Mumby v Mumby
[2016] NZHC 2836
•25 November 2016
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2014-488-000012 [2016] NZHC 2836
BETWEEN NEIL ROBERT MUMBY AND CHERIE
KAREN CARNEGIE Plaintiffs
AND
BRETT JAMES MUMBY AND NEIL ROBERT MUMBY
First Defendants
BRETT JAMES MUMBY Second Defendant
Last submissions: 29 July 2016 Judgment:
25 November 2016
JUDGMENT OF COURTNEY J
This judgment was delivered by Justice Courtney on 25 November 2016 at 4.00 pm
pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date………………………..
MUMBY v MUMBY [2016] NZHC 2836 [25 November 2016]
Introduction
[1] In this proceeding the plaintiffs, Neil Mumby (Neil) and Cherie Carnegie (Cherie), challenged the validity of the will of their mother, Glennys Mumby (Glennys), on the ground that either she did not know and approve its contents or that the will was the product of undue influence by their brother Brett Mumby (Brett). In addition, they brought a claim under the Family Protection Act 1955. I found that Glennys knew and approved the contents of her will and that Brett had not exerted undue influence over her. I found that there had been a breach by Glennys of her duty to Neil, which resulted in a modest adjustment in his favour. Cherie’s claim failed.
[2] The issue of costs now falls to be considered and a number of difficult issues arise, the most significant of which are whether some or all of the costs should be paid from the estate and whether the fourth sibling, Glenda Mumby (Glenda), who was not a party but was represented at trial, should be entitled to costs.
Should costs be met from the estate?
Relevant principles
[3] All matters as to costs are at the discretion of the Court,1 though this discretion must be exercised in a principled way in accordance with Part 14 of the High Court Rules.2 The usual starting point is that the party who fails ought to pay costs to the party who succeeds.
[4] In estate litigation, however, there is a longstanding practice of awarding costs out of the estate and on a solicitor/client basis. The principles underlying this practice were summarised in Re Paterson (deceased):3
(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
1 High Court Rules, r 14.1.
2 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [16].
3 Re Patterson (Deceased) [1924] NZLR 441 (SC) at 442–443; citing Mitchell v Gard (1863) 3
Sw & Tr 275 and Spiers v English [1907] P 122.
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 costs.
(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.
[5] These principles have been consistently applied in New Zealand4 and were described by the Court of Appeal in Woodward v Smith as emphasising the High Court’s entitlement to award costs in probate proceedings in such manner as achieves justice between the parties.5 Despite the consistent application of these principles, however, parties ought not to be encouraged into unmeritorious litigation by the expectation that costs will be met from the estate. In Shovelar v Lane the UK Court of Appeal cited the following passage as reflecting contemporary thinking on the well established principles:6
… it is I think fair to say that the trend of the more recent authorities has been to encourage a very careful scrutiny of any case in which the first exception is to apply, and to narrow rather than extend the circumstances in which it will be held to be engaged. There are at least two factors which I have in my judgment contributed to this change of emphasis. First, less importance is attached today than it was in Victorian times to the independent duty of the Court to investigate the circumstances in which a will was executed and to satisfy itself as to its validity. Secondly, the courts are increasingly alert to the dangers of encouraging litigation, and discouraging settlement of doubtful claims at an early stage, if costs are allowed out of the estate to the unsuccessful parties.
[6] I consider that this must also reflect the current position in New Zealand.
[7] In family protection claims there has also been a longstanding, though not invariable, practice of ordering the solicitor/client costs of all parties to be paid out of the residue of the estate.7 Reasons for departing from this practice may include
the size of the estate if a costs order would unfairly affect the residuary
4 Winterburn v Wilson [2016] NZHC 2687; Harris v Taylor [2016] NZHC 483; Wilson v Donnellan [2014] NZHC 2876; Nijsse v Public Trustee CIV-2002-404-1618, 6 July 2004; Fraser v Chalmers (1997) 11 PRNZ 348 (HC); In Re Neil HC Auckland P3102/91, 17 Dec 1992.
5 Woodward v Smith [2009] NZCA 215 at [73].
6 Shovelar v Lane [2011] EWCA Civ 802 at [34], citing from Kostic v Chaplin [2007] EWHC
2909 (Ch). Whata J’s comments in Wightman v Public Trust [2015] NZHC 1091 declining to follow Shovelar were directed towards the question of costs in a family protection claim rather than the principles relating to probate litigation.
