Russell v Russell
[2002] NZCA 262
•23 September 2002
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA13/02 CA51/02 |
| BETWEEN | GRAHAM JOHN RUSSELL |
| Appellant |
| AND | LORRAINE FRANCES RUSSELL |
| Respondent |
| Hearing: | 17 July 2002 |
| Coram: | Keith J Fisher J Salmon J |
| Appearances: | W J Scotter for Appellant E J Hudson for Respondent |
| Judgment: | 23 September 2002 |
| JUDGMENT OF THE COURT DELIVERED BY FISHER J |
Introduction
The appellant Mr Russell appeals against costs awarded against him in the High Court following his unsuccessful defence to an application under the Matrimonial Property Act 1976 by his former wife, the respondent, Mrs Russell. Hammond J awarded Mrs Russell costs assessed under the High Court Rules on a 2B basis, the detailed consequences to be determined by the Registrar. The Registrar determined the figure ultimately payable and then sealed the judgment on the same day. On an application to review the Registrar’s decision Baragwanath J held that the sealing of the judgment precluded jurisdiction to review the Registrar’s decision.
In this Court Mr Russell appeals against both the costs decision of Hammond J and the jurisdictional decision of Baragwanath J. The appeal touches upon the jurisdiction to apply the new costs regime introduced by the High Court Amendment Rules 1999 (1999/334) to procedural steps taken prior to 1 January 2000 and the question whether there is any special approach to costs when dividing matrimonial or relationship property.
Factual background
Mr and Mrs Russell separated after a lengthy marriage. On 14 March 1991 they entered into an agreement under the Matrimonial Property Act settling the division of their matrimonial property.
In 1997 Mrs Russell brought proceedings in the High Court challenging the agreement and seeking a de novo division of property under the Act. A hearing followed before Hammond J on 14, 15 and 16 February 2000. The hearing came six weeks after the commencement of a new inter-party costs regime introduced by the High Court Amendment Rules 1999. At the conclusion of the hearing there was an exchange between Bench and Bar over costs. Counsel agree that it is correctly captured in the following extract from a subsequent memorandum:
(a) At the conclusion of the hearing, when the issue of costs was addressed, counsel for the Plaintiff, Mr E J Hudson, requested that the Court set the category costs as from 1 January 2000, which stance was agreed to by counsel for the Defendant.
(b) It was further suggested to His Honour by Mr Hudson, that it may be possible for counsel to agree to resolve the costs issue by applying the band category over the whole proceedings. Mr Scotter sought to reserve his position on the issue. Therefore, it was not specifically agreed at the hearing that the band category was to apply to costs incurred prior to 1 January 2000.
The Judge subsequently gave his reserved decision of 22 February 2000. He set aside the agreement as unjust and unreasonable and went on to divide the property on a conventional statutory basis. As to costs he concluded his judgment in these terms:
[93] As to costs, the defendant is not legally aided. The plaintiff is legally aided. Costs should follow the event. Counsel indicated that they are in agreement that this is a case in which costs should be awarded on a 2B basis under the High Court Amendment Rules 1999.
[94] I award the plaintiff costs on that basis. In the event that the parties are unable to resolve that consequence, or disbursements, they can apply to the Registrar for a determination.
A judgment for costs was later sealed representing the Registrar’s detailed determination of 2B costs for the entire proceedings pursuant to Hammond J’s award. The Registrar sealed the judgment on the same day as his determination. On an application to review the Registrar’s determination, Baragwanath J held that the sealing of the judgment precluded jurisdiction to review.
Jurisdiction for Hammond J’s award
The old party and party costs regime was contained in RR 46 to 48 and the Second Schedule to the High Court Rules. From 1 January 2000 it was replaced by the new costs regime introduced by the High Court Amendment Rules 1999. Its commencement date was 1 January 2000. Transitional consequences were addressed in R 5 of the Amendment in the following terms:
5. Transitional provisions relating to application of new costs rules –
(1)Costs in proceedings commenced after the coming into force of this Part must be determined in accordance with the High Court Rules as amended by this Part.
