Ormsby v Van Selm [2016] NZHC 484 (22 March 2016)

Last Updated: 3 May 2016

NOTE: ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS

11B TO 11D OF THE FAMILY COURTS ACT 1980, FOR FURTHER INFORMATION, PLEASE SEE HTTP://WWW.JUSTICE.GOVT.NZ/COURTS/FAMILY.COURTS/LEGISLAT ION/RESTRICTIONS-ON-PUBLICATIONS

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2015-419-184 [2016] NZHC 484

BETWEEN	ALAN DE LISLE ORMSBY Appellant
AND	JAKE VAN SELM First Respondent JACQUELINE ANN VAN SELM Second Respondent JANINE ALEXANDRA ORMSBY Third Respondent

Hearing:	On the papers
Counsel:	D M O'Neill for appellant D Mayall for second respondent G M Spry for third respondent
Judgment:	22 March 2016

JUDGMENT OF KATZ J [Costs]

This judgment was delivered by me on 22 March 2016 at 2:00pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Koning Webster Lawyers, Papamoa Niemand Peebles Hoult, Hamilton Norris Ward McKinnon, Hamilton

ORMSBY v VAN SELM [2016] NZHC 484 [22 March 2016]

Introduction

[1] Alan Ormsby (“Mr Ormsby”) is the son of the late Elizabeth Ormsby (“Mrs Ormsby”), who died in 2007. In her will Mrs Ormsby left Mr Ormsby the family farm, which comprised approximately 98 per cent of her estate.

[2] The second and third respondents (“Ms Van Selm” and “Ms Ormsby” respectively) are Mrs Ormsby’s two surviving daughters. They brought a successful challenge to Mrs Ormsby’s will in the Family Court, pursuant to s 4 of the Family Protection Act 1955 (“Act”). The Family Court Judge held that the will did not provide for their proper maintenance and support and ordered that the farm be divided equally between Mr Ormsby, Ms Ormsby and Ms Van Selm.¹

[3] Mr Ormsby appealed to this Court on the issue of quantum only. He did not dispute that there had been an egregious breach of moral duty on the part of Mrs Ormsby. In a decision dated 13 November 2015 (“Judgment”) I allowed Mr Ormsby’s appeal to the extent that I decreased Ms Ormsby and Ms Van Selm’s shares in the family farm from 33 per cent each to 30 per cent and 25 per cent respectively. ² These awards were still significantly greater than those contended for by Mr Ormsby in either the Family Court or on appeal.

[4] The parties have been unable to agree costs issues following the delivery of the Judgment. Ms Ormsby and Ms Van Selm submit that the parties’ costs should be met out of the estate on a 2B scale basis, whereas Mr Ormsby submits that Ms Ormsby and Ms Van Selm should bear their own costs and also meet his costs, on a 2B scale basis.

Relevant legal principles

[5] The Court has a general discretion as to costs in all matters. Although there is no legal presumption that costs must be awarded out of the estate in family

_{protection cases,}³ _{it is common for that to occur in the absence of exceptional}

¹ _{Van Selm v Van Selm [2015] NZFC 3242, [2015] NZFLR 693.}

² _{Ormsby v Van Selm [2015] NZHC 2822.}

3. Re Lawler HC Palmerston North AP 10/02, 8 April 2003 at [87]; Re Blakey (Deceased) [1957] NZLR 875 (SC) at 878.

circumstances.⁴ At least part of the rationale for this approach is that although proceedings under the Act are civil adversarial claims, in reality the Court’s duty is to stand in the shoes of the deceased to secure the proper discharge of his or her moral duty to qualifying beneficiaries.⁵ A similar approach to costs is taken in contested will cases, where it is well established that if the litigation originates in the “fault” of the will maker, or there were reasonable grounds for raising issues of execution or testamentary capacity, then costs may properly be paid out of the estate. In other cases the principle that costs should follow the event will generally prevail.⁶

[6] In recent years there appears to have been an increasing trend towards costs following the event in family protection cases,⁷ but this is certainly not a uniform practice. As is always the case in costs matters, the overarching consideration must be that any award of costs should do justice between the parties. Ultimately the decision as to the appropriate costs award in any given case will likely depend on a range of factors, including an assessment of the merits of the proceedings and

whether they were reasonably brought, the size and circumstances of the estate, the effect of an award on beneficiaries, and the overall conduct of the litigation.

Should costs be awarded out of the estate?

[7] The respondents seek an order that their costs be paid out of the estate, albeit only on a 2B scale basis as opposed to their actual solicitor client costs. Mr Ormsby opposes such an order. He submits that the respondents should meet their own costs,

_{and should also meet his costs on a 2B scale basis.}

⁴ See the discussion in Wightman v Public Trust [2015] NZHC 1091 at [18]- [21]; Wood-Luxford v

Wood [2012] NZCA 377, [2013] 1 NZLR 31; Wood-Luxford v Wood [2013] NZSC 153, [2014]

1 NZLR 451; Paewai-Kohe v Paewai [2014] NZHC 3137 at [96]; Public Trust v Bristow-Brown [2014] NZHC 2497 at [38]; Henry v Henry [2006] NZFLR 502 (HC) at [120]-[121]; Re Allardice (1909) 29 NZLR 959 (CA) at 971; Re Allen (Deceased) [1922] NZLR 218 (SC) at

224; Welsh v Mulcock [1924] NZLR 673 (CA) at 684 and 688; Bosch v Perpetual Trustee Co Ltd [1938] AC 463 (PC) at 484; Mudford v Mudford [1947] NZLR 837 (CA) at 847; Re Williamson [1954] NZLR 288 (CA) at 302; Re Clapham (Deceased) [1988] NZHC 386; (1989) 4 FRNZ 628 (HC).

