Ryan v Lobb
[2024] NZHC 386
•29 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1591
[2024] NZHC 386
BETWEEN VERENA COLLEEN RYAN
Plaintiff
AND
STUART JAMES LOBB
First Defendant
LOCKHART TRUSTEE SERVICES NO.56 LIMITED
Second Defendant
Hearing: On the papers Counsel:
W M Patterson and L W Dixon for Plaintiff
No submissions received by or on behalf of Defendants
Judgment:
29 February 2024
JUDGMENT OF HINTON J
[Re: Costs]
This judgment was delivered by me on 29 February 2024 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors:
Patterson Hopkins (Auckland) for Plaintiff
McVeagh Fleming (Auckland) for First Defendant KP Legal (Auckland) for Second Defendant
RYAN v LOBB [2024] NZHC 386 [29 February 2024]
[1] On 6 April 2023 I gave judgment as to the construction and implementation of a resettlement clause in a family trust deed.1 That judgment was one of many in a series of proceedings between Ms Ryan and Mr Lobb following the breakdown of their marriage and eventual separation.
[2]I made the following orders:2
1.Vesting Mr Lobb’s Rolex watch in him and Ms Ryan’s Rolex watch and her jewellery in her.
2.Directing that an amount equal to one-half of the value of the antique furniture be transferred from the assets of the Lothbury Trust to the Verena Ryan Family Trust and the value be set at $55,200 (the original sale price) or, if Mr Lobb elects (by written notice to the receiver), the value established in a revised valuation by Webbs, the original valuers.
3.Mr Lobb and others occupying 23 Orakei Road, Remuera are to provide vacant possession to the receiver within two months of the date of this judgment.
4.The receiver is directed to sell 23 Orakei Road at such a price and upon such terms as he thinks fit.
5.50 per cent of the sum reached by deducting from the gross sale price only the costs of sale, the receiver’s costs and the sum of $1.4m, is to be paid to the Verena Ryan Family Trust.
[3] All orders were to be implemented without delay.3 I held that Ms Ryan, as the successful party, was entitled to costs.4
[4] Ms Ryan has incurred costs and disbursements totalling $530,758.43 (including GST) in relation to this proceeding.
[5] The proceeding was properly commenced by Ms Ryan as a trust beneficiary as Mr Lobb had refused to allow the trustees, of whom he was one, to engage in a process for division following separation, provided for by cl 2.5(3) of the Lothbury Trust deed. Under Re Buckton,5 Ms Ryan’s costs would ordinarily be paid from the trust fund. However, the net effect of the judgment, summarised in order five above, was that 50
1 Ryan v Lobb [2023] NZHC 689.
2 At [176].
3 At [180].
4 At [181].
5 Re Buckton [1907] 2 Ch 406 (Ch) at 413–417; cited in Kain v Hutton [2022] NZCA 239 at [12].
per cent of the balance of the trust fund, after deducting debt of $1.4 million and costs, was payable to a new trust settled by Ms Ryan. To the extent any costs are payable out of the pre-resettlement trust fund, Ms Ryan would therefore be meeting 50 per cent. Ms Ryan submits that at most 25 per cent of any costs award should fall on the assets which are to be resettled on her trust because they arose due to Mr Lobb’s conduct. In other words, at most only 25 per cent of the costs award should be borne by the family trust pre-resettlement. She submits that the remaining 75 per cent of her costs should be payable by Mr Lobb on an indemnity basis.
[6]Mr Lobb has not filed submissions as to costs.
Procedural history
[7] On 9 August 2019 Ms Ryan filed the statement of claim in this proceeding. Due to successive unsuccessful interlocutory applications by Mr Lobb the matter did not come before me until June 2022. The details of those interlocutory applications are set out in my judgment.6 It is necessary to canvas them again briefly here. Some have been the subject of separate costs applications.
[8] On 6 December 2019 Mr Lobb applied for an order dismissing the proceeding. He also applied under the Property (Relationships) Act 1976 for return to him of certain documents he said were in Ms Ryan’s control. Associate Judge Smith dismissed the applications.7 Mr Lobb sought leave to appeal. This was declined by the Court of Appeal on 2 June 2021.8
[9] In July 2020 Edwards J discharged the trustees of the family trust. She appointed a receiver as trustee.
