Atchison v Boyd
[2017] NZHC 1942
•15 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2016-404-3142 [2017] NZHC 1942
UNDER Section 66 of the Trustee Act 1956 and the
Court's inherent jurisdiction
IN THE MATTER
of the Estate of FIONA MARIE DUNCUM
BETWEEN
CATHERINE ANN ATCHISON Applicant
AND
KAREN MICHELLE BOYD First Respondent
SEAN CONNOLLY Second Respondent
Hearing: 19 July 2017 Counsel:
A J Steele for Applicant
R J Katz QC and D R Courtney for First Respondent
K E Swadling for Second RespondentJudgment:
15 August 2017
JUDGMENT OF HEATH J
This judgment was delivered on 15 August 2017 at 3.00pm pursuant to
Rule 11.5 of the High court Rules
Registrar/Deputy Registrar
Solicitors:
Martelli McKegg, Auckland Glaister Ennor, Auckland Courtney & Co, Auckland Counsel:
J Katz QC, Auckland
K Swadling, Auckland
ATCHISON v BOYD [2017] NZHC 1942 [15 August 2017]
The application
[1] Ms Atchison, the executrix of the estate of the late Fiona Marie Duncum, seeks directions from the Court1 as to whether certain costs incurred by a former executrix in Court proceedings should be paid out of the estate.
Background
[2] The late Ms Duncum appointed Ms Boyd and Mr Connolly as executors and trustees in her last Will, dated 27 September 1998. At that time, Ms Duncum and Mr Connolly were in a de facto relationship. That relationship ended in April 2013. Ms Duncum died on 10 December 2013. Ms Boyd was a “long-standing and close
personal friend” of Ms Duncum.2
[3] Ms Duncum and Mr Connolly had three children. Although Ms Duncum raised the question with her lawyer whether she should change her Will after separation, she elected not to do so. The residue of the estate passes to FMD Family Trust (the Trust). The beneficiaries of the Trust are the three children and Mr Connolly, though he has acknowledged that he will not seek to benefit personally
from the Trust.3
[4] Ms Boyd brought proceedings in the High Court in which she sought an order for probate in solemn form. Her purpose in doing so was to remove Mr Connolly and have herself confirmed as the sole executrix. Later, she amended her claim to seek an order removing Mr Connolly, but appointing an independent solicitor to assume the role of a co-administrator with her.4 By the end of the hearing, Mr Connolly’s preferred position was to have an independent person appointed to administer the estate, in the place of both Ms Boyd and himself.5
[5] In a judgment given on 19 November 2015, Thomas J made an order removing both Ms Boyd and Mr Connolly. She appointed Ms Atchison as
1 Under s 66 of the Trustee Act 1956 and inherent jurisdiction of the Court.
2 Boyd v Connolly [2015] NZHC 2884, at paras [6]–[9].
3 Ibid, at paras [5] and [10]–[13].
4 Ibid, at para [2].
5 Ibid, at para [3].
administrator of the estate.6 Ms Atchison is a barrister and solicitor of the High Court of New Zealand. The Judge reserved questions of costs, indicating that it appeared they “will need to be borne by the estate”.7
[6] Ms Boyd and Mr Connolly could not agree on the way in which costs should be ordered. The Judge received written submissions on that topic. Both parties sought indemnity costs, Mr Connolly in the sum of $15,663 and Ms Boyd
$67,864.85. If calculated on a 2B basis, Ms Boyd’s costs would have been $32,558.
[7] Thomas J gave judgment on the costs application on 1 September 2016. She awarded Mr Connolly his actual costs, to be paid out of the estate. She reached a different conclusion in respect of Ms Boyd’s costs. Thomas J said:8
[54] Ms Boyd is awarded 2B scale costs with an uplift of 25 per cent. This is not intended to preclude Ms Boyd from ultimately claiming the balance of costs she has incurred while reasonably acting for the estate. It means, however, that she must seek reimbursement for those costs from the current administrator/executor of the estate.
[8] In reaching that conclusion, the Judge had regard to well known principles as to the recovery of costs in cases of this type, for example, Re Beddoe9 and Re O’Donoghue.10 Thomas J’s reasons for reaching her conclusion in respect of costs claimed by Ms Boyd are captured in the following extracts from her costs judgment:11
[35] Ms Boyd’s responses have not explained why the claims put forward include claims for work other than what would have been necessary to prosecute a proceeding for the removal of an executor. Her responses seem to take a broad view of what was related to this proceeding, as including anything related to her work as executor. Costs incurred by Ms Boyd while fulfilling general duties as an executor and trustee are not to be claimed from the Court. They must be sought from the estate separately.
