Coneybeer v Allen [2014] NZHC 3151 (10 December 2014)

Last Updated: 18 February 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-004-001620 [2014] NZHC 3151

BETWEEN	GREGG JOHN CONEYBEER Plaintiff
AND	RICHARD ALLEN First Defendant ALASTAIR McCLYMONT Second Defendant

Hearing:	2 December 2014
Appearances:	No appearance for Plaintiff No appearance for First Defendant S A Keall and A Tsang for Respondent (Royal Reed) F Deliu for Second Defendant/Applicant
Judgment:	10 December 2014

_{JUDGMENT OF COURTNEY J}

This judgment was delivered by Justice Courtney on 10 December 2014 at 4.30 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

_{Date............................}

CONEYBEER v ALLEN & OR [2014] NZHC 3151 [10 December 2014]

Introduction

[1] In this proceeding Mr Coneybeer sued his former solicitor, Mr McClymont, in respect of a relationship property agreement. The agreement was prepared by the solicitor acting for Mr Coneybeer’s wife.¹ Mr McClymont advised Mr Coneybeer and provided the certificate required by s 21 of the Property (Relationships) Act

1976. Mr Coneybeer recently discontinued the proceedings, with Mr McClymont agreeing not to seek costs against Mr Coneybeer. However, he does seek costs against Mr Coneybeer’s current solicitor, Ms Reed.

[2] The application is brought on the ground that errors by Ms Reed in the conduct of the proceeding resulted in him incurring substantial wasted costs. In particular, it is asserted that the proceedings had no hope of success, that Ms Reed made several errors during the course of the proceedings and that she failed to diligently prosecute the claim. A further ground, that the proceedings were brought out of time, was abandoned.

[3] Ms Reed opposes the application on the ground that, whilst there were some errors in the carriage of the proceedings they were not significant and do not, either individually or cumulatively, justify a costs award against her personally.

[4] Mr Keall, for Ms Reed, was retained very recently. On the day of the hearing he sought leave to adduce affidavit evidence relating to the limitation point. This evidence had been provided to Mr Deliu the previous week but as a result of confusing messages from Ms Reed’s office, he did not think it relevant until the day before the hearing. But, in any event, the evidence did not need to be adduced because Mr Deliu conceded that he could not succeed on the limitation point.

Costs against a solicitor personally

[5] The circumstances in which this Court may impose costs on a lawyer personally are well established, having been fully explained by the Privy Council in

_{Harley v McDonald.}² _{It is a summary jurisdiction, to be exercised where the facts}

¹ _{The first defendant, Mr Allen. This application does not concern him.}

² Harley v McDonald [2002] 1 NZLR 1.

are agreed or, at least, readily ascertainable. It should be invoked only in cases where there has been a serious dereliction of the solicitor’s duty to the Court. It responds to provide both compensation for the wasted costs of the affected litigant and punishment for the practitioner’s failure to fulfil his or her duty to the Court.

[6] It is important to remember that the exercise of this jurisdiction is a serious step; the Privy Council observed that:³

A simple mistake or oversight or a mere error of judgment will not, of itself, be sufficiently serious to fall into that category. Something more is required. In Myers v Elman at pp291-291 Viscount Maugham indicated that the test was whether the conduct amounted to a serious dereliction of duty, and that negligence could be so described if it was at a sufficiently high level. At p304 Lord Atkin described the kind of negligence that could lead to an exercise of the jurisdiction as gross negligence. At p319 Lord Wright said that, while a mere mistake or error of judgment is not generally sufficient, a gross neglect or inaccuracy in a matter which was a solicitor’s duty to ascertain with accuracy, such as whether he had a retainer to act, might suffice. A more precise definition of the level of seriousness is not appropriate. But when negligence or incompetence is alleged the conduct must be put into its proper context ...

Their Lordships agree with the Court of Appeal’s conclusion in [1999] 3

NZLR 545 at [59] (pp565-566) that a duty rests on officers of the Court to achieve and maintain appropriate levels of competence and care and that, if he is in serious dereliction of such duty, the officer is properly amenable to the costs jurisdiction. But care must be taken not to assume that just because it appears to the Court that the case was hopeless there was a failure by the barrister or solicitor to achieve the appropriate level of competence and care.

