[Cain] v [Giles]
[2024] NZHC 538
•14 March 2024
NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
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IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2023-419-000138
[2024] NZHC 538
UNDER the Family Protection Act 1955 IN THE MATTER
of an appeal against a decision of the Family Court at Hamilton
BETWEEN
MARISSA CAIN and JOHNNY GREEN
as trustees and executors of the estate of Ronald Giles
Appellant
AND
LORRAINE GILES
Respondent
Hearing: 21 September 2023 Appearances:
K A McDonald for Appellant P A Depledge for Respondent
Judgment:
14 March 2024
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 14 March 2024 at 9 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………..
Counsel/Solicitors:
Gallie Miles, Te Awamutu P A Depledge, Hamilton Jefferies Law, Hamilton
[CAIN] v [GILES] [2024] NZHC 538 [14 March 2024]
[1] The trustees and executors of the estate of [Ronald Giles] (the Trustees) appeal one element of the judgment of Judge G S Collin striking out an application by [Lorraine Giles] seeking a variation of the will of her father, [Ronald], and orders that her trust fund established under the will be paid to her.1 The Trustees appeal the Judge’s decision to make no order as to costs.2
[2] The Trustees say that, if the Judge had been aware of three pre-trial “without prejudice save as to costs” letters from their solicitors to [Lorraine]’s solicitors (the without prejudice letters), the Judge would have awarded costs in their favour. The Trustees seek payment of $28,741.15, being the actual legal costs incurred by the Trustees in defending [Lorraine]’s application after the first without prejudice letter was sent.
[3] On 2 August 2023, Tahana J granted special leave to admit in evidence the without prejudice letters.3 [Lorraine] did not oppose leave being granted. However, [Lorraine] opposes the appeal and says the without prejudice letters do not provide a sufficient basis for departing from the Family Court’s decision on costs.
[4] Initially, the parties had asked this Court to refer the question of costs back to Judge Collin for determination. However, Tahana J ruled that, in accordance with r 20.19(1) of the High Court Rules 2016, the Court’s jurisdiction to direct the Family Court to rehear proceedings that are the subject of an appeal, arises only after hearing the appeal.4
[5]I heard the appeal on 21 September 2023.
[6] Counsel for both parties made submissions on what they considered the substantive decision should be. Ms McDonald, counsel for the Trustees, submitted that this Court should make the decision on costs and should not impose further expense on the parties by referring the decision back to the Family Court.
1 [Giles] v [Cain] [2023] NZFC 2599 [Family Court judgment]
2 At [45].
3 [Cain] v [Giles] HC Hamilton CIV-2023-419-000138, 2 August 2023 (Minute of Tahana J).
4 At [5]–[6].
Mr Depledge, counsel for [Lorraine], said [Lorraine]’s preference was for the decision to be referred back to the Family Court.
[7] Having read the evidence filed in the Family Court, the Family Court judgment and the without prejudice letters, and having considered the submissions of counsel, I am satisfied that Judge Collin made no error. I am also satisfied that the without prejudice letters would have made no difference to the Judge’s decision on costs. I see no reason, therefore, to refer the question back to the Family Court. Accordingly, I dismiss the appeal.
Relevant background
[8] The following account is taken from affidavits and exhibits filed in the Family Court proceeding and from Judge Collin’s decision and minutes issued in the proceeding. It is longer than would ordinarily be necessary when the result of the appeal is obvious. However, the history of what happened following the arrangements made in [Ronald]’s will is complicated. Because that history clearly played a large part in Judge Collin’s decision, I have set it out reasonably fully.
[Lorraine]
[9] [Lorraine] was born in September 1959. She is the eldest of four children born to [Ronald]. The other children are [Bryan Giles], [Oliver Giles] and [Marissa Cain].
[10] [Lorraine] is a person with special needs. Her brain was damaged at birth, which caused her some learning difficulties. [Lorraine] also has limited use of one arm and one shorter leg that causes a noticeable limp.5 Her family placed her in an IHC Home in Hamilton when she was aged 17. [Lorraine] has not lived with her family since then.
