Phillips v Heremaia

[2023] NZHC 3847

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-256

[2023] NZHC 3847

IN THE MATTER

of the estate of ZAHERALI KANJI MOHAMED

BETWEEN

ZAHIRA AUDREY PHILLIPS

Applicant

AND

ZARIN SUSAN HEREMAIA

Respondent

CIV-2023-409-249

IN THE MATTER

of the estate of ZAHERALI KANJI MOHAMED

BETWEEN

ZARIN SUSAN HEREMAIA

Applicant

AND

ZAHIRA AUDREY PHILLIPS

Respondent

Hearing:	On the papers
Appearances:	C A Twyaman for Applicant N Burley for Respondent
Judgment:	21 December 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 21 December 2023 at 2.45 pm pursuant to rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

PHILLIPS v HEREMAIA [2023] NZHC 3847 [21 December 2023]

[1]                 Zahira Audrey Phillips (Audrey) and Zarin Susan Heremaia (Susan) are estranged sisters engaged in litigation involving the estate of their late father, Zaherali Kanji Mohamed, who died on 20 November 2020.

[2]                 The parties were encouraged to attend a judicial settlement conference chaired by Associate Judge Lester on 21 July 2023. They reached a settlement except in relation to costs. Having conducted the settlement conference, Associate Judge Lester was not able to decide costs and the matter has been referred to me.

[3]                 Both parties seek costs, including indemnity costs. The amount of material submitted to the Court is simply staggering. The parties have lost all sense of proportion. The material filed includes lengthy and detailed submissions for each party, reply submissions, affirmations on disputed factual matters, a 231-page bundle of documents, and a bundle of authorities.

[4]                 I expressed my concern about the material at a teleconference on 25 October 2023. I then issued a minute in which I confirmed I did not intend to consider the affirmations which I did not consider assisted me, and nor would I consider submissions about what had occurred at the settlement conference beyond what Associate Judge Lester recorded in his minute.1

Background

[5]                 Mr Mohamed made a will dated 31 October 2003 (2003 will). The 2003 will left his estate in equal parts to Audrey and Susan and appointed Maurice Burney as the executor.

[6]                 Mr Mohamed made another will on 11 August 2016 (2016 will) that was on materially the same terms as the 2003 will, except:

(a)there was an additional clause forgiving any debt owed to him by Susan; and

1      High Court Rules 2016, r 7.79(6) and (7).

(b)in place of Mr Burney, Susan was appointed the executor.

[7]                 Following Mr Mohamed’s death Susan took no immediate steps to apply for probate.

[8]                 On 1 October 2021, Audrey applied for letters of administration of the 2003 will. I understand she had no knowledge of the 2016 will. While that proceeding is not presently before me, Audrey applies for costs in relation to it.

[9]                 On 16 December 2021, Susan sought grant of probate of the 2016 will. In response, Audrey lodged a caveat to prevent the grant.

[10]             There are two proceedings presently before me, one filed by Audrey and one by Susan.

[11]             Audrey’s claim (CIV-2022-409-256) was filed on 23 June 2022. An amended claim was filed on 25 November 2022. Audrey’s amended claim sought orders that:

(a)letters of administration with the 2003 will annexed be granted to the Public Trust;

(b)the 2016 will was not valid for want of testamentary capacity and undue influence; and

(c)in the alternative to (a) and (b) above, that the 2016 will be granted to probate in solemn form on the following basis:

1. that Susan be removed as trustee and executor; and

   (ii)that the Public Trust be appointed as an independent trustee and executor.

   [12]             Susan’s claim (CIV-2023-409-249) was filed on 18 May 2023. It applied for orders that:

(a)the application be consolidated with Audrey’s application; and

(b)the disposition of the property in favour of Susan made in cl 2(c) of the 2016 will is valid.

[13]             Audrey’s claim was called by way of telephone conferences before Eaton J on 3 October 2022 and Doogue J on 25 October 2022. Doogue J noted that Susan purportedly applied to strike out the proceedings and made timetabling instructions to hear that application.

