Owen v Thomas

[2015] NZHC 2966

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-267 [2015] NZHC 2966

UNDER

the Family Proceedings Act 1980 and

Property (Relationships) Act 1976

IN THE MATTER OF

an appeal under section 174(1AA)(a) Family Proceedings Act 1980 and section

39, Property Relationships Act 1976

BETWEEN

OWEN Applicant

AND

THOMAS Respondent

Hearing:	30 September 2015
Counsel:	R Gubb for applicant (respondent on appeal) S R Jefferson QC for respondent (applicant on appeal)
Judgment:	30 September 2015
Reasons:	26 November 2015

REASONS JUDGMENT OF DUFFY J

This reasons for judgment was delivered by me on 26 November 2015 at 10 am pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Counsel:     S R Jefferson QC, Auckland ([email protected]) V A Crawshaw, Auckland ([email protected])

Solicitors:    Wynyard Wood (R G Ewen), Auckland ([email protected]) Beattie Rickman Legal (R B Gubb), Hamilton ([email protected])

OWEN v THOMAS [2015] NZHC 2966 [30 September 2015]

[1]      On 30 September 2015 I delivered a result judgment in which I refused

Ms Thomas’s  application  for  recall  of  the  costs  judgment  that  I  delivered  on

18 December 2014.1

[2]      In the judgment on costs I awarded Mr Owen costs at category 2B for the appeal and the stay of execution application that Mr Owen brought.  The result was costs and disbursements in the total sum of $20,907 were awarded to Mr Owen.

[3]      Ms Thomas sought to have the costs judgment recalled.  Her attempts at this had something of a protracted history.  First, she filed a memorandum in which she requested the recall of the costs judgment.  In a minute dated 22 December 2014 I directed Ms Thomas to file a formal application for recall of judgment.  She then did so.  Mr Owen opposed the recall application.

[4]      In this Court on appeal Mr Owen successfully argued that decisions of the Family Court awarding Ms Thomas an interim maintenance order and an interim distribution of relationship property were wrong, and so the orders to that effect were set aside.  He then sought costs.

[5]      Ms Thomas’s primary argument in her memorandum of 17 October 2014 in opposition to an award of costs was that rather than for this Court to apply the well settled principle that costs follow the event, the Court should refrain from awarding costs until the Family Court had made determinations on Ms Thomas’s substantive applications  for  maintenance  and  the  division  of  relationship  property.    Thus, Ms Thomas sought to persuade the Court that despite Mr Owen’s success in the appeal against the interim orders of the Family Court, any decision by that Court to award final orders should be allowed to influence whether he obtained an award of costs  for  succeeding  in  his  appeal  against  the  interim  orders.    The  secondary argument was that if the Court was of a mind to award costs Ms Thomas wanted a

further opportunity to address that question.

1      Despite the length of time since the costs judgment was given, that judgment has not been sealed.

[6]      On 22 October 2014 Mr Owen filed a memorandum in reply in which he submitted that the fact the substantive matters were unresolved in the Family Court should not preclude this Court awarding him costs following his successful appeal against the interim orders.

[7]      Ms Thomas then filed a further memorandum on costs dated 23 October 2014 in which she reiterated the submission that if the Court was of a mind to deal with costs on the appeal before the Family Court had determined the substantive applications she wanted the opportunity to make further submissions on costs.  She followed this by stating that until the Family Court had determined the substantive applications it was not possible to determine if Mr Owen had succeeded or not.

[8]      Regrettably, through an oversight in the Court’s registry the memorandum dated 23 October 2014 was not brought to the Court’s attention until after it had issued a decision on costs, and Ms Thomas took steps to have that decision to be recalled.    It  follows  that  when  the  costs  award  was  made  the  Court  had  no knowledge of the memorandum dated 23 October 2014.

[9]      The principles regarding recall of judgments are well settled.  They are to be found in the often cited passage in Horowhenua County v Nash (No 2)2  which was recently reaffirmed by the Court of Appeal in Unison Networks Limited v Commerce Commission:3

Generally speaking,  a judgment  once  delivered  must  stand for  better  or worse subject, of course, to appeal.  Were it otherwise there would be great inconvenience and uncertainty.  There are, I think, three categories of cases in which a judgment not perfected may be recalled – first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.

