Taylor v Vernon
[2024] NZHC 1483
•6 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1350
[2024] NZHC 1483
UNDER the High Court Rules 2016, Part 18 IN THE MATTER OF
declarations of a constructive trust
BETWEEN
DIANNE FAYE TAYLOR
Plaintiff
AND
SCOTT FRANCIS VERNON
First Defendant
SCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED
as trustees of the Scott F R Trust Second Defendants
SCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED
as Trustees of the Horizon Hurstmere Trust Third DefendantsHORIZON THORNES TRUST LIMITED
as trustees of the Horizon Thornes Trust Fourth DefendantSCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED
as Trustees of the Horizon Family Trust Fifth Defendants
On the papers: 6 June 2024 Counsel:
Jan McCartney KC/John Cox for the Plaintiff
Vivienne Crawshaw KC/Felicity Monteiro for the First Defendant Adam Ross KC/Nick Frith for the Second to Fifth Defendants
Judgment:
6 June 2024
TAYLOR v VERNON [2024] NZHC 1483 [6 June 2024]
COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 6 June 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
TABLE OF CONTENTS
Paragraph No.
Relevant background [3]
Ms Taylor’s position [14]
Stay applications [14]
Leave application [19]
Defendant’s position [20]
Costs on the leave application [22]
Defendant’s costs on the original statement of claim [26]
The stay applications [28]
Effect of the new causes of action in the stay application [30]
Costs on costs memoranda [31]
Result [32]
Orders [33]
Solicitors:
Rennie Cox (John Cox / Anne Paterson), Auckland, for the Plaintiff
Wilson Harle (Felicity Monteiro / Portia Baine), Auckland, for the 1st Defendant
MinterEllisonRuddWatts (Nicholas Frith / Alex Church), Auckland, for the 2nd to 5th Defendants
Copy for:
Jan McCartney KC, Auckland, for the Plaintiff
Vivienne Crawshaw KC / Samantha M Wilson, Hobson Chambers, Auckland, for the 1st Defendant Adam Ross KC, Shortland Chambers, Auckland, for the Second to Fifth Defendants
[1] Ms McCartney has filed submissions in relation to costs dated 21 December 2023. Counsel for the defendants first filed a joint memorandum in response, dated 24 January 2024. Ms McCartney has filed a reply dated 1 February 2024.
[2]The costs in issue relate to two interlocutory applications:
(a)the defendants’ stay application;
(b)the plaintiff’s application for leave to file an amended statement of claim.
Relevant background
[3] On 8 June 2023, Ms Taylor applied in the Family Court for orders for division of relationship property. At the same time, she applied to transfer the proceedings to the High Court. On 13 June 2023, Ms Taylor applied to the High Court for orders declaring the property held by the second to fifth defendants is subject to a constructive trust in favour of Ms Taylor as beneficiary.
[4] On 5 July 2023, the defendants filed stay applications in this proceeding. The stay applications were on the grounds, in summary, that Ms Taylor’s claim was the subject to two contracting-out agreements (COAs) which prevent claims being brought in equity. The defendants argued that in order to determine the constructive trust claims, the High Court would have to determine the validity of the COAs, which was a question for the Family Court specialist jurisdiction.
[5] On 5 July 2023 the defendants filed a joint memorandum for directions enlarging the time for them to file statements of defence pending determination of their applications in the stay proceeding. No response was received from the Court or Ms Taylor between 5 July and 24 July 2023 to the joint memorandum of 5 July 2023.
[6] On 19 July 2023, Ms Taylor filed a notice of opposition to the stay application which relied on the terms of the COAs and took the position that the claims were not barred as, on proper interpretation, neither COA precluded further claims.
[7] On 24 July 2023 the first defendant and second to fifth defendants filed separate statements of defence.
[8] On 18 August 2023, Associate Judge Gardiner ordered that the stay applications be set down for a hearing.
[9] On 29 August 2023, Ms Taylor sent letters to the first defendant and the second to fifth defendants being a notice of cancellation of the COAs based on fraudulent misrepresentations.
[10]On 30 August 2023, Ms Taylor filed:
(a)a reply to the affirmative defences, relying on the 29 August 2023 letter, and expressed the view that Ms Taylor’s cancellation of the COAs removed any alleged bar to the High Court proceeding;
(b)an amended statement of claim, with two new causes of action seeking declarations under the Contract and Commercial Law Act 2017, alleging that, by notice on 29 August 2023, the COAs had each been cancelled for fraudulent misrepresentation.
[11] Ms Taylor did not seek leave to file the amended statement of claim and took the position that leave was not required, or if it was required, it should be granted. The Court issued a decision on 30 November 20231 holding that leave was required under r 7.77(4) and granting leave. Costs were reserved pending determination of the defendant’s stay applications.
1 Taylor v Vernon [2023] NZHC 3445.
[12] On 6 December 2023, Judge Muir ordered the transfer of the Family Court proceedings to the High Court pursuant to s 38A of the Property (Relationships) Act 1976 (PRA).
[13] Subsequent to the transfer of the Family Court proceedings to the High Court, the defendants discontinued the stay applications.
