Bayley v Hicks [2016] NZHC 504 (23 March 2016)

On 23 March 2016 at 4.30pm pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

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[1] I refer to my final judgment dated 16 December 2015.¹I recorded that the Hicks were the successful parties, because they supported the proposal advanced by the Court appointed experts which was ultimately preferred by me, and resisted Mrs Bayly’s alternative proposal. I noted that prima facie the Hicks were entitled to an award of costs and to their reasonable disbursements, and I made provision for the filing of memoranda.

[2] I have now received those memoranda and considered the same. Mr Glover for the Hicks sought leave to file a memorandum in reply. I granted that request and I have taken the memorandum in reply into account as well.

2009 to 2012 and costs and disbursements of $122,424.03 for the period 2013 to date.

[4] Mrs Bayly resists the Hicks’ application. She argues that costs should lie where they fall, that there has been no successful or unsuccessful party, and that disbursements should not be ordered.

[5] Any award of costs is covered by Part 14 of the High Court Rules. While all matters in relation to costs are at the discretion of the Court, that discretion is not unfettered. It is qualified by the specific rules contained in rr 14.2 to 14.10. The discretion is exercisable only in situations not contemplated by the rules, or which are not fairly recognised by them.

[6] It is a general principle that a party who fails with respect to a proceeding should pay costs to the party who succeeds.²

[7] In the present case, the partition at issue between the parties has come before this Court for hearing on two separate occasions.³First, there was a hearing in

Whangarei in July/August 2011. I issued an interim judgment in relation to the matters raised at that hearing on 19 August 2011. There was then a further hearing in November/December 2015, and I issued a final judgment in relation to the partition on 16 December 2015. It is appropriate to consider costs by reference to each decision. I have also considered the period between the interim judgment and the finalisation of the independent experts’ reports.

[8] Mrs Bayly commenced the proceedings in 2009. In her statement of claim, she sought an order for partition upon such terms as the Court might deem fit. She specifically supported a two lot partition which was based principally on the evidence of a valuer, a Mr Nicholls. The Hicks filed a counter claim. They resisted Mrs Bayly’s proposed partition and sought either an order for sale, or in the alternative, another two lot partition proposed by another valuer, a Mr McBain.

[9] In my interim decision, I concluded that Mrs Bayly’s partition proposal would create hardship for the Hicks, and that the partition proposed by the Hicks was little better. I concluded that both Mr Nicholls and Mr McBain had been blinkered in their respective approaches. Taking into account the nature of the property, I expressed the tentative view that Paihia could be more fairly and reasonably partitioned between the parties if a three lot subdivision was undertaken. I expressed the view that a three lot subdivision might enable a more nuanced division of the property. I made various directions intended to explore and if appropriate, to advance, this tentative view.

[10] Mr Glover, on behalf of Mr and Mrs Hicks, seeks costs not only in relation to the interim judgment, but also in relation to the various steps taken by the parties prior to the interim judgment, e.g. the filing of joint memoranda, the briefing of evidence (12 days is sought), preparing for hearing, attending a judicial settlement conference, visiting Paihia as part of the hearing, and appearing at the hearing. The amount calculated by reference to the applicable scale, in respect of the steps taken between 28 September 2009 (when the proceedings were first filed) and 19 April

decision) is $80,464. Mr Glover sought an uplift of 30 per cent on these scale costs. He argued that the case was complex and significant, that Mrs Bayly continued to pursue Mr Nicholls’ partition notwithstanding that it was unreasonable, that Mrs Bayly failed to provide discovery, and that Mr Nicholls failed to provide disclosure to support his valuation report and suggested partition.

[11] Mr Stewart QC for Mrs Bayly argued that neither party was successful and that the partition proposals each advanced were rejected by me.

[12] In my view, there should be no costs award in relation to the interim judgment or the steps taken leading up to that decision.

[13] I do not consider that either party was successful or unsuccessful. The specific proposals advanced by each were rejected by me. I instead suggested that consideration needed to be given to an alternative which neither party had considered or investigated.