[11] Through the IHC, [Lorraine] moved to Tokoroa where she met [Mary Williams], the owner of a restaurant at which [Lorraine] was given work experience. In 1977, [Lorraine] moved to live with Ms [Williams] and her family. She lived with Ms [Williams] and family members for over 40 years until Ms [Williams] died in July
5 This information is drawn from affidavits sworn by [Lorraine] and not from medical evidence.
2020. With the permission of Ms [Williams]’s granddaughter, [Lorraine] and another woman taken in by Ms [Williams] continue to live in the Williams home in Tokoroa.
[12] Despite her disabilities, [Lorraine] has been assessed as having capacity to make her own decisions. In 2016, a doctor who had been [Lorraine]’s primary care provider in Tokoroa for over 35 years wrote a letter stating that he believed [Lorraine] to be of at least average intellectual capacity. No challenge was made to that evidence. [Lorraine] believes, however, that her father and her siblings considered she was incapacitated and a cripple, and that her siblings have ignored her and have condescended to her.
[Ronald]’s will
[13][Ronald] died on [date deleted].
[14]In his will dated 13 June 1997, [Ronald]:
(a)appointed [Bryan] and a partner from Norris Ward McKinnon, solicitors, to be his executors and trustees;
(b)provided that $10,000 was to be held on trust to be used as his trustee thought necessary for the maintenance and benefit of [Lorraine];6
(c)gave his wife ([Lorraine]’s stepmother) a life interest in two properties (a house at Street, Hamilton and flats at Road, Hamilton which [Ronald] owned jointly with his wife) and provided that his wife was to have the free use of and income from the properties, or any properties acquired from funds derived from a sale of the properties in her lifetime;
(d)provided that, upon the death of his wife, his properties were to be divided equally among the children of [Bryan], [Oliver] and [Marissa];
6 The will initially stipulated $5,000 as the amount of the trust fund for [Lorraine] but the amount was increased to $10,000 in a codicil to the will executed in March 2004.
(e)provided that any undistributed balance of the estate was to be divided equally among the children of [Bryan], [Oliver] and [Marissa] who attain the age of 21.
[15] When probate was granted on 17 June 2004, the executors and trustees of the estate were [Bryan] and a partner of Norris Ward McKinnon.
2006 Variation of will
[16] In 2005 or 2006, [Oliver] applied under the Family Protection Act 1955 for the will to be varied to give him a direct proportionate share in the undistributed balance of the estate.
[17] By consent order dated 8 September 2006 (Family Court Order), Judge Brown ordered that [Ronald]’s will be varied to provide that:7
(a)three sevenths of the undistributed balance of the estate was to go to [Oliver];
(b)four sevenths of the undistributed balance of the estate was to be divided equally among the children of [Bryan] and [Marissa] who attain the age of 21;
(c)[Oliver] was to establish a trust of which he and his three children would be the only beneficiaries and into which the bequest in (a) was to be paid; and
(d)the sum to be held on trust for the maintenance and benefit of [Lorraine] was increased to $60,000.
[18] The Family Court Order recorded that it represented a full and final settlement of any claims [Oliver] “and any other party” may have against the estate of [Ronald].8
7 [Giles] v [Giles] FC Hamilton FAM-2005-019-796, 8 September 2006 (Order of Court)
8 At [8].
[19] Mr Gorringe, a barrister acting for [Lorraine] signed, on [Lorraine]’s behalf, the consent memorandum seeking the Family Court Order.
[Marissa] becomes trustee
[20] On 29 June 2007, the independent trustee retired and [Marissa] was appointed trustee in his place. As a consequence, the only trustees of [Ronald]’s estate were [Lorraine]’s siblings, [Bryan] and [Marissa]. Neither was a partner of Norris Ward McKinnon.
Discussion about possible distribution of funds
[21] In April 2008, Norris Ward McKinnon advised solicitors acting for [Lorraine] that any request for funds would have to be made to [Bryan] and [Marissa], as trustees, and said that the trustees had discussed with [Lorraine] paying a monthly account to her account but had not had a written response.
