Nothling v Clayton
[2022] NZHC 1943
•9 August 2022
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-35
[2022] NZHC 1943
BETWEEN LYNN ALTHEA NOTHLING
First Applicant
ZAK EDWARD NOTHLING
Second ApplicantAND
MARK ARNOLD CLAYTON
Respondent
On the papers: 8 August 2022 Appearances:
Geoffrey C Jenkin for the Applicants David Hayes for the Respondent
Judgment:
9 August 2022
COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 9 August 2022 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
………………………….
Registrar/Deputy Registrar
Solicitors:
Bruce Dell Law, Panmure, Auckland, for the Applicants
Michael Hunwick Lawyer, Te Rapa, Hamilton, for the Respondent
Counsel:
Geoffrey C Jenkin, Princes Chambers, Auckland, for the ApplicantsNew Zealand Commercial Law Corp Limited (David Hayes), Hamilton, for the Respondent
NOTHLING v CLAYTON [2022] NZHC 1943 [9 August 2022]
Introduction
[1] Ms Lynn Nothling and her son Mr Zak Nothling seek costs against Mr Mark Clayton.
Background
[2] The Nothlings, in their capacity as trustees of the Clayton Nothling Trust (the Trust), filed an originating application dated 9 May 2022 seeking an order under s 142 of the Land Transfer Act 2017 for removal of a notice of claim that Mr Clayton had lodged against the property at 2 Gwendoline Street, Rotorua. The originating application was accompanied by a without notice application for directions.
[3] On 10 May 2022, Brewer J dealt with the without notice application on the papers. His Honour stated:1
The applicants allege that Mr Clayton’s notice of claim has been lodged vexatiously and is an abuse of the process of the Court. I have to say that having considered the previous caveat litigation pursued by Mr Clayton there is prima facie support for that allegation. For example, in the litigation before Moore J, Mr Clayton claimed to be a beneficiary of the trust upon which the applicants hold the property and he intended the final beneficiaries of the trust to be his grandchildren. That is incompatible with a claim of interest in the property under the Property (Relationships) Act 1976.
[4] The matter again came before Brewer J on 18 May 2022. His Honour’s minute of that date recorded the view that the case had the hallmarks of an abuse of process and that it would be unjust to allow a situation to continue whereby, among other things, the Trust could not settle an agreement for sale and purchase of the Gwendoline Street property. His Honour indicated he was prepared to order immediate removal of the notice of claim if the Nothlings provided a written undertaking that would preserve Mr Clayton’s ability to bring a claim against a separate property at 17A Grey Street,
1 Nothling v Clayton HC Auckland CIV-2022-470-35, 10 May 2022 (Minute of Brewer J) at [7].
Glenholme, Rotorua, that the Trust was obligated to acquire as trust property under an agreement for sale and purchase.2
[5] On 23 May 2022, having received the Nothlings’ undertakings, Brewer J discharged the notice of claim with immediate effect.3 The following day, an unconditional agreement for the sale of the Gwendoline Street property was settled by the Trust, and so was the unconditional purchase by the Trust of the Grey Street property. The settlements took place some six months after they were supposed to settle on 26 November 2021.
[6] Mr Clayton has not subsequently taken steps to lodge a notice of claim against the Grey Street property.
The Nothlings’ submissions
[7] Mr Geoffrey Jenkin, for the Nothlings, submits that this is an appropriate case for an award of indemnity costs, or at least increased costs. He submits that the case to support Mr Clayton’s notice of claim was always hopeless. Mr Clayton was never going to succeed in his attempt to sustain the notice by ignoring that the Gwendoline Street property was owned by the Nothlings in their capacity as trustees of the Trust. Brewer J recognised this fact in making the interim order on 23 May 2022 — accepting there probably was an abuse of process in this case.4
[8] Mr Jenkin submits the affidavit evidence in this matter shows that Mr Clayton calculated the timing of his notice of claim so as to cause maximum damage and disruption to the Trust’s dealings in property. That Mr Clayton has not taken steps to lodge a notice of claim against the Grey Street property indicates, in Mr Jenkin’s submission, that Mr Clayton’s entire strategy was to subvert the sale and purchase agreements, to cause maximum damage to the trustees and to force them to the negotiating table.5
2 Nothling v Clayton HC Auckland CIV-2022-470-35, 18 May 2022 (Minute of Brewer J) at [3]– [7].
3 Nothling v Clayton HC Auckland CIV-2022-470-35, 23 May 2022 (Minute of Brewer J).
4 Memorandum by counsel for the first and second applicants with respect to costs dated 15 June 2022 at [16]–[25], citing Bradbury v Westpac Banking Corp [2009] NZCA 234 at [29]; and French v French HC Auckland CIV-2010-419-661, 17 August 2010.
