Schmidt v Jawad HC WN CIV 2005 485 000851
[2008] NZHC 2255
•1 April 2008
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2005 485 000851
BETWEEN LANA DELORES SCHMIDT Appellant
ANDZAHID MAHDI JAWAD Respondent
Submissions: 7 March 2008 for Respondent
26 March 2008 for Appellant
Judgment: 1 April 2008
JUDGMENT AS TO COSTS OF RONALD YOUNG J
[1] This appeal was heard in two parts. The first part was an appeal from a decision of the Family Court which had dismissed the appellant’s claim to a share of any increase in value of the respondent’s computer company while they lived in a defacto relationship. I allowed the appeal against the Family Court’s conclusion that while the appellant had made a substantial contribution to the relationship, a failure to make an order in terms of s 14A of the Property (Relationships) Act 1976 would not result in serious injustice. In addition, the Family Court concluded there was no relationship property to divide because it was not satisfied the appellant’s contributions were causally related to any increase in the value of the shares.
[2] In my judgment of 1 December 2005 I concluded that a failure to make an order would result in a serious injustice, and that if there had been an increase in value of the relationship property it was in part because of the appellant’s
contributions.
SCHMIDT V JAWAD HC WN CIV 2005 485 000851 1 April 2008
[3] The second part of the hearing related to what if any increase in the value of the company shares there had been and what share the appellant should have should there be an increase in value. I concluded that there was no increase in value of the company between the relevant dates. The appellant, therefore, while succeeding in the first question as to principal was unsuccessful in the second question as to whether there had been any increase in value of the property during the relationship.
[4] The respondent now seeks orders in terms of ss 40 and 41 of the Legal
Services Act 2000.
[5] The appellant is legally aided. The respondent says there are exceptional circumstances such that s 40(2) of the Legal Services Act 2000 is properly engaged.
[6] The appellant denies that there are exceptional circumstances and says that this Court should simply certify appropriate costs and leave it to the Legal Services Agency pursuant to s 41(2) to decide if the respondent should have any payment towards his costs.
[7] Sections 40 and 41 provide as follows:
40 Liability of aided person for costs
(1)If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
(2)No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.
(3)In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a)any conduct that causes the other party to incur unnecessary cost:
(b) any failure to comply with the procedural rules and orders of the court:
(c) any misleading or deceitful conduct:
(d)any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e)any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f)any other conduct that abuses the processes of the court.
(4)Any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person's liability.
(5)If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person's liability.
(6)If an order for costs is made against a next friend or guardian ad litem of an aided person who is a minor or is mentally disordered, then—
(a)that next friend or guardian ad litem has the benefit of this section; and
(b)the means of the next friend or guardian ad litem are taken as being the means of the aided person.
41 Costs of successful opponent of aided person
(1)This section applies if an order is made under section 40 that specifies that an aided person would have incurred a liability, or a greater liability, for costs if that section had not affected his or her liability.
(2)If this section applies, the party to the proceedings who is prejudiced by the operation of section 40 (in this section the applicant) may apply to the Agency in the prescribed manner for payment by the Agency of some or all of the difference between the costs (if any) actually awarded to that party against the aided person and those to which that party would have been entitled if section 40 had not affected the aided person's liability.
(3)In considering any such application, the Agency must have regard to the following matters:
(a) the conduct of the parties to the proceedings: (b) the court's findings under section 40(2):
(c)the hardship that would be caused to the applicant if the costs were not paid by the Agency.
(4)For the purposes of subsection (3)(c), the Agency may require any person to furnish information on the financial circumstances and needs of the applicant.
(5)If, having regard to the matters specified in subsection (3) and to any information received under subsection (4), and to all relevant circumstances, the Agency considers that any payment should be made by the Agency to the applicant, it may determine accordingly and must make the payment.
(6)The Agency may recover any payment made under this section from the aided person as a debt due to the Agency, unless the payment relates to an order made under section
40(5).
(7)The Agency may make a payment under this section to a lawyer who is not a listed provider under this Act.
[8] Firstly, I agree with the respondent’s submissions that these proceedings are properly categorised as 2B for the purpose of costs. Secondly, if I was setting costs in circumstances where I was unencumbered by any grant of legal aid, then I would have reduced the costs portion of the 2B allocation claimed by the respondent by
25 percent to reflect the appellant’s success at the first stage of the appeal. I accept the percentage of time required for the second portion of the proceedings was far greater than the first part. That would therefore require a 25 percent reduction in the claimed 2B fee of $28,570. Two of the disbursements, being the preparation and compilation of the supplementary witness book and Mr Trow’s disbursements would be properly payable. The filing fee for leave to the Court of Appeal would not be. The disbursements properly payable would not be reduced by the 25 percent figure given they related exclusively to the second part of the proceedings.
