Peterberic v Eady

[2020] NZHC 2079

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-879

[2020] NZHC 2079

IN THE MATTER OF

the Estate of DIANA MAITLAND EADY

IN THE MATTER OF

the trust settled by ROY GRANVILLE McELROY on 12 March 1965 known as the DIANA M EADY FAMILY TRUST and the ECI TRUST

BETWEEN

PETER BERIC

Plaintiff

AND

OLAF GUY EADY

JOANNA MAITLAND CHAPLIN and

SIMON HOLM EADY as executors and trustees of the Estate of the late DIANA MAITLAND EADY

First Defendants

OLAF GUY EADY
JOANNA MAITLAND CHAPLIN and
SIMON HOLM EADY in their capacities as trustees of the DIANA M EADY FAMILY TRUST
Second Defendants

OLAF GUY EADY
JOANNA MAITLAND CHAPLIN and
SIMON HOLM EADY in their capacities as recipients of the assets of the DIANA M

EADY FAMILY TRUST

Third Defendants

OLAF GUY EADY
JOANNA MAITLAND CHAPLIN and
SIMON HOLM EADY in their capacities as trustees of the ECI TRUST

Fourth Defendants

PETER BERIC v OLAF GUY EADY [2020] NZHC 2079 [18 August 2020]

Hearing:

10 August 2020

Appearances:

Vanessa Bruton QC and Priscilla Brown for the Plaintiff Fiona McGeorge for the First Defendants

Simon Jefferson QC and Amanda K Hyde for the Second to Fourth Defendants

Judgment:

18 August 2020

COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 18 August 2020 at 11:00am

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Priscilla Brown, Auckland, for the plaintiff

Martelli McKegg, Auckland, for the 1st Defendants

Keegan Alexander (Peter Spring/Amanda K Hyde), Auckland, for the 2nd to 4th Defendants

Counsel:

V Bruton QC, O’Connell Chambers, Auckland, for the Plaintiff

F N McGeorge, Barrister, Eldon Chambers, Auckland, for the 1st Defendants Simon Jefferson QC, Trinity Chambers, Auckland, for the 2nd to 4th Defendants

[1]    This decision is on costs on the defendants’ applications for security for costs, which were to be heard on 10 August 2020. On 7 August 2020, however, the plaintiff advised that he had been granted legal aid for this proceeding. With that, the defendants advised that they withdrew their security for costs applications. They nevertheless sought costs  against  the plaintiff.  As well  as  costs,  the hearing on  10 August 2020 dealt with the second to fourth defendants’ applications to strike out parts of the plaintiff’s fifth amended statement of claim.

[2]    The plaintiff began this proceeding in 2018. All defendants applied for security for costs. The second to fourth defendants filed theirs in September 2018. Their ground for seeking security was that the plaintiff did not have the means to meet an order for costs if he were to fail in the proceeding. While the plaintiff opposed the security for costs applications, he did not advise that he intended to apply for legal aid.

[3]    The security for costs applications were to be heard on 4 March 2019 but were adjourned in light of the plaintiff’s intimation that he intended to amend his pleadings. Costs on the adjournment were reserved. The defendants applied to strike out some of the plaintiff’s causes of action. In the meantime, the security for costs applications were put on hold. They were revived after Associate Judge Andrew’s decision on the strike-out application.1 A fixture was set for 10 August 2020. The plaintiff filed further documents, but again made no reference to legal aid. The defendants’ submissions assumed that Mr Beric was not applying for and did not have legal aid. Mr Beric applied for legal aid on 27 July 2020. His written submissions in opposition were the first the defendants knew about his legal aid application. The parties sought an adjournment of the security for costs hearing to await the outcome of the legal aid application, but I declined the adjournment.

[4]    On 7 August the plaintiff advised that he had been granted legal aid. At the hearing, Ms Bruton QC explained that there were no conditions attached to the grant of aid. In withdrawing their applications for security for costs, the defendants

1      Beric v Eady [2019] NZHC 3238.

recognised that security would not be ordered, given the restrictions under s 45 of the Legal Services Act 2011 on costs orders against those with legal aid.

[5]    By way of explanation for the delay in applying for legal aid, Ms Bruton said that while Mr Beric’s only income was his national superannuation, he had also received interim spousal maintenance from the estate of the late Diana Eady. Those funds had run out. He had also withdrawn his application for final spousal maintenance in the Family Court. He applied for legal aid when he had nothing else from which he could fund his legal costs.