[14] While Mr Glover made a spirited attempt to argue that the Hicks were successful, at least in regard to the majority of the matters which were in issue, I do not consider that it is helpful to focus too closely on the question of which party failed and which succeeded in relation to each individual issue. In broad terms, each party had similar success – or more accurately lack of success – in the interim decision. In such cases, costs are better fixed on the premise that approximately

[15] Despite Mr Glover’s invitation to do so, I have not found it helpful to focus on how much time was spent on each particular step taken or argument advanced. Both sought to vigorously advance their proposal. The proceedings were initiated by Mrs Bayly. She cannot be criticised for that. The parties were at an impasse. One or the other had to preempt the deadlock. Neither Mrs Bayly nor the Hicks had any choice but to engage in the process. Both wanted to partition the land, but they could not agree on how to divide it. Both stood to benefit from any Court decision

_{partitioning Paihia. The proposed partitions put forward by both were
rejected.}

⁴Packing In Ltd (in liquidation) formerly known as Bond Cargo Ltd v Chilcott (2003) 16 PRNZ

[16] I note the observations by Priestley J in Robertson v Gilbert.⁵Concepts of success and failure will not necessarily be at the forefront of the assessment when it comes to costs in a partition case. The object of a partition is to give each party the benefit of a subdivided lot which will thereafter belong to that party alone. There are benefits to both sides from a partition, and the burden of the process will, in many cases, fall to be shared. At least up until the release of my interim decision, this is one of those cases.

[17] In my view, the better course, given the conclusions I reached in the interim judgment, is to order that costs in relation to the interim judgment and the steps leading up to it should lie where they fall. This course best does justice to both sides.

[18] My interim decision was appealed by Mrs Bayly. The Court of Appeal dismissed her appeal and ordered her to pay the costs of the appeal.⁶

[19] My interim judgment called for the appointment by the Court of independent experts to assist in the partition process.

[20] Prior to the final hearing in November/December 2015, various steps were taken by both parties to explore the three lot proposal which had been suggested by me. The parties agreed on the appointment of the appropriate independent experts. I appointed, and then issued instructions to the independent experts, after consultation with counsel. The two independent experts – one a valuer and the other a surveyor – reported back to the Court, one in March 2014 and the other in June 2014. They proposed a five lot subdivision. Lots 2 and 3 were broadly similar in size to lots 1 and 4. The valuer, a Mr Stevenson, had carried out a comparable sales valuation and he had concluded that lots 2 and 3 were of virtually equal value to lots 1 and 4. Lot

5 was an access lot. A meeting was held in September 2014 between counsel for both parties and Mr Stevenson for the purposes of clarifying aspects of his valuation report. A telephone conference was held in October 2014 to consider what further

appropriate to obtain a cross check of the valuation prepared by Mr Stevenson. She requested that I should direct that he undertake a hypothetical subdivision analysis. There were difficulties, and in December 2014 I indicated to counsel that in my view it was necessary to convene a further hearing to hear from both Mr Stevenson and the other expert, the surveyor, a Mr Donaldson, as to whether a cross check valuation based on a hypothetical subdivision was necessary, and if so, the basis on which the same should proceed. The hearing was held on 17 March 2015, and I issued a further minute immediately following the hearing recording that in my view it was appropriate to require Mr Stevenson to undertake a hypothetical subdivision analysis, as a cross check on his comparable sales valuation. I made directions to this end and also gave directions as to the basis on which the hypothetical subdivision analysis was to proceed. Again, in consultation with counsel, I issued supplementary instructions to Mr Stevenson and Mr Donaldson. Mr Donaldson reported back to the Court and the parties in June 2015. The hypothetical subdivision analysis was prepared by Mr Stevenson and circulated in August 2015.

[21] Many memoranda were filed in relation to the various steps I have outlined, and there were numerous telephone conferences.

[22] Mr Glover seeks a costs order in his client’s favour in relation to all of these

[23] Again, I am not persuaded that any costs order is appropriate. They were all steps taken for the joint benefit of the parties. In large part counsel were in agreement, as is evidenced by the fact that very many of the memoranda filed were joint memoranda. The steps taken explored and investigated the practicality of my tentative view expressed in the interim decision that a three lot subdivision might be appropriate. Once the reports were issued counsel had to assess them and discuss them with their clients and one of the experts. A meeting was held at which both counsel were present. The work undertaken was for the benefit of both parties. In my view it is appropriate that the costs burden of all of these various steps should be shared equally.

[24] I expressly record that obtaining the hypothetical subdivision analysis proved

to be an appropriate step. While it ultimately confirmed Mr Stevenson’s earlier

comparable sales valuation, I do not consider that the costs incurred were wasted expenditure. The hypothetical subdivision analysis certainly assisted me. As Mr Stewart for Mrs Bayly submitted, it had value for the very reason that it supported the comparable sales valuation. I did draw comfort from it, noting in my final decision that the process adopted by the Court appointed experts was robust. I accept Mr Stewart’s point that the hypothetical subdivision analysis helped provide that “robustness”.

August 2011 to 13 August 2014 when all of the independent experts’ reports became

[26] Mrs Bayly did not accept the conclusions reached by the independent experts. She filed affidavits from herself, from another valuer, a Mr Rowsell, and from another surveyor, a Mr Thompson. She initially sought to revisit Mr Nicholls’ proposal which I had rejected in the interim judgment.⁷In the alternative, she sought to advance a new partition proposal which had been prepared by Mr Thompson. Mrs Bayly’s proposal would have resulted in her taking 328.7 hectares, and the Hicks taking a total of 102.2 hectares. She challenged Mr Stevenson’s valuation evidence, and called Mr Rowsell in this regard.

