Roberts v Francis [2013] NZHC 2144 (22 August 2013)

Last Updated: 12 September 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-6889 [2013] NZHC 2144

IN THE ESTATE OF	BRYAN MARK ROBERTS
BETWEEN	CATHERINE ANN ROBERTS and MICHAEL CHARLES ROBERTS Plaintiff
AND	MURIEL SINGLETON FRANCIS Defendant

Hearing:	22 August 2013
Appearances:	E Scorgie for plaintiff H Fulton for defendant
Judgment:	22 August 2013

(ORAL) JUDGMENT OF LANG J [on costs]

ROBERTS v FRANCIS [2013] NZHC 2144 [22 August 2013]

[1] Bryan Mark Roberts died in Auckland on 25 September 2010, aged 82 years. He died intestate, in that he had no will. Dr Roberts was survived by his second wife, Ms Francis, and by two adult children from his first marriage, Ms Catherine Roberts and Mr Michael Roberts (“the plaintiffs”). Both of the plaintiffs now reside in England.

[2] On 5 December 2011, Ms Francis obtained a grant of letters of administration in respect of Dr Roberts’ estate. With the assistance of her solicitors, she then set about realising the assets of the estate. She also elected to receive the statutory legacy of $155,000,1 together with interest on that sum between the date of Dr Roberts’ death and the date of ultimate distribution. In accordance with the statutory regime, the residue of Dr Roberts’ estate is to be divided equally between Ms Francis and the plaintiffs.

[3] Issues have arisen regarding the provision of information about the estate to the plaintiffs. They contend that they have had to prise information out of Ms Francis, and that she has been extremely tardy in providing information to which they were lawfully entitled. They say this state of affairs continued through to May

2013. At that point they were left with no choice but to apply to this Court for an order requiring Ms Francis to file an inventory and account of the assets of the estate.2 They duly filed that application on 7 June 2013. The proceeding was served on Ms Francis on or about 13 June 2013.

[4] Over the next month or so Ms Francis, through her solicitors, provided the plaintiffs with the balance of the information they sought. In addition, Ms Francis filed a formal affidavit setting out an inventory of the estate’s assets and liabilities on

26 July 2013. As a result, the plaintiffs are now satisfied that it is no longer necessary for them to continue with their application. It is now only necessary to

_{resolve outstanding issues relating to costs.}

1 _{Administration Act 1969, s 77.}

2 High Court Rules, r 27(32).

Issues

[5] Two issues arise in this context. First, the plaintiffs seek an order requiring Ms Francis to meet their costs from her own means. They argue that Ms Francis should not be entitled to indemnity from the estate in respect of these costs, because that would effectively require the plaintiffs to meet two-thirds of any award of costs that might be made. In addition, the plaintiffs argue that Ms Francis should be required to pay indemnity costs, or increased costs, because of the manner in which she has conducted herself in relation to the proceeding.

[6] Ms Francis resists that claim. She accepts that the plaintiffs should receive an award of costs on a Category 2B basis, together with disbursements as fixed by the Registrar. She contends, however, that the costs should be paid out of the estate and that she should not be personally liable in respect of them.

[7] The second issue relates to the costs incurred by Ms Francis in relation to the present proceeding. The plaintiffs seek an order that she not be permitted to resort to the assets of the estate to meet these costs. They argue that Ms Francis acted so unreasonably in relation to the proceeding that she should be disqualified from being indemnified in respect of her own costs.

[8] In order to understand these issues, it is appropriate to briefly have some regard to the background. This will assist in setting the context against which the plaintiffs ultimately issued this proceeding on 7 June 2013.

Background

[9] The starting point for present purposes arises out of the fact that the plaintiffs considered Ms Francis had not included all of their late father’s assets in the affidavit she filed in support of her application for orders granting her letters of administration of his estate. They noted that assets owned by Dr Roberts in the United Kingdom were not included in the affidavit as assets of the estate. They also noted that there was no reference in the affidavit to a New Zealand business in which their late father had an involvement at the date of his death.

[10] The plaintiffs made enquiry of the estate’s solicitors regarding these issues in early 2012. This caused the solicitors to make their own enquiries, which revealed that the business formerly owned by Dr Roberts had been taken over by a trust known as the Roberts Family Trust. The solicitors also learned that as at the date of his death, Dr Roberts had a credit in his current account with the trust of approximately $232,000. Based on that understanding, the estate’s solicitors prepared draft distribution statements in May 2012 showing that the residuary beneficiaries of the estate would each receive the sum of $93,429.20.

