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High Court of New Zealand |
Last Updated: 4 July 2018
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
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CIV-2013-485-5912
[2018] NZHC 1588 |
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UNDER
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the Family Protection Act 1955
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IN THE MATTER OF
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THE ESTATE OF JOAN AYLEEN COURTENEY
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BETWEEN
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STEVEN COURTENEY
First Plaintiff
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KLAUDIA ARIANE COURTENEY
Second Plaintiff
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AND
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LANCE HOWARD PRATLEY AS
TRUSTEE AND EXECUTOR OF THE ESTATE, REPLACING STUART
COURTENEY, FORMER EXECUTOR
Defendant
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Hearing:
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On the papers
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Counsel:
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J M Morrison for the Plaintiffs R J B Fowler for the Defendant
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Judgment:
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29 June 2018
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JUDGMENT OF CULL J
[1] In my decision dated 28 July 2017, the plaintiffs’ claim under the Family Protection Act 1955 was upheld and I awarded the New Zealand assets from the estate of Joan Ayleen Courteney to the first plaintiff.1
1 Courteney v Pratley [2017] NZHC 1761.
COURTENEY v PRATLEY [2018] NZHC 1588 [29 June 2018]
[2] As the plaintiffs were successful, I invited counsel to file memoranda, if the parties were unable to agree.
[3] Mr Pratley sought indemnity costs for the steps he took in the proceeding following the conclusion of the 23 May 2017 hearing, which was heard on 9 November 2017.
[4] By my judgment dated 21 December 2017, I declined Mr Pratley’s costs as sought, which is currently under appeal.2
[5] The plaintiffs filed an application for costs dated 22 February 2018 seeking an order for increased costs against the previously named defendant Mr Stuart Courteney and against Mr Pratley, the currently named defendant, for the costs of the further steps in this proceeding, following the conclusion of the 23 May 2017 hearing.
[6] The plaintiffs’ application as it related to Mr Pratley was the subject of a joint memorandum and a consent order has been made in respect of the plaintiffs’ costs against him.
[7] In relation to Stuart Courteney, the plaintiffs seek increased costs (or an uplift) of 1.5 times the costs allowance for the steps in the proceedings, in accordance with schs 2 and 3 to the High Court Rules 2016 based on the 2B scale allocation, together with their disbursements.
[8] Those authorities provide that where a party has taken steps such as funding or controlling litigation, causing further unnecessary cost to the successful party, an award of costs can be made, even though the party has been a non-party.3
2 Courteney v Pratley [2017] NZHC 3285.
Submissions
[9] The plaintiffs submit they are entitled to costs against Stuart Courteney:
(a) For all of the steps in the proceeding prior to his removal as executor of his mother’s estate on 20 October 2015, because the plaintiffs are the successful party and he is the unsuccessful party.4
(b) For the steps in the case following his removal as executor to the delivery of the substantive judgment on the plaintiffs’ family protection claim on 28 July 2017, because:
(i) the plaintiffs are the successful party;
(ii) Stuart Courteney (although at that stage a non-party) was the real party interested in the outcome; and
(iii) the steps the plaintiffs were required to take were necessitated by the steps taken by Stuart Courteney as defendant before his removal.
[10] The plaintiffs submit they should be awarded costs against Stuart Courteney for all the steps taken by him while a party but also for the subsequent steps (where he was technically a non-party) because his conduct influenced the preparation and conduct of the litigation for the plaintiffs.
Increased costs
[11] The plaintiffs also seek increased costs under r 14.6(1)(a) of the High Court Rules, based on Stuart Courteney having taken and pursued positions that lacked merit in the proceeding overall and in the interlocutory applications that he opposed.
[12] The plaintiffs point to Stuart Courteney’s role in the proceeding overall, where he pleaded a defence that he failed to support with evidence or with argument. Further,
4 High Court Rules 2016, r 14.2(a).
his defence was pleaded without any evidential foundation. The plaintiffs claim that Stuart Courteney appears to have understood this and chose to promote the defence he pleaded, as far as he could, without coming to New Zealand and supporting it with sworn evidence before the Court.