[27] The Hicks filed their evidence. They supported the partition proposed by the independent experts. A brief was also filed from a Mr Scholefield, a valuer who had been called at the first hearing. He sought to analyse the available valuation evidence, and he took issue with Mr Rowsell’s criticisms of Mr Stevenson’s valuation.

[28] Written submissions were filed by both parties, and telephone conferences were held to address pre-hearing matters. The hearing then took place over three

[29] The principle issues before the Court which required resolution at the final hearing were:

(a) whether Mrs Bayly’s proposal (based on Mr Thompson’s evidence) or the Court appointed experts’ proposal should be preferred;

(b) whether lots 1 and 4 proposed by the independent experts were of equal value to lots 2 and 3, also proposed by independent experts; and

[31] On 11 November 2015, some three weeks before the hearing, the Hicks’ solicitors sent an offer to Mrs Bayly’s solicitor offering to settle the litigation. That offer was without prejudice save as to costs. Inter alia the Hicks proposed that there should be a consent order directing division in accordance with the Court appointed experts’ report. They recorded that they did not consider that the Thompson option proposed by Mrs Bayly was fair or would result in equal values. They did offer, in the alternative, to accept the original partition advanced by Mr Nicholls, provided that they took the much larger southern lot closest to Mrs Bayly’s adjoining farm, or to accept an amended proposal, under which they would take the northern portion of the land. These alternative offers were made on the basis that each party would bear her or their own costs.

[32] None of these offers were accepted by Mrs Bayly. [33] Mr Glover sought costs for this period.

Date	Event	Time (days)
25 Aug 2015	Joint memorandum	0.2
Oct-Nov 2015	Preparation of affidavits (Marion Hicks, Guy Scholefield x 2)	2.5
21 Oct 2015	Site visit by counsel	1
12 Nov 2015	Joint memorandum	0.2
13 Nov 2015	Case management conference (by telephone)	0.2
26 Nov 2015	Joint memorandum	0.2
27 Nov 2015	Case management conference (by telephone)	0.2
Nov 2015	Preparation of list of issues, authorities and common bundle	2
Nov 2015	Preparation for hearing	3
Nov-Dec 2015	Appearance at hearing (30 Nov-2 Dec 2015)	3
4 Dec 2015	Memorandum	0.4
14 Dec 2015	Memorandum responding to further submissions for the applicant	0.4
DAYS		13.3
RATE (CAT 2)		2,230
SUBTOTAL		$29,659

2015. That visit was made in conjunction with Mr Scholefield, so that counsel and Mr Scholefield could consider the matters raised by Mr Thompson in his brief of evidence. An allocation of one day was sought for this site visit.

[36] Mr Glover sought that those scale costs should be uplifted as I explain below.

[37] Disbursements were sought, in particular $397.99 for Mr Glover’s airfares incurred for the site visit and travelling to and from the property, and $13,529.75, being Mr Scholefield’s invoice for his work in preparing his brief of evidence.

[38] Mrs Bayly submitted that costs should lie where they fall. Mr Stewart on her behalf argued that the matters raised by her at the final hearing were legitimate and reasonable issues, which were required to be explored, and that they were part and parcel of the process of determining whether the Court appointed experts’ proposal

was fair and how any partition should be implemented. Mr Stewart submitted that Mrs Bayly cannot be criticised for taking the various steps taken by her, and that given that the Court was looking to impose a partition on the parties, it was important that the work undertaken by Messrs Stevenson and Donaldson was peer reviewed and tested.

[39] I accept that it was open to Mrs Bayly to take the various steps taken by her. The fact however remains that she was unsuccessful in opposing the partition put forward by the independent experts. She put forward an alternative proposal, which the Court did not accept. Mrs Bayly was the unsuccessful party in this regard. The normal presumption which I have noted above should apply and it is appropriate to award costs against her in relation to the final hearing, and the various steps taken preparatory to that hearing, starting from the time the independent experts’ reports were finally available.

[40] I accept the scale cost calculations made by Mr Glover and set out in the above table.

[41] The site visit undertaken by Mr Glover was in my view appropriate, and the allowance claimed – one day – is not unreasonable. Paihia is near Kerikeri. Kerikeri airport is some distance from the property. It would have taken a day to travel to the property, to visit it, and to return. Given the evidence which Mrs Bayly was proposing to give and call, it was necessary for counsel to understand Mr Thompson’s proposal so that he and Mr Scholefield could properly respond to it.

