PUBLIC TRUST v HISLOP [2016] NZHC 1578

PUBLIC TRUST v HISLOP [2016] NZHC 1578 [12 July 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-003297[2016] NZHC 1578UNDER the Property (Relationships) Act 1976BETWEEN PUBLIC TRUST AS PERSONALREPRESENTATIVE OF THE ESTATEOF SUZANNE HEAVEN (FORMERLYKNOWN AS SUZANNE WYATT)AppellantAND JAMES STEWART HISLOPRespondentOn the papersAppearances: D M Kennedy for AppellantA E Ashmore for RespondentJudgment: 12 July 2016JUDGMENT OF GILBERT J[COSTS]This judgment is delivered by me on 12 July 2016 at 3.30 pmpursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitors/Counsel:Bramwell Grossman, Hastings (D M Kennedy)The Public Trust, Lower HuttA Ashmore, Barrister, Ponsonby, AucklandIntroduction[1] Mr Hislop seeks costs orders pursuant to s 45 of the Legal Services Act 2011 following his successful appeal from a decision of the Family Court and in relation to an application for leave to appeal to the Court of Appeal that was withdrawn after the hearing.1Background[2] Mr Hislop and Suzanne Heaven (the deceased) lived together in a de facto relationship for approximately 22 months prior to Ms Heaven's death on8 April 2005. In February 2004, they jointly purchased a property at Warkworth which became their home. It appears that this property was funded by the proceeds of sale of a property belonging to the deceased and a mortgage. The deceased left a will appointing Mr Hislop and her solicitor as executors and trustees. Mr Hislop wasthe sole beneficiary. Apart from her interest in the home, the deceased's only assetsat the time of her death comprised $246 in a bank account and a tax refund of $309. There was also a debt of $1,128.[3] The executors did not apply for probate. They did not consider that this wasnecessary because the deceased's interest in the home was extinguished upon herdeath and accrued to Mr Hislop. On that basis, the estate was very modest in value. The last asset to be distributed was the tax refund which was paid to Mr Hislop in August 2006.[4] The deceased's only child, Chante Heaven, contends that her motherbreached her moral duty in failing to make any provision for her in her will. She has three children to care for, one of whom is disabled. She is not in employment and has few assets.[5] On 19 December 2006, Ms Heaven filed an application for probate and for the appointment of Public Trust as executor of the estate. This was to enable Public Trust to bring an application under the Property (Relationships) Act 1976 in1 Hislop v Public Trust [2015] NZHC 1101.respect of the deceased's former interest in the home. If successful, this would allowMs Heaven to bring a claim against the estate under the Family Protection Act 1955.[6] The application for probate was discontinued in June 2007 without being served. Ms Heaven says that this was done without her knowledge or authority and she says that she did not become aware of this until she instructed new solicitors in 2011.[7] Public Trust was appointed as administrator of the estate in April 2013. On 30 July 2013, Public Trust filed an application in the Family Court for an order extending the time for commencement of proceedings under the Property (Relationships) Act. Public Trust considered that the estate was a small estate and the time limit for commencing proceedings had expired in April 2006, 12 months after the date of death.2 However, it argued that an extension of time could be granted on the basis that final distribution of the estate had not occurred.3[8] In a judgment delivered by Judge J H Walker in the Family Court at North Shore on 17 November 2014,4 the Court concluded that the deceased's interestin the property was not extinguished upon her death and did not accrue to Mr Hislop by survivorship because of s 83(1) of the Act which provides:83 Relationship property defined(1) If, on the death of a spouse or partner, any property of that spouse or partner passes to the surviving spouse or partner, whether by survivorship or otherwise (but not by succession), then unless, in any proceedings under this Act, the court decides otherwise,-(a) that property is not automatically to be treated as the separate property of the surviving spouse or partner;and(b) the status of the property as relationship property or separate property is to be determined according to the status it would have had if the deceased spouse or partner had not died.[9] The Judge therefore determined, contrary to the view taken by both parties in the proceedings before her, that the estate was not a small estate for the purposes of the Act and the time limit in s 90(1)(a) did not apply. The Judge considered that the2 Property (Relationships) Act 1976, s 90(1)(a).3 Property (Relationships) Act 1976, s 90(4).4 Public Trust v Hislop [2014] NZFC 9170.proceedings were brought within time because they were filed within 12 months after administration of the estate was granted.5[10] In allowing Mr Hislop's appeal from this decision, I concluded that theestate was a small estate in terms of s 2 of the Act because the deceased's interest inthe former home was extinguished upon her death and therefore did not form part of her estate. Section 83 provides that the status of the property as relationship property or separate property is to be determined, for the purposes of proceedings under the Act, as if the deceased had not died. Unless and until the Court makes an order under the Act, ownership of the home is to be determined in accordance with conventional property law.