Stuart v Stoneham
[2023] NZHC 3867
•21 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000334
[2023] NZHC 3867
IN THE MATTER OF the Property (Relationships) Act 1976 BETWEEN
NEIL GORDON STUART
AppellantAND
ANNETTE LISA STONEHAM
Respondent
Hearing: 26 September 2023 Appearances:
SR Mitchell KC for the Appellant
SJ McCarthy KC for the Respondent
Judgment:
21 December 2023
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 21 December 2023 at 4 pm, pursuant to Rule 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar Date……………
Solicitors/Counsel:
Garry Pollak & Co, Auckland SJ McCarthy KC, Auckland SR Mitchell KC, Auckland
STUART v STONEHAM [2023] NZHC 3867 [21 December 2023]
Introduction
[1] Mr Stuart appeals against the 24 January 2023 costs decision of Judge B R Pidwell in the Family Court,1 which followed the Judge’s determination of proceedings commenced by Ms Stoneham (Mr Stuart’s former wife) for division of relationship property pursuant to the Property (Relationships) Act 1976 (the Act), and her claim pursuant to s 182 of the Family Proceedings Act 1980 (FPA).2
[2] The Judge awarded costs to Ms Stoneham after finding that she was largely successful in her claims. Costs were fixed on 2B scale basis,3 and reduced by 20 percent to reflect that Ms Stoneham was only partly successful in the quantum of some of her claims. The Judge also awarded uplifted costs on the step of appearance of Ms Stoneham’s principal counsel at the Family Court hearing.4
[3] This resulted in a total costs award of $82,000 in favour of Ms Stoneham. The Judge also ordered that Mr Stuart pay half of the fees of the experts called on behalf Ms Stoneham (an accountant and valuer), and half of the fixture fee, totalling
$34,084.17.
[4] Mr Stuart appeals against the Judge’s decision primarily on the basis that given Ms Stoneham’s limited success and the nature of the proceedings, the proper outcome was for costs to lie where they fell. In the alternative, Mr Stuart says that costs should have been awarded to each party on an “issue-by-issue” basis, measured against that party’s success on that issue. If the appeal is successful on this basis, Mr Stuart says the matter ought to be remitted to the Family Court for determination. Further and in any event, Mr Stuart says the Judge was wrong to uplift the costs to reflect the fact he was self-represented at the hearing, the discount for Ms Stoneham’s limited success was too small, and the Judge was wrong to order that he pay half of the expert fees incurred by Ms Stoneham.
1 Stoneham v Stuart [2023] NZFC 520 [Costs Decision].
2 The two proceedings were consolidated and heard together.
3 Save for one or two steps being awarded on a scale 2C basis.
4 To reflect that Mr Stuart was self-represented at the hearing, with the result that the Judge requested Ms Stoneham’s counsel to, essentially, put Mr Stuart’s case to his own witnesses to ensure Ms Stoneham’s case was appropriately tested. Mr Stuart also had the benefit of a McKenzie friend at the hearing, being his former counsel.
The substantive Family Court judgment
[5] In order to put the Judge’s costs decision in context, it is helpful first to summarise the process and outcome of the Family Court proceedings. On any view, the proceedings have taken a very significant time to resolve.
[6] The Judge provided a helpful summary of the proceedings’ progress at the outset of her substantive judgment which I replicate here:5
[1] The complex framework in which the parties operated their financial transactions during their 19-year marriage has resulted in the division of their property being unresolved for over 10 years.
[2] Mr Stuart (Neil) remains living in their home, located on an industrial site where he operates a stair making business.
[3] Ms Stoneham (Annette) lives elsewhere. She seeks an equal share of the property acquired during their marriage.
[4] Their property interests have been tangled up in four separate trusts, a company, and one or two partnerships. Inheritances have been injected into those entities, some of which have been subject to separate court proceedings and agreements involving the estates of each of Neil's parents.
[5] Neil suspects Annette has deviously buried his inheritances as she was in charge of the administration for their company and personal affairs. He now reclaims them as his separate property. She says all entities blurred into each other to the point where the inheritance monies have intermingled with relationship funds.
[6]The court is asked to determine a just outcome for the parties.
Legal process
[7] Annette filed an application under the Property (Relationships) Act 1976 (PRA) on 18 May 2012, and under s 182 of the Family Proceedings Act 1980 (FPA) on 19 December 2013 after the parties' marriage was dissolved. For the purpose of this judgment, it is unnecessary to detai1 the lengthy pre-hearing process, except to note, in summary, that it involved two defended discovery hearings (with costs being awarded against Neil on each occasion), a late adjournment of a firm seven day fixture in 2019 on Neil's request, and the Court declining a further application for an adjournment of the replacement fixture, which was heard in the Auckland Court rather than Manukau. It was then part heard, due to Neil's inability to arrange for his expert and another witness to attend. It was re-scheduled to conclude on 25 March 2020, the day the country went into Level 4 Covid-19 lockdown. The delays have created further difficulties and frustration for both parties.
