O'Neill v O'Neill

[2021] NZHC 450

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-000062

[2021] NZHC 450

IN THE MATTER

of the estate of LARRY MICHAEL O’NEILL

UNDER

Part 27 of Rule 27.6 of the High Court Rules 2016

BETWEEN

JUDITH ANNE O’NEILL

Plaintiff

AND

DAVID MICHAEL O’NEILL

Defendant

CIV-2020-419-000126

IN THE MATTER

of an application under the Family Protection Act 1995 and an application

under Part 18 of the High Court Rules 2016

BETWEEN

DAVID MICHAEL O’NEILL, MARTIN TIMOTHY O’NEILL and PHILIPPA SUSAN DENNIS

Applicants

AND

JUDITH ANNE O’NEILL

Respondent

Hearing:	On the papers
Judgment:	10 March 2021

JUDGMENT OF DOWNS J (Costs)

This judgment was delivered by me on Wednesday, 10 March 2021 at 11 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

O’NEILL v O’NEILL [2021] NZHC 450 [10 March 2021]

[1]    Larry O’Neill died 15 August 2016, aged 84. Larry had three adult children from his first marriage: David, Martin and Phillipa.1 In 1979, Larry commenced a relationship with Judith.2 They married in 1999. Their relationship endured until Larry’s death.

[2]    Larry made wills in 2002, 2007 and 2012. The children learned of the 2007 and 2012 wills after Larry’s death. They said Larry lacked testamentary capacity when he made the 2012 will, and both the 2007 and 2012 wills were a product of Judith’s undue influence. Judith said Larry was mentally alert until his death and freely chose to distribute his assets as he did. The children said even if this was correct, Larry breached his moral duty to provide for them and advanced a claim  under  the  Family Protection Act 1955. Judith said Larry had good reasons for doing what he did.

[3]    I delivered judgment 13 November 2020.3 I found Judith had established Larry’s 2012 will was made with testamentary capacity. I also found the children had not established the 2007 and 2012 wills were the product of undue influence, or their claim under the Family Protection Act.

[4]    I noted Judith would normally be entitled to costs, but that she was legally aided. I encouraged agreement about costs. That encouragement has not borne fruit.

[5]    Subject to the legal aid issue, Judith seeks indemnity costs of $100,000 or increased costs of $69,369.75, a 50 per cent uplift on scale. Costs would be $46,246.50 were they 2B. Judith’s actual, legal aid costs were $46,773.29.

[6]    Rule 14.6(4) of the High Court Rules 2016 identifies when indemnity costs may be awarded. Paragraph (a) signals the high threshold envisaged by the rules. The offending party must have acted “vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing or defending a proceeding or a step in the

1      The defendants (and applicants).

2      The plaintiff (and respondent).

3      O’Neill v O’Neill [2020] NZHC 2988.

proceeding”. The Court of Appeal has said indemnity costs may be ordered where the party “has behaved either badly or very unreasonably”.4

[7]    On behalf of Judith, Mr Dale QC argues this threshold is met. He says there was “never enough evidence” for the children to allege Larry lacked capacity or the victim of undue influence. Judith offered 40 per cent of the estate on reasonable conditions by letter dated 20 December 2018. The estate was small, and litigation uneconomic. And, Martin failed to provide timely evidence of his financial position.

[8]    The only one of these points that could cross the high threshold for indemnity costs is the first. However, Davison J concluded there was sufficient evidence of possible incapacity for that issue to be tried.5 And, while weak, the children’s case of undue influence had extrinsic support by the evidence of Mr Booth, a Hamilton solicitor. Prosecution of these cases, therefore, was not very unreasonable.

[9]    Mr Dale advances the same points for increased costs. No more need be said about the evidential bases for the children’s case; the same reasoning precludes increased costs in relation to this aspect. That the estate was small does not warrant increased costs. It was open to the children to seek recognition awards, which by their nature, tend to be modest. Martin’s failure to produce timely evidence about his financial circumstances was unfortunate, but this is unlikely to have contributed materially to Judith’s time or costs, a key aspect of increased costs.6 Mr Dale’s remaining point about Judith’s settlement offer has obvious force.

[10]   On behalf of the children, Mr Morgan QC contends costs should not be increased for failing, without reasonable justification, to accept this offer.7 The offer required the children to pay 25 per cent of the rates, property insurance, and any “essential repairs and maintenance”. Mr Morgan says the last aspect was “a significant disincentive”.

