WL v AJ

[2023] NZHC 3426

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,

11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

https://

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2020-441-77 CIV-2021-441-41

[2023] NZHC 3426

BETWEEN

WL

Plaintiff

AND

AJ

First Defendant

AND

RA

Second Defendant

Hearing:

On the papers

Appearances:

P N Ross for the Plaintiff

E V R Stannard for the Defendants

Judgment:

29 November 2023

JUDGMENT OF PALMER J

(Costs)

Solicitors
Willis Legal, Hastings

Cathedral Lane Law Holdings Limited, Napier

WL v AJ [2023] NZHC 3426 [29 November 2023]

Judgment

[1]        In a judgment of 31 March 2023, Mallon J made directions to divide relationship property in these proceedings equally between the parties, including the former family home.1 She made the following orders:2

(a)WL’s applications for constructive trust, knowing receipt and breach of fiduciary duty are dismissed.

(b)The Agreement (pursuant to which AJ agreed to make no claim on the Property) is void pursuant to s 21F and is not to be given effect under s 21H.

(c)There are no extraordinary circumstances that make equal sharing of the Property repugnant to justice under s 13 of the PRA.

(d)The relationship property (inclusive of the Property) is to be shared equally.

(e)AJ’s claim for occupation rent pursuant to s 18B of the PRA is dismissed.

(f)Within three weeks of the date of this judgment, the parties are to file brief submissions if they are unable to resolve costs despite the indication I have given that they follow the event and band 2B should apply.

Law of costs regarding legally aided litigants

[2]        WL and AJ are in receipt of legal aid. RA is not. Section 45 of the Legal Services Act 2011 provides, relevantly:

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:

1      WL v AJ [2023] NZHC 703 at [106].

2 At [106].

(a)any conduct that causes the other party to incur unnecessary cost:

(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)If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person’s liability.

…

[3]        The Court of Appeal has stated that exceptional circumstances for the purposes of s 45(2) are those which are “quite out of the ordinary”.3

Submissions

[4]        Ms Stannard, for AJ and RA the defendants, submits that WL should pay the actual costs AJ incurred, of $30,525.44, because:

(a)In addition to extensive delays in filing documents, WL repeatedly failed to follow timetable directions. He failed to provide discovery in spite of three court orders, leading to AJ applying for unless orders, which the Court declined to make. WL failed to provide a brief of evidence and list of documents by a court deadline. This required counsel for AJ to have to engage repeatedly with WL’s counsel and with the Court.

3      Ngāti Tama Custodian Trustee Ltd v Phillips [2020] NZCA 252, (2020) 25 PRNZ 465 at [7] citing

Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA) at [20].

(b)WL unreasonably pursued several points in the proceedings:

(i)A constructive trust claim against RA that was entirely without evidential foundation and was abandoned at the end of the hearing.

(ii)Reliance on a contracting out agreement, which was entirely unmeritorious.

(iii)Failing to agree to an equal division of relationship property, which AJ sought throughout the proceedings.

(c)WL is in full-time employment as an engineer whereas AJ relies upon a benefit.

(d)If the parties were not legally aided, under the High Court Rules 2016, costs on a 2B basis would be $38,434 and, if they were uplifted by 25 per cent for the above reasons, would total $48,042.50. That shows the actual fees claimed are reasonable.

[5]        Mr Ross, for WL, submits that although the costs were appropriately categorised as scale 2B, s 45 of the Legal Services Act precludes costs being awarded. The delays and adjournment were due to WL’s serious accident. The litigation was subject to a genuine contest over an agreement, even though it was prima facie void. WL’s claim was premised on what AJ had said to him. AJ delayed filing a defence to the claim and had to seek leave to file out of time. Her evidence changed when confronted with inconsistent evidence. There were no settlement proposals. It is not unreasonable to seek an uneven division of the relationship property when the parties had an agreement. There were no extraordinary circumstances and no costs orders should be made.

Should costs be awarded?

[6]        The judgment involves a reasonably straightforward finding that the agreement was void and the relationship property is to be divided equally. RA’s claim for

post-separation contributions were found to be approximately balanced out by WL’s payments over the relevant period.4 Mallon J found in favour of AJ regarding most of the conflicts in the evidence.5 She declined to make an order for sale and gave RA three months to settle AJ’s claim.6

[7]        As Mallon J stated, ordinarily, costs should follow the event and band 2B would be appropriate. It appears to have been very clear that the merits of the case favoured AJ’s position of equal division of the property. WL would therefore be liable for $38,434 of costs.7 But WL was on legal aid. Section 45(2) requires that costs may only be awarded against him if the Court is satisfied there are exceptional circumstances.

[8]        There do appear to have been delays by WL but Mallon J noted there had been delays by AJ as well.8 The main delay by WL, which led to a hearing in May 2023 being vacated, was because I accepted he had suffered an accident.9 Grice J did not grant the unless orders sought by AJ.10 I do not consider it was unreasonable for WL to test the status of the contracting out agreement. There is also little evidence of refusal to negotiate a settlement.

[9]        I accept that WL failed to comply with court-ordered deadlines on a few occasions. I do not consider, however, that missing these deadlines led to delays in the hearing. The only point which may justify costs is WL’s pursuit of the constructive trust claim. Mallon J expressly stated that the evidence did not support the claim, so it was abandoned at the end of the hearing. For the pursuit of the claim to be considered unreasonable the claim must be “wholly unarguable”.11 From what I can see, the claim was weak. There appears to have been no evidence to support it. But neither is there evidence that it unnecessarily prolonged or complicated a proceeding

4      WL v AJ, above n 1, at [101].

5      At [21], [22], [63], [74], [79] and [81].

6 At [104].

7 At [105].

8 At [104].

9      [WL] v [AJ] HC Napier CIV-2020-441-77, 19 May 2022 (Minute of Palmer J) at [6]–[7].

10     [WL] v [AJ] HC Napier CIV-2020-441-77, 19 September 2022 (Minute of Grice J) at [4].

11     Smyth v Wadland [2009] NZCA 189 at [10].

that was being argued anyway. 12 Unreasonable pursuit of a claim alone is not necessarily “out of the ordinary”.13 By a relatively fine margin, I conclude that the pursuit of the constructive trust claim is not enough to justify an award of costs.

Result

[10]      I decline to award costs. I record, under s 45(5) of the Legal Services Act, that if that section had not affected WL’s liability, I would have awarded costs on a 2B basis against him, adjusted to not exceed the actual costs of $30,525.44.

Palmer J

12     Compare with Merchant Finance Ltd v Xu [2022] NZHC 1991 at [38]–[40]; and Syed v Malik

[2020] NSZHC 1854 at [18]–[22].

13     Laverty v Para Franchising Ltd, above n 3, at [31].