Rule v Rule
[2015] NZHC 661
•2 April 2015
IN THE HIGH COURTOF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-005837 [2015] NZHC 661
IN THE MATTER of the Estate of MURIEL GWENDOLINE
RULE
BETWEEN
DOUGLAS IAN RULE AND ELIZABETH JANE BELCHER Plaintiffs
AND
LESLEY LOUISE RULE AND ANTHONY CHARLES BENNETT COUPE AS EXECUTORS AND TRUSTEES OF THE ESTATE OF THE ESTATE OF MURIEL GWENDOLINE RULE
Defendants
Hearing: 30 March 2015 Appearances:
A C MacMillan for Plaintiffs
S R Houliston and W W Galvin for DefendantsJudgment:
2 April 2015
JUDGMENT OF COURTNEY J
This judgment was delivered by Justice Courtney on 2 April 2015 at 4.00 pm
pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date……………………….
RULE v RULE [2015] NZHC 661 [2 April 2015]
Introduction
[1] In this proceeding the plaintiffs, Douglas Rule and his sister, Elizabeth Jane Belcher (Jane), challenge their mother’s will, under which they received nothing and their sister, Lesley Louise Rule (Louise Rule), received a life-interest in their mother’s half-share in a property in Auckland and the residue of the estate. The defendants, who include Louise Rule, are the executors of the estate.
[2] Following an unsuccessful judicial settlement conference in February 2015 there were further negotiations between counsel for the plaintiffs and counsel for Louise Rule in her capacity as beneficiary. Terms were agreed that were to be incorporated into a deed of family arrangement. Before a deed could be executed a dispute arose as to whether the agreed terms required the defendants to pay a costs order made against them in 2014.
[3] The matter has been set down for determination on two discrete points: whether there is a binding agreement and, if so, whether the agreement requires the defendants to pay the costs order.
The relevant events
[4] During the latter part of February and early March 2015 there was correspondence between Ms MacMillan, for the plaintiffs, and Ms Galvin, for Louise Rule, in her capacity as a beneficiary of the will. The defendant executors did not participate in these negotiations; they had previously indicated that they would abide by any agreement the siblings reached.
[5] In the final exchange of correspondence on 5 March 2015 Ms MacMillan wrote:
My clients do not agree to your client keeping Doug’s desk. As you will be aware the furniture and chattels left to Louise under the Will are only those owned by Mrs Rule, not those owned by Doug or Jane. However, the ownership or not of the desk was not part of the proceedings and therefore ought not to hold up settlement. It can be expressly left to be resolved by the parties between themselves. Accordingly I think we have agreement as follows (trying to tie up all the loose ends):
1.A ¼ share of Mrs Rule’s interest in the Rarere Road property to each of Doug and Jane to be paid by Louise on 30/11/19 (or sooner if the property is sold prior). If not paid on 30/11/19 the property to be sold on the open market and sale proceeds distributed as per the shares.
2.Such shares to be registered on the title upon signing settlement deed and transferred to Louise at her cost when she pays them out on
30/11/19.
3. Louise to pay all outgoings and maintenance on property until
30/11/19 or until sold earlier.
4.$35,000 to be paid to Jane and $36,000 to be paid to Doug immediately from the balance held in the McVeagh Fleming Trust account.
5. Costs of Louise, Doug and Jane to lie where they fall.
6. The estate costs to be paid from the balance of funds held by
McVeagh Fleming.
7.The remainder of the balance in McVeagh Fleming Trust account after payment at 4 – 6 above to be paid to Louise.
8.That should Louise die before payment on 30/11/19 that Doug and Jane receive Louise’s half share of their mother’s estate (the details of how to effect this to be determined by the parties and executors such as for the amended or corrected will to be annexed to the settlement agreement).
9.Some items of Mrs Rule’s or Doug and Jane’s to be provided to them within 1 month of signing the settlement deed such as Jane’s fox fur, the Tobey jugs, kent’s print, other personal items as agreed and a share of the family photos (with the exception of the writing desk which ownership will be determined by the parties separately).
If all is in order, please confirm by return and circulate a joint memorandum to the Court for signature. I will then ask Sam to circulate his deed in doc format for us to amend and circulate.
(emphasis added)
[6] Ms Galvin responded:
That’s fine. I will draft a memorandum advising the Court but I would prefer not to vacate the fixture until the deed of family arrangement has been signed which I anticipate would be early next week at the latest.
[7] Counsel for the plaintiffs, defendants and for Louise Rule filed a joint memorandum later the same afternoon advising that:
1. The parties have reached agreement on all outstanding matters.
2.It is anticipated that a deed of family arrangement will be executed by the parties by early next week at the latest.
