Morley v Browne

[2019] NZHC 3170

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1587

[2019] NZHC 3170

UNDER

Part 19 of the High Court Rules and s 52 of the Trustee Act 1956

IN THE MATTER

of an application for vesting of land in existing trustees

BETWEEN

ROSS BRADEN MORLEY and VIVIENNE JUDITH MORLEY (nee HAMBLY) as

trustees of the WAIMANA TRUST Applicants

AND

SCOTT LAWRENCE BROWNE

Respondent

Hearing:	On the papers
Counsel	T J Herbert for the Applicants M Phillipps for the Respondent
Judgment:	4 December 2019

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 4 December 2019 at 10:30 a.m. pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:

Mr T J Herbert, Barrister, Auckland

Mr M Bright (applicants’ instructing solicitor), Johnston Prichard Fee Ltd, Auckland Mr M Phillipps, Vicki Ammunsen Trust Law Ltd, Auckland

MORLEY v BROWNE [2019] NZHC 3170 [4 December 2019]

[1]                 The applicants seek costs following withdrawal of their application for summary judgment by consent after the respondent provided an authority and instruction (A&I) form for transfer of the property in issue in the proceeding. As that obviated the need for the orders sought, the proceeding is at an end subject to the determination of costs.

[2]                 The parties proposed that the Court deal with costs on the papers, and Lang J made directions by consent for the filing of costs submissions.

Submissions

[3]                 The applicants seek costs on the basis that there should have been no need for them to bring their application had the respondent acted reasonably. The applicants say the respondent had retired as a trustee in July 2016, agreeing to transfer all assets, but the parties had then been in a dispute over a failed business venture. The respondent ignored a letter seeking the transfer before proceedings were issued, objected to the proceedings in correspondence, before signing the A&I form soon after his papers in opposition.

[4]                 The applicants submit that where a former trustee fails to transfer assets, there is a presumption that if proceedings have to be issued the former trustee pays their price.

[5]                 The applicants say costs on a 2B basis would be $14,579 plus disbursements of $1,073.50. The applicants seek a 50 per cent uplift on the basis that the respondent has contributed unnecessarily to the time or expense of the proceeding or a step in it by failing to comply with the Rules or with the direction of the Court, taking or pursuing an unnecessary step or an argument that lacks merit, and failing without reasonable justification to admit facts, evidence, documents or accept a legal argument.

[6]                 The applicants also say that an award of costs would fall outside the respondent’s indemnity from the Trust.

[7]                 The respondent opposes costs and, relying on his trustee indemnity, seeks an order that costs lie where they fall. The respondent says the applicants failed to take steps to vest the Trust assets and transfer titles upon the respondent’s retirement as trustee in July 2016, or subsequently until they demanded the respondent sign an A&I on 30 July 2019. Without consent from the mortgagee, the respondent would have been in breach of his obligations. The applicants failed to record the changes of trustees in the A&I form and precipitously issued  proceedings  in  August  2019. The respondent acted with alacrity by taking legal advice and providing the signed corrected A&I form by 30 September 2019. The respondent objects to the applicants’ characterisation in submissions, and without evidence, of the respondent as recalcitrant.

[8]                 The respondent characterises the case as a discontinuance and relies on Brodrick v Brodrick.1 That case also involved proceedings seeking property from a former trustee, who transferred the property during the proceeding. She did so in return for an indemnity. The plaintiffs discontinued. They sought to review the Associate Judge’s decision that costs lie where they fall. Lang J upheld that decision.

[9]                 The applicants filed a reply characterising the case as withdrawal not discontinuance. In relation to the lack of evidence, the applicants referred to the presumption that the loser generally pays, submitting that the burden of proof is on the loser.

Discussion

[10]              Whether the case is treated as a resolution in the applicants’ favour or a discontinuance, I consider costs should lie where they fall.

[11]              The cases relied on by the applicants are inapplicable.2 They involved costs against a former trustee who refused to transfer following Court vesting orders. They reflect the orthodox principle that costs follow the event. A plaintiff has no entitlement to costs when a proceeding is otherwise resolved. The position is different under

1      Brodrick v Brodrick [2015] NZHC 1038.

2      Ooi v Ting [2016] NZHC 2583; and Kimber v Carver HC Hamilton CP37/97, 9 October 1998.

r 14.8 in relation to fixing costs on interlocutory applications (except summary judgment) when they are “determined”, as that can be by agreement or withdrawal by leave as well as Court decision.3 Rule 14.8 does not apply here.

[12]              Further, a party claiming increased costs carries the onus of persuading the Court that such an award is justified. The applicants have not done so. The applicants’ criticisms to a significant degree relate to the respondent’s conduct before the proceeding was commenced. Generally, costs are to reflect how parties have acted during litigation, not before it.4

[13]              If treated as a discontinuance, there is a presumption in favour of awarding costs to a defendant against whom a proceeding has been discontinued but it may be displaced if there are just and equitable circumstances not to apply it.5 As the Court of Appeal has said,6 the approach is that the Court does not lightly allow a plaintiff to displace the presumption, but the Court is prepared, in a clear case, to recognise that the plaintiff may have achieved its end by other means or otherwise discontinued for reasons not connected to the merits. Also, the Court may consider, in a clear case, why the parties brought and defended the proceeding, and whether steps taken in it were reasonable. This recognises that the interests of justice occasionally may require that such matters be taken into account. It is not to invite a general inquiry into the reasonableness of the parties’ conduct. A plaintiff cannot generally displace the presumption by showing that it had some merit on its side. The Court ordinarily refuses to consider the merits unless they are immediately apparent. The reluctance to enquire into the merits or conduct reflects the objectives of the rules, which allow a plaintiff by discontinuance to end its proceeding unilaterally and fix its liability for costs at that point in a predictable way. To conduct a post-discontinuance inquiry into the merits or the reasonableness of the parties’ conduct is ordinarily contrary to these objectives.

3      Ip v Ip [2016] NZHC 528 at [12]; Winton v Winton [2018] NZHC 486 at [16]-[17]; and SKP Inc v Auckland Council [2019] NZHC 1665 at [5].

4      Paper Reclaim Ltd v Aotearoa international Ltd [2006] 3 NZLR 188 (CA) at [160]; and Paper Reclaim Ltd v Aotearoa international Ltd [2007] NZSC 26, [2007] 3 NZLR 169 at [40]-[41].

5      Kroma Colour Prints Ltd v Tridonicato NZ Ltd [2008] NZCA 150 at [12].

6      Powell v Hally Labels Ltd [2014] NZCA 572 at [20]-[24].

[14]              Here, I recognise that the applicants achieved their end by consent rather than judgment and therefore I consider they have displaced the presumption. But it does not follow that the respondent should pay costs. As indicated, post-discontinuance inquiries into the reasonableness of the parties’ conduct in order to assess the applicants’ claim for costs (or the respondent’s entitlement to be indemnified by the Trust) would be inconsistent with the objectives of the cost rules. It would also be unsatisfactory to do so based on the parties’ written submissions with very limited evidence.

Result

[15]There is no order as to costs.

Gault J