Read v Almond

[2016] NZHC 464

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2014-404-002991

CIV-2014-404-001278 [2016] NZHC 464

BETWEEN

BRUCE JAMES READ

First Plaintiff

ETHNE GLADYS READ
Second Plaintiff

CHRISTOPHER JOHN READ
Third Plaintiff

AND

JANFERIE MAEVE ALMOND

Defendant

On the papers
Judgment:	17 March 2016

JUDGMENT AS TO COSTS OF THOMAS J

This judgment was delivered by me on 17 March 2016 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Solicitors:

Inder Lynch, Auckland Rice Craig, Papakura.

Law & Associates, Manukau.

READ v ALMOND [2016] NZHC 464 [17 March 2016]

Background

[1]    By my decision of 11 November 2015,1 I indicated that the plaintiffs were entitled to costs.

[2]    The parties have been unable to reach agreement. I have received and considered a number of memoranda from the parties.

[3]    The defendant is in receipt of legal aid. The plaintiffs submit that a costs order should be made against the defendant as there are exceptional circumstances falling within the meaning of s 45(2) of the Legal Services Act 2011 (the Act).

Relevant law

[4]    Under s 45(1) of the Act, the liability of a legally aided person, under an order for costs, must not exceed a reasonable amount for that person to pay. That is to be determined having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

[5]    Under s 45(2), no order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances. The exceptional circumstances are listed under s 45(3) as including but not limited to the following conduct by the aided person:

(a)   any conduct that causes the other party to incur unnecessary cost:

(b)   any failure to comply with the procedural rules and orders of the court:

(c)   any misleading or deceitful conduct:

(d)   any unreasonable pursuit of 1 or more issues on which the aided person fails:

(e)     any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:

(f)   any other conduct that abuses the processes of the court.

1      Read v Almond [2015] NZHC 2797.

[6]    Section 45(3) provides that any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person’s liability.

[7]The relevant authorities state the following principles:

(a)The onus is on the applicant to establish entitlement to costs.2

(b)The threshold must involve “unusual and/or clearly out of the ordinary circumstances”.3

(c)The circumstances must relate to the conduct of the proceedings as opposed to the events that led to it.4

(d)The assets and income of the aided person is a circumstance relevant to a decision on what is reasonable for an aided person to pay on an order for costs.5

(e)Whether there are “exceptional circumstances” needs to be determined on a case by case basis, whether or not those involve disapprobation.6

[8]    In Caldwell v Gaze Burt, Thorp J stated the following situations are properly classified as “exceptional circumstances”:7

(a)where the Court believed the claim to be wholly without merit;

(b)where the claim appeared to be grossly exaggerated, particularly if a reasonable offer had been made and rejected; or

2      Awa v Independent News Auckland Ltd (No 2) 1996 2 NZLR 184.

3      S v G Dunedin FAM-2008-012-440, 14 July 2009 at [8].

4      Wall v Gannon HC Rotorua CIV-2006-0463-239, 31 July 2007.

5      The Court of Appeal in Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA) at [20] stated this is one consideration “not normally applicable in fixing costs” but is a circumstance relevant to a decision on what is reasonable for an aided person to pay on an order for costs.

6 Above n 4, at [24].

7      Caldwell v Gaze Burt (1994) 7 PRNZ 491 (HC).

(c)where a legally aided person was in fact found to have substantial private means.

Submissions

The first plaintiff

[9]The first plaintiff assesses costs on a 2B basis as $58,543,75.

[10]   Mr Airey, for the first plaintiff, acknowledges that costs are payable to the defendant in respect of the first amended statement of claim dated 19 August 2014. The amount of $1,170.00 should therefore be offset against the costs otherwise payable in accordance with item 9 in schedule 3 of the High Court Rules (Rules). However, no costs should be awarded in respect of the second amended statement of claim as the amendments, in Mr Airey’s submission, were minor.

