Rushton v Guthrie

[2024] NZHC 695

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2022-412-066

[2024] NZHC 695

UNDER

the Trusts Act 2019 and Property Law Act 2007

IN THE MATTER

of the Estate of Beverley Ann Rushton

BETWEEN

KERRY MARIA RUSHTON

Plaintiff/First Counterclaim Defendant

AND

JENNIFER ANNE GUTHRIE and CHRISTOPHER WILLIAM RUSHTON

Defendants/Counterclaimants

JONATHAN ANDREW BROWN

Second Counterclaim Defendant

Hearing:

(On the papers)

Counsel:

G A Paine for Plaintiff/First Counterclaim Defendant R M Reeve for Defendants/Counterclaimants

J Riddle for Second Counterclaim Defendant

Judgment:

9 April 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

(Costs)

This judgment was delivered by me on 9 April 2024 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

RUSHTON v GUTHRIE [2024] NZHC 695 [9 April 2024]

[1]    This judgment concerns a claim by the defendants, who are the executors and trustees of the estate of Beverley Rushton, for costs against the plaintiff, Kerry Rushton (Ms Rushton), and the second counterclaim defendant, Jonathan Brown  (Mr Brown). Ms Rushton is the daughter of Beverley Rushton, the mother of the defendant Christopher Rushton and the sister of Mr Brown.

[2]    The course of the proceeding has not been straightforward and has taken place against the background of other litigation between the parties arising from the administration of the estate of Beverley Rushton. The background facts are set out in more detail in my earlier judgment of 26 October 2023.1

[3]    Ms Rushton commenced this proceeding seeking orders for the defendants’ removal as executors and trustees of the estate of Beverley Rushton and their replacement with a corporate trustee. Ms Rushton also sought reimbursement of expenses that she says she incurred for her work on behalf of the estate.

[4]    Mr Brown was joined to the proceeding by the defendants. They filed a statement of defence  to  Ms  Rushton’s  claims  and  also  counterclaims  against  Ms Rushton and Mr Brown. In their counterclaims the defendants sought an apportionment between the parties of any liability found to be owed to Ms Rushton and an order for the sale of a property owned jointly by the three parties at Forbury Road, Dunedin under s 339 of the Property Law Act 2007.

[5]    The Forbury Road property was owned as to a one-half share by Mr Brown and a one-quarter share each by Ms Rushton and the defendants. Relevantly for present purposes, as the result of settlement of earlier litigation involving the parties, Ms Rushton and Mr Brown had an option to purchase the estate’s interest in the property in these terms:

Either Jonathan or Kerry will purchase one quarter-share of Forbury Road from the Deceased’s estate at a value of $143,500, with Kerry being granted first option to purchase same from the Deceased’s estate.

1      Rushton v Guthrie [2023] NZHC 2983.

[6]    The defendants also made an application seeking summary judgment and/or strike out of Ms Rushton’s claims and summary judgment on their counterclaim for an order for sale of the Forbury Road property.

[7]    Ms Rushton opposed the defendants’ applications for strike out and summary judgment. She raised several grounds to oppose the sale of the Forbury Road property, including hardship (because it had been her home for many years and a sale would render her homeless) and that she wished to exercise her option to purchase the defendants’ interest.

[8]Mr Brown has taken no steps in the proceeding except in relation to costs.

[9]In a judgment of 26 October 2023, I:2

(a)struck out Ms Rushton’s statement of claim, reserving leave to her to file an amended statement of claim within 28 days in respect of the claim for reimbursement of expenses only (she did not file an amended statement of claim within the time stipulated so her entire claim has been struck out); and

(b)ordered that the Forbury Road property was to be sold. I reserved judgment as to the method of sale and division of the proceeds of sale pending a further hearing.

[10]   Following the issue of the judgment, Mr Brown exercised his option to acquire the estate’s interest in the property. As a result it was not necessary for me to make further orders as to the method of sale and division of the proceeds of sale.3

[11]   The defendants  have  now  sought  costs  against  both  Ms  Rushton  and  Mr Brown.

2      Rushton v Guthrie, above n 1, at [121]–[122].

3      The defendants still wish to pursue a claim against Ms Rushton that she should pay occupation rent for her occupation of the property which is not relevant to the issues I presently have to decide.

Principles

[12]   All matters of costs are discretionary,4 but the discretion must be exercised on a principled basis and having regard to the relevant provisions of the High Court Rules 2016.5

[13]   The determination of costs, so far as possible, should be both predictable and expeditious.6

[14]   The party that has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.7

[15]   The amount of an award of costs is usually determined by an appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to a proceeding or interlocutory application. The applicable daily recovery rate depends upon the nature of the proceeding.