[11] At or about that time, Ms Francis took independent advice from another solicitor regarding her personal position in relation to the estate. Her solicitor then began investigating the affairs of the Roberts Family Trust, and the financial statements prepared in respect of the trust since its formation in 2001. He discovered that a payment in the sum of approximately $360,000 that Ms Francis had introduced into the trust in November 2004 had wrongly been credited in equal shares to the current accounts of both Ms Francis and her late husband. This gave rise in large part to the current account credit previously believed to have been owing to Dr Roberts in the trust’s accounts.

[12] Not surprisingly, this caused a degree of consternation of the plaintiffs. They were already suspicious about the fact that assets had been left out of the affidavit Ms Francis had filed in support of the application for orders granting her letters of administration. They were now shocked to find that a substantial asset that had originally been left out of the estate’s accounts was being reduced by a very significant margin. For this reason they began to seek detailed information from the estate’s solicitors as to why the current account credit should be treated as belonging to Ms Francis alone.

[13] These enquiries continued through the latter part of 2012, and into the early part of 2013. They were answered to some extent in a letter dated 11 April 2013 from Ms Francis’ solicitor to the plaintiffs’ solicitors. The matters contained in that letter were then amplified in a further letter dated 2 May 2013. This appears to have satisfied the plaintiffs to a large extent regarding the issues relating to the current account credit with the Roberts Family Trust, although they still sought provision of

any further documentation relating to the original transaction in which Ms Francis had introduced funds into the trust in November 2004. Other issues are also yet to be resolved in relation to the affairs of the trust.

[14] There were, however, other outstanding requests for information at that time. On 6 March 2013, the estate’s solicitors had written to the plaintiffs enclosing a new distribution statement based on the reduced current account held by the estate in the Roberts Family Trust. This revealed that the plaintiffs would each receive the sum of

$15,194.45, rather than the sum of $93,429.20 as advised to them in May 2012.

[15] At this point the plaintiffs decided to instruct New Zealand solicitors to represent them in relation to issues arising out of the administration of the estate. Their solicitors wrote to the estate’s solicitors on 13 March 2013 raising a number of concerns. These included the need for further information in relation to the current account held by the estate in the Roberts Family Trust. Importantly, however, the letter went on to say:

18. Accordingly please supply:

18.1 The statement of 13 December 2012 referred to in the statement of 5 March 2013, along with any other interim statements of the balance of the Estate assets and liabilities prepared since the statement of 14 May 2012;

18.2 To the extent not apparent from the documents provided under

18.1, please provide a full statement of the movements in the balance of the Estate since the grant of letters of administration;

and

18.3 Invoices and/or other supporting documentation for any payments out of the Estate assets, including an explanation of the need for that payment if appropriate.

[16] In the days that followed this letter, the plaintiffs’ solicitor spoke by telephone to the solicitors acting for the estate and for Ms Francis in her personal capacity. He understood from these discussions that the information sought in his letter dated 13 March 2013 would be provided at an early date. Subsequent follow- up letters, however, did not produce any further substantive response to that request.

[17] On 10 May 2013, the estate’s solicitors provided a further distribution

statement that took into account movements within the estate’s accounts between

14 November 2012 and 6 December 2012. This left unexplained a period between

14 May 2012 and 14 November 2012, in respect of which the plaintiffs had not received any earlier statements. This was a matter of some concern to the plaintiffs, because there was a difference in the sum of $11,931.19 between the opening balance held at 14 November 2012 and the closing balance of the previous statement they had received. As a result, the plaintiffs’ solicitors wrote to the estate’s solicitors on 13 May 2013 seeking details of transactions that occurred between 14 May and

14 November 2012.

[18] In addition, the plaintiffs’ solicitors sought supporting documentation in relation to an expense disclosed in the statements relating to the period leading up to

6 November 2012. This was an expense in the sum of $18,688.00, the only notation in respect of which was “M Francis – reimburse expenses – 6 November 2012”. The plaintiffs’ solicitors sought provision of this information no later than 17 May 2013. They also advised the estate’s solicitors that they should also by that date file an inventory and account of the estate with the High Court. In default, the plaintiffs’ solicitors said they were instructed to apply for an order under r 27.32(1) of the High Court Rules requiring the administrator to file an inventory and account of the estate’s assets and liabilities. The plaintiffs’ solicitors also indicated that they would be instructed to apply for the removal and replacement of the current administrator.