7 See e.g. Ormsby v Selm [2016] NZHC 484; Wightman v Public Trust [2015] NZHC 1091; Wood- Luxford v Wood [2012] NZCA 377, [2013] 1 NZLR 31; Wood Luxford v Wood [2013] NZSC
153, [2014] 1 NZLR 451; Paewai-Kohe v Paewai [2014] NZHC 3137; Public Trust v Bristow- Brown [2014] NZHC 2497; Woodward v Smith [2009] NZCA 215; Keelan v Peach CA81/02,
12 May 2003; Re Allardice (1909) 29 NZLR 959 (CA); Re Williamson [1954] NZLR 288 (CA).
beneficiaries.8 In Re Miller Rodney Hansen J went further, expressing the view that it was desirable that the prospect of an adverse costs award should operate as an incentive to settlement in appropriate cases and that parties who were sui juris and active contestants in the litigation should generally expect costs to follow the event.9
I am not satisfied that this reflects the correct position. Naturally, claimants should not be encouraged into litigation by the expectation that costs will be met from the estate. But the Court’s discretion to depart from the usual practice achieves that end. In Wightman v Public Trust Whata J described the Court as standing in the shoes of the testator or testatrix to secure the proper discharge of his or her moral duty to
qualifying beneficiaries.10 The practice of meeting costs from the estate reflects that
purpose.
[8] This case involved both a challenge to the will and a family protection claim. In my view justice does not necessarily require that each party seeking costs be treated the same. I therefore address Brett’s, Neil’s and Glenda’s claims for costs separately, applying the principles that I have discussed above as appropriate. In each case I address the quantum of the costs sought and the question whether, and to what extent, those costs ought to be met from the residuary estate.
[9] The current value of the residuary estate is approximately $400,000. As a result of my judgment, the residuary estate, together with the value of the Awanui property ($135,000 at the date of trial), is to be split equally between Neil, Cherie and Glenda.
Costs on the probate action
Costs claimed by Brett
[10] Neil and Cherie accept that Brett is entitled to costs, having successfully defended the challenge to validity of the will. He seeks indemnity costs ($90,696) or, alternatively, costs on a 2B scale with an increase to 2C for trial preparation ($67,313) or alternatively, costs on a 2B basis ($52,818). He is neutral as to whether the costs are paid from the residue of the estate but if they are, he prefers that this be
done without reducing Glenda’s interest as a residuary beneficiary.
8 Bones v Wright [2013] NZHC 2093.
9 Re Miller (2001) 20 FRNZ 459 (HC).
10 Wightman v Public Trust, above n 6, at [22].
[11] This proceeding was classified as category 2 at the first case management conference though no time band was ever allocated. Mr Magee, for Brett, submitted that although the proceeding was not legally complex significant work was required for preparation because of the need to review and transcribe the diaries kept by Glennys’ late husband, Cecil Mumby, which dated back to 1990 and for that reason sought to have costs assessed as 2B for most steps in the proceeding but 2C for trial preparation.
[12] I do not accept that the preparation in this case was unduly onerous to the point of justifying a 2C calculation. It is true that the review and transcription of Cecil’s diaries would have been time consuming, but such evidence is very common in cases of this kind and the amount of it was not excessive.
[13] Brett has also sought certification for second counsel, which Neil and Cherie resist. This was a five-day trial that involved a number of witnesses and junior counsel was certainly justified.
[14] Brett has sought indemnity or costs on the basis that the allegation that Glennys did not know or approve the contents of her will was entirely without merit and that the cause of action based on undue influence involved serious personal attacks against his character that were motivated by dislike of him. Neil and Cherie oppose the making of either order on the basis that the threshold for such an award set out in r 14.6 has not been reached; indemnity costs are reserved for bad or very
unreasonable conduct.11
[15] I do not consider that this case warrants indemnity costs. However, I do consider that there should be some uplift for two reasons. First, the assertion that Glennys did not know or approve the contents of her will was never tenable. Neil and Cherie were fully aware of the circumstances in which the will was executed and ought not to have advanced this allegation. Secondly, aspects of the undue influence case were needlessly pursued. I have particularly in mind the evidence relating to Glennys’ complaint (which I found to be untrue) that Brett nagged her to move out
so that he could live in the farmhouse with a girlfriend. Before the trial Brett
11 Bradbury v Westpac Banking Corp, above n 11; Prebble v Huata [2005] NZSC 18, [2005] 2
NZLR 467 at [6].
provided his brief and a brief from the woman named as the girlfriend denying the allegation. The slightest level of enquiry would have confirmed that the allegation insofar as that woman was concerned was unfounded. Nor was there any evidence adduced of any other woman to whom Glennys could have been referring. Even though it ought to have been clear that this allegation could not succeed, it was not abandoned until closing.
