Brodbeck v New Zealand Trustees Services Limited
[2024] NZHC 954
•29 April 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000018
[2024] NZHC 954
UNDER Sections 126 and 127 of the Trusts Act 2019 BETWEEN
LYNETTE ANNE BRODBECK
Applicant
AND
NEW ZEALAND TRUSTEE SERVICES LIMITED, ANDREW ERNEST GOODALL, MARJORIE ANNE GOODALL, and WARREN JOHN
GOODALL as trustees of the GOODALL FAMILY TRUST
Respondents
Hearing: On the papers Appearances:
A W Johnson for Applicant
A Gilchrist for First Named Respondent
W E Andrews for Second, Third and Fourth Named RespondentsJudgment:
29 April 2024
JUDGMENT OF WILKINSON-SMITH J
(Costs)
This judgment was delivered by me on 29/04/2024954 2024 at 2pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
A W Johnson, Martelli McKegg, Auckland
W E Andrews, Dawsons Lawyers Limited, Auckland A Gilchrist, Southern Cross Chambers, Auckland
A Habershon, Perpetual Guardian, Christchurch
BRODBECK v NEW ZEALAND TRUSTEE SERVICES LIMITED [2024] NZHC 954 [29 April 2024]
[1] The proceeding relates to the Goodall Family Trust which owns Ti Rakau Developments Limited (the Company). The applicant, Ms Brodbeck, is a discretionary and final beneficiary of the Trust.
[2] The respondents in this matter were trustees of the Trust at the time of the application being a professional trustee company, New Zealand Trustee Services Ltd (NZTS), and three members of Ms Brodbeck’s immediate family (collectively the Trustees). The second-named to fourth-named respondents are Ms Brodbeck’s mother Marjorie Goodall and two brothers Andrew and Warren Goodall (referred to as the Goodalls throughout).
[3] Ms Brodbeck discontinued the proceeding on 13 November 2023. Notwithstanding, the default position under r 15.23 of the High Court Rules 2016, Ms Brodbeck says that this is a case where the Court should exercise its discretion to make an order that the Goodalls pay her costs.
[4]Ms Brodbeck seeks increased costs against the Goodalls.
[5] She also seeks an order that costs lie where they fall between herself and the first-named respondent NZTS. NZTS consents to such an order.
[6] The Goodalls oppose Ms Brodbeck’s claim for costs and seek costs on a 2B basis for steps taken prior to 20 September 2023 (the date of Calderbank letter) and increased costs from 20 September 2023.
Background
[7] On 4 November 2021, Ms Brodbeck sought information from the Trustees namely basic trust information, the terms of the Trust, memorandums or guidance related to the Trust, and its financial accounts.
[8] Between 4 November and 9 November 2021, Ms Brodbeck was advised by her mother, Marjorie Goodall, that the Trustees had obtained legal advice and intended to remove her as a beneficiary of the Trust to negate her information request. The
Goodalls state that this was said in the “heat of the moment” and was not intended to be acted upon. The threat was quickly withdrawn by the Goodalls’ solicitors.
[9] On 3 December 2021, Ms Brodbeck notified the Trustees of her intention to commence legal action to obtain the requested information. She received a copy of the Trust Deed on 17 December 2021.
[10] In April 2022, Ms Brodbeck commenced proceedings for summary judgment seeking disclosure from the Trust in relation to the Trust’s financial statements from 2017 to 2021 and any documentation relating to the transfer/resettlement of the assets from Ti Rakau Trust, which held assets from the Company and Goodall Industries Ltd, to the Trust.
[11] The application for summary judgment was discontinued and settled in accordance with communications that occurred throughout May and June 2022 (the Agreement). Ms Brodbeck states that the Agreement provided for undertakings to be performed by the Trustees. The respondents state that no formal undertakings were given and that no undertakings were given to the Court.
[12] Documentation concerning the resettlement of the Company’s assets was subsequently disclosed to Ms Brodbeck. However, the financial accounts were not disclosed. The Goodalls state that this was due to factors outside of their control, citing the inactivity and underperformance of the Trust’s former accountant. The Goodalls say they always intended to provide the Trust’s financial information to Ms Brodbeck. The Trust’s financial accounts were provided to Ms Brodbeck in September 2023.