5 At [26]–[32].
[9]Mr Jenkin submits indemnity costs of $34,742.25 are appropriate.6
Mr Clayton’s submissions
[10] Mr David Hayes, for Mr Clayton, submits costs should lie where they fall. He says costs are not to be used as a punishment. Costs in prior proceedings have already been determined. He says that in this matter Brewer J issued a minute that strongly indicated Mr Clayton’s application to sustain the notice of claim would fail, and that Mr Clayton accordingly decided not to proceed. Mr Hayes says that despite Mr Clayton doing so, the Nothlings filed submissions and sought a hearing to obtain final judgment. That judgment was later refused as moot, given Mr Clayton’s indication he would abide the Court’s decision. Mr Hayes submits, therefore, that the Nothlings wasted costs on an ill-fated application.7
[11] Mr Hayes says it is difficult to ascertain the Nothlings’ actual costs. He submits much of the work appears to be administrative and that the proceedings are not complex. He says the hours claimed indicates more work than a case of this complexity deserves, or time charged for irrelevancies. He says the invoice hours are unreasonably excessive, and that, given submissions were filed after the Nothlings were advised the case was not proceeding, that cost should not be borne by Mr Clayton. Further, Mr Hayes submits, the submissions and affidavits in part appear to be cut and pasted from submissions made in earlier proceedings. He says it would be surprising that the actual cost was as substantial as that invoiced.8
[12] As to the Nothlings’ scale costs calculation, Mr Hayes says the schedule requires amendment. He points to item 3, claiming 1.5 days for what he characterises “a modest submission seeking directions”. He seeks a reduction to $1,195, saying half a day would have been enough. He says further that item 7 should be disallowed, as written submissions to support the substantive originating application were not needed
— justifying a further costs reduction of $3,585. Mr Hayes also submits that items 8– 10, relating to the application for final orders that I found to be moot, should not be awarded to the Nothlings. Rather, because Mr Clayton succeeded on that “failed
6 At [33]–[34].
7 Respondent’s costs memorandum dated 23 June 2022 at [1]–[4].
8 At [5]–[7].
application”, the relevant amounts should be awarded to him. Mr Hayes submits that these adjustments would result in scale costs of $10,038 plus disbursements of $790.9
[13] Concluding, Mr Hayes submits that no costs should be awarded as the Nothlings’ conduct was unreasonable. The matter could have been settled. Mr Clayton clearly sought to settle, but the Nothlings refused to do so. That refusal has led to wasted costs. Accordingly, Mr Hayes submits that the Nothlings are effectively seeking costs of a proceeding they could have avoided fully or in part. Costs should therefore lie where they fall.10
The Nothlings’ reply submissions
[14] In reply, Mr Jenkin submits that r 14.6(4)(a) provides that the Court can and will order indemnity costs if a party has acted vexatiously, frivolously, improperly or unnecessarily. He says that has been the case in this proceeding and that the Nothlings simply seek reimbursement for the costs they have incurred because of Mr Clayton’s vexatious conduct. He says the submissions in the proceeding were filed and served in accordance with timetable orders that Brewer J made on 18 May 2022. Mr Hayes’ memorandum advising that Mr Clayton would abide the Court’s decision came later in time. Mr Jenkin says the work associated for the purposes of the substantive hearing had already been completed by the time Mr Hayes filed that memorandum. He says it was entirely reasonable in the circumstances for the Nothlings to seek final orders, given Mr Clayton’s past unpredictable conduct.11
[15] Mr Jenkin says Mr Clayton’s notice of claim in fact raised some complex legal issues that counsel needed to deal with in submissions. He says the fees calculated as per scale 2B work out to be just in excess of the Nothlings’ actual costs, and that this is a reasonable recovery in circumstances where the substantive fixture did not go ahead as a fully defended matter. He submits further that it is clear that Mr Clayton’s notice of claim completely lacked legal merit, and that Mr Clayton knew this — continuing to maintain his position to extract the greatest possible advantage.12
9 At [8]–[11].
10 At [12]–[17].
11 Memorandum by counsel for the applicants in reply to respondent’s costs memorandum dated 23 June 2022 (dated 27 June 2022) at [1]–[7].