...

The essential point is that it is not errors of judgment that attract the exercise of the jurisdiction, but errors of a duty owed to the Court.

Background to application

[7] The agreement that was the subject of the proceedings covered both relationship property issues and child support. The former family home was owned by a family trust of which Mr Coneybeer and his former wife were trustees and beneficiaries. It had a mortgage over it securing borrowings of $235,000. The trustees owed $107,000 to Mr Coneybeer and Ms Rush. The important aspect of the agreement for present purposes was that Mr Coneybeer gave up any entitlement he

_{had in the trust and in the debt owed to him by the trust in exchange for his wife’s}

³ At [55] – [57].

agreement that she would not seek child support from him in respect of their children who were then aged six and nine.

[8] In 2010 Mr Coneybeer commenced proceedings in the Family Court seeking to have the agreement set aside. One of the grounds of the application was that the agreement was void because he had not received adequate independent legal advice before signing.⁴ That proceeding did not come to trial in the Family Court until November 2013. In July 2012, in order to preserve the cause of action against Mr McClymont, which expired in September 2012, Ms Reed commenced

proceedings against Mr McClymont in the District Court and they were later transferred to this Court.

[9] Mr McClymont’s immediate response to the proceedings was an application to strike them out. With hindsight it can be seen that this application would not have succeeded but, in any event, it was not pursued because it was recognised from an early stage that the most practical way forward was to defer any further steps until the Family Court proceedings had been determined.

[10] At a case management conference on 24 October 2012 Asher J recorded that:

However, all three parties agree that a successful outcome to [the] application to set aside the agreement is likely to mean that there is no basis for any claim of any significance against either defendant. In other words, a successful outcome may mean that this proceedings does not need to go further.

[11] At a further conference on 4 April 2013 Asher J noted that the Family Court proceedings were still on foot and “should sensibly proceed before the High Court proceedings.” By October 2013 the Family Court proceedings had still not been determined and in a minute following a conference on 2 October 2013 Asher J recorded that he was “prepared to accede to counsels’ request for a further adjournment of the proceeding.”

[12] Judge Burns delivered his decision in the Family Court on 18 March 2014. He identified a number of problems with the agreement, including the fact that the

⁴ Property (Relationships) Act 1976, s 21F(3).

Child Support Act 1991 does not permit parties to contract out of its provisions so that, notwithstanding the agreement, Mr Coneybeer was still assessable for child support.

[13] The Judge considered that adequate independent advice would have required a solicitor to identify the relevant assets and liabilities, categorise them as relationship or separate property, identify the value of the assets and compare the entitlements under the PRA and FPA. These steps had not been taken (or at least there was no evidence of them having been taken; Mr McClymont did not have a file). Although the Judge preferred Mr McClymont’s evidence regarding the nature and extent of advice given, he concluded that the meeting between Mr McClymont and Mr Coneybeer was short and that there was no valuation or other information available regarding the value of the property that would have enabled Mr McClymont to provide adequate independent advice. The Judge concluded that, in the absence of evidence of the necessary steps having been taken, he could not be satisfied that the independent advice that Mr McClymont gave was adequate.

[14] The Judge set aside the agreement insofar as it related to the relationship property, but not as regards the voluntary agreement on child support or forgiveness of debt. Further, the Judge treated Mr Coneybeer’s obligations regarding child support as imposing a trust over the amount to which he would otherwise have been entitled in respect of relationship property, with the result that his child support liability exceeded his equity and there could be no net gain to him as a result of the proceedings. The result was what is commonly described as a Pyrrhic victory.

[15] In his unchallenged affidavit filed for this application Mr Coneybeer explained that following receipt of the Family Court decision he nevertheless instructed his solicitors to continue the High Court proceedings in the belief that he was entitled to damages for the stress he had suffered as a result of the conduct of the solicitors involved in the relationship property agreement. By June 2014 he had decided not to appeal the Family Court decision but had not yet made a decision regarding the future of the High Court proceedings. Eventually, however, he instructed his solicitors to try and settle the High Court proceedings on the basis of discontinuance without costs. These negotiations resulted in a joint notice of

discontinuance dated 22 August 2014 in which it was agreed that Mr McClymont would not seek costs against Mr Coneybeer but reserved the right to pursue costs against Ms Reed.