3.As soon as the deed has been executed counsel will advise the court accordingly and file a notice of discontinuance.
4.In the circumstances it is unlikely that the three day fixture commencing 30 March 2015 will be required.
[8] Later that evening Ms MacMillan wrote to McVeagh Fleming, who acted for the executors, attaching an invoice for a costs award made against the defendants earlier in the litigation. The response was immediate; the defendants considered that the costs fell within clause 5 of Ms MacMillan’s 5 March 2015 letter as costs of “Doug and Jane to lie where they fall”. As a result of this issue no deed of family arrangement was executed.
[9] The matter was referred to Venning J in advance of the fixture scheduled for
30 March 2015. He invited counsel to consider whether the matter should proceed to a fixture on the basis that the settlement was conditional on the completion of a deed (that condition not having been fulfilled) or, if either or both of the parties maintained that there was a binding agreement, to have the question of whether the
costs award was covered by the agreement determined as a preliminary point.1
[10] In a subsequent minute Venning J recorded that the defendants and Louise Rule in her capacity as beneficiary maintained that there had been a concluded agreement as a result of the correspondence. 2 He directed that the question as to whether there had been a binding settlement agreement on the basis of the exchange of correspondence and, if so, whether the costs order was included in the settlement agreement be determined as preliminary questions.
Was there a binding contract?
[11] Mr Houliston, for the defendant, and Ms MacMillan, for the plaintiffs, both submitted that the final exchange of emails on 5 March 2015 resulted in a concluded
1 Minute of Venning, J 9 March 2015.
2 Minute of Venning, J 13 March 2015.
agreement which was acknowledged by the parties in the joint memorandum of counsel. Their differences mainly lay in the interpretation of that agreement; Ms McMillan argued that that the costs award was a stand-alone pre-existing obligation to be met by the defendants. Mr Houliston argued that the effect of the agreement was that the plaintiffs had compromised their right to make demand for payment of the costs order; if the position was otherwise then there had been no consensus and no concluded agreement.
[12] Mr Houliston’s argument depended on tracing the correspondence chain from
25 February 2015 in order to show that that all the discussions were directed towards at only reimbursing the plaintiffs for filing fees and hearing fees rather than the costs order. The difficulty with this argument is that the correspondence preceding the final exchange on 5 March 2015 could do no more that show what the parties’ respective positions were at the various stages of the negotiations. It is not
admissible to assist in the objective search for the parties’ presumed intention3.
[13] In any event, I consider that, regardless of how the correspondence of 5
March 2015 is interpreted, the real issue is not one of consensus but whether there was any intention by the parties to be bound by the agreement evidenced in the correspondence (the issue signalled in Venning J’s minute of 9 March 2015).
[14] In Pascoe Properties Ltd v Attorney-General 4 the Court of Appeal discussed the difference between reaching agreement on terms and intending to be bound, referring to Eyre Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd:5
The only question considered by the [trial judge] was whether there was a binding contract between the parties. In considering this question … it is of assistance to distinguish between three questions: Did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?
3 Investors Compensation Scheme v West Brunswick Building Society [1998] 1 WLR 896 at 912-
913; Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC1101, [2009] 4 All
ER 961; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444
4 Pascoe Properties Ltd v Attorney-General [2014] 616 at [67] citing Electricity Corporation of
New Zealand Ltd v Fletcher Challenge Ltd [2002] 2 NZLR 433 (CA)
5 Eyre Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) NSWLR 309 (SC) per
Mahoney JA, cited in Verissimo v Walker [2006] 1 NZLR 760 (CA) at (26).
[15] The Court of Appeal said:
Whether a party has intended to enter into a contract and whether it has succeeded in doing so are questions to be determined objectively. It must be recognised that there can be a difference between parties reaching an agreement on all the relevant terms of an agreement and reaching an agreement that they are bound. As a matter of practice, it can be the case that it is understood between the parties that although they may reach agreement on all relevant terms, there can be no binding contract until there is a written agreement. There may also be cases where the lead-up to the parties reaching an agreement shows that they will not be bound until a particular event, such as the drafting of a formal deed and written execution, occurs.
(footnotes omitted)
[16] It is evident from the 5 March 2015 correspondence and the joint memorandum to the Court that the parties were not prepared to finally commit themselves until a deed of settlement had been executed; in particular, none of the parties was prepared to vacate the fixture on the strength of the correspondence between counsel. The parties had merely agreed on the terms upon which they would be prepared to settle by executing a deed. As a result, no concluded agreement had been reached.
Were the court costs to be borne by the plaintiffs or the estate?
[17] My conclusion as to the existence of a binding agreement means that the question of interpretation is, strictly, otiose. I deal with it briefly for the sake of completeness.