(2)Costs in proceedings commenced before the coming into force of this Part must be determined, -
(a)In the case of a step in the proceedings taken before the coming into force of this Part, in accordance with the High Court Rules as in force immediately before the coming into force of this Part:
(b)In the case of a step in the proceedings taken after the coming into force of this Part, in accordance with the High Court Rules as amended by this Part.
(3)For the purposes of subclause (2), a step in a proceeding described in column 1 of Schedule 2 of those rules is taken on the date appearing opposite it in column 2 of that schedule.
(4)If the application of subclause (2) would, in the opinion of the Court, lead to an unjust result, the Court may, -
(a)If subclause (2)(a) applies, have regard to what the determination of costs would be in relation to the particular step in accordance with the High Court Rules as amended by this Part; or
(b)If subclause (2)(b) applies, have regard to what the determination of costs would be in accordance with the High Court Rules as in force immediately before the coming into force of this Part.
In the proceedings before Hammond J, some of the steps had been taken prior to 1 January 2000 (“the 1990’s steps”) while others came after that date (“the 2000 steps”). Prima facie, party and party costs for the 1990’s steps fell to be determined under the old costs regime and the 2000 steps under the new costs regime.
Hammond J awarded Mrs Russell “costs on a 2B basis under the High Court Amendment Rules 1999” without qualification. It seems clear that in doing so he intended that the 2B scale established under the new costs regime would apply to all steps taken in the proceedings, whether before or after 1 January 2000. That is the natural meaning of what he said. There is no need to resort to his subsequent minute confirming that that is what he intended.
We agree with Hammond J that there was jurisdiction to take that approach. One source of jurisdiction lay in R 5(4)(a) of the High Court Amendment Rules 1999. Notwithstanding R 5’s starting point that costs for the 1990’s steps would be determined under the old costs regime, the effect of R 5(4)(a) was to allow the Court to depart from the old costs regime for 1990’s steps if it would otherwise “lead to an unjust result”. In the last two decades before the reform of the costs rules there had been a growing judicial recognition of the obsolescence of the scale provided in the Second Schedule as it then stood. To avoid unjust results Courts tended to award well above scale. That broad proposition, in association with matters particular to the individual case, could have provided the foundation for exercising the discretion contained in R 5(4)(a) of the transitional provisions. In turn that could have laid the foundation for applying the new costs regime retrospectively in an appropriate case.
The same result could have been reached independently of R 5(4)(a). The old regime was not limited to R 48 and its reference to the Second Schedule. Under R 46 as it then stood there was an overriding discretion over costs. In particular R 46(2)(c) conferred a discretion to fix a sum greater than the sum named in the Second Schedule (R 46(2)(c)). In the exercise of that discretion it was not uncommon for courts to award a sum in the vicinity of two-thirds of the costs reasonably payable on a solicitor‑client basis. Since two-thirds of the costs reasonably payable on a solicitor‑client basis underlies the new costs regime, albeit in a more systematic form, it would not be anomalous for a judge exercising his or her discretion under the old R 46 to substitute a figure arrived at under the new costs regime for the figure that would have resulted from the old Second Schedule. We are aware of cases in which that has been done and can see no objection to it in principle so long as each case is individually considered.
Misunderstanding over counsel’s agreement
For those reasons we think that there was jurisdiction for Hammond J’s award. However, both paths to that result required either the active exercise of a discretion or the agreement of the parties. Hammond J clearly thought that counsel had agreed that all costs should be awarded on the new 2B basis. It was that understanding that led him to award costs in those terms. In this Court counsel are agreed that that was a misunderstanding. The true position is correctly captured in the memorandum referred to earlier.