[11]The first plaintiff seeks an award to cover disbursements in the sum of

$19,084.50.

[12]   The first plaintiff seeks a 50 per cent uplift on scale costs given the following factors:

(a)The defendant did not provide discovery of her affidavit of assets and liabilities notwithstanding she was on notice prior to the defendant’s discovery being completed. The defendant claimed this had no relevance to the proceedings but subsequently agreed to give discovery of the affidavit. A formal order to that effect was made on 12 June 2015. The defendant was granted an extension of time for giving this additional discovery but was again in default of this and other timetabling orders. On 10 August 2015, a Judge directed “immediate compliance” with all outstanding orders by the defendant and made an “unless order” to the effect that, if all outstanding requirements had not been satisfied by 11 August 2015, the plaintiffs could apply for orders striking out the defence and awarding costs

against the defendant.   The affidavit of assets was provided on 14 August 2015.

(b)The defendant provided piecemeal discovery, the last of which was not completed until 21 August 2015. The first plaintiff was required  to have served the common bundle by 19 August 2015. In Mr Airey’s submission, the late and ongoing disclosure of additional documents created practical difficulties in terms of the first plaintiff’s ability to prepare the common bundle. Secondly, the defendant did not give full discovery. For example, the receipt of the travel agency for the airfares to the United States, paid by Chris Read, was not discovered by the defendant and was provided only at the hearing. This led to considerable cross-examination of Chris Read in relation to this issue which, in Mr Airey’s submission, could have been avoided had the invoice been properly discovered. Thirdly, the defendant’s disclosure of financial information was incomplete. This caused difficulties for the accountant engaged by the plaintiffs to provide expert evidence and resulted in his having to attempt to calculate the amount owed in respect of the mortgage.

[13]   The award of costs is reasonable for s 45(1) purposes because, in Mr Airey’s submission, the defendant is not without financial resources. The defendant’s share as determined in the Judgment is 24.74 per cent, which equates to $280,799.00. Having deducted the defendant’s borrowings, the defendant remains with some

$190,000.00 available from her share of the proceeds if the property is sold at the assessed valuation.

[14]   The following factors qualify as “exceptional circumstances” within the meaning of s 45(3) of the Act, in Mr Airey’s submission:

(a)The defendant repeatedly failed to comply with directions of  the Court regarding the filing of briefs of evidence and the service of an index of documents to be included in the common bundle, resulting in an unless order being made against her.

(b)The defendant did not comply with her obligations in relation to discovery in a timely manner.

(c)The defendant refused to give discovery of the affidavit of assets and liabilities which she made in the context of her relationship property proceedings, asserting that it was not relevant in circumstances where there was never any proper basis for such a claim. The refusal to give disclosure of it was an attempt to withhold relevant evidence that the defendant knew would be unhelpful to her case, Mr Airey says.

(d)A significant portion of the defendant’s evidence involved a “character assassination” of the first plaintiff in relation to matters from the parties’ childhoods which had little or no relevance to the issues at hand.

(e)The lengthy cross-examination of Chris Read would have been unnecessary had the receipt from the travel agent been discovered in light of his acknowledgement that the airfares he purchased were never intended by him to give rise to an interest in the property.

(f)The hearing was unnecessarily lengthened by the calling of Mr Naylor whose evidence was evidence was hearsay, being largely based on what he had been told by the defendant.

(g)The proposed evidence of Ms Sharlene Almond was largely irrelevant and focused on attacking the character of the first plaintiff, Mr Airey says.

[15]   In Mr Airey’s submission, the way in which the defendant chose to defend  the proceeding warrants a finding of “exceptional circumstances”. He submits that a conclusion can safely be drawn that her evidence was untruthful or misleading.

[16]   Mr Airey also submits that the overall result of the case is a factor which should be taken into account. The first plaintiff was successful in all causes of action

which were pursued at the hearing whereas the defendant’s position on all key issues

was comprehensively rejected.

