Mattingley v Tolley

[2012] NZHC 30

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2011-476-000127 [2012] NZHC 30

BETWEEN  SANDRA MARY MATTINGLEY Plaintiff

ANDMARK CLIFTON TOLLEY First Defendant

ANDHUBBARD CHURCHER TRUST MANAGEMENT LIMITED AND FOOTES TRUSTEES LIMITED Second Defendants

Hearing:         26 January 2012 (On the Papers) Counsel:      S J Zindel for Plaintiff

J V Ormsby for First Defendant and First-Named Second Defendant

Judgment:      26 January 2012

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS ON COSTS

[1]      On 14 November 2011 the Court declined the plaintiff’s application to sustain a caveat she had registered over a property owned by the defendants.   Costs were reserved.     The  defendants  have  applied  for  costs;  the  plaintiff  opposes  the application.

[2]      The plaintiff is in receipt of legal aid.  Accordingly, the provisions of ss 45 and 46 of the Legal Services Act 2011 are relevant.  Section 45 provides:

45     Liability of aided person for costs

(1)     If  an  aided  person  receives  legal  aid  for  civil  proceedings,  that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

SANDRA MARY MATTINGLEY V MARK CLIFTON TOLLEY HC TIM CIV-2011-476-000127 26 January

2012

(2)     No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.

(3)    In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:

(a)   any conduct that causes the other party to incur unnecessary cost: (b)   any failure to comply with the procedural rules and orders of the

court:

(c)   any misleading or deceitful conduct:

(d)   any unreasonable pursuit of 1 or more issues on which the aided person fails:

(e)   any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:

(f)   any other conduct that abuses the processes of the court.

(4)     Any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person's liability.

(5)     If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person's liability.

(6)     If an order for costs is made against a next friend or guardian ad litem

of an aided person who is a minor or is mentally disordered, then -

(a)   that  next  friend  or  guardian  ad  litem  has  the  benefit  of  this section; and

(b)   the means of the next friend or guardian ad litem are taken as being the means of the aided person.

[3]      Section 45 is in identical terms to s 40 of the Legal Services Act 2000.

[4]      Subsection (2) prevents the Court from making an order for costs against the plaintiff unless it is shown that there are exceptional circumstances.   In Laverty v Para Franchising Ltd,[1]  McGrath J delivering the judgment of the Court said at paragraph [31]:

[1] Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA).

For circumstances to qualify as exceptional, however, they have to be “quite

... out of the ordinary”: Awa v Independent News Ltd [(No. 2) [1996] 2

NZLR 184] at page 186.

[5]      Later  in  the  same  paragraph  the  learned  Judge  stated  that  within  the parameters set out in ss (45 and 46) the Court has a discretion as to whether it should make an award of costs against an aided party and, if so, in what sum.

[6]      In Johns v Johns & Holloway,[2] Asher J said at paragraph [6]:

The word “exceptional” in itself has a clear meaning.  It must be something distinctly out of the ordinary which warrants the Court departing from the rule set out in (s 45(2)) ...

[2] Johns v Johns & Holloway HC Auckland CIV-2007-404-5101, 23 August 2007.

[7]      In the same case at paragraph [7] His Honour said:

Those who have been granted legal aid will have received it because they do not  have  available funds to  meet  the  funds  of  Court  proceedings.   The relevance of the means of the parties is referred to as a general consideration in (s 45(1)), and those means remain relevant even if there are exceptional circumstances.   Orders for costs against legally aided persons with no or small net assets may be of little value to the other party, and can have a particularly punitive aspect if the legally aided person’s financial position is such that an order for costs may result in their insolvency and bankruptcy. Thus the fact that there are exceptional circumstances is not the end of the matter, and the Court in deciding the amount of an award of costs must consider the means of the parties before fixing a figure.

[8]      Neither the plaintiff nor the defendants put before me any evidence as to their financial means, so the only information I have is the inference that might be drawn on the plaintiff’s financial circumstances, given that she is in receipt of legal aid.  It must first be determined whether there are exceptional circumstances warranting an order for costs against the plaintiff, under subs (2), and only if that test is met will it be necessary to refer the application back to the parties in order to determine the amount that is reasonable for the plaintiff to pay, in terms of subs (1).

[9]      In support of a submission that there are exceptional circumstances justifying an award of costs to the defendants, their counsel relied on two factors.   First he submitted that there had been an unreasonable pursuit of the claim (s 45(3)(d)), which he described as totally without legal merit, and one which should never have

been brought.   He submitted that a brief review of insolvency law would have revealed that as a matter of law the plaintiff had no standing to claim a caveatable interest and that it is established law that a remedial constructive trust, as distinct from an institutional constructive trust, cannot give rise to a caveatable interest until the trust is declared to exist by a court.

[10]     Secondly, he submitted that there was conduct which caused the defendants to incur unnecessary cost (s 45(3)(a)).  In this respect he referred to the application for discovery of documents prior to the application being heard.

[11]     In relation to the first of these points, there is, in my view, some justification for a view that the effect of the plaintiff’s insolvency on the claim she wishes to bring, and which she relied on to support her claim to a caveatable interest in the defendants’ land, had not been analysed to the extent it should have been.  I need add nothing further to the conclusions already stated in the judgment of 14 November

2011.

[12]     So far as the latter is concerned, I note the comments of the Associate Judge who dealt with the discovery application, but note also that there is no reference by him to the fact that the plaintiff was in receipt of legal aid for this application. Where  discovery  is  sought  in  a  circumstance  where  it  would  not  normally  be ordered, it is commonly the practice of the Court to indicate to parties that if an order is made and the result of the proceeding is unfavourable to that party, the full costs of discovery may well have to be borne.   Seen in that light the prediction of the Associate Judge on the possible incidence of the costs of the discovery she sought may be seen as a general indication conforming with accepted practice.   Further, there  is  no  indication  that  at  the  time  this  advice  was  given  by the  Judge  the provisions of s 45 had been brought to his attention.   For these reasons I do not accord any weight to the Judge’s observation.

[13]     I have considered the submissions of counsel, and all the facts of the case, which are discussed in detail in the judgment of 14 November 2011, to determine whether they amount to exceptional circumstances, as that phrase is to be understood (see  paragraphs  [4]  and  [6]  above).    In  my  view  the  circumstances  are  not

exceptional,  either  for  the  reasons  identified  by  counsel  for  the  defendants,  in combination, or in totality.

[14]     The application for costs is therefore declined as it does not meet the test in s 45(2) of the Legal Services Act 2011.

J G Matthews

Associate Judge

Solicitors: Zindels, Nelson

Wynn Williams & Co, Christchurch