Murrell v Hamilton
[2014] NZHC 1459
•26 June 2014
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2012-412-000336 [2014] NZHC 1459
BETWEEN JANE MAREE MURRELL
Plaintiff
AND
WILLIAM ELLIOT HAMILTON First Defendant
AND
GEOFFREY MIRKIN Second Defendant
AND
W E H TRUSTEE LTD Third Defendant
Hearing: On the papers Appearances:
L A Andersen for the Plaintiff
D R Tobin for the First and Third Defendants
Second Defendant appears in PersonJudgment:
26 June 2014
JUDGMENT OF PANCKHURST J [RE COSTS]
Introduction
[1] Ms Murrell made a constructive trust claim after the failure of a de facto relationship. The claim failed at the last hurdle, as I held that the claim could not be sheeted home against the trustees of the family trust which owned the house property in question.
[2] Ms Murrell, however, succeeded in relation to a number of prior issues, including that:
MURRELL v HAMILTON [2014] NZHC 1459 [26 June 2014]
(a) she had made contributions to the property,
(b)she had a reasonable expectation of an interest in the property based on the actions of her partner, Mr Hamilton,
(c) the property had been sold at a profit,
(d) her interest was 15 per cent of the profit, and
(e) Mr Hamilton, in his personal capacity, should have recognised the
legitimacy of his former partner’s claim.
However, the conscience of the other trustee (the second defendant) was not similarly affected, not therefore the trust and for this reason the claim failed.
The costs sought
[3] Two parties seek costs, Mr Hamilton in both his personal capacity and as a trustee of the trust, and Mr Mirkin as a former trustee of the trust. Mr Mirkin, however, was not represented at the hearing, although he gave evidence as a witness. His claim is for the costs of his representation until July 2013, when Mr Parker withdrew from further involvement, having filed a memorandum to the Court signalling that intention and my having raised no objection.
[4] Mr Hamilton’s claim is advanced on three alternative bases. He seeks 2B costs totalling $35,024; or alternatively scale costs to 10 April 2013 and indemnity costs thereafter; or scale costs to the specified date and increased costs thereafter.
[5] A similar approach has been taken by Mr Mirkin, but his claim terminates at the point of his withdrawal from the proceeding in July 2013. Hence, he seeks scale costs to that date; or a combination of scale and indemnity costs; or a combination of scale and increased costs.
[6] The basis of the indemnity/increased costs claims is that on 10 April 2013 a letter was written on behalf of the defendants containing a detailed denial of liability,
but also an offer to pay $10,000 in final settlement. The offer remained open for 14 days. Failing acceptance of the offer, the defendants gave notice that the letter would be relied upon in seeking two sets of indemnity costs.
The unsuccessful party’s approach
[7] Ms Murrell challenges aspects of the scale costs calculations, whether any costs should be awarded to Mr Mirkin, the second defendant; and opposes both indemnity and increased costs. Indeed, Ms Murrell submits that any scale costs award should be reduced by 30 per cent because the defendants contributed unnecessary to the time and expense of the proceeding.
[8] Given the competing approaches, I shall deal with the issues of principle first. These are whether the second defendant should receive costs, whether indemnity/increased costs are appropriate, and whether Ms Murrell’s argument seeking reduced costs should be recognised. It will then remain to fix the appropriate award(s) according to scale.
The second defendant’s claim
[9] Mr Anderson submitted that no costs should be awarded because the second defendant was only a party in his trustee capacity; there was no need for separate representation, and Mr Mirkin is protected in that he is entitled to a full indemnity from the assets of the trust.
[10] Mr Mirkin was separately represented from when the proceeding were issued. Then, in a memorandum dated 11 June 2013, Mr Parker noted that there was no specific allegation against Mr Mirkin in the statement of claim, nor any suggestion that he had acted in bad faith. Hence, he was entitled to be exonerated from personal liability under the Trustee Act 1956 and also reimbursed in relation to any judgment entered against the trust, including in relation to legal costs. The memorandum suggested that Mr Mirkin should “simply stand to one side as there should be no judgment against him, nor should there be any costs awarded against him”. The Court’s “recognition” that Mr Mirkin need not take any further role in the proceeding
was sought, subject to his providing evidence if called upon to do so. He was, and
Mr Tobin led such evidence. Mr Parker took no part in the hearing.
[11] In essence, the question is whether Mr Mirkin should have withdrawn from an active role in the proceeding from the very beginning? This is in effect the argument advanced by Mr Anderson. The reality of the situation was that Mr Mirkin lived and resided in Dunedin. Mr Hamilton lived and resided in Arrowtown and the house property occupied by the parties was also in Arrowtown. The only contact between Messrs Hamilton and Mirkin was as a result of their being trustees of the trust. Importantly, there was nothing in the statement of claim to indicate that actions on Mr Mirkin’s part were relied upon in support of the claim. Rather, it was alleged that Mr Hamilton’s actions, including representations he made to the plaintiff on behalf of the trust, supported the existence of a constructive trust.
