Roband v O'Sheas
[2018] NZHC 1241
•30 May 2018
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2013-419-000966
[2018] NZHC 1241
BETWEEN JANINE MAREE ROBAND
Plaintiff
AND
O’SHEAS
First Defendant
MICHAEL CANN
Second Defendant
Hearing: [On the Papers] Appearances:
J M Roband (Self-represented Plaintiff) in Person
L J Taylor QC and R C Woods for the First Defendant M Cann (Self-represented Second Defendant) in Person D M O’Neill to Assist the Court
Judgment:
30 May 2018
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 30 May 2018 at 4.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Counsel: L J Taylor QC, Wellington
D M O’Neill, Hamilton
Solicitors: Robertsons, Auckland
Copies To: J M Roband, Hamilton
M Cann, Hamilton
ROBAND v O’SHEAS [2018] NZHC 1241 [30 May 2018]
Introduction
[1] In my judgment dated 9 October 2017, I dismissed Ms Roband’s claims against O’Sheas in their entirety, and dismissed all but one of the claims against Mr Cann.1 The remaining claim was adjourned pending receipt of further evidence.
[2]O’Sheas and Mr Cann seek costs awards in their favour.
(a)O’Sheas seeks $516,089.24. That sum comprises schedule 2B costs, uplifted by 75 per cent from the commencement of the claim until 7 October 2016, and indemnity costs from 8 October 2016 until the end of the trial.
(b)Mr Cann represented himself at trial. He seeks $34,199 for his legal disbursements and expenses incurred in the preparation of his defence.
[3] Ms Roband is no longer legally represented and has not taken any further part in the proceeding.2 Given the quantum claimed by O’Sheas, and the comprehensive submissions filed in support, I appointed Mr O’Neill to assist the Court on the question of costs. I am grateful for that assistance which was provided by way of written submissions.
[4]The issues to be determined are as follows:
(a)Are the scale costs and disbursements claimed by O’Sheas appropriate?
(b)Should O’Sheas be awarded increased costs?
(c)Should O’Sheas be awarded indemnity costs?
(d)Should Mr Cann be awarded a sum for his legal disbursements and expenses?
1 Roband v OʼSheas [2017] NZHC 2468.
2 Ms Roband filed a short memorandum setting out her expenses in relation to the proceeding, with supporting invoices, which she asked the Court to take into account in fixing costs.
History of the proceeding
[5] Ms Roband, Mr Cann and Mr John O’Shea were once co-trustees of the McGerkinshaw Property Trust. O’Sheas was also the solicitor to that Trust. Ms Roband sued O’Sheas and Mr Cann in relation to a number of transactions which she said preferred the interests of others to those of the Trust. Those transactions concerned:
(a)the provision of an unlimited and interlocking guarantee in 2006 (2006 Guarantee);
(b)the application of the proceeds of sale from a property known as the Newstead property;
(c)the refinancing of debt in relation to another property known as the Alconbury property; and
(d)the failure to enforce lease arrangements in accordance with Ms Roband’s instructions.
[6] The proceeding was commenced on 20 December 2013. At that time, the statement of claim did not include any cause of action in relation to the 2006 Guarantee. Ms Roband pleaded breach of fiduciary duty, breach of trust, negligence and breach of retainer.
[7] In a letter dated 12 August 2015, O’Sheas made the first of two settlement offers to Ms Roband. It proposed that Ms Roband abandon her claim with each party bearing their own costs. That offer expired without a response.
[8] Ms Roband subsequently sought and was granted leave to amend her claim to include allegations of breach in relation to the 2006 Guarantee. That claim became the primary claim at trial. The nature of the amendments made at the time meant that the trial which was due to commence on 18 April 2016 had to be adjourned.
[9] On 15 September 2016, O’Sheas sent their second settlement letter to Ms Roband. O’Sheas offered to pay Ms Roband the sum of $300,000 in full and final settlement of Ms Roband’s claim against O’Sheas. Ms Roband rejected the offer in a letter dated 7 October 2016 and counter-offered for the sum of $800,000. O’Sheas rejected that counter-offer.
