Apatu v Apatu HC Napier CIV-2007-441-823 [2011] NZHC 1656 (3 November 2011)

Last Updated: 24 November 2011

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

_{CIV-2007-441-823}

BETWEEN ASHLEY KANARA APATU First Plaintiff

AND WINIPERA EVA MAUGER Second Plaintiff

AND KENNETH TAMA TE KAPUA APATU First Defendant

AND NATHAN WIRIHANA APATU RENATA ROBIN APATU

AND KATHERINE LOUISE BATES Second Defendants

Counsel: J McLennan for Plaintiffs

M Macfarlane for Defendants

Judgment: 3 November 2011

JUDGMENT OF WILLIAMS J (AS TO COSTS)

In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 4.00pm on the 3rd November 2011.

_Solicitors:

ASHLEY KANARA APATU V KENNETH TAMA TE KAPUA APATU HC NAP CIV-2007-441-823 3

November 2011

Holmden Horrocks, Barristers & Solicitors, telephone: [phone]

Sainsbury Logan & Williams, telephone: [phone]

Introduction

[1] Before me are memoranda as to costs by both parties to these proceedings. By judgment delivered 10 May 2011 I found that the plaintiffs fail in all of their claims. I invited memoranda as to costs to be filed if agreement could not be reached.

[2] With respect to claim CIV-2009-441-515 (the claim brought by Ms Winipere (Wini) Mauger against Mr Terrence (Terry) Apatu) the parties are agreed that costs should be given on a 2B basis, with 0.5 days for the hearing, if indemnity or increased costs do not apply.

[3] With regard to the main claim, CIV-2007-441-823 (brought by both plaintiffs), the defendants seek increased or indemnity costs against the plaintiffs for, they argue, unreasonably declining a settlement offer, taking hopeless points in argument and conducting their case in a way which caused wasted time and expense. Further, the defendants seek costs for both defendants’ counsel. The plaintiffs oppose costs on those bases. The plaintiffs accept that costs should follow the event but on a 2B basis for one defendant’s counsel only. The defendants accept that if costs are awarded on a scale basis that 2B is appropriate.

[4] It is also pertinent to note at the outset that the plaintiffs have appealed against my 10 May 2011 decision. The appeal was filed on 20 June 2011. I consider the relevance of that below.

Background

[5] These proceedings relate to a relatively protracted dispute between family members. The issues all arise out of the disposition of the estate of the parties’ father, Mr Wirihana Apatu, who died in 1970. The defendants were trustees and executors of their father’s estate. The plaintiffs are half of the beneficiaries which

were to retain the residue of their father’s estate. While some dispositions were directed by Wirihana Apatu to the beneficiaries, the beneficiaries were not to receive all of their entitlement until the death of their mother, Mrs Minola Apatu, who received a life interest in much of the estate. Minola Apatu died in 2003.

[6] The plaintiffs alleged breach of trust or fiduciary duty against the defendants in several respects. Variously, claims were brought against one or other or both of the defendants. Wini also brought some claims against Terry’s estate individually. Either before or during the hearing three of those claims were abandoned.1 Indeed, in respect of some of those claims, it only became apparent that they were not being pursued in the plaintiffs’ closing submissions. In the end, I identified nine claims as

requiring determination by me (at [8] and [9] of my 10 May 2011 judgment). The first related to an application under s 44 of the Administration Act 1950 and the second was a breach of the duty to account. I summarised the remaining claims at [9] thus:2

(a) Ashley and Wini say the trustees have failed to obtain succession in the Māori Land Court for their rightful shares in a block of Māori land called Owhaoko C2.

(b) They say that Terry fraudulently obtained title to the Ohiti Waitio 3A block, when it should have formed part of Wirihana’s residuary estate and been available to them as beneficiaries.

(c) They say that two original Lindauer paintings formerly hanging in the family home at Lawn Road have been wrongly acquired by Terry and Rei. Ashley says that they should be in a museum.

(d) They say that certain taonga are or were wrongly held by the trustees

of Wirihana’s estate. These taonga comprise:

a greenstone pendant inserted in a gold bracelet;

photographs of Taranaki Te Uamairangi and other members of his immediate family;

a greenstone mere; and huia feathers.