[16]   This is a category 2 proceeding, being a proceeding of average complexity in the High Court.8

[17]   Time allocations for steps in any proceeding or interlocutory application are set out in sch 3 of the High Court Rules.

[18]   The Court may make an order for increased costs in the circumstances set out in r 14.6, which relevantly provides:

14.6     Increased costs and indemnity costs

(1)Despite rules 14.2 to 14.5, the court may make an order—

(a)increasing costs otherwise payable under those rules (increased costs); or

4      High Court Rules 2016, r 14.1(1).

5      High Court Rules, pt 14.

6      Rule 14.2(1)(g).

7      Rule 14.2(1)(a); Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

8      Rule 14.3(1).

(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2)The court may make the order at any stage of a proceeding and in relation to any step in it.

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

…

(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

…

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[19]   Finally in this brief summary of principles, I need to consider the law as it relates to a defendant in the position of Mr Brown who took no part in the proceeding prior to judgment.

[20]   The default position under r 14.14 is joint and several liability among defendants, but as with all issues of cost that is subject to the exercise of the Court’s discretion. Where the case is out of the ordinary, such as where one defendant does not take any steps while other defendants actively oppose a claim, consideration must be given to altering the burden of costs. Guidance in this respect can be found in the Court of Appeal’s judgment in Hong v Deliu where Kós J said:9

[23]      Thirdly, a defendant joined in a proceeding has, essentially, three options: (1) to defend, (2) to abide (either conditionally or unconditionally) or

(3) to admit the cause of action. These have different costs consequences. Costs incurred (and recoverable) by the plaintiff will be greater in the former case than the latter two.  A defendant who abides still puts the plaintiff to the

9      Hong v Deliu [2016] NZCA 75 (footnotes omitted). Leave to appeal from the Court of Appeal’s decision was refused in Deliu v Hong [2016] NZSC 93.

cost of a trial, albeit a less strenuous one. A defendant who admits averts that cost for the plaintiff judgment in such a case may be entered by formal proof. Where either the second or third option has been taken, the course is out of the ordinary. Even though the level of costs will be less than in the first instance, a Court will still need to consider, however briefly, whether it is just that the usual scale measure of costs should be visited on that defendant.

[24]      Fourthly, where there is more than one defendant a Court will need to consider how costs should be allocated between them. While the default position under r 14.14 of the High Court Rules is joint and several liability among defendants, that is subject to the Court’s overriding discretion. In our view, where the case is out of the ordinary in some significant way, consideration must be given to whether to alter that burden. In particular, where costs are not sought against one unsuccessful defendant, it does not follow that the other should be liable for the whole scale measure of costs. Likewise where a defendant has taken a reduced part in opposing judgment such as by abiding the outcome or admitting the cause of action.

[25]      Fifthly, such principles have been applied in a number of High Court decisions where a reduced share of costs has been ordered against a party abiding the outcome. In Kawarau Jet Services Holdings Ltd v Queenstown Lakes District Council French J (after referring to an earlier High Court decision) observed:

In so far as these comments could be interpreted as meaning that a person who abides the decision of the Court can never be liable for any costs, I must respectfully disagree. That would be too absolute a proposition. Ultimately, the task of the Court is to make an assessment of overall justice as between the particular parties. On the facts of this case, where the Council made a very fundamental and serious error which necessitated the issuing of proceedings, I consider the council should make a contribution. However, because it responsibly did not defend the proceeding, its liability should be limited to 20% of the costs and disbursements, excluding the costs of the experts.

The other defendant, which had actively defended, was to be responsible for the other 80 per cent, and the whole of the experts costs. A broadly similar approach was taken by Gendall J in Sutton v Canterbury Regional Council. In each of those cases the council defendants were found to have erred, justifying the imposition of costs against them. In a third case, Wang v North Shore District Court (No 3), Woolford J reviewed these authorities and observed:

The inference from [these] cases … is that where the defendant abides the Court’s decision and does not adopt an unreasonable position, they will not necessarily be required to bear the full costs of court proceedings.

In that case the abiding defendant’s error was not sufficiently substantial to warrant a contribution to the plaintiff’s costs.

[26] Sixthly, it follows from the discussion of the preceding cases that the issue posed by Mr Hong at [16] above has to be answered in the affirmative. A defendant abiding the outcome may indeed be liable for costs where it is just that it bear some share of the plaintiff’s costs. The threshold for liability

is not so high as to require some perversion of justice first. Error causing a need to issue proceedings to vindicate the plaintiff’s rights will suffice to expose an abiding defendant to some liability for costs. The extent of contribution required will depend on the extent of the original error and the reasonableness of the defendant’s conduct thereafter.

