Wightman v Public Trust
[2015] NZHC 1091
•20 May 2015
| IN THE HIGH COURTOF NEW ZEALAND CHRISTCHURCH REGISTRY |
| CIV-2012-409-001312 [2015] NZHC 1091 |
| BETWEEN | COLIN MARK WIGHTMAN & OTHERS |
| AND | PUBLIC TRUST ROBERT WILLIAM WIGHTMAN |
| Hearing: | On the Papers |
Counsel: | S M Grieve and S Caradus for Plaintiff |
Judgment: | 20 May 2015 |
JUDGMENT OF WHATA J
[re Costs]
This judgment was delivered by Justice Whata
on 20 May 2015 at 4.00 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Duncan Cotterill, Christchurch
Young Hunter, Christchurch
In my judgment of 9 December 2014,[1] I resolved that the testator, Wallace, breached his moral duty to the five claimant grandchildren. I awarded the sum of $150,000 to each of them from an estate estimated to be worth in the order of $11.5M. I expressed the view that the claimants should receive their reasonable costs out of the estate. Nevertheless, I invited memoranda, if agreement could not be reached. Agreement was not reached and the successful claimants seek costs on an indemnity basis, namely:
(a)Legal costs of $285,238, plus GST to the end of the hearing;
(b)$79,000, plus GST for costs since the hearing;
(c)Court fees of $10,140; and
(d)Disbursements of $20,903.83, plus GST.
[1]Wightman v Public Trust [2014] NZHC 3124.
Mr Robert William Wightman (Robert William) was a party to the proceeding and, but for the distribution to the five claimant grandchildren (being his siblings and cousins), he stood to receive the entirety of the residual estate. Robert William vigorously opposed the plaintiffs’ claim. He now opposes an order for costs out of the estate, except on a standard 2B basis. He also opposes the payment of disbursements to a farm consultant employed by the applicants.
Context
The plaintiffs’ claim was novel. Five grandchildren sought and obtained a finding of breach of moral duty by their grandfather, Robert Wallace Wightman (Wallace) who passed away in 1965. A previous claim by their parents was largely unsuccessful. Wallace however left a large part of his estate to his daughter, Clara, to distribute to “any or all” of his 15 grandchildren. Clara died in 2011, leaving Wallace’s then residual estate to Robert William. A corollary of this is that the five claimant grandchildren received nothing directly from their grandfather’s estate. This is to be compared with the other remaining grandchildren, who received substantial sums from one or other of their grandparents.
The present proceedings were commenced in July 2012. Robert William registered his opposition, claiming among other things that the original decision made by the High Court debarred the present claim. This was rejected by Panckhurst J, who described as Robert William’s argument about the cause of action estoppel as “more ingenious than realistic”.[2] He awarded costs on a standard 2B basis at the request of the plaintiffs.
[2]Wightman v Public Trust [2013] NZHC 671 at [25].
The substantive proceedings were heard by me over the course of three days, including cross-examination of the claimants and Robert William. Four substantive issues needed to be resolved, namely:
(a)Whether the estate had already been finally distributed;
(b)Whether the five grandchildren should be granted an extension of time to make a claim against Wallace’s estate;
(c)Whether there had been a breach of Wallace’s moral duty to the grandchildren; and
(d)If relief was granted, what was the nature of that relief?
Ultimately, I found in favour of the plaintiffs on each of these issues. I found however that Robert William had over the span of 20 or more years organised his affairs on the basis that he would eventually own the Rangatira farm (being the bulk of Wallace’s residual state). I observed that any “unfairness” by granting an extension of time to make the claim could be mitigated by the nature of the remedy (if any) afforded to the claimants. In particular I was mindful that no award should put the Rangatira farm at jeopardy of sale.[3]
Settlement negotiations and Calderbank offer
[3]Wightman, above n 1 at [83].
Attempts were made by the plaintiffs to engage in mediation with Robert William prior to the substantive hearing. There is correspondence between them suggesting that an independent mediator be retained. The plaintiffs also proposed to engage a valuer and a farm consultant in order to enable them to formulate their claim with better knowledge of the value of the estate and the farm. Robert William, however, was reluctant to mediate without a clear indication from the claimants as to what they were seeking by way of a distribution out of the estate. Mr Wightman also expressed his doubts about the merits of the claimants’ position, especially given the lapse of time since the testator’s passing.