Ms Taylor’s position
Stay applications
[14] Ms McCartney summarises the grounds relied on by the defendants in seeking a stay as:
(a)Ms Taylor’s claim is subject to the COAs which “prevents the plaintiff bringing the claim in equity”;
(b)the proceedings were a duplication in the Family Court proceedings and an abuse of process;
(c)considerations of costs, convenience, and the interests of justice support a stay so that there are not two sets of proceedings into separate courts.
[15] Ms McCartney submits that the second to fifth defendants grounds for the stay were the same as those enumerated for the first defendant, together with a new ground that no claim can arise against the second to fifth defendants unless the COAs are found to be void or otherwise set aside.
[16] Ms McCartney submits that the stay applications were misconceived as it was always inevitable that the proceedings would be transferred from the Family Court to the High Court. She submits that the authorities establish and that, in circumstances of litigation such as the current proceeding, it is appropriate to transfer the proceedings to the High Court in order to save time, costs and the additional resources by running the same set of issues and applications through a second court. She submits that that is what the Family Court judge accepted, and the stay applications were bound to fail.
She submits there should be a 50 per cent uplift in respect of the costs in opposing the stay application on the basis that increased costs are appropriate to reflect the lack of merit in the application and the failure to accept a correct legal argument.
Leave application
[17] Ms McCartney submits that on established principles it was always inevitable that the Court would grant leave to Ms Taylor to file her amended statement of claim. She summarises the defendants’ grounds of opposition to leave as prejudice from delay and abuse of process and submits that the opposition was without merit and was unnecessary.
[18] Ms Taylor seeks costs in respect of opposing the leave application, together with a 50 per cent uplift on the basis that the defendants opposition lacked merit and the defendants failed to accept a correct legal argument.
Quantification of Ms Taylor’s costs
[19] At [23] of Ms McCartney’s submissions of 21 December 2023 are set out the calculation of costs and she submits that category 3 (and a combination of bands B and C) are appropriate. Ms Taylor seeks a time allocation of 6.95 days which gives, through the application of combined bands B and C, a costs figure of $24,533.50. She then seeks an uplift of 50 per cent, being $12,266.75, producing total costs of
$36,800.25. Included in this amount is a claim for time for preparing Ms Taylor’s submissions on costs dated 21 December 2023, i.e. seeking an award of “costs on costs”.
Defendants’ position
[20] Counsel for the defendants submits that Ms Taylor’s claim is excessive and inconsistent with the provisions of the High Court Rules 2016, particularly r 7.77(8).
[21]The defendants submit that:
(a)costs should lie where they fall on the stay applications;
(b)the first defendant should be awarded scale costs of $4,780.00 (plus disbursements) for his original statement of defence under r 7.77(8);
(c)the second to fifth defendants should be awarded scale costs of
$6,692.00 (plus disbursements), for their original statement of defence and joint memoranda dated 5 July 2023 and 24 July 2023 as costs that were occasioned by the original statement of claim, under r 7.77(8);
(d)Ms Taylor should bear her own costs for the application for leave to file an amended pleading under r 7.77(8). The defendants accept that an order for scale costs is due to their opposition of Ms Taylor’s leave application is appropriate (calculated as $4,302.00);
(e)these costs are appropriately calculated on a category 2B basis, and while the defendants consider that the proceeding is likely to warrant category 2B for the purposes of costs, formal categorisation ought to await the filing of consolidated pleadings;
(f)no uplift on scale costs are justified;
(g)costs should lie where they fall in respect of the costs memoranda, given the parties were broadly equivalently successful on the underlying applications.
Costs on the leave application
[22] Counsel for the defendants summarised Ms Taylor’s argument that she is entitled to costs on her application for her application for leave as granting of leave was “inevitable”, and she is entitled to indemnity costs as “the position taken by the defendants was improper and unnecessary”.
[23] Counsel for the defendants submit the overriding rule is that costs are at the discretion of the Court; so far as possible the determination of costs should be predictable and expeditious; and r 14.2(1) sets out the general principle that the successful party is paid scale costs by the unsuccessful party. Counsel submits that on
the leave application both parties had some level of success – the defendants on the need for an application for leave and the plaintiff on the granting of leave.
[24] Counsel for the defendants refers to r 7.77(8) which relates to amended pleadings and provides:
If an amended pleading has been filed under this rule, the party filing the amended pleading must bear all costs of and occasioned by the original pleading and any application for amendment, unless the court orders otherwise.
[25] Counsel submits that under r 7.77(8), the default position is that Ms Taylor should bear all costs of the original pleading and her application for leave. He seeks to distinguish the case of Nellies v Mark2 as the plaintiff in that case was unsuccessful in arguing that leave was not required. Counsel submits that on this basis it is appropriate the plaintiff bear her own costs in relation to the application for leave but accepts that the defendants are liable for costs in opposing the application for leave which was unsuccessful.
Defendant’s costs on the original statement of claim
[26] Counsel for the defendant submits that the first defendant and the second to fifth defendants should each be entitled to costs in their statements of defence to the original statement of claim filed by Ms Taylor. Counsel also submits that the second to fifth defendants should be entitled to costs for the joint memoranda filed on 5 July 2023 and 24 July 2023 as they were occasioned by the original statement of claim.
