Preston v Preston

[2020] NZHC 957

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2017-463-30 CIV-2017-463-31

CIV-2017-463-51 [2020] NZHC 957

BETWEEN	KE PRESTON and Others Plaintiffs
AND	GL PRESTON and Others Defendants

Hearing:	On the papers
Counsel:	IM Hutcheson for plaintiffs JM McCleary for defendants
Judgment:	13 May 2020

JUDGMENT OF FITZGERALD J

[As to costs]

This judgment was delivered by me on 13 May 2020 at 10 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:Jespersen & Associates, Auckland (G Jespersen) Buddle Bentley McCleary Ltd, Whakatane

Preston v Preston [2020] NZHC 957 [13 May 2020]

Introduction and background

[1]        In my judgment delivered on 18 December 2019,1 I determined the parties’ respective claims in these three proceedings, which arose out of the end of Mr and Mrs Preston’s marriage in September 2015.2

[2]        In the first proceeding  (the  051  proceeding),  originally  commenced  by  Mr Preston in the Family Court, Mr Preston sought orders under the Property (Relationships) Act 1976 (the Act) defining the parties’ relationship property and dividing that property between them.

[3]        In response, Mrs Preston made a number of applications pursuant to the Act and under the Family Proceedings Act 1980 (the FPA) for adjustments to the relationship property pool and its division.3 She also commenced the 031 proceedings and the 030 proceedings in this Court. In the 031 proceedings, Mrs Preston claimed an equitable interest in both a home owned by Mr Preston’s family trust, as well as in shares in Mr Preston’s drilling business, also owned (largely) by his family trust.4 The 030 proceedings related to the couple’s holiday property in Pauanui, which is jointly owned by their respective family trusts (Pauanui Property). Mrs Preston alleged that Mr Preston’s trust was in breach of an agreement to sell the Pauanui Property, and sought specific performance of the agreement.

[4]        The 051 proceedings were transferred (by consent) to this Court to be heard together with the 031 and 030 proceedings.

[5]        In my December 2019 judgment, I largely found in favour of Mr Preston in the 051 proceedings, dismissing Mrs Preston’s claims for the various adjustments sought to the relationship property pool. I also dismissed Mrs Preston’s claims in the 031 and 030 proceedings.

1      Preston v Preston [2019] NZHC 3389.

2      For convenience, I will refer to the plaintiff parties collectively as “Mrs Preston” and the defendant parties as “Mr Preston”.

3      These proceedings were later transferred to the High Court, to be heard together with the 030 and 031 proceedings (both commenced by Mrs Preston in this Court).

4      Mrs Preston’s claim to an interest in these assets was based on Lankow v Rose type principles.

[6]        At the conclusion of my judgment, I encouraged the parties to agree costs. While Mrs Preston agrees that costs must follow the event and accordingly Mr Preston is entitled to costs in the ordinary way, she opposes both the scale cost calculations presented on behalf of Mr Preston, as well as Mr Preston’s submission that the scale costs award in his favour ought to be uplifted by 50 per cent.

[7]        The dispute over the scale costs calculations largely turns on how scale costs should be calculated across the three sets of proceedings, which were heard together and where there was a substantial degree of overlap. As to the claim to increased costs, Mr Preston says this is justified because a number of Mrs Preston’s claims lacked any merit and were advanced  in  reliance  on  exaggerated  evidence.  He  also  says  Mrs Preston unreasonably rejected a number of settlement offers made by him.

[8]        In terms of the overall amounts in issue, Mr Preston says he has incurred approximately $283,000 in actual legal fees (plus expert witness fees of $34,500). The scale costs sought by him (prior to any uplift) total approximately $140,000. With a 50 per cent uplift, Mr Preston seeks a costs award in his favour of approximately

$210,000 (plus disbursements and expert fees).

[9]Mrs Preston says the scale costs award should be no more than approximately

$87,000, in light of the significant overlap between the three proceedings. Mrs Preston also says it may be appropriate to reduce these scale costs further, given the efficiencies in running the three proceedings together. She says no uplift is warranted to the scale costs award, and certainly not in the realms of 50 per cent across all steps in all three proceedings.

[10]The balance of this costs judgment is structured as follows:

(a)First, I address each of the steps for which scale costs are claimed by Mr Preston in the 051 proceedings.

(b)Second, I then repeat the same exercise for each of the 030 and 031 proceedings, thus arriving at a total appropriate scale costs award across all three proceedings.

(c)Third, I address and determine Mr Preston’s claim to an increase in scale costs on the basis set out at [7] above.