[13] On 22 December 2022, Ms Brodbeck filed an originating application seeking a review of decisions made by the Trustees; ancillary orders/directions that all trustees be removed from the Trust and replaced with an independent trustee; and for the provision of information.
[14] On 31 May 2023, Mander J directed that the proceeding be set down for a four‑day hearing to commence on 20 November 2023, and directed Ms Brodbeck to
file a particularised statement of claim by 21 June 2023. Ms Brodbeck filed her statement of claim on 23 June 2023.
[15] During that time NZTS was removed as a trustee and Comac Nominees No.34 Ltd (Comac) was appointed as professional trustee of the Trust.
[16] In September 2023, the Trust’s financial accounts were provided to Ms Brodbeck. Ms Brodbeck disputes this as she does not believe that the provided accounts properly record the Trust’s financial position.
[17] On 20 September 2023, counsel for the Goodalls sent Ms Brodbeck an offer to settle the proceedings. The offer was made without prejudice as to costs. The offer noted that all the financial statements had been disclosed and that Comac had been appointed as independent and professional trustee.
[18] Ms Brodbeck’s reply on 25 September 2023 noted her concerns about the content of the financial accounts. The reply set out the basis on which she would be prepared to discontinue the proceedings stipulating:
(a)that the Goodalls resign as trustees;
(b)the appointment of specified co-trustees;
(c)that she be provided with the Trust’s correspondence, bank statements, and records;
(d)that the new trustees fully review the management and administration of the Trust; and
(e)that the Trust would cover her costs in the proceedings.
[19] On 27 September 2023, the Goodalls filed a memorandum stating that the November fixture was no longer required as the outstanding financial accounts from the Trust and the Company had been provided to Ms Brodbeck, the Goodalls had
retired as trustees, Comac had been appointed as independent and professional trustee, and the Trusts and the Company had engaged a tax agent and accountant.
[20] Ms Brodbeck elected to continue the proceedings again indicating her concerns that the Trust’s financial statements did not represent the Trust’s true financial position.
[21] Ms Brodbeck attempted to file an amended statement of claim dated 6 October 2023. The amended claim sought orders against Marjorie Goodall in a different capacity namely as appointer under the Trust. It also sought orders removing Comac as a trustee and alleged a breach of trustee duties by Comac.
[22] On 13 October 2023, Anderson J declined leave to file the amended statement of claim saying that the further claim against Marjorie Goodall was a very different claim to the existing claim which was a review of her decisions as trustee. Comac was not a party to the proceedings, and it was inappropriate to join Comac at such a late stage. The hearing was just over a month away. Anderson J acknowledged that there might be a need to amend the claim in a much more limited way to reflect recent events and to remove relief that no longer applied.1 The hearing date was maintained.
[23] On 17 October 2023, Ms Brodbeck proposed to file another amended pleading. Muir J found that the proposed new amended pleading was outside the terms contemplated by Anderson J and said that there was force in the Goodall’s submission that what was proposed was a “backdoor” attempt to litigate the very matters which Anderson J specifically said could not be addressed at such a late stage. Muir J said:
[6] Ms Brodbeck is on notice that in the event she pursues an application to amend in the terms proposed and is unsuccessful, she may face an application for increased indemnity costs. There may potentially also be claims for wasted costs if such application necessitates adjournment of the fixture.
[7] Alternatively, Ms Brodbeck may seek leave to file an amended pleading confirming to the limitations in Anderson J’s Minute. I have no doubt that if the restrictions imposed by her Honour are adhered to, consent orders will be possible on the application and the fixture retained.