Costs claimed from Ms Rushton

[21]   The defendants’ position is that Ms Rushton should be liable for indemnity costs or at least costs on a category 2 band B (2B) basis with an uplift of 40 per cent of scale.

[22]   For Ms Rushton, Mr Paine submits there is a case that costs should lie where they fall because this was a family dispute which had its genesis in the fact that Beverley Rushton’s will had been badly drafted and there was no way of satisfying all the competing interests. He also argues that Ms Rushton has no ability to pay costs other than from her share of the Forbury Road property.

[23]   The position taken for Ms Rushton is unrealistic. The defendants were successful on their applications for strike out and summary judgment and are entitled to costs against Ms Rushton. It appears that this reality is reflected in Mr Paine’s further submissions that:

[13] The matter therefore boils down to whether or  not  in  the circumstances scale costs are to be awarded in line with your Honour’s judgment or there is to be an increase of scale to either indemnity or somewhere near that line.

…

[16] Whatever way forward the matter goes, there is little point in the plaintiff expending a great deal of money to differentiate between a scale costs award and an increase on the scale costs award which are the only options available, and the plaintiff is unable to meet even the scale costs which was agreed at the beginning of the proceeding which would be 2B category.

[24]   Mr Reeve has prepared a table of the costs sought from Ms Rushton calculated on a 2B basis. It is attached as a schedule to this judgment along with the amounts that I have allowed. In summary, I have disallowed claims for:

(a)steps not taken in the proceeding and specifically discovery and inspection; and

(b)items 30-33B (inclusive) of sch 3 of the High Court Rules, which do not apply to the defendants’ interlocutory applications.

[25]   There is also a claim for disbursements of $1,555.98 that appear reasonable and necessary, which I allow.

[26]   The result is that the defendants are entitled to at least an award of costs against Ms Rushton in the amount of $42,064.00 plus disbursements of $1,555.98. However, that is not the end of the matter because the defendants say that indemnity costs or an uplift on scale costs is appropriate.

[27]   As far as the defendants claim indemnity costs, counsel advises that their actual costs amount to $93,357.28 (incl GST), notwithstanding a write down of time of almost $17,500. However, none of the usual information that I would expect to have been provided in support of a claim for indemnity costs (such as details of solicitors who worked on the file, charge out rates applied, a breakdown of tasks undertaken, and copies of invoices) have been provided. Bearing in mind that the costs claimed relate to interlocutory applications that took only half a day to hear, the actual costs incurred are high requiring such information to be provided.

[28]   It is, however, appropriate to award increased costs against Ms Rushton under r 14.6(3)(b)(i), (ii) and (c) because she unnecessarily and substantially added to the time and expense of the proceeding:

(a)by failing to comply with the rules and directions of the Court, including by filing pleadings that were wholly deficient, failing to provide initial disclosure promptly on request, failing to seek directions for service, and failing to promptly serve the proceedings;

(b)as her claim to remove the defendants as executors was entirely without merit. I consider there is good reason to believe the application was

made entirely for tactical reasons and as a reaction to the decision of the defendants to seek a sale of the Forbury Road property and reject her claim for expenses (as I found they were correct to do);

(c)as her claim for reimbursement of expenses was made without any consideration as to the legal basis for advancing such a claim and amounts claimed were plainly unjustified or inflated. The claim initially survived strike out by a slim margin; and

(d)as she made numerous allegations against the defendants attacking their honesty and integrity and competence in the manner in which they administered the estate which were not supported by evidence and should not have been made.

[29]   Ms Rushton apparently has limited financial means, although I have not been provided with any meaningful evidence as to her position in this regard. That is not usually a basis to reduce costs to which another party would otherwise be entitled. To the extent Ms Rushton has limited means, I would expect she would have been advised by counsel of the financial consequences of issuing the proceedings and then opposing the defendants’ applications.

[30]   Standing back and looking at the matter in the round, I accept Mr Reeve’s submissions that an increase on 2B costs is justified and assess the appropriate increase at 30 per cent.

Costs claimed from Mr Brown

[31]   The defendants also seek above scale costs against Mr Brown. This is a more problematic position, in my view.

