Mather v Mortlock
[2013] NZHC 1930
•1 August 2013
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-001570 [2013] NZHC 1930
IN THE MATTER OF the Estate of Jennifer Mary Mather BETWEEN
NICHOLAS JOHN MATHER Plaintiff
AND
JAMES PAUL LYON MORTLOCK, PAUL LYON MORTLOCK and DENIS IAN JOHNSTON as Administrators of the Estate of Jennifer Mary Mather
First Defendants
SIMON BARRY MATHER and BRIDGET DESIREE MATHER Second Defendants
Hearing: (Submissions in writing)
Second Defendants (18 April 2013); First Defendants ( 22 April
2013); Plaintiff (2 May 2013); First Defendants (6 May 2013); Second Defendants (8 May 2013)
Counsel:
M S McKechnie for Plaintiff
D M Lester for First Defendants
R G Smedley for Second Defendants
M J Wallace for GrandchildrenJudgment:
1 August 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to costs
Introduction
[1] This proceeding involved an application for an order recalling the grant of probate in relation to the will of the late Jennifer Mather (“Mrs Mather”). The plaintiff said that Mrs Mather did not have testamentary capacity at the time she signed the will. Fortunately, with all beneficiaries represented, the parties reached a
settlement and consent orders were made whereby the probated will was upheld
MATHER v MORTLOCK [2013] NZHC 1930 [1 August 2013]
subject to three variations. The position of the grandchildren beneficiaries was variously maintained or improved.
[2] The parties could not reach agreement on costs except in relation to the costs of counsel appointed to represent the grandchildren.
[3] Remarkably (although, in practice, not altogether uncommonly) each of the parties looks for orders that another party pay costs. The spread of opinion on the costs issue has manifested itself in an equal spread of memoranda for the judge to digest “on the papers”. The most outstanding effort was a memorandum of 11 pages of narrative with attachments “A” to “O”.
[4] When giving judgment by consent in relation to the substantive application, I adopted that part of the agreement between the parties which called for the filing of memoranda from counsel on an agreed timetable. I overlooked expressly requiring the increasingly usual practice of costs submissions limited to three or four pages. That was my mistake. I nevertheless would have expected counsel to recognise that the 10 page limit on synopsis for any interlocutory application (r 7.39(4)) would be recognised by counsel as representing an absolute maximum.
[5] For pragmatic reasons and in the interests of economy for all, I have refrained from directing, in particular, counsel for the plaintiff to file a more succinct document. I instead set about digesting all the paper before me.
The applications
[6] The first defendants – executors – apply for an order that the plaintiff pay them the actual costs of themselves, their barrister and counsel for the grandchildren ($30,741.80 inclusive of GST) together with disbursements ($677.35).
[7] The second defendants – two residuary beneficiaries – apply for an order that the plaintiff pay the actual costs of the second defendants since 12 March 2012 ($21,689.70 inclusive of GST, which counsel compares to a scale recovery based on a 2B award of $7,869.80).
[8] The plaintiff – the third residuary beneficiary – applies for an order that the first defendants/executors pay the plaintiff’s costs on a 2B basis (counsel does not provide a 2B calculation) or for such greater sum as the Court may consider appropriate. Secondly, they ask that the first defendants be ordered to meet their own costs without resort to the estate.
[9] Counsel for the grandchildren – all other represented parties accept that the costs of counsel for the grandchildren must be met. The defendants all submitted that the plaintiff should reimburse the estate for those costs.
The background – disputed testamentary provision
[10] Mrs Mather was the mother of the plaintiff (“Nicholas”) and of the second defendants (“Bridget” and “Simon”). Mrs Mather and her late husband made wills on the same or similar dates in 1987, 1998, 2005 and June 2007.
[11] Mrs Mather made her last will on 17 July 2007. She subsequently died in October 2010. The first defendants as executors obtained a grant of probate in relation to the 17 July 2007 will.
[12] Until her July 2005 will, Mrs Mather was providing a one-third share of the residuary estate for each child. Bridget was given an option to purchase the holiday property at Wainui, Banks Peninsula (with the purchase price to fall into residue). No provision was made for grandchildren.
[13] By her last will of 17 July 2007, the holiday property at Wainui, Banks Peninsula was transferred to Simon and Bridget in equal shares. Mrs Mather reduced the provision for Nicholas to a one-fifth share of residue with Bridget and Simon each to receive a two-fifths share. Four grandchildren were gifted $50,000 each.
[14] Mrs Mather was predeceased by her husband who died in April 2008.