1 Brodbeck v New Zealand Trustee Services Ltd HC Auckland CIV-2023-404-18, 13 October 2023 at [16]–[17].
[24] Instead of filing an application for leave to amend the pleading in a way that conformed to the limitations in Anderson J’s minute, Ms Brodbeck filed a further memorandum accepting that the November fixture should be vacated and stating that she may seek to discontinue the proceeding and commence a fresh proceeding. By further memorandum counsel for Ms Brodbeck again sought to vacate the fixture and asked for directions relating to the application for leave to amend the claim with costs to be determined following the determination of the proceedings. Venning J said that, to the extent that the memorandum by Ms Brodbeck could be regarded as an application for adjournment of the November fixture, that was declined. Venning J further determined that the November hearing would proceed to deal with the issues pleaded in the June 2023 statement of claim. It was made clear that if Ms Brodbeck wished to address issues that had arisen since the appointment of Comac, she would need to commence a new set of proceedings.
[25] On 7 November 2023, counsel for Ms Brodbeck filed a synopsis of submissions. These submissions relied on further issues outside the pleadings and evidence before the Court. Counsel for the Goodalls filed a memorandum seeking pre-trial directions regarding the admissibility of the matters contained in the submissions.
[26] On 10 November 2023, Comac’s solicitors advised Ms Brodbeck that it appreciated the concerns raised and that it intended to consider the matters raised in her submissions and take appropriate steps.
[27] On 13 November 2023, Ms Brodbeck filed a notice of discontinuance of the proceeding.
Ms Brodbeck’s position
[28] Ms Brodbeck seeks scale 2B costs ($27,724 and $2,530 of disbursements). She also seeks increased costs totalling $39,933.50 (costs and disbursements) from the Goodalls.
[29] The increased scale costs of 50 per cent are sought for certain steps in the proceedings. Those steps being preparing the originating application and supporting
affidavit, the preparation of written submissions, the preparation of the bundle for the hearing and the preparation for the hearing. Ms Brodbeck states that the contents and volume of affidavits increased the time needed to prepare. The costs sought are set out below:
[30] Ms Brodbeck says that the presumption that the discontinuing party must pay the costs of the defendant should not apply. This is because the claim was discontinued in full on the basis that the need for the proceeding was obviated.
[31] Referring to Moodie v Strachan, Ms Brodbeck states that the Court may exercise its discretion to not apply the presumption and instead award costs in favour of the discontinuing plaintiff if “the defendant’s acts or omissions have caused the litigation and then rendered it unnecessary”.2
[32] Ms Brodbeck submits that it was reasonable for her to bring the proceeding as the Goodalls had breached their obligation to honour undertakings in the Agreement. It is further alleged that the Goodalls were unprepared to perform the undertakings at the required time.
[33] The Goodalls were responsible for the proper administration of the Trust. Ms Brodbeck says that it was apparent that the Trust’s administration suffered serious issues that required review and necessitated replacement of the Goodalls as trustees. Ms Brodbeck states that the proceeding was only discontinued when Comac agreed to review matters which she sought to have reviewed.
The Goodalls’ position
[34] The Goodalls seek 2B costs totalling $13,862 up until Ms Brodbeck’s rejection of the 20 September 2023 Calderbank letter. Counsel for the Goodalls submits that it is appropriate that Ms Brodbeck, as the discontinuing party, pays their costs. In the event the Court displaces the presumption, counsel for the Goodalls submits that costs for steps taken before 20 September 2023 should lie where they fall.
[35] The Goodalls seek increased costs of 50 per cent ($16,849.50) on steps taken after Ms Brodbeck’s rejection of the September offer. The Goodalls also seek disbursements of $650.
2 Moodie v Strachan [2015] NZHC 327 at [15].
[36] The Goodalls note that the Court’s discretion to displace the presumption should not be exercised lightly. Further, the Goodalls do not accept that the only reason Ms Brodbeck chose to discontinue the proceedings was because Comac was “going to do its job properly and review the trust and its activities”.
[37] The Goodalls state that there was no intention to breach the Agreement and there is no evidence that they reneged on their obligations under the Agreement. The timing breach only occurred because of errors and complexities that were unknown at the time the Agreement was entered into.
[38] In response to adverse comments made regarding the timing of the Goodalls’ retirement as trustees they state that it was not feasible for them to retire before the financial accounts were completed and disclosed as the accounts had to be signed by trustees who could confirm the accuracy of the accounts. Further, the Goodalls say that Ms Brodbeck’s claims that the financial accounts do not represent the Trust’s financial position are without foundation.