The second and third plaintiffs

[17]   Mr Woods, for the second and third plaintiffs, submits that the exceptional circumstances which call for an order for costs against the defendant are:

(a)Misleading or deceitful conduct: the defendant, as the second plaintiff’s attorney, acted in breach of her fiduciary duties. Additionally, the absence of any attempt by the defendant to provide an account for her receipt of funds during the relevant period should be subject to indemnity costs.

(b)Unreasonable failure to negotiate: the second and third plaintiffs made a Calderbank offer on 4 September 2015 which was accepted by the first plaintiff but declined by the defendant. The offer was again presented by the plaintiffs on the second day of trial but was rejected by the defendant.

(c)Unnecessary cost: the third plaintiff suffered unnecessary costs as a result of the defendant’s failure, refusal or neglect to comply with the order of discovery in a timely fashion and, in particular, to disclose her bank statements and mortgage transaction history. Mr Woods submits this caused unnecessary cost in both the briefing and workings of the expert accountant, Mr Hussey, as he was forced to reconstruct the mortgage history from loan documents (approximately 15 per cent of actual disbursements). The defendant was warned of  the likelihood of such additional costs, Mr Woods says. Additionally, Mr Woods submits the defendant’s briefs of evidence contained unnecessary invective directed at the plaintiffs which prolonged the hearing by approximately 15 per cent.

(d)Failure to comply with Court rules and orders: the defendant was late in filing her briefs of evidence; late in complying with directions as to

discovery; failed to comply with orders necessary to complete the common bundle; and ultimately became subject to an unless order. The defendant also advanced an application for an oral evidence order which was declined. Mr Woods submits this was sought to cause stress and inconvenience to the second plaintiff in full knowledge of her frailty and age.

(e)Unreasonable pursuit of issues upon which the defendant failed: the defendant  argued  the  affirmative  defence  of   laches   which,   in Mr Woods’ submission, was meritless.

[18]   The second and third plaintiffs seek scale costs on a 2B basis of $58,543.75, which is approximately 60 per cent of actual costs. They also seek indemnity costs  in the proceeding from 4 September 2015 (the date on which the Calderbank offer was made). Mr Woods says that the actual time on cost post 4 September 2015 totals

$38,640.

The defendant

[19]   Ms Law, for the defendant, submits that, but for the legal aid position, costs would have been awarded on a 2B basis (without indemnity costs and/or increased costs being awarded). The defendant was legally aided and there are no “exceptional circumstances” justifying an award of costs in terms of s 45, in Ms Law’s submission.

Response to the submissions from the first plaintiff

[20]   There was not the repeated failure on the part of the defendant to comply  with the directions of the Court as insisted by the plaintiffs, in Ms Law’s submission. She says she kept other counsel informed of her difficulties. The second and third plaintiffs filed an amended statement of claim on 7 August 2015 and the first plaintiff unreasonably expected the defendant to finalise reply briefs and the index of documents while also responding to that amended statement of claim. Although the defendant accepts the changes were minor, counsel for the second and third plaintiffs had not advised what those changes were, necessitating time being spent comparing

the claim with the prior amended claim, Ms Law says. Additionally, Ms Law notes that timetabling orders were also breached by the plaintiffs. In any event, the plaintiffs were aware of the ongoing illness of counsel for the defendant.

[21]   In Ms Law’s submission, the defendant’s discovery obligation was an ongoing one which she fulfilled as the documents became practically discoverable. The affidavit of assets and liabilities is an example; while the defendant initially was of the view that it was not relevant to the proceedings, she encountered delays in obtaining the affidavit from the Family Court following a court order to give discovery of the affidavit.

[22]   The defendant denies her evidence about her relationship with the first plaintiff was not relevant to the issues at trial, stating it was the reason for the undisclosed nature of the investment her father had made on her behalf. Evidence relating to this matter did not increase the hearing time as the defendant was required to have her evidence taken as read, Ms Law submits.