[10] Ms Roband’s then legal advisors were subsequently granted leave to withdraw and the second firm fixture date was vacated to allow Ms Roband time to engage replacement counsel.
[11] The trial took place over two weeks in May 2017. Expert witnesses were called by Ms Roband and O’Sheas on solicitors’ duties, and on the quantification of damages. O’Sheas also called a handwriting expert to give evidence about whether Ms Roband’s signature had been forged on key documents.
[12] I dismissed Ms Roband’s claims against O’Sheas. I also dismissed the breach of trust claims against Mr Cann. I found that there were grounds to remove Mr Cann as trustee, but a replacement trustee had not been nominated and I did not have evidence relating to the Trust assets. That claim was adjourned with leave reserved to Ms Roband to file further evidence if the application was to be pursued. The application has not been pursued.
[13] In the course of my judgment I made several adverse credibility findings against Ms Roband. O’Sheas relies on these findings, amongst others, in claiming an award of indemnity costs.
Are the scale costs and disbursements claimed by O’Sheas appropriate?
[14] O’Sheas calculates scale costs on a schedule 2B basis to amount to $51,944. I am satisfied that such a claim is appropriate.
[15] Disbursements in the sum of $115,187.76 (excluding GST) are also claimed. The bulk of this sum is for expert witness fees, and in particular the damages/loss experts. Copies of the invoices have been provided. I am satisfied that the disbursements claimed are reasonable.
Should O’Sheas be awarded increased costs?
[16] O’Sheas seeks a 75 per cent uplift on scale costs. It says Ms Roband unreasonably rejected two settlement offers made on a Calderbank basis, and that a greater uplift is justified in the circumstances of this case. The aspects which give rise to a greater uplift form the basis of the claim for indemnity costs and are considered in that context further on in this judgment. This section deals only with the effect of the rejected Calderbank offers on the award of scale costs.
[17] Rule 14.6(3)(b)(v) of the High Court Rules 2016 provides that increased costs may be awarded where a party fails to accept an offer of settlement without reasonable justification with the result that they contribute unnecessarily to the time or expense of the proceeding or a step in it. Calderbank offers are specifically provided for in r 14.10, with their effect on an award of costs at the discretion of the Court as provided in r 14.11(1).
[18] In Weaver v HML Nominees Ltd, Katz J observed that whether increased costs should be awarded for failure to accept a Calderbank offer is necessarily fact-specific. Her Honour identified a number of factors which could affect the assessment of whether increased costs should be awarded and, if so, the extent of any increase. Those factors include (but are not limited to) the following:3
(a)the size of the offer relative to the actual costs of counsel;
(b)the amount of the claim;
(c)the reasonable expectations of the party that refuses the offer;
(d)the amount of preparation for trial already undertaken;
(e)whether the proceeding concerns an uncertain area of law;
(f)whether the parties were in a position to assess the merits when the offer was received;
(g)the information available to the party who receives the offer and the extent to which they can to assess the offer;
3 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
(h)the timing of the offer;
(i) the conduct of the offeror. (footnotes omitted)
[19] The first offer was made on 12 August 2015 and expired on 28 August 2015. O’Sheas offered not to seek costs against Ms Roband if she discontinued the claim at that point (a “walk away” offer). The letter set out O’Sheas’ position on the claim as it was then pleaded. Reliance was placed on the 2006 Guarantee which had been signed by all parties. O’Sheas contended that the 2006 Guarantee meant that Ms Roband’s claim would fail for a lack of causation. This was described as an “unassailable” and “insurmountable” barrier to Ms Roband succeeding in her claim. The letter concluded with the view that “the plaintiff’s claim has no prospect whatsoever of success”. That settlement offer expired without response from Ms Roband.
[20] There has been a traditional reluctance to award increased costs for “walk away” offers made early in the proceeding. That is because the viability of a claim may be difficult to assess at the early stages.
