FEARY AND ANOR V COMMISSIONER OF CROWN LANDS HC CHCH CIV-2008-409-000233

FEARY AND ANOR V COMMISSIONER OF CROWN LANDS HC CHCH CIV-2008-409-000233 15 December 2008IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV-2008-409-000233IN THE MATTER OF the District Courts Act 1947 AND IN THE MATTER OF s151 of the Law Practitioners Act 1982 BETWEEN MARK STAFFORD FEARY KAREN ANN FEARY Appellants AND COMMISSIONER OF CROWN LANDS Respondent AND BETWEEN BUDDLE FINDLAY Appellant AND COMMISSIONER OF CROWN LANDS Respondent Counsel: N Till QC for Fearys K Foley for Buddle Findlay R B Chan for Respondent Judgment: 15 December 2008JUDGMENT OF HON. JUSTICE FRENCH on Application for Leave to Appeal[1] The appellants, Mr and Mrs Feary, seek leave to appeal my judgment of 28 October 2008 which was itself an appeal from the District Court. [2] The decision concerned seven legal bills and the right of the respondent to refer them to the law society for costs revision under the Law Practitioners Act 1982.Factual background[3] In April 2002, the Fearys and the respondent, the Commissioner of Crown Lands ("the Commissioner"), had entered into a Deed of Settlement settling certain litigation that had arisen between them. Not all issues were resolved, and the settlement included an agreement to submit outstanding matters to arbitration. [4] It was a term of the settlement deed that "the Commissioner shall meet all further legal costs incurred by Mark and Karen Feary in relation to the issues to effect this deed, so long as those costs are reasonable." [5] The deed also provided that in the event of the parties being unable to agree about the reasonableness of the legal costs, the bills would be submitted to the Costs Revision Committee of the Canterbury District Law Society for revision. [6] In December 2005, there was a further agreement between the parties that in respect of all existing unpaid accounts, any referral to the Law Society would be made by 7 February 2006, while in respect of any future accounts, referral would be made within 20 working days of receipt. [7] Although the Commissioner disputed the reasonableness of some of the bills, he did pay significant portions of them. The Fearys paid the outstanding balances directly to their lawyer, Buddle Findlay. [8] Without knowing the Fearys had paid the disputed portions of the bills, the Commissioner purported to refer the bills to the Law Society for costs revision under the Law Practitioners Act 1982. [9] Under the Law Practitioners Act 1982, the party chargeable with a solicitor's bill of costs is entitled as of right to refer the bill to the District Law Society for revision unless more than six months after the date of delivery of the bill has elapsed, or the parties otherwise agree. If the referral is out of time, a Court order is needed before the bill can be referred. A further refinement under s151 is that where the referral is both out of time and the bill has been paid, the Court can only make an order of referral if satisfied there are special circumstances.[10] It was common ground that because of the agreement with the Fearys, the Commissioner was a party chargeable for the purposes of the Act, despite not being Buddle Findlay's client himself. [11] However, the Commissioner's referrals were all out of time. That, plus the fact the bills had all been paid, triggered the application of s151. [12] When this was drawn to the Commissioner's attention, he then filed an application in the District Court for the necessary leave, arguing special circumstances. [13] Both Buddle Findlay and the Fearys opposed the Commissioner's application on the ground it should have been filed in the High Court. It was also contended that even if the District Court did have jurisdiction, there were no special circumstances. [14] The District Court Judge held the District Court did have jurisdiction under s151. The Judge further found that in respect of five bills, special circumstances did not exist, and accordingly he declined to make any order of referral. [15] The Judge was, however, prepared to make an order of referral in respect of two other bills. [16] As regards the costs of the application, the Judge held that costs should lie where they fell. He was minded to reach that conclusion partly because of what he perceived to be the Fearys' unreasonable conduct in opposing something that could only be of benefit to them. It is clear he considered their conduct illogical and ultimately explicable only on the basis of sheer bloody-mindedness. He concluded the Fearys should not have been an active party. [17] Buddle Findlay then appealed the Judge's costs decision. For their part, the Fearys appealed both the costs decision and the substantive decision to refer the two bills to the Law Society for revision.[18] On appeal, it became clear the Judge had overlooked a concession made by the Commissioner about one of the two bills, in respect of which he had granted leave. [19] That meant the hearing before me was essentially concerned only with the disputed portion ($5255.26) of one bill and the decision not to award any costs. [20] In my judgment, I held the District Court did have jurisdiction under s151 to grant leave. [21] I also upheld the Judge's decision that on the facts of this case there were special circumstances as defined by the Court of Appeal in Cortez Investments Limited v Olphert & Collins [1984] 2 NZLR 434.. In so finding, I relied on the combined effect of two facts: first, the fact the Commissioner had referred the matter to the Law Society and filed the Court application within the statutory time limit of six months (although outside the agreed time limits); and secondly, the fact the Commissioner was unaware the Fearys had paid the bill. The latter meant the case was unusual and out of the ordinary run, because normally the party chargeable is the client and they would know whether the bill had been paid because they would be the ones who had paid it. [22] On the issue of costs, I upheld the Fearys' appeal. I did so for several reasons, one of which was that because the Commissioner had consented to the Fearys being joined as a party in the first place, he could not now object to the consequences that flowed from that in terms of costs. Rather than refer the matter back to the District Court for reconsideration, I fixed costs myself in the sum of $4500, being 80% of costs calculated on a 2B basis. [23] One of the grounds of the Fearys' appeal against the Judge's costs decision was that the Judge had failed to consider whether they were entitled to full indemnity costs under clause 2 of the deed of settlement. [24] The relevant wording of clause 2 is as follows:The Commissioner shall meet all further legal costs incurred by Mark and Karen Feary in relation to the issues to effect this deed, so long as those costs are reasonable.