1 In respect of profits from the well installed at Lawn Road, the Kemp Block and a secondary claim with respect to Rakautatahi 1E5.

2 The reader will note that claim (h) has been omitted. That was the claim brought by Wini in

CIV-2009-441-515.

(e) They say that the family homestead and surrounding 10 acre block at Lawn Road was treated by Ken and Terry as if it belonged to Wirihana’s estate when in fact it belonged to Wirihana’s mother, Hinekatorangi, and should have been administered accordingly. They say that after Wirihana died, the Trustees paid their mother income from cropping on the block when she had no right to it.

(f) Ashley says that in around 1973, he was entitled to a cash payment of about $14,000 from Taranaki Te Uamairangi’s estate. Ashley says he never received that payment.

(g) The plaintiffs claim that Terry placed fertiliser on the Rakautatahi IE5 block and recorded the cost of that fertiliser as a debt against Wini in the estate when she never agreed to that.

[7] While this judgment should be read alongside my 10 May 2011 judgment, I summarise my findings for the reader of this judgment. The plaintiffs’ claims were found to have failed for varying reasons, I summarise those reasons as follows:

(a) the plaintiffs had no legal entitlement to any more shares;

(b) the plaintiffs could not establish fraud on the facts and further that the missing signature on the deed was insufficient to satisfy me that Ashley did not consent to the transfer;

(c) the paintings were not the estate’s property and the beneficiaries had

no entitlement to them;

(d) the same as (c) was true for the taonga;

(e) with regard to the income arising out of the property, no trust arose and the claim was, in any event, barred by the Limitation Act 1950. With regard to expenditure on the property, I was not satisfied on the balance of probabilities that the trustees were acting contrary to the instructions under the will;

(f) it was not proved on the balance of probabilities that Ashley did not receive the money; and

(g) I was not satisfied that fraud was proved and would have been prepared to exercise the court’s jurisdiction under s 73 of the Trustee Act 1956.

Counsels’ submissions and my decision

[8] An award of costs, and the application of laws generally, should be predictable.3 Claims for an opponent’s legal adviser’s indemnity costs are, by their very nature, not predictable.4 Access to justice for a would-be plaintiff is also important, and so courts should not too readily depart from the default costs position: costs at the standard scale.5

[9] I am satisfied that, if costs are to be assessed at scale, costs should be assessed on a 2B basis. I now turn to consider whether costs should be assessed at scale.

Indemnity, increased or scale?

[10] Counsel for the defendants, Mr MacFarlane, argues that as there were six statements of claim (combined between the two proceedings), discovery was ―a shambles‖ with the plaintiffs seeking to produce new documents at trial, and obvious explanations to the plaintiffs’ claims and unassailable defences were ignored, indemnity costs should be awarded in the present case. Mr MacFarlane also produces an offer of settlement made to the plaintiffs by the defendants by letters from both of their solicitors dated 24 November 2009. That offer made settlement suggestions with regard to the paintings, the taonga, the abandoned claim for Ken’s expense claim from the estate for $4,895 for a well installed at Lawn Road, the claim for fertiliser on Rakautatahi, the rent claimed for Lawn Road by the plaintiffs and a further claim, not specifically pleaded, for $450 owed to Ashley. The plaintiffs

_{declined this offer.}

3 _{High Court Rules, r 14.2(g).}

4 _{Bradbury v Westpac Banking Corporation [2009] NZCA 324, [2009] 3 NZLR 400 at [11].}

5 Bradbury v Westpac Banking Corporation at [28].

[11] In response, with regard to the settlement offer, Mr McLennan, for the plaintiffs, submits that at best the defendants could receive increased costs after that letter was received by the plaintiffs. He submits that the plaintiffs’ behaviour prior to receiving that letter was anything but unreasonable.