[21] In Hira Bhana & Co Ltd v PGG Wrightson Ltd, the Court of Appeal held that it was not unreasonable for a plaintiff to reject a walk away offer made in August 2004, when the trial was in late 2005. In that case, the credibility of witnesses was a crucial factor in the case and it was not unreasonable to proceed to trial to test credibility.4
[22] Similarly, in Easton Agriculture Ltd v Manawatu-Wanganui Regional Council, Kós J declined to award increased costs for a walk away offer made after evidence had been exchanged and relatively close to trial. In that case, the issue of causation was “by no means pre-ordained” and the litigation risk of the party claiming costs was “not insignificant”.5
4 Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342 at [24]–[26].
5 Easton Agriculture Ltd v Manawatu-Wanganui Regional Council HC Palmerston North CIV- 2008-454-31, 22 December 2011 at [15]–[22].
[23] In this case, the offer was made after discovery had been completed. There had been substantial costs incurred in progressing the proceedings, including completing discovery, to that date.
[24] In addition, the offer was made before the exchange of briefs of evidence. The causation defence as outlined in the letter relied on a counterfactual in which the likelihood of the way that other parties (such as Westpac and BNZ) would have reacted was featured. I consider Ms Roband was entitled to wait to assess the strength of the evidence before deciding whether or not to accept the offer.
[25] Finally, the causation analysis in the letter was based on the claim as it then stood. That claim took on a different complexion by the time of the trial. Although causation was an issue at trial, it was subsidiary to a number of other issues, and it was not the primary reason for Ms Roband’s claims failing.
[26] In those circumstances, I do not consider Ms Roband’s rejection of the walk away offer to be unreasonable and I decline to award increased costs in relation to the first offer.
[27] However, the second offer made on 15 September 2016 falls into a different category. In this letter, O’Sheas offered to pay the sum of $300,000 in full and final settlement. In an email dated 7 October 2016, Ms Roband’s then legal advisors sent an email declining to accept the offer, but counter-offering that Ms Roband would accept $800,000 (including GST if any and costs) in settlement of her claim.
[28] By the time of this second offer, the second amended statement of claim had been filed and the cause of action relating to the 2006 Guarantee had been pleaded. Briefs of evidence had also been exchanged and the letter detailed the various vulnerabilities in that evidence. Those deficiencies ultimately mirrored my own conclusions reached on the evidence adduced at trial.
[29] Furthermore, the offer of $300,000 was a reasonable estimate of the costs incurred to date, and the costs that were to be incurred in preparing for the trial in
February 2017. It was a genuine and commercially realistic attempt by O’Sheas to limit its exposure to costs.
[30] I consider Ms Roband’s rejection of this settlement offer to be unreasonable. If she had accepted the offer, she would have saved unnecessary expense for all parties to the proceeding. Her refusal to accept this offer warrants an award of increased costs from the date this offer was rejected, namely 7 October 2016. I consider an uplift of 50 per cent to be reasonable. Whether a further uplift is warranted will depend on my analysis of whether indemnity costs are justified. That issue is considered next.
Should O’Sheas be awarded indemnity costs?
[31] Rule 14.6(4)(a) provides for an award of indemnity costs if a party has acted “vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing or defending a proceeding or a step in a proceeding”.
[32] Indemnity costs are exceptional, and may only be justified where the misconduct is “flagrant”. The following circumstances in which indemnity costs have been ordered were endorsed by the Court of Appeal in Bradbury v Westpac Banking Corp:6
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law;
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.
[33] Although O’Sheas considers that indemnity costs from the commencement of trial could be justified, it concedes that such costs are exceptional. Accordingly, it seeks full indemnity costs from 8 October 2016 to the end of trial, and a 75 per cent uplift on scale for all steps prior to that date. That uplift is for the unreasonable
6 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].
rejection of the first settlement offer, and the flagrant aspects of Ms Roband’s conduct which O’Sheas argues justifies an award of indemnity costs. That conduct falls into the following categories:
(a)the serious nature of the allegations made by Ms Roband; and
(b)Ms Roband’s conduct in advancing and pursuing her claim.