[10]     The third principle is of relevance here.  Circumstances that can constitute a very special reason for recalling a judgment include: (a) when the parties have failed

to draw the Court’s attention to a fact or point of law that is plainly relevant; (b)

2      Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.

3      Unison Networks Limited v Commerce Commission [2007] NZCA 49 at [10].

where a Judge has failed to determine an issue that has properly been put before him or her; or (c) where the applicant has been taken by surprise by a particular application  from  which  the court  ruled  adversely against  the  applicant,  and  the applicant did not have a fair opportunity to be heard on it4.  The last circumstance is what Ms Thomas contends has occurred here.

[11]     Ms Thomas argues that because the Court was not aware of her memorandum dated 23 October 2014 it has made a determination without taking that memorandum into account and accordingly she has not had a fair opportunity to be heard on Mr Owen’s application for costs.   She argues that she had wanted to draw to the Court’s attention submissions on the question of the appropriateness and quantum of a costs award.

[12]     Discretionary factors that Ms Thomas contends favoured not awarding costs to the respondent included: (a) the interim maintenance at issue came to a total of

$51,054, which did not warrant Mr Owen being awarded costs of $20,907; (b) a stay application before Fogarty J was resolved without the need for a judicial determination;  and  (c)  there  was  a  contradiction  in  Mr  Owen’s  submissions regarding Ms Thomas’s ability to pay costs.5

[13]     Ms Thomas also submits that an award of costs was inappropriate because the error in the judgment awarding her interim maintenance was an error on the part of the Family Court Judge and not something for which Ms Thomas was responsible. Secondly, r 14.7 enables the Court to refuse to make a costs order where the property or interest at stake is of exceptionally low value or for some other reason the Court is justified in refusing to award costs.   Here Ms Thomas argues that the interim maintenance  of  $51,054  and  the  advance  distribution  of  relation  property  of

$32,533.26  are  of  low  value.    Further,  she  submits  that  as  Mr  Owen  had  the

opportunity to argue against substantive maintenance when the matter was next

4      See Re Blenheim Leisure (Restaurants) Ltd No 3 The Times 9 November 1999 as cited in Unison

Networks Ltd v Commerce Commission, above n 3, at [32].

5      The details of this submission I found difficult to comprehend.

before the Family Court, there was no need for him to appeal against the interim maintenance order.6

[14]     Next, Ms Thomas submits that the appeal raises a novel point, which made it a test case.  Relying on International Factors Marine (Singapore) Pte Ltd v The Ship Komtek II,7 she contends that the usual principle of costs following the event did not apply to test cases.  Finally, she asserts that she is financially strapped and that she and her children will suffer if she is required to pay costs.

[15]     As regards the costs award that Mr Owen had sought and obtained on the stay of proceedings application Ms Thomas argues that Mr Owen had failed to acknowledge the without prejudice discussions between the parties where an offer was made to resolve the matter, but was ultimately rejected by Mr Owen.  Secondly, when the matter came before Fogarty J on 22 August 2014 no stay was granted, instead Mr Owen agreed to make a third payment of interim spousal maintenance. Thus, Ms Thomas contends that the hearing on 22 August 2014 was unnecessary, and so it did not warrant recognition when it came to an award of costs.

[16]     Mr Owen rejects the arguments put forward by Ms Thomas and argues that he  is  entitled  to  an  award  of  costs  at  category  2B,  given  that  his  appeal  was successful in all respects.  His submissions traverse the relevant steps that each party took last year in relation to the costs argument.

[17]     Mr  Owen  submits  that  on  receipt  of  Ms  Thomas’s  memorandum  dated

17 October 2014, which was when she first indicated that costs should be deferred until the substantive maintenance application was determined in the Family Court, he responded on 22 October 2014 seeking to have the question of costs determined immediately.

[18]     He then refers to the memorandum that Ms Thomas filed on 23 October

2014, which is the document that was not drawn to the Court’s attention before the

6      Ms Thomas did not address how a successful argument against the making of a maintenance order could assist in undermining an unchallenged order to pay interim maintenance.