[12] As to the wasted time and effort, Mr MacFarlane argues that the plaintiffs’ decision to call Messrs Glyn Jones and Peter Bloor to give evidence was unnecessary. When called, Mr Jones read a different brief to that which he provided to the Court prior to his giving evidence. Further, Mr MacFarlane argues that his evidence was not in any way connected with the claims which were continued by the plaintiffs. With regard to Mr Bloor, Mr MacFarlane argues that most of his evidence was also not relevant, but that which was relevant was confined to Māori Land Court records with regard to the Ohiti-Waitio issue.

[13] In response, Mr McLennan submits that costs should be deferred until the plaintiffs’ appeal has been heard in the Court of Appeal. In the alternative, Mr McLennan argues that costs should only be awarded on a 2B basis or at minimum with a 25 per cent uplift. The plaintiffs’ basis is that the reason why I did not find for the plaintiffs was that I preferred the evidence of the defence over that of the plaintiffs. Counsel relies on the fact that security for costs were not ordered against the plaintiffs as Associate Judge Gendall, in considering the issue of security

for costs, was not satisfied that ―the plaintiffs’ claim is particularly weak‖.6 Further,

there is no evidence to support an allegation that discovery was a ―shambles‖. Mr McLennan submits that it is not uncommon for documents not in trial bundles to be produced at a hearing and that that does not, in any event, justify a claim for increased or indemnity costs.

[14] I am satisfied that costs ought to be dealt with now. While the appeal has been filed, it has not, to my knowledge, been prosecuted. It is not appropriate to

_{wait any longer.}

6 Apatu v Apatu HC Napier CIV-2007-441-823, 24 March 2010 at [19].

[15] With regard to indemnity costs, they have only been awarded in this country except rare cases generally entailing breach of confidence or flagrant misconduct.7

Rule 14.6(4) provides (as relevant):

(4) The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

...

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[16] In Bradbury v Westpac Banking Corporation Baragwanath J stated at [27]:8

Indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[17] In Hedley v Kiwi Co-operative Dairies Ltd,9 Goddard J adopted the following principles arising out of the Federal Court of Australia’s decision in Colgate Palmolive Co v Cussons Pty Ltd:10

...

The question must always be whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on party and party basis. Circumstances warranting the exercise of the discretion to award indemnity costs include:

(a) the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;

(b) evidence of particular misconduct that causes loss of time to the court and other parties;

(c) the fact that the proceedings were commenced for some ulterior motive;

(d) the fact that the proceedings were commenced in wilful disregard of known facts or clearly established law;

7 _{Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1991] 3 NZLR 457 (CA) at 460.}

8 _{[2009] NZCA 324, [2009] 3 NZLR 400 at [27].}

9 (2002) 16 PRNZ 694 (HC) at [11], endorsed by the Court of Appeal in Bradbury v Westpac Banking

_{Corp [2009] NZCA 234, [2009] 3 NZLR 400 (CA) at [29].}

10 [1993] FCA 536; (1993) 118 ALR 248, see the head note for this summary.

(e) the making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions;

(f) an imprudent refusal of an offer to compromise.

[18] Discouraging unmeritorious claims has been recognised as coming within the

―catch all‖ provision in relation to increased costs.11 Rule 14.6(3) provides:

(3) The court may order a party to pay increased costs if—

(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i) failing to comply with these rules or with a direction of the court; or

(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[19] In the present case, I do not agree with the defendants’ submission that

_{discovery was generally run so badly or unreasonably that an award of full}

11 Victoria University of Wellington v Alton Lee [2001] NZCA 313; [2001] ERNZ 305 (CA); A’s Co Ltd v Dagger HC Auckland M1482–SD00, 14 August 2003.

indemnity costs should be made. Nor can it be said that all of the plaintiffs’ claims were hopeless. With regard to the plaintiffs’ claims regarding Lawn Road, Rakautatahi and the Administration Act/duty to account, I consider that an award of indemnity costs would be unjust. Those claims, I consider, were not hopeless in the sense that action brought in respect of them was flagrant. I also do not think that the plaintiffs subjectively necessarily knew the allegations of fraud or misconduct to be false. I am satisfied that at least Ashley has come to believe that Terry did defraud him in some way. The Owhaoko claim was genuine, as there was clearly an arrangement albeit unenforceable. The ownership of the paintings and the taonga was controvertible, although that was not appropriately addressed in these proceedings. The plaintiffs also had the benefit of Associate Judge Gendall’s conclusion that the claims made were not so weak that an award for security for costs was appropriate in those circumstances; although I accept of course that that conclusion was limited in nature.