12 At [8]–[16].
Legal principles
[16]Rule 14.6 of the High Court Rules 2016 provides:
14.6 Increased costs and indemnity costs
(1)Despite rules 14.2 to 14.5, the court may make an order—
(a)increasing costs otherwise payable under those rules (increased costs); or
(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
(2)The court may make the order at any stage of a proceeding and in relation to any step in it.
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i)failing to comply with these rules or with a direction of the court; or
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
(4)The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[17] In Bradbury v Westpac Banking Corporation, Baragwanath J stated the position of the Court of Appeal in the following terms:13
We therefore endorse Goddard J’s adoption of Hedley v Co-Op Dairies Limited14 at paragraph [11] of Shepherd J’s summary in Colgate-Palmolive Co v Cousins Pty Ltd at paragraph [24].. While recognising that the categories in respect of which the discretion may be exercised are not closed (see rule 14.6(4)(f)), it listed the circumstances in which indemnity costs have been ordered:
(a)the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the Court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law;
13 Bradbury v Westpac Banking Corporation [2009] NZCA 234 at [29].
14 Hedley v Co-Op Dairies Ltd (2002) 16 PRNZ 694 (HC).
(e)making allegations which ought never have to be made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.
[18] In French v French,15 the respondent had lodged a caveat against the title to a farm property owned by his brother and his wife. He did so as part of an ongoing dispute about wills concerning their parents. The respondent had propounded the later will of his father but his application to propound the will previously before Venning J had failed. Filing the caveat was just another manifestation of the respondent’s inability to accept the position.
[19] An aggravating factor was that the caveat was lodged when his brother and his wife were on the verge of transferring their farm property pursuant to a sale agreement, and the Associate Judge accepted that the motive was designed to cause maximum inconvenience and discomfort to them.
[20] The Associate Judge found that the respondent’s continued opposition to the application to remove the caveat fell into (c), (d) and (e) of Baragwanath J’s categories as set out above. His Honour accepted that the claimed indemnity costs were reasonably incurred and granted the application.
[21] The French decision is relevant to analysis of the conduct of Mr Clayton in the present instance.
Analysis
[22] The facts of the present case are analysed against the criteria set out by Baragwanath J as set out above, and also by analogy with the French decision.
Hopeless case
[23] Mr Jenkin submitted that the case to support the claim lodged by Mr Clayton was always hopeless. He submitted that Mr Clayton was never going to succeed in his attempt to sustain the notice by ignoring the fact that the Gwendoline Street
15 French v French (unreported) HC Auckland, CIV-2010-419-661, 18 June, 17 August 2010, Associate Judge Doogue.
property was owned by the Trust. This was a situation Mr Clayton had previously accepted and in fact maintained in his earlier proceedings in respect of the earlier caveat which came before Moore J.
[24] Mr Jenkin also submitted that the intention to apply to set aside the s 21 contracting-out agreement had not been followed through and even if an application to set aside that agreement was successful, it would not assist Mr Clayton. Mr Jenkin submits this is because the Gwendoline Street property was acquired by the Trust from another trust, the MCRT Trust, set up by Mr Clayton himself. In setting aside the s 21 contracting-out agreement it would not have the effect of turning the Gwendoline Street property into relationship property because it had always been owned by a Trust.
[25] Finally on this point, Mr Jenkin submitted that the hopelessness of Mr Clayton’s claim was recognised by Brewer J when he made his interim order on 23 May 2022 and removed the notice. His Honour commented that it was probably an abuse of process.
[26] My conclusion on this point is that Mr Jenkin is correct and the notice of claim was always a hopeless case.
Ulterior motive
[27] Mr Jenkin submitted that the first caveat lodged by Mr Clayton and registered against the title to the Gwendoline Street property was lodged by Mr Clayton on 22 November 2021. The sale agreement was made unconditional by solicitor’s letter dated 27 October 2021 and both the sale and purchase of the substitute property at Grey Street was due to settle on 26 November 2021. He submits the logic of the caveat was timed in order to cause the maximum damage to the Trust.
[28] Moore J’s decision of 8 March 2022 ordered the removal of the caveat on a summary basis. In [34] of his judgment, Moore J said that Mr Clayton’s evidence was inconsistent with the undisputed documentary evidence and the broader context of how and why the contracting-out agreement came into existence. His Honour decided
on a summary basis that Mr Clayton’s interpretation of the law and/or the facts was untenable.