[36] Ms Boyd’s costs are very high for a short hearing and relatively straightforward claim. They are more than twice scale costs, which is unusual since scale costs should be around two-thirds of actual costs, although clearly that metric will not always be accurate. More
6 Ibid, at para [49].
7 Ibid, at para [50].
8 Boyd v Connolly [2016] NZHC 2070, at para [54].
9 Re Beddoe [1892] 1 Ch 547 (CA) at 558.
10 Re O’Donoghue [1998] 1 NZLR 116 (HC) at 121 and 122.
11 Boyd v Connolly [2016] NZHC 2070.
problematically, when analysed, her invoices reflect work which could not have been attributed to the proceeding such as the Notice of Claim under s
42 of the Property (Relationships) Act 1976.
…
[41] I remain uncomfortable with the level of costs accrued by Ms Boyd on behalf of the estate. More centrally, I am not satisfied that they reflect solely the work undertaken in relation to the proceeding, focused as it was on whether Mr Connolly or she should be removed as an executor and trustee.
[42] In the absence of time recordings which more accurately allow analysis of what work the solicitors completed, it is very difficult to isolate and identify specific costs which were reasonable as opposed to those which were for work not directly necessary for the proceeding, as judges have done in other cases.
[43] However, the case law does indicate that there is a broad discretion to assess the appropriate level of costs in trustee and executor cases. There is no requirement to grant indemnity costs.
[44] As well as the sheer level of costs accrued by Ms Boyd (which are significant in isolation, not simply compared to Mr Connolly’s costs), the memoranda offered by Ms Boyd suggest some of her claimed legal costs are outside of the scope of this proceeding.
[45] In my judgment, I noted a number of legal steps (such as arranging draft deeds to be drawn up) which were taken by Ms Boyd without Mr Connolly’s knowledge, and that she could not estimate what costs had been incurred by her on behalf of the estate. I said:
[43] My concern is reinforced by the costs which Ms Boyd has incurred without agreement and which she expects the estate to pay. The concern she expressed, that the lawyer proposed by Mr Connolly would be expensive and focused on pursuing every single point, is therefore, somewhat ironic. I consider lawyers to be better placed at assessing when a matter is suitable for settlement by weighing up the advantages and disadvantages of continuing with legal action. In making such a decision, emotion will not cloud their judgment.
[46] It is clear that there were issues in the original proceedings as to the appropriateness of elements of Ms Boyd’s behaviour and as to the costs she was incurring on behalf of the estate. Parts of these related to the engagement of the firm AscoLegal to perform work in the capacity of solicitors for the estate, without wider agreement of the estate.
[47] In my view, given these factors, this is a situation in which granting indemnity costs is not justified. I consider that it would be reasonable to make an award of 2B scale costs with an uplift of 25 per cent from the estate. This reflects the reasonable costs of a proceeding of this size and complexity, with an uplift to represent a rough approximation of what indemnity costs would likely be in a case such as this.
The present proceeding
[9] Ms Atchison seeks directions on the following question:
1.2.2Whether or not the whole of the file relating to the legal fees and disbursements incurred by [Ms Boyd] in alleged administration of the Estate … should be reimbursed [out of the estate] …
[10] Mr Steele, for Ms Atchison, confirmed that the executrix is surrendering her discretion to the Court to determine what costs incurred by Ms Boyd (if any) should be paid out of estate funds.12 The nature of the Court’s role when an executor or trustee invokes s 66 of the Trustee Act 1956 to seek directions to protect his or her position was discussed fully by the Court of Appeal in Chambers v SR Hamilton Corporate Trustee Ltd.13 As discussed in that judgment, it is generally inappropriate to use the originating application procedure when disputed questions of fact exist.14
[11] A case management conference was held on 19 July 2017. The purpose of the conference was to obtain directions as to the conduct of the proceeding. I received memoranda from counsel for Ms Boyd and Mr Connolly. Ms Atchison abides the decision of the Court. A significant issue was how the reasonableness of costs incurred by Ms Boyd should be assessed.