[23]   In Ms Law’s submission, the evidence of Mr Naylor corroborated statements made by the defendant about being locked out of Mrs Read’s house and contradicted Bruce Read’s evidence. Given the credibility issues raised at the hearing, his evidence was critical, Ms Law submits. In any event, his evidence took less than an hour during a seven day hearing. This makes it patently wrong, in Ms Law’s submission, to state that his evidence prolonged the hearing.

[24]   Ms Law submits that Sharlene Almond’s evidence was not irrelevant and that it only became apparent part way through the hearing that Sharlene Almond was not going to be called. This was because of the considerable time pressures put on the defendant by the Court which, in Ms Law’s submission, was out of the defendant’s hands.

[25]   The defendant denies that her allegations were untruthful or misleading; although her evidence was not found credible, she maintains the legitimacy of her claim and the truthfulness of her evidence. She refutes the suggestion that she has

fabricated her evidence, including the notation in her cheque book. This finding is being appealed.

[26]   Finally, the defendant was put to unnecessary expense as a result of late notice of the first plaintiff’s discontinuance of the fourth and fifth causes of action.

Response to the submissions from the second and third plaintiffs

[27]Ms Law submits the allegations of misleading or deceitful conduct in relation

to the defendant’s role as a fiduciary is irrelevant in a costs claim.

[28]   The allegation that the defendant’s claims were implausible, inconsistent and lacked credibility is, in Ms Law’s submission, overstated given an interest of 25 per cent in the property has been upheld.

[29]   Ms Law submits the defendant was exercising her “fundamental right of access to the Courts to obtain what … she is entitled to under the law”. She succeeded in obtaining 25 per cent in the property which is comparable to the Calderbank offer. In any event, the settlement offer was made too late. In Ms Law’s submission, there was insufficient time properly to assess the offer.

[30]   Ms Law rejects the allegation that the hearing was prolonged by 15 per cent by the defence evidence from Ms Betsy and Mr Naylor. The hearing of seven days took nearly 42 hours; meaning the hearing was prolonged by approximately six hours on this evidence. In any event, the evidence put was fundamental to the defendant’s case.

[31]   The defendant denies that the defence of laches caused unnecessary expense and delay. In Ms Law’s submission, the plaintiffs have already benefitted by the finding that they are not precluded from a remedy by reason of the doctrine of laches. They should not benefit twice.

[32]   Ms Law then refers to the context of the delay in filing the briefs and index, cites failures of the plaintiffs and contends, in any event, there was no prejudice.

[33]   Finally, Ms Law submits a costs order against the defendant would be unreasonable in the circumstances. The defendant is presently a beneficiary. She is 63 years of age and has a dependant daughter. Her only asset is the house and a  2007 Suzuki Swift with a value of $7,000. She has an order against her to pay the second plaintiff the sum of $29,000. Her debts include $4,000 on credit cards. She has a debt to Legal Services in relation to these proceedings in the amount of

$76,736.44.

Analysis

[34]I consider the issues in the following order:

(a)What is the amount that the defendant would have been ordered to  pay if s 45 did not affect her liability?

(b)Are there exceptional circumstances justifying an award of costs against the defendant?

(c)If there are exceptional circumstances within the meaning of s 45, is the costs order reasonable having regard to all the circumstances including the means of all the parties and their conduct in connection with the dispute?

The amount the defendant would have been ordered to pay

[35]The applicable principles under the Rules are as follows:

(a)costs are ultimately within the discretion of the Court;8

(b)the party who fails with respect to a proceeding should pay the costs involved;9

(c)an award of costs should reflect the complexity and significance of the proceeding;10

8      High Court Rules, r 14.1.

9      High Court Rules, r 14.2(a).

(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable;11

(e)so far as possible, the determination of costs should be predictable and expeditious;12 and

(f)increased costs may be justified under r 14.6 in identified circumstances where the Court is justified in making an order for increased costs, despite the principle that the determination of costs should be predictable and expeditious.