[11]      Before turning to the costs claimed in each proceeding, two preliminary points arise.

[12]      First, Mr Preston has calculated scale costs on the basis of category 2B throughout. Mrs Preston accepts that is appropriate. However, Mr Preston’s counsel, Mr McCleary, submits that some aspects of the trial and trial preparation may warrant categorisation on 2C basis, stating “the Court is invited to make appropriate adjustments to the schedule in respect of category as it sees fit”.

[13]      I decline to take up this broad and unspecified invitation. If a party seeking costs is of the view that certain steps in the proceedings ought to be categorised by reference to category C rather than category B, then it is incumbent on them to identify those steps and set out why it says category C is justified.5 Category C applies if “a comparatively large amount of time for the particular step is considered reasonable”.6 It is not possible for the Court to consider these matters in a vacuum, without any submissions or information from the parties as to what steps they say took a comparatively large amount of time (at least compared to the assumptions built into the costs rules).

[14]       The second preliminary point is the degree of overlap between the three sets of proceedings. There was undoubtedly a large degree of overlap between the 051 and 031 proceedings. And as between those proceedings, the 051 proceeding was clearly the principal proceeding. Indeed, Mr Hutcheson, counsel for Mrs Preston, submitted in his opening at the substantive hearing that, depending on the findings made in the 051 proceedings, findings might not need to be made at all in the 031 proceedings.

[15]      I also accept that the broad scope of the 051 proceedings meant there was at least some overlap between the 051 and 030 proceedings, particularly in relation to the background factual evidence needing to be adduced in each proceeding. As is evident

5      Commissioner of Inland Revenue  v  Chesterfields Preschools Ltd  [2010] NZCA 400, (2010) 24 NZTC 24,500 at [161].

6      High Court Rules 2016, r 14.5(2)(c).

from the content of my substantive judgment however, the 030 proceedings did give rise to discrete facts and legal issues.

[16]I turn now to the costs claimed in each proceeding.

051 proceedings

[17]      As noted earlier, these proceedings were originally commenced by Mr Preston in the Family Court (at Whakatāne) on 19 September 2016. They were subsequently transferred by consent to the High Court, given Mrs Preston’s commencement of the 030 and 031 proceedings in this Court in the interim.

[18]      The following summarises the scale costs claimed by Mr Preston for each step in the proceedings and my determination.

[19]Items 1 and 37 – commencement of proceeding by plaintiff:

(a)Mr Preston claims for commencement in the High Court, together with item 37 (filing an application and supporting affidavit), given a narrative affidavit was prepared and sworn by him at the time he commenced his relationship property proceedings in the Family Court.

(b)Given the proceedings were commenced in the Family Court, however, there was not a full statement of claim in these proceedings in the ordinary way. I accordingly agree with Mr Hutcheson that it is not appropriate to award costs by reference to item 1 in the High Court Rules 2016 (which assumes the proceedings have been commenced in the High Court by way of a statement of claim/notice of proceeding).

(c)As to item 37, I also decline to make an award for this step, at least in connection with commencement of the proceedings. Once the proceeding had been transferred to the High Court, allowance is made in sch 3 to the High Court Rules 2016 for preparation of briefs of evidence. Accordingly, affidavits prepared or sworn by Mr Preston and

relied on in the context of his evidence in chief are appropriately
captured by item 30 (see [24(b)] below).
(d)	In addition, given the proceedings were commenced in the Family
Court, I agree with Mr Hutcheson that it is appropriate the applicable
District Court Rules and rates apply for steps taken while the
proceedings were in that Court. There is accordingly an allowance for item 1 of 1.5 days at the District Court daily rate of $1,780 per day.7
[20]	Items	8 and 40 – opposition to transfer:
(a)	Mr Preston claims item 8 for a notice of opposition to transfer
proceedings to the High Court, together with item 40, submissions of
counsel in respect of a judicial conference on 14 March 2017.
(b)	The costs associated with this interlocutory application were not dealt
with at the time the application was determined. Given Mrs Preston’s
transfer  application  was  ultimately successful,  I  do  not  consider it appropriate for costs to be awarded to Mr Preston in relation to it.8
They are therefore excluded from the costs award.
(c)	Mrs Preston accepts, however, that it is appropriate to award
Mr Preston costs for an appearance at a judicial conference held in the Family Court on 14 March 2017.9   I agree this is appropriate and this
amount is included in the costs award.
[21]	Items	10 and 13 – first case management conference in High Court

(preparation and appearance):

7      District Court Rules 2014, sch 5. Schedule 5 has since been replaced, by rule 6 of the District Court Amendment Rules 2019 (the appropriate daily recovery rate for a category 2 proceeding is now $1,910 per day).