[15] Upon Mrs Mather’s death, and the publication of her will provisions,
Nicholas expressed concern as to Mrs Mather’s testamentary capacity in June and
July 2007. Through his legal advisers he obtained medical reports. Two medical practitioners concluded that in June and July 2007, Mrs Mather did not have testamentary capacity.
[16] Nicholas’s solicitor wrote an open letter to the estate solicitors in November
2011 asserting that it was the July 2005 will which was valid and must take effect.
Discussions to resolve testamentary issues
[17] Bridget and Simon took their own legal advice. Through their solicitor they responded in March 2012. It was stated that they had not discovered anything to rebut the evidence obtained by Nicholas as to a lack of capacity. They agreed that the 2007 wills could be set aside. They proposed that matters be settled by an agreement recorded in a Deed of Family Arrangement.
[18] A draft deed was prepared and circulated by the estate solicitors in July 2012. Bridget was to revert to having an option to purchase the Wainui property (with purchase price to fall into residue). The estate solicitors anticipated that the children would honour the four legacies to the grandchildren notwithstanding that the legacies were not in the 2005 will. That arrangement yet to be agreed between the beneficiaries themselves, was not included in the draft deed.
[19] Nicholas’s legal representatives responded. As Mr McKechnie in his submissions for Nicholas notes that the lawyers raised at least three concerns with the draft, namely:
(a) it contained no recital of events which led to the challenge to the making of the 17 July 2007 will and its probate;
(b)the deed proposed that the three children assumed the role of administrators;
(c) the deed did not deal with the issue of bequests to the grandchildren or their obtaining independent advice.
This proceeding is issued
[20] This proceeding was commenced at the same time as Nicholas’s lawyers responded on the draft. Mr McKechnie’s instructing solicitors sent the statement of claim and other documents to the High Court at Christchurch for filing in this proceeding.
[21] Nicholas, as plaintiff, asserted that Mrs Mather had lacked testamentary capacity in 2007 and sought an order as to the probating of the will of July 2005.
[22] The defendant executors filed a defence asserting that Mrs Mather had testamentary capacity at the time she signed her 2007 wills. They sought a declaration as to that. In the alternative, they sought a declaration (in the event the Court found a lack of testamentary capacity by 2007) that the 2005 will was valid and that it should be probated.
[23] Simon and Bridget, although not named as defendants, also entered appearances through counsel. They stated that they did not oppose Nicholas’s claim, but appeared in order to preserve their rights. Through counsel they submitted that they should be joined as parties, which occurred at the first case management conference.
[24] The executors’s solicitors proposed that the Court appoint counsel to represent the grandchildren, which was attended to at the first case management conference. Along with Simon and Bridget, they also suggested that the Court allocate a judicial settlement conference against the background of discussions which had been taking place to explore a resolution of the dispute.
Discussions to resolve testamentary issues continue and conclude
[25] I dealt with the case management. I recorded in the first case management
Minute:
Counsel have put before me at the conference information as to previous negotiation between the parties. There appears to be little distance between the parties, particularly having regard to the value of this estate.
[26] I recorded the willingness of Simon and Bridget to recognise the equal sharing for the three children in terms of the 2005 will and further the willingness of all three children to honour the $50,000 legacies so that they would apply even were the 2005 will probated.
[27] I then recorded what was emerging as the sticking point for Nicholas. I did so in these terms:
[12] Mr McKechnie has indicated that Nicholas seeks also some form of acknowledgement from Mr Mortlock to the effect that his firm failed in its solicitor/client obligation to the late Mrs Mather and her children. Mr Lester has pointed out that the Court of Appeal’s judgment in Knox v Till [1999] 2 NZLR 753 is against the proposition that a duty of care existed to the children of the client in these circumstances.
[13] Be that as it may, Nicholas would apparently seek in any negotiated resolution that Mr Mortlock’s firm contribute in some way (such as by foregoing costs of solicitor and counsel incurred to date). That is a matter for negotiation between the parties if they see fit. It is not an issue directly before the Court because Messrs Mortlock are sued in their trustee capacity only, not in their personal capacities as the solicitors who acted for Mrs Mather. Given the decision in Knox v Till, it is difficult to envisage any route by which Nicholas Mather could sue the Mortlocks in their solicitor/personal capacity.
[14] In any event, I intend by the directions I make to provide time for the parties to attend mediation. It will be for them individually to determine whether they bring into account any mediation matters strictly outside the scope of this present litigation.
[28] Given the willingness of the parties to continue to explore settlement, I adjourned the proceeding for two months to enable them to consider private mediation if they did not reach agreement on terms.