5 Stoneham v Stuart [2020] NZFC 7936 [Substantive Judgment] (footnotes omitted).
[8] The pre-hearing process identified and resolved a number of issues, which are incorporated in the agreed issues listed below.
[9] Neil's late father's trust, The David Stuart Trust (DST), was not separately represented at the hearing. The trustees at the commencement of the FPA proceedings were Neil and David Bevan who both gave evidence in that capacity. The current trustees appear to be John Spencer, Lindsay Stuart and Neil. The DST's position is so intertwined with Neil's personal position that I am satisfied all relevant issues in relation to the trust have been tabled and fairly considered by the Court.
[10] Neil has been represented by eight different lawyers throughout the proceedings. For the hearing, he was self-represented. His former lawyer, Mr Meyrick, was appointed as a lay advocate/McKenzie friend at the outset to provide support and guidance to Neil for the duration of the hearing. The Court is grateful to Mr Meyrick for the role he played. As Neil's former counsel, he had sound knowledge of the complex facts and legal concepts and was able to provide vital support to Neil, who, at times, became overwhelmed by the process.
[11] Counsel for Annette, Mr McCarthy, was asked by the Court at varying points to ensure that Neil's evidence (both his own and that of his experts) was put fairly to the applicant's witnesses. Mr McCarthy performed that task in an exemplary manner, ensuring that the process was fair and the evidence appropriately tested, in somewhat difficult circumstances. The Court is grateful to him for the role he played.
[12] The Court indulged Neil in a number of ways, including providing him (and counsel) with a list of questions at the outset to ensure he understood the focus of the hearing. He agreed with the list of questions and some were added in at his request. Those questions form the outline of this judgment.
[13] I am fully satisfied that Neil had a fair hearing, despite being self- represented.
[7] The hearing took place over six days in 2020. With input from the parties, the Judge formulated a list of issues for determination (see below). As noted in the above extract from the Judge’s decision, key issues included whether Mr Stuart’s inheritances from his father and mother (who had died approximately seven and three years respectively prior to the couple’s separation) had become so intermingled that they had lost their status as separate property. Mr Stuart firmly maintained that they and their proceeds remained his separate property. As noted, Ms Stoneham also sought an order under s 182 of the FPA on the basis that the DST was a nuptial settlement, and the end of the parties’ marriage resulted in her expectations in relation to that trust being defeated. Mr Stuart disputed that Ms Stoneham had any interests in the DST.
[8] The list of issues for determination were set out in the Judge’s substantive judgment as follows (the struck out text represents where there had been agreement such that the issue was no longer “live”):
[41] At the outset of the hearing, the Court provided a list of issues to the parties and counsel, which were the agreed focus of the hearing. A number of issues resolved during the course of the hearing, as listed above, but for the sake of clarity, I list the full issue here, with those resolved issues struck out:
(a)
Is the current value of 7A Mono Place $1,960,000?
(b)
Is 7A Mono Place owned by the David Stuart Trust and Neil Stuart
in equal shares?
(c)
Is Neil Stuart’s share of 7A Mono Place relationship property?What is its value in light of the partnership structure?
(d) Is Annette Stoneham a beneficiary of the DST?
(e) Is the DST a nuptial settlement s 182? That is to say, was it intended to provide for the continuous provision for either Neil or Annette or both in their capacity as spouses?
(f) If so, should the Court exercise its discretion to remedy the consequences of the failure of premise of the continuing marriage, looking at the terms of the settlement, parties' expectations, the source and character of the assets, the interest of children and/or other beneficiaries, need, duration of marriage?
(g) If the court does exercise its discretion, how should it do so?
(h)
What is the value of the shares in Able Stairs Ltd? What is the
value of Neil and Annette’s current accounts?
(i) What orders are required regarding the sale proceeds of the Kupe Street property (interim distribution), in particular:
(i)Did Neil purchase Kupe Steet from his mother’s estate?
(ii)If so, how was that financed? Furthermore, was his inheritance preserved as separate property?
(iii)How was the money raised to pay Lindsay’s share?
(j) Does Neil seek any adjustments for post-separation money transactions for any entities? If so, what?
(k) Has Neil's inheritance from his father been intermingled?