[39] The Goodalls say that increased costs are justified as Ms Brodbeck unreasonably rejected their September offer and took further unnecessary steps — incurring additional costs that would not have been incurred if she had accepted the offer or followed the directions of Venning J.
Legal principles
Discontinuance
[40] Awards of costs following discontinuance are governed by r 15.23 of the High Court Rules. Rule 15.23 reads:
15.23 Costs
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[41] This rule recognises that discontinuance is “ordinarily tantamount to judgment for the defendant”.3 It adheres to the general position that costs follow the event and provide predictability.
[42] It has long been recognised that the presumption may be displaced where ‘just and equitable’.4 This follows the general rule that costs are at the discretion of the Court.5 The presumption is not displaced lightly and turns on the circumstances of the case. The onus is on the plaintiff to persuade the Court to exercise its discretion to displace the presumption. 6
[43] The mere fact that a claim had some merit is insufficient to displace the presumption.7 There is no limit to the factors the Court may consider in exercising its discretion.8 Factors that have been taken into account include:9
(a)why parties bought and defended the proceedings;
(b)whether steps taken by the parties were reasonable;
(c)whether the defendant’s acts caused the litigation and rendered the litigation unnecessary;
(d)whether the proceeding was discontinued due to the actions of a third party; and
(e)whether the plaintiff has discontinued the proceedings because they “substantially succeeded”.
3 Powell v Hally Labels Ltd [2014] NZCA 572 at [19].
4 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150 at [12]; and Earthquake Commission v Whiting [2015] NZCA 144 at [66].
5 High Court Rules 2016, r 14.1.
6 Deo Gratias Developments Ltd v Tower Insurance Ltd [2018] NZHC 1881 at [11].
7 Powell v Hally Labels Ltd, above n 3.
8 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd, above n 4; and Earthquake Commission v Whiting, above n 4.
9 Powell v Hally Labels Ltd, above n 3; Earthquake Commission v Whiting, above n 4; and Phillips v Heremaia [2023] NZHC 3847 at [24].
[44] To substantially succeed Ms Brodbeck must show that the discontinuance of the proceedings should not be interpretated as failure. A claim has not failed if a plaintiff has achieved its ends by other means or if the proceeding was discontinued for reasons plainly unrelated to the merits.10 Partial success or success on limited terms is still success.11
Increased costs
[45] Rule 14.6 of the High Court Rules enables the award of increased costs. Rule 14.6(3) provides:
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i)failing to comply with these rules or with a direction of the court; or
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(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
(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
10 Powell v Hally Labels Ltd, above n 3, at [21]; and Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894, 20 January 2009 at [19].
11 Kilduff v Tower Insurance Ltd [2018] NZHC 2021 at [16] citing Weaver v Auckland Council [2017] NZCA 330 at [26].
(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[46] The onus is on the party seeking increased costs to persuade the Court that such an award is justified.12 Increased costs may be awarded where a party has failed to act reasonably.13 When considering whether to award increased costs the Court must examine the nexus between a party’s alleged unreasonableness and how that unreasonableness contributed to delay or increased expenses in the proceeding.14
[47]When considering whether to award increased costs courts may consider:15
(a)the size of the offer relative to the actual costs of counsel;
(b)the amount of the claim;
(c)the reasonable expectations of the party that refuses the offer;
(d)the amount of preparation for trial already undertaken;
(e)whether the proceeding concerns an uncertain area of law;
(f)whether the parties were in a position to assess the merits when the offer was received;
(g)the information available to the party who receives the offer and the extent to which they can to assess the offer.
(h)the timing of the offer;
(i) the conduct of the offeror. (footnotes omitted)
[48] Where increased costs are sought on specific steps the approach in Holdfast NZ Ltd v Selleys Pty Ltd applies.16 First proceedings must be categorised, then the appropriate time band is determined for each step in the proceeding. Then where circumstances warranting increased costs apply the Court must consider for each
12 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27]; and Energy Securities LP v Vector Ltd [2019] NZHC 1387 at [38].
13 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
14 Energy Securities LP v Vector Ltd [2019] NZHC 1387 at [38].
15 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30] as applied in Whitley v SDCIC NZ Architecture Ltd [2023] NZHC 785 at [15].