7      International Factors Marine (Singapore) Pte Ltd v The Ship Komtek II [1998] 2 NZLR 108 (HC) at 119.

costs award was made, and essentially submits that in this memorandum Ms Thomas did not advance matters beyond what she had already submitted in her earlier memorandum of 17 October 2014.  He contends therefore that the fact the Court did not see the memorandum of 23 October 2014 before it made the costs award is of no consequence.  Insofar as Ms Thomas wanted the Court to defer making a costs award until the Family Court had determined whether to make a substantive order for spousal maintenance, he argues that this Court would already have been aware of this request from reading the 17 October 2014 memorandum.   When it comes to Ms Thomas’s contention that she was not given a fair opportunity to be heard on the question of costs, Mr Owen submits that she had no less than two opportunities to provide submissions on the merits of an award of costs and expressly declined to do so.  He argues that she, in effect, made a considered strategic decision not to take the opportunity to advance arguments on the merits of a costs award, and so she must now bear the consequences of her choice.

[19]     Mr Owen strongly objects to Ms Thomas’s reference to the without prejudice communications, when it comes to costs regarding the application for a stay.   He contends that those communications are privileged and, therefore, not admissible. He refers to s 57 of the Evidence Act 2006 which deals with the issue of privilege for settlement negotiations.  He contends that the subject communications were clearly marked without prejudice; that the parties did not agree to waive privilege; nor were the privileged communications made subject to the proviso that they were made without prejudice except as to costs, as is required by s 57(3)(c)(i).  He submits that, therefore, the privileged communications do not fall within the exception as to costs, and accordingly they should never have been put before the Court.

[20]     When it comes to the question of the arguments on recall and the third principle in Horowhenua County v Nash (No 2) Mr Owen submits that Ms Thomas had every opportunity to make submissions as to the level or appropriateness of costs.  He contends that the fact that the Court was not made aware of Ms Thomas’s second memorandum dated 23 October 2014 is irrelevant.  He argues that it is clear from the decision on costs that Ms Thomas’s first memorandum (dated 17 October

2014) was considered.   Further, that the memorandum stated essentially the same argument as the later memorandum of 23 October 2014, namely that costs should not

be considered until the outcome of the Family Court hearing was known, but that detailed submissions on costs would be made if required.  He submits, therefore, that it was abundantly clear that costs for the appeal were in issue; that the Court had expressly invited both counsel to file memoranda as to costs; that Ms Thomas was given  adequate  opportunity  to  file  submissions  as  to  costs  and  chose  on  two occasions instead to file brief memoranda dealing with the issue of costs that did not address  the  question  substantively.    He  submits  that  there  was  no  reason  why Ms Thomas could not have taken the opportunity given to her by the Court and filed submissions on all aspects of costs.  He contends, therefore, that the present case is not one where Ms Thomas can say she was taken by surprise.  Instead, he submits that Ms Thomas knew that submissions on costs were required; was given a fair opportunity to consider his submissions; and to respond to them, which she did. That she failed to file comprehensive submissions on costs was entirely due to the way in which she chose to conduct her case.

[21]     Mr Owen further submits that the costs that were awarded were correctly calculated on a 2B basis and were in accordance with r 14.2(a) of the High Court Rules; as he was successful in all respects of the appeal it was only appropriate that he receive costs on a 2B basis.  Accordingly, he submits, it is difficult to see what different outcome might have been achieved, even if substantive submissions on the merits of an award of costs had been made by Ms Thomas.

[22]     In  relation  to  other  specific  arguments  put  forward  by  Ms  Thomas,  he submits that the suggestion the present case was a test case on a novel point was unfounded.  He submits that this was no more than a straightforward appeal which was well within the realm of expertise of all counsel.  He disputes the suggestion that the amount involved in the interim maintenance award was not of “an exceptionally low value”.  He submits that it represented an annual income to Ms Thomas of over

$100,000, further, the three months of maintenance that was paid to her before the successful appeal (being $25,527.66) was more than the award of costs.

[23]     As regards the inclusion of costs for the stay, he submits that the without prejudice communications could not be admitted, and the only point that needed to

be made was that Ms Thomas did not at any time consent to the stay, which accordingly required the point to be argued.