4      Westpac v Bradbury [2009] 3 NZLR 400 at [27].

5      O’Neill v O’Neill [2018] NZHC 1356.

6      High Court Rules 2016, r 14.6(3)(b).

7      Rule 14.6(3)(b)(v).

[11]   Judith’s offer was both timely and reasonable. Mr Morgan’s point is not persuasive. The children had to pay only 25 per cent of essential repairs and maintenance, meaning, obviously, most of the expense would be borne by Judith herself. It would be unlikely for Judith to raise the prospect of costly “essential repairs and maintenance” because she would be paying for most of them—and she had little money. It follows the children failed, without reasonable justification, to accept Judith’s offer. That said, a 50 per cent uplift would be excessive. Twenty-five per cent would be sufficient, from the date that offer expired.

[12]   Mr Dale argues that Judith was legally aided does not preclude increased costs in her favour. He notes Master Faire, as he then was, reached this conclusion in Kawhia Offshore Services Ltd v Rutherford.8 Mr  Dale  submits  s  116  of  the  Legal Services Act 2011 “opens the way to making a costs order unfettered by the statutory restriction on the amount of the legal aid grant”. This section provides:

116 Effect of rights conferred by this Act

Any rights or liabilities of an aided person under this Act do not affect—

(a)   the rights or liabilities of other parties to the proceedings; or

(b)   the principles on which the discretion of any court or tribunal is normally exercised.

[13]Mr Dale also submits legal aid rates are artificially low.

[14]   The balance of authority lies against these submissions. In Taunoa v Attorney- General Ronald Young J said:9

A resolution of the different views of costs here requires a principled approach. I consider the proper approach here is to identify the proper category and band, calculate the total costs payable on that basis, reduce them by an appropriate percentage, in this case to reflect partial success only, and then compare this figure with the total fees payable to counsel from the Legal Services Board. If the scale fees exceed the Legal Services payment then r 47(f) applies. This provides:

47 Principles applying to determination of costs

The following general principles apply to the determination of costs:

...

8      Kawhia Offshore Services Ltd v Rutherford HC Hamilton, CP61/99, 10 July 2002.

9      Taunoa v Attorney-General (2004) 8 HRNZ 53 (HC) at [43].

(f) An award of costs should not exceed the costs incurred by the party claiming costs:

[15]And:10

… Is the proposed costs award greater than actually incurred? If the answer is yes, then the amount actually incurred will be the amount of costs awarded. That is the position here.

[16]   In Graham v Graham, Williams J applied Taunoa to confine costs to those incurred by legal aid:11

Even if I were minded to make some reduction for partial success, costs calculated on a 2B basis would be significantly more than the $5,142.25 actually incurred. For that reason I do not need to consider the first point in any detail. Rule 14.2(f) plainly caps the costs I can award at $5,142.25. I award costs of that sum accordingly.

[17]In Body Corporate 207715 v McNish, Katz J cited Taunoa with approval:12

No order for costs can be made against a legally aided person unless the Court is satisfied that there are exceptional circumstances. A legally aided party who succeeds in litigation, however, is entitled to costs. The fact that a legally aided person may have been charged at rates less than those contemplated by Schedule 2 to the High Court Rules (as must have been the case here) does not justify a reduction in the costs awarded to that party, provided that the costs award does not exceed the actual costs incurred. As a general rule a successful legally aided party is entitled to the full sum of the legal aid grant, provided this is the same or less than the appropriate costs award calculated on  a  scale  basis.  Ronald  Young  J  summarised   the   position   in   Taunoa v Attorney-General ...

[18]   These cases rest on the orthodox proposition, expressed as r 14.2(1)(f) of the High Court Rules, a costs award “should not exceed the costs incurred by the party claiming costs”. Citing Taunoa, the learned authors of McGechan on Procedure say this rule gives effect “to the principle that no party should profit from the conduct of litigation”.13

10     Taunoa v Attorney-General, above n 9, at [45].

11     Graham v Graham [2018] NZHC 29 at [4].

12     Body Corporate 207715 v McNish [2016] NZHC 475 at [4].

13     McGechan on Procedure (online loose-leaf ed, Thomson Reuters) at [HR14.2.01(6)].

[19]   I am not persuaded to depart this longstanding rule, and one integral to the predictability of the costs regime.14 However analysed, Judith’s costs were those incurred with legal aid, a sum of $46,773.29.

[20]I award this amount to Judith.

……………………………..

Downs J

Solicitors/Counsel:

Neilsons Lawyers Ltd, Auckland. Nielsen Law, Hamilton.

PJ Dale QC, Auckland.

PJ Morgan QC, Hamilton.

14     High Court Rules, r 14.2(1)(g).