Fungavaka v Watts [2018] NZHC 2951 (14 November 2018)

Last Updated: 13 December 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2013-404-000616 [2018] NZHC 2951

BETWEEN	CALPHURNIA MAMELE FUNGAVAKA Applicant
AND	AUDRA MARIE WATTS Respondent

On the papers
Judgment:	14 November 2018

COSTS JUDGMENT OF HINTON J

This judgment was delivered by me on 14 November 2018 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

.............................................................................. Registrar/Deputy Registrar

Counsel/Solicitors:

Kathryn Davenport QC, Auckland Rowan Butler, Barrister, Auckland Frank Hogan, Barrister, Auckland Gregory J Thwaite, Auckland

CALPHURNIA MAMELE FUNGAVAKA v AUDRA MARIE WATTS [2018] NZHC 2951 [14 November 2018]

[1] This judgment relates to costs following estate litigation, which involved an application for an accounting, for removal of the respondent as administrator, and for costs.

[2] The applicant is the mother of five children whose father, Mr Fungavaka, died in very tragic circumstances in Tonga in August 2012. The respondent was the wife of Mr Fungavaka at the time of his death.

[3] Mr Fungavaka died intestate. On 20 May 2013, the respondent obtained letters of administration appointing her as administrator of the estate.

[4] When Mr Fungavaka died, he had a life insurance policy which it seems passed directly to his wife as the named beneficiary. It was therefore not part of his estate. The amount payable to her under the policy was approximately $200,000.

[5] There were other assets which did form part of the estate, including Mr Fungavaka’s Police superannuation pay-out. These assets totalled approximately
$100,000. In the absence of challenge, on an intestacy the respondent was entitled to the first $155,000 of the estate, and therefore the full estate.

[6] The above details were not known, or inadequately known or verifiable by the applicant.

[7] In addition to the above, in 2015 the respondent (as Mr Fungavaka’s administrator) brought a proceeding under the Fatal Accidents Act in Tonga. I note that counsel for the respondent said the proceeding was not brought under that Act, but my impression from a reading of the Act was that an action would not otherwise have lain for damages following death. Under the Fatal Accidents Act, every action had to be brought in the name of the executor or administrator of the deceased person for the benefit of the wife, husband, parent or legitimate child of that person, and in every such action the Court may award such damages as it thinks fit, having regard to the injury to the parties respectively. The Court must then divide the amount recovered in damages amongst the parties for whose benefit the action is brought in such shares as the Court may direct. Section 6 of the Act provides that not more than one action
shall be brought for, and in respect of, the same complaint.

[8] The applicant and respondent were not on good terms.

[9] Acting on erroneous advice from counsel in Tonga, the applicant refused to assist in the Tongan litigation for the benefit of the children and claimed (through counsel in Tonga) to be intending to run her own litigation for them.

[10] In March 2016, the respondent reached a confidential settlement of the Tongan proceeding and received approximately NZ$240,000. As part of the settlement, she agreed that she would take active steps to create a trust or trusts providing the sum of approximately NZ$20,000 for the benefit of each of Mr Fungavaka’s children. The trust or trusts were to mature upon each child attaining the age of 23, with provision for advance of capital or income prior to then. The settlement also provided that the respondent received $45,000 for out-of-pocket expenses and costs. The settlement was to be paid by eight equal payments with the last payment in March 2018.

[11] Presumably acting under the deed of settlement, in May 2016, the respondent settled a trust whereby she and New Zealand Trustees Services Limited were the trustees and she had power of appointment and removal of the second trustee. This was called the Kalibunga Trust. The trust deed was a global one which named all of the children and the respondent as discretionary beneficiaries. In a number of respects, in my view, the terms of the Trust were inappropriate or incorrect.

[12] The applicant requested full details of the estate in her capacity as litigation guardian for the children, including details of the Tongan settlement.

[13] The respondent did not provide an accounting, including details of the Tongan settlement, despite that settlement having been achieved, in my view, in her role as administrator of the estate. While to some degree the respondent’s actions were understandable, given the applicant had declined to assist with the Tongan settlement, the respondent had a clear legal duty as administrator to provide a full verified account.

[14] In July 2016, the applicant filed applications for an accounting in the estate;
for removal of the respondent as administrator of the estate, and for costs.

[15] Counsel appeared before me on a number of different occasions in connection with this matter. Inter alia, the applications were set down for hearing on 6 December 2016, for which the applicant filed full submissions on 22 November 2016. Two days prior to the hearing, the respondent provided documents evidencing the Tongan settlement. The hearing was adjourned by consent. Settlement was not reached and a new hearing was allocated in May 2017. In March 2017, the respondent provided a verified account of the estate.

[16] The upshot was that, after full information was provided and analysed, all matters between the parties were resolved, and in particular a new trust was settled.

[17] The only residual issue is one of costs.

[18] The parties had several conferences or hearings before me regarding costs. Costs are always difficult where a proceeding has settled, but I agreed with the applicant that the application had been properly brought, and the matter would not have settled without it (and the steps that followed).