[13] As a result, the pleaded defence required the plaintiffs to incur significant costs to prepare evidence and address arguments to the defence raised, when Stuart Courteney incurred minimum cost and had no exposure to any financial risk in supporting his defence.
[14] The plaintiffs point to the interlocutory applications in which Stuart Courteney took positions that were indefensible, based on misrepresentations and concealment.
[15] The plaintiffs say Stuart Courteney was shown to be untruthful about the assets and liabilities of the estate and to have misused his power as executor to control the flow of information and to obstruct the plaintiffs’ ability to prove the true position. It was this misconduct that led to his removal as executor.
Issues
[16] The questions before me are:
(a) should the plaintiffs’ costs be increased to the rate of 1.5 times the 2B scale allocation?
(b) should such costs be made against a non-party?
Should costs be increased?
[17] Costs are at the discretion of the Court and the Court has the discretion to make an award of increased costs, where satisfied that the award ought to be made.5
[18] Increased costs can be awarded under r 14.6(3)(b) if:
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
...
(ii) Taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or ...
[19] The leading case on increased and indemnity costs is Bradbury v Westpac Banking Corp6 and the principles from that judgment have been confirmed by the Court of Appeal in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue.7 The Court of Appeal in Bradbury described increased costs as justified “where there is failure by the paying party to act reasonably”.8
[20] The plaintiffs seek increased costs at the rate of 1.5 times the 2B scale allocation, based on the approach of the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.9 The Court of Appeal’s decision in Holdfast was more recently considered by Fogarty J in Kidd v van Heeren (No 5).10 Fogarty J comprehensively viewed a number of authorities and concluded as follows:
[42] When considering whether the Court should increase costs under r 14.6(3)(a) it is necessary to have regard to the complexity and significance of the proceeding. While this will generally be recognised by the classification of proceedings under r 14.3, some forms of complexity and significance will also mean that the time taken on particular steps will need to be greater than that allowed under category C. Courts do need to be aware of the risk of double counting, but this does not mean that the complexity and significance of the proceeding is irrelevant.
[43] I also consider that when deciding whether costs should be increased under r 14.6(3)(a) the Court is entitled to have regard to the actual time spent on particular steps (but not the actual cost incurred). As Andrews J held, the actual time spent will be an indicator of the complexity and significance of a proceeding. Furthermore, I consider that the competitive market for legal services means that there is a disincentive to be inefficient. This does not mean that the actual time spent is determinative of what a reasonable length of time is, just that it can be useful in assessing that time.
6 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.
8 Bradbury, above n 6, at [27(b)].
9 Holdfast NZ Ltd v Selleys Pty Ltd, [2005] NZCA 302; (2005) 17 PRNZ 897 (CA).
10 Kidd v van Heeren (No 5) [2015] NZHC 3191.
[44] Finally when considering the possibility of increasing costs under r 14.6(3)(a) unlike r 14.6(3)(b) the Court is not anchored by the time allowances in the Rules. This flows from the Court of Appeal’s reasoning in Holdfast mandating a four step approach:
(a) categorise the proceeding in terms of r 14.3;
(b) work out a reasonable time for each step either under the schedule or by the application of r 14.6(3)(a);
(c) then apply the appropriate daily rate from (a) to the time calculated under (b); and finally
(d) If any of the grounds in r 14.6(3)(b) apply the Court can impose an uplift from the point reached under the first three steps. It is this uplift that will generally not exceed 50 percent.
[45] Thus the 50 per cent guideline does not apply to determining the length of time that is reasonable for a particular step, only to the imposition of increased costs for the reasons listed in r 14.6(3)(b).
