PETERS v PETERS [2013] NZHC 1061

PETERS v PETERS [2013] NZHC 1061 [13 May 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2011-404-6265[2013] NZHC 1060BETWEEN ANGELA MARY PETERSFirst PlaintiffMARGARET ANN CHAMBERLAINAND JONATHAN GEORGE NEWSONAND AMBERLY TRUSTEES LIMITEDAS TRUSTEES OF THE IJ & MACHAMBERLAIN NO. 3 FAMILYTRUSTSecond PlaintiffAND SCOTT GRAHAM PETERSFirst DefendantGRAHAM TAYLOR PETERSSecond DefendantEDNA MAY PETERSThird DefendantAND RUSSELL HYDE IBBOTSON ANDRUSSELL ERIC WILSONMAWHINNEY PRACTISING AS AFIRM OF SOLICITORS KNOWN ASPRESTON RUSSELL LAWThird PartyHearing: 18 March 2013Counsel: M H L Morrison for PlaintiffsC T Patterson and A Halloran for DefendantsM C Smith and Z A Fuhr for Third PartyJudgment: 13 May 2013JUDGMENT OF HEATH JThis judgment was delivered by me on 13 May 2013 at 9.30am pursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarIntroduction[1] This proceeding was brought by Ms Angela Peters (Angela), MrsChamberlain (Angela's mother) and the trustees of the IJ and MA Chamberlain No 3 Family Trust (the Chamberlain Trust) (collectively, the Chamberlain interests)against Angela's former husband (Scott) and the trustees of the Peters Family Trust(the Peters Trust) (collectively, the Peters interests). Angela is Mr and MrsChamberlain's daughter.[2] The central issue was the characterisation of a sum of $800,000 provided to Angela on 11 June 2009, to be used by Angela and Scott for the acquisition of a family home in Auckland. The Chamberlain interests alleged that the advance was made by Mr and Mrs Chamberlain to their daughter, whereas Scott and the trustees of the Peters Trust (being, Scott and his parents, Mr Graham and Mrs Edna Peters) believed that it was a gift to Angela, arising out of an advance on Angela's expectedinheritance.1[3] Ultimately, by a Deed of Settlement dated 21 December 2012, the proceeding was settled, on the basis that all parties agreed that the advance was from Mr andMrs Chamberlain to Angela and constituted a "relationship debt" for the purposes ofresolving post separation relationship property issues between Angela and Scott.[4] Although the Peters interests agreed that the sum of $800,000 should be repaid on the basis that it was a relationship debt, there was nothing in the pleadings or the settlement agreement that constituted any admission of liability, or of particular conduct, on the part of Scott or his parents.1 This aspect of the proceeding was brought in the name of the Chamberlain Trust because Mr Chamberlain died after the loan was made and one half of the debt passed, by his Will, to the trustees of the Chamberlain Trust.The costs sought[5] The Chamberlain interests seek one set of costs on a 2B basis up to the date of an offer to settle and thereafter an order for increased costs.2 They rely, in respect of the latter claim, on r 14.6(3)(b)(v) of the High Court Rules:14.6 Increased costs and indemnity costs...(3) The court may order a party to pay increased costs if—...(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—...(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or....[6] The Chamberlain interests seek increased costs on the basis that the Peters interests rejected a without prejudice save as to costs offer made after an unsuccessful Judicial Settlement Conference held in April 2012. The relevant letter was dated 28 May 2012, some seven months before settlement occurred.[7] The Peters interests rejected the Chamberlain interests' offer by letter dated 7June 2012. They made a counter-offer, but that was not accepted.[8] The Chamberlain interests contend that acceptance of the offer would haveresulted in a "very significantly better outcome" for the Peters interests than thoseeventually agreed on settlement. They point to the additional costs of discovery and inspection, amendment of pleadings and other aspects that resulted in wasted costs being incurred subsequently.2 Angela and the Chamberlain Trust are represented separately but acted in concert through one counsel for most of the proceeding.[9] For the Peters interests, Mr Patterson submitted that it was not unreasonable, on the basis of the allegations made against his clients (which included an allegation of fraudulent conduct) for the offer to be rejected while discovery and inspection was undertaken, to ascertain the true nature of the transaction. He contended that there was evidence to indicate a genuine belief on the part of the Peters interests that the money had been advanced as a gift and that issue required exploration. At the time of the offer, information of that type was not available to the Peters interests.