8      This reflects the principle that costs on interlocutory applications ought to be dealt with at the time the application is determined, as the merits on an interlocutory application and the substantive proceeding will normally be different matters. See McGechan on Procedure (online ed, Thomson Reuters) at [HR14.8.04] and the authorities cited therein. I note Mrs Preston makes no costs claim in relation to her application to transfer to the High Court.

9      Being item 9.9, 0.3 days at $1,780 per day, thus $534.

(a)Mr Preston claims these items for a first case management conference in the High Court scheduled for 19 September 2017. The conference did not proceed, however, as matters were dealt with by consent on the papers.

(b)Mrs Preston accordingly accepts that item 10 is properly claimed (preparation for the first case management conference), but not item 13 (appearance). Mrs Preston also notes that the conference was in respect of all three proceedings and therefore it is not appropriate for the full preparation costs to be award across all three proceedings. I address adjustments to be made to the costs claimed for this step in the 031 and 030 proceedings when discussing each of those proceedings later in this judgment. For present purposes, however, I agree that on the basis the first case management conference did not proceed but was dealt with by  consent,  it  is  appropriate  to  award  costs  for  item  10 (preparation) but not item 13 (appearance).

[22]Item 21 – inspection of documents:10

(a)Mr Preston claims 1.5 days in accordance with the schedule 3 costs allocation.

(b)This is accepted by Mrs Preston, as claimed in the 051 proceedings. She also submits that it is appropriate the list of documents be awarded in these, the primary proceedings, but that these amounts ought not to also be claimed in the other proceedings.

(c)I agree that the full allowance for both the listing and inspection of documents ought to be awarded in these, the primary proceedings. There is therefore an allowance in the 051 proceedings for item 20, list of documents, at 2.5 days, and item 21, inspection of documents, at

1.5 days.

10     Mr Preston does not make a claim for list of documents on discovery in this proceeding; that step is, however, claimed in the 031 proceedings.

[23]      Items 13 and 15 – preparation for and appearance at subsequent case management conference:

(a)Mr Preston claims items 13 and 15 for preparation for and appearance at a subsequent case management conference (a pre-trial conference).

(b)Mrs Preston notes that the pre-trial conference scheduled for 20 March 2018 was also dealt with by consent on the papers. She accepts, however, that item 15 is appropriate, being preparation for an appearance at a pre-trial conference. I agree. The costs award in the 051 proceeding is therefore to exclude item 13 but include item 15.

[24]      Items 40, 33 and 33B – preparation of written submissions, briefs, list of issues, authorities and agreeing common bundle:

(a)As Mr Hutcheson notes, item 40 concerns submissions filed on originating applications. The appropriate step for submissions for a substantive trial is item 33 (3 days).11

(b)Accordingly, item 40 is excluded from the costs award. But included in the costs award for pre-hearing preparation are items 30 (2.5 days for plaintiff’s preparation of briefs or affidavits); item 31 (2.5 days for plaintiff’s preparation of list of issues, authorities and common bundle) and item 33 (3 days for preparation for hearing).

[25]Item 34 –appearance at hearing:

(a)Mr Preston has not made a claim in each separate proceeding for the appearance at hearing. Rather, he claims the five-day appearance as a separate cost category; that is, it is applicable to all hearings.

11 Based on the High Court costs rules in force at the time of the hearing in early July 2019. The amended costs rules on which Mr Preston bases his claim for these pre-trial steps came into force on 1 August 2019 by virtue of the High Court Amendment Rules 2019. Those Amendment Rules do not have retrospective effect and therefore do not apply; see Body Corporate 417948 v Watts &  Hughes  Construction  Ltd  [2019]  NZCA  469  at  [25];  and  PVG  Securities  Trustee  Ltd  v 100 Investments Ltd [2020] NZHC 111 at [11], fn 19.

(b)There is of course no dispute that an appearance based on a total of five days is appropriate. However, Mr Hutcheson says it would be appropriate to nominally apportion the five-day appearance across the three proceedings.

(c)I consider that is an appropriate approach. It would permit, for example, costs to be revisited in relation to appearance at the hearing were Mrs Preston’s appeal on, say, one of the three proceedings to be allowed, but not the other proceedings.

(d)I also agree with Mr Hutcheson’s assessment that the 051 proceedings occupied the majority of the hearing time. Taking what can only be a relatively high level and robust approach, I allocate three of the five hearing days to the 051 proceedings, 0.5 days to the 031 proceedings and 1.5 days to the 030 proceedings. I consider this is a fair reflection of the hearing time occupied by the respective proceedings, which is also reflected in the content of my substantive judgment.