[20] On the other hand, I accept that, in hindsight, the plaintiffs were imprudent not to accept the November settlement offer; that some causes of action were pleaded and not pursued at trial; and that claims by Ashley for payment from Taranaki’s estate and by Wini against Terry (CIV-2009-441-515) were clearly statute barred. Accordingly, while I do not believe that the plaintiffs acted very badly or very unreasonably (especially in the context of a protracted family dispute that clearly became a rather emotional issue on both sides), the defendants are entitled to some increased or indemnity costs. The question is at what proportion.

[21] I am sure all parties would agree that the claims cannot be said to have equally taken up theirs, and this Court’s time. The Administration Act/duty to account claim was the most factually intensive claim, however, little legal argument was directed to that claim. The majority of parties’ legal argument concerned s 73 of the Trustee Act and limitations/laches analysis which formed the defendants’ defences predominantly regarding those claims which I do not consider to be meritless. On the other hand, a substantial amount of evidence was heard with regard to the plaintiffs’ claims regarding the paintings and taonga, which were the subject of a Calderbank offer at an earlier stage. In the round, I consider that costs

should be assessed one third on an indemnity basis and the remaining two thirds on a

2B basis.

Costs for both defendants or one?

[22] Mr MacFarlane also argues that costs for each defendant’s counsel should be awarded. The second defendants instructed new counsel on 18 November 2009 when it became clear that the plaintiffs sought to proceed to trial. Mr MacFarlane submits that second counsel was required as there was a possibility of conflict due to the parties’ differences in position in arguing for relief under ss 73 and 74 of the Trustee Act 1956, second that only the first defendant was pursued on the Administration Act and duty to account causes of action and third that Wini Mauger brought separate proceedings, individually against the second defendants.

[23] In response, Mr McLennan submits that the decision to be separately represented was a decision made by them and the defendants should bear the costs of that decision. Further, to the extent that there was any conflict, that is not borne out by the facts since if any conflict existed counsel could not have continued to represent either defendant, and new counsel would have been required for both defendants after 18 November 2009. Mr McLennan argues that, therefore, r 14.15 of the High Court Rules prohibits separate costs.

[24] As discussed by Priestly J in Norfolk Trustee Company Ltd v Tattersfield Securities Ltd the prohibition under r 14.15 (as it now is, Priestly J was interpreting the rule’s predecessor: r 51) is against ordering more than one set of costs in favour of defendants who ―could have joined in their defence‖.12 Accordingly, as Priestly J said in Norfolk, a cautious approach ought to be adopted before making multiple awards of costs to the successful parties where there is an overlap or community of interest.13

_{[25] In Jordan v O'Sullivan (No 2) Clifford J noted at [8]:}14

12 _{HC Auckland CIV-2004-404-3668, 30 March 2005 at [49].}

13 _{At [51].}

14 HC Wellington CIV-2004-485-2611, 1 May 2009.

The extent to which the defendants’ interests were materially identical, as well as the extent to which one defendant did or could have relied upon the evidence or submissions of the others, are factors tending to suggest that the defendants could have joined in their defence. Conversely, factors suggesting that defendants could not reasonably join in their defence include if the plaintiffs ran separate cases against the defendants, or sought separate relief, the defendants’ reputations are at stake, (for example, there is an allegation of fraud), a conflict of interest was likely in terms of the way the plaintiffs ran their case and/or the defendants’ relationship is such that they are justified in remaining at arms length from each other.

[26] But this was not a zero sum situation. In Re Blue Chip New Zealand Ltd

(in liq) Venning J discounted the second defendant’s costs to reflect that:15

... the developer parties were entitled to be separately represented on this application, including at the hearing. However, the practical reality of the position is that in large part there was a common thread running through the submissions both in the structure of the oppositions and the submissions in opposition. Undoubtedly it was appropriate for the developers to have separate advice but they were able practically to rely upon the notices of opposition and certain submissions made by counsel for Turn and Wave Ltd.