(l) Should the Court value the Mono Place property and Able Stairs Ltd's shares at the date of separation?
(m) What is the effect of the alleged reciprocal agreement between Neil and his father to not pay rent at Mono Place on the valuation and accounting evidence?
(n)Is the debt owed by the DST relationship property?
(Footnotes omitted)
[9] On the s 182 claim (issues (d) to (g) above), Mr Stuart disputed as a matter of interpretation that Ms Stoneham was a beneficiary of the DST, and argued that it was not a nuptial settlement in any event. He did not engage on the quantum of any s 182 award. Mr Stuart was unsuccessful in challenging Ms Stoneham’s s 182 claim. Ms Stoneham had sought an order that there be a resettlement of half of the interest of the DST in her favour, the quantum of which Mr Mitchell KC, Mr Stuart’s counsel on this appeal, records as amounting to $553,000.6 In the event, Ms Stoneham was awarded $150,000.
[10] Issue (i) above concerned what was referred to as the Kupe Street property, and in particular Mr Stuart’s share in that property (the property having been left by his mother to him and his two brothers in equal shares). The key issue was whether, and if so to what extent, relationship property had funded Mr Stuart’s buy-out of one of his brother’s shares in the property. Mr Stuart said that not all of the funding was sourced from relationship property and that this issue turned on the extent to which, if at all, his inheritances had been intermingled. Ms Stoneham’s case was that Mr Stuart’s half share of the sales proceeds of the Kupe St property was all relationship property, or alternatively Mr Stuart had intermingled his original one-third share with relationship property, rendering the whole half-share relationship property (pursuant to s 10(2) of the Act). The Judge rejected both those submissions. She also rejected Mr Stuart’s submission that the entirety of his interest in the proceeds of sale of the Kupe St property remained his separate property. The Judge held that Mr Stuart’s original one third share was separate property, but increases in value to that property were attributable wholly or in part to the application of relationship property, and awarded Ms Stoneham $237,277.50 as a result (Ms Stoneham had sought approximately $404,000).
6 Not disputed in Ms Stoneham’s appeal submissions.
[11] Mr Stuart appealed to this Court against this (and other) findings made by the Judge, and was partly successful on this issue, with the quantum of relationship property attributable to the Kupe Street property reduced to $134,646.50.7
[12] The other main issue was that at (n) above, namely whether a debt owed by the DST to Mr Stuart was relationship property. Ms Stoneham was successful on this issue.
[13] In relation to the Mono Street property (issue (c) above), which was held through a partnership between Mr Stuart and the DST, it was common ground that this was relationship property (which was accepted by Mr Stuart in his opening submissions), but there was a dispute as to the value. Mr Stuart challenged the basis upon which to conduct that valuation as well as the quantum. He failed on both.8
[14] The Judge noted that Mr Stuart had raised issue (k) above in his closing submissions. She dismissed the claim (advanced by Mr Stuart pursuant to s 17A of the Act) on the basis there was no evidence to support it.
[15] The remaining issues were more minor, and some were agreed or the subject of agreed expert evidence at the hearing, and/or are not suggested to make any substantive difference on the question of costs.
The Judge’s costs decision
[16] Despite the Judge delivering her (detailed and closely reasoned) judgment on 16 September 2020, costs of the proceedings were not determined until January 2023, and some 11 months following the last of the parties’ costs submissions being filed.9 The delay in filing the costs submissions following the substantive judgment was, it seems, as a result of Mr Stuart’s appeal against the Judge’s substantive judgment
7 Stuart v Stoneham [2021] NZHC 3316. Mr Stuart was unsuccessful on all other aspects of the appeal.
8 Substantive Judgment, above n 5, at [80].
9 The Judge explained this delay, namely the proceedings being a Manukau proceeding but heard in Auckland, and it taking some time for the Registry to collate the memoranda for referral to the Judge.
(which Ms Stoneham also cross-appealed), the appeal judgment being delivered in December 2021.10
[17] I am not aware of the practice of determining costs in the Family Court when an appeal is filed, or whether there was an agreement in this case to defer the determination of costs pending the appeal being determined. I merely observe that it would usually be preferable for costs to be determined immediately following the substantive judgment, irrespective of an appeal. That way, costs are determined promptly and while matters are fresh for both the Court and counsel. Costs findings can, of course, be revisited in light of the outcome of the appeal, should that be required.