[32]   The defendants invite me to draw an inference that Mr Brown adopted “a strategy of wilfully obstructive inaction” necessitating their pursuit of the counterclaims against him. While they accept Mr Brown was not obliged to exercise his option to purchase their interest in the Forbury Road property, it is said he refused to engage with the defendants or acknowledge correspondence which illustrates an

obstructive and unreasonable attitude and disdain that necessitated the proceeding. The defendants say against the background of the litigation that had already occurred it was unconscionable for Mr Brown to “sit on his hands” while they incurred yet more costs. They also say that by his silence Mr Brown caused unnecessary costs to be incurred in having service effected upon him in the United States of America (where he lives).

[33]   Mr Brown’s counsel responsibly accepts that he has some liability for costs, but not at the level sought by the defendants. It is submitted that Mr Brown was put in an invidious position as between Ms Rushton and the defendants, and he believed that Ms Rushton was to first exhaust her option to acquire the estate’s interest in the Forbury Road property before he could do so. It is acknowledged that while his approach may have necessitated the need for the defendants to apply for a sale of the Forbury Road property, he then took no steps to oppose the defendants and an uncontested application to have the property sold ought to have progressed in a straightforward and cost-efficient manner. It is also submitted that many of the steps in the proceeding for which costs are claimed do not relate to the application for the sale of the property (but to issues solely between Ms Rushton and the defendants), and to the extent that they do his lack of participation did not add to the defendants’ costs. Broadly, Mr Brown’s position is that his costs liability ought to reflect an unopposed application for the sale of the Forbury Road property.

[34]   A useful starting point is to note that there were four claims before the Court effectively determined by my judgment of 26 October 2023. They were:

(a)Ms Rushton’s claim to remove the defendants as executors and trustees;

(b)Ms Rushton’s claim for reimbursement of expenses;

(c)the defendants’ counterclaim that any entitlement Ms Rushton had for reimbursement of expenses be apportioned between the parties to the extent of their interest in the Forbury Road property; and

(d)the defendants’ application for an order for sale of the Forbury Road property.

[35]   The first and second claims were brought by Ms Rushton against the defendants only, they did not directly involve Mr Brown. Whether the defendants’ first counterclaim had any merit has not been determined, it has fallen away as a result of Ms Rushton’s statement of claim being struck out. That leaves the defendants’ second counterclaim for the sale order which was successful and to which it is accepted Mr Brown was a necessary party and thus exposed to some costs liability.

[36]   Costs are awarded to compensate a party for steps taken in the proceeding. Mr Brown’s failure to respond to correspondence or exercise his option to acquire the defendants’ interest in the Forbury Road property are relevant to costs in this particular circumstance as the defendants were forced to issue the counterclaim for a sale order to which he was a necessary party. The defendants were successful in that proceeding and are entitled to an award of costs.

[37]   However, Mr Brown cannot be held responsible for costs incurred by the defendants in defending Ms Rushton’s claims made only against them, or for the inappropriate manner in which Ms Rushton opposed the defendants’ application for strike out and summary judgment which unnecessarily added to defendants’ costs.

[38]   I also do not consider that the fact Mr Brown exercised his option to acquire the defendants’ interest only after judgment was obtained suggests a strategy of “wilfully obstructive inaction”. He was under no legal obligation to exercise the option, and it is entirely plausible he did so to extract himself from the litigation and assist the family. By doing so he saved the defendants further costs in finalising the terms of sale and the costs and risks of a sale of the Forbury Road property on the open market.

[39]   On behalf of Mr Brown, Ms Riddle undertook a line-by-line analysis of the defendants’ costs claims and whether they related to the defendants’ counterclaims against Mr Brown. On that basis, she submits that an appropriate award of costs against Mr Brown is $25,095 plus a share of disbursements.

[40]   I do not adopt that line-by-line approach, mainly because the extent to which steps taken in the proceeding relate to the counterclaims made against Mr Brown (as opposed to Ms Rushton’s claims against the defendants) or were necessary only because of the conduct of Ms Rushton cannot be easily assessed. Ultimately, I am required in the exercise of my discretion to make an assessment of Mr Brown’s liability for costs to do overall justice between the parties.

[41]   I consider the just result is that Mr Brown’s contribution to the defendants’ costs should be 60 per cent of the defendants’ scale 2B costs (but excluding step 2 for commencing the defendants’ defence to Ms Rushton’s claims).   This is a sum of

$22,370.40.  The defendants  are also  entitled  to  disbursements  amounting  to

$1,555.98.

