Douglas v Douglas [2014] NZHC 602 (28 March 2014)

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Douglas v Douglas [2014] NZHC 602 (28 March 2014)

Last Updated: 15 April 2014

NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO

11D OF THE FAMILY COURTS ACT 1980. FOR FURTHERINFORMATION, PLEASE SEE HTTP://WWW.JUSTICE.GOVT.NZ/COURTS/FAMILY- COURT/LEGISLATION/RESTRICTIONS-ON-PUBLICATIONS.

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2013-463-118 [2014] NZHC 602

BETWEEN	JOHN DOUGLAS Appellant
AND	SARAH DOUGLAS Respondent

Hearing:	On the papers
Counsel:	D Williamson for Appellant R O Gowing for Respondent
Judgment:	28 March 2014

JUDGMENT OF KATZ J (Costs)

This judgment was delivered by me on 28 March 2014 at 4.30 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Wadham Goodman, Palmerston North

Gowing & Co. Ltd, Whakatane

DOUGLAS v DOUGLAS [2014] NZHC 602 [28 March 2014]

Introduction

[1] In Douglas v Douglas¹ I partially allowed an appeal by Mr Douglas from a decision of the Family Court. In particular, I quashed an economic disparity award of $63,000 made by the Family Court in favour of Mrs Douglas. I upheld, however,

_{a spousal maintenance award in her favour, in the sum of $38,775.}

[2] Mr Douglas now seeks an award of 2B scale costs in respect of his appeal, in the sum of $20,027.18. Mrs Douglas was in receipt of a grant of legal aid

_{for these proceedings and accordingly Mr Douglas must establish “exceptional}

_{circumstances” before an award of costs can be made.}²

_{He submitted that}

_{exceptional circumstances existed on three key grounds, namely that Mrs Douglas:}

(a) engaged in conduct that caused him to incur unnecessary cost;³

_{(b) failed to comply with the procedural rules/orders of the Court;}⁴ _and/or

(c) unreasonably refused to negotiate a settlement.⁵

Relevant legal principles

[3] Section 45 of the Legal Services Act 2011 (“Act”) provides, relevantly, that the liability of a legally aided person for costs is as follows:

(1) If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

(2) No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.

1. Douglas v Douglas [2013] NZHC 3022. Pseudonyms have been used for the names of the parties to protect their identities.

² _{Legal Services Act 2011, s 45.}

³ _{Section 45(3)(a).}

⁴ _{Section 45(3)(b)}

⁵ Section 45(3)(e).

(3) In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:

(a) any conduct that causes the other party to incur unnecessary cost: (b) any failure to comply with the procedural rules and orders of the

^court:

(c) any misleading or deceitful conduct:

(d) any unreasonable pursuit of 1 or more issues on which the aided person fails:

(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:

(f) any other conduct that abuses the processes of the court.

[4] In Murphy v Murphy⁶ Toogood J stated that no intrinsic test has evolved in determining what might constitute “exceptional circumstances” in the context of costs claims against legally aided litigants. Each case must be determined on its own facts. In Caldwell v Gaze Burt⁷ Thorp J considered that exceptional circumstances could include cases where the Court believed the claim to be wholly without merit; where the claim appeared to be grossly exaggerated, particularly if a reasonable offer had been made and rejected; and where a legally aided person was in fact found to

_{have substantial private means.}

[5] Where a plaintiff has shown exceptional disregard for orders and directions

_{made by the Court costs will be awarded against a legally-aided plaintiff.}⁸ _{In Smyth}

_{v Wadland}⁹

_{the Court of Appeal found exceptional circumstances to exist where}

there had been reprehensible conduct by the appellant during the course of events that led to the litigation and the proceedings lacked any merit.

_{[6] In Laver v Para Franchising Ltd}¹⁰

_{the Court of Appeal said it would not}

confine the range of exceptional circumstances to cases where the legally-aided party’s conduct of the litigation warranted a mark of disapproval. The Court noted

_{the possibility of a legally-aided party who was quite wealthy or one who might}

⁶ _{Murphy v Murphy [2013] NZHC 2145 at [15].}

⁷ _{Caldwell v Gaze Burt (1994) 7 PRNZ 491 (HC).}

⁸ _{Johns v Johns HC Auckland CIV-2000-404-5101, 23 August 2007.}

⁹ _{Smyth v Wadland [2009] NZCA 189.}

¹⁰ Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA).

succeed against one of multiple parties and accordingly be in a position to meet or pass on an award of costs.