[27] I consider that the present case is comparable. Separate representation was required: separate relief was sought against each defendant; not all of the plaintiffs’ claims were against both defendants; and each defendant argued individually for relief under ss 73 and 74 of the Trustee Act which could have pitted each defendant’s interests against the other. On the other hand, there was a substantial overlap between the substance of the defences; preparation should (and probably would) have been shared, and a modest reduction on costs is appropriate to reflect that. While costs for both defendants will be awarded, I think it is appropriate to reduce each by 25 per cent.

Quantum

[28] I have found, therefore, that costs should be awarded on an indemnity basis for one third of the defendants’ costs with the remaining two thirds to be met on a 2B basis. Further, I have found that costs should be awarded for both defendants, but each reduced by 25 per cent. Mr McLennan submits that quantum should not be fixed without counsel being afforded a further opportunity for submissions. I

_{disagree. First, the assistance that a court can receive in assessing quantum is}

15 Re Blue Chip New Zealand Ltd (in liq) HC Auckland CIV-2009-404-1511, 3 May 2011.

limited.16 The assessment is an objective one for me. Further, these proceedings have been dragged out long enough. For all concerned, a result is warranted. And, ultimately, the amount of costs is a matter for my discretion.

[29] With regard to the main claim, the defendants would be entitled to the following costs on the 2B scale:17

(a) first defendant: $43,540.00.

(b) second defendants: $46,340.00. [30] That is a total of $89,880.00.

_{[31] The defendants contend that their actual costs amount to $137,807.98:}18

$62,443.53 to the first defendant and $75,364.46 to the second. I have reviewed the invoices attached in support. The figure $137,807.98 reflects the fact that I am satisfied that the only cost that was unreasonably claimed is that for venue hire in an invoice dated 21 May 2009.

[32] As for whether this revised total is reasonable,19 all I have to go on in the present case is a comparison between the scale and actual costs.20 And I do not consider the difference to be disconcerting such that it leads me to believe that costs claimed are unreasonable.

[33] Counsel also submits that costs for claim CIV-2009-441-515 amounted to

$6,720.00 on a 2B basis and that amount is likely to be the same as actual costs as no separate costing was done for that work. In light of the significant costs award

_{against the plaintiffs, and the fact that work for this claim and for the other were not}

16 _{Bradbury v Westpac Banking Corporation [2008] NZHC 751; (2008) 18 PRNZ 859 (HC) at [206].}

17 The defendants will notice that this figure is different from that contained in their Annexure Three to their 3 June 2011 memorandum. That is because I consider it unreasonable to claim twice for the

defendants’ statement of defence to the plaintiffs’ fourth amended statement of claim which statement

_{of defence was filed jointly (item 22 on the defendants’ annexure two).}

18 The defendants will notice that disbursements are excluded from this figure. Disbursements are dealt with separately at the end of this judgment.

19 _{Bradbury v Westpac Banking Corporation at [206].}

20 cf Bradbury v Westpac Banking Corporation at [209].

invoiced separately and therefore I cannot know what work was charged to which matter, I consider that this claim is adequately covered by the present award.

Conclusion

[34] Accordingly, I consider that costs awards of around $37,400.00,21 plus disbursements of $2,031.05 and half of the expert accounting costs in the order of

_{$1,402.31, to the first defendant and around $42,000.00,}22 _{plus disbursements of}

$264.44 and half of the expert accounting costs in the order of $1,402.31, to the second defendants are appropriate in the present case.

[35] I therefore make the following order: The plaintiffs are jointly liable to the: a) first defendant for $41,000; and b) second defendants for $44,000;

_{both figures being inclusive of disbursements and GST.}

_{Williams J}

21 $20,812.43 (33.33 per cent of indemnity costs) + $29,026.38 (66.66 per cent of scale costs) =

_{$49,838.81 - 25 per cent = $37,379.10.}

22 $25,118.97 (33.33 per cent of indemnity costs) + $30,890.24 (66.66 per cent of scale costs) =

$56,009.21 - 25 per cent = $42,006.91.