(e)There is accordingly an allowance in the 051 proceedings for appearance at hearing of three days.

[26]      Before any further adjustments discussed later in this judgment, the above results in a total scale costs award in the 051 proceedings of $38,661, as set out in the schedule to this judgment.

031 proceedings

[27]      The following reflects the costs claimed by Mr Preston, Mrs Preston’s response and my findings.

[28]      Item 2 – commencement of defence: This item is accepted by Mrs Preston and is accordingly included in the costs award for the 031 proceedings.

[29]      Items 10 and 13 – first case management conference in High Court (preparation and appearance):

(a)Mr Preston claims  the  full  allowance  for  each  of  these  items.  Mrs Preston objects on the same grounds as set out at [21(b)] above.

(b)As noted at [21] above, the first case management conference in the High Court was dealt with on the papers by consent. It also concerned all three proceeding. I therefore do not agree that the full allowance for preparation for the first case management conference ought to be awarded in this proceedings, that is, in addition to the full allowance already made in the 051 proceedings.

(c)Mrs Preston submits there should be no allowance for this step in the 031 proceedings. I disagree. As noted, this and the 051 proceedings overlapped to a large degree. But there will no doubt have been at last some time considering the separate issues in the two proceedings and appropriate steps in relation to them. I accordingly made an allowance in the 031 proceedings of 0.2 days for preparation for first case management conference. Item 13 is excluded for the same reasons set out at [21(b)] above.

[30]Items 20 and 21 – lists of documents and inspection of documents:

(a)Mr Preston claims the full 2.5 days for item 20, list of documents, together with the full 1.5 days for item 21, inspection of documents.

(b)Mrs Preston again says this should not be separately claimed, given these amounts have already been awarded (in full) in the 051 proceedings. I agree that at least in relation to the 031 proceedings, there was a high degree of overlap, such that there ought not to have been any substantial work involved in discovery in these proceedings that would not have also been carried out under the 051 proceedings in any event.12 Recognising that this was, however, a separate proceeding,

12     Noting that Associate Judge Christiansen, in a minute dated 15 September 2017, confirmed that only one list of documents needed to be prepared.

and there was not necessarily a full overlap, I allow a total of one day for both listing and inspection of documents.

[31]Items 13 and 15 – preparation for and appearance at pre-trial conference:

(a)I accept Mrs Preston’s submission that these items are largely covered by the allowance in the 051 proceedings. To cover any additional preparation work directed solely to the 031 proceeding, I make an allowance of 0.2 days for item 15. Item 13 is excluded for the same reasons set out at [23(b)] above.

[32]      Items 40, 33 and 33B – preparation of written submissions, briefs, list of issues, authorities and agreeing common bundle:

(a)I refer to my observations at [24(a)] above. The correct scale cost items are items 30, 32 and 33.13

(b)I agree with Mr Hutcheson that as the three proceedings were heard together, it is not appropriate that the full award for each of these three steps be made in each of the three proceedings. I accept, however, that particularly in respect of the legal principles applying in the 031 proceedings, there will have been some additional work over and above that carried out in any event in the 051 proceedings.

(c)Again, only  a  high  level  and  robust  approach  can  be  adopted.  Mr Hutcheson submits that it may be appropriate for these steps in the 031 proceedings to be awarded on a scale 2A basis. I agree that is a reasonable approach. It can be fairly assumed that given the work undertaken in the 051 proceedings, any additional work undertaken in relation to the 031 proceedings will have been relatively limited. There is accordingly an award in these proceedings for items 30, 32 and 33, but on a 2A basis.

13     Noting that in the 031 proceedings, Mr Preston was a defendant (rather than a plaintiff, as in the 051 proceedings).

[33]      Item 34 – appearance at hearing: In accordance with the approach adopted at [25(d)] above, there is an allowance of 0.5 of a day for appearance at the hearing in this proceeding.

[34]      Based on the above, and before any further adjustments, there is a total scale costs award in the 031 proceedings of $18,732 as set out in the attached schedule.

030 proceedings

[35]      As noted, these proceedings concerned an alleged breach of an agreement in relation to the sale of Mr and Mrs Preston’s Pauanui Property. While the factual matters in relation to it involved some overlap with the 051 proceedings, this was significantly less so than as between the 051 and 031 proceedings. The 030 proceeding also gave rise to quite separate legal issues.

