Black v Black [2014] NZHC 1478 (27 June 2014)

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ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PARTIES AND THE CHILDREN.

BETWEEN	TRACY BLACK Appellant (and Respondent)
AND	JOANNE BLACK, SAM BLACK, SUSY BLACK, CAITLIN WHITE and MATTHEW SMITH First Respondents (and Appellants) TRACY BLACK Second Respondent

Hearing:	14 April 2014
Court:	Whata and Gendall JJ
Appearances:	L A Andersen for Mrs Black (Appellant) W J Scotter for S, S and C Black G Spry for C White and M Smith (Respondents)
_Judgment:	_{27 June 2014}

Introduction	[1]
Facts	[4]
- The Will	[5]
- A troubled family history	[9]
- The circumstances of Mrs Black and the claimants	[13]
Judgment of the Family Court	[19]
Jurisdiction	[37]
_{The claims and argument}	[39]

- Mrs Black	[40]
- Joanne, Sam and Susy	[41]
- Caitlin and Matt	[42]
- Reply	[43]
Issues	[44]
Framework of Assessment	[47]
- Did Mr Black owe a moral duty of maintenance and/or support to his children or grandchild at the time of his death?	[54]
- Did Mr Black breach his moral duty by leaving his estate to Mrs Black?	[59]
- What is necessary to repair the breach to the children and grandchild?	[62]
Life interest	[73]
Costs Appeal	[74]
- Submissions on costs
- Joanne, Sam and Susy	[79]
- Caitlin and Matt	[83]
- Mrs Black	[84]
- Test on appeal	[85]
- Discussion
- Introduction	[89]
- Increased or indemnity costs	[91]
- Conclusion on costs appeal	[100]
Result	[101]
_{Costs on the appeal}	[105]

[1] This is an unusual and perhaps unique case which involves a family protection claim by natural children (and one of the grandchildren) challenging their deceased father’s will which left all his estate to his surviving spouse, the mother and grandmother of the claimants. Unlike the frequently seen second-marriage situation where natural children challenge a parent’s will which leaves assets to a step-parent spouse, here the contest is between the biological or natural children and grandchildren and their estranged mother/grandmother.

Family Protection Act 1955 (the Act) is not engaged where a testator has, by leaving his estate to his surviving spouse thereby left nothing to the children of their

marriage/relationship. But, on the quite exceptional facts of the present case, where the test as to whether a testator has breached his moral obligation to his children is clearly met, the Court is required to interfere.

[3] These are the issues that come before this Court in the present appeal by Tracy Black (Mrs Black) against a decision in the Family Court granting in part a claim under the Act by her children Sam, Joanne, Susy and Caitlin, and her grandchild Matthew (Matt) whereby an award of part of the residuary estate of their late father/grandfather Fred Black (Mr Black) was made in their favour.¹

Mrs Black’s appeal is both against the fact of that award itself and the generosity of

the award. In addition cross-appeals are brought in this Court by Joanne, Sam, Susy, Caitlin and Matt which claim first, that the Family Court award in their favour is not generous enough, and secondly, that the quantum of a costs award made in their favour in the Family Court is inadequate. The appeal and the cross-appeals are all opposed.

[4] Mr Black died on 20 May 2009. He left behind his wife, Mrs Black, and surviving children, Sam, Joanne, Susy and Caitlin. He was also father to Phoebe who tragically committed suicide on 19 April 2004. Phoebe has two children, Matt and Briar.

[5] Over the 50 or so years of their marriage, Mr and Mrs Black built up a reasonably substantial asset base, estimated to be worth in the order of $3 million at the time of his passing.²In his Will dated 21 July 1994, Mr Black left his residuary estate to his wife should she survive him. If she did not survive him, then he left the sum of $25,000 each to his surviving children and if his children predeceased him, then the same sum was to be left to their children. The residue was then to be held upon trust for the Order of Mother Teresa of Calcutta for general charitable purposes

[6] This Will reflected the then shared intentions of Mr and Mrs Black as recorded by them in a letter to their children which records:

THIS LETTER WAS WRITTEN BY BOTH OF US, WE FULLY SUPPORT EACH OTHER IN THSES (sic) WISHES

IT IS OUR SINCERE BELIEF THAT ALL PERSONS SHOULD PROVIDE FOR THEIR OWN WELFARE, THAT IS IF THEY HAVE HAD THE OPPORTUNITY TO DO SO. WE FELT SO STRONGLY ABOUT THESE PRINCIPALS (sic) THAT NEITHER OF US WOULD ACCEPT ANY ESTATE FROM OUR PARENTS.

WE BELIEVE THAT ALL OF YOU WERE GIVEN THE OPPORTUNITY TO PROVIDE ADDEQUATELY (sic) FOR YOURSELVES.

WE ADVOCATED AN EDUCATION FOR YOU ALL AND WE SUPPORTED THAT BELIEF, YOU ALL HAD EQUAL OPPORTUNITIES TO PROVIDE A DECENT STANDARD OF LIVING FOR YOURSELVES AND YOUR FAMILIES.

WE BELIEVE THAT GOD WOULD EXPECT US TO PROVIDE FOR THOSE THAT HAVE NOT HAD YOUR OPPORTUNITIES. MORRALLY (sic) WE ARE OBLIGED TO CONTRIBUTE AS MUCH AS WE CAN TO HELP THOSE LESS FORTUNATE THAN YOURSELVES AND WE HOPE THAT OUR SMALL CONTRIBUTION WILL ALLIVIATE (sic) SOME SUFFERING.

WE BELIEVE THAT YOU WILL ALL SUPPORT OUR BELIEFS, AND IN DUE TIME IF YOU ARE IN A SIMILAR POSITION AS WE ARE YOU WOULD DO THE SAME.

WE HAVE LOVED YOU ALL, AND I HOPE YOU BELIEVE THAT WE HAVE DONE OUR BEST FOR YOU.

The consistency in Fred’s Wills over many years reflects his beliefs and wishes when he was fully competent. I have a duty to uphold his wishes. He had said to me that I was the only one he trusted.

[9] Mrs Black was a devoted wife, who together with Mr Black worked hard to build their relationship property. Mr Black however largely delegated his parental duties to Mrs Black, working long hours to build the family business. This left the children feeling isolated from him during their childhood, though they respected and loved him. By contrast, while Mrs Black provided for their physical wellbeing, she ran a very strict household it seems often devoid of compassion or emotional support for her children, linked no doubt to what the children suggest is Mrs Black’s battle with depression. There were times when the children were placed in foster homes for lengthy periods, and both Sam and Phoebe were sent to boarding school at a young age, causing significant emotional distress to them. All of this contributed to the bitterness they feel for their mother.

[10] Phoebe, Sam and Caitlin also suffered with mental health illness. This would manifest itself in behavioural problems, obviously presenting a significant challenge for Mrs Black who effectively had the sole care of the children, and exacerbating what the children describe as an already dysfunctional family life. Sam, for example, recalls being thrashed by Mrs Black, though this is denied by her.

[11] Joanne, Sam and Caitlin laboured on the family business, at times without commensurate financial reward, yet they and the other children received little or no meaningful financial support from either of their parents on reaching their adulthood, even though each of them struggled financially from time to time. This accorded with Mr Black’s steadfast belief that he should not financially support his children (or his grandchild) in their adulthood. Mr Black then left nothing in his Will to his children if Mrs Black survived him, contrary it seems to the advice of his solicitors. Instead we infer that he left his estate to Mrs Black, thinking (in light of their joint letter) that she would also leave nothing to the children as well.