[9] The respondent says, pursuant to s 40(2), there are exceptional circumstances such that the amount the appellant should be ordered to pay should be more than her contribution to the legal aid grant. The exceptional circumstances identified by the respondent are as follows:
(a) Novel questions of law.
Accepting for the moment there may have been novel questions of law in the first part of these proceedings I agree with the appellant that it is difficult to see that this is an exceptional circumstance which would justify, in terms of s 40(2), an obligation on the appellant to pay more than her contribution required as part of the grant of legal aid. In addition, it must be kept in mind that the appellant succeeded in this part of the argument.
(b) Calderbank offer.
An attempt at settlement between the parties was undertaken after the first judgment but before the proceedings were completed by the second judgment. In March 2007 the respondent offered $20,000 in full and final settlement. That was rejected by the appellant who counter-offered indicating she would accept $120,000 in full and final settlement. The making of a Calderbank offer in some circumstances can be a relevant factor in assessing whether there are exceptional circumstances (s 40(4)(e)). Here, as the respondent correctly points out, the offer of settlement was above the figure ultimately obtained by the appellant. The appellant says that given she had already been successful in the first argument and given she had evidence from a professional accountant that her share was significantly more than
$20,000 the refusal to settle for $20,000 was reasonable. The point that must be kept in mind is that the appellant failed to obtain any monetary judgment. In those circumstances, the appellant’s rejection of the offer of settlement is relevant to exceptional circumstances. The effect of the offer is, however, to some degree reduced given the appellant’s circumstances. As appellant’s counsel says, the offer of
$20,000 was made only after the respondent lost the initial part of the case. At that time the offer was less than the appellant’s legal aid bill and therefore would likely have all been payable to the Legal Services
Agency. And, finally, the appellant did have professional accounting advice which indicated a high value than the $20,000 settlement offer suggested. This illustrates that the appellant’s response to the respondent’s Calderbank letter was not blindly irrational.
(c) Deportation.
The appellant is a citizen of the United States. It seems that she has been in danger of being deported from New Zealand. The respondent wrote to the Legal Services Agency suggesting that their original decision to grant legal aid should be reversed. The Legal Services Agency refused to do this. As it has turned out, the appellant successfully complained to the Ombudsman regarding her immigration status and the removal order has now been cancelled. In any event, I agree with the appellant that Ms Schmidt’s immigration status is irrelevant in considering whether there are exceptional circumstances here.
(d) Mr Underwood’s evidence.
Mr Underwood was the accountant who acted for the appellant. Mr Underwood’s proposition was that the 2002 financial accounts were inaccurate because they did not reflect the stock at hand. In my judgment I said:
[14] . . . While Mr Underwood did not claim that this falsehood was deliberate, it is difficult to believe that Mr Jawad would not have known he was only recording half or less of the actual value of the stock held.
The respondent’s case is that Mr Underwood’s evidence was essentially an allegation of dishonesty by the respondent without proof.
I do not see this aspect of the evidence as relevant to exceptional circumstances. I do not consider that Mr Underwood did anything other than what he considered was appropriate in the circumstances as he viewed them. He did not attempt, in his evidence, t o claim that what he saw as the errors in the stock on hand were deliberate or that the respondent had deliberately tried to manipulate the accounts so that the business could be undervalued. He, legitimately in the circumstances, pointed out what he believed was an anomaly in the accounts which, as he followed it through, convinced him the business was worth significantly more than might have appeared from the accounts. In my view, there is nothing that could be said to give rise to exceptional circumstances in the accounting debates between Mr Underwood and Mr Trow.
[10] In their submissions counsel raised the delay in the completion of the second part of the case. As I remarked in my second judgment, I had thought when I gave my original judgment in December 2005, that it would be a straight-forward task to obtain evidence to value the business. This did not prove to be the case. My assessment is that both parties played their part in the delay that occurred. In those circumstances I would discount delay as relevant under s 40(2).
[11] I conclude that the only fact that could be relevant to exceptional circumstances is the Calderbank letter. In the circumstances I have described, I do not consider it is sufficiently powerful to constitute exceptional circumstances.
[12] The respondent’s application, therefore, that I make an order under s 40(2) is declined.
[13] I do, however, conclude pursuant to s 40 that the appellant would have incurred a liability for costs but for the provisions of s 40. The amount is as set out in [8].
[14] In the circumstances, it will now be for the respondent to apply to the Legal Services Agency pursuant to s 41 of the Act to try and convince them to make an appropriate payment to him of the costs that I have identified as being reasonable and appropriate.
“Ronald Young J”
Solicitors:
Treadwells, Wellington, for Appellant
Mabel Sue, Wellington, for Respondent
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