JEF v GJO [2012] NZHC 3607 (21 December 2012)

Last Updated: 1 February 2013

NOTE: ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS

11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION PLEASE SEE WWW.JUSTICE.GOVT.NZ/COURTS/FAMILY- COURT/ABOUT/MEDIA/GUIDELINES#FC9.

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2011-419-001529 [2012] NZHC 3607

IN THE MATTER OF an appeal pursuant to the District Courts

Act 1947, Section 72

BETWEEN J E F Appellant

AND G J O

First Respondent

AND G J O AND R M W AS TRUSTEES OF THE S FAMILY TRUST HAMILTON Second Respondent

Hearing: 21 December 2012 (On the Papers)

Counsel: D Hayes for the Appellant

R D Clark for the Respondent

Judgment: 21 December 2012

JUDGMENT OF DUFFY J [Re Costs]

This judgment was delivered by Justice Duffy on 21 December 2012 at 1.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

_Date:

JEF v GJO HC HAM CIV-2011-419-001529 [21 December 2012]

Background

[1] The appellant commenced an appeal from a Family Court decision finding that a property had been validly transferred to a trust before the commencement of the appellant’s de facto relationship with the deceased and that, therefore, she had no interest in it. In JEF v GJO [2012] NZHC 1021, I dismissed the appeal.

[2] The respondents now seek increased costs.

Respondents’ submissions on costs

[3] The respondents submit that the scale provides for costs to be awarded in the sum of $9,751, plus disbursements in the sum of $641.17.

[4] The respondents state that the actual costs incurred on this appeal are:

_{Item Particulars Amount}

1 Part of invoice dated 11 April 2012

2 Invoice dated 18 April 2012

_TOTAL

$ 8.050.00

$ 4,312.50

_$12,362.50

[5] The respondents submit that this was unmeritorious litigation that involved a trust argument that should have been the subject of an application to the High Court, and that the appellant has acted unnecessarily in commencing these proceedings and to that extent acted unreasonably.

[6] The respondents point to various settlement proposals that were rejected by the appellant. Also, scale costs do not cover the time and effort spent on the appeal and the respondents have been entirely successful. The appellant also made claims that had already been soundly rejected by a well-reasoned decision in the Family Court.

[7] Finally, the respondents point to the fact that the appellant inappropriately raised an argument about a sham trust that was not pursued, even when proceedings had been granted in the Family Court proceedings for the appellant to apply to the High Court.

[8] The respondents, therefore, seek increased costs to the sum of $12,362.50, plus costs of the application amounting to $1,811.25.

Appellants’ submissions on costs

[9] The appellant submits that costs on a 2A basis would be appropriate. The appellant submits that $3,384 is more realistic than the $9,751, plus disbursements that the respondents have described as scale costs.

[10] The appellant also refers to the “ill-considered application” by the respondents to have the appeal dismissed, which should at least leave costs where they fall. The appellant submits that the disbursements claimed probably relate to that application.

[11] As to indemnity costs, the appellant submits they are not appropriate only because the appellant rejected a settlement offer that did not point out the error in its case. In response to the fact that some issues raised in submissions were not argued in Court, the appellant says it had already notified the respondents about these issues on 13 March 2012.

Relevant law

[12] The relevant rule of the High Court Rules is r 14.6:

14.6 Increased costs and indemnity costs

(1) Despite rules 14.2 to 14.5, the court may make an order—

(a) increasing costs otherwise payable under those rules

(increased costs); or

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2) The court may make the order at any stage of a proceeding and in relation to any step in it.

(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.

(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

(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e) the party claiming costs is entitled to indemnity costs under a contract or deed; 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.

[13] Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA) at [27]

discusses the difference between standard costs, increased costs and indemnity costs:

(a) standard scale applies by default where cause is not shown to depart from it;

(b) increased costs may be ordered where there is failure by the paying party to act reasonably; and

(c) indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

Increased costs

[14] The correct approach to awarding increased costs was set out in Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA) at [43]–[48]:

(a) Categorise the proceeding under r 14.3;

(b) Work out a reasonable time for each step in the proceeding under r 14.5;

(c) Where appropriate, the applicant should apply for extra time for a particular step under r 14.6(3)(a);

(d) Step back and look at the costs award the applicant could be entitled to at this point. If the applicant considers it could argue for additional costs under r 14.6(3)(b) it should do so, but any increase above 50 per cent on the costs produced by steps 1 and 2 is unlikely.

