Watts v Austin

[2024] NZHC 1446

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-23

[2024] NZHC 1446

UNDER

the Property Law Act 2006

IN THE MATTER OF

an application for orders under s 339

BETWEEN

BRADLEY TALOR WATTS

Applicant

AND

SOPHIE MARIE CATHERINE AUSTIN

Respondent

On the papers
Counsel:	M R C Wolff for the Applicant R N Zwaan for the Respondent
Judgment:	31 May 2024

JUDGMENT OF McHERRON J

(Costs)

Background

[1]    On 11 April 2024, by consent, I made orders for the sale and division of a residential property owned by Bradley Watts and Sophie Austin, in accordance with a joint memorandum of counsel dated 9 April 2024.1 In their memorandum, the parties advised that the basis for the proceeding was now resolved upon the sealing of the orders by consent. Accordingly, I noted in my minute that once that step has occurred, the proceeding could be regarded as having concluded. The parties did not ask me to, nor did I, reserve costs for a later decision.

1      Watts v Austin HC Wellington CIV-2024-485-23, 11 April 2024 (Minute of McHerron J).

WATTS v AUSTIN [2024] NZHC 1446 [31 May 2024]

[2]In summary, the orders I made by consent were:

(a)to authorise professional marketing and sale of the property at an agreed price of $1,090,000 or higher;

(b)to authorise Mr Watts to sign documents necessary to effect the marketing, sale and transfer of the property;

(c)that both parties are required to co-operate with, and refrain from taking steps which may jeopardise, the sale and implementation of the agreed orders;

(d)the net sale proceeds of sale are to be paid in equal shares to the parties, after:

(i)deduction of real estate agent’s commission and reasonable conveyancing costs;

(ii)payment of “interim compensation” to Mr Watts of $1,106.39 for money owed to him in respect of “Property matters and joint accounts”, plus $10,372.86 for mortgage instalments missed by Ms Austin in respect of the property to date and any further missed mortgage payments of $1,728.81 per week (or a pro-rata of any part week)  which have been  paid  by  Mr Watts  after  4 March 2024 and until the date the mortgage is discharged;

(iii)deduction of $30,000 representing the amount in dispute between the parties regarding other mortgage payments and personal property matters which will be dealt with separately to the sale of the property. This sum is to be held in Mr Watts’ solicitor’s trust account and will remain there until the parties reach agreement, or until an order of a Court or Tribunal is made in respect of the outstanding issues.

[3]    Finally, the consent orders specify that “For the avoidance of doubt, this interim compensation does not limit, or restrict, any claim [Mr Austin] may otherwise make in relation to division of the balance of the net sale proceeds.”

[4]    The sealed orders were sent to counsel together with my minute on 11 April 2024.

Mr Watts’ costs application

[5]    On 2 May 2024, counsel for Mr Watts filed a memorandum seeking costs and disbursements totalling $10,061. A schedule to the memorandum itemises costs sought in respect of two steps in the proceeding: filing the originating application and supporting documents and filing an interlocutory application for leave, calculated on a 2B basis and totalling $6,214.

[6]    In addition, Mr Watts seeks a 50 per cent uplift reflecting what he contends were Ms Austin’s “repeated, unreasonable, and intentional delays”. Mr Watts also seeks to recover the filing fees for the originating application and interlocutory application, totalling $740.

[7]    In summary, the basis upon which Mr Watts seeks costs is set out in the memorandum as follows:

(a)the fundamental principle that costs follow the event;

(b)the approach taken in previous High Court cases that where an applicant in an interlocutory hearing obtains a result sought in their application, even if by consent, they can be considered the “successful” party for the purposes of the application;2

(c)the power to award increased costs as reflected in r 14.6 of the High Court Rules 2016.

2      Precast NZ Ltd v Any Step Ltd [2017] NZHC 2450 at [47]–[49] and Jones v Jones [2021] NZHC 1680 at [9].

[8]    Mr Watts acknowledges that Ms Austin is legally aided and notes that ss 45 and 46 of the Legal Services Act 2011 protect legally aided persons from liability in most circumstances. However, Mr Watts submits that where a person is not legally aided for a period, they are instead private litigants and render themselves liable to costs which occur during that time.3

Assessment

[9]    My starting point is that all matters relating to the costs of or incidental to a proceeding are at the discretion of the Court.4 Exercising this discretion by reference to the principles in r 14.2 of the High Court Rules, I have decided it is not appropriate to award costs against Ms Austin, for the following reasons.