Did Mrs Douglas fail to comply with procedural rules/orders of the Court or engage in other conduct that caused Mr Douglas to incur unnecessary costs?

[7] The first issue is whether Mrs Douglas failed to comply with procedural rules or orders of the Court or engaged in other conduct that caused Mr Douglas to incur unnecessary costs, at a sufficient level of seriousness to invoke the “exceptional circumstances” exception.

[8] Mr Douglas alleges that, prior to the Family Court hearing, Mrs Douglas turned away a jointly instructed valuer and failed to comply with directions as to valuation of a vehicle and jet ski in her possession. I put this allegation to one side, however, as events that predated the Family Court hearing are not relevant to costs issues on appeal.

[9] Of potentially more relevance, Mr Douglas relies on various breaches of timetable directions, including submissions being filed late. To the extent that any such procedural issues pre-dated the filing of the appeal they are irrelevant. As for any procedural failings in the lead up to the appeal, they were not, in my view,

‘exceptional’ enough to warrant a costs order against Mrs Douglas. Regrettably, breaches of timetable orders do occur in litigation. It seems unlikely, however, that any breaches in this case have increased costs to a significant degree, certainly not enough to bring the case within the “exceptional” category so as to justify an award of costs of over $20,000 against a legally aided party.

Did Mrs Douglas unreasonably refuse to negotiate a settlement?

[10] Mr Douglas submits that Mrs Douglas made no offers to settle the dispute, compared with three offers by Mr Douglas to settle. The first offer was made prior to the Family Court fixture, the second was prior to filing the appeal, and the third offer was made prior to the hearing of the appeal. Mr Douglas submits that it was clear that his appeal had good prospects of success. Mrs Douglas would have benefitted had she accepted the offers rather than proceeding with her appeal.

[11] Mrs Douglas accepts that two of the three offers made by Mr Douglas are relevant. The offer made prior to the defended Family Court fixture is, however, irrelevant (which I accept).

[12] Mrs Douglas points out that in his appeal, Mr Douglas sought to achieve a judgment that awarded Mrs Douglas no spousal maintenance at all. She contends that this aspect of his appeal was unreasonable, unrealistic and unlikely to succeed. While Mrs Douglas accepts that in hindsight it would have been beneficial for her to have accepted Mr Douglas’ offer to settle, the offers required her to accept that Judge Wills had got both issues (economic disparity and spousal maintenance) wrong, which she did not accept. Mrs Douglas was not prepared to compromise on both appeal points.

[13] Settlement negotiations prior to the hearing of an appeal are conceptually different in nature to settlement negotiations which take place prior to the substantive trial. At the pre-trial stage the parties’ positions and arguments are entirely untested. Each party must assess the strength and weaknesses of their own case and act accordingly. If one party over-estimates the strength of their case and turns down a reasonable settlement offer then it is appropriate that costs consequences should flow from that. The opposing party will have been put to unnecessary costs in proving (or defending) the claim.

[14] Post trial, the situation is somewhat different. A Judge has heard and determined the parties’ dispute. His or her determination stands unless and until it is overturned on appeal. Each case will turn on its own facts, but in such circumstances it will be much more difficult to establish that it was unreasonable for a party to compromise their legal rights (as established at trial).

[15] Mrs Douglas was awarded $63,000 in the Family Court for economic disparity and $38,775 for spousal maintenance. Unless and until that decision was overturned on appeal, that was her legal entitlement. There was no obligation on her to compromise that entitlement, on the basis that Mr Douglas may establish on appeal that the Judge had erred. The issues raised by the appeal were far from

straightforward and Mrs Douglas was entitled to have them tested in Court. She should not be penalised in costs for doing so.

[16] Accordingly, although Mr Douglas was partially successful on appeal, and the economic disparity award was quashed, I consider that Mrs Douglas was not unreasonable in declining to negotiate a settlement prior to the appeal being heard. Mrs Douglas had been successful in the Family Court. She was not obliged to accept a lesser sum from Mr Douglas in circumstances where she was, at that stage, legally entitled to the full amount awarded in the Family Court.

[17] The failure to accept Mr Douglas’s post trial settlement offers in this case do not therefore constitute “exceptional” circumstances, so as to justify a costs award against Mrs Douglas as a legally aided party.

Result

_{[18] The application for costs is dismissed. Costs are to lie where they fall.}

Katz J