Official Assignee v Singh
[2020] NZHC 1132
•27 May 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000980 [2020] NZHC 1132
BETWEEN THE OFFICIAL ASSIGNEE
Applicant
AND
JASWEEN DEEPAK SINGH
Respondent
On the papers [ ] Appearances:
K Morrison for the Plaintiff
A J Hamblett for the Defendant
Judgment:
27 May 2020
COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 27 May 2020 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Meredith Connell, Auckland A J Hamblett, Auckland
OFFICIAL ASSIGNEE v SINGH [2020] NZHC 1132 [27 May 2020]
Introduction
[1] In my substantive judgment dated 13 March 2020, I found in favour of the applicant, the Official Assignee.1 I made the following order in relation to costs:
[38] As costs follow the event under the statutory costs regime, I make an order for costs against Mr Singh on a 2B basis, with disbursements as fixed by the Registrar.
[2] Subsequently, however, counsel for the respondent reminded the Court, via memorandum, that the respondent, Mr Singh, is legally aided. Accordingly I recalled the judgment and issued a minute making the following correction as to costs:2
[38] The respondent is legally aided. Pursuant to s 45(2) of the Legal Services Act 2011, no order for costs may be made against him unless the Court is satisfied that there are exceptional circumstances. If costs are in issue on the grounds of exceptional circumstances, the judgment creditor [that is, the applicant] has until 20 March 2020 to file and serve a memorandum, failing which there will be no order for costs.
Legal Services Act 2011
[3] Section 45(2) of the Act provides that “No order for costs may be made against an aided person in civil proceedings unless the court is satisfied that there are exceptional circumstances.” Subsection (3) then sets out a non-exhaustive list of factors the court may consider in assessing whether there are exceptional circumstances, including the following conduct by the aided party:
(a)any conduct that causes the other party to incur unnecessary costs:
(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.
1 Official Assignee v Singh [2020] NZHC 180.
2 Official Assignee v Singh HC Auckland CIV-2019-404-980, 16 March 2020.
[4] The Court has previously commented, albeit in relation to the Legal Services Act 1991, that “the final analysis of whether there are exceptional circumstances must turn on the facts of the case in hand”.3 The concept of ‘exceptional circumstances’ establishes a high threshold.4 To that end, a finding of exceptional circumstances is confined to cases where the aided party’s conduct of the litigation warranted a mark of disapproval.5 Ultimately the Court has discretion as to whether it should make an award of costs against the aided party —within the strict parameters of the Act — and, if so, in what sum.6 I consider that these principles equally apply to the 2011 Act.
[5] Any costs order against an aided party must be reasonable for the aided party to pay, having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.7 Furthermore, any costs order made against an aided party must specify the amount the successful party would have been ordered to pay if this section had not affected that party’s liability.8
Are there exceptional circumstances?
[6] The applicant submits that there are exceptional circumstances in that the respondent (that is, the legally aided party) has:
(a)unreasonably refused to negotiate a settlement or participate in alternative dispute resolution;
(b)litigated a meritless case; and
(c)failed to comply with procedural rules and put the applicant to unnecessary costs.
3 X v Y [2000] 2 NZLR 748 (HC) at [18].
4 M v L (1997) 11 PRNZ 519 (HC) at 521.
5 Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA) at [24].
6 At [31].
7 Legal Services Act 2011, s 45(1).
8 Section 45(4).
Did the respondent unreasonably refuse to negotiate a settlement?
[7] Counsel for the applicant says that, on 16 July 2019, the applicant made a Calderbank offer to the respondent in the sum of $100,000 (the substantive claim being for $118,000). The letter was issued well in advance of the hearing, which took place on 20 September 2019. Despite this, counsel says no response was ever received from the respondent, nor did the respondent make a counter-offer. The letter of offer stated:
5.If Mr Singh is willing to pay $100,000 by 5pm on 26 July 2019, the Official Assignee will accept this amount in full and final settlement of this matter and discontinue the proceeding on a no issue as to costs basis. If payment of this sum is late, interest of 10% p.a. will be payable until the full amount plus accrued interest is received, and the Official Assignee is entitled to recover the amount owed as a debt due. Further terms, such any requirements as to confidentiality, will need to be agreed.
