Ormerod v Ormerod

[2018] NZHC 527

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2063

[2018] NZHC 527

UNDER

Part 19 of the High Court Rules

IN THE MATTER

of an application by William Arthur Forster Ormerod as sole executor and trustee of the estate of John Louis Ormerod

BETWEEN

WILLIAM ARTHUR FORSTER ORMEROD

Applicant

AND

JULIET ORMEROD

Respondent

Hearing:	14 December 2017
Counsel:	K Davenport QC for Applicant N Holdaway for Respondent
Judgment:	23 March 2018

JUDGMENT OF WHATA J

This judgment was delivered by me on 23 March 2018 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Solicitors:           Carlene Blucher Law Limited, Auckland

Norwest City Law, Limited, Auckland

ORMEROD v ORMEROD [2018] NZHC 527 [23 March 2018]

[1]                  I have before me memoranda as to costs from both the applicant and the respondent. In short, this proceeding relates to an application to release a solicitor from her undertaking. The respondent agreed to the undertaking being released the day before the matter was to be heard.

Background

[2]                  The applicant, William Ormerod, and the respondent, Juliet Ormerod, are siblings. They are both beneficiaries of their father’s estate; William is also the executor of that estate. The sole remaining asset of the estate is the sale proceeds of the former family home. William and Juliet entered into a property agreement where they agreed to split the proceeds of that sale, and Juliet agreed to pay William $130,000 in recognition of him meeting the outgoings on the house. On 28 February 2017, the day settlement occurred for the sale of the family home, William’s solicitor, Ms Norton, provided an undertaking to Juliet’s solicitor, Ms Holdaway. That undertaking was to “hold all settlement funds less payment for rates on term deposit undisbursed until such time as a distribution statement has been forwarded to you, for your client’s approval, but not later than 3rd of March 2017”.

[3]                  On 2 March 2017, Ms Norton sent Ms Holdaway a final distribution statement and distribution deed. Juliet refused to approve the distribution statement or to discharge the undertaking. On 6 September 2017, an application was filed in the High Court seeking:

(a)To discharge Ms Norton from her undertaking so that the funds could be distributed; and

(b)Leave to proceed by way of originating application in relation to the distribution of the estate.

[4]                  An application for substituted  service  was  also  made,  that  is,  to  serve  Ms Holdaway. This was granted. A conference was convened on 28 September 2017. In the minute of that conference, I stated:

[2]        Ms McGuigan maintained that an originating procedure was appropriate in relation to both the discharge of an undertaking given by the executor’s solicitor and the distribution of the estate.

[3]        Ms Holdaway maintained that the originating application procedure was not appropriate because there were substantive matters in dispute, including whether the undertaking had been discharged and whether it was appropriate for the estate to be distributed.

[4]I formed the view that there are two distinct matters in issue, namely:

[a]  The discharge of the undertaking; and

[b]  Whether the estate can be distributed.

[5]        I also indicated I was not prepared to entertain the application in relation to distribution, but that the application to discharge the undertaking should proceed. Timetabling orders for filing an amended application, notice of opposition, affidavit evidence and agreed statement of facts were also made. A fixture was ultimately set down for 14 December 2017.

[6]        With the benefit of the notice of opposition, I convened a further conference on 7 December 2017 to clarify the reasons for opposition. In the corresponding minute, I observed:

[2]        At the conference, I sought clarity as to the reasons for opposition. The notice of opposition identifies a plethora of concerns, none of which state why the undertaking given by Ms Norton is not or cannot be discharged given that it is expressed to expire no later than 3 March 2017.

[3]        I also indicated it appeared to me that, based on the respondent’s affidavit, the primary concern related not to the precise terms of the undertaking but, rather, about what the respondent perceives to be her “true entitlement.” But her entitlement is recorded in a property agreement signed by her. Nor was Ms Holdaway able to identify at the conference how the distribution statement was flawed (though in fairness Ms Holdaway did not have her file with her).