[42] As noted above, Mr Glover sought an uplift of 50 per cent to scale costs, for three reasons:

(b) because the Hicks were put to additional cost by Mrs Bayly’s insistence in obtaining the additional hypothetical subdivision analysis; and

[43] I have already noted that in my view Mrs Bayly was not unreasonable in insisting on the hypothetical subdivision analysis. I do however consider that her pursuit of her alternative partition proposal and her rejection of the Hicks offer do bear on costs.

[44] As I found in my final judgment, Mrs Bayly’s alternative partition proposal was neither fair nor reasonable to the Hicks. I set out the reasons for that conclusion in my final judgment. Briefly, if adopted, to a significant extent it would have denied the Hicks the opportunity to farm part of the property. It was not sensitive to the nature of the property and the land types it comprises. It ignored the parties undivided half shares in the land. It would have resulted in a significant discrepancy in value, and in the Hicks taking only a relatively small part of the northern headland. It would have affected the Hicks’ ability to take advantage of the subdivision opportunities offered by the land adjoining Onewhero Bay. It would have exposed the Hicks to risk, because it was proposed that they would take much of one identified land class, and little of the land in other identified land classes. It also sought to impose a burden on the Hicks for deferred rates, which Mrs Bayly and her husband had enjoyed. I reached the conclusion that Mrs Bayly’s proposal, if adopted, would have exacerbated tensions between the sisters.

[46] Mrs Bayly did propose at the hearing that she should take lots 2 and 3 and that the Hicks should take lot 1 and 4. As I noted in my final decision, this proposal was mischievous. It was at odds with Mrs Bayly’s stance at all previous hearings. It would have resulted in a quite illogical situation.

[47] Further, Mrs Bayly rejected an offer made without prejudice except as to costs.

[48] The rules acknowledge that parties to proceedings may make such offers – r

14.10. They serve as a means whereby parties can seek to limit their exposure to the risk of costs.⁸

[49] Mr Stewart on Mrs Bayly’s behalf asserted that Mrs Bayly’s refusal to accept the offer was not “without reasonable justification”. Further he asserted that the letter was not a true “Calderbank” offer – and that rather it was a statement of what the Hicks wanted. Mr Stewart asserted that it was not unreasonable for Mrs Bayly to decline the offer, and noted that in any event it was not sent until 11 November 2015, with the hearing due to commence on 30 November 2015. Further it was argued there can be no justification for an uplift in costs incurred before the letter was sent.

[50] I do not accept that Mrs Bayly had reasonable justification for rejecting the offer. The justification for a party’s rejection of an offer has to be assessed at the time of rejection, not against the subsequent result. ⁹This notwithstanding, in my judgment Mrs Bayly did reject the offer without reasonable justification. She had been a party to the appointment of the independent experts. Through her counsel, she had been a party to the finalisation of the instructions to be given to them. At her

request, a hypothetical subdivision analysis had been carried out, and the result of that analysis supported Mr Stevenson’s comparable value assessment. The experts were independent of the parties and they had prepared full and detailed reports. She was not reasonably justified in rejecting their views and coming up with an alternative proposal, which she should have appreciated would be unacceptable to the Hicks.

[51] In my view, the letter was a true “Calderbank” letter. There were a number of

[52] The letter was sent on 11 November 2015. I accept that it cannot affect steps taken prior to the time it was sent, but in my judgment, it can affect steps taken after that date.

14.6(3)(b)(v). I award increased costs of 50 per cent for all steps taken after 11

⁹New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548,

[54] It follows that I allow costs against Mrs Bayly and in favour of the Hicks for the various steps taken set out in the above table, from 25 August 2015 to 21 October

2015, on a 2B basis. I allow costs on steps taken thereafter on a 2B basis, together with a 50 per cent uplift.

(a) preparation of the bundles for the independent experts - $471.52; (b) travel by Mr Glover to Paihia on 21 October 2015 - $397.99; and (c) Mr Scholefield’s costs and disbursements - $13,529.75.

I do not approve any of the other disbursements claimed. They relate to the costs payable to the independent experts. In my view the independent experts’ costs should be met jointly by the parties, because their reports were for the benefit of both parties.

[56] It follows that I make an award in favour of the Hicks and against Mrs Bayly in the sum of $40,363 on account of costs and $14,399.26 on account of

BETWEEN	J D BAYLY Applicant
AND	M AND J A HICKS Respondents

Hearing:	On the papers
Appearances:	R B Stewart QC and J K Goodall for Applicant K T Glover for Respondents
_Judgment:	_{23 March 2016}

High Court of New Zealand Decisions

Bayley v Hicks [2016] NZHC 504 (23 March 2016)