[24]     Mr Owen disputes the suggestion that it was open to him to simply let the interim maintenance order run its course and proceed to argue substantive maintenance.   In this respect he contends that  the appeal judgment showed the Family Court Judge had made a material error, one which he could not let stand and which position this Court upheld.

[25]     Finally, he rejects the suggestion that the costs as ordered will result in a profit for him.  He confirmed that the costs sought do not exceed his counsel’s actual costs, and no costs were sought in relation to second counsel.

[26]     In conclusion, Mr Owen submits that the strict test for recall of a judgment has not been met by Ms Thomas, and accordingly the application should be dismissed.

[27]     Ms Thomas filed submissions in reply.   Ms Thomas argues that had her memorandum of 23 October 2014 been before the Court it would not have made a determination on costs without first hearing from her further.  This circumstance she contends is the very sort of ground in which a decision ought to be recalled.8

[28]     Regarding the use of the without prejudice communications she contends the without prejudice communications ought to be before the Court as they amount to a Calderbank offer that falls well within s 57(3)(c), and thus are an exception to the rule against the admission of without prejudice correspondence.

[29]     As regards the principles for recall of a judgment she accepts the principles are narrow, but contends, nonetheless, that there are special reasons in her case why the costs decision should be recalled.   She maintains that the reason for the costs decision being delivered without hearing from her further is due to the registry error

in not providing the Court with her memorandum dated 23 October 2014.   She

8      Here she relies on Faloon v Commissioner of Inland Revenue [2010] NZCA 242 at [2].

contends, therefore, that she was taken by surprise when the decision on costs was made.

[30]   She then made substantive submissions on costs, first referring to the memorandum dated 23 December 2014 at paragraphs 8-15.  She raised r 14.7 of the High Court Rules regarding when a Court may refuse or reduce costs.  She argues that in the present proceedings the only issue upon which Mr Owen succeeded was on the question of the interim distribution of relationship property.  Ms Thomas then addressed the merits of the appeal decision in relation to the finding on whether a Court had jurisdiction to make an interim distribution order of the type made by the Family Court in this proceeding.  She submits that whilst the Court’s decision on that question had gone against her, Mr Owen’s position was “unmeritorious and resulted in a checkmate of the respondent on a purely technical basis.” As regards the interim spousal maintenance she submits that Mr Owen was not entirely successful as the outcome of the appeal was the Court setting the interim maintenance order aside and sending it back to the Family Court for reconsideration.

[31]     She further argues that the respondent’s success in challenging the question of interim maintenance was not clear because the Family Court Judge who made the interim maintenance order came to the same decision on the question of reasonable needs when it came to the substantive maintenance order.  Ms Thomas contends that it would be “highly inappropriate” for her to “be required to effectively repay via costs the spousal maintenance award made in her favour in the Family Court.”  In addition she argued that proportionality is an important factor in determining costs.

[32]     She summarised her arguments regarding whether there was any merit in her opposition to costs as being:

(a)       her success regarding the application for a stay; (b)     the Calderbank offer;

(c)       the slim margin by which the respondent succeeded in the interim distribution argument;

(d)      her ultimate success on the interim spousal maintenance matter; and

(e)       the sums involved.

Discussion

[33]     There appears to be no dispute between the parties when it comes to the relevant  principles  for  recall  of  a  judgment;  their  dispute  is  about  how  those principles are to be applied.

[34]     I acknowledge that a party should have a proper opportunity to be heard before the Court makes an adverse decision against that party.   Further, where the omission to provide a proper opportunity to be heard is inadvertent and stems from an error on the part of the Court’s registry this may in principle constitute special circumstances of the type that were recognised in fall within Horowhenua County v Nash (No 2) as justifying recall of a judgment.

[35]     However, I do not consider that what occurred in the present case amounts to Ms Thomas being denied a proper opportunity to be heard.   Mr Owen as the successful  party  applied  for  costs  by  memorandum  dated  9  October  2014. Ms Thomas filed her memorandum dated 17 October 2014 in response to Mr Owen’s memorandum.  He then filed a reply memorandum dated 22 October 2014.  At that point Ms Thomas had no right to file anything further on the question of costs.  As someone who was a respondent to a costs application her opportunity to be heard on that topic was when she filed her memorandum dated 17 October 2014.