6.In the event that this offer is declined and the judgment is entered in favour of the Official Assignee for a greater sum than the settlement sum proposed above, this letter will be used to support an application by the Official Assignee for an increased costs award.
7.This offer is open for acceptance until the close of business on 19 July 2019. If not accepted by this time, the offer will lapse and be immediately withdrawn. The Official Assignee will then be reverting his focus to preparing for the hearing schedule for 28 August 2019. Once these further costs have been incurred, the Official Assignee will not be in a position to settle matters at the level presently offered.
[8] Counsel submits that the respondent’s failure to engage in productive settlement discussions was unreasonable, especially given the amount at stake in the proceeding (being $118,000). The applicant says this constitutes exceptional circumstances under the Act and warrants an award of costs in the applicant’s favour.
[9] In response, counsel for the respondent says the respondent was not obliged to settle the claim in the amount of $100,000. Equally, counsel says the applicant could have abandoned the claim, given the amount of the sum claimed, for the reason that, in any event, the claim will most likely not result in any benefit for the creditors of Mr Narayan (the Bankrupt).
[10] The respondent’s second point is misguided, and I address that point first. In the substantive judgment, I set out the claims that had been received in Mr Narayan’s
bankrupt estate according to the affidavit of Mr Pullan, the Deputy Assignee.9 The claims total to $132,400.31. While the amount sought in this proceeding, $118,000, is less than the total amount of the claims against the Bankrupt’s estate, it cannot be said that the proceeding would not result in any benefit for the creditors. In light of the claims against the Bankrupt’s estate, the proceeding was not for an insignificant amount.
[11] There is, however, some merit to the respondent’s first point: the respondent was not obliged to settle the claim. The Act is clear that for there to be exceptional circumstances, there must be an unreasonable refusal to negotiate a settlement.
[12] First, the applicant only allowed three working days for the respondent to accept the offer — the offer being made on 16 July 2019 and the offer remaining open until the close of business on 19 July 2019. The idea that the respondent could have responded to the offer up to the date of the hearing — originally scheduled for 28 August 2019 but later moved to 20 September 2019 — is not consistent with the position taken in the letter. Furthermore, it was categorical that there would be no further opportunity to discuss settlement at the “level presently offered”, being
$100,000. It is also notable that the applicant’s next step was to file submissions by 14 August 2019, that is, around a month from the date the offer was made. There was no urgency such that the respondent should only be allowed three days to respond.
[13] Secondly, the timing of the offer and the events prior to the offer are also significant. The letter of offer is dated 16 July 2019, just four working days after the applicant filed Mr Narayan’s affidavit. That affidavit was significant; the application was initially presented simply as a straight-forward application to cancel an insolvent and documented gift. But the gift was obviously unusual, and Mr Narayan’s evidence disclosed that the circumstances of the gift were not quite as they were portrayed in the documents. Ms Kumar’s role — a bankrupt who orchestrated Mr Narayan’s acquisition of the asset and the subsequent disposition of the equity — undoubtedly formed part of the background giving rise to the gift, but nothing touching on any of
9 Official Assignee v Singh, above n 1, at [9].
this was given in evidence in support of the application. It was only when Mr Singh raised the issue of a loan that Mr Narayan’s evidence was filed in rebuttal.
[14] In the circumstances, it would have been reasonable to give the respondent more time to reflect on the offer in light of the new evidence from Mr Narayan and to have a proper opportunity to consult counsel. Accordingly, I have some reservations as to whether the respondent’s failure to engage in settlement discussions was unreasonable so as to constitute exceptional circumstances under the Act.
Was the respondent’s case meritless?