[29] Both in the lead-up to the first case management conference on 18 October
2012 and subsequently, the second-named defendant executor, Paul Mortlock, entered into correspondence with various parties including the grandchildren and other solicitors. By November 2012 he was circulating a draft deed including provision for some form of disclaimer or indemnity to the executors. Mr McKechnie expresses dissatisfaction with that correspondence describing some of it as “most irregular”. I do not regard it so.
[30] At the second case management conference, on 11 December 2012, I observed that it was clear that family members largely had agreement on the outcome of provision from Mrs Mather’s estate. I recorded that the matters to be finalised were “largely machinery” such as the precise identity of the executors and the identity of the trustees for the grandchildren.
[31] Nicholas’s wish to obtain a contribution from the Mortlocks personally in relation to their involvement with Mrs Mather’s wills continued to be an issue. I recorded the Court’s concern in relation to Nicholas’s position:
While I accept there should be a final opportunity for Mr McKechnie to pursue that possibility further, the Court needs the plaintiff to understand that any unresolved issue which he may have with the Mortlocks in that regard should ultimately not hold up the resolution of this litigation.
[32] I adjourned the proceeding to a further case management conference in February 2013 to enable the parties time to complete a settlement of all issues and to document the settlement.
[33] At the subsequent conference on 19 February 2013 I was able to minute the file to the effect that the parties had been able to identify all the acceptable terms of a settlement subject only to the issue relating to costs which Mr McKechnie had been pursuing. I recorded:
The intention of the plaintiff to seek some form of financial contribution from Mortlocks as a firm will need to be reconsidered given the acceptability of the terms of a substantive settlement. In my Minute of 18 October 2012, I touched on some of the difficulties of any claim against Mortlocks, particularly in the context of this litigation. This now appears to be the only issue holding up resolution of the plaintiff’s claim, and counsel for other parties have appropriately signalled their concern at the holding up of settlement.
A consent order (incorporating the parties’ settlement)
[34] On 20 March 2013, the Court received from all counsel a joint memorandum recording that a settlement agreement had been reached. The Court was asked to consider the proposed terms of agreement and to make a consent order, which it did on 27 March 2013.
[35] Costs were not agreed and were to be determined upon the basis of memoranda filed.
Discussion
[36] It is important to stand back and to consider the essential nature of the issues as they existed around the time this proceeding was commenced.
[37] There was no contest between the adult beneficiaries as to testamentary capacity. Simon and Bridget accepted Nicholas’s desire that entitlements for the adults should proceed as under the 2005 will.
[38] The potential existed for the grandchildren to miss out on the 2007 legacies if the 2005 will was to be probated. However, the concessionary approach adopted by Simon, in particular, from an early point meant that the grandchildren’s interests were never likely to call for litigation.
[39] The way in which all the remaining terms of settlement (other than costs) came together promptly following the issue of the litigation reinforces the “largely machinery” observation which I made in the course of case management. It is true, and Mr McKechnie puts it as a complaint, that the defendant executors issued a statement of defence asserting as the first position the existence of testamentary capacity in 2007 and the validity of the final will. But, standing back, this cannot be seen in terms other than that the defendant executors were formally defending the last will. Their very first memorandum filed for case management purposes noted the appropriateness of scheduling a judicial settlement conference and noted the continuing exploration of resolution.
[40] The proceeding was therefore effectively parked from the outset and became simply the backdrop against which negotiations continued and were concluded with the making of the consent orders in March 2013.
[41] It is clear both from the concerns which Mr McKechnie repeatedly raised in relation to the issue of costs and recovery from the trustees by memorandum and from the email exchanges which have been provided that the issue which single-
handedly caused the most delay in reaching resolution was the pursuit of contribution from Mortlocks personally.
[42] The formal issuing of this proceeding and the appointment of counsel to represent the grandchildren was ultimately in the interests of, if not absolutely essential, to a successful outcome. Consent orders were thereby achieved. But for that benefit obtained through the issuing of the proceeding, I would have found there to be a case in relation to this proceeding for an award of costs against the plaintiff on the basis that the proceeding was being used for a collateral purpose. I conclude, for the reasons I have stated, that on the substantive testamentary issues which needed to be resolved, the parties were always capable of reaching an agreed resolution. The significant impediment to a complete resolution was the insistence (by those representing the plaintiff) on provision by Mortlocks of a sum by way of costs or other financial contribution.
[43] I view the proceeding in this case as essentially an appropriate mechanism by which the parties could ultimately obtain a resolution as to testamentary provision which they would have reached in any event.