[19] In the course of the conferences, I indicated that costs in the order of $15,000 would be reasonable. The applicant indicated acceptance of that and the respondent was prepared to pay an amount of that order, but not by way of costs, rather by further payment into the children’s Trust.

[20] The parties thought they would be able to resolve the costs issue and it was left to them to do so.

[21] Unfortunately, not only were costs not resolved, but the costs issue became tortuous.

[22] The relevant submissions as to costs are as follows:

(a) Applicant’s memorandum dated 3 July 2017.
(b) Respondent’s submissions dated 4 July 2017.

(c) Outline of respondent’s rebuttal submissions as to costs dated 11 July 2017 (including a letter from the applicant’s solicitor offering that
$15,000 be paid into a lawyer’s trust account as full and final settlement of costs).

(d) Memorandum of solicitor for respondent as to status dated 31 July 2017. (The respondent’s solicitor invited the applicant’s solicitor to draft a joint memorandum as to position, but no response was received.)

(e) Memorandum of counsel for the applicant dated 7 August 2017 (referring to the applicant’s memorandum dated 3 July 2017 setting out the basis for a costs award).

(f) Memorandum of counsel for the applicant dated 5 October 2017 asking that the “agreed award” of $15,000 be paid to the applicant in person, and not the Trust, as she is not a beneficiary of the Trust.

(g) Memorandum of solicitor for respondent as to status dated 9 October 2017, advising the respondent’s offer was to pay $15,000 to the Trust.

(h) Memorandum of solicitor for respondent as to undertaking dated 9 November 2017. This states that, if there is no hearing on costs and no order for costs made against the respondent, the respondent undertakes to pay within two weeks’ notice of the Court’s ruling the sum of $15,000 to the Trust established for the Fungavaka children.

(i) Further memorandum of counsel for the applicant dated 21 November 2017, reiterating that costs of $15,000 should be paid to the applicant in person. The applicant points out in this memorandum that her claim was not abandoned. She says that the respondent provided the information sought by her shortly before the hearing, and accordingly she is entitled to costs.
[23] The respondent says that the following memoranda are also relevant:

(a) The respondent’s substantive submissions of 9 May 2017.

(b) The applicant’s supplementary submissions of 9 May 2017.

(c) The respondent’s memorandum as to issues of 19 May 2017.

(d) The respondent’s chronology of 22 May 2017.

(e) The respondent’s memorandum as to status of 22 June 2017.

[24] In addition, at my request, counsel filed further memoranda on 31 October 2018 and 2 November 2018 to assist me to navigate the relevant material. I found these very helpful.

[25] I have determined to fix costs in the sum of $17,500, for the following reasons:

(a) The application for failure to account was properly brought and there were significant attendances before there was a full accounting.

(b) Matters escalated in the meantime, such that for example at, or close to provision of a full accounting, the respondent objected to the applicant’s counsel representing her, and raised an application to remove the applicant as testamentary guardian of the children.

(c) In estate proceedings, it is not uncommon for solicitor/client costs to be reimbursed out of the estate. I have no doubt that solicitor/client costs, or certainly time incurred, well exceeded the sum I have fixed. Here the estate and the respondent are as one, the respondent being the only beneficiary on this intestacy.

(d) There can also be no serious dispute that the way in which the respondent initially structured the Kalibunga Trust was incorrect or inappropriate. This was an issue that was resolved as a consequence of
the proceeding. While not directly at issue in the proceeding, it was indirectly at issue as part of, or flowing from the obligation to account and the application for removal.

(e) Matters would not have been resolved without the issue of proceedings and the steps that followed.

(f) The applicant says that 2B scale costs came to $17,259.50 and the respondent calculates those costs at $12,000-odd. While I do not consider costs in a case such as this can fairly be limited to a consideration of scale costs, those figures provide some parameters.

(g) In response to my indication, counsel for the respondent said that
$15,000 would be an acceptable sum to be paid, but said that it should be paid into the Kalibunga Trust. While the parties tried to work their way around what was a point of principle, they were not able to do so. Costs have been incurred by the applicant personally, on behalf of the children, and in the absence of agreement to the contrary, have to be ordered to her account. (That is still indirectly to the benefit of the children, which I appreciate was a concern of the respondent’s.)

(h) Although I advised that I considered $15,000 would be a reasonable costs award, the applicant has had to file a number of memoranda since then, and hence the uplift to $17,500.

(i) While the applicant sought an “uplift” of 50 per cent on what she said was scale of $17,259, to reflect the “respondent’s procedural conduct”, and on the basis that the respondent had some ulterior motive, or displayed ill-will, I do not consider the case falls into that category. (I should make it plain that I do not consider the respondent had any ill- will at all towards the children, to the contrary.)

[26] To avoid further aggravation between the parties, I direct that the respondent pays the sum of $17,500, being the award of costs in favour of the applicant, into the
trust account of Norton Law, Kumeu, being Ms Davenport QC’s instructing solicitors, on behalf of the applicant, rather than directly to the applicant.









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Hinton J