A report was eventually produced by Mr Durham at the plaintiffs’ expense, and this was served in February 2014. An offer by the plaintiffs to mediate was also rejected in April 2014. This was followed by a without prejudice save as to costs offer on 13 June 2014. The offer recorded the following (among other things):
For this reason, we are instructed to make an offer to settle by way of full and final settlement for $4,320,000. This offer is intended to reflect the arrangement entered by Margaret and Rebecca’s daughters on the sale of Mt Hutt, although our clients will not receive as much as their cousins have. Nevertheless, just as they included Corrina Anderson in their sale proceeds, our clients will propose to split any settlement proceeds with Clare Gemmell. While Charles Anderson has been invited to take part in these proceedings, he has declined that opportunity. Our clients would naturally want to ensure that both they, and your client, were protected from further claims so any agreement would require the approval of the High Court.
There was no response to this letter.
Framework for assessment
Rule 14.1 confers a general discretion on this Court to award costs. That discretion is not unfettered and should be exercised in accordance with the general scheme of Part 14. When the discretion is exercised outside the general scheme of those rules, then it must be undertaken in a considered and particularised way.[4]
[4]Refer Glaister v Amalgamated Dairies Ltd [2014] 2 NZLR 606 (CA) at 24 and 28; refer also Jones v WHK Sherwin Chan & Walshe (2011) 25 NZTC 20-095 (HC).
As set out in Holdfast NZ Ltd v Selleys Pty Ltd,[5] the following steps should be taken when assessing costs:
(a)Categorise the proceedings under r 14.3;
(b)Work out a reasonable time for each step under r 15.5;
(c)Consider whether extra time is justified;
(d)Step back and assess the overall entitlement to costs, under r 14.6, dealing with increased and indemnity costs.
Increased and indemnity costs
[5]Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA), refer also in the family protection context TB v JB [2014] NZHC 1478 at [92].
Increased costs may be awarded where one party can show that the other party failed to act reasonably. As to indemnity costs, the leading authority remains Bradbury v Westpac Banking Corporation.[6] It frames the relevant test as follows:
Indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[6]Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400, (2009) 19 PRNZ 385 at [29].
Jurisdiction is also conferred upon the Court at r 14.6(3)(d) and (4)(f) dealing with the discretion to award either increased or indemnity costs on the following basis:
Some other reason exists which justifies the Court making an order for [increased or indemnity] costs despite the principle that the determination of costs should be predictable and expeditious.
Assessment
Category
Given the complexity of the case, the proceedings are properly categorised as 3C. In short, the case involved an assessment of jurisdiction, fact and law spanning more than 50 years.
Reasonable time
A 3C award would result in an amount of $157,584 including the preliminary hearing. The plaintiffs’ assessment of the time required is not challenged (though the underlying basis for a cost award in excess of 2B is not accepted).
Extra time
The plaintiffs seek an indemnity award and have not framed their claim on the basis that extra time required.
Increased or indemnity costs
The plaintiffs rely on the following passage from Bill Patterson, Law of Family Protection and Testamentary Promises to support my indication that reasonable costs should be paid out of the estate:[7]
Costs, when awarded, are usually on a solicitor and client basis so as to afford a complete indemnity to each party, unless the estate is not large enough to enable this to be done, in which case, the Court will fix costs at a more modest level or even award no costs at all.
[7]Bill Patterson Law of Family Protection and Testamentary Promises (4th ed, LexisNexis, Wellington, 2013) at 342.
This view coincides with recent senior appellate Court awards of costs out of the estate on an indemnity basis.[8] Furthermore, the practice of awarding costs out of the estate on an increased or indemnity basis is longstanding,[9] reflecting the special character of proceedings under s 4 FPA and the proper discharge of a testator's moral duty to family members.[10]
[8]Luxford-Wood v Wood [2012] NZCA 377; Luxford-Wood v Wood [2013] NZSC 153.
[9]See Allardice v Allardice (1910) 29 NZLR 959 (CA); Keelan v Peach [2003] NZFLR 727 (CA); Michie v Hopcraft (1910) 29 NZLR 779 (SC).
[10]See Patterson at 2.1.