[12] In fact, r 14.15 of the High Court Rules applies:
Defendants defending separately
The court must not allow more than 1 set of costs, unless it appears to the court that there is good reason to do so, if—
(a) several defendants defended a proceeding separately; and
(b) it appears to the court that all or some of them could have joined in their defence.
Applied in the circumstances of this proceeding, the question is whether Mr Mirkin needed to be separately represented at all, or until July 2013.
[13] The principles relevant to the application of r 14.15 are conveniently summarised in Jordan v O’Sullivan (No 2)1:
The extent to which the defendants’ interests were materially identical, as well as the extent to which one defendant did or could have relied upon the evidence or submissions of the others, are factors tending to suggest that the defendants could have joined in their defence. Conversely, factors suggesting that defendants could not reasonably join in their defence include if the plaintiffs ran separate cases against the defendants, or sought separate relief, the defendants’ reputations are at stake, (for example, there is an allegation of fraud), a conflict of interest was likely in terms of the way the
plaintiffs ran their case and/or the defendants’ relationship is such that they are justified in remaining at arms length from each other.
In this instance all of the relevant factors point to there being no need for separate representation of the first and second defendants. Moreover, Mr Mirkin was not personally exposed, given that he was a party in his trustee capacity and entitled to be indemnified.
[14] In my view, it was appropriate that he seek separate legal advice, but from a very early point a decision should have been taken that separate representation was not required. It follows there is no good reason to allow more than one set of costs, save that I allow $1500 to cover the obtaining of initial separate advice.
Indemnity/increased costs
[15] Indemnity or increased costs are sought on the basis of the April 2013 letter containing an offer without prejudice, except as to costs. Mr Anderson submitted that the indemnity/increased costs claims were misconceived. Rules 14.10 and 14.11 govern what were previously known as Calderbank letters. The former rule recognises that without-prejudice settlement offers may be made before trial, while rule 14.11 governs the effect, if any, of the making of such an offer. The effect in relation to costs is “at the discretion of the Court”. Where the claimant is offered a sum greater than the amount he or she recovers, the party who made the offer “is
entitled to costs on the steps taken in the proceeding after the offer is made”.2
[16] In this instance the defendants are entitled to costs in any event, since Ms Murrell’s claim failed. Rule 14.11(2)(b) further provides that the Calderbank provisions “do not limit rules 14.6 or 14.7”. These create the discretion to award indemnity/increased costs and to refuse/reduce costs for cause, respectively.
[17] It follows that Mr Anderson was correct in submitting that reliance upon the Calderbank letter to claim indemnity/increased costs was misplaced, since rr 14.6 and 14.7 are self-contained and must be invoked on the terms. That is, the party claiming under the rules must establish one or other of the specified grounds
justifying a departure from scale costs, either up or down. As the defendants simply rely upon the Calderbank letter alone, not any of the specified grounds, their claims for indemnity/increased costs must fail.
Reduced costs
[18] While accepting that costs must follow the event, Mr Anderson sought to invoke r 14.7(f)(iii) that the defendants failed, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument. In particular, counsel pointed to incorrect advice provided by Mr Mirkin that over the period relevant to this proceeding care had been taken to ensure that family funds remained separate and were applied to the various entities retaining that separate property status.
[19] In fact, it emerged at the hearing that the family trust records were almost non-existent. The judgment included this:3
[58] Under cross-examination it emerged there was no designated file for the Trust, no file notes, one trustee resolution and only limited financial statements. The financial statements covered the period that [the house] was tenanted and were for tax purposes. They did not include a statement of the Trust’s assets and liability.
Hence, the argument continued that at the substantive hearing the true picture finally emerged, and resulted in significant time spent questioning witnesses (Mr Hamilton in particular) in an endeavour to establish the actual profit realised from the sale of the house property.
[20] It is the case that the time and expense of the proceeding was increased on account of the need to endeavour to reconstruct financial information which should have been readily available had the trust been efficiently administered. However, in terms of the rule there must be a failure to “admit facts, evidence or documents”. Here, there was a misleading assertion made before the proceeding was commenced that careful records were kept. My understanding is that this assertion was debunked prior to the hearing, through the discovery of documents, and that the added time and
expense at the hearing arose from the fact that adequate records did not exist. In
3 Murrell v Hamilton & Ors [2013] NZHC 3241.
short, the failure was to keep the records in the first place, not a failure in the course of the proceeding. It follows that I am not persuaded reduced costs are appropriate.
Scale costs
[21] This is clearly a case for 2B costs. Mr Hamilton seeks costs in the sum of
$35,024 (being 17.6 days at $1990 per day). Mr Andersen, for the plaintiff, challenged four items of the claim on the basis that no, or a reduced, time allocation was appropriate. He submitted that the correct time allocation was 13.8 days, producing an award of $27,462. Some, at least, of the items are justifiably challenged, while others require evaluation. In my view, the appropriate course is to award $28,500, plus the separate award of $1500 in relation to the second defendant. This, I consider, is fair and appropriate in all the circumstances.
Solicitors:
L A Andersen, Barrister, Dunedin
D R Tobin, Barrister, Dunedin
Parker Cowan Lawyers, Queenstown