[12] At about the time Mr Black executed his Will he was diagnosed with Alzheimer’s disease, with his condition worsening to the point that he needed specialist residential care. Mrs Black essentially assumed sole responsibility for him, both in a legal sense as his Attorney and in a supportive sense as his wife. Naturally

she employed the wealth that they had assembled over many years as if it was joint property, handling their investment portfolios in a manner that she thought best served their needs. This involved transferring funds from Mr Black’s investment portfolio to her own, for what she thought was a prudent tactical measure to protect the property, but also for her personal benefit as well. Notable transfers include what are now described as loans in 2001 and 2007 totalling $800,000. At the time of Mr Black’s death their combined wealth was in the order of $2.7 million. The estate was probably worth about $1.2 million, though that is a rough estimate only.

$1.4 million dollars, comprising (among other things) an investment portfolio and a home. We examine her current net worth in more detail at [66] – [69]. She remains largely estranged from her children, though she has some contact with Susy, and is fond of her granddaughter, Teresa.

[14] Joanne is currently coping financially, after many years of financial struggle bringing up a family. She has a house worth about $350,000 with a substantial mortgage, and a car which she bought for about $10,000. She remains embittered towards her mother because of the lack of meaningful support over many years.

[15] Sam’s financial circumstances are difficult. At the time he swore his affidavit he was renting a house in Christchurch, his business was struggling and he has substantial debts. He is married, has two children and has decided to migrate to Australia. He had some limited contact with Mrs Black until the commencement of these proceedings.

[16] Matt’s financial circumstances are also difficult. He worked as an independent maritime contractor until his boat was wrecked. He is now unemployed, and at the time of swearing his affidavit was facing criminal charges. His mother’s suicide had a severe impact on him and he attributes some of the blame for the suicide to his grandmother.

[17] Caitlin is a mother of three, struggles with financial, social, physical and mental health issues, including PTSD, and is receiving mental health treatment. She is a victim of a home invasion in which she was severely injured. She relies on a benefit as she is not able to perform full time work. She receives $660 per week and pays rent of about $450 per week. She does not have a car. Her ex husband stays with her to help look after the children, but is not in gainful employment. She acknowledges receiving some minor financial help from her parents from time to time.

[18] Susy is not in good physical health, suffering from blood clotting and induced liver disease. She was also severely injured in a fall and then again in another accident. She receives pain management for chronic pain. She has two daughters, but is divorced from their father. She acknowledges that she received some support from her mother at the time of her separation. She is not able to work, rents her home and has a large credit card debt of about $35,000. But she has a superannuation account of about $110,000 and her assets exceed her liabilities by about $100,000.

[19] Relevant authorities and principles are cited by the Judge.⁴We essay them below, so we do not repeat them here.

[2] Mr Black and Mrs Black’s surviving children, Sam, Joanne, Susy and Caitlin, together with Phoebe’s children, Matt and Briar,⁵seek to challenge the terms of Mr Black’s Will pursuant to the Family Protection Act

1955. In broad terms they allege that their father/grandfather failed in his moral duty to them as his children/grandchildren because he failed to make adequate provision from his estate for them in the knowledge that Mrs Black was likely to exclude them from her Will.

⁴Including Little v Angus [1981] 1 NZLR 126 (CA); Williams v Aucutt [2000] NZCA 289; [2000] 2 NZLR 479, [2000] NZFLR 532, (2000) 19 FRNZ 260 (CA); Auckland City Mission v Brown [2002]

[2002] NZCA 33; 2 NZLR 650, (2002) 22 FRNZ 232 (CA); Flathaug v Weaver [2003] NZFLR 730, (2003) 22

FRNZ 1035 (CA); Vincent v Lewis [2006] NZFLR 812, (2006) 25 FRNZ 714 (HC); Henry v Henry [2007] NZCA 42, [2007] NZFLR 640 (CA); and Fisher v Kirby [2012] NZCA 310 at [114].

⁵It needs to be noted that along with Matt, Phoebe’s other child Briar, a grandchild of Mr and Mrs Black, had made a similar claim against the estate which was settled in October 2012 with a payment to her of $35,000. Thereafter, Briar played no part in the proceedings or this appeal.

[5] This case is unique therefore in that it involves the surviving children (and one of the grandchildren) challenging their father’s Will while their mother/grandmother is still alive. While it is relatively common for step-children to challenge a Will when their biological parent predeceases their step-parent, this case would appear to be the first where a Will in which the estate is left to the surviving spouse but is challenged by their biological children.

[22] Later in his judgment, the Judge then expresses the ultimate issue in this way:

[47] .... has Mr Black breached his moral duty to his children by vesting his entire estate in his wife of 52 years?

[48] Central to resolution of this question is whether Mr Black could have reasonably foreseen that his wife would not give effect to their wishes and leave it to charity and/or leave little, if anything, to their own children. And central to the children’s concerns is that their mother would simply dissipate the estate through spending and/or charitable gifts, so that at the point of her death, there is no estate left for them to mount a meaningful family protection claim against her estate.

[24] The Judge then made a number of key factual findings. He observed that Mr and Mrs Black provided for the basic necessities of life for their children, but that much of their parenting was undesirable. The Judge found that Mr Black left the day to day parenting of the children to Mrs Black, and that he held to the philosophy that once the children had reached adulthood they were on their own.⁶He also considered that Mr Black was:

[58] ... clearly not immune to spending money on himself and Mrs Black, but totally immune to assisting his children during his lifetime to any great extent.

[25] He did not consider there was any evidence that Mr Black was in any way abusive and that the only criticism that has been levelled against him in the evidence is that he was too passive and stood by while Mrs Black mistreated their children. The Judge also accepted the evidence of the children that Mrs Black’s parenting left a lot to be desired, that she inappropriately physically disciplined the children and

emotionally manipulative and controlling. He also found on the balance of probabilities that when Sam was physically abused while at boarding school, Mr and Mrs Black turned a blind eye to his protestations of abuse, and that Mrs Black single-handedly destroyed Sam’s relationship with a former partner because she did not approve of her.⁷

[63] Mrs Black’s parenting clearly lacked empathy, warmth and relational nurture, and I agree with the evidence of Joanne that it is a tragedy that she now has no relationship with her four surviving children, no insight as to how she has contributed to a disintegration in that relationship, and no willingness, at least as evidenced during the hearing, to repair the relationship at all with any of her children. Her evidence showed an ability to adopt a revisionist view of her recollection of events which were designed to portray her in a favourable light, even when such views were devoid of a basis in reality.

[27] The Judge found that Mr Black could not have been blind to the effect of Mrs Black’s parenting on their children. He also found that at the time Mr Black entered into his final Will he would have been under a clear expectation that, should he predecease his wife, his estate would go to Mrs Black and a similarly clear expectation that, upon her death, she would primarily benefit charities and not their

[28] The Judge acknowledged that Mrs Black did in fact depart from this expectation as evidenced by her 14 August 2005 Will where she proposed to leave a large portion of her estate to Caitlin and Susy, excluding Sam and Joanne. Though he also finds that, as a consequence of this litigation, she has now excluded all the children, and benefitted to a large extent a special needs grandchild (Teresa White), excluding her four remaining children and the other grandchildren.⁹

[67] It is clear as set out above that all the claimants, apart from Joanne, are in a difficult financial situation. None of the claimants were the beneficiary of generous inter vivos dispositions. None of the claimants have given any particular support or care to their father during his lifetime. For the period in which he was in the rest home, Joanne did not visit him and Sam (sic) visited infrequently. All claimants, except Joanne, have significant financial need.