[44] This is therefore not a case in which the primary principle that “costs follow the event” should be applied. In a sense, everyone has been the winner.
[45] Against that background, I turn to consider briefly the positions of the various parties. First of all there are the beneficiaries, being Nicholas as plaintiff and Simon and Bridget as second defendants. There were, as their respective pleadings indicated, issues to be resolved with the will. While one approach might be to leave costs where they lie as between those parties, that would mean that Nicholas would bear the entirety of his side of the costs whereas Bridget and Simon would share their side of the costs. In the circumstances, I consider it just that to the extent it is appropriate to allow recovery of items under Schedule 3 of the High Court Rules, there should be an order for costs to be recovered from the estate on a 2B basis by the plaintiff (one set) and by the second defendants (one set together) respectively. Given the monitoring nature of the Court’s role, it is not appropriate to allow for all memoranda filed and all attendances. Instead, I certify in the case of the plaintiff for
Item 1 (commencement of the proceeding); Item 10 (once for the first case management conference); Item 13 (twice for subsequent conferences) and Item 28 (obtaining judgment without appearance). In the case of the second defendants, I certify for Item 2 (commencement of the defence); Item 10 (once for first case management conference); and Item 13 (twice for subsequent case management conferences). In each case, the party is entitled to its reasonable disbursements, to be fixed by the Registrar if there is any dispute. In relation to the entire award to each party, the costs and disbursements will be ordered to be paid out of the estate.
[46] I turn then to the defendant executors. I do not regard the defence which they filed as inappropriate. It was a formal defence. It was followed very shortly afterwards by the clearest indication to the Court that the defendant executors considered that the proceeding was capable of resolution (through judicial settlement conference or otherwise). The proceeding was indeed settled without the further steps which normally accompany litigation.
[47] Mr McKechnie referred to a decision of the England and Wales Court of Appeal in Shovelar v Lane.1 He referred to the case for the principle that for litigation costs to be recovered by the executors from the relevant estate the costs needed to have been reasonably and properly incurred. The executors in Shovelar’s case had been ordered following a hearing of hostile litigation to pay the plaintiff’s costs without resort to the estate. Mr McKechnie, while not pursuing an order that
the defendant executors pay costs to the plaintiff, submitted that this was an appropriate case for the first defendants to be ordered to meet their own costs of the litigation personally and not from the estate.
[48] The Shovelar case concerns the slightly different issue of reimbursement for costs payable to another party (rather than reimbursement of the executors’ own costs). The judgment itself clearly reveals the difference between the facts in Shovelar as found by the trial Judge and upheld by the Court of Appeal on the one hand and the facts of this case. Ward LJ, delivering the leading judgment, said of the
executors:2
1 Shovelar v Lane [2011] 4 All ER 669 (CA).
2 At [49].
I have some sympathy for the executors because it was, as the judge said in para 44 of her judgment ‘quite proper to protect the estate’ and quite proper, therefore, to put in some holding defence, but sadly the pleadings filed do not reflect any neutrality. They engaged in adversarial litigation …
[49] In this case, the defendant executors’ defence was plainly a holding defence.
They correctly anticipated the completion of a negotiated settlement process.
[50] It is appropriate that the Court not interfere with the executors’ entitlements to indemnity in the administration of the estate. No order is required in relation to their entitlement.
[51] To the extent that the defendant executors sought an order for costs as against the plaintiff, my earlier observations as between the plaintiff and the second defendants apply equally. I do not consider it just to award costs in favour of the estate against the plaintiff.
[52] Finally, I turn to the costs of counsel for the grandchildren. Those are properly payable out of the estate and there will be an order accordingly. The determination of whether the costs requested by Mr Wallace are reasonable is in the first instance a matter for consideration by the trustees, but the Court will reserve leave for a determination of appropriateness if there is any issue in that regard.
Orders
[53] I order:
(a) The plaintiff and the second defendants respectively are to have their costs on a 2B basis and their disbursements, the quantum to be fixed by the Registrar if not agreed, to be paid out of the estate of Jennifer Mary Mather upon the basis of the items identified at [45] above.
(b)The reasonable costs and disbursements of counsel for the grandchildren on a solicitor and client basis are to be paid to him from the estate of Jennifer Mary Mather, with leave reserved to Mr Mather
to have the Court fix his reasonable costs and disbursements if there is any issue between the parties in that regard.
Associate Judge Osborne
Solicitors:
M S McKechnie, Barrister, Rotorua
Mortlocks Lawyers, Christchurch
Counsel: D M Lester, Barrister, Christchurch
Anthony Harper, Christchurch
M J Wallace, Dunedin
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