[15] First, counsel for the applicant says the case has always been a simple one and based on contemporaneous documents executed by the respondent. Counsel notes my comment in the substantive judgment that, “the contemporaneous documents executed by both Mr Narayan and Mr Singh record, as a matter of unambiguous fact, that the deposit was to be by way of a gift [rather than repayment of a loan]”.10
[16] Counsel says that, by contrast, the respondent’s attempt to refer to payments made to another as payments made to the Bankrupt was not supported by any document and refuted by the Bankrupt himself. Accordingly, counsel says the respondent ought to have been aware that he had a low chance of succeeding with his defence. Furthermore, there was no novel point of law to be tested through this case. In litigating a meritless case, the respondent put the applicant to unnecessary costs.
[17] In response, counsel for the respondent says the respondent put forward a fairly reasoned theory of the case based upon legal principle and supported by case law. And while the Court ultimately decided the case in the applicant’s favour, counsel says, it does not necessarily follow that the respondent’s case was without merit.
[18] As I have said both at [13] above and in the substantive judgment, while the application was initially presented as a straight-forward application to cancel an insolvent and documented gift, that was obviously not the case.11 I ultimately held, on the basis of the contemporaneous document, namely the deed of gift, that the
10 At [28].
11 At [13]–[14].
transaction was a gift and not repayment of a loan. However, there were real questions to be answered arising from Mr Narayan’s affidavit as to what happened and the relationship between him, Ms Kumar and Mr Singh. The applicant’s case was not irrefutable. Indeed, it was not until further evidence was filed for the respondent and the witnesses cross-examined that I could hold, on the balance of probabilities, that the transaction was a gift. Accordingly, the case was not meritless, that is, wholly unarguable, so as to amount to exceptional circumstances.
[19] Secondly, the respondent says he was let down by his then-lawyers and that there was more evidence to be produced. He says he instructed his lawyers to prepare, file and serve a second affidavit by the respondent but the lawyers would not do as he asked. It was not necessarily the respondent’s fault his lawyers would not follow his instructions. I note, however, that no evidence of such instructions has been proffered.
[20] Counsel for the respondent submits that an example of said missing evidence is evidence in relation to a sum of $44,367 that the respondent advanced to the Bankrupt through his solicitor, Mr Whitworth, so that the Bankrupt could pay his tax debt to Inland Revenue. This amount was not referred to in the respondent’s affidavit, which listed the total loaned amount and each individual advancement alleged, or the respondent’s submissions. Likewise, Mr Whitworth’s affidavit did not refer to this amount nor was he questioned on this point at the hearing.
[21] Having already found that the case was not meritless, it is not strictly necessary for me to address this point. For completeness, however, the short answer to this submission is that the present costs dispute is not a proper opportunity to raise concerns about omitted evidence or to effectively revisit the findings made on the evidence that was put to the Court. If there was an omission to follow his instructions and to raise certain evidence, the respondent must look to other avenues that may be open to him to bring a complaint or claim against his then-lawyers. But, for present purposes, such bare assertions are irrelevant to the merits of the respondent’s case.
[22] Thirdly, related to the second point, the respondent invites the applicant to offset the sum of $44,736 explained above against the judgment sum of $118,000.
However, again, this is not a matter for this Court; it is a matter to be discussed between the two parties — the issue is not relevant to whether costs should be awarded.
Did the applicant incur unnecessary costs as a result of the respondent’s failure to comply with procedural rules?
[23] Counsel for the applicant says that, on 23 August 2019 — three working days prior to the one-day fixture originally set for 28 August 2019 — the respondent sought leave to vacate the hearing on the basis that he sought to adduce further evidence, namely an affidavit from his solicitor, Mr Whitworth. The applicant opposed leave.
[24] Following a teleconference, I allowed the respondent to file further evidence. In my minute dated 27 August 2019, I recorded that:
Costs on today’s appearance are reserved. I note that the Official Assignee intends to seek costs in terms of the exceptions that apply in relation to legally aided person, and that ordinar[ily] Mr Singh could expect at least 2B costs and possibly increased costs because of his delay and the indulgence that is granted as a result of his delay.