[14]             The case then came before Nation J on 18 November 2022. He noted that Susan had decided not to pursue the application for strike out, but rather had provided Audrey’s lawyers with “a pragmatic solution that is fair to both residual beneficiaries”. Audrey’s counsel advised that she was willing to resolve the proceedings on the basis that either of the wills was admitted to probate, so long as an independent executor and trustee was appointed to administer the estate. Her preference was for the 2003 will to be admitted to probate, as otherwise there would “still have to be continuing proceedings” because of the presumption that Susan could not benefit under that 2016 will when it was witnessed by her husband. Nation J set the case down for a three- day hearing.

[15]             Associate Judge Lester held a telephone conference in respect of both proceedings on 22 May 2023. At that conference the parties agreed that the three-day hearing could be vacated. Audrey confirmed that she would not seek declarations that the 2016 will was invalid on the basis of undue influence or lack of capacity. The only issue that remained was therefore the removal of Susan as the executor of the will. Associate Judge Lester noted the estate was a modest one, and then said:

[7]        The respondent was not opposed to the idea of an independent executor but was concerned that an independent executor could end up depleting the estate further and investigating the applicant’s concerns about the estate. The applicant, having had access to the deceased’s bank statements, has concerns about a number of transactions in effect alleging that the respondent and/or her husband received funds from the deceased for which they have an obligation to account.

[8]        Given the applicant’s real concern lay with understanding financial transactions that were of concern to her, I suggested that the parties’ energies

be put into exploring that issue rather than arguing about the identity of the executor.

[9]The following consensus has been reached:

(i)There will be an independent executor appointed to administer the estate pursuant to the 2016 Will.

(ii)The hearing commencing 17 July 2023 is vacated.

(iii)There will be a Judicial Settlement Conference (JSC) with me on Friday 21 July 2023 for the purposes of considering the applicant’s concerns in relation to transactions from the deceased’s bank account.

(iv)The applicant is to identify her concerns in respect of those transactions, with sufficient clarity to enable them to be addressed by the respondent. (I suggest that counsel agree an appropriate cut off point so that very small amounts do not need to be addressed).

(v)The parties may attend the JSC by AVL or in person as they think fit, otherwise counsel will appear in person.

(vi)Costs in respect of the proceeding are reserved, to be dealt with by memoranda following the JSC.

[16]             There was a judicial settlement conference on 21 July 2023. After the judicial settlement conference, Associate Judge Lester issued a minute, to which the parties consented, that outlined their agreement. This relevantly provided:

[6]        I record that the settlement and the orders I record below are in full and final settlement of all matters between Audrey and Suzie. Audrey and Suzie have also agreed that as between them and Dale Heremaia and the Heremaia Family Trust and as between their father’s estate and Dale Heremaia and the Family Trust, this settlement is in full and final settlement of all issues relating to their father’s estate.

[7]        For the avoidance of doubt the full and final settlement between Audrey and Suzie includes a loan made by Suzie to Audrey in or about January 2017 of $25,000.

[8]        There is an order that Mortlock McCormack Law is to pay to Audrey the sum of $105,000 of the funds they are holding for the estate of the late Mr Mohammed. The funds payable to Audrey are to be paid to the trust account of Wynn Williams, solicitors, Christchurch.

[9]        The balance of the estate monies held by Mortlock McCormack Law are to be paid to Suzie as she directs.

[10]      I record that this settlement is without prejudice to each party’s right to seek costs against the other in this proceeding and in the related proceeding.

[11]      For the avoidance of doubt, both this proceeding and the related proceeding are recorded as being discontinued by consent with costs reserved to be dealt with as set out below.

[12]      While I have said the two proceedings are discontinued, leave is reserved to apply for any further consequential orders that may be required in relation to issues arising from this settlement.

What the parties want

[17]Audrey seeks costs against Susan as follows:

(a)wasted  costs  on  her  application  for  letters  of  administration  of   1 October 2021, which she argues was only necessary because Susan failed to exercise her duties as executor of the 2016 will;

(b)scale costs on a 2B basis from the commencement of her proceeding on 23 June 2022 until 8 November 2022 because, it is said, she was entirely successful and the direct cause of her costs was Susan’s misleading and unnecessary defence;

(c)indemnity costs from 9 November 2022 until 22 May 2023, or alternatively increased costs for this period, on the basis that she offered to settle the proceedings and Susan unreasonably rejected it, Susan ran a “hopeless” case, evidence was provided in a piecemeal way, and Susan unreasonably refused to admit facts and legal arguments;

(d)scale costs on a 2B basis from 23 May 2023 until determination of costs, including for the preparation of submissions, again based on her success in the proceedings; and

(e)indemnity costs on filing an additional memorandum addressing attempts by Susan to raise privileged materials in relation to costs.