[22] A handwritten annotation on that advice by [Lorraine] recorded that she had a telephone discussion with [Marissa] who had offered to have $100 put into [Lorraine]’s account each month so she could have coffee with her friends and that [Lorraine] had been insulted by the offer.9 It appears there was no further discussion about distributing funds to [Lorraine] at that time.
[Bryan] removes money from estate, is replaced as trustee and is convicted of fraud
[23] In June 2008, [Bryan] and [Marissa] arranged for the funds held for [Lorraine] by Norris Ward McKinnon to be transferred to the trust account of [AB] & Associates, a firm of accountants and then to a Westpac bank account that had been opened by [Bryan]. These funds and funds held for the residuary beneficiaries were advanced as a loan to a company of which [Bryan] was the sole director and in which he and his wife owned the bulk of the shares as trustees. In September 2011, that company was put into liquidation with debts of over $600,000.
9 The date of [Lorraine]’s annotation is not recorded.
[24] In June 2012, solicitors acting for [Marissa], as trustee, sought an accounting from [Bryan] of what had happened with [Lorraine]’s trust fund. Negotiations and legal proceedings ensued.
[25] In August 2013, Ronald Young J ordered that [Bryan] was removed as trustee and appointed Mr [Green], a chartered accountant, as replacement trustee.10
[26] In October 2013, [AB] & Associates received the sum of $91,684.78 from lawyers acting for [Bryan]. In March 2014, [AB] & Associates transferred the sum of
$96,599.86 to the trust account of Mr [Green]’s accounting practice. In 2015, [Bryan] paid a further $14,366.50 into the trust account in response to an application by the Trustees to adjudicate [Bryan] bankrupt. It appears that, following deduction of legal fees and other costs, the Trustees recovered funds of the order of $75,500 from [Bryan].
[27] In September 2017, [Bryan] was convicted of 16 charges under the Crimes Act 1961, including obtaining by deception, forgery and dishonesty using a document, and two charges under the Serious Fraud Office Act 1990 of obstructing a Serious Fraud Office investigation.
Investment and efforts at distribution of funds to [Lorraine]
[28] In September 2014, the Trustees placed $65,000 on term deposit with the Bank of New Zealand.
[29] On 22 January 2016, the Trustees resolved to pay out $10,000 from the capital of the trust to [Lorraine]. On 17 February 2016, Mr [Green] wrote to [Lorraine] asking for her bank account details so they could make the payment. [Lorraine] did not respond to Mr [Green]’s letter. However, in September 2016 a solicitor acting for [Lorraine] engaged with Mr [Green] and advised that [Lorraine] wished to be paid out the entire fund held on trust to her account.
10 [Cain] v [Giles] HC Hamilton CIV-2012-419-879, 22 August 2013 (Order of Court).
[30] Email correspondence between [Lorraine]’s solicitor and Mr [Green] indicates that, in telephone discussions held in September and October 2016, Mr [Green] was open to paying out the sum in the Family Court Order and confirmed that there were sufficient funds for payment to be made, but that he needed authority to make the payment and that he would consult [Marissa]. There was also a discussion about Mr [Green] paying $10,000 to the solicitor’s trust account as an interim step but the solicitor later advised that [Lorraine]’s instruction was to accept only full payment of her entitlement. No further progress was made.
[31] On 7 November 2016, Mr [Green] wrote to [Lorraine]’s solicitor, referring to and providing a copy of the Trustee’s resolution of 22 January 2016, and again asking for [Lorraine]’s bank account details. The letter concluded:
… if your client does not wish to receive this distribution, please let us know and we will happily add this back to Trust Capital and reduce her court ordered entitlement.
[Lorraine] files application
[32] On 17 July 2020, [Lorraine] filed her application under the Family Protection Act seeking the whole of her entitlement under [Ronald]’s will, which, she asserted, was in keeping with the order made in the Family Court Order regarding the entitlement of [Oliver]’s children. The application noted that [Lorraine] had received no financial support from her father’s estate since his death. It also recorded that, as advised by the Trustees, the net value of the estate as at 31 March 2015 was
$214,126.00.
[33]On 25 February 2021, the Trustees filed a notice of defence.