[11] Public Trust sought leave to appeal to the Court of Appeal against my judgment delivered on 21 May 2015. In deciding whether or not to grant leave, I needed to determine whether the proposed appeal raised some question of law or fact capable of bona fide and serious argument in a case involving some public or private importance sufficient to outweigh the cost and delay of a further appeal.6[12] The principal question raised by the proposed appeal was whether the interest held by a joint tenant in real estate immediately prior to death forms part of thatperson's estate for the purposes of determining whether it is a "small estate" asdefined in s 2 of the Property (Relationships) Act 1976. If not, proceedings under that Act must be commenced within 12 months of the date of death or, if administration of the estate is granted in New Zealand within that 12 month period, no later than 12 months after the grant of administration. A subsidiary issue concerned the date on which an estate is finally distributed for the purposes of s 90(4) of the Act.[13] The application for leave to appeal to the Court of Appeal was heard on 14 December 2015. In response to questions from the Court, Mr Ashmore responsibly conceded that leave should be granted if Public Trust was uncertain as to whether an estate with little or no assets was nevertheless not a "small estate" if a5 Property (Relationships) Act 1976, s 90(1)(b).6 Waller v Hider [1988] 1 NZLR 412 (CA).claim was available under the Act. He acknowledged that if there was genuine uncertainty on the part of Public Trust, which administers many estates in New Zealand, this could justify the cost and delay of a further appeal. Accordingly,determination of the application was deferred to enable Public Trust's position to beclarified.[14] It took some time for Public Trust to determine its position. Ultimately, it advised the Court that it did not seek clarification of the law through a further appeal and it sought to withdraw its application for leave to appeal to the Court of Appeal. The application was accordingly dismissed.Legal Aid[15] Public Trust allowed these proceedings to be pursued in its name, on behalf of Ms Heaven, on the basis that it would not be responsible for the costs of the proceeding and would be indemnified by her against any adverse costs award.[16] Legal aid was granted in the name of Public Trust for the appeal and the application for leave to appeal to the Court of Appeal. I understand that the grant of legal aid reflected that Ms Heaven was the effective claimant and that she had insufficient income or assets to meet the costs of the proceeding.Legal principles[17] Section 45 of the Legal Services Act insulates a legally aided person from an adverse costs award unless there are exceptional circumstances:45 Liability of aided person for costs(2) No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.(3) In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:(a) any conduct that causes the other party to incur unnecessary cost:(b) any failure to comply with the procedural rules and orders of the court:(c) any misleading or deceitful conduct:(d) any unreasonable pursuit of 1 or more issues on which the aided person fails:(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:(f) any other conduct that abuses the processes of the court.(5) If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to theproceedings if this section had not affected that person's liability.Submissions[18] Mr Hislop seeks a direction under s 45(5) of the Act as to what, if any, order for costs would have been made against Public Trust in respect of the proceedings up to 26 June 2015 had it not been legally aided. He also seeks an order for costs against Public Trust for the steps taken after that date. These relate to the application for leave to appeal to the Court of Appeal.[19] Mr Ashmore submits that there are three exceptional circumstances justifying an award of costs being made against Public Trust for the leave application:(a) It applied for leave to appeal without independently considering the merits of the proposed appeal.(b) It delayed in ascertaining and disclosing its position in relation to the leave application.(c) It is in a financial position to meet an award of costs.