[36]      Given the above discussion in relation to the 051 and 031 proceedings, it is not necessary to address the costs claimed in the 030 proceedings in detail. I make the following observations and awards:

(a)I adopt the same approach taken in the 031 proceedings in relation to items 2 (commencement of defence), 10 and 13 (preparation for and appearance at first case management conference), and items 13 and 15 (preparation for and attendance at pre-trial conference).

(b)For listing and inspection of documents, I accept this proceeding will have generated documents that were not necessarily discoverable in the 051 proceedings. I consider an allowance of 2 days for item 20 (list of documents) and 1 day for item 21 (inspection of documents) is appropriate.

(c)For items 30, 32 and 33 (steps preparatory to the hearing), I agree that some separate award is appropriate, particularly given these proceedings had less of an overlap with the other proceedings. I consider it appropriate to award 2 days for item 30 (defendants’ preparation of briefs or affidavits), 1 day for item 32 (defendants’

preparation of list of issues, authorities and common bundle) and 1.5 days for item 33 (preparation for hearing).

(d)I allocate 1.5 days for appearance at the hearing, in accordance with the approach set out at [25(d)] above.

[37]      The schedule of total scale costs awarded in the 030 proceedings, of $25,422, is set out in the attached schedule to this judgment. This brings the total (unadjusted) scale costs award across all three proceedings to $82,815.

Disbursements

[38]      Mr Preston claims disbursements of filing fees, scheduling fee, hearing fee and photocopying the bundle. Mrs Preston does not object in principle to these amounts, but on her behalf, Mr Hutcheson suggests that:

(a)the disbursements should be allocated to the relevant proceeding in which they were incurred; and

(b)the hearing fee payment ought to be split and allocated as between the three proceedings (for the same reason as the item claimed for appearance of counsel at the hearing).

[39]      I agree that is appropriate. There is insufficient information before the Court to make the suggested allocation as between the three proceedings. I accordingly award disbursements totalling $8,589 as claimed by Mr Preston. Should any or all of the costs orders made in this judgment need to be revisited as a result of the outcome of an appeal, however,  I  record  that  each  of  these  disbursements  claimed  by  Mr Preston is awarded to the individual proceeding in which it was incurred. The hearing fee of $6,400 is allocated $4,000 to the 051 proceeding, with $1000 to the 031 proceeding and $1,400 to the 030 proceeding.

[40]      Mr Preston also claims as a disbursement fees for expert accounting evidence given by Jay Shaw of Grant Thornton and Associates. Mr Shaw’s evidence established the value of Mr Preston’s shares in the Eastern Bay Thrusting Ltd business

(EBTL) at the end of the parties’ relationship  and at a current date (relevant to     Mrs Preston’s claim of economic disparity under s 15 of the Act).

[41]Again, there is no dispute as to the amount claimed for Mr Shaw’s fees, being

$34,500. I make an award for that disbursement. As Mr Shaw’s evidence was solely directed to matters arising in the 051 proceeding, it is appropriate this disbursement is allocated to that proceeding.

Application by Mr Preston for increased costs

Introduction

[42]      As noted earlier, Mr Preston seeks a 50 per cent uplift in scale costs on the basis Mrs Preston’s claims lacked merit and/or she unreasonably refused to accept settlement offers. The claim for increased costs is made on the basis of rr 14.6(3)(b)(ii) and (v) of the High Court Rules 2016.

[43]      As the Court of Appeal confirmed in Bradbury v Westpac Banking Corp, “increased costs may be ordered where there is a failure by the paying party to act reasonably”.14 However, there must also be consideration of the extent to which the failure to act reasonably contributed to the time or expense of the proceedings.15

Discussion – does a lack of merit justify an increase in costs?

[44]      While I ultimately concluded that many of Mrs Preston’s claims were lacking in merit, I do not consider the appropriate threshold is met to award increased costs on this basis. Turning to each proceeding:

(a)In the 051 proceedings, even if some of the claims for adjustments had been framed in a more limited or restrained way, I am not persuaded that Mr Preston’s costs would have been materially reduced. For example, if the expectation claims had been advanced on the basis of a more limited claim to the Fairway property and the EBTL business, the

14     Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

15     Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 5, at [165].

same types and amount of factual evidence would have had to be adduced, and the same legal arguments would have had to have been made. Further, I found in Mrs Preston’s favour on aspects of the claims in this proceeding, such as my finding that there was a nuptial settlement for the purposes of s 182 of the FPA.   And I agree with   Mr Hutcheson that my findings on credibility do not warrant an increase in costs. Such findings were necessary given the sharp conflict in factual evidence, which will often be the case in relationship property proceedings of this type. I specifically excluded any suggestion that Mrs Preston was doing anything other than seeking to be truthful in her evidence. My findings in respect of the parties’ respective credibility cannot, therefore, justify increased costs.