Settlement discussions
[34] Whether before or after the notice of defence was filed, there were discussions concerning a possible settlement of [Lorraine]’s application. The terms of a settlement acceptable to [Lorraine] were agreed with the Trustees but the Trustees were unable to obtain agreement to the settlement by the residuary beneficiaries – presumably the grandchildren of [Ronald], being the children of [Bryan], [Oliver] and [Marissa].
First without prejudice letter
[35] On 20 April 2022, the Trustees’ solicitors sent the first without prejudice letter to [Lorraine]’s solicitors.
[36] The terms of the letter and the reply of [Lorraine]’s solicitors on 11 May 2022 are discussed below.
Trustees’ strike out application
[37] On 16 June 2022, the Trustees applied to strike out [Lorraine]’s application. The Trustees’ application stated that [Lorraine]’s application disclosed no reasonable basis and was an abuse of process because it was an attempt to relitigate matters determined by the Family Court Order and was time-barred under s 9(2) of the Family Proceedings Act.
[38] On 29 September 2022, [Lorraine] filed her notice of opposition to the Trustees’ strike out application.
Initial hearing of strike out application
[39] On 12 December 2022, Judge Collin held an initial hearing of the Trustees’ strike out application. The Judge was concerned with what he heard. In a minute, the Judge recorded:11
[3] There is a dispute as to what has happened. According to [[Lorraine]] she has not received anything from the Trust. According to information from the trustees she was paid $9,039 between 2009 and 2012. However, requests by [[Lorraine]]’s lawyer for information regarding the payment of these has not been answered.
[4]I have received confusing information today. Apparently, there is
$56,000 left. This indicates that in 14 years there has been no income accumulated and the capital has been used. The only possible explanations are:
(a)The payment of $9,000 which is unaccounted for.
11 [Giles] v [Cain] FC Hamilton FAM-2020-019-000599, 12 December 2022 (Minute of Judge Collin).
(b)The payment of legal fees from the Trust set aside for [Lorraine]’s benefit. It has been acknowledged that this has occurred. If this is the case it is unacceptable.
[5]I stated that I “smell a rat”. I do. It is hard to reach any other conclusion than that [Lorraine]’s interests have not been met by the trustees. I am unwilling to let the matter go. I believe that [Lorraine] may have suffered a serious injustice.
[40] The Judge directed the Trustees to provide specified information, including the annual accounts of [Lorraine]’s trust fund, discovery of all funds held by the trust back to 2006, full details of income earned from the trust fund since 2006 for the benefit of [Lorraine], and the current position of the fund set aside for [Lorraine].12 The Judge also recorded that he had not heard or determined the strike out application and was unwilling to do until the information was provided.13
Mr [Green]’s affidavit
[41] As a result of the Judge’s direction, on 13 February 2023, Mr [Green] swore an affidavit which explained the history of the administration of the trusts established in [Ronald]’s will, including [Bryan]’s misappropriation of trust funds and the steps taken to recover those funds.14 For present purposes, it is relevant to note that, as recorded above, in September 2014, the Trustees placed $65,000 on term deposit with the Bank of New Zealand. The term was 180 days at an interest rate of 4.1 per cent per annum. That sum plus interest accrued was reinvested at each term expiry until March 2016 when the account balance stood at $67,579.87. The amount reinvested in March 2016 was $56,579.87. The remaining $11,000 was transferred into an account used by the Trustees to pay the administration costs of [Lorraine]’s trust fund (the Trust administration account).
[42] By August 2016, the interest rate had fallen to 3.3 per cent and continued to decline until it had reached 0.85 per cent in May 2021. As at the term maturity date of 7 June 2021, the balance stood at $62,194.40. From that date, the funds were taken
12 At [6].
13 At [9].
14 The affidavit, sworn on 13 February 2023, was the second affidavit sworn by Mr [Green] in this proceeding. The first affidavit, sworn on 4 May 2022, was filed in support of the trustees’ application to strike out [Lorraine]’s application and provided little information about the administration of the trusts.
off term deposit and put into the Trust administration account. Bank account records exhibited to Mr [Green]’s affidavit show that the balance of the Trust administration account stood at $5,114.58 when the term deposit funds were paid into it. This resulted in a combined balance of $67,308.63 as at 30 June 2021 (after deduction of a bank fee of $0.35).