But the cited passage must be read alongside the full narrative provided by Patterson, including the observation the practice of the Court to award costs on a solicitor client basis out of the estate is not universal and is subject to the proper application of rule 14 governing costs. Patterson helpfully provides several examples where the practice has not been employed.[11]
[11]For example, Patterson notes that where the applicant is successful, no order for the applicant's costs will be made out of the estate because the order in favour of the applicant is such that it is proper that the applicant meet his or her own costs (17.41). The outcome in Keelan v Peach, above n 9, often cited in support of the practice, is in fact an illustration of an exception to it, with the appellant in that case required to pay the respondent's costs.
My review of recent authorities also suggests that the Court is now more cautious about awarding costs out of the estate, particularly where the estate is small, the costs award will have a substantial effect on beneficiaries and or there is some other disqualifying feature that makes payment out of the estate inappropriate.[12] But I do not think we have reached the point where the practice can be ignored, given its recent application (for example) by the Supreme Court.[13]
[12]See, for example, TB v JB [2014] NZHC 1478 where the Court observed that exceptional circumstances are required before an indemnity award is made. I note that this observation was made in the context of an appeal against a costs award and in circumstances where the size of the estate was small relative to the claim for costs; Bones v Wright [2013] NZHC 2093; Kirby v Sims HC Wellington CIV-2010-485-794, 22 December 2011.
[13]Wood-Luxford v Wood (SC), above n 8.
In the result, I have come to the view that the longstanding practice of awarding costs out of the estate on a solicitor client basis is a relevant factor to be taken into account is determining whether costs should be paid out of the estate and on what basis. This is consistent with the driving principle of the costs regime that any costs award should be predictable and expeditious. But whether an award of this nature should be adopted in any given case will depend (as it does already) on the circumstances of the estate, the effect of an award on beneficiaries, and the conduct of the litigation.
For completeness I wish to address the United Kingdom Court of Appeal decision in Shovelar v Lane[14] cited by Mr Hunt. The Court of Appeal resolved that indemnity awards out of the estate are appropriate in probate cases concerning an inquiry into the correction of testator error. By contrast, the Court concluded that the usual rules governing costs should apply where the estate proceedings are essentially adversarial.[15] But for my part, the dichotomic approach in Shovelar should not be followed in New Zealand. While claims under s 4 of the FPA are properly described as civil adversarial claims, the Court stands in the shoes of the testator/testatrix to secure the proper discharge of his/her moral duty to qualifying beneficiaries. This duty was first engrafted onto then unique legislation by the Court of Appeal in Allardice v Allardice[16] and reified in a number of senior appellate decisions over the span of more than 100 years.[17] The practice of awarding costs is linked to this autochthonous jurisprudence. It should be applied and or modified in light of the evolution of that jurisprudence, rather than the jurisprudence of another (albeit closely connected) jurisdiction.
Application to this case
[14]Shovelar v Lane [2011] EWCA Civ 802, [2012] 1 WLR 637 (CA).
[15]Rodney Hansen J expressed a similar view in Re Miller (Costs) (2001) 20 FRNZ 459 (HC) at [6], though more succinctly, observing that applicants making claims against an estate are sui juris and costs should be assessed in the usual way. [Notably that case concerned a claim by a charity, the losing party. The central issue was whether costs should lie where they fall].
[16]Allardice v Allardice above n 9.
[17]See Patterson, above n 7 at [2.1].
As to whether increased or indemnity costs should be awarded on the facts in this case, I observe:
(a)The plaintiffs were granted leave to commence these proceedings out of time. They have been afforded an indulgence. This brings back into focus the need to be sure that there is no unfairness to Robert William in any award made.
(b)The plaintiffs have been awarded a substantial sum out of the estate.
(c)The estate is large and the public trust has indicated that both the award and the costs can be accommodated by the estate (although by way of additional financing). But the primary effect of the costs award out of the estate will be carried by Robert William.
(d)I accept Mr Hunt's complaint that the settlement offer was unrealistic. The authorities are clear, an award is not about achieving parity and the settlement offer appeared to be based on this. A more moderate starting point may have avoided litigation, though I accept that Robert William was strident in his opposition.