[16] Likewise, the allegation of Brett spitting in the house had little prospect of success. There was only one witness to this alleged behaviour, Belle Mumby, and only one occasion could be proved. Given the unchallenged evidence regarding Brett’s medical condition this allegation was unnecessary and hurtful. I impose an uplift of 10 per cent from scale costs for these matters. Scale costs, at 2B, with second counsel, is $54,274.38. The uplift takes that to $59,701.81.
[17] Neil seeks a 16.5 per cent reduction in the costs awarded to Brett on account of his success on the family protection claim. This is not appropriate because Neil is seeking costs separately in relation to that aspect.
Should the costs be met from the estate?
[18] Although Neil and Cherie failed to prove undue influence, the assertion did have an evidential foundation in the file notes made by the legal executive who prepared the will and in statements made by Glennys herself. I found that the file notes were, to some extent, unreliable and that some of Glennys’ statements were untrue. But in the circumstances it could not be said that the challenge based on undue influence was unreasonable. This aspect of the case therefore falls within the second category described in Re Paterson, which would justify costs being met by the estate.
[19] On the other hand, as I have noted, there was no merit in the assertion that Glennys did not know and approve the contents of her will and some of the allegations made in support of the undue influence claim ought not to have been made or ought to have been abandoned earlier. These aspects added unnecessary cost to the trial, which I have recognised in the uplift. However if those costs are met from the estate then Glenda, who was not a party to the way the case was run, will be affected. I do not consider that this is just.
[20] Taking all of these points into account I consider that the interests of justice are best served by allowing 50 per cent of the costs payable to Brett to be met from the residuary estate with the balance to be met by Neil and Cherie personally.
Neil and Cherie: costs on the family protection action
[21] Neil succeeded in his family protection claim. He seeks 2B costs of $50,183 plus $110 disbursements, a total of $50,293. Ordinarily he would be entitled to such costs. Cherie failed in her family protection claim and would ordinarily be liable to pay costs. But the position is complicated because Neil and Cherie shared representation (and, I infer, the cost of the trial). An award of scale costs to Neil would defeat the purpose of scale costs as a reasonable contribution to what would be a reasonable cost to him. Moreover, Neil’s success was very modest and required little, if any, additional evidence; the evidential foundation for the family protection claim already existed in the evidence required for the undue influence cause of action. For these reasons I consider that the costs to Neil on the family protection claim ought to be $12,545, this figure to be met from the residuary estate.
Glenda Mumby
[22] Glenda was a witness in the proceeding and not a protagonist. She was directed to be served but not joined. She was, however, represented throughout the trial and her counsel made submissions both in closing and in relation to costs. She seeks 2B costs of $29,436 plus disbursements and seeks to have those costs met by Neil and Cherie, not out of the estate, which she says will unfairly affect her. Glenda’s claim for costs is strongly resisted by Neil and Cherie. They assert that her conduct over a proposed settlement in 2015 disentitles her to costs, either from the estate or from them personally.
[23] The proceedings were originally scheduled for trial on 16 March 2015. Just before the hearing Neil, Cherie and Brett reached an agreement that was to be in full and final settlement of all their claims but which required Glenda to agree to the terms of it. The terms of the proposed settlement were known to the Court because a copy of the handwritten draft agreement was tendered to Andrews J as the trial Judge. It provided for a cash payment of $170,000 by Brett to Neil and Cherie who
would then share in that payment and the entire residue of the estate. Glenda would forego her entitlement to any part of the residue.
[24] In anticipation of Glenda signing the agreement the fixture was vacated and the matter listed for review in April 2015. Glenda initially indicated that she would take legal advice before signing the agreement but by mid-April 2015 she had not confirmed her position. In a minute of 24 April 2015 Andrews J recorded that Brett’s solicitor was to write to Glenda’s solicitor seeking a response. Neil and
Cherie signalled their intention to join her. On 11 May 2015 Glenda filed a notice of appearance recording that she did not oppose Brett’s claim but reserved her right to oppose any award out of her share of the estate.
