Smith v Smith

[2019] NZHC 320

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2018-488-14

[2019] NZHC 320

IN THE MATTER

of an application for contempt of Court order against Machiko Smith

BETWEEN

BOYD ALLEN SMITH

Applicant

AND

MACHIKO SMITH

Respondent

Hearing:	(On the papers)
Counsel:	J A Browne and P J Wilson for Applicant B Westenra for Respondent
Judgment:	1 March 2019

COSTS JUDGMENT OF BREWER J

This judgment was delivered by me on 1 March 2019 at 3:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Henderson Reeves Lawyers (Whangarei) for Applicant Wills Westenra Ltd (Whangarei) for Respondent

SMITH v SMITH [2019] NZHC 320 [1 March 2019]

Introduction

[1]This is a costs judgment.

[2]        Mr and Mrs Smith are at feud. They were married for many years but separated in 2015.

[3]        On 23 July 2015, Mr Smith obtained a restraining order against Mrs Smith in the Family Court. That order restrained Mrs Smith from disposition of, inter alia, any credit balance in any bank account in her or Mr Smith’s name or their joint names.

[4]        The parties subsequently entered into an agreement settling their relationship property division. However, the validity of that agreement is the subject of challenge in the Family Court.

[5]        Contending that Mrs Smith had breached the order, Mr Smith subsequently filed an originating application seeking orders:

(a)That Mrs Smith be held in contempt of Court and be committed to prison or fined as the Court thinks fit;

(b)A portion of any fine be paid to himself; and

(c)Costs on an indemnity basis.

[6]        The contempt application related to a range of transactions initiated or undertaken by Mrs Smith, in what Mr Smith alleged were deliberate breaches of the order and therefore instances of contempt of Court.

[7]        On 19 December 2018, I found that four of the transactions constituted deliberate breaches of the order and amounted to contempt:1

1      Smith v Smith [2018] NZHC 3405.

(a)One transaction (a $21.30 purchase of cigarettes) I did not take into account on the basis “de minimis non curat lex”.2

(b)One transaction had been booked before Mrs Smith had notice of the restraining order. Mrs Smith allowed the transfer to proceed and diverted the funds to a separate, new bank account. The funds were included in the settlement agreement and there was no loss to Mr Smith.

(c)The final two transactions involved the purchase of shares for the purpose of obtaining a better return than was available on interest. Again, there was no loss to Mr Smith.

[8]        I made comment in my judgment that Mrs Smith appeared to have something of an obsession about the pursuit of better returns on investments through an almost compulsive use of online banking tools.3

[9]        I was also satisfied that Mr Smith’s motivation in bringing the application was largely punitive, pursuant to his feud with Mrs Smith, rather than focussed on ensuring compliance with future orders of the Family Court.4

[10]      I issued a formal warning to Mrs Smith that Court orders, including orders of the Family Court, are to be obeyed strictly. I warned her that the Court’s response to further breaches of Court orders would likely be significant.

[11]      On the basis of Mr Smith’s limited success and his predominantly punitive motive for bringing the application I made a provisional decision to order costs to lie where they fall. I gave leave to the parties to make submissions to the contrary if they wished.

2      “The law is not concerned with trivial matters”.

3      Smith v Smith at [40].

4 At [41].

Submissions

[12]      Both parties filed memoranda on 25 January 2019. Counsel for Mr Smith filed a further memorandum in reply to Mrs Smith’s submissions on 8 February 2019.

[13]      Costs are at the discretion of the Court.5 Each party seeks costs from the other. I will consider their submissions in turn.

[14]      The submissions for Mr Smith emphasise that costs traditionally follow the event,6 and partial success is still generally considered success for the purpose of allocating costs.7 Mr Smith acknowledges he has not succeeded on all matters. Nonetheless, he submits his success in having some of Mrs Smith’s actions held to constitute contempt of Court should be considered success when awarding costs.