[6]    In seeking costs, the defendants addressed the effect of the restrictions on ordering legally aided persons to pay costs under s 45. In this case, however, I do not have to deal  with that question, because  I would not have ordered costs against    Mr Beric in any event. If the court will not order costs against a party under the usual costs rules, there is no basis for ordering costs under s 45. The section sets a fetter on the court’s exercise of its costs power, but does not impose a fresh liability for costs.

[7]    Under r 15.23 of the High Court Rules 2016, unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay the costs of the defendant up to and including the discontinuance. That applies by analogy to abandoned interlocutory applications.2 Under r 14.8, unless there are special reasons to the contrary, costs on an opposed interlocutory application must be fixed in accordance with the rules when the application is determined and become payable when they are fixed. Similarly, when an interlocutory application is withdrawn, costs should be decided on the withdrawal – again, unless there are special reasons to the contrary.

[8]    When the Court is asked to exercise its discretion to order costs on a discontinuance under r 15.23, the Court does not normally consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome. In this case, however, the grant of legal aid made the outcome obvious. The Court would not have ordered Mr Beric to provide security for costs once he was

2      High Court Rules 2016, r 1.6.

granted legal aid. In Bevan-Smith v Reed Publishing (NZ) Ltd, an order for security was set aside when the plaintiff later obtained a grant of legal aid.3

[9]    The upshot is that Mr Beric has been vindicated in resisting the security for costs applications, under the principle that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds.4 He should have costs.

[10]   The defendants sought costs against Mr Beric (even claiming “exceptional circumstances” under s 45(3) of the Legal Services Act 2011) because of his delay in applying for legal aid. It meant that they wasted costs on the security for costs applications. While that is not a reason to deny costs to Mr Beric entirely, it may provide grounds for reducing costs under r 14.7 of the High Court Rules 2016. The defendants argue that if Mr Beric had applied for legal aid earlier, they would not have wasted their time and efforts on the security applications. Under r 14.7(f), the Court may in defined cases reduce costs if a party claiming costs has contributed unnecessarily to the time and expense of a step in the proceeding. Delay in applying for legal aid is not one of those defined cases. Nevertheless, the rule is clearly directed at discouraging parties from unnecessarily contributing to the time and expense of a proceeding. If a party has wrongly contributed to the costs of the other parties by its conduct in the proceeding, that may count as “some other reason” under r 14.7(g).

[11]   In my judgment, Mr Beric delayed in applying for legal aid. His lack of funds had become apparent earlier this year. The need to seek legal aid should have been apparent then. If he had advised the other parties earlier that he was applying for legal aid, they would not have pressed on with their security for costs applications. That can be seen in their request last week to adjourn, once they found out that he was applying for legal aid. The defendants’ costs in preparing their submissions in support of their application for security for costs were wasted, as that effort could have been saved had Mr Beric applied for legal aid earlier. I do not, however, consider that earlier steps in the security for costs application were wasted. Mr Beric cannot be expected

3      Bevan-Smith v Reed Publishing (NZ) Ltd, HC Auckland, CIV-2003-404-3628, 20 August 2004.

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

to have applied for legal aid at the outset. He seems to have had the means then to pay costs, without having to call on legal aid. His funds ran out later.

[12]   Accordingly, I award Mr Beric costs under category 2 in resisting the application for security for costs, but there will be a deduction from his costs for the defendants’ costs on a category 2 basis for preparing their submissions in support of their security for costs applications.

[13]   There should only be one set of costs between Mr Beric and the defendants collectively. While the executors, the first defendants, filed a separate application and their own submissions, they largely duplicated the steps taken by the second to fourth defendants. I understand that the estate has little, if any, funds left from which an order for costs could be paid. In those circumstances, the costs are likely to fall on the second, third and fourth defendants personally, rather than on the estate. It is unnecessary and inappropriate for the defendants to pay two sets of costs when the plaintiff substantially took the same steps to oppose both applications.

[14]   I trust counsel will be able to confer as to the amount of costs. Leave is reserved to apply for the amount to be fixed if counsel cannot agree.

[15]   While this decision fixes liability for costs, I do not direct that costs are to be paid immediately. I have still to give my decision on the first defendants’ strike-out application. The outcome of that application may have an impact on costs and I may wish to hear further from the parties.

…………………………………

Associate Judge R M Bell