[21] It is important, in the context of this application, to have regard to Fogarty J’s reference to the imposition of increased costs for the reasons listed in r 14.6(3)(b). The 50 per cent guideline, as identified above, does not apply to determining the length of time that is reasonable for a particular step but for the reasons listed in r 14.6(3)(b). Those reasons have been canvassed in other cases, such as continuing with the cause of action where it is clear it has no legal basis or is without merit;11 declining a settlement offer;12 and where litigation has resulted in costs incurred which are well beyond those envisaged by the relevant rules.13
[22] The plaintiffs seek the increased costs award essentially for these reasons:
(a) Stuart Courteney took positions that lacked merit;
(b) he pleaded a defence that he failed to support with evidence or with argument;
(c) he took positions that were indefensible; and
11 Exportrade Corp v Irie Blue New Zealand Ltd [2016] NZHC 1806 at [7] and [11].
12 Victoria Quarter No 1 Ltd v FBB Holdings Ltd [2016] NZHC 1597 at [19].
[23] There was no appearance for Stuart Courteney.
[24] I am satisfied that Stuart Courteney contributed unnecessarily to the time and expense of the proceedings. Having raised a defence to the plaintiffs’ claims, and put the plaintiffs to added expense in refuting Stuart’s allegations, Stuart Courteney did not appear or instruct anyone on his behalf to appear at the substantive hearing, either to defend the plaintiffs’ claim or to consent. His position throughout the proceeding was indefensible, in any event. I consider Stuart acted unreasonably in failing to withdraw his defence.
[25] The most time consuming and troublesome actions by Stuart however, was his refusal, as the estate’s sole trustee, to disclose and account for the estate’s assets overseas. The Court still does not know the extent of the estate’s overseas assets or their value. Stuart was removed as a trustee by this Court. He was untruthful about the assets and liabilities of the estate. He misused his powers as executor and as a result of such misconduct, he was removed as executor.
[26] As Stuart Courteney failed to act reasonably, I consider increased costs of an extra 50 percent are appropriate.
Are the plaintiffs entitled to costs against a third party?
[27] As a result of Stuart Courteney’s removal as a trustee and executor, he now has the status of a non-party. The plaintiffs submit they are entitled to costs against Stuart Courteney, even though he is now a third party.
[28] The plaintiffs rely on Dymocks Franchise Systems (New South Wales) Pty Ltd v Todd (No 2) and Arklow Investments Ltd v MacLean.14 Those authorities provide that where a party has taken steps, causing further unnecessary cost to the successful party, an award of costs can be made, even though the party has been a non-party.15
14 Dymocks, above n 3.
15 Dymocks, above n 3, at [25(3)]; and Arklow, above n 3, at [18]–[21].
[29] In Dymocks, the Privy Council held that generally speaking costs against non- parties are exceptional, although stated that:16
Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation...
[30] The Court held that the ultimate question is whether in all the circumstances it is just to make the order for costs against a non-party.
[31] As Stuart Courteney has substantially controlled and sought to benefit from proceedings up until he was removed as a trustee and executor, I consider it is in the interests of justice that he pay the plaintiffs’ costs. He acted unreasonably and contributed unnecessarily to the time and expense of the proceedings. The steps the plaintiffs were required to take were necessitated by Stuart’s actions, which he took for his own benefit, throughout the litigation proceedings and before he was removed from his positions as trustee and executor. Stuart was the real party to the litigation, despite now being a non-party, and as a result of his actions, the plaintiffs have effectively borne the added costs of the proceeding.
[32] The plaintiffs are not seeking full or indemnity costs or any other costs associated with other litigation. Counsel has also confirmed for the purposes of HCR 14.2(1)(f) that the costs sought, do not exceed the actual costs and expenses incurred by the plaintiffs, for the steps in this proceeding for which costs are claimed against Stuart.
[33] I consider it is just and reasonable in this case to make the order for costs against Stuart Courteney.
16 Dymocks, above n 3, at [25(3)].
Result
[34] For the above reasons, costs are awarded to the plaintiffs as follows:
(a) Costs on a 2B basis, for the relevant steps, of $88,772 are awarded.
(b) This is increased to 1.5 times the scale allowance, and a total of
$133,158 in costs are awarded.
(c) Disbursements of $2,620 are also awarded.
(d) The total figure of increased costs and disbursements awarded is
$135,778.
Cull J
WCM Legal Ltd, Carterton
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