[31] The Judge then referred to the significant period of estrangement as between Joanne and Sam and Mr Black but there was no such estrangement in relation to Briar and Susy. Nevertheless he found there had been no disentitling conduct. Rather:

[73] ... Mrs Black, due to the force of her personality, has acted as a barrier to the children wanting to develop a meaningful relationship with their father. But Mr Black was aware of the needs of his children at the time that he executed his Will, and with advice, chose not to benefit his children if Mrs Black survived him, and only modestly if she did not.

[32] The Judge opined nevertheless that the primary obligation following a long marriage is to the surviving spouse and that obligation in most cases supersedes and may render nugatory any claims by the children. He said the situation might be different in a very large estate but this estate is not significant at approximately

$1.2 million. After costs have been resolved, the net estate, he says, is likely to be in the vicinity of $600,000-$700,000.¹⁰

[33] He observed that Mrs Black is entitled to expect that upon the death of Mr Black she would have sufficient monies to enable her to travel but more particularly to provide for a reasonable standard of rest home accommodation should that be required in the future. He observed, however, that she had significant

[76] In essence, it seems to me that what the applicants want the Court to do is to ensure that they take from their father’s estate now in an effort to circumscribe the ability of their mother to dissipate their father’s estate during her lifetime. I know of no authority which would enable the Court to engage in such social engineering and tinkering with a surviving spouse’s right to administer his or her financial affairs as he or she sees fit. But I have concluded that, given the clear needs of the children, Mr Black did owe a moral duty to them in terms of their maintenance which can be rectified through a modest adjustment to the Will. He owed no duty in terms of support for the reasons set out above. There also needs to be a difference in approach between Joanne and the other claimants.

[35] He then ordered that Joanne should receive 3% of the residuary estate and the other claimants 5% each of the residuary estate to a total of 23%.

[36] In a subsequent decision dated 29 October 2013 at [18] the Judge ordered costs on the following basis:

[18] I accordingly fix costs to be met from the estate on the basis set out below namely:

(a) Mr Scotter and Mrs Spry’s clients are entitled to scale costs on a 3C basis in the sum of $53,705. Mr Scotter’s clients are additionally entitled to disbursements of

(b) Costs for Mrs Black in the sum of $37,701.34 being her actual costs but less than scale costs.

(c) The Estate’s solicitors’ costs are to be met out of the estate as well. I reject the assertion of Mr Scotter, not substantiated in argument or evidence, that the Estate’s solicitors have not been neutral or impartial.

[37] This is an appeal brought by way of s 15 of the Family Protection Act 1955. Section 15(1A) provides that the High Court Rules and ss 74 – 78 of the District Courts Act 1947 apply. Section 75 of the District Courts Act 1947 provides that all appeals are by way of rehearing. In these circumstances, as Mr Andersen noted, the

¹²Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate Court even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate Court’s opinion is different from the conclusion of the Tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.

[38] Mr Andersen also submits however that the High Court should only interfere with the discretionary exercise as to the remedy for breach if there was a relevant error of law or principle or if the Judge took into account an irrelevant consideration, or failed to take into account a relevant consideration or if the decision is plainly wrong.¹⁴There being no dispute about this, we proceed on that basis.¹⁵

[39] This matter effectively concerns three appeals, with numerous grounds of appeal. We will endeavour to identify the material points in the following summary of the argument.

[40] Mrs Black in her appeal pleads that the Judge erred in finding a moral duty to provide maintenance. Mr Andersen makes the following submissions in support:

(a) Mr Black fulfilled his moral duty to his children and grandchildren by leaving his estate to his wife.

(b) There is no obligation or requirement to be sure that Mrs Black would provide for their children in the future.¹⁶

(c) There is no moral duty to maintain or support adult children especially where the parents have built up the whole of their shared property

during the relationship with the expectation that the survivor would continue to enjoy the property on the death of a spouse.¹⁷

(d) Conversely, a supportive spouse is entitled to generous recognition of her role in the family and contribution to the relationship property.¹⁸

(e) In any event, the adult children and grandchild here are not in financial need, in the sense of the necessities of life.¹⁹

(f) Any provision for Matt, the grandchild, should be less than a deceased parent.²⁰

[41] In the second (cross) appeal brought in part by Joanne, Susy and Sam, Mr Scotter contends for them:

(a) The Judge erred by finding that there was only a duty to provide maintenance for the children.

(b) The relationship of parent and child has primacy in our society and the obligation of a parent to a child is an ongoing one.²¹

¹⁹Mr Andersen submits that Joanne is a barrister and earned A$120,000 in 2013; Sam and his wife are employed – and his circumstances post Christchurch earthquakes could not have been foreseen; Caitlin receives $500 weekly in disability benefits and her husband contributes $400 a

week, and she spent a legacy of $66,000; Susy’s position is unclear as she was not available for

cross examination – but she pays monthly rent of A$1240, has credit card debt of $35000, a superannuation fund worth $110,000 and her assets exceed her liabilities by $100,000; Matt is unemployed, but can meet his daily needs.

(d) The children were plainly at risk in that they would receive nothing from either Mr or Mrs Black’s estate given their shared philosophy that the children should not benefit from them in their adulthood.

(e) With the abolition of gift duty, Mrs Black is now free to distribute her assets by gifting to other persons, amplifying the risk to the children.

(f) The Judge should have determined the value of the estate - while acknowledging that it was not possible to fix the estate with exactitude. Mr Scotter says it is reasonably available to infer that the estate was worth $1.5 million.

$2.7 million prior to disposition. Mrs Black also enjoyed the benefit of an $800,000 interest free loan from Mr Black’s assets and she withdrew $350,000 from her investment portfolio in the 18 months leading up to the Family Court hearing.

(h) The Judge erred in finding that the number of applicants was irrelevant, given the size of the estate.

(i) Citing Brown, Joanne, Susy and Sam would be entitled to $500,000 or more following Mrs Black’s death.²²

(j) A proper remedy here is to provide a life interest to Mrs Black, with the estate vesting in the children on her death.

(k) There is evidence to suggest that Mr Black intended at one stage to create a life interest for Mrs Black rather than to gift the residue of the estate to charity. This intention was not carried into the final Will.

_{[42] Also in that second (cross) appeal, Ms Spry for Caitlin and Matt,
submits:}

(a) Caitlin and Matt had difficult childhoods, and both are extremely needy financially.

(b) Both suffer from mental health issues and Caitlin has multiple physical health problems.

(d) While a grandchild’s claim has to be considered in its own right, in that they do not step into the shoes of parent, the grandchild is entitled to rely on a moral duty in the same way as a child can.²⁴

(e) The Judge did not give sufficient weight to the moral claims of Caitlin and Matt and failed to make the appropriate detailed circumstantial inquiry into their needs.