[25] Counsel for the applicant submits that, as a result of the respondent’s late application to adduce further evidence and vacate the hearing, the applicant was put to costs in preparing and liaising with witnesses for the original hearing.
[26] In response, counsel for the respondent says that while it was unfortunate that the respondent’s lawyers requested an adjournment of the hearing at such a late stage, it is not unusual or exceptional for such adjournments to be sought and granted in a case such as this. Counsel says the respondent had lawyers representing him, and court procedures are generally beyond the personal responsibility of the respondent where he has lawyers representing him.
[27] I deal with this point briefly. I allowed the late filing of the affidavit as counsel for the applicant acknowledged that there would be no prejudice to the applicant if it were allowed.12 While I noted in my minute that the late application caused delays and that the Court was granting the respondent an indulgence, I am not satisfied that this alone constitutes exceptional circumstances — which has a high threshold.
12 At [15].
[28] For the above reasons, I have reservations as to whether there are exceptional circumstances in this case such that the Court can award costs against an aided party. In any event, I consider an award of costs, in any amount, is inappropriate in this case, having regard to the respondent’s financial circumstances — which I turn to next.
What amount of costs (if any) is reasonable?
[29] Section 45(1) provides that costs against an aided person “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”. In other words, any award of costs against an aided party must be reasonable and one that the aided party can realistically cope with.13 The costs award must also not subvert the very worthy objects of the legal aid legislation.14
[30] Having found that there are no exceptional circumstances, I am not required to consider the amount of costs reasonable (if any). However, for completeness, I address this point in any event.
The respondent’s financial circumstances
[31] The applicant seeks costs on a 2B basis. Counsel says the respondent has an asset in the form of the equity in his property, namely 5A and 5B Pollen Crescent, Hamilton. And this asset can be realised and used to meet the costs award.
[32] In response, counsel for the respondent says the respondent is currently in dire financial circumstances. Counsel advises that:
(a)The respondent is unemployed and unable to work as a result of injuries suffered during a car accident in May 2014 when he was employed as a courier driver. This fact was also stated in the respondent’s affidavit for the substantive hearing and not challenged by the applicant at that time. A further doctor’s letter in support dated 14 October 2019 was attached to the respondent’s costs submissions.
13 Awa v Independent New Auckland Ltd [1996] 2 NZLR 184 (HC) at 189.
14 At 189.
(i)Counsel also advised that the respondent was not receiving accident compensation or social welfare benefit at the moment.
(ii)The respondent lives with his wife and two young children at 5A Pollen Crescent. He is supported by his wife, a student.
(b)The respondent is the registered proprietor of units 5A and 5B. But the properties are mortgaged to TSB, and the respondent says about
$472,000 is owing to TSB under the mortgage. TSB is giving him relief from repaying the mortgage loan during the COVID-19 lockdown.
(c)The respondent has been renting out 5B Pollen Crescent, but not since December 2019, when his tenants damaged the property and left traces of methamphetamine contamination in the property. The results of a methamphetamine screening assessment dated 11 December 2019 was provided, together with quotes for repair works required for unit 5B.
(i)The respondent says the insurance payments for the repairs are delayed because he needs to take his former tenants to the Tenancy Tribunal first. The excesses for the claim are insured.
(ii)The Tenancy Tribunal hearing for this matter was scheduled for 7 April 2020 but was adjourned because COVID-19.
(d)The respondent intends to put units 5A and 5B on the market and sell them once the COVID-19 lockdown is lifted, unit 5B is repaired and the property market returns to some form of normality.
(i)Inland Revenue has previously brought a Commissioner’s Bankruptcy Notice on the respondent. That notice lapsed when the creditors’ application was not filed within three months.