[34] As to the first of these categories, O’Sheas points to three instances where Ms Roband made allegations of dishonesty, fraud, and serious misconduct which were not upheld at trial:
(a)An allegation that Mr O’Shea had deliberately acted in breach of trust, and dishonestly. Such a claim was necessary to overcome an exclusion of liability clause in the Trust Deed and Deed of Indemnity in favour of Mr O’Shea as trustee.
(b)An allegation that Ms Ngaire Meredith acted oppressively and unethically when attending on Ms Roband at Waikato Hospital on 17 April 2008.
(c)An allegation that Mr Cann had forged Ms Roband’s signature on a Westpac form which O’Sheas relied on as part of its defence.
[35] The second of these categories relies on Ms Roband’s conduct in advancing and pursuing her claim. O’Sheas says that Ms Roband altered her evidence and amended her pleadings to suit her case, rather than to reflect the genuine factual position known to her and disclosed on the evidence. O’Sheas refers to the following in support of this ground:
(a)My assessment of Ms Roband as being “willing to change evidence to support her claim rather than give a truthful and honest account of events”.7
7 Roband v OʼSheas [2017] NZHC 2468 at [53].
(b)The allegations of misconduct against Mr O’Shea and Ms Meredith which were only made to circumvent O’Sheas’ defences identified in their letters of settlement and statement of defence.
(c)The amendment of the claim so as to include a cause of action in relation to the 2006 Guarantee in response to O’Sheas’ first settlement letter which referred and relied on that guarantee to defeat the then pleaded claims.
(d)The introduction of a fundamentally different counter-factual in Ms Roband’s reply brief of evidence which followed O’Sheas’ second settlement letter and the service of Mr Graham’s expert brief of evidence.
[36]As these grounds overlap to some extent, I address them together.
[37] I start with the allegations made against Mr O’Shea, Ms Meredith and Mr Cann. I agree that Ms Roband made claims of serious misconduct against Mr O’Shea which were not pressed nor established at trial. The claims made against Mr O’Shea were the only way the exclusion of liability clause in the Trust Deed and Deed of Indemnity could have been defeated. There was no evidence adduced at trial to substantiate the very serious claims against him.
[38] Ms Roband’s claims that Ms Meredith, a legal executive at O’Sheas, had improperly pressured her to sign documents whilst she was waiting in a hospital room having suffered a suspected stroke, were also very serious. I accepted Ms Meredith’s version of events, and rejected Ms Roband’s account as being “self-serving, lacking in credibility, and not corroborated by her mother’s account of the meeting at trial”.8 As with the claims made against Mr O’Shea, these serious allegations appear to have been made in an attempt to circumvent evidence which contradicted Ms Roband’s claim that she did not consent to the Alconbury purchase.
8 Roband v OʼSheas [2017] NZHC 2468 at [107].
[39] However, the claims that Mr Cann forged her signature on a Westpac form do not fall into the same category. I determined that claim on the balance of probabilities and in reliance on evidence of a handwriting expert called by O’Sheas. That expert considered Ms Roband probably did sign the form, but she could not exclude the possibility that Ms Roband’s signature was a simulation. It is also possible, on the most generous view of the evidence to Ms Roband, that she could not recall signing this document given the turmoil in her marriage at this time. Ms Roband’s claims of forgery fell short, but, unlike the allegations made against Mr O’Shea and Ms Meredith, they were not completely groundless.
[40] Ms Roband’s willingness to construct a claim to circumvent inconvenient evidence or defences was also evident in the evolution of her claim regarding the 2006 Guarantee. The original statement of claim did not include a cause of action in relation to the 2006 Guarantee. But O’Sheas relied on it in its first settlement offer setting out why the claim, as then pleaded, would fail. Ms Roband subsequently amended her statement of claim to include a cause of action in relation to the 2006 Guarantee. This cause assumed a central focus at trial.
