PETER BERIC v OLAF GUY EADY [2020] NZHC 2079

PETER BERIC v OLAF GUY EADY [2020] NZHC 2079 [18 August 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-879[2020] NZHC 2079IN THE MATTER OF the Estate of DIANA MAITLAND EADYIN THE MATTER OF the trust settled by ROY GRANVILLEMcELROY on 12 March 1965 known as theDIANA M EADY FAMILY TRUST and theECI TRUSTBETWEEN PETER BERICPlaintiffAND OLAF GUY EADYJOANNA MAITLAND CHAPLIN andSIMON HOLM EADY as executors andtrustees of the Estate of the late DIANAMAITLAND EADYFirst DefendantsOLAF GUY EADYJOANNA MAITLAND CHAPLIN andSIMON HOLM EADY in their capacities astrustees of the DIANA M EADY FAMILYTRUSTSecond DefendantsOLAF GUY EADYJOANNA MAITLAND CHAPLIN andSIMON HOLM EADY in their capacities asrecipients of the assets of the DIANA MEADY FAMILY TRUSTThird DefendantsOLAF GUY EADYJOANNA MAITLAND CHAPLIN andSIMON HOLM EADY in their capacities astrustees of the ECI TRUSTFourth DefendantsHearing: 10 August 2020Appearances: Vanessa Bruton QC and Priscilla Brown for the PlaintiffFiona McGeorge for the First DefendantsSimon Jefferson QC and Amanda K Hyde for the Secondto Fourth DefendantsJudgment: 18 August 2020COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELLThis judgment was delivered by me on 18 August 2020 at 11:00ampursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Priscilla Brown, Auckland, for the plaintiffMartelli McKegg, Auckland, for the 1st DefendantsKeegan Alexander (Peter Spring/Amanda K Hyde), Auckland, for the 2nd to 4th DefendantsCounsel:V Bruton QC, O'Connell Chambers, Auckland, for the PlaintiffF N McGeorge, Barrister, Eldon Chambers, Auckland, for the 1st DefendantsSimon Jefferson QC, Trinity Chambers, Auckland, for the 2nd to 4th Defendants[1] This decision is on costs on the defendants' applications for security for costs,which were to be heard on 10 August 2020. On 7 August 2020, however, the plaintiffadvised that he had been granted legal aid for this proceeding. With that, thedefendants advised that they withdrew their security for costs applications. Theynevertheless sought costs against the plaintiff. As well as costs, the hearing on10 August 2020 dealt with the second to fourth defendants' applications to strike outparts of the plaintiff's fifth amended statement of claim.[2] The plaintiff began this proceeding in 2018. All defendants applied for securityfor costs. The second to fourth defendants filed theirs in September 2018. Theirground for seeking security was that the plaintiff did not have the means to meet anorder for costs if he were to fail in the proceeding. While the plaintiff opposed thesecurity for costs applications, he did not advise that he intended to apply for legal aid.[3] The security for costs applications were to be heard on 4 March 2019 but wereadjourned in light of the plaintiff's intimation that he intended to amend his pleadings.Costs on the adjournment were reserved. The defendants applied to strike out someof the plaintiff's causes of action. In the meantime, the security for costs applicationswere put on hold. They were revived after Associate Judge Andrew's decision on thestrike-out application.1 A fixture was set for 10 August 2020. The plaintiff filedfurther documents, but again made no reference to legal aid. The defendants'submissions assumed that Mr Beric was not applying for and did not have legal aid.Mr Beric applied for legal aid on 27 July 2020. His written submissions in oppositionwere the first the defendants knew about his legal aid application. The parties soughtan adjournment of the security for costs hearing to await the outcome of the legal aidapplication, but I declined the adjournment.[4] On 7 August the plaintiff advised that he had been granted legal aid. At thehearing, Ms Bruton QC explained that there were no conditions attached to the grantof aid. In withdrawing their applications for security for costs, the defendants1 Beric v Eady [2019] NZHC 3238.recognised that security would not be ordered, given the restrictions under s 45 of theLegal Services Act 2011 on costs orders against those with legal aid.[5] By way of explanation for the delay in applying for legal aid, Ms Bruton saidthat while Mr Beric's only income was his national superannuation, he had alsoreceived interim spousal maintenance from the estate of the late Diana Eady. Thosefunds had run out. He had also withdrawn his application for final spousalmaintenance in the Family Court. He applied for legal aid when he had nothing elsefrom which he could fund his legal costs.[6] In seeking costs, the defendants addressed the effect of the restrictions onordering legally aided persons to pay costs under s 45. In this case, however, I do nothave to deal with that question, because I would not have ordered costs againstMr Beric in any event. If the court will not order costs against a party under the usualcosts rules, there is no basis for ordering costs under s 45. The section sets a fetter onthe court's exercise of its costs power, but does not impose a fresh liability for costs.