[18]             Susan submits Audrey is not entitled to costs. She opposes Audrey’s claim for costs on grounds that include that:

(a)costs Audrey has actually paid may be lower than she is claiming for indemnity costs;

(b)an award of costs should reflect the complexity and significance of the proceeding, which must also take into account proportionality and the estate is modest;

(c)Susan was willing to settle, in sharp contrast to Audrey who filed proceedings without notifying Susan and failed to make reasonable enquiries before doing so;

(d)Audrey was fully unsuccessful in her claim; and

(e)there was no hearing, and therefore no findings on credibility and no win and loss.

[19]             Susan then argues that she should be awarded indemnity costs. She says, among other things, that she made offers of settlement before the judicial settlement conference, including an offer of 1 March 2023 which it is said would have resulted in Audrey receiving more than she received following the judicial settlement conference.

[20]             Susan further submits she is entitled to indemnity costs because — despite wild allegations made by Audrey of impropriety, indirect suggestions of fraud, requests for further information and expensive legal costs — the value of Mr Mohamed’s estate was agreed at the judicial settlement conference to be around $122,000 and not the more than $300,000 that Audrey believed.

Legal principles

[21]             The parties agreed at the judicial settlement conference to discontinue their respective proceedings. This means that r 15.23 of the High Court Rules 2016 is engaged, which provides:

15.23   Costs

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of an incidental to the proceeding up to and including the discontinuance.

[22]             Rule 15.23 creates a presumption that a plaintiff who discontinues a proceeding must pay costs to the defendant. The rationale for this rule is that discontinuance is ordinarily tantamount to judgment for the defendant.2 The rule elevates the principle that costs follow the event to a presumption.3

[23]             In Earthquake Commission v Whiting, the Court of Appeal noted the two exceptions to a plaintiff’s obligation to pay costs under r 15.23, namely where the defendant may agree otherwise or the Court may order otherwise.4 Circumstances where the Court has been persuaded that the presumption should not apply include where the proceeding has been rendered redundant because of some intervening governmental or third party decision or where the defendant’s acts or omissions caused the litigation and then rendered it unnecessary.

[24]             However, the Court is not limited in the factors it may take into account when deciding whether the presumption in r 15.23 has been displaced. The Court may consider the parties’ conduct in the matter and the reasonableness of the parties’ respective stances, including the reasons why the plaintiff brought and continued a proceeding and why the defendant opposed it.

[25]             Importantly, however, the Court will not consider the merits of the parties’ respective cases unless they are immediately apparent.5 To do so would go against the principle that the assessment of costs should be predictable and expeditious by causing litigation to “linger on its deathbed” and putting the parties to further expense in pursuit of an uncertain award.6

2      Powell v Hally Labels Ltd [2014] NZCA 572 at [19].

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

4      Earthquake Commission v Whiting [2015] NZCA 144, (2015) 23 PRNZ 411 at [63].

5      Earthquake Commission v Whiting, above n 4, at [71].

6      Powell v Hally Labels Ltd, above n 2, at [24].

Who was successful?

[26]The issues that arose in the two proceedings were principally:

(a)whether the 2003 or 2016 will should be admitted to probate;

(b)who should be the executor of the will; and

(c)if the 2016 will was admitted to probate, was the disposition of property to Susan under the will valid.

[27]             All these issues were effectively resolved by Associate Judge Lester on 22 May 2023. The Judge’s minute records that Audrey agreed not to pursue the applications seeking a declaration that the 2016 will was invalid. He also recorded that the parties agreed that an independent executor would be appointed to administer the estate pursuant to the 2016 will. The disposition of property to Susan under the 2016 will appears to have been treated as valid by the parties, because the Judge also recorded that there would be a settlement conference in respect to Audrey’s “real concern” which related to “transactions from the deceased’s bank account”. This was a reference to transactions said to have been made by Susan and her husband from Mr Mohamed’s bank accounts.

[28]             At the judicial settlement conference the parties agreed that there was a loan from Susan to Audrey of $25,000 (rather than being part of her disposition under the will as she contended earlier) and that Audrey would get a payment of $105,000 from the estate.