[36]I accept that costs would have been appropriately categorised as 2B.

Notably, the second plaintiff’s claim was not wholly successful.

[37]Turning to the issue of increased costs, the first plaintiff submits an uplift of

50 per cent should be made to reflect the defendant’s conduct.

[38]Rule 14.6(3) provides:

(3)  The court may order a party to pay increased costs if—

(a)  the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)    the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)   failing to comply with these rules or with a direction of the court; or

(ii)   taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)   failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)   failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

10     High Court Rules, r 14.2(b).

11     High Court Rules, r 14.2(d).

12     High Court Rules, r 14.2(g).

(v)    failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule

14.10 or some other offer to settle or dispose of the proceeding.

[39]   Although I accept there was failure on the part of the defendant to comply with the timetabling directions, and the plaintiffs were successful in their application for an unless order following the defendant’s non-compliance, I am not satisfied the defendant’s behaviour was to the requisite standard warranting increased  costs. From a review of the history of the matter, it does not seem the defendant’s default was deliberate or that the defendant had no intention of complying with the timetable directions put in place in respect of the hearing. The defendant provided an explanation for her non-compliance leading up to the making of the unless order and there was compliance with the unless order once it was made.

[40]   A Calderbank offer was made to the defendant on 4 September 2015, three days before the hearing began and on the last working day before its  commencement. As it turned out, the plaintiff’s assessment closely resembled the ultimate result. The plaintiffs now seek increased costs to reflect the defendant’s unreasonable refusal of the offer.

[41]   Although r 14.10 permits the making of a Calberbank offer “at any time”, which can mean right up to the point judgment is delivered, the timing of the settlement offer is important. Late offers will generally have little or no impact.13

[42]   The nature of these proceedings is such that, in my view, all the parties  should have been encouraged from the outset to use their best endeavours to settle. This is so not only because of the nature of the relationship between the parties but also bearing in mind the age and condition of the second plaintiff, Mrs Read. The plaintiffs allude to the tactical advantage and strategy which they say the defendant adopted in relation to Mrs Read, starting with the application for her to give viva voce evidence rather than relying on her brief of evidence. Given Mrs Read’s age and physical state, her evidence was given with parties and counsel in attendance at the rest home where she then resided. When it became apparent that she was

13     Andrew Beck and others McGechan on Procedure (online ed, Brookers) at [HR14.10.02].

generally adhering to her brief of evidence, was consistent and lucid in her evidence but yet easily tired, I suggested to the parties in the first adjournment that they  should revisit any previous attempts at settlement. After a very brief attempt, I was advised that settlement was not possible.

[43]   Despite my comments as to the desirability of settlement, however, parties are entitled to have their case heard and, given the late timing of the Calderbank offer, I am not persuaded increased costs would have been awarded, had s 45 not affected the defendant’s liability.

Exceptional circumstances

[44]   Ms Law is correct to say that the submission for the second and third plaintiffs on deceitful conduct in relation to the defendant’s fiduciary duties is irrelevant in a costs claim. The wording of s 45(3) is clear in that it refers to the  aided person’s conduct during the proceedings rather than earlier conduct. I  therefore put this submission to one side.

[45]   I accept there has been some failure by the defendant to comply with Court directions and timetable orders. In Douglas v Douglas, it was acknowledged that “regrettably breaches of timetable orders do occur in litigation”.14 However, unlike that case, the defendant’s breaches of timetabling directions led to an unless order being made. In my assessment, that is unusual.

[46]   In saying that, I accept that the defendant has, on at least one occasion, failed to comply with the timetable directions for reasons that were not her own. The parties are in agreement that the second and third plaintiffs’ amended statement of claim of 7 August 2015 contained relatively minor changes however, for costs purposes, I accept the defendant was entitled to default on other timetabling requirements in order to review those changes.