(b)Similar observations apply to the 031 proceedings. So, for example, if Mrs Preston had claimed a, say, 20 per cent interest in the Fairway Property and EBTL (that is, rather than a 50 per cent interest), the same nature and level of factual evidence, and legal submissions, would have been required. And it is unlikely that a claim pitched at that level could be said to have been unreasonable or wholly without merit, at least to the degree necessary to attract an increased costs award.

(c)In the 030 proceedings, the lack of clarity in the Property Sharing Agreement’s terms (particularly in relation to the sale process) meant it was not unreasonable for the interpretation disputes to arise. Further, Mr Preston accepted that in relation to the 2014 partnership accounts, an error was made which led to Mrs Preston’s mortgage contributions not being taken into account. While that error was remedied in the following year, this did contribute to the difficulties experienced immediately following separation in dealing with the Pauanui Property. Mr Fisher, in giving evidence on the partnership account, also acknowledged that there had been additional “forensic reviews” in relation to the accounts which gave rise to some further alterations. His evidence indicated that the partnership accounting exercise was not wholly straightforward or uncontroversial. There were also genuine

difficulties arising in relation to the chattels and/or fixtures, for example, Mr Preston arranging for removal of the hot tub by crane.

[45]      I  accordingly  decline  to  award  an   increase  in   costs   on   the  basis  of   r 14.6(3)(b)(ii).

Discussion –  did  Mrs  Preston  unreasonably  reject  settlement  offers  made  by  Mr Preston?

[46]      It is relevant that the overall result in the 051 proceedings is that Mrs Preston is required to make an equalising payment to Mr Preston of $13,888.72.16 As noted, Mrs Preston’s claims in the 031 and 030 proceedings were dismissed.

April 2016 offer

[47]      Mr Preston points to an offer made by him in April 2016, which Mr McCleary submits:

…would have put Mrs Preston in almost exactly the same position that she is now, following the High Court judgment. The only material difference between the April 2016 offer and the High Court judgment was the value attributed to the boat. Mr Preston had the boat appraised at $38,000. It was later agreed that Mrs Preston would take this asset at her valuation of $52,000 plus GST [if any]. In the April 2016 offer, Mr Preston sensibly waived his right to a claim against the money in the holiday fund account, all other accounts held by Mrs Preston and all claims for post-separation expenditure. His offer was fair and reasonable.

[48]      Mr Hutcheson notes that the offer related only to relationship property matters, was made very early in the process, and even if an award of increased costs were to be made on the basis of this offer, that increase could only apply to costs in respect of the relationship property aspects of the overall proceedings. I note, however, that the offer also included a proposal in relation to the Pauanui Property, and as such, was not confined to the relationship property matters.

[49]      The party seeking increased costs must satisfy the Court that the paying party’s failure to accept the offer of settlement was unreasonable. The reasonableness of a

16 In my minute dated 4 March 2020, at [6], I requested counsel for Mrs Preston to confirm if the calculation of that equalising payment is accepted. Counsel has not, to date, suggested any discrepancy in that amount. I accordingly proceed on the basis the amount is accurate.

rejection is to be assessed at the time of the rejection, not just against the subsequent result at trial.17

[50]      The April 2016 offer did represent a sensible attempt at compromise. I am conscious, however, that it was made very early in the dispute, and would have required Mrs Preston to effectively value her own claims at that time as having near zero prospect of success. It will be rare when it is unreasonable for a plaintiff to view their own claims as having something more than a zero prospect of success.18

[51]      Ultimately, and based on the (reasonably limited) submissions made by each party on this issue, I do not consider it was unreasonable, at least to the degree required to justify an increase in costs, for Mrs Preston to reject the April 2016 offer. As noted, that would have effectively required her to value her own claims on the basis of zero prospects of success. I do not consider it unreasonable for Mrs Preston to consider they had more prospects than that, and that they were worthy of further investigation and pursuit.

[52]      I accordingly decline to award an increase to scale costs on the basis of the April 2016 offer.

August 2017 offer

[53]      Mr Preston made a further and separate offer in relation to the 030 proceedings on 9 August 2017. Mr McCleary submits that the August 2017 offer provided a fair and reasonable mechanism to establish the value of the Pauanui Property, and there was also an option for Mrs Preston to instruct her own independent accountant to consult with the accountant (FisherQuays) who had prepared the partnership accounts for the Pauanui Property (given the then dispute over the parties’ post-purchase contributions to the property). The offer also included a mechanism for an independent accountant to be nominated to resolve any dispute in relation to the partnership accounts. The offer was premised on Mrs Preston discontinuing the 030 proceedings and paying 2B scale costs to Mr Preston.