[18] The relevant terms were those contained in clauses 5 and 6 of
Ms MacMillan’s email, which I set out again for convenience:
5. Costs of Louise, Doug and Jane to lie where they fall.
6. The estate costs to be paid from the balance of funds held by
McVeagh Fleming.
[19] The costs order had been made by Bell AJ on 4 June 2014 in his decision allowing the plaintiffs’ (second) application for an order requiring one of the executors of the estate, Mr Coupe, to file further answers to interrogatories on the grounds that answers he had previously given were not sufficient. The proceeding
had already been categorised 2B and on the question of costs the Associate Judge said:6
Ms MacMillan asks for costs on the application. Mr Houliston accepts costs must follow the event. I make an order for costs on the application on a category 2 basis. The order for costs is only on this application, including the application of the leave … On that, I hold the defendants responsible because there was a failure to answer interrogatories fully, which necessitated this application.
[20] The principles to be applied in interpreting contracts was recently summarised by the Supreme Court in Firm PI1 v Zurich Australian Insurance Ltd T/A Zurich New Zealand:7
It is sufficient to say that the proper approach is an objective one, the aim being to ascertain the “meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.8 This objective is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background” it has to be background that a reasonable person would regard as relevant. Accordingly the context provided by the contract as a whole and any relevant backgrounds informs meaning.
[21] There was no dispute over the context against which the agreement of 5
March 2015 was reached: a judicial settlement conference had not resulted in any settlement but discussions had continued. The correspondence in late February and early March contained offers and counter-offers. I have already noted that the earlier negotiations are not admissible. It is, however, agreed that none of the parties raised the question of the costs order prior to Ms McMillan sending her invoice on 5 March
2015.
[22] Mr Houliston’s argument was that the costs awarded by Bell AJ had not become payable at the point the agreement was reached and were therefore costs associated with the plaintiffs’ application, to be borne by them. He relied on r 14.8 of the High Court Rules which provides:
(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary, –
6 At [25].
7 Firm PI1 v Zurich Australian Insurance Ltd T/A Zurich New Zealand [2014] NZSC 147.
8 Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 (HL) at
912 per Lord Hoffman; Chartbrook Ltd v Persimmon Homes Ltd [UKHL 38].
(a) must be fixed in accordance with these rules when the application is determined; and
(b) become payable when they are fixed.
[23] Mr Houliston argued that costs were not fixed for the purposes of r 14.8(1)(b) until actually quantified so that an order for costs made simply by reference to a previously determined categorisation did not amount to the fixing of costs. On his argument, costs would not be fixed until the parties either agreed quantum or quantum had been the subject of a further determination by the Court.
[24] Ms MacMillan submitted that determination as to costs in accordance with a previous categorisation amounted to costs being fixed. She relied on the treatment of costs by Cooper J in Body Corporate 169791 v Auckland City Council which drew a clear distinction between the fixing and payment of costs.9 In that case the unsuccessful applicant on an interlocutory application sought an order that be “fixed but not paid”. Cooper J characterised the issue as being “whether costs should be
both fixed and paid now”. However, the Judge was not persuaded to do so. He noted that wording of r 14.8(1) required costs to be fixed in accordance with the rules when the application is determined unless there were special reasons to the contrary and went on to fix costs by reference to category and time band.
[25] It is absolutely clear from Cooper J’s approach that determining costs in this way amounts to the fixing of costs and that, by virtue of r 14.8(1)(b) those costs become payable at that point. I agree with that approach; it is entirely consistent with the plain wording of r 14.8(1). It follows that, in making his order, Associate Judge Bell fixed costs and that by virtue of r 14.8(1)(b) those costs became payable immediately.
[26] A costs order payable by the defendants can only be viewed as the costs of the defendants. Since the defendants are the executors those costs are properly viewed as estate costs for the purposes of clause 6. The circumstances in which the
costs order was made make it even clearer that these are costs to the estate; it is
9 Body Corporate 169791 v Auckland City Council HC Auckland CIV-2004-404-005225, 3
December 2009.
apparent from Associate Judge Bell’s decision that the costs were awarded as a result of the failure of one of the executors to comply with an earlier court order.
Result
[27] On the two questions for determination I find that:
(a) There was no binding contract because the parties did not intend to be bound until a deed of family arrangement had been executed;
(b)Had there been a binding agreement the effect of the terms recorded in Ms McMillan’s email of 5 March 2015 would have been that the costs order fell within the description of estate costs, to be borne by the defendants.
[28] Counsel may address the issue of costs by memorandum filed on behalf of the plaintiffs within 21 days, the defendants within a further 7 days and the plaintiffs
in reply within a further 7 days after that.
P Courtney J
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