[47]For the reasons already stated, I do not place too much emphasis on the fact

that the defendant failed to respond to the plaintiffs’ Calderbank offer. I agree with

14     Douglas v Douglas [2014] NZHC 602 at [9].

Ms Law’s submission that there was, in the circumstances, insufficient time properly to assess the offer. The last settlement offer was made on the second day of the hearing. Although each case will turn on its own facts, a settlement offer at that  point is treated as being different in nature from settlement offers made at the pre- trial stage. I have not been referred to any real effort at settlement by the parties in good time before the trial.

[48]   Counsels’ submissions on unnecessary invective or the “character assassination” of the plaintiffs have some merit. As I stated in my decision, the defendant’s version of events was not convincing. For example, I rejected the defendant’s proposition that she would have never bought a property with the first plaintiff because of their longstanding conflict, finding that any such conflict was only apparent when the first plaintiff began to challenge her use of their parents’ money. Counsel for the second and third plaintiffs say this prolonged the hearing by approximately 15 per cent. While this evidence may have lengthened the hearing, it was substantial plank of the defence and the defendant was therefore entitled to run it.

[49]   On the topic of the length of the hearing, I note with concern the defendant’s allegation that she was somehow denied the opportunity properly to put her case, with some reference to pressure from the Court. There are a number of important points to be made in this regard. First, the case was set down on the basis of the time estimated by counsel. It is in incumbent on counsel properly to estimate the time so that the Court’s resources can be properly allocated. Secondly, the Court adopted measures to assist in maximising the time available, including starting early and extending the trial past the period for which it was set down. Thirdly, in cross examination of the plaintiff’s witnesses, the defendant’s case was put in painstaking detail. An example of this is the time spent in cross examination about payment of the fares for Ms Almond and her family to go to America. The issue was finally put to bed when Ms Almond produced a receipt from her travel agent, something which had not been made available in discovery. Fourthly, junior defence counsel conducted her cross-examination in a manner which required my intervention on numerous occasions, prolonging the proceedings.

[50]   It was the defendant’s choice not to call Sharlene Almond. It is for the parties to decide what evidence they call.

[51]   The time involved in the calling of Mr Naylor and Ms Betsy was not out of all proportion to the duration of the hearing.

[52]   It is clear that the plaintiffs’ forensic expert, Mr Hussey, in effect reconstructed the defendant’s mortgage history from loan documents. He was not convinced he had received disclosure of all the defendant’s accounts. Ms Almond denies this and I cannot take this matter any further.

[53]   Many of the factors on which the plaintiffs rely are implicit in the final result. That is, that I did not accept the defendant’s case and found in the most part for the plaintiffs on the balance of probabilities. There is some reference in the submissions to a finding that Ms Almond altered her cheques stubs. I suggest counsel look carefully at the decision. Although the cross-examination of Ms Almond in relation to her cheque book reconciliations and bank statements was outlined in the decision, there was no finding in that regard.

[54]   While it is a finely balanced decision, I do not consider there are exceptional circumstances so as to warrant an award of costs against the defendant.

The means of the parties

[55]   Even if I were to find exceptional circumstances, I would have to consider  the means of the parties. The second plaintiff is in receipt of  national superannuation. The third plaintiff owns a home and modest assets. The  first plaintiff  is  retired  and  has  shares  and  other  investments  worth  approximately

$300,000. The plaintiffs have incurred substantial costs in bringing these proceedings. The defendant is a beneficiary but is not without financial resources. Having deducted her borrowings from the defendant’s share in the property, she would have some $190,000 available from her share of the proceeds if the property were to be sold at the assessed valuation. In saying that, the defendant is ordered to pay the first plaintiff the sum of $29,000 and that must be taken into account for the

purposes of s 45. She also has a debt to legal services of over $75,000. Given those considerations, any award of costs would have been minimal.

Conclusion

[56]For the reasons given, there will be no award of costs.

Thomas J