The application for costs against Ms Reed

[16] Mr Deliu accepted that most of the grounds advanced in support of the application could not, individually, justify an award of costs against Ms Reed. Instead, he argued that the various grounds disclosed a pattern of error and lack of competence that, cumulatively, justified such a step.

[17] The first complaint was that when Ms Reed filed the proceedings in the District Court she failed to attach the “notes for defendant” required by rr 2.3.2, 2.10 and/or 2.11(g) of the District Court Rules 2009. This was one of the grounds asserted in Mr McClymont’s earlier application to strike out. Mr Deliu argued that the omission rendered the entire proceedings void ab initio. There is absolutely no merit in the argument because Rule 1.8 of the District Court Rules provides that a failure to comply with the rules does not nullify the proceedings or any step taken in the proceedings.

[18] The second ground is that the claim was hopeless from the outset. Mr Deliu argued, first, it was an abuse of process to run the same factual contentions in two jurisdictions simultaneously and, secondly, that the High Court proceedings were always doomed because if Mr Coneybeer succeeded in the Family Court he would have no basis for the claim in the High Court. Conversely, if he failed in the Family Court that would suggest that the allegations of negligence against Mr McClymont in this proceeding would fail also. I do not accept either assertion.

[19] It is perfectly clear from Harley that the mere fact that counsel advances a case that is not likely to succeed or even is doomed to fail will not in itself justify a personal costs award against the solicitor concerned. One reason is that the Court cannot know what instructions the solicitor had. It is relevant in this regard that in his affidavit filed in opposition to this application Mr Coneybeer makes it plain that he felt very aggrieved at Mr McClymont’s inadequate advice and strongly wished to pursue the proceedings.

[20] In any event, the case was not necessarily doomed. The Family Court was determining the validity of the relationship property agreement and, in particular, its compliance with s 21. Judge Burns was concerned with the adequacy of the independent advice given. In comparison, the proceedings in this court were concerned with an allegation of negligence by Mr McClymont. Whilst one arguably might draw an inference about Mr McClymont’s performance from the finding that the advice was inadequate for the purposes of s 21, the finding did not purport to, and could not have, determined whether Mr McClymont was actually negligent. Moreover, it is possible to foresee circumstances in which Mr Coneybeer could have sustained a loss that was recoverable from Mr McClymont regardless of the outcome in the Family Court.

[21] Nor do I accept Mr Deliu’s argument that it was an abuse of process to commence the negligence proceedings against Mr McClymont at the same time as the Family Court proceedings were on foot. The two cases may have had their origins in the same agreement. But the nature of the allegations and the relief sought were entirely different. Faced with the impending expiration of the limitation period on the negligence proceedings it was not an abuse of process or an error of any kind for Ms Reed to have commenced the proceedings in this Court; she would undoubtedly have been negligent had she not moved to preserve what appeared to be perfectly good cause of action.

[22] The third complaint is that Mr Coneybeer took no steps for two years to progress the matter for trial. Mr Deliu invited the inference that Mr Coneybeer never intended to pursue the claim and was merely lodged it as a holding pattern. I have already dealt with this submission. There can be no complaint about the lack of progress in this proceeding pending determination of the Family Court proceedings. A very experienced High Court Judge had supervision of this matter and regarded it as appropriate to postpone progress on this matter to enable the Family Court proceedings to be concluded. That was, with respect, an entirely proper course. I note, further, that this point was never raised by Mr Deliu at any of the case management conferences in which all counsel agreed that the matter should be left in abeyance pending the resolution of the Family Court proceedings.

[23] The fourth complaint relates to a letter that Ms Reed wrote prior to the proceedings being commenced. The letter, dated 29 May 2012, asserted that Mr Coneybeer had grounds against Mr McClymont “including but not limited to breaches of the professional obligation described in the Rules of Conduct and Client Care for Lawyers (“the Rules”) and breaches of the Consumer Guarantees Act 1993 as well as breaches under tort and equity.” The letter went on to suggest that, by providing the solicitor’s certificate on the agreement, Mr McClymont had acted in breach of r 2.5 which required him not to certify the truth of any matter without believing on reasonable grounds that the matter is true. Ms Reed further suggested that Mr McClymont had failed to uphold and facilitate the administration of justice by participating in the process of certifying the s 21 agreement when the circumstances pointed to the likelihood of Mr Coneybeer being coerced into signing the agreement.