[18] Turning to the costs judgment, the Judge referred to s 40 of the Act which provides that in any proceedings under the Act, and subject to any applicable rules, costs are at the discretion of the Court. She also referred to r 207 of the Family Court Rules 2002, which provide that when determining costs, a Family Court judge may apply the District Court rules on costs.11 Having referred to the key principles of those rules, the Judge then referred to how those principles have been applied in the Family Court, and in relationship property proceedings in particular. She noted that the practice, historically, had been for costs in relationship property proceedings to lie where they fell, given the nature of such proceedings, as explained by Asher J in Johnson v Johnson.12 However, the Judge noted that the current position is that the court should ordinarily apply the civil costs regime absent some reason to the contrary.13 The Judge nevertheless emphasised Asher J’s observation in Johnson v Johnson that there must be “particular recognition of the emotional, and at times complex commercial and legal problems that arise when relationships end”, and “[e]ven reasonable parties in that situation can have difficulty finding a solution.”14
10 Ms Stoneham had filed her costs submissions shortly after the Substantive Judgment, in October 2020, but Mr Stuart’s were not filed until February 2022.
11 District Court Rules 2014, rr 14.2 to 14.12.
12 Johnson v Johnson [2016] NZHC 1606, [2016] NZFLR 634
13 Citing Fisher of Matrimonial and Relationship Property (online looseleaf ed, LexisNexis) at [19.41]; Van Selm v Van Selm [2015] NZHC 641, (2015) 30 FRNZ 163 at [34], [41] and [44]; Gibbs v Gibbs [2015] NZHC 3043 at [55]; and Campbell v Goldie [2019] NZHC 1573, [2019] NZFLR 125 at [45].
14 Johnson v Johnson, above n 12, at [38].
[19] The Judge then briefly summarised each party’s position, namely Ms Stoneham’s claim for 2B scale costs, as the successful party in the proceeding, and Mr Stuart’s position that costs should lie where they fell, particularly given the complexity of the proceeding (due to the manner in which the parties had structured their affairs) and that Ms Stoneham was not wholly successful.
[20] The Judge noted the convoluted progress of the matter to a final hearing, and stated:
[19] The starting point is that Ms Stoneham should receive costs as, overall, she was successful in her applications. She had to file proceedings to quantify her share of property acquired during the parties' marriage which was solely under Mr Stuart’s control. His stance throughout was to challenge her entitlement and resist a determination which would inevitably result in him having to sell or borrow funds to meet a monetary payment. However, he was entitled to argue that his inherited property should be preserved, which formed a large part of the evidence and submissions.
[21] The Judge then addressed the various issues for determination at trial by reference to the list of issues discussed earlier in this judgment. She noted that Mr Stuart had failed on many of these matters. She stated:
[29] The only aspects of Ms Stoneham's position that was not upheld were the amount of her s 182 claim (which is a discretionary amount and difficult to quantify until all the factual findings were made), and the extent of her interest in the Kupe Street property.
[30] This analysis shows that overall, Ms Stoneham was predominantly the successful party.
[22] The Judge accepted that in those circumstances, it was appropriate to award costs, and on a 2B basis, though accepted Ms Stoneham’s claim for costs of preparing affidavit evidence on a 2C basis. She also awarded a 25 percent uplift for appearance of Ms Stoneham’s principal counsel at the hearing, stating, “[t]he court gave Mr McCarthy the additional tasks of assisting the court to ensure the evidence was tested fairly, and the requirements of s 92 of the Evidence Act 2003 [sic] were met.”15
[23] In terms of the expert fees, the Judge noted that while Mr Stuart had filed evidence from experts, Mr Stuart was unable to secure his expert’s attendance at the
15 At [35].
hearing for cross-examination. Nevertheless, the Judge noted that she had benefitted from the evidence of both experts where they agreed; that due to the manner in which the parties had structured their affairs, it was inevitable that expert evidence would be required; and that both parties benefited from the expert evidence, particularly that of the accounting expert called on behalf of Ms Stoneham (Mr Beylefeld) and the valuer. She accordingly ordered Mr Stuart to pay half of those two experts’ fees.
[24] Finally, the Judge reduced the costs award that would have otherwise been made in Ms Stoneham’s favour by 20 percent (on a “broad brush” basis), to acknowledge the “successful position” Mr Stuart held in relation to the quantum of the s 182 FPA claim and his interest in the Kupe Street property.16
The parties submissions on the appeal—summary
Mr Stuart’s submissions
[25] Mr Mitchell, for Mr Stuart, primarily argues that the Judge was wrong to conclude Ms Stoneham was the successful party overall. He points in particular to the outcome on the s 182 FPA and Kupe Street property claims, and that Ms Stoneham only recovered around one-third (or less) of the amounts originally sought. On that basis, Mr Mitchell says that Mr Stuart had a real and substantial degree of success. Mr Mitchell also submits that the complexity of the proceedings was driven by how both parties structured their affairs prior to their separation, rather than the manner in which the proceedings were conducted and did not justify a costs award in Ms Stoneham’s favour.
