Murphy v Murphy

[2013] NZHC 2145

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2010-463-797 [2013] NZHC 2145

BETWEEN	CHEYNE DENNIS MURPHY Plaintiff
AND	ROBYN STEPHANIE MURPHY Defendant

Hearing:	On the Papers
Counsel:	J Wynyard for Plaintiff T Grimwood for Defendant
Judgment:	22 August 2013

JUDGMENT (NO. 3) OF TOOGOOD J [COSTS]

This judgment was delivered by me on 22 August 2013 at 4:45 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

MURPHY v MURPHY [2013] NZHC 2145 [22 August 2013]

Result

[1]      This  judgment  concerns  an  application  for  costs  against  a  legally-aided plaintiff1 or, alternatively, an order specifying the amount of costs which would have been ordered had the plaintiff not been in receipt of legal aid.2

[2]      For the reasons given below, I decline to make an order for payment of costs, but fix the costs that would otherwise have been ordered at $37,810.

Background

[3]      On 15 February 2013,3  I determined a property ownership dispute under the Property Law Act 2007 (“the PLA”) between a mother (the defendant) and son (the plaintiff), holding that the mother should become the sole registered proprietor of the property in dispute but that she should pay her son $13,500 by way of compensation under s 343(a) of the PLA.  I requested the parties to file memoranda about the form of the orders to be made to give effect to the judgment and reserved the question of costs.  I observed that, as the parties had each had a measure of success, it might be appropriate to let costs lie where they fell but gave leave for the filing of costs memoranda.

[4]      After  receiving  further  submissions  from  counsel,  I  issued  a  second judgment4 in which I made orders under s 343(g) of the PLA directing the parties to undertake the necessary conveyancing to give effect to the principal judgment.

[5]      The defendant sought an award of costs against the plaintiff notwithstanding that the plaintiff had received legal aid to support his claim.  I recorded in the second judgment that I had been informed by counsel for the defendant that a Calderbank offer was made to the plaintiff approximately a month prior to the commencement of the hearing “for a sum significantly greater than the  plaintiff ’s final award”.   I

reserved leave for counsel to make further submissions and in particular to address

1      Legal Services Act 2011, s 45(2).

2      Ibid, s 45(5).

3      Murphy v Murphy [2013] NZHC 217.

4      Murphy v Murphy [2013] NZHC 1151.

the Calderbank offer in the context of the criteria for establishing “exceptional circumstances” under s 45(2) of the Legal Services Act 2011 (“the Act”), including the examples given in s 45(3).

The legislative provisions

[6]      Section 45(2) of the Act provides that an award of costs may be made against the   defendant   only   if   “the   Court   is   satisfied   that   there   are   exceptional circumstances.”  Section 45 of the Act provides, so far as is relevant:

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.

(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.

....

Defendant’s submissions

[7]      Mr Grimwood seeks costs for the defendant calculated on a category 2B basis.  He says the defendant succeeded in defeating the plaintiff’s claim for half the approximately $150,000 equity in the property.   Against the plaintiff’s claim for about $75,000, he was awarded only $13,500.

[8]      Mr Grimwood has calculated that the costs to which the defendant would be entitled, if the plaintiff was not legally aided, would be $37,810 made up as follows:

Action	Time allowed by HCR	Time claimed	Cost
Statement of defence	2 days	2	$3,980
Amended statement of defence	0.6 days	0.6	$1,194
First case management conference	0.4 days	0.4	$796
Discovery	2.5 days	2.5 days	$4,975
Inspection of documents	1.5 days	1.5 days	$2,985
Writing submissions	1.5 days	1.5 days	$2,985
Hearing	Time of hearing measured in quarter days	3 days	$5,970
Preparing briefs	2.5 days	2.5 days	$4,975
Preparing list of issues, authorities and common bundle	2 days	2 days	$3,980
Preparation for hearing	3 days	3 days	$5,970
Total	19 days	$37,810

[9]      It is not argued that the failure to accept the defendant’s Calderbank offer would justify an award of increased costs under r 14 of the High Court Rules.

[10]     Mr Grimwood submits that there are “exceptional circumstances” justifying

an order requiring the plaintiff to pay costs:

(a)      because the plaintiff rejected a fair and reasonable Calderbank offer of $30,000, more than twice the amount eventually awarded to the plaintiff  by  the  Court.     He  says  that  the  refusal  to  accept  the defendant’s offer amounted to “an unreasonable refusal to negotiate a settlement” in terms of s 45(3)(e); and

(b)because the plaintiff’s rejection of the defendant’s offer of $30,000 was to make a counter-offer for $55,000 and that the defendant was required to “incur unnecessary cost” in defending the claim, thereby meeting the criterion in s 45(3)(a).

[11]     Mr Grimwood says that the costs incurred by the defendant after the rejection of her Calderbank offer, calculated on a category 2B basis, amounted to $23,880.

Plaintiff ’s submissions

[12]     For the plaintiff, Mr Wynyard refers to my indication that each of the parties has succeeded to an extent which would justify leaving costs to lie where they fell. He says that the Court’s consideration should be confined to determining whether the rejection of the Calderbank offer amounts to “exceptional circumstances”.   In that regard he argues that there was nothing in the conduct of the plaintiff requiring the defendant to incur unnecessary costs.  He points out that the evidence at trial was that the plaintiff first raised the issue of ownership of the property with the defendant in 2004 and then again in 2010 and that the matter could well have been settled earlier if the defendant had co-operated.

[13]     He  argues  that  the  plaintiff  complied  with  all  timetabling  directions  and orders of the Court so that there was nothing in his conduct of the proceeding to

cause the defendant to incur unnecessary costs.  Mr Wynyard pointed out that it had been the defendant who failed to comply with directions for filing and serving lists of documents.  Mr Wynyard also submits that the plaintiff had not engaged in any misleading or deceptive conduct, that the claim was reasonably brought, and that it achieved a measure of success.