(f) There is no authority for the proposition that a husband is required to leave his entire estate to his wife, even a wife of 52 years, if they have children of the marriage with serious financial and personal difficulties and needs.

(g) The decision of Wylie v Wylie is analogous to the present case and the Court in that case had no difficulty in finding that the surviving spouse was sufficiently provided for and that some provision should be made for the children of the estate.

(h) Further, although Mrs Black does not have to justify her provision from the estate, her position must be taken into account when looking at the reasonableness of the testator’s provision for her and her own

²⁴Citing Re Ward (deceased) (1990) 7 FRNZ 586 (HC) at 591; and Chalk v Hoare, above n 20, at

(i) Once there was equal division of relationship property, and if that provided the wife with security, she has no significant claims to the husband’s other assets with the exception of the relationship home.

(j) The Judge should have placed some weight on the fact that Mrs Black was not open and honest in relation to her financial position, was disingenuous during cross-examination and had taken significant portions of Mr Black’s estate.

(k) The Judge should have made an adverse finding against Mrs Black in respect of her conduct in relation to the management of the estate.

(l) Mrs Black’s failure to be open about her position has fettered the Court’s ability to properly weigh and balance the claims of Matt and Caitlin against Mrs Black and the estate’s financial position.

Those factors include their need and their moral claim, the size of the estate (about $800,000) and while this would be insufficient to meet the needs of each claimant, the estate is large enough to alleviate the

(a) A parent’s moral duty to adult children (and grandchildren) is not absolute but is dependent on other duties, including the primary duty to the spouse;

(b) A parent who leaves his or her whole estate to the children’s parent is unlikely to have a moral duty to provide for his or her children at the expense of his or her spouse, as any legitimate expectation of the children of an inheritance will be on the death of both parents.

(c) There is no authority for the proposition that the claim of adult children or grandchildren, expected to take care of themselves, can defeat the legacy to the spouse of the whole of the estate.²⁵

(d) If the position of the children and Matt is accepted, the flood gates will open.

(e) Various fact specific allegations are rejected, including the submissions about financial need and the allegations of dishonesty.

(f) There could be no expectation of access to Mr Black’s property while he was alive, so there should be no expectation of access to relationship property after his death while Mrs Black is still alive.

(i) Having not challenged the Will, no reliance can be had on file notes suggesting a different testamentary intention.

[44] While the grounds of appeal and argument canvas a range of matters, we think the appeals call for the resolution of the following key issues:²⁶

²⁵_{The cases involving claims by step children are said to be
distinguishable.}

²⁶The parties did not agree a formulation of the key issues, but Mr Andersen proffered the

Can a testator owe a duty of maintenance and support to adult children and grandchildren where:

(iii) The spouse is also the other parent (or grandparent) of the Applicant seeking provision from the estate on a maintenance and/or support basis; and

(iv) Where the whole of the estate has been accumulated as a result of the parties joint efforts during their lifetime?

(a) Did Mr Black owe a moral duty of maintenance and/or support to his children and/or the grandchildren at the time of his death?

(b) Did Mr Black breach his duty to the children and/or the grandchildren by leaving his entire estate to Mrs Black?

[45] Central to the resolution of the above questions is the effect of Mr Black’s decision to leave his estate to Mrs Black, the natural mother to the claimant children, Sam, Joanne, Susy and Caitlin.

[46] In turning now to consider the first two substantive appeal and cross-appeal issues noted at [44](a), (b) and (c) above, we leave to one side at this point, the third appeal relating to the costs awards made by Judge Coyle in the District Court. We will return to this at [74] below.

[47] Section 4 of the Family Protection Act 1955 empowers the Court to determine whether a testator has discharged his or her moral duty to make adequate provision for the proper maintenance and support of eligible persons. It does not enable the Court to rewrite the Will to remedy perceived unfairness or to achieve parity.²⁷

[48] The inquiry into the content of the moral duty in any given case, and any breach and requisite remedy, involves evaluation of a number of factors, including:²⁸

²⁷_{Williams v Aucutt, above n 4; Little v Angus,
above n 4; Vincent v Lewis, above n 4.}

²⁸Williams v Aucutt, above n 4; Little v Angus, above n 4; Vincent v Lewis, above n 4; John

Caldwell “Family protection claims by adult children: what is going on?” (2008) 6 NZFLJ 4

(a) The nature of the relationship of the testator and the claimant; (b) The financial need of the claimant;²⁹

[49] The competing claims in this case call for further explanation of the testator’s duty to his surviving spouse and the effect if any of that duty on his parental obligations.

[50] A surviving spouse’s claim is often described as paramount,³⁵but that description is not a rule of law.³⁶Rather, as stated in Wylie, the law limits the spousal claim to the extent of deficiency in terms of her/his need of proper

provides an insightful review of the developments of the law in this area to 2008 which we have found of considerable assistance in formulating this list

³⁴Fisher v Kirby [2012] NZCA 310 at [114]; and which may mean that the most that can be done is to ensure the estate is justly divided between persons that have moral claims - Re Sutton [1980] 2 NZLR 50 (CA).

³⁵See for example E v E (1915) 34 NZLR 785 (CA); Forrester v Hastie HC Christchurch

A321/83, 6 October 1988 at 13; Re Hughes (deceased) HC Christchurch M360/88, 21

September 1989 at 10; Re Jones (deceased) HC Christchurch M503/91, 2 June 1992 at 7; Re August (deceased) [1993] NZFLR 534 (HC) at 537; Clements v Clements [1995] NZFLR 544 (CA) at 545 and 547; Re Lawler HC Palmerston North AP10/02, 8 April 2003 at [65].

³⁶_{In re Worms (deceased): Worms v Campbell [1953]
NZLR 924 at 934 and 936-937.}

[51] The Court of Appeal in Flathaug provides the seminal statement on the nature of the parental obligation, but we isolate their component parts because they resonate so strongly in this case:³⁸

(b) The moral obligation which attaches to it is embedded in our value system and underpinned by law.

(d) It is an obligation which is largely defined by the relationship which exists between parent and child during their joint lives.

[52] As with the spousal claim, the Court may intervene if and to the extent there is a breach of the moral and ethical duty that a just and wise testator can be held to owe to children in all the circumstances of the case.³⁹

[53] The relative priority to be afforded to the claims of spouses and children will be a question of fact in each case, having regard to the various factors noted at [48]. Nevertheless, the claim of the surviving spouse who has made a long and substantial contribution to the estate of the deceased will ordinarily be given generous

Did Mr Black owe a moral duty of maintenance and/or support to his children and/or grandchild at the time of his death?

[54] The Judge was plainly aware of the guiding principles, but we think that he

became sidetracked on whether the duty to the children rested on “maintenance” or

_{“support”. The Court of Appeal in Wylie did not
refer to whether the children’s}

⁴⁰Wylie v Wylie, above n 17, at[22]. Notably, the Court of Appeal in this case went on to find that the adult daughters in that case were entitled to greater provision (from $56,000 to $200,000 each), notwithstanding the claims of the surviving wife and their brother. Relevant factors in that case included contribution to the assets by one daughter and the needs of the other.

claims rested on maintenance or support. Rather the Court focused on what a wise and just testator should do in the circumstances. Similarly the Court of Appeal in Flathaug adopted what Richardson J described in Auckland City Mission v Brown as a “compendious inquiry into the combined elements of the composite expression”.⁴¹

[55] We are also of the view that the Judge erred when he rejected a moral duty to “support” the children, because Mr Black owed and discharged his duty of support to Mrs Black.⁴²Rather we think that the content of Mr Black’s duty to his children is to be assessed by reference to his relationship to them, and his and their personal circumstances.

