Bale v Patel

[2021] NZHC 3399

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-87

[2021] NZHC 3399

IN THE MATTER

of the Trustee Act 1956 and Declaratory Judgments Act 1909

BETWEEN

MICHAEL GEORGE BALE AND HEMGRA JEETENDRA AS EXECUTORS AND TRUSTEES OF THE LAST WILL OF NARSHAI

First Plaintiffs

MICHAEL GEORGE BALE AND HEMGRA JEETENDRA AS TRUSTEES OF THE VALLABH NARSAI FAMILY TRUST

Second Plaintiffs

AND

BHARATI PATEL

First Defendant

ASHA PATEL
Second Defendant

JEETENDRA VALLABH

Third Defendant

Hearing:

On the Papers

Counsel:

K P Sullivan for First and Second Plaintiffs

R J Fowler QC and K H Lawrence for First and Second Defendants

L M McKeown for Third Defendant

Judgment:

10 December 2021

JUDGMENT OF ISAC J

[Costs]

BALE v PATEL [2021] NZHC 3399 [10 December 2021]

Introduction

[1]    This was a proceeding by the executors and trustees of the last will of Vallabh (Wally) Narsai seeking directions under s 66 of the Trustee Act 1956 or, alternatively, s 133 of the Trusts Act 2019. The trial was scheduled to proceed before me on 12 and 13 April 2021 but at the commencement of the hearing I was advised by counsel for the parties that they had reached agreement which would settle the proceeding and that a judgment by consent could be entered. I subsequently received a joint memorandum of counsel accompanying draft orders by consent. By minute dated 14 April 2021, I then went on to make the agreed orders.

[2]    I reserved the issue of costs. Failing agreement, the parties were directed to serve memoranda.

[3]    Asha and Bharati Patel, the first and second defendants, have reached agreement with the plaintiff executors and trustees as to costs. Jeetendra Vallabh, the third defendant, objects to this agreement and seeks costs orders against Asha and Bharati.

Background

[4]    Wally settled a family trust in 1994. The discretionary beneficiaries included his children, Asha, Bhatri and Jeetendra. Jateendra was later made final beneficiary of the trust. Wally passed away on 1 June 2016. His last will left the residue of the estate to the trust, the residuary beneficiary.

[5]    The proceeding principally concerned the status of several properties in Newtown, and whether they had been validly transferred to the trust. But the plaintiffs also sought orders declaring:

(a)that the first plaintiffs as the validly appointed administrators of the Estate were/are entitled to collect up particular assets which comprise the estate, and distribute them in accordance with the will;

(b)that the second plaintiffs were/are the current trustees of the Trust;

(c)that the trust owns particular assets, including the properties in Newtown; and

(d)that the second plaintiffs have authority as trustees to manage and administer the assets of the trust in accordance with the terms of the trust deed and their statutory duties as trustees.

[6]    Bharati and Asha opposed the applications. Jeetendra supported the plaintiffs’ applications.

Parties’ proposals

[7]    As I have noted, Asha and Bharati have reached agreement with the plaintiffs as to costs. That agreement would see 75% of Asha’s and Bharati’s actual costs and disbursements ($62,729 incl GST) paid as  an  interim distribution from  the trust  (40 per cent) and estate (60 per cent). Jeetendra opposes this agreement. His costs in the proceeding on a solicitor-client basis total $63,049.37. He seeks an order requiring Bharati and Asha (on a joint and several basis) to pay him $31,444.751 together with an order that the balance of his costs ($31,604.621) be met 60% by the estate ($18,962.77) and 40% by the Trust ($12,641.85).

Discussion

[8]    All matters relating to costs are discretionary.2 But the discretion must be exercised on a principled basis. And the determination of costs, so far as possible, should be both predictable and expeditious.3 Although the party who fails with respect to a proceeding should generally pay costs to the party who succeeds,4 that principle is not strictly applicable in this context. It is hard to see strict winners and losers here. Likewise, the general rule that a plaintiff who discontinues a proceeding against a

1      Category 2B costs and disbursements of $21,036.50 and increased costs (50 per cent uplift on 2B costs,

excluding disbursements) of $10,408.25.

2      High Court Rules, r 14.1.

3      Rule 14.2(1)(g).

4      Rule 14.2(1)(a).

defendant must pay costs to the defendant must be seen in the context of this case, which concerned a family trust, and the fact it was discontinued very late in the piece due to late disclosure.

[9]    The parties have levelled criticisms at each other in terms of the merits of the original proceeding, and whether it should have been brought in the first place. Indeed, Jeetendra applies for increased costs against Bharati and Asha on the basis they made and pursued arguments that lacked merit and failed, without reasonable justification, to admit facts, evidence, documents, and accept legal arguments. And their concession came more than two years after the proceedings were filed, and at an extremely late stage, with the details still being negotiated at Court prior to the hearing commencing on 12 April 2021.

[10]   Mr Fowler QC, on behalf of Bharati and Asha, unsurprisingly rejects this contention. He submits there was a real question as to whether the properties and funds in question were estate or trust property, as well as a number of related questions. It is unnecessary to traverse the various legal issues that were in issue — and whether the proceeding had merit — but Mr Fowler points to the late disclosure provided to his clients the day before the hearing, which, as he says, changed the picture considerably. In essence, the late disclosure made clear that the initial property transfers were valid, and that Wally had treated the trust as valid to a greater extent than previous documentation had indicated. It was in that context that his clients took the view that the matter ought to be resolved by consent.

[11]   As I see it, the proceeding was fundamentally about the actions of Wally or at least the operation and administration of the trust generally. While there may have been personal motivations for bringing and defending the proceeding, it remained focused on the trust. In that context — and considering the plaintiffs have taken a very pragmatic view of costs — I cannot see why a personal costs order should be made against Bharati and Asha. It seems to me that the agreement reached as between Asha and Bharati and the plaintiffs is a sensible approach to the various claims of the beneficiaries without attributing any blame.

[12]   It follows that Jateendra’s claim for increased costs is not warranted. Increased costs should only be made where there has been a failure to act reasonably.5 That is a relatively high threshold, which has not been met here. I accept Mr Fowler’s submission that until the late disclosure, the plaintiffs’ position was not obvious or incontrovertible to the extent required to justify an award of increased costs.

[13]And as Associate Judge Johnston said in Driver v Radio New Zealand Ltd:6

[11]              It is true that the Court retains an overarching discretion, and there is provision for increased and decreased costs. However, it appears to me to be important in achieving the objective of the regime for the Court to resist making orders for increased or decreased costs other than in exceptional circumstances. Certainly, the fact that one side has been wholly successful and the other side wholly unsuccessful is not a basis for departure from scale costs, even if, with the benefit of hindsight, it appears the Court had little difficulty in dismissing the case for the unsuccessful party.

[12]              Any other approach it seems to me would risk costs becoming unpredictable and another regular source of contention that would only lead to further costs being incurred.

[14]   The agreement reached between the plaintiffs and Asha and Bharati outlined at [7] is a sensible resolution of the competing positions of the parties. Costs are ordered in keeping with it. Jeetendra’s costs are also to be borne by the estate and the trust in the proportions he sought (60% from the estate; 40% from the trust).

Isac J

Solicitors:

WCM Legal, Wellington for Plaintiffs

Greg Kell Law Ltd, Wellington for First and Second Defendants Duncan Cotterill, Wellington for Third Defendant

5      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27].

6      Driver v Radio New Zealand Ltd [2020] NZHC 3398.