⁵ _{Wightman v Public Trust, above n 4, at [22].}

⁶ _{Re Paterson (Deceased) [1924] NZLR 441 (SC) at 442-443.}

⁷ See for example Fisher v Kirby [2012] NZCA 310, [2013] NZFLR 463; Barker v Barker HC Auckland CIV-2006-404-181, 7 December 2006; TB v JB [2014] NZHC 1478, [2015] NZFLR 9; Brain v Harwood [2014] NZHC 2067; Fry v Fry [2015] NZHC 2716; and Wightman v Public Trust, above n 4.

[8] Mr Ormsby submits that if costs fall on the estate then he will bear a disproportionate costs burden, given that he is the major beneficiary of the estate (45 per cent). He submits that this would be unfair because he succeeded on appeal, given that the Family Court’s award in favour of the respondents was reduced. Mr Ormsby further submits that his appeal was brought and conducted responsibly, in that he did not challenge the finding that there had been a breach of moral duty and only challenged the amount of the award.

[9] I have not been persuaded, however, by Mr Ormsby’s arguments. In my view it is appropriate that costs be met out of the estate on a 2B scale basis, as sought by the respondents.

[10] The breach of Mrs Ormsby’s moral duty to the respondents was very significant. The consequence of that breach was that it became necessary, at first instance, for the Family Court to “stand in the shoes” of Mrs Ormsby and attempt to secure the proper discharge of her moral duty to the respondents. This Court then had to undertake that exercise again on appeal.

[11] The respondents’ conduct of the appeal was responsible and their submissions were of considerable assistance to the Court in the difficult exercise of assessing the appropriate quantum of the awards necessary to remedy Mrs Ormsby’s breaches of moral duty.

[12] Mr Ormsby submits that it was open to the respondents not to oppose the appeal at all. Alternatively he submits that they could have agreed that the appeal should succeed “but disagreed on the quantum of the Family Court division”. It is not entirely clear to me what is meant by the second alternative. Realistically the respondents’ options were to oppose the appeal or not oppose the appeal. They could possibly have agreed to some reduction of the Family Court award on appeal, but given how far apart the parties were this would not have avoided the need for a defended hearing. As a result it is unlikely there would have been any cost savings in such a course.

[13] Presumably, if the respondents had simply not opposed the appeal, Mr Ormbsy would have argued that an award of 10 per cent of the family farm to each of his sisters would be sufficient to remedy Mrs Ormsby’s breach of moral duty, as that was his position in the Family Court. During the appeal hearing, however, counsel for Mr Ormsby conceded (in the face of some fairly compelling arguments from the respondents) that a combined award of up to 40 per cent of the farm to the respondents could be justified.

[14] The respondents, on the other hand, each supported the Family Court judgment on appeal. They argued that an even division (one third each) of the family farm was appropriate and should be maintained on appeal.

[15] In my view it was entirely reasonable and responsible for the respondents to oppose the appeal and to assist the Court on quantum issues, given that it was common ground that there had been a breach of moral duty. The respondents had the benefit of a carefully reasoned and comprehensive Family Court judgment in their favour. The proceedings, and the appeal, did not stem from any fault or wrongdoing on the part of the respondents, but rather from Mrs Ormsby’s complete and utter failure to properly provide for her daughters, which both the Family Court and this Court found to be an egregious breach of her moral duty. The Family Court, and then this Court, had to stand in Mrs Ormsby’s shoes to attempt to remedy her breach.

[16] The ultimate award in the Judgment (30 per cent to Ms Ormsby and 25 per cent to Ms Van Selm) was closer to the position advanced by the respondents on appeal than that advanced by Mr Ormsby. Accordingly, while the appeal did succeed, the extent of that success was fairly limited. The respondents’ decision to both bring proceedings in the Family Court, and then defend the Family Court decision on appeal, was vindicated.

[17] This is not a case where any “fault” can be attributed to the parties. Both the initial proceedings and the appeal were reasonably brought and responsibly run. The necessity for the proceedings arose out of the “fault” of Mrs Ormsby, not any of her children. If Mrs Ormsby had not breached her moral duty to the claimants, then these proceedings would not have been necessary.

[18] For all the reasons I have outlined I am satisfied that an order that all of the parties’ costs, on a 2B scale basis, be met out of the residue of the estate is in the interests of justice. I note, for completeness, that the residue of the estate is significant and more than capable of carrying the fairly modest burden of all parties’

2B scale costs on appeal.

Result

[19] I order that the 2B scale costs and disbursements of the appellant and the

second and third respondents (as set out in counsel’s memoranda) be paid from the

_{residue of the estate.}

Katz J