(e)The plaintiffs’ actual costs (including preliminary hearing costs) are about two to three times[18] more than the costs incurred by Robert William and 1.8 times a 3C scale award. The comparative costs incurred are a relevant factor to be considered in the assessment of a reasonable costs award, even though the plaintiffs had the running of the case. They provide an objective reference point as to the reasonableness of scale of the costs incurred as Robert William engaged on all of the key issues. For completeness, I mean no criticism of counsel for the plaintiffs in making the comparison. The case was complex and needed detailed analysis of fact and law. Their success speaks for itself. But overall, the contribution to be made by the estate should be no more than what is reasonable in the circumstances.
(f)A full indemnity award would shift the comparative inefficiency in the presentation of the plaintiffs’ case to Robert William, as the sole remaining beneficiary of the estate following the disposition of the awards to the plaintiffs.
[18]There is some ambiguity about the exact level of Robert William’s actual costs as he was initially represented by other counsel. But given that Young Hunter was involved in the major part of the litigation, including the preliminary hearing, I am satisfied that any other costs incurred are likely to be relatively minor.
In these circumstances, and with the benefit of careful reflection, an increased or indemnity costs award is not appropriate in this case.
Quantum
As to quantum, I am however satisfied that the plaintiffs should receive an award on a 3C for all parts of the proceedings. I am mindful that Pankhurst J made an award of costs on a 2B basis at the behest of the plaintiffs in relation to the preliminary hearing by analogy to r 14.8.[19] But with the benefit of having heard the full case I consider it would be plainly unjust to limit the costs to the plaintiffs to a 2B award for their success on a key issue. Indeed, it would unfairly transfer the burden of Robert William’s adversarial approach to the plaintiffs. Accordingly, to the extent it is required, I rely on r 14.8(2) to discharge the order on the basis that it should not have been made.
[19]It appears from the judgment on costs that Mr Hunt (at [7]) submitted that r 14.8 was apposite.
There shall be an order of costs on all parts of the proceeding on a 3C basis in favour of the plaintiffs out of the estate.
Disbursements
Mr Durham's report was relevant to the proceedings insofar as it aided the assessment of the potential options of the estate in the event that the Court ordered relief from the estate. As noted at [83] of the judgment, the potential impact of an award on the capacity to retain the Rangatira farm in family hands, was a key issue in the proceedings.[20] But I am not satisfied as to reasonableness of the disbursements claimed.
[20]Wightman, above n 1 at [83].
First, I accept Mr Hunt’s contention that the detailed analysis of the adequacy of the current management was surplus to requirements in order to address the key issue mentioned above.
Second, I examined the invoices and they fall well short of what is required to justify an award in terms of rule 14.12. In short I am unable to assess the reasonableness of the disbursement claimed without a clear breakdown of the invoices, including the number of hours incurred in relation to specific tasks, the applicable charge out rates and the reasonableness of those charge out rates in context.
I afforded the plaintiffs an opportunity to redress the gap in the evidence about the reasonableness of the disbursement claimed, but the responses did not address my concern. They were not able to provide an affidavit from Mr Durham so could not elaborate on his invoices. While the plaintiffs are not at fault for this lacuna, I may only award disbursements that I consider are both specific to and reasonably necessary for the conduct of the proceeding, and are reasonable in amount.[21] The information supplied did not satisfy this requirement. From what I can deduce from the information given the amount of time charged for the baseline assessments ($15,835), the final invoice for “expert services” ($16,208) appears excessive, notwithstanding the requirement to rework budgets.[22] I observe, however, that Mr Durham’s initial estimate at $10,000 plus GST appears reasonable and is justified by reference to his report. There should be an order accordingly.
Ms Gemmell’s contribution
[21]Refer r 14.12(2)(b)—(d).
[22]I deduce from the correspondence that the charge-out rate was in the order of $155 per hour ($4,200 divided by 27 hours as per Mr Durham’s note of 3 April 2014). If this is correct Mr Durham spent in the order of 206 hours ($32,043 divided by $155 per hour) in preparing and finalising his evidence. Of this approximately 104 hours ($16,208 divided by $155 per hour) was expended on the final report and the evidence proper.
Ms Gemmell’s costs raise a complex issue as to whether a non litigant contributor may have their costs recouped together with the payment out of the costs for the litigant parties. I invited the plaintiffs to provide evidence of any litigation agreement reached between them and Ms Gemmell. An agreement was produced. It records:
BACKGROUND
…
F. The Parties wish to divide equally between them any award or payment they obtain as a result of the claim, whether through Court order, settlement or otherwise.