[27] The first defendant seeks costs in respect of the statement of defence on a 2B basis as $4,780.00 (plus disbursements) and the second to fifth defendants seek costs on a 2B basis of $6,692.00 (plus disbursements).
The stay applications
[28] Counsel for the defendants submits that the description of the first defendant having “abandoned” the stay applications is a mischaracterisation and submits that the
2 Nellies v Mark [2023] NZHC 1526.
stay applications were rendered redundant by a transfer of the related Family Court proceeding to the High Court. Counsel submits that costs on the stay applications should lie where they fall, as the applications have been made redundant by a series of timetabling delays in the High Court and by the supervening Family Court decision on transfer of the Family Court proceedings to the High Court. Counsel also submits the stay applications arguably were also occasioned by the original pleading and so are arguably covered by r 7.77(8) and therefore Ms Taylor should bear the costs of them.
[29]Counsel for the defendants submits:
(a)that the supervening event bringing about the discontinuance was the Family Court’s decision to transfer the Family Court proceedings to the High Court;
(b)the stay applications were brought as an interim measure pending resolution of the Family Court proceeding – to be determined by the Family Court’s ruling on transfer and/or the validity of the COAs;
(c)it is incorrect to say that the stay applications were bound to fail on the basis the Family Court would always order a transfer;
(d)the stay applications were an interim measure to ensure that the defendants would not be forced to defend two sets of concurrent proceedings and, if matters had progressed more quickly in the High Court, then the stay applications may have been determined prior to any transfer ruling from the Family Court;
(e)the stay applications were made redundant by supervening events and there are no grounds for costs to be awarded against the defendants on the stay applications and no grounds for increased costs;
(f)that the stay applications were abandoned, not because of the merits which remain undetermined, but because of transfer of the Family Court proceeding.
Effect of the new causes of action in the stay application
[30]Counsel for the defendants submits:
(a)that amended statement of claim filed by Ms Taylor on 30 August 2023, shortly after the hearing of the stay applications had been ordered by Associate Judge Gardiner, had the practical effect of delaying the hearing of the stay applications as the stay applications required amendment;
(b)that directions were then made by the Court providing for amended stay applications to be filed and the first defendant was preparing to do so;
(c)that r 7.77(8) arguably applies in this context where the original stay applications, at least to the extent amendment was required, was a cost occasioned by the original pleading and was a further factor supporting the defendants’ position that costs should lie where they fall on the stay applications.
Costs on costs memoranda
[31] Counsel for the defendants submits that costs should lie where they fall in respect to Ms Taylor’s memoranda; that the defendants have not taken any unreasonable position in opposing the costs at the conference on 14 December 2023 as Ms Taylor had entirely ignored r 7.77(8) and has grossly over-estimated her costs entitlement. Counsel also points out the plaintiff made no attempt to agree costs between counsel prior to the memorandum of 12 December 2023.
Result
[32]The reasons for the orders made below are as follows:
(a)I do not accept Ms McCartney’s position that the transfer of the proceedings from the Family Court to the High Court was “inevitable”. There was an opposed hearing and a judgment given by Judge Muir directing that the proceedings be transferred under s 38A of the PRA after weighing up the relevant factors;
(b)I do not accept Ms McCartney’s position that leave to file the amended statement of claim was “inevitable”. The judgment involved weighing up the relevant factors in reaching the decision to grant leave;
(c)I accept the defendant’s argument that the merits of the stay applications remain undetermined and, due to delays in timetabling before they could be heard, were overtaken by the supervening event of transfer of the proceedings from the Family Court to the High Court;
(d)rule 7.77(8) applies in respect of the defendant’s costs occasioned by the original statement of claim and the application for leave to amend it;
(e)I do not accept Ms McCartney’s proposition that category 3, with the combination of bands B and C are appropriate. Costs should be categorised as 2B as these were ordinary defended interlocutory applications.
Orders
[33]In light of the above, I make the following orders:
(a)Ms Taylor is awarded costs on a 2B basis in respect of her leave application to file an amended statement of claim, reduced by 25 per cent as she was unsuccessful on the argument that leave was not required, but was successful in obtaining leave. The greater part of the application related to the application for leave and hence the reduction of 25% rather than 50%;
(b)the first defendants are entitled to costs on a 2B basis in respect of filing a statement of defence to the original statement of claim;
(c)the second to fifth defendants are entitled to costs on a 2B basis in respect of filing a statement of defence to the original statement of claim;
(d)the defendants are entitled to costs on a 2B basis in respect of filing the joint memoranda of 5 July and 24 July 2023;
(e)costs should lie where they fall on the stay applications. As I have noted above these applications were undetermined and were overtaken by a supervening event of transfer of the proceedings from the Family Court to the High Court due to timetabling delays in being heard;
(f)costs should lie where they fall in respect of the costs memoranda, as “costs on cots” is not justified.
[34] The parties are directed to agree costs on the basis of the above orders and if there is any further dispute this may be referred back to the Court.
…………………………….. Associate Judge Taylor
2
1