Oakland Dairy Limited v Flooks

[2023] NZHC 3223

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-000013

[2023] NZHC 3223

UNDER

Part 19 of the High Court Rules 2016 and under section 109 of the Property Law Act 2007

BETWEEN

OAKLANE DAIRY LIMITED

Applicant

AND

KATHRYN LYNETTE FLOOKS, TRACEY MAY FLOOKS, MANDY LEE ROHRLACH,

TREVORD EDGARD FLOOKS and BARRIE WAYNE PRICE

as administrators in the Estate of KEVIN STANLEY FLOOKS

First Respondent

TRACEY MAY FLOOKS

Second Respondent

Hearing:

[On the Papers]

Appearances:

A A Low and L W Dixon for Applicant

A M Cameron for Second-named First Respondent and Second Respondent

G H J Brant and A K H McManus for First-named First Respondent

Judgment:

15 November 2023

JUDGMENT OF EDWARDS J

[re Costs]

This judgment was delivered by me on 15 November 2023 at 3.00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

[1]                The applicant (Oaklane) and first-named first respondent (Kay) seek orders of costs against the second respondent (Tracey).1 The application follows my judgment dated 17 July 2023.2

[2]                Oaklane was successful in obtaining a declaration that all sums owed to the estate of Mr Kevin Flooks had been repaid in full and the estate’s half share of a mortgage should be discharged. Kay, who was a joint mortgagee with the estate, supported Oaklane’s application. The key issues in the proceeding concerned oral variations to the interest rates and loan expiry date of the mortgage.

[3]                A family dispute forms the backdrop to the proceeding. The late Kevin Flooks was married to Kay. Their son (Trevor) and his wife purchased the shares in Oaklane in 2008 thereby obtaining ownership of the family farm. Tracey and Debra are the daughters of Kevin and Kay. As recorded at [16] of the judgment, they commenced Family Protection Act 1955 proceedings challenging, amongst other things, the arrangement in relation the family farm.

[4]                Kay, and three of her four children (Trevor, Tracey,  and Mandy) were appointed executors of Kevin’s estate. The fifth executor is the family accountant. Tracey was the only executor who challenged Oaklane’s repayment of the mortgage and refused to consent to a discharge.3

[5]                Oaklane and Kay both seek indemnity costs incurred after 21 March 2023, and two-thirds of actual solicitor-client  costs for time incurred prior to  this date.  The  21 March 2023 date is the date that Kay provided her affidavit in this proceeding confirming Oaklane’s evidence regarding the variations to the interest rates and loan expiry date. Oaklane and Kay also seek an order that Tracey meets her costs personally, rather than having recourse to her indemnity as an executor of the estate.

1      Due to the family connection between the parties, I will refer to them by their first names to avoid confusion. I mean no disrespect in doing so.

2      Oaklane Dairy Ltd v Flooks [2023] NZHC 1852.

3      The notice of opposition to the originating application was filed by Tracey on behalf of herself and her sister Debra. However, Debra was not named as a party and did not take part in the proceeding. Accordingly, the costs order sought is only against Tracey.

[6]                Tracey opposes the orders sought and says that an award of scale costs calculated on a schedule 2B basis would be just. She also says that any order of costs should be met from the estate in accordance with her executor’s indemnity.

Should increased or indemnity costs be awarded to Oaklane and/or Kay?

[7]                The first issue is whether Oaklane and/or Kay should be awarded indemnity costs after 21 March 2023, and increased costs (being two thirds of actual solicitor- client costs) prior to that date.

[8]                The grounds relied upon to support the claim to both increased and indemnity costs are essentially the same. Oaklane and Kay say that Tracey changed her position multiple times prior to the hearing and made unreasonable requests for documentation. She also refused an offer to secure the disputed sum which would have avoided the need for litigation and refused to accept evidence establishing the variations. The applicants say that after 21 March 2023, Tracey should have realised that her defence of the claim was hopeless and yet she maintained her defence through to the hearing and required both Kay and Trevor for cross-examination.