It was that misunderstanding that led to all that has followed. It would be unjust to allow the existing costs award to stand without considering afresh the submissions which counsel would have wished to advance as to the approach to be taken in awarding costs for steps taken prior to 1 January 2000. In the interests of expedition both parties have urged us to resolve costs in this court rather than refer the question back to Hammond J. It is not disputed that costs on a 2B scale are appropriate for the steps taken since 1 January 2000. The argument relates to steps taken before that date.
Costs on the merits
Mr Scotter’s fundamental submission was that in a matrimonial or relationship property case costs are normally left to lie where they fall. That principle was expressed by Chilwell J in Y v Y [1977] NZLR 385, 411 when he said:
With regard to costs it is my view that the applications under this Act are in general for the benefit of both parties. If the wife had not made her application when she did the husband would have found it necessary at some time to make application himself. The ordinary principle that costs should follow the event applied to applications under this Act would merely serve to reward the party first to file his or her application. This may not be so in all cases such, for example, as where the respondent attempts to evade service or delays or hinders the applicant by the manner of the conduct of his defence or where one party is under a disability. Such is not the case here … in my judgment each party should hear his and her own costs.
While each case must be considered according to its own details we agree that in cases involving nothing more than a division of assets between two parties, each of whom requires resolution of their own property rights, it will often be found appropriate to make no order as to costs.
A defended case in which one party has successfully challenged an agreement does not fall readily within that principle. In that situation the defendant’s rights will have been defined already in the agreement. If the proceedings are defended it will normally be because the defendant seeks to retain the status quo. That type of proceeding has more in common with a conventional civil dispute in which the plaintiff’s rights are ultimately vindicated notwithstanding unjustified resistance from the defendant. In that situation the rationale for costs is that the unsuccessful defendant ought to have recognised the invalidity of the agreement at the outset. In this way costs are an instrument for encouraging responsibility in the conduct of litigation. Of course these are generalities. In the end costs must be closely tailored to the specifics of each individual case, as the contrary outcome in Wood v Wood [1998] 3 NZLR 234 illustrates.
In the present case the right starting point was the assumption that costs should follow the event unless there were reasons to the contrary. Mr Scotter pointed out that Mrs Russell had waited for six years before challenging the agreement. We agree with Mr Hudson that whether the agreement had been challenged early or late, the costs would have been the same. Further, Mr Russell was handsomely compensated for the delay. Hammond J determined that valuations should be fixed as at the date of separation and that he should retain income enjoyed over the ensuing period.
To quantify the costs we have started by examining the costs actually charged by the solicitors and counsel for Mrs Russell. The position is complicated by the legal aid rates on which they were working. Using two different legal approaches to costs would also involve some difficulty in this case given the way in which the preparation time was split between the periods before and after 1 January 2000. The new scale broadly equates to two-thirds of the costs that would have been reasonable on a solicitor-client basis throughout. We are persuaded that the just solution is to adopt the 2B scale as a starting point for costs throughout. Mr Hudson responsibly conceded that from that starting point the normal allowance of three days for discovery and inspection ought to be reduced to one day.
Registrar’s determination
Our reappraisal of costs makes it unnecessary to traverse the relationship between the right to review a Registrar’s decision under R 276, on the one hand, and the finality principle once a judgment has been sealed, on the other. It is a topic which might usefully be examined by the Rules Committee. In the meantime it might be thought desirable that, except where there are pressing reasons to the contrary, a week should be allowed between a Registrar’s decision and the sealing of any consequential judgment so that the parties can apply to review the Registrar’s decision.
Result
The appeal is allowed to the limited extent that for the costs awarded in the court below there will be substituted costs according to scale 2B in the High Court Rules for steps taken before and after 1 January 2000 subject to reduction to one day’s allowance for discovery and inspection. Leave is reserved to apply for further directions as to the detailed implementation of this order.
The appeal having failed in substance, the appellant must pay the respondent’s costs in this Court in the sum of $3,500 with disbursements to be fixed by the Registrar.
Solicitors
Harkness Henry & Co, Hamilton for Appellant
Family Law Centre, Hamilton for Respondent
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