[24] Mr Deliu submitted that these allegations were baseless and that the letter constituted an abuse of the court process. He acknowledged that the letter was written well before the proceedings were issued and did not form part of the proceedings so cannot, in itself, justify an award of costs. He nevertheless invited me to view the letter as indicative of incompetence on Ms Reed’s part and take it into account in my assessment of her overall conduct when determining the costs application. I decline to do so. If Ms Reed made allegations against a fellow practitioner that were baseless the appropriate forum for a complaint is the Law Society.

[25] The next complaint is that Mr McClymont incurred substantial costs needlessly. Mr Deliu asserted in his written submissions that Mr McClymont had incurred “a not insubstantial liability of $24,225” though Mr McClymont’s affidavit gave no details of the amount he had incurred and did not provide copies of invoices. The affidavit did outline the steps that Mr Deliu and members of his chambers have taken in relation to the proceedings. Most relate to the strike out application (which was misconceived) and preparation of memoranda for and attendance at case management conferences.

[26] Given that minimal steps were required of Mr McClymont prior to discontinuance and that the only substantial step, the application to strike out, could not have succeeded, I cannot accept that Mr McClymont did incur substantial costs as a result of any misconduct on Ms Reed’s part.

[27] Mr Deliu next submitted that Mr McClymont could not reasonably expect to obtain payment of costs from Mr Coneybeer himself and it is for that reason that he did not seek costs against him.⁵

[28] There is, in any event, no evidence of Mr Coneybeer’s financial circumstances. Mr Deliu relied on an email from Mr Coneybeer’s solicitors which evidently contains a settlement offer and also refers to Mr Coneybeer’s financial circumstances being dire. However, this email, dated 7 August 2014, was clearly written as part of the negotiations for the discontinuance of the proceeding and was marked without prejudice. Mr Deliu submitted that he was entitled to rely on the letter because he had redacted it so as to obliterate the part of the email referring to the settlement offer. This approach is incorrect. Under s 57(1) of the Evidence Act

2006 privilege attaches to “any communication” between parties to a dispute that is made in connection with an attempt to settle the dispute. The communication comprised the entire email. Under s 65(5) that privilege can be waived by all the persons holding the privilege. But Mr Coneybeer had not waived the privilege. The email should not have been exhibited and I disregard it, though it would have made no difference to my conclusion.

[29] Finally, Mr Deliu criticised Ms Reed for allowing inexperienced counsel to conduct the proceeding. He criticised her for conducting the litigation with only two years’ post-qualification experience and for allowing a junior solicitor, Ms Prasad, to have appeared at a case management conference. Once again, there is simply no merit in these submissions. It is true that Ms Reed and Ms Prasad appear not to have significant experience and that Ms Prasad attended one of the conferences without being adequately briefed. On the other hand, the errors that Mr Deliu has pointed to

_{have, by and large, been relatively minor. Further, neither Ms Reed nor Ms Prasad}

⁵ The mere fact that a party cannot finance a costs award is not a ground to seek a cost award against the party’s counsel. That is plainly not the purpose of a costs award against a lawyer as set out in Harley.

appeared in any substantive hearing; in the Family Court a specialist family law barrister was engaged. It is reasonable to expect that if the High Court proceedings had gone further an experienced barrister would have been retained.

Result

[30] The circumstances of this case do not warrant a costs order against Ms Reed. There may have been some errors in the conduct of the case but they were not significant and could not have led to substantial wasted costs on Mr McClymont’s part. The application for costs against Ms Reed is therefore dismissed.

[31] Mr Keall sought costs on a 2B basis or, alternatively suggested that the costs might lie where they fell. Mr Deliu urged me not to award costs on the application, which would lead to “costs on costs”. However, this application required affidavits and submissons to be prepared and a half-day of hearing time. Further, Mr Keall wrote to Mr Deliu the week before the application pointing out the difficulties with it. It would be wrong not to award costs in these circumstances. I direct that costs

_{be paid to Ms Reed on a 2B basis.}

P Courtney J