17     Easton Agriculture Ltd  v  Manawatu-Wanganui  Regional  Council  HC  Palmerston  North  CIV 2008-454-31, 22 December 2011 at [12].

18 At [17].

[54]      Mr McCleary says that had Mrs Preston engaged with the offer at the time, then as a matter of logic, she would have only done better than as set out in the FisherQuays partnership accounts. On this basis, he says the August 2017 offer would have put Mrs Preston’s trust in the same or better position than the outcome of the High Court judgment.

[55]      No substantive submissions are made on Mrs Preston’s behalf as to why it was not unreasonable for her not to accept the offer at the time. Mr Hutcheson does note, however, that this offer could only apply to costs incurred in the 030 proceedings. I accept that submission. The offer was limited to the Pauanui Property and thus cannot be advanced to justify an increase in costs in the 051 and 031 proceedings.

[56]      As noted earlier, an early issue in relation to the partnership accounts was in fact an error on Mr Preston’s part which led to initial contributions by Mrs Preston to the Pauanui mortgage not being included. As also noted, while this was later corrected, it no doubt contributed to the difficulties experienced following separation in dealing with the Pauanui Property.

[57]      Much of Mrs Preston’s solicitor’s formal response to the August 2017 offer addressed what was said to be the errors in and general unreliability of the FisherQuays partnership accounts. Indeed, the accuracy of the accounts was said by Mrs Preston’s solicitor to be “a matter of controlling significance” in concluding an agreement on the Pauanui Property. Despite this, however, Mrs Preston did not call any accounting evidence at the hearing to challenge the accuracy of the partnership accounts. And other than the error in the 2014 accounts (which had been corrected in the 2015 accounts), no other material errors were identified. Rather, Mrs Preston’s challenge to the accounts at the hearing was based on matters of principle, namely whether the parties’ post-purchase contributions should be categorised as relationship property (and thus “backed out” of the Property Sharing Agreement in relation to the Pauanui Property), an issue unheralded in Mrs Preston’s pleadings.19

[58]      Given the fundamental premise upon which Mrs Preston rejected the August 2017 offer was a topic on which she called no evidence at the hearing, I consider it

19     See [211] of my substantive judgment; Preston v Preston, above n 1.

was unreasonable for her not to accept the offer, or to at least engage in an essential aspect of it, such as the appointment of an independent accountant, which would have no doubt cut through the remaining dispute on the post-purchase contributions.

[59]      But I do not accept that a 50 per cent increase to scale costs is warranted. That level of increase is the maximum the Court of Appeal envisages would generally be appropriate to award for an increase in scale costs.20 I consider a more modest increase is appropriate. This is not a case where a party rejected a reasonable settlement offer out of hand and failed to engage at all. Rather, the record is clear that both parties were keen and trying to settle the 030 proceedings, and Mrs Preston’s solicitor’s response to the August 2017 offer did suggest a process for agreeing the post-purchase contributions. And as noted, the August 2017 offer was premised on Mrs Preston discontinuing the 030 proceedings and paying scale 2B costs. I also consider there were genuine concerns and disputes as to Mr Preston’s action in relation to certain chattels/fixtures, including the removal of a hot tub from the Pauanui Property by crane. This added a further level of complexity to resolving the dispute.

[60]      Taking all these matters into account, but particularly that the largest stumbling block to settlement was an issue on which Mrs Preston ultimately called no evidence, I award a 20 per cent increase in scale costs to those steps taken in the 030 proceedings after August 2017.

May 2018 offer

[61]      Mr Preston made a third offer in May 2018. It was an attempt to settle all three sets of proceedings. That offer comprised:

(a)An equalising payment from Mrs Preston to Mr Preston of approximately $22,000 (so marginally higher than the equalising payment actually required), together with a compensatory payment from Mr Preston to Mrs Preston in relation to chattels of $10,000.

20     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46]–[48].

(b)A payment from Mr Preston’s family trust to Mrs Preston of $60,000 to settle her claim in the 031 proceedings to an interest in the Fairway Property.

(c)A payment of $7,000 from Mr Preston’s family trust to Mrs Preston to settle her claim in the 031 proceedings to a share in EBTL.

(d)An offer to settle the Pauanui Property on the basis set out in the August 2017 offer.

[62]      Mr McCleary says that the May 2018 offer would have accordingly seen a net payment from Mr Preston to Mrs Preston of approximately $55,000, and a fair and reasonable settlement process in relation to the Pauanui Property.