[42]   The amount I award is less than Ms Riddle submitted would be appropriate in the circumstances. I am comfortable with that for several reasons. First, the award is close to what Ms Riddle submitted would be appropriate on a line-by-line analysis. Second, while Ms Riddle provided helpful and sensible submissions, she was at a great disadvantage in that she received last-minute instructions without the benefit of any previous involvement in the proceeding. The extent to which costs were unnecessarily incurred due to Ms Rushton’s conduct would not be apparent to her. Third, Ms Riddle had accepted some of the defendants’ claims for steps taken in the proceeding to which I consider they are not entitled.

Result

[43]   The defendants are awarded costs against Ms Ruston on a category 2 band B basis in the sum of $42,064 with an uplift on scale costs of 30 per cent, making a total award of $54,683.20 along with disbursements of $1,555.98.

[44]   The defendants are awarded costs against Mr Brown of 60 per cent of the amount calculated on a category 2 band B basis (but excluding step 2 for commencing the defence) in an amount of $22,370.40 and disbursements of $1,555.98.

[45]   For the avoidance of doubt, the liability of Ms Rushton and Mr Brown for costs and disbursements is joint and several but only to the extent that Mr Brown shall not be required to contribute in amounts greater than the awards stated in [44 ] above.

O G Paulsen Associate Judge

Solicitors:

McMillan & Co, Dunedin Downie Stewart, Dunedin Gallaway Cook Allan, Dunedin

Schedule

Costs
Item	Detail	Time allocation	Claim	Allowance
2	Commencement of defence	2	$4,780.00	$4,780.00
4	Counterclaim	1.6	$3,824.00	$3,824.00
11/36	Filing memoranda to address service issues (27 August 2022, 7 September 2022, 28 September 2022)	0.4	$956.00	$956.00
13	Attendance at judicial conference (teleconference) 13 September 2022	0.3	$717.00	$717.00
36	Filing memoranda filed to address initial disclosure matters (30 September 2022)	0.2	$478.00	$478.00
36	Notice requiring further particulars	0.5	$1,195.00	$1,195.00
10	Preparation for first CMC (12 October 2022)	0.4	$956.00	$956.00
11	Filing memorandum (10 October 2022) for first CMC	0.4	$956.00	$956.00
13	Appearance at first CMC (12 October 2022)	0.3	$717.00	$717.00
11/36	Filing memorandum (13 October 2022) in response to minute of 12 October 2022 (re joinder)	0.4	$956.00	$956.00
36	Filing updating memorandum (16 January 2023)	0.2	$478.00	$478.00
36	Filling extended memorandum (17 March 2023) to accompany applications for summary judgment and strike out	0.4	$956.00	$956.00
11/36	Filing updating memorandum for second CMC (vacated) (28 March 2023)	0.2	$478.00	$478.00
11	Filing memorandum (26 April 2023) for second CMC (27 April 2023)	0.4	$956.00	$956.00
13	Appearance at second CMC (27 April 2023)	0.3	$717.00	$717.00
36	Receiving further affidavit from Kerry and memorandum; memorandum of reply re same (10 July 2023); further memorandum on additional evidence (21 July 2023) further to Minute of A J Lester	0.8	$1,912.00	$1,912.00
20	Documents on discovery	2.5	$5,975.00	Nil

21	Inspection of documents	1.5	$3,585.00	Nil
23	Filing interlocutory application 17 March 2023 (x2 – strike out and summary judgment)	0.6 x 2	$2,868.00	$1,434.00
24	Preparation of written submissions for hearing on 20 September 2023 (x2 per case management)	1.5 x 2	$7,170.00	$3,585.00
24	Preparation of written submissions for hearing on 14 November 2023 (vacated)	1 (i.e. 1.5 x 0.666)	$2,390.00	$2,390.00
25	Preparation of bundle for hearing on 20 September 2023	0.6	$1,434.00	$1,434.00
26	Appearance at hearing of defended application (20 September 2023	0.5	$1,195.00	$1,195.00
29	Sealing order or judgment	0.2	$478.00	478.00
30	Preparation of affidavits, list of authorities, common bundle for hearing on 20 September 2023	2	$4,780.00	Nil
31	Additional allowance for common bundle	0.5	$1,195.00	Nil
32	Preparation for hearing on 20 September 2023	2	$4,780.00	Nil
32	Preparation for hearing on 14 November 2023 (vacated)	0.5	$1,195.00	Nil
36	Teleconference 13 November 2023 (i.e. comparable to item 13 referred to above)	0.3	$717.00	$717.00
34	Appearance at hearing for sole counsel on 20 September 2023	0.5	$1,195.00	$1,19.00
36	Costs submissions	1.5	$3,585.00	$3,585.00
TOTAL	$63,574.00	$42,064.00