[36]     So in terms of the opportunities that this Court provides to someone who is a respondent  in  a  costs  application  Ms  Thomas  was  given  ample  opportunity  to address Mr Owen’s application.  That her response simply proposed the deferral of costs until some later time is something for which she is responsible.  Furthermore it was her considered response and not something she did accidently.

[37]     I consider, therefore, that the present circumstances resemble those in Hill v

Wellington Transport District Licensing Authority 9 where the Court of Appeal found that Mr Hill could not complain that he had not been given proper notice of a hearing

9      Hill v Wellington Transport District Licensing Authority [1984] 2 NZLR 314 (CA).

to revoke his taxi cab licence, despite the time period for giving such notice being breached, as he had written to the Authority advising that he proposed to take no steps.  The Court of Appeal considered that Mr Hill was aware of the hearing date and had intentionally chosen not to attend the hearing; thus any denial of the opportunity to be heard was the result of his own actions.

[38]     Moreover,  once  the  usual  sequence  of  memoranda  for  an  issue  to  be determined on the papers is before the Court the likely response is for the Court to then determine the issue in dispute. Thus Ms Thomas had no basis for expecting that she would have a further opportunity to be heard on the question of costs.

[39]     If Ms Thomas wanted to file further submissions following Mr Owen’s reply memorandum I consider that she was required to seek leave of the court before taking that step, which she did not do.

[40]     In any event the submissions in the memorandum dated 23 October 2014 went no further than what was said in the first memorandum.  There was nothing more than a repeat of the request she made in the first memorandum on costs.  So, the fact the Court was not aware of her second memorandum on costs is neither here nor there.   Her argument that costs should be deferred until the Family Court had determined the question of substantive spousal maintenance was already before this Court.  Moreover, it was expressly addressed in the judgment and rejected.  Thus, Ms Thomas has no grounds for complaining that the Court did not address this aspect of her submissions on costs.

[41]     It was not for Ms Thomas to determine how an award of costs is to be approached.  There was nothing wrong with her submitting that the award of costs should be deferred in the way in which she suggested, however, if she wanted to address the merits of the argument for costs she should have done that as well in her memorandum dated 17 October 2014.   She should not have assumed that the staggered approach that she wanted would be acceptable to the Court or to Mr Owen. Nor was it for her to bring about acceptance of this approach by fait accompli through filing partial submissions conditional upon her having a further opportunity to be heard on the merits of a costs award.  She should have realised that she might

have no more than one opportunity to be heard, and that there was a risk for her if she did not use that opportunity to the fullest extent.

[42]     In her application for recall Ms Thomas could not point to anything that would have altered the Court’s approach to the costs award.   If she had identified something that made a material difference to the merits of the decision to award costs this may have persuaded me to recall the judgment.

[43]     The general rule is that costs on interlocutory applications or appeals against interlocutory  applications  should  be  dealt  with  at  the  time  of  the  application. Ms Thomas’s insistence on the interim orders being complied with left Mr Owen in a position where he was faced with obeying Court orders, applying for a stay of proceedings or appealing against those orders.  She could have consented to his stay application or reached an informal agreement with him re the payment of the interim orders.  But she chose a different course of action.

[44]     I reject the argument that Mr Owen was not successful in his appeal.  Both orders of the Family Court were set aside; neither order could stand.   Nor do I consider that the case was a test case.  There was nothing novel or complex about the questions that were raised in the appeal.

[45]     I reject Ms Thomas’s argument that the costs Mr Owen sought outweighed the benefits he received on the appeal.  The sums of money involved exceeded the costs award.  Had he not challenged the interim orders he would have been obliged to comply with them.  Furthermore, I consider that it would have been apparent to Ms Thomas that she was at risk of an award of scale costs if she chose to oppose the appeal, or the stay application.  One of the purposes of the rules regarding costs is to put parties on notice of the risk that they face regarding costs.

[46]     I reject the argument that Mr Owen’s success on the interim maintenance order was purely technical.   The order was set aside.   It was not sent back to the Family Court for reconsideration, as Ms Thomas now asserts.   In the judgment on the appeal I directed the parties to file memoranda on what steps were to be taken following the setting aside of the interim maintenance order as the hearing of the

substantive maintenance application was so close in time as I could not see that there was any opportunity for the interim maintenance issue to be re-considered by the Family Court.10   In fact neither party complied with that direction.