[10] Mr Patterson submitted that, in circumstances where the conduct alleged had not been admitted, costs should lie where they fall.Analysis[11] Ordinarily, on discontinuance of a proceeding, there is a presumption that the plaintiff will pay costs to the opposing party.3 That rule does not apply in a case where there has been a settlement. In Uttinger v Baycity New Zealand Ltd,4 the Court of Appeal said:In our view, [the predecessor of r 15.23 of the High Court Rules] is aimed largely at the unilateral discontinuance of proceedings by a plaintiff and not those resulting from a settlement. On its face, [the rule] contemplates that the parties may agree on any costs matters arising on a discontinuance. Whether there is such an agreement will depend on a construction of the settlement documentation in question, free of any presumptions based on [the rule]. If anything, the presumption would be that parties would intend any settlement documentation to cover all matters at issue between them.[12] In this case, the parties expressly agreed to reserve costs, in their Deed of Settlement. In those circumstances, the usual rules relating to the fixing of costs apply. Ordinarily, a determination of costs will require some assessment of theparties' relative success, even though a final determinations about the merits cannotbe made.53 High Court Rules, r 15.23. For example, see Kroma Colour Prints Ltd v Tridonicatco NZ Ltd(2008) 18 PRNZ 973 (CA), in the context of a successful displacement of the presumption in (what is now) r 15.23 of the High Court Rules. See also McGechan on Procedure, at para HR 15.23.01.4 Uttinger v Baycity New Zealand Ltd (2008) 19 PRNZ 54 (CA).5 Morris Crock Ltd v Cycletreads Ltd HC Auckland CIV-2004-404-4764, 5 December 2005 at para [26].[13] In my view, the Chamberlain interests were justified in bringing the claim. Eventually, all parties agreed that the $800,000 advanced represented an undisputed relationship debt. Nevertheless, for the reasons advanced by Mr Patterson,6 it was not unreasonable for the Peters interests to continue completion of discovery and inspection before finalising their position on settlement. In my view, r 14.6(3)(b)(v) of the High Court Rules7 is not engaged. In my view, there is no other basis on which increased costs could be awarded against the Chamberlain interests.[14] A complicating factor is that while the substantive proceeding did not go to trial, a third party claim by the Peters interests against solicitors who acted on the acquisition of the relevant property did. Mr Morrison was aware at the time that submissions were made on costs that I would be hearing evidence on the third party claim over the following days.[15] A difficulty in resolving costs has arisen because, on the evidence I heard on the third party claim (which did not include any evidence from either Angela or Mrs Chamberlain), I was satisfied that the two key allegations of fact made against thePeters' interests could not be sustained. One was the allegation of fraud. The otherwas an assertion by Angela that she did not know the property was to be conveyed into the names of the trustees of the Peters Trust.[16] For reasons given in a judgment being issued on the third party claim contemporaneously,8 I found that those allegations were inconsistent with contemporary documents, as well as the positions taken by both the solicitors, Preston Russell Law, and the trustees of the Peters Trust. In the absence of evidence from Angela or her mother, I accepted the positions taken by those parties.[17] On those findings, it was not unreasonable for the Peters interests to insist on completing discovery and inspection before finalising their position on settlement. As it happens, their settlement position did worsen, but that is the risk they took. I would not have been prepared, in any event, to award increased costs in favour of the6 See para [9] above.7 Set out at para [5] above.8 Peters v Peters [2013] NZHC 1061.Chamberlain interests when serious allegations made against the Peters interests might not have been substantiated at trial.[18] I consider that the appropriate course is to order costs on a 2B basis againstthe Peters' interests. That reflects the fact that the Chamberlain interests succeededin their claims but also acknowledges that serious disputes, which might have been resolved against the Chamberlain interests, remained over allegations of misconduct by Scott and his parents.Result[19] For those reasons, on the claim between the Chamberlain interests and thePeters' interests I award one set of costs in favour of the former on a 2B basis,together with reasonable disbursements. Those costs and disbursements shall be fixed by the Registrar._____________________________P R Heath JDelivered at 9.30am on 13 May 2013Solicitors:Lowndes Jordan, AucklandGraeme Skeates Law, AucklandGilbert Walker, AucklandCounsel:C T Patterson, Auckland