[19] The plaintiff’s solicitors had not received any response to that letter by 24

May 2013. As a result, they wrote to the estate’s solicitors indicating that the

plaintiffs were left with no choice but to issue proceedings.

Application for costs by the plaintiffs

The arguments

[20] The plaintiffs point out that Ms Francis and/or her solicitors had failed to provide them with any response within a reasonable period after they received the letter dated 13 May 2013. They say that the gap in the estate’s accounts was significant, because it represented five months during the latter part of 2012. This

resulted in a reasonably significant difference between the closing balance of the previous statement and the opening balance of the estate’s accounts as at

14 November 2012. Moreover, Ms Francis and her solicitors appear to have ignored the request for supporting documentation in relation to Ms Francis’ claim for reimbursement of her expenses.

[21] They also emphasise that the failure to provide this information occurred against a backdrop of significant delay in supplying information on other occasions during 2012. They contend that Ms Francis appears to have wholly disregarded their entitlement as beneficiaries to receive this information during that period.

[22] Given the fact that Ms Francis provided the required information within a very short period after being served with the proceeding, the plaintiffs contend that they are effectively the successful parties in this proceeding because they achieved what they wanted to achieve in it. As a result, they should be entitled to an award of costs against Ms Francis.

[23] Ms Francis disagrees. She contends that the proceeding was unnecessary, because the plaintiffs already had virtually all of the information they required before they issued the proceeding. Ms Francis also contends that it is by no means certain that the Court would have directed her to file an inventory and account in the event that the matter had gone to trial.

Liability for costs

[24] I take the view that the plaintiffs must be regarded as the successful parties in the proceeding, because they achieved the practical outcome they sought in it. They received the information their solicitors had sought on 13 May 2013, and they also compelled Ms Francis to file a verified affidavit containing an inventory and account of the estate’s assets and liabilities. It is unlikely, in my view, that Ms Francis would have filed the latter document at all but for the fact that proceedings had been issued. I accept that she may have eventually provided the information the plaintiffs sought in their letter dated 13 May 2013, but probably not as quickly as she ultimately supplied it.

[25] I therefore do not accept the submission for Ms Francis that the proceeding was unnecessary. There was no response from Ms Francis or her solicitors for a period of over two weeks after the request was first made on 13 May 2013. In those circumstances, and having regard to the background of earlier delay, I consider the plaintiffs were entitled to file this proceeding.

[26] The plaintiffs are therefore entitled to an award of costs in their favour.

Quantum

[27] The next issue is that of quantum. The power to make an award of increased or indemnity costs is contained in r 14.6 of the High Court Rules, which relevantly provides as follows:

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

...

(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

...

(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.

Indemnity costs

[28] Broadly speaking, the Court may exercise the power to award indemnity costs under r 14.6(4) where a litigant has acted badly or very unreasonably. The relevant principles are summarised in Bradbury v Westpac Banking Corporation.3 I consider, however, that the facts of the present case are far removed from the circumstances in which the Court will award indemnity costs against a litigant. Although there was a background history of delay in the present case, the amount of information outstanding as at the date the proceeding was issued was relatively small. In addition, the request for the information for reimbursement of Ms Francis’

expenses had only been made for the first time in the letter dated 13 May 2013. I

therefore do not consider that an award of indemnity costs is justified.

Increased costs

[29] In seeking increased costs the plaintiffs contend that Ms Francis acted in a contradictory manner in the present proceeding, because she complied with the plaintiffs’ requests but also filed documents in opposition to their application. They contend that in doing so she took an unnecessary step in the proceeding and thereby unnecessarily prolonged it in terms of r 14.6(3)(b)(ii). They point out there was no need for Ms Francis to file a notice of opposition if she always intended to provide

_{the substantive relief that the plaintiffs sought in the proceeding.}

3 Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 at [27] (CA).

[30] I do not consider, however, that the filing of the documents in opposition can realistically be viewed as the taking of an unreasonable or unnecessary step in the present case. The Court retains a residual discretion as to whether to make an order under r 27.32 requiring an administrator to file a statement of inventory and account. It is possible the Court may have been persuaded that the plaintiffs already had sufficient information so as to justify not making an order in the present case. Alternatively, the Court may simply have directed Ms Francis to supply the specific information the plaintiffs sought. The Court may not have required the estate to be put to the additional expense of preparing and filing a full affidavit. In those circumstances, I consider that Ms Francis was entitled to file a notice of opposition.