[10] Mr Lobb sought orders for tailored discovery. Associate Judge Paulsen declined that application and made an order for standard discovery.9 Mr Lobb applied
6 At [55]–[65].
7 Ryan v Lobb [2020] NZHC 3085.
8 Lobb v Ryan [2021] NZCA 224.
9 Ryan v Lobb [2021] NZHC 3294.
for leave to appeal or vary/rescind the discovery orders. Leave was declined by Associate Judge Paulsen on 3 December 2021.
[11] The hearing before me was set down for two days but ultimately occupied four. Again, and as I discuss below, this can be attributed to Mr Lobb.
[12] Following my judgment, Mr Lobb appealed and sought a stay of execution. His appeal was deemed abandoned when his case on appeal was not filed as required.10 Edwards J dismissed the application for stay.11
[13] Notwithstanding Edwards J rejecting his application for a stay, Mr Lobb and associated parties have taken other steps to delay the implementation of my substantive orders. Those steps have been considered in subsequent decisions of Edwards and Powell JJ and are not relevant to the determination of costs following my judgment.
[14] Despite the length of time since my judgment and despite my order that sale of the Orakei Road property be effected immediately, settlement of the sale only occurred on 20 December 2023. The receiver has therefore only recently come to any position to effect a costs order.
Indemnity costs
[15] As noted, to the extent costs are not awarded on the basis of Re Buckton, Ms Ryan seeks costs on an indemnity basis. She submits that Mr Lobb unnecessarily defended the proceeding and that all steps taken in it were unnecessary, vexatious and/or improper. She says his conduct in the proceeding up to and during the hearing before me justifies departure from the presumption of scale costs in the High Court Rules 2016.
[16] Rule 14.6(4) of the High Court Rules permits the court to order indemnity costs if:12
10 Ryan v Lobb [2023] NZHC 2452.
11 Ryan v Lobb [2023] NZHC 1518 at [65]–[92] and [95].
12 High Court Rules 2016, r 14.6(4).
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[17] Indemnity costs are rare and require “exceptionally bad behaviour.”13 In Bradbury v Westpac Banking Corp the Court of Appeal outlined categories of cases where indemnity costs have been ordered:14
[29](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 … [the] “hopeless case” test [set out by French J in J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2)].15
[18] The essential question in this case is whether, in terms of r 14.6(4), Mr Lobb acted vexatiously, frivolously, improperly or unnecessarily in defending the proceeding. I am satisfied that the threshold for indemnity costs set out in r 14.6(4) is
13 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [28].
14 At [29].
15 J Corp Pty Ltd v Australian Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 70, (1993) 46 IR 301 at 303.
met. So too was Edwards J in a related proceeding.16 With reference to the categories identified by the Court of Appeal in Bradbury, I consider Mr Lobb’s conduct fell squarely into the categories set out in [29](b), (d) and (e) above.
[19] First, Mr Lobb engaged in misconduct that resulted in a loss of time for the Court and Ms Ryan. Mr Lobb’s conduct prior to the hearing caused unnecessary delays over a period of two-and-a-quarter years. His protest to jurisdiction was unmeritorious. So too was his application for more tailored discovery and applications for leave to appeal. Mr Lobb also raised a number of informal applications before me and made numerous (and repeated) objections. All were rejected.17 All were without merit. Most importantly for this application, all contributed unnecessarily to the length of the proceeding and required response from Ms Ryan.
[20] Mr Lobb’s submissions were numerous. He filed unnecessary or irrelevant documents as part of lengthy affidavits and memoranda. One of Mr Lobb’s affidavits reached over 800 pages. Several exceeded 200 pages. His closing submissions alone extended to 610 paragraphs over 192 pages. Mr Lobb persisted in what was objectively a hopeless case as I set out in my judgment. He acted wholly unnecessarily and as I also stated in my judgment, took a scattergun and vindicative approach to the litigation.18
[21] Further, Mr Lobb’s approach to the proceeding, position on certain factual matters and insistence on an extensive asset tracing exercise required Ms Ryan to undertake overly thorough discovery. Ms Ryan had no option but to obtain the documentation at significant cost.
[22] I am also satisfied that Mr Lobb made submissions on many points that should never have been made. In some instances his submissions were not just unsupported but completely inconsistent with contemporaneous documentary evidence.19 Other submissions were wholly inappropriate, scandalous and involved sweeping,
16 Ryan v Lobb [2023] NZHC 3239 at [18].
17 Ryan v Lobb, above n 1, at [70].
18 At [68].
19 At [117].
unfounded allegations against Ms Ryan and others, including her legal advisers.20 Issues with Mr Lobb’s submissions were complicated by Mr Lobb first representing himself, later engaging lawyers, and then representing himself again.