[26] Mr Mitchell also emphasises that much of the hearing focused on Mr Stuart seeking to protect his substantial inherited property, and that it was not at all unreasonable for him to have done so, particularly in the context of what was ultimately proved to be inflated quantum claims advanced by Ms Stoneham.
[27] Ultimately, Mr Mitchell acknowledges the more modern approach to costs in relationship property proceedings, but says that in this particular case, with the mixed
16 At [40].
degree of success by both parties, the nature of the proceedings, the complexity of the parties’ financial arrangements, and that both parties benefited from the determination of what was relationship property, an outcome of costs lying where the fell was a proper and appropriate outcome.
[28] On the experts’ fees, Mr Mitchell submits that as both parties were required to obtain expert assistance, and given that assistance was of benefit to the Court and the parties alike, it was unreasonable to order Mr Stuart to meet half of Ms Stoneham’s expert fees. Mr Mitchell also challenges the uplift for Ms Stoneham’s counsel’s appearance at the hearing on the basis Mr Stuart was self-represented, noting the difficulties in Mr Stuart obtaining representation, said to be as a result of a Notice of Claim blocking Mr Stuart’s ability to secure a loan for the costs of the proceedings.
Ms Stoneham’s submissions
[29] Mr McCarthy, for Ms Stoneham, supports the costs judgment. He emphasises that the costs decision involves an exercise of the Judge’s discretion, and thus the scope for appellate intervention is limited. He submits that the Judge applied the orthodox approach to costs in relationship property proceedings.
[30] Mr McCarthy addresses the outcome on the various issues in the proceeding, submitting that the Judge was plainly right to conclude that Ms Stoneham was the successful party overall. Mr McCarthy submits that it was therefore well within the Judge’s discretion to award costs to Ms Stoneham, and to reduce them overall by 20 percent to reflect that she was not fully successful on the quantum of some of her claims. Mr McCarthy supports the uplift for the additional tasks he was required to carry out at the hearing, noting there is no evidence put before this Court on the appeal in relation to why Mr Stuart says he came to be unrepresented at the appeal.
[31] As to disbursements, Mr McCarthy highlights the assistance the Court received from the expert evidence, that both parties benefited from the expert assistance, and thus it was within the Judge’s discretion to order Mr Stuart to pay only half of the related fees.
Legal principles
The approach to the appeal
[32] Because an appeal against a decision on costs is an appeal against the exercise of a discretion, Mr Stuart must show that the Judge’s decision was wrong in principle, failed to take into account some relevant matter, took account of some irrelevant matter, or was plainly wrong.17
Costs principles in relationship property proceedings
[33] As the Judge noted, the position in relation to costs in relationship property proceedings has changed over the years, to a position where it is not unusual for costs to be awarded by reference to the District Court costs rules. These are imported by s 207(2) of the Family Court Rules, as relevant factors that may apply to guide the Court’s overriding discretion. Reference to a set of settled rules on costs when exercising a broad discretion is obviously beneficial, as any discretion ought to be exercised on a principled basis, rather than arbitrarily. It also permits costs outcomes to be more predictable, and thus better enables parties to agree the costs outcome (rather than incurring more costs arguing about costs).
[34] Asher J in Johnson v Johnson helpfully explained the change in approach to costs in relationship property proceedings in the following way: 18
[34] There undoubtedly was a practice of not awarding costs in Property (Relationships) Act cases in all Courts, certainly in the early days of the Act. Reason (sic) for this can be discerned. Parties who have a relationship break- up are faced with the need to agree or litigate. The issues can, through no fault of the parties, be complex and at times finely balanced. Certainly while the law was being developed in the decades following the Matrimonial Property Act 1976, it was understandable that cases, where there was uncertainty as to the way to approach a problem, had to be fought out in court. Often it would have been harsh to have placed a costs burden on the party that did not succeed on an argument or arguments. Moreover, in those early days, there was no scale.
[35] Over recent years the principles in relationship property disputes have become more established, and the approach to costs has settled and been made predictable. The development of scales and detailed rules in the District Court
17 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15].
18 Johnson v Johnson, above n 12 (footnotes omitted).
and High Court Rules as to increased or indemnity costs have made calculations more certain. As was stated by Keane J in FT v JML:
These days the winning party in property relationship cases has a more recognised right to an award on the principle that costs follow the event than was so even a few years ago. Conversely, the losing party's misconduct may not now need to be so egregious to justify an award.