[56] We have essayed the salient facts at [4]-[18]. A very troubled family history and the absence of financial and emotional support in their adult years have had a significant impact on the health and wellbeing of the children, and the grandchild Matt. Phoebe’s suicide in 2004 is perhaps an indicator of the level of trauma suffered by them, over the course of their fraught relationship with their parents. The level of estrangement is in this context, sadly understandable, and in fact a corollary of familial dysfunction. The children are plainly in significant need, both financially and emotionally, though Joanne has demonstrated resilience to achieve some financial security.

[57] Given these circumstances, which are somewhat unusual and particular to the present case, we find that Mr Black remained subject to an ongoing moral duty to both maintain and support his children, and his grandchild at the time of his death. His detached and arms length approach to their emotional wellbeing during their upbringing was neglectful, and undermined their sense of place and belonging within the family. His refusal to assist them financially into their adulthood in any significant way compounded their alienation and their estrangement. They were

_{deserving of his familial recognition and emotional support at the time
of his death.}

⁴¹Flathaug v Weaver, above n 4, at [40] referring to Auckland City Mission v Brown, above n 4, at

[58] In summary, we consider that this is a case where a wise and just testator standing in Mr Black’s shoes, properly acknowledging the nature of his relationship with his children and grandchild, and their financial and emotional needs, would continue to provide for both their maintenance and support, to the extent he is able while at the same time properly discharging his obligations to his wife.

Did Mr Black breach his moral duty to the children and grandchild by leaving his estate to Mrs Black?

[59] Mr Black effectively abdicated his moral duty to his children and grandchild by excluding them altogether from his Will and leaving the estate to his wife. The decision to exclude the children gave effect to Mr and Mrs Black’s then shared and expressed belief that they owed no ongoing duty to provide for their children. Further as Mr Andersen noted, the duty of the deceased spouse does not automatically pass to the surviving spouse in any enforceable sense.⁴³So the decision then to provide nothing for them in his Will precluded or at least fettered any subsequent claim by the children against Mrs Black in respect of Mr Black’s

[60] The Judge was clearly troubled with this state of affairs, and approached the issue of whether Mr Black discharged his duty to the children by assessing whether it was reasonably foreseeable that Mrs Black would provide for the children in her Will. But we think that simply invites speculation on what should be a clearly enforceable duty to provide proper maintenance and support for the children. A

similar point was made by North J in Re Harrison,⁴⁴referring to the decision of the

_{House of Lords in Bosch v Perpetual Trustee Co Ltd.}⁴⁵_{North J observed:}⁴⁶

In these circumstances it is not, in their Lordships’ opinion, a valid reason for refusing to increase the appellants’ legacies that an increase has been made in the provisions made by

the testator for his widow. In considering all the circumstances of the case, the learned judge

should have borne in mind that the circumstances as they exist at present will not necessarily remain unchanged, and in omitting to do so he has, in their Lordships’ opinion, inadvertently misdirected himself

That, I think with respect, is contrary to the rationale of Bosch’s case (supra), where the suggestion appears to have been advanced and rejected that the fact that a Judge made an order which provided adequately for the proper maintenance of the wife satisfied the needs of the children too. As their Lordships pointed out, the widow might re-marry and have other children, and her second husband might be a man of slender means. In their Lordships view the Judge misdirected himself by failing to bear in mind “that the circumstances as they exist at present will not necessarily remain unchanged”. So here, no one can say with any certainty that the financial position of the appellant’s husband will not change for the worse.

[61] Overall therefore we find that in the unique circumstances prevailing in this case, Mr Black presumptively breached his moral duty to maintain and support his children by intentionally failing to provide for them at all and leaving his entire estate to his wife.

[62] The Judge acknowledged what he called Mrs Black’s paramount claim but he concluded that the claimants were entitled to some provision for maintenance given their financial need. He did not find that there was any disentitling conduct, noting that Mrs Black’s conduct acted as a barrier to their relationship with Mr Black.⁴⁷He also found that there were no inter vivos contributions to them of substance. We agree with his general assessment to this point (though we acknowledge that the

children were assisted from time to time with occasional small loans and modest cash gifts).

[63] We pause to consider the objection raised before us by Mr Andersen to the Judge’s assessment of financial need. He says it must relate only to the provision of the necessities of life. But this ignores the longstanding principle that “proper” maintenance is to be assessed by what is just in the circumstances.⁴⁸This issue is not to be approached in a niggardly way. Sam, Susy, Caitlin and Matt are, objectively assessed in very difficult financial circumstances and might legitimately expect some

_{entitled to their father’s recognition of their place
within the family, their}

contribution to his estate (and in particular their work in the family business as children), and the repair needed to remedy his prior neglect. This provides ample justification for some provision being made also for Joanne, as well as the other children and the grandchild.

[65] Turning to quantum, the Judge divided the estate by percentages, because of difficulties he noted in assessing the value of the estate. The percentages however appear to reflect the Judge’s assessment of the relative entitlements of the claimants including Mrs Black. They are not large – amounting to 23% across five claimants. The primary driver for this division appears to be the Judge’s recognition of Mrs Black’s paramount claim and the focus on financial need, rather than the notion of support. As we think the Judge erred in this respect, we consider it is necessary to recalculate what is required to remedy the breach.

[66] In order to assess the proper remedy, we must first try to determine the value of the estate and Mrs Black’s net worth. Unfortunately an incomplete and confused picture emerges from submissions and the evidence about these matters. Mr Andersen estimates Mrs Black’s current Forsyth Barr investment portfolio at the date of the District Court hearing at about $1,869,270. He says her home is worth about $420,000 giving her total assets worth $2,289,270. This reduces to assets of

about $1,400,000 after the deduction of the $902,063.58⁴⁹being the net value of the

estate. When the costs in the present proceedings are deducted, the estate value reduces to $750,105.72.

[67] By contrast Mr Scotter puts the estate at about $1.5 million, relying on pleadings in the High Court proceedings – though he accepts that it is not possible to fix the estate value with certainty. He agrees that the value of the Forsyth Barr shares held by Mrs Black was estimated prior to the Family Court hearing at $1,869,270, but that this followed after withdrawals were made by Mrs Black of about $350,000 in the previous 18 months. He also notes that she had a bank account balance of

_$95,765.⁵⁰_{He then estimates Mrs Black’s
worth was therefore closer to $2.7 million}

⁴⁹This figure is said to reflect adjustments for solicitor’s costs, counsel’s costs in the High Court, settlement payment to Briar, and fees owing to the claimants in respect of High Court proceedings.

immediately prior to “distribution”, assuming her house is worth $350,000. He then highlights that she has benefited from a loan from Fred’s assets (under her hand as his Attorney) of $800,000.