[63]      Again, Mrs Preston does not make any substantive submissions in relation to this offer. But Mr Hutcheson correctly notes that given its date, any increase in costs could only apply from that date onwards.

[64]      I consider it is appropriate to award an increase in costs based on a failure to accept the May 2018 offer. It is apparent that up to that date, Mr Preston had been making genuine attempts to resolve all proceedings. The May 2018 offer was clear and simple, and offered a better outcome for Mrs Preston than the position under my substantive judgment. It involved a net cash payment to Mrs Preston, and as such, represents at least something more than a mere “walk away” offer.

[65]      Again, however, I conclude that a reasonably modest increase is appropriate, rather than the 50 per  cent  suggested.  While  the  May  2018  offer  plainly  put Mrs Preston in a better position than under my substantive judgment, it still required her to ascribe relatively low prospects of success to her own claims in the 051 and 031 proceedings. And, given the costs no doubt incurred by Mrs Preston to that date, it perhaps offered no too much more than a walk away offer. But reflecting that parties are to be encouraged to make sensible settlement offers (which the May 2018 offer plainly was), and that they ought to have some costs protection in doing so, I consider

an increase in scale costs of 20 per cent to those steps taken in the 051 and 031 proceedings after May 2018 is also warranted.

Result

[66]Before adjustments, I assess total scale costs in Mr Preston’s favour to be

$82,815.

[67]That scale costs award is adjusted as follows:

(a)A 20 per cent increase in scale costs on those steps taken in the 030 proceedings after August 2017 ($4,192.40);21 and

(b)A 20 per cent increase in scale costs on those steps taken in the 031 and 051 proceedings after May 201822 ($2,230 in the 031 proceedings and

$4,906 in the 051 proceedings).

[68]This produces a total scale costs award in Mr Preston’s favour of $94,143.40

plus disbursements of $43,089.

Fitzgerald J

21     Being all steps other than commencement of defence.

22     Being steps 30, 31, 33 and 34 (051 proceedings); steps 30, 32, 33 and 34 (031 proceeding).

SCHEDULE OF SCALE COSTS

Property (Relationships) Act 1976 claim (–051 proceeding)

Family Court

Item	Description:	Days	Daily rate	Amount
1	Preparing statement of claim (receiving instructions, researching facts and law, and preparing and serving that document).	1.5	$1,780	$2,670
9.9	Appearance at a judicial conference held on 14 March 2017.	0.3	$1,780	$534

High Court

Item	Description:	Days	Daily rate	Amount
10	Preparation for first case management conference	0.4	$2,230	$892
20	List of documents on discovery	2.5	$2,230	$5,575
21	Inspection of documents	1.5	$2,230	$3,345
15	Preparation for a pre-trial conference (on 20 March 2018)	0.5	$2,230	$1,115
30	Plaintiff’s preparation of briefs or affidavits	2.5	$2,230	$5,575
31	Plaintiff’s preparation of list of issues, authorities and common bundle	2.5	$2,230	$5,575

33	Preparation for hearing	3	$2,230	$6,690
34	Appearance at hearing	3	$2,230	$6,690
Total:				$38,661

Constructive Trust claim (–031)

Item	Description:	Days	Daily rate	Amount
2	Commencement of defence	2	$2,230	$4,460
10	Preparation for first case management conference	0.2	$2,230	$446
20 & 21	Lists of document on discovery and inspection of documents	1	$2,230	$2,230
15	Preparation for pre-trial conference	0.2	$2,230	$446
30	Defendant’s preparation of briefs	1.5	$2,230	$3,345
32	Defendant’s preparation of list of issues, authorities and common bundle	1	$2,230	$2,230
33	Preparation for hearing	2	$2,230	$4,460
34	Appearance at hearing	0.5	$2,230	$1,115
Total:				$18,732

Pauanui Property (–030)

Item	Description:	Days	Daily rate	Amount
2	Commencement of defence	2	$2,230	$4,460
10	Preparation for first case management conference	0.2	$2,230	$446
15	Preparation for pre-trial conference	0.2	$2,230	$446
20	Lists of documents of discovery	2	$2,230	$4,460
21	Inspection of documents	1	$2,230	$2,230
30	Defendant’s preparation of briefs	2	$2,230	$4,460
32	Defendant’s preparation of list of issues, authorities and common bundle	1	$2,230	$2,230
33	Preparation for hearing	1.5	$2,230	$3,345
34	Appearance at hearing	1.5	$2,230	$3,345
Total:				$25,422

Total:  $82,815