[9]                Taken on their own, none of the grounds raised by the applicants would be sufficient to justify an award of indemnity or increased costs. While Tracey may have changed her position, so did Oaklane. While the requests for documentation may have been broad, they were made prior to the proceeding and Oaklane acceded to those requests. The offer to secure the disputed sum was also made prior to the commencement of the proceeding, and it did not relate to the entire disputed sum. I also consider the cross-examination at trial to be limited and focused.

[10]            Nevertheless, when weighed in totality, I consider these grounds demonstrate an element of unreasonableness in Tracey’s pursuit of her defence to the claim. Tracey’s initial challenge to repayment of the mortgage was justified on the basis that the variations were agreed orally. However, that justification became harder to maintain in the face of evidence from Kay confirming the oral variations to the mortgage. The variations to the interest rates were substantially supported by the documentary evidence. Given Tracey was not a party to those oral agreements her

determination to pursue her defence in the face of the evidence reflected a degree of obstinance.

[11]            The wider context is also relevant here. Tracey defended the claim in her capacity as executor, but she had a personal interest in establishing that the mortgage had not been repaid. If the mortgage remained on foot, then the value of the estate would increase. As already mentioned, Tracey and her sister commenced Family Protection Act claims which challenged, amongst other things, the arrangements in relation to the family farm. This gives rise to an inference that Tracey may have persisted with the defence of Oaklane’s application, even after receiving Kay’s affidavit, for personal reasons.

[12]            That element of unreasonableness is not, however, sufficient to meet the threshold for indemnity costs post 21 March 2023. Although Tracey’s claim weakened significantly after receiving Kay’s evidence, it could not be considered hopeless. While I accepted the evidence of both Kay and Trevor on the variations and rejected Tracey’s challenge, that does not make Tracey’s conduct so unreasonable that indemnity costs should be ordered. None of the grounds in r 14.6(4) are made out and there is no other reason justifying an award of indemnity costs.

[13]            Whether the unreasonableness element gives rise to a claim for increased costs is more difficult to appraise. That is because neither claimant followed the settled approach to claims for increased costs. That approach requires increased costs to be sought in relation to a particular step in the proceeding. As the Court of Appeal has confirmed, it is not a case of awarding a percentage of actual costs incurred, as the applicants seek in this case.4

[14]            Nevertheless, on the whole, I consider Tracey’s unreasonableness in pursuing her defence in the face of Kay’s evidence contributed unnecessarily to the preparation time required for the hearing and for the hearing time itself. To that extent, Tracey’s conduct falls within r 14.6(3)(b)(iii). An uplift to the scale allowances for the

4      Jessica Gorman, Stephanie Grieve, Jason McHerron, Robert Osborne, Nicholas Wood McGechan on Procedure (Westlaw NZ, Thomas Reuters) at HR 14.6.02; Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

preparation and hearing steps set out in schedule 2B is warranted in the circumstances. I apply a 20 per cent uplift to those two steps.

[15]            It follows that costs should otherwise be calculated on a schedule 2B basis. The calculations submitted by Oaklane and Kay (unhelpfully) differ with the result that Kay’s application is for a greater sum than that sought by Oaklane. That position cannot be sustained. Indeed, I consider Kay’s claim for costs should be reduced to allow for the fact that Oaklane had the main carriage of the proceedings, and Kay played a relatively minor role, adopting many of Oaklane’s submissions.

[16]            The resulting costs awards for each of Oaklane and Kay are set out in the annexed schedule. The calculations are primarily based on the scale costs for an originating application with the following adjustments:

(a)The time allocation for Oaklane’s preparation for the hearing has been calculated according to item 33B (witness action) to accommodate the cross-examination that took place at the hearing.

(b)An allowance for preparation of the bundle for hearing has been included in Oaklane’s costs.

(c)An allowance of 1.5 days has been included in Kay’s costs for preparation of her affidavit. This is less than the two day allowance as that step also relates to the preparation of the application.

(d)I certify for one counsel only.

(e)The time allocations for Kay’s preparation and hearing steps have been reduced to reflect the commonality of position with Oaklane and her relatively minor role at the hearing as noted at [15] above.

(f)The 20 per cent uplift is applied to the preparation and hearing steps.

[17]            Finally, Oaklane and Kay are entitled to their reasonable disbursements. There is no breakdown, nor supporting information, to support the $2,169.82 sought by

Oaklane. Oaklane shall provide proof of these disbursements to the Registrar who is directed to finalise the disbursements allowed.

