Turner v Public Trust

[2020] NZHC 622

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-326

[2020] NZHC 622

IN THE MATTER

of the Trustee Act 1956

BETWEEN

MAPUNA LYNETTE TERESA TURNER

Plaintiff

AND

THE PUBLIC TRUST

Defendant

Hearing:	On the papers
Appearances:	M Reason for Plaintiff A Holden for Defendant
Judgment:	24 March 2020

JUDGMENT OF LANG J

[on costs]

This judgment was delivered by me on 24 March 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

Nolan & Lu, Lawyers, Hamilton Wilson Harle, Auckland

M Reason, Te Aroha

TURNER v THE PUBLIC TRUST [2020] NZHC 622 [24 March 2020]

[1]                 On 7 February 2020 I issued a judgment in which I declined an application by Ms Turner for a freezing order and/or injunctive relief preventing the Public Trust from selling a property owned by the estate of the late Dennis Paul Samson.1 I am now required to fix costs in relation to the application.

[2]                 The Public Trust seeks an award of costs against Ms Turner on a category 2B basis together with disbursements as fixed by the Registrar. These would amount to approximately $11,310.91. The Public Trust has incurred total legal costs of approximately $34,000 dealing with this matter.

[3]                 The Public Trust was undoubtedly the successful party in this proceeding and would ordinarily be entitled to an award of costs against Ms Turner. The issue of costs is complicated in the present case by two factors. The first is that Ms Turner was the recipient of a grant of legal aid in relation to the application. The second is that Ms Turner is currently an undischarged bankrupt.

Costs against a legally aided party

[4]                 Section 45 of the Legal Services Act 2011 (the LSA) relevantly provides as follows:

45       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:

1      Turner v The Public Trust [2019] NZHC 92.

(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]                 Ms Turner stands to inherit a one-half share of the proceeds of sale of the house property that was the subject of the present proceeding. Current estimates suggest the house has a value of approximately $300,000. The costs and expenses incurred by the Public Trust would obviously have to be paid before Mr Sansom’s estate could be distributed. Ms Turner’s share of the estate would be paid in the first instance to the Official Assignee, who would be reimbursed for his costs and disbursements. He would then distribute the balance to creditors who have filed claims in Ms Turner’s estate.

[6]                 The Public Trust understands the claims filed with the Official Assignee amount to approximately $75,000. This is likely to be less than the value of her share of the estate. It therefore seems there is a realistic prospect the Official Assignee will be paying a surplus to Ms Turner once he has completed administration of her bankruptcy.

[7]                 In the present case any award of costs against Ms Turner would constitute a debt accruing after she became bankrupt. The Official Assignee would therefore not pay it using funds derived from the realisation of Ms Turner’s assets.

[8]                 These factors persuade me it is reasonable for Ms Turner to pay an award of costs on a category 2B basis together with disbursements because she will shortly have the means to meet the award in terms of s 45(1) of the LSA. The fact that she has put

Mr Samson’s estate to considerable expense in defending a proceeding that had little prospect of success also means she should be required to pay costs. Furthermore, exceptional circumstances exist under s 45(2) because Ms Turner’s financial position will change markedly once she receives any surplus from the Official Assignee.

[9]                 These factors persuade me it is appropriate to make an award of costs against Ms Turner on a category 2B basis together with disbursements as fixed by the Registrar. In terms of s 45(4) of the LSA this is the same amount Ms Turner would have been required to pay if she had not been legally aided.

[10]              The Public Trust acknowledges it cannot offset the legal costs it has incurred against Ms Turner’s share of Mr Samson’s estate.2 It therefore seeks an order requiring the Official Assignee to pay any costs awarded against Ms Turner to the Public Trust before distributing the surplus to Ms Turner.

[11]              The Public Trust has not set out the legal basis on which the Court could make the order it seeks. Furthermore, it would be contrary to s 281 of the Insolvency Act 2006. This requires the Official Assignee to pay any surplus to the bankrupt once creditors have been repaid with interest. I therefore decline to make such an order. It will therefore be for the Public Trust to levy execution of the costs awarded against Ms Turner by whatever means it considers appropriate.

Lang J

2      Monk v Burgess [2019] NZHC 324, [2019] NZAR 534.