[36] His approach was developed by Duffy J in Van Selm v Van Selm. She observed:
While costs decisions are discretionary, the Court should apply the [District Court] regime in the absence of some reason to the contrary. Any departure must be a considered and particularised exercise of the discretion.
[37]The same approach has been adopted in other High Court cases.
[38] Therefore the District Court and in this case the High Court costs regime applies. In applying those principles there must be particular recognition of the emotional, and at times complex commercial and legal problems that arise when relationships end. Even reasonable parties in that situation can have difficulty in finding a solution. Nevertheless, when a party takes a significant contested position in property relationship litigation, and can be seen as unsuccessful in that litigation, it can be expected that there will be the same costs consequences as there would be in civil litigation.
[35]This approach was more recently underscored by van Bohemen J in
Campbell v Goldie.19
Discussion
[36] I am clear in my view that the appeal must be dismissed—save for those points discussed at [50]-[55] below (relating to the size of the discount for Ms Stoneham’s partial success in the quantum of key claims, plus the uplift to the appearance at the hearing of Ms Stoneham’s principal counsel).
[37] First, it is not—nor could it be—suggested that the Judge misdirected herself on the proper approach to determining costs in a proceeding of this nature. Indeed, the approach adopted by the Judge was acknowledged by Mr Mitchell in the Family Court to be the more modern approach. And as discussed earlier, to determine costs in relationship property proceedings by reference to the principles set out in the District Court costs rules is now orthodox.
19 Campbell v Goldie [2019] NZHC 1573, [2019] NZFLR 125.
[38] Second, the Judge did not err in the sense outlined at [32] above, in concluding that Ms Stoneham was the successful party in the proceeding overall.
[39] Where there is a suggested “mixed” outcome in a proceeding, or where a party has been awarded damages or similar amounts but less than those claimed, there are often arguments about who is the successful party for the purposes of the costs rules. Reference to some Court of Appeal decisions on this topic illustrates the point.
[40] In Packing In Ltd (in liq) v Chilcott, the Court of Appeal stated that when determining who is the successful party for the purpose of costs, the Court should take a broad and realistic appraisal of the end result:20
[5] In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.
… Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.
[41] Subsequently, however, the Court of Appeal in Weaver v Auckland Council commented on its approach in Packing In.21 The Court observed that while Packing In is “understandable in its own context”:22
… we do not consider that Packing In is authority for the proposition that in a damages claim it should be routine for the Judge dealing with costs to be required to unpick what happened in quite the detail undertaken in that case.
[42] Reinforcing that the “loser” ordinarily pays, the Court of Appeal in Weaver observed that although the appellants in that case had not succeeded to the full extent of their damages claim (but only roughly to half that extent), “success on more limited
20 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5]–[6] (emphasis added).
21 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379.
22 At [24].
terms is still success.”23 The Court went on to observe that given the limited success in that case, the award of costs to the appellants was to be reduced by 50 percent.
[43] These observations reflected and reinforced the Court of Appeal’s comments in Water Guard NZ Ltd v Midgen Enterprises Ltd, a decision issued shortly before Weaver v Auckland Council.24 In that case, the plaintiff had succeeded in only two of its five claims. The High Court considered that 75 percent of trial time had been devoted to the plaintiff’s unsuccessful claims, and so found the defendant to be the successful party. Costs were awarded on that basis, also taking into account the plaintiff’s unreasonable conduct in declining settlement offers.25
[44] The Court of Appeal overturned the High Court’s costs orders. It emphasised that it was unprincipled to award costs to the losing side. It disagreed with the High Court that the plaintiff had lost the status of being the “successful” party because it failed on most of its claims which in turn occupied most of the trial. It observed that those matters can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall. Overall, the Court considered that while the plaintiff was strictly successful, costs should nevertheless lie where they fell in light of the declined settlement offers and the trial-time allocations:
[18] When viewed in the round, allowing the burden of costs to lie where they fall in what was fruitless and uneconomic litigation accords with the overall justice of the case.
[45] Turning back to the circumstances of this case, on any reading of the substantive judgment (and Peters J’s judgment on the appeal), Ms Stoneham was the predominantly successful party on all key issues. It is correct that she was ultimately not awarded the full amounts she sought on the s 182 claim, and in relation to the Kupe Street property. Nevertheless, as the Court of Appeal observed in Weaver, her success on more limited terms is still success. And Ms Stoneham was also substantively successful in terms of the quantum of those claims. This was not a case,
23 At [26].
24 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
25 Costs were awarded to the defendant (on a 2B basis) for 75 percent of the trial where it was successful, but only for one counsel to take into account its failure on the three proven claims. Though the defendant was unsuccessful on the remaining 25 percent, no costs were awarded in the plaintiff’s favour for that portion because of the unreasonable conduct.
for example, of a party being successful on a s182 claim but receiving very nominal damages only.