[41] Ms Roband adopted that same approach in her evidence. This included changing her evidence about what she would have done had she received the advice she said she should have received on the 2006 Guarantee. That evidence was important to the assumptions relied upon by the experts in quantifying damages, and the change was made to suit her case. She also altered her evidence as to what she actually knew about the 2006 Guarantee. I concluded that this shift in her evidence:9
… reflected an overall lack of integrity in Ms Roband’s evidence on key issues. In general, I found her willing to change her evidence to support her claim, rather than give a truthful and honest account of events.
[42] I consider Ms Roband’s conduct reflects more than poor judgment warranting an award of increased costs. Considered in its entirety, Ms Roband’s approach involves fabricated claims made for the sole purpose of bolstering her claim. This is conduct falling within at least categories (d) and (e) of Bradbury above, if not (a) and (b). That sort of conduct engages the policy upon which indemnity costs are awarded.
9 Roband v OʼSheas [2017] NZHC 2468 at [53].
[43] However, I am not persuaded that indemnity costs are justified from 8 October 2016. Although it is true that indemnity costs may be ordered where a party has behaved “badly” or “very unreasonably”,10 the Court of Appeal in Bradbury cautioned that:11
… costs orders should allow a litigant with a real argument presented responsibly to approach the Court without apprehension that the predictable costs regime may be departed from if the case fails.
[44] Awarding indemnity costs from 8 October 2016 would overstate the flagrancy of Ms Roband’s conduct in my view. It would signal a complete denouncement of the entire basis for Ms Roband’s claim when aspects of the claim were not baseles, hopeless, or completely devoid of merit.
[45] I consider an award of indemnity costs for the trial would respond adequately to the most flagrant aspects of Ms Roband’s conduct. That is, her allegations made against Mr O’Sheas and Ms Meredith, and her shifting evidence at trial. An award greater than this would be a disproportionate response in my view.
[46]I therefore propose to award:
(a)scale 2B costs from the commencement of trial to 7 October 2016;
(b)increased costs (by 50 per cent) from 8 October 2016 to 30 April 2017; and
(c)indemnity costs from 1 May 2017 until the end of trial.
[47]Orders in these terms are set out at the end of this judgment.
Should Mr Cann be awarded a sum for his legal disbursements and expenses?
[48] Mr Cann seeks an award of $34,199. This sum represents his out of pocket expenses incurred in defending the claims, including legal services to assist him in conducting his defence. Mr Cann represented himself at trial.
10 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].
11 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [94].
[49] Those legal services were provided by McCaw Lewis and an affidavit filed on behalf of that firm has certified the legal costs which were provided to Mr Cann in respect of his defence of the claim. I am satisfied that the costs claimed are reasonable and that an order in the quantum claimed is appropriate.
[50] I have considered whether there are grounds to reduce the costs otherwise payable given my findings that Mr Cann was an improper person to fulfil the trustee role. However, this was not an issue that took up any time at trial and it did not put Ms Roband to any additional and unnecessary costs.
[51] In fact, I adjourned the application to remove Mr Cann as trustee due to the lack of evidence about the Trust assets, and a replacement trustee. The application was not pursued, and it is appropriate that an order now be made to dismiss that application. I do not consider there to be grounds to reduce the costs otherwise payable by Mr Cann in those circumstances.
[52] Accordingly, an award in the sum of $34,199 in Mr Cann’s favour is appropriate.
Result
[53]I make the following orders as to costs:
(a)Ms Roband shall pay O’Sheas:
(i)Costs on a schedule 2B basis from the commencement of the proceeding up to and including 7 October 2016;
(ii)Costs on a schedule 2B basis – uplifted by 50 per cent – from 8 October 2016 to 30 April 2017;
(iii)Indemnity costs from 1 May 2017 to 12 May 2017; and
(iv)Disbursements in the sum of $115,187.76 (excluding GST).
(b)O’Sheas shall file and serve a memorandum setting out the quantum of costs calculated in accordance with these orders for final approval.
(c)Ms Roband shall pay Mr Cann the sum of $34,199 for his legal disbursements.
[54]Ms Roband’s application to remove Mr Cann as trustee is dismissed.
Edwards J
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