[15] As stated in Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400 at [165], when taking into account whether a party has failed to act reasonably, the Court should consider the extent to which the failure to act reasonably contributed to the time or expense of the proceeding and adjust costs to that extent only.

[16] A defendant seeking increased costs against a plaintiff, which had earlier failed to accept a settlement proposal, will need to establish that the failure was unreasonable. This unreasonableness is to be assessed at the time of rejection, not just against the subsequent result: New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548, 19 August 2010 at [37].

[17] According to Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676,

13 July 2009 at [13], not all letters will constitute offers that lead to increased costs, only those that have actually made an offer that is vindicated by the quantum of damages. In that case:

The letter that was sent on behalf of Nandro by its lawyers, seeking to persuade the Datts to drop the second proceedings, was a detailed and intelligent letter, sent for the justifiable purpose of trying to stop the litigation at that point and save further costs. However, it was not a Calderbank letter. No offer was made which was later vindicated by the quantum of damages, as occurs when orders are made on the basis of a Calderbank letter. Rather, one party stated, as parties often do at the outset of proceedings, that it considered the other side’s case to be hopeless. I do not consider that the sending of such a letter is a circumstance warranting a departure from the usual rule as to costs. It does not constitute a failure to accept an offer of settlement under r 14.6(3)(b)(v).

Analysis

[18] In the Family Court hearing, the appellant was specifically given time to go to the High Court to get a decision on whether the trust was a sham or not. She chose not to do so. She then raised this argument on appeal. I found that she was not entitled to do so except on a narrow factual finding about the non-payment of the

$100 leading to an argument that the trust was invalidly constituted, but I then found that even that argument had no merit. Thus, there is a strong case for increased costs

to be awarded on the ground that the appellant has failed to act reasonably in commencing this appeal.

[19] On the issue of whether there was an unreasonable rejection of the settlement offer, I have some doubt as to whether the settlement offer dated 16 November 2011 could really be classified as a typical Calderbank offer that has been rejected. Although the letter is phrased as such, the respondents did not actually offer anything to the appellant for abandoning the appeal beyond saying that they will not seek costs. This seems more like a situation where one party has sent a letter to point out that the other side’s case is hopeless. So a rejection of this offer is not unreasonable. All the other settlement offers from the respondents occurred after the appeal decision and are not relevant.

[20] So, while there was a failure to act reasonably, this is not a particularly special case where increased costs should be more than 50 per cent of scale costs. I suggest that should be the upper limit of costs.

[21] The problem here is that the parties are not agreed on what scale costs are. In a letter dated 18 June 2012 (“G”), the respondents have said that costs on a 2B scale for the High Court appeal would total $3,384. Now, the respondents are saying that those costs total $9,751 ([20] of Memorandum on Costs). The appellant argues that costs on a 2A basis would be appropriate, and that the figure of $3,384 is what scale costs should be.

[22] Scale 2B is the scale that is generally applied. Whilst the issues were not overly complex, that is because of the hopeless nature of the appeal. An appellant cannot pursue a hopeless appeal and then rely on the lack of difficulty to support a low award of costs.

[23] On a 2B scale, costs come to:

Daily rate $1,880.00

_{Item Particulars Days Amount}

54 Two appearances at callover

55 Preparation of case on appeal

56 Preparation of written submissions

57 Appearance at hearing

_TOTAL

0.4

1

3

0.5

$ 752.00

$1,880.00

$5,640.00

$ 940.00

_$9,212.00

[24] Actual costs are $12,362.50. I consider a modest increase above scale 2B to reflect the nature of the appeal is warranted. Costs are set at $10,500, with reasonable disbursements to be determined by the Registrar. The respondents have been successful in their application. They seek costs on it. I find they are entitled to costs on a 2A basis. There was nothing so out of the ordinary that a higher award of costs is warranted.

Duffy J

Counsel: D Hayes P O Box 9323 Waikato Mail Centre Hamilton 3249 for the Appellant

R D Clark P O Box 931 Waikato Mail Centre Hamilton 3240 for the

Respondent