Crawford v Phillips [2018] NZCA 351 (6 September 2018)

Last Updated: 10 October 2018

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA399/2017 [2018] NZCA 351

	BETWEEN	JOHN ERNEST CRAWFORD AND PHILIP SAMPSON WELLS AS EXECUTORS OF THE ESTATE OF KRUZO PHILLIPS Appellants
	AND	DORIS PHILLIPS AS EXECUTOR OF THE ESTATE OF JOHN YUKICH Respondent

Court:	Asher, Wylie and Thomas JJ
Counsel:	A J Steele for Appellants D J Blaikie for Respondent
Judgment: (On the papers)	6 September 2018 at 11 am

JUDGMENT OF THE COURT (COSTS)

The fair and reasonable actual costs and disbursements of the appellants and respondent are to be paid by the estate of Kruzo Phillips.
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REASONS OF THE COURT

(Given by Asher J)

[1] In its judgment of 22 June 2018 this Court dismissed the appeal of the appellants, John Crawford and Philip Wells.^[1] They were executors of the estate of Kruzo Phillips. Mr Crawford was a friend of Mr Phillips. Mr Wells was Mr Phillips’ solicitor and he drafted Mr Phillips’ will (the Will). The appeal was against the dismissal of a defendant summary judgment application that the appellants had filed, in which Associate Judge Bell had held that certain provisions in the Will were invalid for uncertainty.^[2] The effect of our decision dismissing the appeal is that there is a partial intestacy in relation to the Will.
[2] The appellants have stated that they will treat this Court’s decision as determinative of the validity of the provisions of the Will, notwithstanding that the appeal concerned summary judgment. That approach has been signalled to the High Court, and any necessary consequential orders relating to the Will will be made by that Court.
[3] In dismissing the appeal we recorded in relation to costs:

[45] At the request of Mr Blaikie for the respondent, and without objection from Mr Steele, we reserve the question of costs to allow the parties to negotiate and reach agreement. If agreement cannot be reached on costs the parties are to file submissions within 30 working days of the date of this judgment.

[4] The parties have been unable to reach agreement, and we have now received submissions on costs from them. Mr Steele for the appellants submit that “fair and reasonable” indemnity costs and disbursements should be paid by the estate to Messrs Crawford and Wells, despite the fact that the appeal has failed. They submit that the respondent should have costs out of the estate on the same basis. In contrast, Mr Blaikie for the successful respondent submits that scale costs should follow the event in the usual way. He submits that the appellants should be personally liable to pay the respondent’s costs, and that the appellants should not be entitled to claim their legal costs against the estate.

Our analysis

[5] It has long been the rule in New Zealand and England that costs follow the event. In this Court this is now reflected in r 53A(a) of the Court of Appeal (Civil) Rules 2005. Despite the express provision that costs follow the event, it is also stated in both the High Court Rules 2016 and Court of Appeal (Civil) Rules that the Court has an overriding discretion as to costs in all proceedings.^[3]
[6] Despite costs generally following the event, it has also long been the position in England and New Zealand that special principles apply to the Court’s discretion when there is a contest concerning a will. This is not specifically referred to in the High Court Rules or the Court of Appeal (Civil) Rules. However the position is regarded as summarised in the statement of Stringer J in Re Paterson (Deceased) where he observed, following earlier New Zealand and English authority:^[4]

(i) If the litigation originates in the fault of the testator — eg by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life — or of those interested in the residue, the costs may properly be paid out of the estate. (ii) If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent. (iii) Unless the circumstances of the case are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail.