(ii)The respondent and his counsel had a meeting with Inland Revenue on 4 February 2020. It was agreed that the respondent
would try to sell units 5A and 5B, pay TSB the mortgage and pay what he owes to Inland Revenue, being around $90,345.70.
(iii)The respondent says that if a forced sale of units 5A and 5B is actioned in the currently depressed, post-lockdown market, no one will receive anything — neither the applicant nor the IRD.
(e)The only other assets the respondent has are debts owing to him by the Bankrupt and a Ms Krishna. The respondent says he will try to start legal proceedings against Ms Krishna for the debts that she owes him.
[33] Overall, I consider that the respondent is in dire financial circumstances, not to mention the added economic difficulties related to COVID-19. Having regard to the principle that any costs award (if any) against an aided person must be reasonable and one that the aided party can realistically cope with, I consider that a costs award is not appropriate in this case. I say this having regard to the means of all the parties to the dispute, including the Official Assignee. In my view, the applicant is better placed to bear the cost of the proceeding, despite being the successful party.
[34] That being said, under s 46, the applicant may apply to the Legal Services Commissioner to pay some or all of the costs that the applicant would ordinarily be entitled to but for the operation of s 45. To that end, I now turn to the costs that the applicant would ordinarily have been entitled to but for s 45.
Amount of costs that would ordinarily have been awarded
[35] By operation of s 45, I make no order for costs against the respondent. Section 45(5) provides that, in such cases, the Court may make an order specifying what order for costs would have been made against the aided party but for s 45. There is some debate as to whether a finding of exceptional circumstances is required to make a s 45(5) order specifying costs that would have been awarded — I am satisfied that, on a proper reading of the section and the purpose of the Act, it is clear that a finding of exceptional circumstances is not a pre-requisite to s 45(5).15
15 McGechan on Procedure (online ed, Thomson Reuters) at [HRPt14.11(2)(e)] and [LA45.10(2)].
[36] The applicant seeks costs on a 2B basis, but he has not itemised the particular steps for which costs are sought. I would have awarded costs as follows:
Step/Item Description16 Time allocation Amount 37 Filing originating application and supporting affidavits (dated 27 May 2019) 2 days (2B) $4,460 11 Joint memorandum (emailed) (dated
20 June 2019)
0.2 days (2A) $446 36 Notice requiring production of person for cross-examination who has sworn
an affidavit (dated 7 August 2019)
0.1 days $239 14 Teleconference for leave to adduce further evidence (dated 27 August 2019) 0.5 days (2B) $1,195 36 Notice requiring production of person
for cross-examination who has sworn an affidavit (dated 5 September 2019)
0.1 days $229 11 Memorandum of counsel objecting to hearsay evidence (dated 17 September 2019) 0.4 days (2B) $956 34 Appearance at hearing for sole or principal counsel (dated 20 September
2019)
0.5 days $1,195 36 Memorandum as to costs (dated 20 March 2020) 0.4 days $956 Total $9,676
[37] I note that, in the offer of settlement, the applicant indicated an intention to seek increased costs in the event the offer was not accepted. However, the applicant’s costs submission does not in fact seek increased costs. I therefore would not have awarded increased costs in favour of the applicant.
Result
[38] Overall, I am not satisfied that there are exceptional circumstances — noting the high threshold — so as to allow the Court to make a costs award against a legally aided party, the respondent. In any event, in light of the respondent’s financial circumstances, a costs award would not be reasonable (in any amount). Accordingly, by operation of s 45 of the Legal Services Act 2011, I make no award for costs.
16 Steps taken prior to 1 August 2019 are calculated on the now-replaced sch 2 recovery rates.
[39] That being said, but for the operation of s 45, the applicant would have been entitled to scale costs on a 2B basis in the sum of $9,676. As noted above, under s 46, the applicant may apply to the Legal Services Commissioner for payment, by the Commissioner, of some or all of the costs that the applicant would have been entitled to. Such an application will be determined by the Commissioner.
Associate Judge Sargisson
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