[29]             In terms of the parties’ relative successes, I consider that both parties had a measure of success. Susan’s claim as to the validity of the disposition of property to her in the 2016 will was effectively upheld. She was successful in defending Audrey’s challenge to the 2016 will. However, Audrey was successful in relation to the appointment of an independent executor.

Other arguments

[30]             Both parties make claims for indemnity or increased costs based on the other party contributing unnecessarily to the time or expense of the proceedings by pursuing arguments that lacked merit.

[31]             Audrey claims Susan acted unreasonably in not accepting that she could not be the executor of the estate. Audrey submits that Susan’s case was “hopeless”. This claim was originally made on the basis that Susan was not fit and able to act as a trustee and executor because:

(a)of the circumstances in which the 2016 will was made and Susan’s involvement in those circumstances;

(b)her “position of conflict” — her personal interest in remaining an executor as opposed to an independent executor; her personal interest in not bringing applications to swell the estate as they would likely be made against her personally; and her alleged actions to coerce Mr Mohamed to dispose of his property in a way that benefitted her, to revoke the 2003 will and to remove a certain person as his attorney;

(c)Susan had not taken steps to manage her position of conflict appropriately;

(d)it was in the interests of the beneficiaries that Susan be removed; and

(e)it was expedient that she be removed as executor and trustee.

[32]             I am in no position to determine to what extent there is any merit in these arguments. Had the claims proceeded to a hearing the success of these arguments depended on the Court accepting Audrey’s disputed narrative that Mr Mohamed was coerced into making the 2016 will and many of the decisions thereafter regarding his welfare and property, as well as making assessments as to how Susan has exercised her role as executor. It is certainly not immediately apparent to me that, in defending the claim to appoint an independent executor, Susan was acting unreasonably.

[33]             Audrey also argues she made an offer to settle the claim on the same basis that the claim was actually settled on. This is based on a memorandum of her lawyers dated 8 November, which recorded that Audrey was willing to settle on the basis either will be admitted to probate, subject to the proviso that an independent executor and trustee be appointed to administer the estate. However, as recorded in the memorandum, Audrey’s position remained that Susan would be presumptively disentitled from benefitting under the 2016 will. To the extent the memorandum could be said to be an “offer”, it was not on the same terms as the parties ultimately agreed.

[34]             Audrey makes reference to matters that occurred prior to the issue of these proceedings, which are not relevant in this costs context.7

[35]             Similarly, she argues for an entitlement to costs in respect to the proceeding she filed in October 2021, which is irrelevant as it is a claim for costs in another proceeding.

[36]             Audrey also contends there was late disclosure by Susan which demonstrated that the proceedings were unnecessary. That is simply another factual matter I cannot determine.

[37]             Audrey also argues that Susan persistently failed to admit facts and legal arguments. For example, Audrey points to Susan not accepting until 18 May 2023 that she could not benefit from the 2016 will because her husband was a witness to it. This argument loses its force when, under the settlement reached, Susan did benefit under the will.

[38]             Similarly, I do not accept Susan’s submission that her offer of 1 March 2023 would have produced a better result for Audrey than she achieved at the settlement conference. Contrary to counsel’s submissions, the offer did not include the forgiveness of a debt between Susan and Audrey. Further, it did not provide for the appointment of an independent executor and trustee to administer the will, which was clearly a matter of importance to Audrey and ultimately conceded by Susan.

7      Braeburn Dairies Ltd v McGregor and White Electrical Ltd HC Dunedin CIV-2009-412-668,  16 December 2011 at [14].

[39]             Other arguments advanced by Susan concern disputed factual matters, which I am unable to resolve.

Conclusion

[40]             On a strict application of r 15.23 each party would be required to pay costs to the other in respect of one proceeding. However, all issues of cost are discretionary and the proceedings were closely related. The parties settled as a result of negotiation and the extent to which what was agreed reflects the merits of the parties’ positions is not immediately apparent. What is clear is that they shared a degree of success.

[41]             Having reached a settlement in a confidential setting the parties cannot expect that the Court will now conduct a mini-trial on the papers of the rights and wrongs of their respective positions, nor is it possible for the Court to do so. The only just outcome in the circumstances is that costs lie where they fall.

Result

[42]There shall be no order for costs in these proceedings.

O G Paulsen Associate Judge

Solicitors:

Wynn Williams, Christchurch Saunders & Co, Christchurch