[7] This statement was applied in Loosley v Powell.^[5] It was held that the usual position under r 53A(a), that the person who has failed in the litigation pays costs, is modified by the Re Paterson approach, applied by the Court in its overriding discretion.^[6]
[8] In the present case, the proceedings arose due to a lack of certainty in some provisions of the Will. In terms of the statements in Re Paterson (Deceased), the litigation originated from the fault of the will-maker. To put it in the alternative, the state in which the Will was left by the will-maker has given rise to the problem.
[9] Mr Blaikie contends that in this case one of the executors is the solicitor, Mr Wells, who in fact drafted the Will. Mr Blaike submits that Mr Wells drafted the Will negligently and this negligence led to the need for proceedings. Therefore, the executors should not have their costs met by the estate. We do not see this as relevant to the present case. The position between Mr Wells as an executor, and Mr Wells as the solicitor who drafted the Will, must be distinguished. Mr Wells was a party to these proceedings as an executor. Any claims that may be available in respect of the drafting of the Will would involve him in the entirely different capacity of Mr Phillips’ solicitor. The two capacities of executor of the estate and solicitor for the will-maker are not to be confused. Plainly, if we took into account alleged negligence by Mr Wells and refused to order costs for the executors, Mr Crawford, who had no role in drafting the Will, would be prejudiced as he would be personally liable for costs. That would be unfair to him.
[10] In our view, in resisting the claim that the key provisions of the Will were invalid, the appellants were acting in a manner consistent with their positions as executors. It cannot be said that they did not have “sufficient and reasonable grounds” to seek to defend the provisions of the Will in the way that they did. Although we agreed with the decision and reasons of the High Court, it cannot be said that the appeal was hopeless. The relevant case law was not straightforward. The will-maker, Mr Phillips, may well not have wanted the result that follows our decision. The appellants were seeking a result that they perceived met his wishes.
[11] We have reached the view therefore that the fair and reasonable actual costs of the unsuccessful appellants should be paid by the estate. For the same reasons, rather than ordering that the appellants meet the respondent’s costs personally, the respondent’s costs are also to be met by the estate. We acknowledge that, given the respondent is the recipient of the estate, our order that her costs be met by the estate is of little moment insofar as she is concerned.
[12] The only significant asset of the estate is the farm at Hokianga referred to in the substantive judgment. There are no other assets available to meet the costs apart from the farm. The farm is subject to what we have called a “management interest”, in favour of Mr Crawford, whereby Mr Crawford may use, occupy and enjoy the farm and receive all profits therefrom for so long as he manages and maintains the farm. The validity of the provision in the Will creating the management interest was not challenged before us. Therefore, that provision remains effective and the farm cannot be sold until the management interest terminates. Once the management interest terminates, the farm will pass into the estate of John Yukich, of which Mrs Phillips is executor, due to the partial intestacy. The respondent is the executor of that estate. She has indicated that she intends to keep the farm after the determination of the management interest. She does not wish to see the farm sold. Therefore, whilst we are ordering costs out of the estate, it is not clear at this stage how and when that order will be given effect. However, the parties each take the position that these matters need not concern the Court. Therefore, we make our order and leave it to the parties to determine how it will be given effect.
[13] Mr Steele observed in his submissions that, if the executors are entitled to costs from the estate, then those costs should take the form of an equitable lien or charge on the farm pending the trustees being in a position to sell the farm and discharge the costs from the net proceeds of sale. As we understand it he does not seek a specific order in this regard, and even if he did, we would not be able to grant it given that no such relief was sought in the pleadings. It is not appropriate for this Court in an appeal against a summary judgment order to grant such previously unsought relief. This may be a matter that can be pursued in the High Court if necessary.

Result

[14] We order that the fair and reasonable actual costs and disbursements of the appellants and respondent are to be paid by the estate.

Solicitors:
Martelli McKegg, Auckland for Appellants

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^[1] Crawford v Phillips [2018] NZCA 208.

^[2] Phillips v Crawford [2017] NZHC 1478, [2017] NZAR 1233 at [60].

^[3] High Court Rules 2016, r 14.1; and Court of Appeal (Civil) Rules 2005, r 53.

^[4] Re Paterson (Deceased) [1924] NZLR 441 (SC) at 442–443, citing Mitchell v Gard (1863) 3 Sw & Tr 275 and Spiers v English (1907) P 122.

^[5] Loosley v Powell [2018] NZCA 73.

^[6] At [7].