[46] Third, given the Judge was correct to conclude that Ms Stoneham was the successful party overall, there was no error in not acceding to Mr Mitchell’s submissions that costs should lie where they fell. Reducing a successful party’s costs to zero is of course an available outcome under the civil costs regimes. But this was not some “marginal” win by Ms Stoneham on a couple of matters only, nor is there any suggestion of unreasonable conduct on her part in advancing her claims that might otherwise have warranted reducing her costs to zero. Further, she was required to bring the proceedings to have the claims resolved and receive the amounts the Judge found she was entitled to: there is no suggestion that Mr Stuart made any pre-hearing settlement offers that equated to or exceeded the amounts Ms Stoneham was ultimately awarded.
[47] Fourth, the nature of these relationship property proceedings does not mean that the Judge erred as a matter of principle, or was plainly wrong, in applying the civil costs regime to them. Indeed, and as noted earlier, in doing so she was applying orthodox principles now applied by the Family Court in such proceedings. Relationship property proceedings will often involve a number of discrete, separate issues (or to use the terminology in this Court, causes of action) for determination. But that does not drive a conclusion that absent something more, costs should always lie where they fall if there is suggested “mixed” success.26 Such an outcome is also not special to relationship property proceedings. Many civil proceedings involve a range of separate issues being determined, and a mixed outcome on those issues. Pursuant to the costs rules, and subject of course to the overriding discretion of the court, the successful party in the proceeding overall is to be awarded costs, though costs may be reduced (including to zero) where appropriate.27
[48] Further, it strikes me that Mr Mitchell’s suggested alternative “issue by issue” approach is akin to that addressed in Packing In and discouraged by the Court of
26 Again noting that this was not a case of relatively even “mixed” success; but rather predominant success by Ms Stoneham.
27 District Court Rules, r 14.7
Appeal in Weaver, and at least in this case would result in the unedifying task of counsel and the Court conducting a minute trawl through each of the claims, the outcomes on each, and the time spent on each claim, the evidence devoted to each claim and so on, to determine the relative success and failure, and related costs, on each “issue”.28 That would be inconsistent with the purpose of costs being determined in relation to the “proceeding”,29 and being determined expeditiously.30
[49] Finally, I do not consider the Judge erred in the sense outlined at [32] in ordering Mr Stuart to pay for half of the two expert fees. Ordinarily, even if costs are discounted to reflect a party’s limited success at trial, as the successful party overall, that party is awarded their full disbursements. In this way, being required to meet only half of those expert fees was beneficial to Mr Stuart, who might ordinarily have been expected to pay the full amounts. The fact that the proceedings concerned complex matters, that it was inevitable that the parties would be required to brief experts, and that Mr Stuart also paid his own expert not insignificant fees, is not a proper basis to relieve him from contributing to Ms Stoneham’s disbursements. These factors are present in any civil litigation involving expert witnesses, including relationship property proceedings.
[50] I do, however, consider the Judge erred in the sense outlined above in discounting Ms Stoneham’s costs award by only 20 percent. Whether, and if so, what reduction is made to a successful party’s costs award to reflect that they have been unsuccessful in some issues at trial is inevitably a question of fact and degree, and ordinarily a matter best informed by the trial judge’s overall view of the outcome of the proceeding. There will accordingly usually be a range of discounts that could be appropriate in any given case, as different judges might apply different discounts, none of which can be said to be plainly wrong.
[51] In this case, however, I consider the 20 percent discount was outside the proper range to reflect the outcome of the proceeding. On two key issues, the s 182 claim and the Kupe Street property, Ms Stoneham was awarded significantly less than she
28 An approach almost adopted in the parties’ submissions on this appeal, hence the substantial submissions on an appeal of this nature.
29 District Court Rules, r 14.1.
30 Rule 14.2(1)(g).
originally claimed, being around one third only (or slightly less). And in relation to the Kupe Street property, the Judge did not accept the basis upon which Ms Stoneham had advanced that claim. I accept that in relation to both claims, Mr Stuart challenged them as a matter of principle, and in relation to the s 182 claim, did not engage in quantum. But in proceedings of this nature, where the amounts awarded are substantially less than those claimed, I consider there is a particular utility in reflecting that in the costs outcome. Encouraging parties to adopt more restrained approaches to quantum (through costs consequences) will in turn, in the ordinary course, encourage a more reasonable response, and enhance the prospects of compromise and resolution of what are ultimately difficult, costly, and emotional proceedings. Further, proceedings of this kind are particularly likely to drive entrenched positions where one party considers the other is unjustifiably seeking a very significant share of their property. Where the amounts awarded are significantly less than the sums claimed, the resisting party’s opposition to the claims will not have been wholly unreasonable.