[12] Although not raised by counsel at the case management conference, I suggested an alternative method by which questions of Ms Boyd’s entitlement to costs could be addressed. I did so because I was concerned that the course proposed by counsel may have required joinder (or at least service of the proceeding on) of lawyers who had previously acted for Ms Boyd. I was concerned to retain the utility of the originating application procedure, if practicable. It seemed likely, if joinder or
service on the lawyers had been directed, that disputed facts were likely to emerge.15
[13] My proposal involved appointment of a senior legal practitioner with experience in estates and/or trusts as a Court expert, under r 9.36 of the High Court
12 Ibid, at para [54], set out at para [3] above.
13 Chambers v SR Hamilton Corporate Trustee Ltd [2017] NZAR 882 (CA), at paras [32]–[34].
14 Ibid, at para [34]. Leave to commence this proceeding by originating application was granted by
Davison J on 28 March 2017.
15 See para [10] above.
Rules, to make an assessment of the reasonableness of the costs claimed and whether they should be paid out of the estate. Rule 9.36 provides:
9.36 Appointment of court expert
(1) In a proceeding that is to be tried by Judge alone and in which a question for an expert witness arises, the court may at any time, on its own initiative or on the application of a party, appoint an independent expert, or, if more than 1 such question arises, 2 or more such experts, to inquire into and report upon any question of fact or opinion not involving questions of law or of construction.
(2) An expert appointed under subclause (1) is referred to in this rule and in rules 9.37 to 9.42 as a court expert.
(3) A court expert in a proceeding must, if possible, be a person agreed upon by the parties and, failing agreement, the court must appoint the court expert from persons named by the parties.
(4) A person appointed as an independent expert in a proceeding under rule
9.44(3) may not be appointed as a court expert unless the parties agree.
(5) In this rule, expert, in relation to a question arising in a proceeding, means a person who has the knowledge or experience of, or in connection with, that question that makes that person’s opinion on it admissible in evidence.
[14] I refer to r 9.36(1). Under that provision I have jurisdiction to appoint an expert “to inquire into and report upon any question of fact or opinion not involving questions of law or of construction.” As the issue had not been raised earlier, Ms Swadling, for Mr Connolly, had no instructions. Mr Katz QC, for Ms Boyd, was minded to accept the proposal. Subject to Ms Swadling’s abiity to take instructions, after discussing the question with counsel, I asked for a draft order to be submitted for my consideration.
[15] In my Minute of 19 July 2017, I recorded:16
[8] Counsel will confer and submit a draft order for my consideration. I
ask that the draft order address the following points:
[a] First, the name of a proposed appointee. Rule 9.36(3) provides that if agreement cannot be reached on the identity of the expert, the Court must appoint someone from a list
16 Atchison v Boyd HC Auckland CIV-2016-404-3142, 19 July 2017 (Minute of Heath J), at para [8]. Further observations were added, at paras [9]–[13], to alert counsel to other issues to be addressed in a draft order.
submitted by the parties. If the parties cannot agree, I ask each to submit three names for my consideration.
[b] Second, the scope of the expert’s engagement. In particular,
[i] whether work undertaken by the lawyers was reasonable to respond to the instructions they were given.
[ii] whether the costs incurred by Ms Boyd are reasonable in the circumstances.
[iii] whether some or all of the costs incurred are personal to Ms Boyd, or properly claimable out of the estate.
[c] Third, the powers to be conferred on the expert to undertake his or her tasks.
[d] Fourth, the date by which a report must be filed and served.
[16] Counsel for Ms Boyd has submitted a draft order for my consideration. Not all of its terms meet with Mr Connolly’s approval. Although accepting that the proposed appointee is someone appropriate to undertake the task, he contends that the order should be made on more broad terms than that proposed by counsel for Ms Boyd. Ms Swadling, on Mr Connolly’s behalf, also suggests that the proposed draft seems more narrow in scope than I had intended.
[17] The reasons for the differences between counsel turn primarily on the purpose of the report. Ms Swadling contends:
5.Central to the second respondent’s concerns are that the first respondent incurred costs unreasonably in the circumstances that she is now seeking reimbursement for from the estate. In other words, she took steps that were unreasonable in the circumstances, incurring costs that were therefore unreasonable in the circumstances. This is a different issue to whether the quantum of costs charged were unreasonable (which is also a concern).
6.In order to assess whether the steps taken by the first respondent were in fact reasonable, it is necessary to consider the wider factual background. The wider factual background may not necessarily be fully disclosed on the face of the files of the lawyers instructed by the first respondent.