[43] In May 2021, before payment of the term deposit funds into the Trust administration account, the trustees withdrew $6,139.73 from the account to pay legal fees incurred in the proceedings filed by [Lorraine]. Between November 2021 and October 2022, the trustees withdrew a further $10,573.92 to cover additional legal fees incurred in the proceedings. Various other withdrawals were made, presumably to cover administration costs. As at 30 December 2022, the Trust administration account balance stood at $56,185.55.
[44] In other words, the information provided by Mr [Green] confirmed that the funds in the Trust administration account, most of which came from the term deposit funds that had been invested to secure the bulk of the money recovered from [Bryan] after his misappropriation of trust funds, now stood at just over $56,000. This was less than the $60,000 set aside for [Lorraine] under the Family Court Order made in 2006. And the funds continued to be eroded by the Trustees’ recovery of their legal costs.
Second without prejudice letter
[45] On 20 January 2023, the Trustees’ solicitors sent the second without prejudice letter to [Lorraine]’s solicitors.
[46] The terms of this letter and the reply of [Lorraine]’s solicitors on 24 January 2023 are discussed below.
Third without prejudice letter
[47] On 6 March 2023, the Trustees’ solicitors sent the third without prejudice letter to [Lorraine]’s solicitors. The terms of the letter are discussed below. There is no evidence of any reply to the letter.
Resumed hearing of strike out application
[48] On 10 March 2023, the hearing of the strike out application resumed. Judge Collin reserved his decision.
[49] On 27 April 2023, Judge Collin issued the Family Court judgment, striking out the application and making no order as to costs.15
Family Court judgment
[50] After recalling what was provided for [Lorraine] under [Ronald]’s will and the Family Court Order, Judge Collin noted that, notwithstanding these provisions, [Lorraine] had deposed that she had not received any benefit from the trust fund. For that reason, she had made a further application under the Family Protection Act for a variation to the will and the Family Court Order seeking the entirety of the trust fund be paid to her. In response, the Trustees applied to strike out her application as an abuse of process.16
[51] The Judge recalled the relevant rules of the Family Court Rules 2002 and the principles applicable to strike outs, stay and dismissal.17 He noted that, when an application is struck out or dismissed, the door to the Court was effectively shut before the merits of the case could be looked at. For that reason, it needed to be abundantly clear that the application could not possibly succeed.18
[52] The Judge noted that, following [Ronald]’s death, Mr Gorringe had been appointed to represent [Ronald]’s grandchildren and [Lorraine], but that, in November 2005, Mr Gorringe relinquished his position as counsel for the grandchildren because he considered he could not act for them as well as [Lorraine]. The Judge observed that Mr Gorringe had continued to act for [Lorraine] “presumably having satisfied himself that he was able to receive instructions from her and act accordingly.”19
15 Family Court Judgment, above n 1.
16 At [1]—[7].
17 At [9]—[16].
18 At [17].
19 At [21]—[22].
[53] The Judge reviewed the process by which the Family Court Order was made, having looked into the 2005 Family Court file and the terms recorded in a memorandum filed by Mr Gorringe. With respect to the 2005 proceedings, the Judge concluded that:20
(a)Mr Gorringe had been able to accept instructions from [Lorraine] and had signed the consent to resolve those proceedings based on instructions received from her;
(b)Mr Gorringe had turned his mind to the relevant issues contained in [Ronald]’s will, including the provision that $60,000 was held on trust for [Lorraine]’s benefit and that the trust was be administered by the trustees of [Ronald]’s estate; and
(c)the Family Court Order was made in full and final settlement of the claims under the Family Protection Act.