[23] I am satisfied that Mr Lobb acted in wilful disregard of known facts, made allegations that ought not to have been made, acted improperly and was the substantial cause of huge delay. Several of the categories identified by the Court of Appeal in Bradbury are present. Indemnity costs are justified.
[24] Having determined that Mr Lobb’s conduct falls within the ambit of r 14.6(4) and Ms Ryan is entitled to indemnity costs, I must now address quantum.
Quantum
Re Buckton costs
[25] While I consider it arguable for the reasons set out above that the entire costs incurred by Ms Ryan should be assessed on an indemnity basis, to take a conservative approach and an approach most generous to Mr Lobb, I order that 15 per cent of the total costs incurred by Ms Ryan, being $77,000 approximately including GST, and the filing fee for the statement of claim of $110, be paid out of the trust fund prior to resettlement. This amounts to $77,110, including GST. Under no scenario should Ms Ryan have been put to any greater cost than that to obtain resolution under cl 2.5(3). The matter should have been quite straightforward. Instead, Mr Lobb turned it into a quagmire.
Indemnity costs
[26] Indemnity costs are calculated on the basis of a reasonable allocation of actual costs having regard to the appropriate time taken, the significance and complexity of the work, and the median hourly rate reasonably applicable.21 They fall to be determined with reference to actual costs, but may be less than the costs actually
20 At [95].
21 Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494 at [58] citing Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC) at [204] and [209].
incurred by a party if a Court considers that the actual costs were not reasonably incurred.22
[27] The total amount of legal fees claimed is $446,200 (or $513,130 inclusive of GST). Of this, $77,110 inclusive of GST will be payable out of the pre-resettlement trust fund.
[28] Mr Patterson has provided to the Court the schedule of time spent on the proceeding as well as a schedule of scale costs. I have reviewed the schedules and the narrations therein. The work is apportioned between Mr Patterson as senior counsel (at an average hourly rate of $630), Mr Dixon (at an average hourly rate of $376) and Mr Gatting, a junior counsel (at an average rate of $194 per hour). Mr Patterson billed approximately 700 hours of work on the proceeding, Mr Dixon 100 and Mr Gatting approximately 21 hours.
[29] I am satisfied that the total time recorded is accurate and reasonable. I note also on at least two occasions the fee invoiced to Ms Ryan was less than the time billed.
[30] I also have no difficulty with the hourly rates charged. In particular, Mr Patterson is very senior and experienced in this field. His average hourly rate of
$630 could fairly be higher. The proceeding was unreasonably delayed and protracted and was made complex by Mr Lobb’s actions, such that it required extensive time at a senior level.
[31] However, I consider it should have been possible for some of the work undertaken by Mr Patterson to have been carried out by Mr Dixon or someone at his level. The amount of time spent by senior counsel seems somewhat disproportionate. Of the 85 per cent balance of the time billed, I assess costs for indemnity purposes on the basis of 500 hours at $630 for Mr Patterson and 180 hours at $376 for Mr Dixon. Mr Gatting’s billing remains unchanged except I have deducted 15 per cent.
[32] This amounts to total legal fees of $386,204 approximately. Inclusive of GST this amounts to $444,135.
22 Black v ASB Bank Ltd [2012] NZCA 384 at [77].
[33] I find that the sum of $444,135 was more than reasonably incurred. Ms Ryan is entitled to those costs on an indemnity basis under r 14.6(4) of the High Court Rules.
Disbursements
[34] Ms Ryan seeks $17,628.43 in disbursements. Again, Mr Patterson has provided invoices for these expenses. I am satisfied all were reasonably incurred.
[35] The trust pre-settlement is already to bear the filing fee of $110. I allow the other disbursements ($17,518.43).
Orders
[36]The costs application is allowed.
[37] Costs of $76,969.5 are to be borne from the trust fund prior to resettlement, together with disbursements of $110.
[38]Ms Ryan is awarded indemnity costs in the sum of $444,135 inclusive of GST.
[39]Disbursements of $17,518.43 are allowed.
[40] I have not received submissions as to whether an order is sought regarding payment out of Mr Lobb’s share of the trust fund of the sums referred to at paras [38] and [39] and leave is reserved in that regard.
Hinton J
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