[15]      Mr Smith suggests awarding indemnity costs or increased costs is appropriate following a finding of contempt of Court. His submissions emphasise the policy considerations underpinning the law of contempt, including the need to ensure efficient and efficacious justice and maintain public faith in the justice system.

[16]      Mr Smith also points to various cases supporting the proposition that severe instances of contempt may warrant an order for indemnity costs.8 Rather than pursue this point further I will simply observe that the type of conduct described in these cases is consistently more severe than Mrs Smith’s breaches of the restraining order.

[17]      Finally, Mr Smith notes that increased costs may be warranted where a party contributes unnecessarily to the time or expense of a proceeding, including by pursuing unnecessary steps or arguments lacking merit.9 He submits Mrs Smith maintained she had not committed contempt of Court until the day of the hearing, and in her early denials gave misleading evidence concerning one of the relevant transactions. He also submits costs were raised by the large number of positive

5      See High Court Rules, r 14.1.

6      Rule 14.2

7      Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36; and Weaver v Auckland Council [2017] NZCA 330.

8      See Bowie v Weyburne [2013] NZHC 1828; and Qu v Zeng [2018] NZHC 1355.

9      High Court Rules, r 14.6

defences raised by the defendant, many of which were not formally pleaded or were otherwise unsuccessful. Mr Smith submits these factors justify an increase in any award of costs in his favour.

[18]      However, Mr Smith also acknowledges his application was only partially successful, and as such suggests that ordering costs in his favour on the 2B scale would “amount to a significant reduction” to recognise that fact.

[19]      Mrs Smith seeks indemnity or increased costs. I note that such an award after she has been found to be in contempt of Court would clearly contravene the usual “loser pays” approach and be a curious response to deliberate breaches of a Court order.

[20]      The submissions for Mrs Smith seemingly amount to reiterating arguments from the initial hearing that Mr Smith has brought the proceedings in a vexatious manner as part of a wider feud, and thus indemnity costs are warranted pursuant to    r 14.6(4)(a) of the High Court Rules.10

[21]      The remainder of Mrs Smith’s memorandum repeats submissions from the initial hearing regarding the discussion Van Bohemen J in Mike Pero (New Zealand) Ltd v Krishna of contempt proceedings which appear disproportionate to the gravity of the matters at issue.11 In that case the Court dismissed an application regarding a breach of a Court order that was technical, minor and brought about by the appellant (whom it did not prejudice), and awarded costs in favour of the defendant.12

Discussion

[22]I am not persuaded by either party’s submissions.

[23]      Mr Smith’s “partial success” in this proceeding is much less significant than those in Water Guard and Weaver, which meaningfully impacted the positions of the

10 That rule allows for an order of indemnity costs if a party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding.

11     Mike Pero (New Zealand) Ltd v Krishna [2018] NZHC 40.

12 At [61].

parties. In Water Guard, the plaintiff succeeded on a claim for $67,527.97 after initially seeking $511,100. In Weaver, the plaintiffs succeeded regarding half of the pleaded loss, which still amounted to around $60,000.

[24]      The High Court Rules provide for a refusal or reduction in costs otherwise payable where the issues at stake were of little significance.13 In this case, to the extent that I found Mrs Smith to be in contempt it was at the very lower end, resulting only in a formal warning. I did not find any loss was caused to the plaintiff and considered his application for contempt primarily motivated by a personal punitive intent. Further, I do not consider the various policy concerns underpinning a finding of contempt to have been seriously engaged by Mrs Smith’s behaviour. Her behaviour appears to have been driven more by a fixation on investment returns than any desire to challenge the Court’s authority or do damage to Mr Smith.

[25]      I am similarly unpersuaded by Mrs Smith’s own claim for damages. While her breaches of the restraining order were not deeply serious, they were also not purely trivial or technical. She breached a Court order knowingly and deliberately and received a formal warning for contempt.

Result

[26]Costs are to lie where they fall.

Brewer J

13     Rule 14.7(c).