[31] In addition, she faced a claim for costs against herself personally, as well as an application for orders that she not be permitted to have resort to the estate’s assets in respect of those costs or her own costs. She was also entitled, in my view, to defend that aspect of the matter.

[32] I therefore do not consider that this is an appropriate case for an award of increased costs. I am satisfied that, although the plaintiffs are entitled to an award of costs, it should be an award of costs on a Category 2B basis together with disbursements as fixed by the Registrar.

Should Ms Francis meet the award of costs personally?

[33] The final issue is whether Ms Francis should be required to meet the award of costs personally, or whether they should be paid from the estate.

[34] On this point, I accept the submission for the plaintiffs. It would be wrong, in my view, for the plaintiffs to effectively be required to meet the award of costs themselves through a reduction in the value of their own shares in the residuary estate. Ms Francis effectively caused the proceeding, because her solicitors failed to respond in a timely manner to the request for information in the letter from the plaintiffs’ solicitors dated 13 May 2013. She should, in my view, bear some responsibility for that.

[35] I therefore consider that Ms Francis should be required to meet these costs personally, and they should not fall on the corpus of the estate. In taking that view, I follow the approach taken by Asher J in Brownlee v McCaslin.4 In that case the executrix of an estate had similarly failed to provide a beneficiary with information relating to the estate. Asher J awarded scale 2B costs against the executrix, and directed that they be paid by her personally. I make the same order in the present case.

Should Ms Francis be entitled to indemnity from the estate in respect of her own costs?

[36] The next issue is whether Ms Francis should be entitled to indemnity in respect of her own costs from the assets of the estate. The Court may take that step where an executor or administrator acts unreasonably in incurring an expense.5

[37] The same considerations that have led me to conclude that an award of indemnity or increased costs would not be appropriate persuade me that Ms Francis should not be required to meet the cost of defending these proceedings from her own resources. As I have already indicated, she had a tenable argument to the effect that the Court should not require her to go to the expense of filing a formal affidavit setting out an inventory and account of the estate’s assets and liabilities. She was also entitled to defend the application to the extent that it required her to meet costs personally. For that reason she did not act unreasonably in defending the proceeding.

[38] I therefore decline to make the order that the plaintiffs seek relating to indemnity. I do so with one exception.

[39] Ms Francis went to the expense of instructing a solicitor to provide an affidavit in opposition to the plaintiffs’ claim. The deponent avers that applications under r 27.32 are rare in New Zealand. He also observes that he “cannot see that anything further would be achieved by requiring the administrator to file in the Court

_{the inventory and accounts the subject of this application.”}

4 _{Brownlee v McCaslin HC Auckland CIV-2011-404-004822, 21 December 2011.}

5 Re O’Donoghue [1998] 1 NZLR 116 at 122.

[40] In my view, this evidence could never have been substantially helpful to the Court so as to qualify as expert opinion evidence.6 First, it takes into account material that Ms Francis provided to the plaintiffs after the proceeding was issued. Secondly, it ignores the fact that, in this area of the law, the outcome is likely to be dictated by factors that are highly contextual and fact specific. General comments about the rarity or otherwise of such applications in New Zealand are of no

assistance whatsoever.

[41] For that reason, I direct that Ms Francis is to meet the costs of preparing and having that affidavit sworn from her own resources, and is not entitled to indemnity from the estate in respect of them.

Summary

[42] I summarise my conclusions as follows:

1. The plaintiffs are awarded costs on a Category 2B basis together with disbursements as fixed by the Registrar in respect of this interlocutory application.
   
2. Ms Francis is to meet those costs from her own resources, and not from the assets of the estate.
   

3. Ms Francis shall meet the costs of preparing and filing Mr Kelly’s

affidavit from her own resources.

4. Other than in that respect, Ms Francis is entitled to be indemnified from the assets of the estate in respect of the costs incurred in

_{defending this application.}

_{Lang J}

6 Evidence Act 2006, s 26(1).

Solicitors:

Chapman Tripp, Auckland

DG Law, Panmure, Auckland

Counsel:

E Scorgie, Auckland

H Fulton, Auckland