…
AGREEMENT
The Parties agree:
1.They will appoint Duncan Cotterill Lawyers (Stephanie Grieve and Stephen Caradus) to bring under the Act (“the Claim”) on behalf of the five eligible grandchildren (“the Applicants”).
2.Each of the Parties agree to fund the claim under the Act in equal shares to a maximum amount of $120,000 plus GST and disbursements (“the Maximum Amount”). Subject to clause 11 (below), each party will be severally liable for their share (one sixth) of the total costs incurred, including legal costs and disbursements, up to the Maximum Amount.
3.Costs and disbursements will be invoiced to the Parties from time to time as they are incurred in the course of the Claim. On the issue of an invoice, each Party will receive a separate invoice for a one sixth share of the total amount of the invoice.
…
6.The Applicants will bring the Claim in accordance with the following strategy:
6.1Each of the Parties will share equally in any award or settlement payment obtained by the Applicants and resulting from the Claim unless otherwise agreed between them.
…
11.Notwithstanding paragraph 2 (above) in the event of the Court making a costs award against the Parties, each Party will be responsible for their share of the costs award (one sixth). In the event that any Party pays more than their one sixth share of the costs, they are entitled to recover the amount paid in excess of their one sixth share from the Party (or Parties) who has paid less than their one sixth share.
The plaintiffs also cite McGechan’s Commentary to s 51G of the Family Protection Act 1955 which states:
The Court, relying on English authority, has found no reason to limit its costs jurisdiction to parties to the proceeding, but has held that it encompasses non parties: Hamilton v Papakura DC (1997) 11 PRNZ 333, at pp 338-339 (parties financially supporting the plaintiff’s proceeding)…
Erwood v Maxted[23] was also cited for the following proposition:
[18] …We have no doubt that this Court possesses jurisdiction to make such an order in respect of a non-party under the broad discretion conferred by r 53 of the Court of Appeal (Civil) Rules 2005 to make any orders as to costs that seem just. There is ample authority in New Zealand and elsewhere for the proposition that a broadly-based costs discretion may be exercised against non-parties to civil litigation. Although these cases have dealt with awards of costs against a non-party, we see no reason in principle why a non-party, in circumstances such as those applicable here, should not be entitled to an award of costs in their favour.
(Footnote omitted.)
[23]Erwood v Maxted (2010) 20 PRNZ 466 at 471.
Mr Robert William Wightman opposes a costs award inclusive of Ms Gemmell’s costs by reference to r 14.2(f) which states:
(f)An award of costs should not exceed the costs incurred by the party claiming costs.
Mr Hunt submits that this rule prohibits an award of costs, in favour of the party, which exceeds the costs incurred by that party.
But as I have decided to award costs on a 3C basis only, the remaining substantive issue is whether or not the five plaintiffs in this case incurred costs to that level. The litigation agreement makes it clear that each of the parties agreed to share costs on a one sixth basis. In the result, the five parties to the proceeding are liable to costs to five sixths of the costs incurred. An award on a 3C basis, by my calculation, is less than the total exposure of the parties to costs. On that basis, the issue has effectively become moot.
In case I am in wrong about this, the plaintiffs in reaching agreement with Ms Gemmell compromised their share of any award in the litigation, the consideration for which included a pro rata allocation of costs. Whether directly or indirectly, therefore, the active parties to the proceedings are carrying the costs in the proceeding. The underlying principle of justness in the award of costs therefore resonates here as it did in Erwood v Maxted.[24]
Costs on the application for costs
[24]Above n 23.
Robert William Wightman has partially succeeded in his opposition to full indemnity. That being the case I consider that costs on the application for costs should lie where they fall.
Mr Robert William’s costs
Robert William does not require an order in relation to his costs.
Outcome
The plaintiffs are entitled to their costs on a 3C basis, including in relation to the preliminary hearing on jurisdiction.
The costs award in respect of the preliminary issue is revoked.[25]
[25]Wightman v Public Trust above n 2.
There shall be an order for disbursements of $10,000 plus GST together with Court fees.
The sums shall be paid out of the estate.
I do not expect there will be any issues as to final quantum.
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