[52] Nevertheless, in this case, Mr Stuart challenged the s 182 and Kupe Street property claims as a matter of principle and was unsuccessful in doing so. He did not engage on the quantum of the s 182 claim. Given the basis upon which Mr Stuart challenged the claims, even if the quantum of them as advanced had been tempered somewhat, it seems unlikely from my reading of the judgment that that would have meant the claims would have fallen away or resolved in some other way. The fact that Ms Stoneham was only partially successful on the quantum of these claims therefore cannot justify her costs award overall being reduced to zero. But I do consider that a reduction of around 30 to 40 percent, rather only 20 percent, would have been appropriate. Given the nature of the appeal, and that any discount falling within that would not have been wrong, the appeal will be allowed on the basis a discount of 30 percent ought to have been applied to Ms Stoneham’s costs award.31
[53] I also consider the Judge was plainly wrong to award a 25 percent increase for Mr McCarthy conducting cross-examination-like duties (at the request of the Judge).
31 Note, the discount does not apply to the half share of the expert fees that the Judge awarded in Ms Stoneham’s favour, or the half share of the hearing fee.
[54] Even if Mr Stuart had been represented at the hearing, his counsel would have conducted full cross-examination of Ms Stoneham and her witnesses, and Mr McCarthy would have still been present at the hearing while that occurred, and still charging the same fees to Ms Stoneham. So there was not a substantial increase in Ms Stoneham’s legal costs as a result of Mr McCarthy carrying out these additional duties at the Judge’s request. Mr McCarthy suggested that if Mr Stuart had been represented at the hearing, a lot less points would have been taken and the hearing would have been considerably shorter. I am not sure that is necessarily so, or at least to the extent that it would have significantly decreased Ms Stoneham’s costs. Counsel for Mr Stuart would have still been required to act on his instructions, so while there might have been some streamlining of the points, the essential issues would have still needed to have been ventilated and determined.
[55] I accordingly do not consider that Mr McCarthy carrying out the “additional tasks” of assisting the Court to ensure the evidence was tested fairly substantially increased Ms Stoneham’s costs of Mr McCarthy’s appearance at the hearing, or did so in a manner which warranted the 25 percent uplift for this step.
[56] Finally, and although not a specific ground of appeal, Mr Mitchell also criticised what he said to be a lack of reasons in the Judge’s costs judgment, including a suggested failure to address why she rejected Mr Stuart’s submissions that costs should lie where they fell, and why in the circumstances of this case he submitted it was appropriate not to apply the civil costs regime at all.
[57] There is nothing in this point. While the costs judgment is relatively (though not particularly) brief, it quite adequately explains why the Judge adopted the outcomes she did. She summarises the competing submissions and sets out the legal principles in some detail, expressly addressing the changed approach to costs in relationship property proceedings discussed earlier in this judgment. She then explains, by reference to the outcome of the proceedings, why she considered Ms Stoneham to be the successful party overall. Reading that aspect of the costs judgment together with the substantive judgment itself, it is plain why the Judge— rightly—concluded that Ms Stoneham was the successful party overall. And while the Judge does not expressly address why she rejects Mr Stuart’s submission that costs
ought to lie where they fell, it is inherent in her finding that Ms Stoneham was the successful party overall and only failed on those quantum aspects of the s 182 and Kupe Street property claims (driving the original 20 percent reduction) that this was not an appropriate case for such an outcome.
Result and costs
[58]The appeal is allowed, to the extent that:
(a)the 20 percent reduction in Ms Stoneham’s costs award is set aside and replaced with a 30 percent reduction; and
(b)the 25 percent uplift awarded for the appearance of principal counsel at the hearing ($2,865.00) is set aside.
[59]The appeal is otherwise dismissed.
[60] As to the costs of this (costs) appeal, I encourage the parties to agree a costs position, rather than incurring further costs arguing about costs. It may assist if I express my (preliminary and non-binding) view that an appropriate outcome may be for costs to lie where the fall.
[61] If despite this the parties cannot agree costs, a party seeking costs may file a costs memorandum within 20 working days of the date of this judgment, with the other party filing a memorandum in response within a further 10 working days. No memorandum is to be longer than three pages in length (excluding schedules/attachments). I will thereafter determine costs on the papers.
Fitzgerald J
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