[7] Under r 15.23 of the High Court Rules 2016, unless the defendant otherwiseagrees or the Court otherwise orders, a plaintiff who discontinues a proceeding againsta defendant must pay the costs of the defendant up to and including the discontinuance.That applies by analogy to abandoned interlocutory applications.2 Under r 14.8, unlessthere are special reasons to the contrary, costs on an opposed interlocutory applicationmust be fixed in accordance with the rules when the application is determined andbecome payable when they are fixed. Similarly, when an interlocutory application iswithdrawn, costs should be decided on the withdrawal – again, unless there are specialreasons to the contrary.[8] When the Court is asked to exercise its discretion to order costs on adiscontinuance under r 15.23, the Court does not normally consider the merits of therespective cases, unless they are so obvious that they should influence the costsoutcome. In this case, however, the grant of legal aid made the outcome obvious. TheCourt would not have ordered Mr Beric to provide security for costs once he was2 High Court Rules 2016, r 1.6.granted legal aid. In Bevan-Smith v Reed Publishing (NZ) Ltd, an order for securitywas set aside when the plaintiff later obtained a grant of legal aid.3[9] The upshot is that Mr Beric has been vindicated in resisting the security forcosts applications, under the principle that the party who fails with respect to aninterlocutory application should pay costs to the party who succeeds.4 He should havecosts.[10] The defendants sought costs against Mr Beric (even claiming "exceptionalcircumstances" under s 45(3) of the Legal Services Act 2011) because of his delay inapplying for legal aid. It meant that they wasted costs on the security for costsapplications. While that is not a reason to deny costs to Mr Beric entirely, it mayprovide grounds for reducing costs under r 14.7 of the High Court Rules 2016. Thedefendants argue that if Mr Beric had applied for legal aid earlier, they would not havewasted their time and efforts on the security applications. Under r 14.7(f), the Courtmay in defined cases reduce costs if a party claiming costs has contributedunnecessarily to the time and expense of a step in the proceeding. Delay in applyingfor legal aid is not one of those defined cases. Nevertheless, the rule is clearly directedat discouraging parties from unnecessarily contributing to the time and expense of aproceeding. If a party has wrongly contributed to the costs of the other parties by itsconduct in the proceeding, that may count as "some other reason" under r 14.7(g).[11] In my judgment, Mr Beric delayed in applying for legal aid. His lack of fundshad become apparent earlier this year. The need to seek legal aid should have beenapparent then. If he had advised the other parties earlier that he was applying for legalaid, they would not have pressed on with their security for costs applications. Thatcan be seen in their request last week to adjourn, once they found out that he wasapplying for legal aid. The defendants' costs in preparing their submissions in supportof their application for security for costs were wasted, as that effort could have beensaved had Mr Beric applied for legal aid earlier. I do not, however, consider that earliersteps in the security for costs application were wasted. Mr Beric cannot be expected3 Bevan-Smith v Reed Publishing (NZ) Ltd, HC Auckland, CIV-2003-404-3628, 20 August 2004.4 High Court Rules 2016, r 14.2(1)(a).to have applied for legal aid at the outset. He seems to have had the means then to paycosts, without having to call on legal aid. His funds ran out later.[12] Accordingly, I award Mr Beric costs under category 2 in resisting theapplication for security for costs, but there will be a deduction from his costs for thedefendants' costs on a category 2 basis for preparing their submissions in support oftheir security for costs applications.[13] There should only be one set of costs between Mr Beric and the defendantscollectively. While the executors, the first defendants, filed a separate application andtheir own submissions, they largely duplicated the steps taken by the second to fourthdefendants. I understand that the estate has little, if any, funds left from which an orderfor costs could be paid. In those circumstances, the costs are likely to fall on thesecond, third and fourth defendants personally, rather than on the estate. It isunnecessary and inappropriate for the defendants to pay two sets of costs when theplaintiff substantially took the same steps to oppose both applications.[14] I trust counsel will be able to confer as to the amount of costs. Leave isreserved to apply for the amount to be fixed if counsel cannot agree.[15] While this decision fixes liability for costs, I do not direct that costs are to bepaid immediately. I have still to give my decision on the first defendants' strike-outapplication. The outcome of that application may have an impact on costs and I maywish to hear further from the parties.Associate Judge R M Bell