[10]   First, Mr Watts did not seek costs in the joint orders he presented to Ms Austin for agreement and which formed the basis of the orders made by the Court by consent. Ms Austin understandably thought that the orders she agreed could be made by consent would be the end of the litigation between the parties. I think it is a significant factor counting against an award of costs, that a contribution to Mr Watts’ costs was originally factored into the sale order that Mr Watts presented to Ms Austin for agreement. However, after her counsel pointed out that she was not liable for costs, reference to costs was removed from the order that was presented to the Court by consent. It was my understanding that all issues between the parties had been resolved apart from issues regarding other mortgage payments and personal property matters in respect of which $30,000 was set aside in the consent orders. That is why my minute did not reserve the issue for costs for further consideration and stated that the proceeding can be regarded as having concluded once the orders were sealed.5 Indeed, Mr Watts’ costs application risks undermining the parties’ agreement to refrain from taking steps that may jeopardise the sale and implementation of the agreed orders ([2](c) above)).

3      Carter v Western Viaduct Marine Ltd [2003] 16 PRNZ 1034 (HC) at [25] and [28]–[29]. See also

Goodman v McKenzie HC Auckland CIV-2005-404-2270, 20 October 2006 at [13].

4      High Court Rules 2016, r 14.1.

5      Minute of McHerron J, above n 1.

[11]   Second, contrary to Mr Watts’ submission, my assessment is that Ms Austin did not repeatedly, unreasonably and intentionally delay the proceedings. Ms Austin did not oppose the orders being made. Rather, the litigation between her and Mr Watts proceeded entirely by agreement.

[12]   Third, Mr Watts’ reference to the principle that where a person is not legally aided for a period, they are instead to be liable for costs as private litigants for that period, is misplaced in this instance. In certain cases, s 45 of the Legal Services Act 2011 will not apply because it will not be appropriate to characterise a party as legally aided. The most common situation in which that approach would be appropriate will be where a grant of legal aid is terminated at a certain point in the litigation, following which the litigant becomes self-funding in their litigation from that point on. The principle in Carter v Western Viaduct Marine Ltd also applies in respect of steps taken in a proceeding before a grant of legal aid is made. However, the present case is not one in which legal aid was granted but then was withdrawn.6 Here, Ms Austin applied for legal aid on 27 November 2023 (before the proceeding was filed). She says that the Legal Services Agency lost her application and it had to be resubmitted. Legal aid was eventually granted on 22 December 2023, only one day after Mr Watts filed the originating application.

[13]   The point at which the Court assesses whether someone is legally aided for the purposes of s 45 is commonly the point at which costs are being assessed by the Court. That is what happened in Gill v Lethlean.7 It is also what occurred in Cato v Manaia Media Ltd.8 In that case, Robinson J made no costs award against the second defendant who only became legally aided in 2020 even though the proceeding itself was commenced in 2017.

6      As in Carter v Western Viaduct Marine Ltd [2003] 16 PRNZ 1034 (HC).

7      Gill v Lethlean [2021] NZHC 296 at [27].

8      Cato v Manaia Media Limited [2024] NZHC 539.

[14]   Fourth, Ms Austin alerted Mr Watts to the fact that she was or would be legally aided and was not liable for costs. Accordingly, it seems that Mr Watts was on notice from the outset that Ms Austin was or would become legally aided. In these circumstances, the approach taken in Gill v Lethlean and Cato v Manaia Media Ltd is applicable.

[15]   Fifth, apart from the fact that Ms Austin is to be regarded as an aided person for the purposes of s 45 of the Legal Services Act, I do not consider that the delays in resolution described by Mr Watts’ counsel in his memorandum would amount to “exceptional circumstances” for the purposes of s 45(2). He describes a relatively brief period of a matter of months in which he attempted to agree with Ms Austin to sell their property. During this time, she was attempting to gain legal representation, and she has referred to other personal circumstances affecting her ability to respond as quickly as Mr Watts would have liked. Moreover, as Ms Austin points out, part of the delay is attributable to Mr Watts reducing an offer which she had previously accepted.

[16]   Finally, the parties have carefully worked through the matters to which they were willing to agree and costs were considered but were ultimately removed from the proposed consent orders. I am therefore reluctant to interfere with what they agreed to, after the fact.

[17]   Mr Watts relies on the principle that costs follow the event and that he should be regarded as the successful party because he has by consent achieved what he applied for in his originating application.9 In the context of the present case, that principle can only be taken so far.

[18]   The parties constructively and successfully worked together to resolve their property division by agreement. I prefer to view them both as having succeeded in the present litigation, rather than to portray one of them as having failed and the other succeeded.

9      High Court Rules 2016, r 14.2(1)(a).

Result

[19]For the above reasons, I decline to make an award of costs.

McHerron J

Solicitors:

JB Morrison, Wellington

Te Aro Law Limited, Wellington