[20] Mr Ashmore relies on a memorandum dated 17 December 2015, prepared byDean O'Leary, an in-house solicitor employed by Public Trust. In thismemorandum, Mr O'Leary briefly traversed the background to the proceeding andPublic Trust's involvement in it at the request of Ms Heaven's solicitors. He recorded that after Mr Hislop's appeal was allowed in the High Court, Ms Heaven'ssolicitors wrote to Public Trust asking for its views on an appeal. Trevor Tso was dealing with the matter at Public Trust at that time. Mr Tso responded to the solicitors as follows:[I have] no comment to make on the success or otherwise of a possible appeal. I am mindful of the litigation costs and wish to be assured that the costs to date and the costs of an appeal to the Court of Appeal – should it prove successful, can be met in full by your client from her own resources.[21] Ms Heaven's solicitors responded that Public Trust's costs would be covered by legal aid.[22] I do not consider that this amounts to an exceptional circumstance that could justify an award of costs against Public Trust. The reality is that the proceedings were being pursued by Ms Heaven on the advice of her solicitors and with the assistance of a grant of legal aid. Public Trust was involved because proceedings under the Property (Relationships) Act had to be commenced by the deceased'spersonal representative.7 For obvious reasons, Mr Hislop was not going to take this step.[23] It was reasonable for Public Trust to facilitate the proceedings. If the time limit issue could be overcome, a claim under the Property (Relationships) Act would have good prospects of succeeding. This would pave the way for a claim by Ms Heaven against the estate under the Family Protection Act. However, because the estate had no assets, it was also reasonable for Public Trust to seek protection from any adverse costs award.[24] In these circumstances, it is unrealistic to suggest that Public Trust should have taken independent advice on the merits of the proposed appeal. It had no funding for this. Given the decision in the Family Court, it could not be said that the proposed appeal was hopeless or devoid of merit. Public Trust was entitled to assume that Ms Heaven's solicitors would not advance an improper application forleave to appeal. It would also have been entitled to take some comfort from the fact that legal aid funding had been approved for the leave application.7 Property (Relationships) Act 1976, s 88.[25] The second circumstance relied on as being exceptional is the time it took Public Trust to clarify its position in relation to the application for leave to appeal. It follows from my conclusion regarding the first circumstance advanced by Mr Ashmore that Public Trust cannot be criticised for allowing the application for leave to appeal to proceed without independently considering the prospects of anappeal succeeding. Public Trust's independent position in relation to the proposedappeal was a matter raised by the Court at the hearing on 14 December 2015. If Public Trust was itself seeking clarification of the legal position, independently of wishing to support Ms Heaven with her claim, then that could have been an important factor weighing in favour of granting leave to appeal to the Court of Appeal. Mr Ashmore agreed with this assessment. This is why the Court asked Public Trust to clarify its position.[26] By then Mr Tso had left Public Trust. Mr O'Leary needed to review therelevant files and consult with others at Public Trust before he could provide the information requested by the Court. It was appropriate for Public Trust to consider its position carefully before responding to the Court. This is not an exceptional circumstance that could justify an award of costs against Public Trust.[27] The fact that Public Trust is a substantial organisation and could meet an award of costs is also not an exceptional circumstance justifying such an awardbeing made against it. Public Trust has simply sought to facilitate Ms Heaven'saccess to justice. It should not be discouraged from doing so in future because of the risk of an adverse costs award being made against it merely because it has the means to pay. In any event, because of its right to indemnity, any adverse costs award will fall on Ms Heaven. In my view, it would be wrong to visit a substantial costs award on Ms Heaven given her personal and financial circumstances and the underlying justice in her cause.[28] For these reasons, Mr Hislop's application for an award of costs againstPublic Trust pursuant to s 45 of the Legal Services Act is declined.[29] If it had not been for s 45 of the Act, I would have awarded costs to Mr Hislop for the appeal and in relation to the application for leave to appeal on a category 2, band B basis.Result[30] Mr Hislop's application for an order for costs pursuant to s 45 of the LegalServices Act 2011 against Public Trust is dismissed.[31] Were it not for s 45, Mr Hislop would have been entitled to an order for costs against Public Trust for all steps taken in this Court calculated on a category 2, band B basis. If counsel are unable to agree on the calculation, the dispute can be referred to me by way of memorandum for determination on the papers._________________________M A Gilbert J