[25] On that issue, I held:[69] I am satisfied that on a true construction of clause 2 of the Deed of Settlement the Fearys are not entitled to indemnity costs from the Commissioner. Seen in context, the phrase "the issues to effect this deed" must in my view be referring to the substantive issues that were outstanding about compensation etc, and which were to be arbitrated. Much clearer words would have been needed to ascribe an intention to bind the Commissioner to underwrite costs incurred in connection with disputes about costs. The decision of Clifford J in Attorney General v Feary HC Wellington CIV-2006-485-000610, 7 March 2007, was on a different point. It was not about costs arising out of a dispute about costs.[26] My decision was delivered on 28 October 2008. After receiving my decision, the Commissioner decided not to proceed with the Law Society revision. It has since paid the disputed portion of the bill at issue, as well as other bills that were referred to the Law Society in time and so not part of this proceeding. [27] The Commissioner's stated reason for abandoning the costs revision is that he considered the cost and effort of pursuing the matter would probably outweigh the eventual benefit obtained. The Fearys however dispute the Commissioner's motives and say the decision was only made in response to their filing this application for leave to appeal.The grounds of the application for leave[28] The principles applicable to the granting of leave are well established. [29] As was stated in Waller v Hider [1998] 1 NZLR 412 and Snee v Snee (1999) 13 PRNZ 609 (CA), the appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest public or private of sufficient importance to outweigh the cost and delay of the further appeal. Ultimately, the guiding principle must be the requirements of interest. [30] According to the notice of application for leave, the proposed appeal raises what are said to be important questions of law and fact, namely:a) whether special circumstances existed that justified the referral to the Law Society; b) whether the District Court has jurisdiction to consider applications under s151 of the Law Practitioners Act; c) the meaning and application of clause 2 of the Deed of Settlement. [31] The issues are said to be of both public and substantial private importance because: i) The issue of the referral of bill 6 to the Canterbury District Law Society when no special circumstances existed, nor could exist, is of considerable private importance to the parties as it cuts across agreements made by the parties and the Court should not lightly disregard and interfere with contractual arrangements made between parties. It is further submitted that I was wrong not to have regard to what is alleged to be disentitling conduct on the part of the Commissioner and that my finding of special circumstances was based on circumstance (namely that the Commissioner wanted revision) which no longer apply. ii) The issue of jurisdiction is of public importance because: 1. the Court's determination is contrary to the plain meaning of the legislation; 2. there is an expectation by the public that all legislation be interpreted correctly; 3. it could impact on the process for applications for referral of accounts, under and subject to transitional arrangements under the Law Practitioners Act.and of private importance because of the effect of the Court's determination on jurisdiction upon the Fearys: 1. because they were wrongly required to answer proceedings in the District Court that the legislation required to be initiated in the High Court; 2. as a consequence it has been more complicated and difficult for the Fearys to appeal to the Court of Appeal. iii) The issue of indemnity costs is of private importance because it relates to the effect and extent of agreements between the parties and the Court's determination adversely affects those agreements and is contrary to an earlier ruling of the Court at Wellington on materially the same issue in favour of the Fearys. iv) The issue of indemnity costs is of public importance because it will have wider application as to the effect and application of agreements framed in similar terms and because the Court's determination is contrary to an earlier ruling of the Court at Wellington on materially the same issue.The Court's ruling[32] In my view, the application is unmeritorious and fails to satisfy the test postulated in Snee and Waller. [33] I reach that conclusion for the following reasons. [34] First, regardless of the Commissioner's motives in paying the bill, the fact of the matter is that the disputed bill has been paid. The issue is therefore no longer a live one.[35] Further, my finding that special circumstances existed was entirely fact specific. [36] The reasonableness or otherwise of the Commissioner's conduct is also entirely fact-specific, and while it may subjectively be of importance to Mr and Mrs Feary, it is not a matter that warrants the granting of leave. [37] Secondly, the Law Practitioners Act 1982 has been repealed. The issue of jurisdiction will therefore only apply to a very limited number of cases, none of which are likely to raise a similar fact scenario. [38] As for the interpretation of the clause in the settlement deed, that too raises issues that are specific to this case and not of general application. [39] The other High Court decision relied upon by the Fearys in support of this application is not inconsistent with my ruling. It did not concern the Commissioner's liability under the deed for costs incurred over a dispute about costs. [40] The arbitrator has however had to consider the very same issue. He reached the same conclusion I did. [41] Even if I am wrong on my interpretation of the clause, the Fearys are still required to act reasonably. [42] In my view, the interests of justice overwhelmingly require there be an end to this already protracted litigation.Outcome of application[43] The application for leave to appeal is dismissed. [44] The Commissioner is entitled to costs on a 2B basis.Solicitors: Godfreys, Christchurch Buddle Findlay, Christchurch Crown Solicitor, Christchurch