[4]        Ms Holdaway also noted, however, that contrary to her client’s expectations:

[a]Ms Norton failed to transfer funds to her as previously agreed; and

[b]the respondent never agreed to execute a deed of indemnity and release that was sent after settlement.

[7]        I also expressed concern about Ms Holdaway’s proximity to the matters in issue.

[8]        On 13 December 2017, Ms Holdaway confirmed that Ms Norton was released from her undertaking.

Costs submissions

[9]The applicant, William, now seeks indemnity costs. He submits that:

(a)Juliet has defended the proceedings inappropriately and without merit. Her objection to releasing Ms Norton from her undertaking was because she felt she was not receiving enough under the property agreement. She was also unhappy she did not receive the funds on the day of settlement. The undertaking had nothing to do with the terms of the property agreement, or when Juliet would be paid.

(b)Juliet could have released Ms Norton from her indemnity long before 13 December 2017, the day before the hearing. If she had done so, the costs William incurred in the proceedings would have been avoided.

(c)To refuse to release Ms Norton from her undertaking can only be described as an abuse of process. It has resulted in William having to seek second-tier lending in order to purchase a home.

[10]Juliet opposes the award of indemnity costs. She submits that:

(a)She had to defend the proceedings in order to receive her entitlement. She was dependent on the continuation of the undertaking because she had removed a caveat from the property in reliance on that undertaking.

(b)It was not Juliet’s fault that she did not release Ms Norton from her undertaking. Instead, William prevented Ms Norton from releasing the funds when he changed his instructions to Ms Norton, and required her to obtain Juliet’s signature on the deed and indemnity and release forms,

something which Juliet did not want to do out of concerns over how the estate was being administered. As a result, it is William’s own actions which resulted in the originating application.

(c)Indemnity costs would be unjust because she has herself incurred costs.

(d)Juliet and her solicitor have complied with and submitted all the necessary documents required, save for not executing the deed of indemnity and release.

(e)William was only partially successful in his application to have the undertaking removed because Juliet did not release Ms Norton from her undertaking unconditionally but rather only to allow William to purchase a home.

[11]Juliet also submits that an award of costs should be made in her favour because:

(a)There were other beneficiaries of the estate who incurred legal costs in order to receive an inheritance and they were awarded legal costs against the estate. Given the other two beneficiaries were able to receive costs, Juliet should as well.

(b)A minute dated 28 September supports the award of costs to Juliet.1

[12]Alternatively, Juliet suggests that each party pays their own costs.

Process

[13]      The costs process has been delayed because Juliet has missed two filing deadlines.2     Counsel for the respondent, Ms Holdaway, filed a medical certificate on

1      That minute at [9] suggested there was a possibility that costs in advance could be made in favour of Juliet to allow her to pay legal fees, and gave both parties an opportunity to file submissions on that issue which could be heard on the papers. An application for costs in advance was not made.

2      Counsel for the respondent missed the due date of 29 January, but was granted an extension until 12 February. She then missed that deadline, submitting her memorandum on 13 February 2018.

20 February 2018 advising she missed the submission deadline because she was unwell.

Assessment

[14]      Ordinarily, the party who fails with respect to a proceeding should pay costs to the party who succeeds.3 In this case, William was the successful party; his solicitor was released from her undertaking. However, I do not accept, by a slim margin only, Ms Davenport’s submission that this is a case where indemnity costs are warranted. Juliet’s case was always weak, but it was not vexatious. I am satisfied, however, that it took Juliet altogether too long to accept what should have been an inevitable outcome, as foreshadowed in my 7 December 2017 minute. This is a reason for increased costs. I accept an increase of 20 per cent is appropriate reflecting, in a broad- brush way, the likely unnecessary cost to prepare for a hearing incurred by the applicant, at least from the date of my minute of 7 December 2017.

[15]      Accordingly, there shall be an order for costs on a 2B basis, plus 20 per cent, to William together with disbursements. Quantum is to be fixed by the Registrar. It  is to include all attendances up to and including the costs application. While I understand Ms Holdaway was ill for a period, it took too long to attend to this issue.

3      High Court Rules 2016, r 14.2(1)(a).