[68] Regrettably, we are unable to make definitive findings about the net worth of the estate or Mrs Black’s personal wealth. The estate has probably fluctuated around

$1.2 million since Mr Black’s death and Mrs Black’s net worth has similarly floated around $1.2 to $1.5 million. We accept that Mrs Black benefited from the “loan” transfer to her of $800,000. Mr Scotter expresses this benefit in terms of a lost interest cost over the period of the “loan” of about $440,000. The existence of this benefit was not challenged by Mr Andersen in his submissions, though Mr Andersen maintained that it should not be notionally added to the estate. That must be correct, because interest on this sum has not in fact accrued to the estate. But in assessing what is proper maintenance and support required in the circumstances, this benefit has to be taken into account. Having said that, we think recognition must be made of the care provided for Mr Black by Mrs Black during this period (in addition to her contribution to Mr Black’s wealth), including the cost of his care, said to be about

[69] In the result, for the purpose of our assessment, we assume that Mrs Black currently has personal wealth in the order of $1.4-$1.5 million, but this was likely to be in the order of $1.8 million at the time of Mr Black’s death, given the withdrawal of about $350,000 spent by her since then. She also had the benefit of about

$800,000 of Mr Black’s personal wealth for several years at no interest cost. She however carried the burden of caring for Mr Black over that entire time. Furthermore, we accept Mr Andersen’s submission that she will need care in her retiring years, and we agree she is entitled to a generous share of an estate she helped build. Nevertheless we have come to the conclusion that, in the unique circumstances of this case, an allocation of 77% of the remaining estate is more than generous. In our view, it exceeds what is proper in the circumstances having regard to the legitimate claims of the children and the grandchild. We think that around

50% of the estate is ample to discharge Mr Black’s duty to Mrs Black, bearing in

_{mind that her personal financial wealth is also attributable to their
joint endeavour.}

[70] As to the children, like Judge Coyle in the Family Court, we are not able to approach the division in specific quantitative terms. We think it is preferable to approach the division in percentage terms, given that their claims largely have a similar basis, though Joanne’s claim is based on emotional rather than financial need. Indeed, it seems to us from all the evidence before the Court that she was likely to have carried a larger emotional burden of alienation.

[71] In approaching the distribution in this way we are mindful that the objective is not to achieve parity as between all the parties here, but to repair the breach. We have also considered case law dealing with percentage allocation to understand the general trend of the law on the issue of what is required to repair the breach, while remaining true to the wishes of the testator. It appears to us also that a 20%

allocation sought by the children is at the upper end of the spectrum⁵²and too high in

this case given Mrs Black’s legitimate entitlement to a generous distribution from the estate. Rather we think that a 10% distribution to each of the children including Joanne serves the purpose of repair to each of them in the circumstances.

[72] For completeness we now address the special position of Matt, the grandchild. His mother’s suicide in 2001 naturally had a severe impact on him. In Re Ward⁵³the Court addressed the claims of grandchildren against the estate of a grandfather. The father in that case also committed suicide before the death of the grandfather. Unlike the present case, in Re Ward the grandchildren it appears had indirectly benefited from contributions from the grandfather to the father’s estate. It

appears also that the deceased assumed that the grandchildren would benefit from the realisation of a family farm that formed part of the father’s estate. In then granting an award to the grandchildren, the Court considered two important factors, namely the need for family recognition and the absence of any direct assistance from the deceased to the grandchildren following the father’s death. We consider that these two factors apply with equal if not greater force in this case. Moreover, we find it difficult to conceive of a more deserving context in which the moral duty of

_{the parent to support the child should pass to deserving grandchildren
and often in}

equal measure, given demonstrable emotional and financial needs. It is true that Matt’s relative youth and his lack of dependents need to be taken into account. And, we also acknowledge Mr Andersen’s submission that Matt’s financial need became more pressing after Mr Black’s passing. But financial need is only one aspect to consider in a wider context where parental recognition and support has been very limited. We conclude here that Matt as a grandchild with clearly deserving emotional and financial needs, but being only one of the late Phoebe’s two children, should receive a 5% distribution from the estate.

[73] Although that effectively disposes of the substantive appeal before us, for completeness we will turn briefly to address an argument advanced by Mr Scotter in particular that Mr Black’s breach of moral duty here could be addressed in another way. This would be to award only a life interest in his estate to Mrs Black with a gift over of the residuary estate to Sam, Joanne, Susy, Caitlin and Matt on her death. This alternative remedy is often regarded as appropriate in Family Protection claims where the contest on the death of one parent, for example a father is between, on the one hand, his natural children and on the other, his second spouse, their step-mother. We are of the view however that such a life interest arrangement is not appropriate in the particular circumstances prevailing here. Mrs Black is not a step-mother. She is the natural mother of Joanne, Sam, Susy, and Caitlin. Sadly, the entirely dysfunctional relationship between Mrs Black, her children and her grandson must mean in our judgment that a clean break is desirable. Any life interest arrangement would not achieve this. It would likely lead to ongoing bitterness and rancour which needs to be avoided.

[74] We turn now to consider the cross-appeal by Sam, Joanne, Susy, Caitlin and Matt over Judge Coyle’s costs decision which followed his substantive decision in this proceeding. In that substantive decision, Judge Coyle had referred to the costs

[74] ...in their submissions, counsel indicated that they sought costs be met out of the estate and, on counsel’s estimates, those costs, Mrs Black’s costs and the estate’s costs are likely to erode between a third and half of the value of the estate. Thus, in net figures, assuming that the issue of costs is resolved as the complainants would like it to be, the net estate is likely to be in the vicinity of $600,000 - $700,000.

[82] ... Without predetermining the issue, I would have thought that all parties’ actual costs associated with this litigation only should be borne by the estate.

[75] In his costs application Mr Scotter, on behalf of Joanne, Sam, and Susy had sought $150,000 (plus GST) in costs (reduced from his claimed actual costs of

$225,000) (plus GST) and disbursements, totalling in all some $176,679.39.⁵⁵

Mrs Spry on behalf of Caitlin and Matt had sought costs of $100,000 (plus GST) and disbursements, totalling in all some $120,667.13. The total costs and disbursements sought by these applicants therefore amounted to $297,346.52, excluding the costs of the executors of the estate which were unknown at that stage.

[76] In the costs decision, Judge Coyle accepted the submission from Mr Andersen that, acknowledging the complexity of these proceedings, costs here ought to be calculated on a 3C basis.⁵⁶Applying these scale costs to both Mr Scotter’s and Mrs Spry’s clients yielded a figure of $53,705 for each group. Mrs Black’s scale costs would have amounted to $51,405, but this in fact exceeded her actual costs which were $37,701.34.⁵⁷Before making an award Judge Coyle observed that the costs claimed by Mr Scotter and Mrs Spry were almost three times the amount of scale costs, even on a 3C basis, and there was no explanation provided as to how this was calculated.⁵⁸

[77] The costs awards ultimately made by Judge Coyle, all directed to be met from the estate, were as follows:⁵⁹

(a) $53,705 each to Mr Scotter’s and to Mrs Spry’s clients along with disbursements of $4,179.39 to Mr Scotter’s clients and disbursements of $2,667.13 to Mrs Spry’s clients.

(b) $37,701.34 to Mr Andersen’s client, Mrs Black being her actual costs. (c) Estate solicitor’s costs were also to be met out of the estate.

[78] It is the costs awards noted at [77](a) above which are the subject of the present cross-appeal.