Should Tracey bear her own costs or be indemnified from the estate?

[18]            The second issue is whether Tracey should bear her own costs or be indemnified from the estate.

[19]            As already mentioned, Tracey commenced her defence of Oaklane’s claim in her capacity as an executor of her father’s estate. She was the only one of the five executors who opposed Oaklane’s claim.

[20]            It is true that this case did not involve a hostile claim between beneficiaries to the estate. It was a claim by a third party (Oaklane) against the executors seeking a discharge of the estate’s share of the mortgage. That leads to a presumption that Tracey, as executor, can access the indemnity for any costs awards made against her.5 However, the reality is that a family dispute formed the background to the litigation and provided impetus for Tracey’s opposition to Oaklane’s claim.

[21]            I consider Tracey acted reasonably and in accordance with her duty to protect estate assets for the benefit of the beneficiaries in the initial stages of the litigation. Given the variations agreed were oral in nature, I consider she was entitled to refuse to give consent to the discharge of the mortgage until satisfied that it had been repaid. To that extent, she was acting in her capacity as executor and was entitled to access her indemnity from the estate.

[22]            However, as already noted, there was an element of self-interest in pursuing her defence of the claim. That was a factor in the pursuit of her opposition even after receiving Kay’s affidavit confirming the oral variations which were in issue. Rather than acting on behalf of the estate, Tracey’s opposition was motivated by personal interest. In those circumstances, it is fair that Tracey bear personally the costs awarded after 21 March 2023.

5      Pratley v Courteney [2018] NZCA 436, [2018] NZAR 1787.

[23]            The steps recorded both before and after 21 March 2023, and the associated values, are recorded in the schedule annexed.

Result

[24]I award costs to Oaklane in the sum of $17,447 and costs to Kay in the sum of

$11,233. Disbursements are to be fixed by the Registrar.

[25]            Tracey shall be entitled to access her executor’s indemnity for the costs awarded that relate to steps in the proceeding taken on and before 21 March 2023 (as shown on the annexed schedule) but shall bear all remaining costs personally.

[26]The costs of the respective cost applications shall lie where they fall.

Edwards J

Counsel/Solicitors:

A A H Low, Auckland Patterson Hopkins, Auckland A M Cameron, Auckland Asco Legal, Auckland

Stace Hammond, Hamilton

Schedule 1 – Oaklane 2B Scale Costs

Date	Item	Description	Time band 2B	Uplift 20%
16 December 2022	37	Filing application and supporting affidavits	2
16 December 2022	11	Filing memorandum of counsel	0.4
16 December 2022	22	Filing interlocutory application	0.6
20 March 2023	11	Joint Memorandum	0.4
8 June 2023	40	Preparation of written submissions	1.5
14 June 2023	41	Preparation by applicant of bundle for hearing	0.6
19 June 2023	33B	Preparation for hearing	1	1.2
21 June 2023	42	Appearance at hearing for principal counsel	0.5	0.6

Total time	7.3
Quantum at $2,390 per day (category 2 r 14.3 HCR 2016)	$17,447
Costs prior to 21 March 2023	$8,126
Costs 21 March 2023 onwards	$9,321

Schedule 2 – Kathryn Flooks 2B Scale Costs

Date	Item	Description	Time band 2B	Uplift 20%
20 March 2023	11	Filing memorandum for first case management conference	0.4
21 March 2023	37	Filing application and supporting affidavits	1.5
21 March 2023	7	Notice of appearance	0.2
22 March 2023	13	Appearance at first case management conference	0.3
19 June 2023	40	Preparation of written submission	0.5
21 June 2023	33B	Preparation for hearing	0.5	0.6
21 June 2023	42	Appearance at hearing for principal counsel	1	1.2

Total time

4.7

Quantum at $2,390 per day (category 2 r 14.3 HCR 2016)

$11,233

Costs prior to 21 March 2023

(including item 37)

$4,541

Costs 21 March 2023 onwards

$6,692

Total 2B Scale Costs = $28,680

Total Costs prior to 21 March 2023 = $12,667

Total Costs from 21 March 2023 onwards = $16,013