16 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]–[48].
affected step what a reasonable fee would be in the circumstances. In each case a step‑by-step approach is required.17
Discussion
[49] In the present case Ms Brodbeck acted reasonably in bringing the proceedings. While her mother’s statement about removing her as a beneficiary was quickly withdrawn by the Goodall’s solicitors, it naturally undermined Ms Brodbeck’s trust that matters could be worked though without the need for the proceeding. That lack of trust is evident in the documents filed.
[50] By this proceeding Ms Brodbeck asserted her rights as a beneficiary and succeeded in obtaining almost all the relief she originally sought.
[51] The Goodalls say that they were willing to comply with the Agreement and that the delay in providing financial accounts was beyond their control. The litigation was not the impetus for the eventual provision of the accounts which were always going to be provided as soon as they were available. Further, the Goodalls voluntarily retired as trustees and were replaced with a professional independent trustee.
[52] Ms Brodbeck eventually discontinued the proceeding because she had achieved the ends sought by the original pleadings. Essentially, there was almost nothing left to argue about as the Goodalls had done what she wanted in terms of the original pleadings. Ms Brodbeck did not, however, discontinue when she should have done.
[53] After 20 September 2023, Ms Brodbeck did not act reasonably. By that stage she had succeeded in obtaining the relief sought in her pleadings with the exception of a review of the Goodalls’ actions while trustees. A professional trustee Comac had been appointed. Having largely achieved what she initially set out to achieve, Ms Brodbeck sought to amend the pleadings widely and to add Comac as a respondent. She was told on 13 October 2023 by Anderson J that such an amendment was impermissible. There was a further “back door” attempt to amend the proceedings
17 Opai v The Attorney-General of New Zealand [2019] NZHC 1915 at [17].
which Muir J rejected on 19 October 2023. There was then a further attempt to adjourn the hearing date in order to amend the proceedings in front of Venning J on 2 November 2023. It was made clear that Ms Brodbeck must either proceed to the fixture or discontinue.
[54] Ms Brodbeck chose to continue and filed submissions which again raised impermissible matters outside the pleadings and evidence originally filed. Having put the Goodalls to considerable extra and unnecessary cost, Ms Brodbeck discontinued one week before the scheduled hearing date.
[55] I find that the presumption is displaced in respect of events up until 20 September 2023. Ms Brodbeck did substantially succeed in obtaining the relief sought and should be regarded as the successful party.
[56] There are no grounds for increased costs. Many of the matters raised by Ms Brodbeck as justifying increased costs relate to preparation of documents for the hearing which should have been discontinued at an earlier stage. Ms Brodbeck’s affidavit relied heavily on the material prepared for the earlier summary judgment proceedings which was resolved with costs lying where they fell.
[57]Ms Brodbeck is entitled to 2B costs in respect of items 37, 36, 39, 11, 39 and
12. I make an award of costs in her favour of $13,145 plus disbursements of $2,530 being a total of $15,675.
[58] The situation is different after 20 September 2023. I find that the Goodalls are entitled to costs for events after 20 September 2023. There was no basis for Ms Brodbeck to continue the proceedings and she gained nothing further. I find that Ms Brodbeck’s approach after 20 September 2023 was unreasonable and did create additional and unnecessary cost. It arose from the lack of trust fuelled by her mother’s comments about removing her as a beneficiary, but the Goodalls had done what they could to address that and to reassure Ms Brodbeck that they would act appropriately as trustees including offering to resign and eventually doing so in favour of an independent trustee.
[59] I award increased costs to the Goodalls for events post 20 September 2023 in the amount of $16,849.50.
[60] The practical outcome is almost the same as an order that costs are to lie where they fall.
Result
[61] I make an order that costs are to lie where they fall between Ms Brodbeck and the first respondent NZTS.
[62] The second-named to fourth-named respondents are to pay the applicant’s costs of $13,145 and disbursements of $2,530.
[63] The applicant is to pay the second-named to fourth-named respondents increased costs of $16,849.50.
Wilkinson-Smith J
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