[79] Mr Scotter, counsel for Joanne, Susy and Sam in this cross-appeal, seeks an increased costs award to his clients of $150,000 plus GST and disbursements of

$26,676.39. As to this he asserts that following the substantive decision, he was under the impression from Judge Coyle that actual costs of the parties would be met by the estate. On the final day of hearing he indicated that he could justify actual costs of $225,000 plus GST and disbursements. This total included time spent on certain High Court matters. Mr Scotter also indicated that due to the disproportionality of these costs to the total value of the estate, he would be rounding down his costs significantly to $150,000. This would limit his costs charged to each of his three clients to an amount of $50,000 each.

[80] Mr Scotter went on to submit that Judge Coyle’s seeming change in stance between the hearing of the matter and delivering his costs decision reflects the Judge’s view on the “huge disparity between costs sought by Tracy personally and costs sought by Mr Scotter and Mrs Spry.” However, Mr Scotter contends that the total of Mrs Black’s costs do not account for the fact that costs of the solicitors for the estate, Medlicotts, from 25 May 2011 to the conclusion of trial totalled a further

$109,066.60 and these were paid by the estate as well. Mr Scotter therefore suggested that any true comparison between total costs for Mrs Black and her interests and those of the other parties actually yields a result that is quite close.

[81] Mr Scotter further criticises the fact that as the present costs awards stand, the only party that received full indemnity costs is Mrs Black, who he says in reality was the unsuccessful party here.

(a) The costs judgment fails to reflect that he was acting for three applicants and equally does not reflect the agreed disparity between work done by him and by Mrs Spry. Mr Andersen and Mrs Spry agreed that time properly spent by him exceeded (almost inevitably) time properly spent by Mrs Spry by 50%.

(b) Mr Scotter says he was initially approached by all six applicants/claimants, but in the end it was decided, due to conflict issues, that it would be appropriate for him to act only for Joanne, Susy and Sam, while Caitlin, Matt and Briar should be referred to Mrs Spry. This decision he said saved costs, and the final costs awards here should properly reflect this.

[83] Mrs Spry on behalf of Caitlin and Matt seeks an increased costs award to her clients to a total sum of $100,000 plus GST and disbursements of $20,667.13. In doing so, effectively she endorses the submissions advanced by Mr Scotter.

[84] In his submissions in reply, Mr Andersen for Mrs Black raised a series of responses to certain of the submissions advanced by Mr Scotter and Mrs Spry here. These responses include:

(a) The approach advocated at the hearing that all costs should be met from the estate is not appropriate in light of the current approach to costs in cases such as the present.

(b) It is not accepted that the change in stance as to costs between the hearing and the delivery of the costs decision reflects Judge Coyle’s view on the disparity of costs between the applicants and Mrs Black.

(c) As to a suggestion that was made that there is no record of any claim for costs by Mr Andersen’s instructing solicitor, Mr Paterson, Mr Andersen simply submits that Mr Paterson has not rendered a bill as he was not involved in the litigation, and it is his choice to do that.

(d) While not accepting that the estate solicitors, Medlicotts, were acting for Mrs Black in both capacities, Mr Andersen states the reality of the situation is that the estate had been distributed to Mrs Black and there was therefore no interest in the estate that was separate to hers.

(e) The fact the estate as unsuccessful party is the only fully indemnified party only becomes relevant if Mrs Black is successful on appeal as the estate has incurred significant costs of $109,066.60 which have not been claimed and which are effectively payable by Mrs Black.

(f) As to the fact that Mr Scotter represented multiple parties, Mr Andersen contends that the award of costs on a category 3C basis more than compensates for this.

(g) That the awards made by Judge Coyle in the substantive proceedings have ultimately been shown to establish that the claims by the children were uneconomic (as their share of the residue plus a share of costs is not sufficient to even meet their total solicitor-client costs) is not a proper ground for increasing costs.

(h) It is not accepted as has been alleged by Mr Scotter, that Mrs Black failed, without reasonable justification, to admit facts, evidence, documents, and legal argument or failed to adequately comply with a notice for interrogatories.

(i) As to the importance of the case allegedly justifying an award of increased costs, Mr Andersen submitted that the importance of the case is reflected in the award of costs on a 3C basis.

(j) No reasons have been given here as to why any suggested failure to exercise his costs discretion by Judge Coyle amounted to an appealable error.

[85] There can be little doubt here that the appeals against these costs decisions are appeals against the exercise of a discretion. This is supported by the rules and legislation,⁶⁰and by case law.⁶¹This reticence of appellate courts to interfere with the exercise of a discretion is amplified in cases concerning costs.⁶²This conclusion stands despite the fact that it is common ground that the discretion conferred in

respect of costs is to be exercised in a principled manner consistent with the more detailed costs rules.⁶³

[86] It has been said by the Supreme Court that although costs decisions are discretionary, “the discretion has never been unfettered and must be exercised judicially.”⁶⁴This point was well made by the Supreme Court in Shirley v

But although the costs jurisdiction is discretionary, it is not unprincipled, or else it would be unacceptably arbitrary. As Lord Halsbury LC pointed out in Sharp v Wakefield:

“when it is said that something is to be done within the discretion of the authorities ... that something is to be done according to the rules of reason and justice, not according to private opinion ... according

⁶⁰See the High Court Rules, r 14.1; District Court Rules 2009, r 4.1; Family Court Rules 2002, r 207.

⁶¹Zondag v Zondag [2008] NZCA 321 at [71]; Morning Star (St Lukes Garden Apartments) Ltd v Canam Construction Ltd CA90/05, 8 August 2006 at [55]; Scales Trading Ltd v Far Eastern Shipping Co Public Ltd CA61/99, 28 September 1999 at [22].

⁶²_{Lewis v Cotton [2000] NZCA 399; [2001] 2 NZLR 21, (2000) 20 FRNZ 86
(CA) at [65].}

PRNZ 186 at [7]; Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR

to law, and not humour. It is to be, not arbitrary, vague, and fanciful, but legal and regular.”

[87] The language in s 207(2) Family Court Rules 2002, however, framed as it is in the permissible, could be seen to provide a very broad discretion.⁶⁶But, while the discretion may be broad, that does not confer unlimited license to ignore the more detailed rules now included in r 207(2). Unless there are good reasons for doing so, the Family Court should ordinarily defer to those detailed rules, and where a contrary course is adopted proper reasons should be provided.

[88] The result of all of this is that the appellants can only therefore be successful if they can establish that Judge Coyle’s costs award involved, what can be generally termed an error of principle.

[89] In Manukau Golf Club Inc v Shoye Venture Ltd the Supreme Court stated, it is a fundamental principle that costs follow the event and that:⁶⁷

The party who fails with respect to an appeal should pay costs to the party who succeeds.

[90] In this case costs did follow the event in favour of the successful parties. In addition, those costs were met from Mr Black’s estate which we are satisfied was appropriate. The complaint here seems to centre around the fact that the appellants (the then applicants) did not receive either increased or indemnity costs.⁶⁸The costs were calculated by reference to rr 4.2 – 4.5 of the District Court Rules, which, as a

_{preliminary observation, reflects appropriate deference to the detailed
rules.}

[91] After concluding that Mr Scotter’s and Mrs Spry’s clients were entitled to costs on a 3C basis, Judge Coyle in the Family Court made the following observations:⁶⁹

[16] ... I agree with the submissions of Mr Andersen that the submissions of Mr Scotter and Mrs Spry do not address any justification as to why there should be increased or indemnity costs...