[25] On 14 July 2015 Brett’s counsel filed a memorandum recording that he had written to Glenda’s solicitors on 29 April, 20 May and 4 June 2015 and had received no response apart from the 11 May notice of appearance reserving rights. In the circumstances, a further fixture date was sought.
[26] On 7 August 2015 counsel (including counsel for Glenda) filed a joint
memorandum recording that Glenda’s notice of appearance reserving rights dated
11 May 2015 had been filed as a consequence of Neil and Cherie indicating their intention to join her as a party. A timetable was sought which included Glenda’s filing of an affidavit by 14 August 2015. Glenda’s affidavit dated 6 August 2015 described the circumstances surrounding her involvement in the settlement agreement. She said:
… When Brett rang me at midday on the first day of that trial and asked me if I agreed with what we had talked about together, I assumed he simply meant my quarter share of the farm into the pot and dividing it amongst the children. I did not have an issue with that. I assumed I would still be getting a cash legacy from under the Will …
That evening when Brett’s solicitor called, it became apparent that, again we were operating from different understandings as the settlement agreement basically meant I had no cash component alone and was receiving nothing. If I was aware of the exact details of the settlement agreement I would never have agreed to it and would have said so from the outset.
Brett’s lawyer said that she would forward paperwork to record the
settlement later that evening.
It was only that evening when the picture became very clear that I put my foot down and refused to settle.
[27] Mr Wood, for Neil and Cherie, was highly critical of Glenda’s conduct. He
submitted that her affidavit of 6 August 2015 showed that as early as the evening of
16 March 2015 (the day the settlement agreement was reached) Glenda understood the terms of the settlement and had resolved not to settle on that basis but did not advise any of the parties of that and avoided all subsequent attempts to obtain a response from her as to whether and when she intended to sign the settlement agreement. The result was that the fixture of 16 March 2015 was lost. Moreover, it became inevitable that the plaintiffs would seek to join her into the proceeding to ensure that she was before the Court, with the consequence that she would need counsel to represent her.
[28] This view of events is not accepted by Glenda. Her counsel pointed out that, although she was not named as a party, Neil and Cherie’s claims and the proposed settlement affected her share of the residual estate. She was therefore entitled to protect her position by engaging counsel and being represented at trial.
[29] In my view Glenda was entitled to be represented at trial and, indeed, would have been unwise not to have her interests represented. This was a substantial piece of litigation and it must have been apparent to all parties that there was a risk that costs would be required to be met from the estate, whatever the outcome. The residuary estate was not modest but the costs of a five-day trial could reduce it quite significantly if all solicitor/client costs were met from it. Moreover, each of the executors (Brett and Neil) had a personal interest in the proceeding. In these circumstances it would have been appropriate for Glenda to have been joined as a party from the outset under r 4.23 of the High Court Rules. The fact that she was not formally joined does not preclude her entitlement now as an interested party.
[30] Glenda’s failure to respond to the queries about the settlement agreement did, however, show poor judgment. The proper thing to have done would have been to advise what her position was rather than putting the other parties to the inconvenience of trying to determine what her position was. The only truly adverse effect was one of lost time; if Glenda was not prepared to settle on the proposed terms then the parties were always destined for trial and on the same issues as existed at the time of the previous trial. The delay would have entailed some level of
cost which is, however, properly addressed in a reduction of costs rather than being viewed as disentitling conduct.
[31] I therefore make a costs award in Glenda’s favour on a 2B basis with a reduction of 10 per cent to reflect the cost and inconvenience to the other parties in vacating the trial and resuming the following year. That produces a costs award of
$26,492.40 plus disbursements.
Should the costs be met from the estate?
[32] The undue influence cause of action was reasonably brought and one of the family protection claims succeeded, albeit to a limited extent. In these circumstances it is right that Glenda’s costs be met from the estate.
Result
[33] Brett is entitled to:
(a) costs of $59,701.81. Half of those costs are to come from the residuary estate. The other half Neil and Cherie are personally liable for, jointly and severally;
(b) disbursements of $1,456.38 to be met from the residuary estate.
[34] Neil is entitled to:
(a) costs of $12,545 to be met from the residuary estate;
(b) disbursements of $110 to be met from the residuary estate.
[35] Glenda is entitled to:
(a) costs of $26,492.40 all of which are to be met from the residuary estate;
(b) reasonable disbursements (if any), to be met from the residuary estate.
P Courtney J
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