[14]     As to the response to the defendant’s Calderbank offer, Mr Wynyard says the plaintiff did not ignore the offer or reject it out of hand but made a counter-offer and told  the  defendant  subsequently  that  he  remained  interested  in  exploring  and pursuing a negotiated settlement.  There was no response from the defendant.  He says that the counter-offer was not made on a “take it or leave it” basis but was one based on a realistic assessment, which was explained, whereas the defendant’s settlement figure of $30,000 was not justified by any analysis of the facts or law.

Discussion

Exceptional circumstances

[15]   While the Courts have considered what might constitute “exceptional circumstances” in the context of costs claims against legally-aided litigants,5 no intrinsic test has evolved and each case has been determined on its own facts.6

[16]     Some reference may be made to other cases, however, by way of example.  In Caldwell v Gaze Burt,7  a case decided under the 1991 Act, Thorp J considered that exceptional circumstances could include cases where the Court believed the claim to be wholly without merit; where the claim appeared to be grossly exaggerated, particularly if a reasonable offer had been made and rejected; and where a legally aided person was in fact found to have substantial private means.

[17]     In Lavery v Para Franchising Ltd, 8  the Court of Appeal said it would not confine the range of exceptional circumstances to cases where the legally-aided

5      See Mason v Glover [2012] NZHC 1313 at [11] – [17].

6      Awa v Independent News Auckland Limited [No. 2] [1996] 2 NZLR 184, 186 (HC).

7      Caldwell v Gaze Burt (1994) 7 PRNZ 491 (HC).

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

party’s conduct of the litigation warranted a mark of disapproval.  The Court noted the possibility of a legally-aided party who was quite wealthy or one who might succeed against one of multiple parties and accordingly be in a position to meet or pass on an award of costs.

[18]     Asher J concluded in Johns v Johns that costs should be made against a legally-aided plaintiff in a case where the plaintiff had shown exceptional disregard for orders and directions made by the Court and the need to bring litigation to a conclusion.9     In Smyth v Wadland,10  the Court of Appeal found exceptional circumstances to exist where there had been reprehensible conduct by the appellant during the course of events that led to the litigation and the proceedings lacked any merit.

[19]     Mr Grimwood argues that in refusing to accept a Calderbank offer which proved to be more than double the amount awarded to the plaintiff by the Court, and making a counter-offer of an even greater amount, the plaintiff has refused to negotiate  a  settlement11    and  has  thereby  caused  the  defendant  to  incur  the unnecessary cost  of defending the claim,12  at least from the date on which the

defendant’s Calderbank offer was made.

[20]     The examples given are not definitions but merely a list of the types of conduct  the  Court  may  take  into  account  in  determining  whether  there  are exceptional circumstances.   I do not think the plaintiff’s conduct in relation to the Calderbank offer is properly characterised as a refusal to negotiate a settlement. Although the plaintiff’s counter-offer proved to be well in excess of the amount the defendant was found to be required to pay to him by way of compensation, the

$55,000 figure bore a relationship to the amount which the defendant argued at trial, on the basis of an analysis of payments he had made in respect of the property13 plus an allowance for costs.  The figure was also supported by an explanation when it was

proposed by the plaintiff ’s solicitors.  While that sum offered does not amount to a

9      Johns v Johns HC Auckland CIV-2000-404-5101, 23 August 2007.

10     Smyth v Wadland [2009] NZCA 189.

11     Legal Services Act 2007, s 45(3)(e).

12     Ibid, s 45(3)(a).

13     Murphy v Murphy, above n 3 at [52].

significant compromise on the amount he sought at trial, the plaintiff ’s solicitor’s email of 27 August 2012 expressed a willingness “to continue to explore negotiations further”. That conduct is not of the same nature as the unreasonable conduct described in the examples given at [16]-[18] above.

[21]     The  concept  of  unreasonableness  as  described  in  the  examples  given  in s 45(3) needs to be read in the light of the test that the circumstances must be “exceptional”.  The factors listed in s 45(3) suggest that a party must have taken an unreasonable position in bringing or defending a claim, or have demonstrated a failure to adopt a reasonable appreciation of litigation risk, or behave in a manner amounting to an abuse of the Court. Those features are not present in this case.

[22]    In light of my conclusion that the plaintiff’s settlement approach was not unreasonable in the context of s 45(3), the suggestion that the defendant was thereby put to unnecessary expense also falls away.

[23]   For  these  reasons  I  am  not  satisfied  that  there  are  “exceptional circumstances” which justify an order for costs against the plaintiff under s 45(2) of the Act.

Order specifying otherwise appropriate costs award

[24]     Section 45(5) of the Act provides that if an order for costs is not granted because of the operation of the section, an order can be made specifying what order for costs would have been made but for the fact that the party was legally aided.  In this case, the sum sought is $37,810 calculated on a category 2B basis.  Mr Wynyard did not dispute the calculation.

[25]     The plaintiff sought, at best, a finding that he was entitled to a half-share of an approximately $150,000 equity in the property, or $75,000.  In the circumstances, the defendant’s offer of $30,000, a reasonable period before trial, represented a realistic appreciation of the likely cost of continuing litigation in the High Court, in a case which would otherwise have been well within the jurisdiction of the District

Court.  The defendant was put to additional cost in preparing for and running the case at trial after her offer was rejected.

[26]     Accordingly, I make an order specifying that an order for costs in the sum of

$37,810 would have been made against the plaintiff with respect to the proceeding if s 45 of the Act had not affected the plaintiff’s liability for costs.

.......................................

Toogood J