an authoritative ruling. In New Zealand, questions concerning the interpretation of rental review provisions of leases have often been addressed under the provisions of the Declaratory Judgments Act, as is illustrated by The Drapery and General Importing Co of New Zealand (Ltd) v The Mayor of Wellington. Access to the jurisdiction does not depend on there being an existing dispute. Nor is it necessary that there be a lis.

[9]    Here, the dispute between the parties does not arise out of any difference between them as to the effect or meaning of the lease. The dispute concerns whether the Court should exercise its discretion to order specific performance of the lease. This will only be resolved by the determination at trial, of a range of factual controversies.

[10]   The most appropriate means of resolving this dispute (short of the parties reaching agreement) is by an ordinary proceeding in this Court. The plaintiffs were not wrong to reject the defendants’ proposals as to the form of the proceeding.

[11]   I do not consider that the plaintiffs pursued summary judgment unreasonably. The application was not so obviously one-sided on the merits and the plaintiffs may have taken some comfort as to the strength of their position as the Attorney-General

3      Melville v NRMA Insurance New Zealand Limited & Ors HC Wellington, CP 70/01, 14 April 2002 at [58] and G Kelly and C Kelly Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington 2013) at [24.34].

4      Mandic v The Cornwall Park Trust Board (Inc) [2011] NZSC 135; [2012] 2 NZLR 194 at [9] (footnotes omitted).

had been consulted and had filed a memorandum stating the opinion that the charitable purposes of the Trust were being met by the lease arrangement.

[12]   It is not possible to say at this point that the plaintiffs were wrong, either, to refuse settlement offers. The defendants have only ever been prepared to offer one further term of 21 years, whereas the plaintiffs consider they are entitled to renewals, potentially, in perpetuity. Whether the plaintiffs are correct will also only be determined after a trial.

[13]   Finally, the defendants cannot rely on their impecuniosity to justify an award of costs for two reasons. First, I do not consider this is a relevant consideration under either the principles in Philpott or Part 14 subpart 1 of the High Court Rules 2016, and no supporting authority was provided to justify an award of costs on this basis. Second, there is force in Ms Matthew’s submission that as one of the current trustees, Craig Thorburn, had been appointed a trustee before Frederick Thorburn received a substantial payment in consideration for the lease, the defendants should have sufficient funds to pay their costs to date and maintain their defence to the substantive proceeding.

Result

[14]The costs on the plaintiffs’ unsuccessful application for summary judgment are

reserved.

O G Paulsen Associate Judge