[47]     As regards the stay of proceedings application this was touched on at the appeal hearing before me as Mr Owen was concerned that the decision on the appeal might not be delivered before he was due to make the next interim maintenance payment.  The reason that Mr Owen did not obtain orders in the stay application is because it was overtaken by his success on the appeal.  However, at the time of the appeal hearing he was not to know that.  The stay application was pursued out of caution on his part.  The application was well founded as his success in the appeal shows that it had merit, which would have been a factor in granting the stay.

[48]     I  reject  Ms  Thomas’s  argument  regarding  the  relevance  of  the  without prejudice  correspondence  on  the  question  of  the  costs  for  the  stay  application. Section 57(3)(c) of the Evidence Act 2006 makes it clear that such communications can only be considered for costs purposes if they are made without prejudice save as to costs.  Ms Thomas did not couch her without prejudice communication in those terms.   Accordingly, they cannot be considered when it comes to determining an award of costs.

[49]     I have carefully considered all the submissions that Ms Thomas has made regarding the recall application and the bases for this Court either refusing to award costs or making a reduced award of costs in favour of Mr Owen.  I cannot see any foundation to any argument that she makes, which would warrant me recalling the costs judgment.   On the other hand Mr Owen has made a number of persuasive arguments  that  are  reflected  in  the  views  that  I  have  reached  on  the  recall application.

[50]     There is, however, one matter that was drawn to my attention at the hearing of the recall application by Mr Gubb, who appeared on that occasion for Ms Thomas. The quantum of the costs award includes the sum of $995 for the appearance before

Fogarty J on 22 August 2014, when Mr Owen’s stay application was first before the

10     Owen v Thomas [2014] NZHC 3322 at [46] and [47].

Court for determination.  On that day the parties reached an accommodation which meant  there  was  no  need  for  an  opposed  hearing  before  Fogarty J.    Mr  Gubb contended, therefore, that Mr Owen should not have claimed $995 for appearance at the hearing on 22 August 2014.  Counsel for Mr Owen had little to say by way of opposition to that argument.  He confirmed that the hearing before Fogarty J did not proceed, and that the parties did reach some accommodation that day, although the result was that the stay application was still alive before me when I heard the appeal on 3 September 2014.

[51]     Fogarty J’s minute dated 22 August 2014 records that there was no need for a hearing  before  him  as  Mr  Owen  had  agreed  to  make  the  monthly  interim maintenance payment that was then due, and costs were reserved.

[52]     The agreement that was reached before Fogarty J did not resolve the question of subsequent monthly interim maintenance payments, and so it did not dispose of the stay application.  However, I consider that there was no basis for Mr Owen to seek the sum of $995 to cover the cost of the attendance at the hearing before Fogarty J.  Had Ms Thomas applied herself to dealing with Mr Owen’s application for costs on the merits this is something that she might have raised.  However, she did not do so; nor did she do so in her written submissions in support of the recall application.

[53]     I considered whether the incorrect inclusion of the $995 in the quantification of the costs sought for the appeal and stay application merited allowing the recall application to that extent only.  However, I decided against doing so.  This is because I consider that Ms Thomas had ample opportunity to address all issues regarding costs, and she failed to do so.   The finality principle requires parties to make the most of the opportunities that they are given to be heard.  The fact a party fails to make the most of such an opportunity is no justification for recalling a judgment.

[54]     Furthermore, I am aware that Mr Owen will seek costs on his success in opposing the recall application.  In principle his success should see costs follow the event.   However, costs are discretionary.   I consider that it is open to me when it comes to determining the costs to be awarded on the recall application to take into

account the fact that Mr Owen has already received $995 more in costs than he should have done under the scale.  At the hearing I indicated to Mr Owen’s counsel that I was of a mind to make such an adjustment.  I did not note any strong objection to that approach.

[55]     It follows that the recall application was refused.  Mr Owen has sought costs on the recall application.  Ms Thomas raised the issue of legal aid.  It is now for the parties to address these issues in compliance with the directions given in my minute of 9 November 2015.