[17] I agree with Mr Andersen’s submission that none of the factors under rr 4.6.3 or 4.6.4 have been identified or relied upon by either Mr Scotter or Mrs Spry in their submissions...

[92] It is in this context that Judge Coyle’s decision to refuse to provide increased or indemnity costs must be analysed. In terms of increased costs, it is trite law that the procedure to be followed by an applicant seeking increased costs is that set down by the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd which can be summarised as follows:⁷⁰

(b) Work out a reasonable time for each step in the proceeding (which involves reference to the daily recovery rates and the time allocations);

(d) Only after the preceding three steps have been complied with should the applicant step back and consider the amount of costs it would receive by this process, and then argue for additional costs if it is considered such can be justified.

⁷⁰Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA) at [43] – [45] and [48].

[93] This discussion clearly establishes that at no time was this exercise undertaken by either Mr Scotter or Mrs Spry. In any event, even if they had submitted on this issue, it is unlikely in our view that increased costs would be warranted under the circumstances prevailing in this case. Also, this was a proceeding that had already been categorised as 3C meaning it was a proceeding that “because of their complexity or significance require counsel to have special skill and experience” and for all steps “a comparatively large amount of time is considered

convincing submission advanced as to why 3C scale costs are inadequate in these circumstances. Certainly no justification is provided here to explain why 3C scale costs need to be nearly trebled in the case of Mr Scotter’s clients and nearly doubled in the case of Mrs Spry’s clients.

The Court is not interested in the actual time a particular counsel may have spent on a particular step. Some counsel are highly efficient. Others, perhaps through inexperience, take much longer to do the same work. The Court is not interested in how long the particular counsel involved took, whether with respect to a particular step or with respect to the proceeding as a whole. The matter is to be looked at objectively.

[95] In addition, care needs to be taken to ensure that any costs awards do not unreasonably erode Mr Black’s estate. This point is alluded to by Judge Coyle with his reference to the judgment of Rodney Hansen J in Re Miller (costs).⁷³This was

also recently referred to by the High Court in Bones v Wright where it was stated:⁷⁴

Despite these general principles, the practice developed in family protection proceedings is for the Court to order that the costs of all parties should be borne out of the residue of the estate of the deceased. This rule, however, is not invariable. On occasion, the Court will leave costs to lie where they fell, with the result that the parties on occasion have to meet their own costs out of their respective shares of the estate. This practice has developed because the courts have appreciated that a costs order against the residue of an

⁷²Beach Road Preservation Soc v Whangarei District Court [2001] NZHC 811; (2001) 16 PRNZ 13 (HC) at [16].

⁷³Black v Black [costs], above n 55, at [4] referring to Re Miller (costs) (2001) 20 FRNZ 459 (HC)

estate can impact unfairly on residuary beneficiaries, particularly where the estate is not large.

More recent cases suggest that costs in family protection cases should not be excluded from the general rule that costs should follow the event, but that this rule can be departed from in appropriate cases.

[96] In the present case, the proposed costs sought by Mr Scotter’s and Mrs Spry’s clients together totalled $250,000 plus GST. By no estimation is this an insignificant amount for costs, particularly when weighed against the value of Mr Black’s estate. This is all the more so when disbursements are factored in.

[97] Turning now to consider Judge Coyle’s decision refusing to award indemnity costs, we are also satisfied that the cross-appeal on this ground should fail. In the Court of Appeal decision Bradbury v Westpac Banking Corporation there was a discussion on indemnity costs where it was stated:⁷⁵

...the starting point of our rules, which gives a one-third or thereabouts deduction from a set figure is comfortably in the modern mainstream. It affords recognition of the access to justice factor that prevails in the United States and should not lightly be departed from. Clear cause must be shown to justify an increase. Our three-stage classification, with a discretion in each class as to where the order should be pitched, accords with that approach. Indemnity costs, which depart from the predictability of the Rules Committee's regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be “flagrant”: (Prebble v Huata (No 2) [2005] 2 NZLR 467; (2005) 17

We therefore endorse Goddard J’s adoption in Hedley v Kiwi Co-op Dairies Ltd (2002) 16 PRNZ 694, at para [11], of Sheppard J's summary in Colgate- Palmolive Co v Cussons Pty Ltd, at pp 232-234, para [24]. While recognising that the categories in respect of which the discretion may be exercised are not closed (see r 14.6(4)(f)), it listed the following circumstances in which indemnity costs have been ordered:

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

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

⁷⁵Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [24] and

(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J's “hopeless case” test.

[98] It is therefore beyond question that there is a high threshold to be met for indemnity costs to be awarded.⁷⁶Such costs can only be awarded in “truly exceptional circumstances”.⁷⁷The present circumstances are not exceptional. As with the increased costs claims, neither Mr Scotter nor Mrs Spry put before Judge Coyle any evidence upon which he could have formed the view that indemnity

costs were appropriate. Thus, there is no error of principle upon which this appeal can bite. In any event, as Judge Coyle observed, the only party in the present case potentially guilty of misconduct warranting an uplift might be the claimants themselves, putting before the Court as they did superfluous material with no purpose he found other than to impugn Mrs Black’s character.

[99] That Judge Coyle at one point may have evinced a tentative disposition to award actual costs on a solicitor-client basis is irrelevant. It was expressly qualified, probably for the reasons subsequently encountered. In the end an approach was adopted that accorded with the more specific rules and one that accorded with principle. Judge Coyle was entitled to adopt that approach.

[100] In conclusion, we are satisfied that this is not a case which warrants interference in the exercise of Judge Coyle’s discretion, in awarding the costs he did. It would be difficult to maintain that Judge Coyle erred in principle when he had no evidential foundation on which he could determine that either increased or indemnity costs were warranted. And, in any event, we agree with his decision here to award costs to all parties (met from the estate) on the highest possible scale category of 3C and we do not consider this to be a situation warranting interference with his

[101] The substantive cross-appeal by Joanne, Susy, Sam, Caitlin and Matt succeeds in part, and as a result the initial substantive appeal by Mrs Black must fail.

[102] We find there has been a breach of moral duty by Mr Black both to support and maintain these claimants.

[103] To remedy that breach, Mr Black’s will of 21 July 1994 is varied to provide

(a) To Joanne, Sam, Susy and Caitlin - they are each to receive 10% of the residuary estate;

(d) In all other respects, the will of Mr Black is to remain the same. An order to this effect is now made.

[105] As to costs on these appeals, Joanne, Susy, Sam, Caitlin and Matt have effectively succeeded in the major substantive aspect of their appeals and we see no reason why they should not be entitled to costs in the usual way. It is true that they failed in their appeal against Judge Coyle’s costs decision, but as we see it this is minor in the overall scheme of all issues at stake here.

[106] And we agree first, that scale costs are appropriate here, secondly that the importance of this present appeal does justify an award of costs on a category 3C

basis, and thirdly, that the costs of all appellants including Mrs Black (also on a 3C

[107] An order is now made that all parties to this appeal are entitled to an award of costs on the appeal on a category 3C basis, together with disbursements as approved by the Registrar, all such costs to be met by the estate.

High Court of New Zealand Decisions

Black v Black [2014] NZHC 1478 (27 June 2014)