7.In order to be able to properly ascertain whether the steps taken by Ms Boyd were reasonable, including the instructions given by her to the lawyers, the scope of the inquiry to be undertaken by the expert should include inquiry into the wider circumstances of the dispute between the first and second respondent. This will need to include
obtaining factual background from the second respondent and, as appropriate, his legal advisers. The inquiry may extend to other persons as the expert might deem appropriate, eg the late Fiona Duncum’s eldest daughter, Amanda Jane Florence Johnson.
[18] All counsel agree that Mr Christopher Darlow, Solicitor of Auckland, be appointed as the Court expert. Mr Darlow has acknowledged expertise in trust and estate law. I agree with both parties that he is a suitable appointment.
[19] The proposed scope of Mr Darlow’s inquiries are set out in the draft order:
C. The orders set out below were made following the case management conference following hearing from the parties and their counsel.
1.Christopher Robert Darlow (“the expert”) of Auckland, Solicitor is appointed as a Court expert pursuant to Rule 9.36 High Court Rules for the following purposes.
1.1The expert is to obtain from the applicant’s solicitors all files, documents and any other materials required to enable the expert to report to the Court as set out below.
1.2The expert shall furnish to the court a report which report shall address the fees charged to the first respondent by Miles Agmen-Smith of Auckland, Solicitor (including any disbursements or fees of counsel included therein) in relation to the Estate of the late Fiona Marie Duncum to determine whether:
1.2.1The fees relate to work undertaken as reasonable to respond to instructions given to Miles Agmen-Smith (and to any counsel) by the first respondent.
1.2.2Whether the fees charges for that work are reasonable in all the circumstances.
1.2.3Any work undertaken was personal to the first respondent and unrelated to the administration of the Estate of Fiona Marie Duncum and the extent of that work in quantum terms.
1.3For the purposes of his report the expert may request any further information from the applicant and her solicitors and may request the Court to make further or ancillary orders pursuant to Rules 9.36 and 9.37 High Court Rules. For the purposes of any such application the expert may apply to the Court by memorandum to be served on the applicant and the first respondent.
…
[20] Subject to Mr Darlow’s ability (which does not need to be recorded in the sealed order) to assess the questions submitted to him in light of the two judgments given by Thomas J in the probate proceeding, I consider the order is sufficiently broad to cover the nature of the inquiry that Mr Darlow is to undertake. He has the ability to seek further information from the parties, or further direction from the Court, if he were to form the view that additional material was required before he
could form opinions on those questions.17
[21] As I indicated at the case management conference, I have residual concerns about whether Mr Connolly should be heard at all on the present application. His costs in the proceeding before Thomas J have been paid in full. The only remaining question is to determine the extent (if any) to which Ms Boyd is entitled to reimbursement of costs paid by her, being the difference between actual costs paid and the 2B costs (with an uplift of 25 per cent) awarded by Thomas J.18 In conducting his inquiry, Mr Darlow will be taking account of (and protecting) the interests of beneficiaries. Also, Mr Connolly will have the opportunity to be heard
on any issues arising out of Mr Darlow’s report.
[22] Enlarging the scope of Mr Darlow’s inquiry is only likely to increase the costs payable out of the estate. I do not consider that it is in the interests of beneficiaries for such costs to be incurred, unless Mr Darlow were to indicate that he needed to make further inquiries of the type suggested before reporting to the Court. In my view, the scope should only be extended to cover the additional tasks for
which Ms Swadling contends,19 if Mr Darlow considers it is necessary to do so.
[23] On that basis, I consider that the order proposed by Mr Katz should be made.
Result
[24] With the following variations, I make an order appointing Mr Darlow as
Court expert under r 9.36 of the High Court Rules on the terms set out in the draft annexed to Mr Katz’s memorandum of 27 July 2017:
17 See para 1.3 of the draft order, set out at para [19] above.
18 Boyd v Connolly [2016] NZHC 2070, at para [54], set out at para [3] above.
19 Set out at para [17] above.
(a) Mr Darlow shall file and serve his report on or before 6 October 2017, or such later date as this Court directs.20
(b)The costs of the expert shall be paid, in the first instance, out of estate funds, subject to the right of either party to seek an order adjusting the incidence of those costs.
(c) I reserve all questions of costs in relation to the proceeding generally.
[25] I direct the Registrar to set down the proceeding for a telephone conference before me at 9am on the first available date after 13 October 2017. Counsel shall file and serve memoranda setting out their respective positions after reflecting on Mr Darlow’s report. Those memoranda shall be filed and served no later than three
working days before the date allocated for the conference.
P R Heath J
Delivered at 3.00pm on 15 August 2017
20 I make that variation due to my inability to deal with this issue more promptly.
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