[29] Mr Jenkin submits that Mr Bracegirdle then lodged a caveat (with exactly the same wording as Mr Clayton’s prior caveat) on or about 15 February 2022, which was the day before the hearing of the removal application before Moore J in respect of the earlier caveat lodged by Mr Clayton. The effect of this was that even though Moore J made an order for Mr Clayton’s caveat to be removed, because of the caveat lodged by Mr Bracegirdle, the sale and purchase of the Gwendoline Street property and the Grey Street property could not occur. Mr Jenkin submits this caused further damage to the Trust.
[30] The Trust then lodged the second application to remove the caveat lodged by Mr Bracegirdle. The second application came on for hearing before Brewer J on 3 May 2022. However, before the hearing agreement was reached and in terms of that agreement Mr Bracegirdle agreed the caveat could be removed by consent. Subsequently the memorandum was placed before His Honour and the second caveat was also released.
[31] When the Trust went to settle the sale and purchase of the Gwendoline Street property and the Grey Street property the following day, it discovered Mr Clayton had lodged a notice of claim under the Property (Relationships) Act. Mr Jenkin submits the timing and manner in which the notice was lodged was designed to cause maximum damage to the Trust. The settlements were once more aborted.
[32] When Brewer J made an interim order removing the caveat against the Gwendoline Street property on the basis that Mr Clayton could lodge a claim against the Grey Street property, Mr Clayton did not do so. Mr Jenkin submits that discloses a strategy of Mr Clayton to subvert the Trust’s sale and purchase agreements, to cause maximum damage to the Trust, and force them to the negotiating table.
[33] My conclusion on this point is that from the evidence, the actions of Mr Clayton have been carried out with a view to causing damage and discomfort to the Trust in relation to its property transactions. In my view, this is analogous to the
situation in the French decision and Mr Clayton’s conduct falls within paragraphs (c),
(d) and (e) of the categories set out by Baragwanath J.
[34] As to Mr Hayes’ submissions in response, and the reply by Mr Jenkin dated 27 June 2022, I make the following comments:
(a)I accept Mr Jenkin’s submission that the submissions for the hearing on 2 June 2022 were filed in accordance with the timetable orders made by Brewer J in his minute of 23 May 2022. Despite being filed on the afternoon of 24 May 2022, after being notified by Mr Hayes that the respondent would not be filing a notice of opposition, the work was clearly done prior to that time following the timetabling directions at
[8] of Brewer J’s minute of 18 May 2022. I do not therefore accept Mr Hayes’ submission that the submissions were unnecessary and were wasted cost.
(b)Mr Jenkin submitted that in the circumstances, the applicants were justified in seeking final orders at the hearing on 2 June 2022, given the respondent’s past unpredictable conduct. He submits it was clear in the telephone conference of 18 May 2022 before Brewer J (as recorded [7] of the minute) that the respondent intended a lodge a notice of claim against the substitute property in Grey Street.
(c)As to [12] to [17] of Mr Hayes’ memorandum regarding the submission that the applicants could have settled the proceeding and avoided costs, I accept Mr Jenkin’s response at [11] to [16] of his memorandum of 27 June 2022. In Mr Jenkin’s submission the settlement proposal involved the possibility of Mr Clayton lodging a further caveat or notice of claim against the Grey Street property, which would have been without merit and would have disrupted the Trust’s purchase of the Grey Street property. Consequently in my view the applicants’ rejection of the settlement proposal was justified because of the risk of further actions by Mr Clayton given the history of the matter to date.
[35] In the event, the minute I issued on 8 June 2022 dismissed the applicants’ applications for final orders viewed as being moot, as the notice of claim had been removed from the Gwendoline Street property and no notice was lodged against the Grey Street property. I therefore am of the view that Mr Clayton is entitled to 2B costs in respect of the telephone conference I held on 2 June 2022. Mr Hayes has quantified these costs at [10] of his memorandum of 23 June 2022 as $2,390.00.
Result
[36]I make the following orders:
(a)The applicants are entitled to indemnity costs (pursuant to r 14.6(4)(a) of the High Court Rules 2016) and disbursements of $34,742.25 as sought.
(b)Mr Clayton is entitled to costs on a 2B basis in respect of the hearing on 2 June 2022, quantified at $2,390.00.
…………………………….. Associate Judge Taylor