[54] The Judge briefly summarised what had happened since the Family Court Order, including the misuse or misappropriation of [Lorraine]’s trust fund by [Bryan], the offer of a distribution of $10,000 to [Lorraine] and her refusal of that. He recorded that an affidavit filed by [Marissa] did not deny [Lorraine]’s assertion that she had received no benefit from her father’s estate. The Judge also recorded that the Trustees had endeavoured to reach a settlement to avoid unnecessary legal costs, but any agreement was conditional on the consent of the residuary beneficiaries of [Lorraine]’s trust fund and “unfortunately” not all the residuary beneficiaries had consented.21
[55] The Judge recorded that the above position remained unchanged. The Trustees maintained that they were willing to make a distribution, but [Lorraine] sought a lump sum based on the $60,000 ordered in 2005, with interest and costs. The residuary beneficiaries remained unwilling to settle, so there was an impasse that could not be resolved without Court intervention.22
20 At [30].
21 At [31]—[39].
22 At [40].
[56]The Judge also recorded that:23
(a)[Ronald] had intended that [Lorraine] receive some benefit from his estate but, to date, she had received nothing.
(b)The adult beneficiaries of [Ronald]’s estate had intended that [Lorraine] benefit from [Ronald]’s estate because they had consented to the Family Court Order.
(c)The actions of [Bryan] had compromised [Lorraine]’s trust fund.
(d)On the information received, he was satisfied that [Marissa] and Mr [Green] had acted responsibly in endeavouring to resolve the difficulties created by [Bryan]’s misappropriation of funds.
(e)If the evidence in [Marissa]’s affidavit was accepted, the current trustees had faced significant difficulties caused by [Bryan]’s actions and the diminution of the trust fund caused by [Bryan], legal proceedings and costs, [Lorraine]’s rejection of a distribution of
$10,000, and [Lorraine]’s willingness to reach a settlement that was not reciprocated by the residuary beneficiaries.
(f)As he had commented previously, it was morally repugnant that [Lorraine] had received no benefit from her father’s estate in the 18 years since [Ronald]’s death and [Lorraine]’s vulnerability heightened this repugnancy, which was on-going. If the Trustees had attempted to pay money to [Lorraine], then the blame attributable to the current trustees was diminished.
(g)If possible, the Family Court should resolve the current proceedings because the amount at stake was modest; legal costs would be likely to diminish the amount available and would be to [Lorraine]’s
23 At [42].
disadvantage; and if proceedings needed to be issued in the High Court, there would be further delay.
[57] The Judge then stated that, despite these comments, he had reluctantly concluded that the Family Court must either strike out or stay [Lorraine]’s application.
His reasons were that:24
(a)There had been a proceeding in the Family Court that had determined the issues in full and final settlement of all claims.
(b)He was satisfied that it was an abuse of process to attempt to relitigate matters that had been finally determined.
(c)It was 18 years since the Family Protection Act proceedings were finally determined;
(d)Even if a second claim could be made under the Family Protection Act, the application was out of time and no application had been made for this to occur.
(e)This was not a case where [Lorraine] had been unrepresented or there had been a failure to consider the amount she received from her father’s estate and how she would receive it – as Mr Gorringe’s memorandum confirmed.
(f)Sections 126 and 127 of the Trusts Act 2019 provided jurisdiction for [Lorraine] to have the Trustees’ acts, omissions or decisions reviewed by the High Court, which was the appropriate way of dealing with her issues.
(g)The Family Court did not have jurisdiction to deal with [Lorraine]’s application under s 141 of the Trusts Act.
24 At [43].
(h)To preserve [Lorraine]’s position, he had considered either staying the Family Court proceedings until an application was filed in the High Court or the Family Court proceedings were transferred but, “[a]gain and reluctantly”, he declined to do so for the above reasons.
[58] The Judge then struck out [Lorraine]’s application and made no order as to costs.
The without prejudice letters
[59] As noted above, the without prejudice letters comprise three letters sent in April 2022, January 2023 and March 2023 from the Trustees’ solicitors to [Lorraine]’s solicitors. [Lorraine]’s solicitors replied to the first and second letters.
First letter dated 20 April 2022
[60] In the first letter, the Trustees’ solicitors recalled an earlier letter of 13 May 2021 in which they stated their belief that [Lorraine] faced considerable litigation risk if she pursued her application because it was both statute barred and res judicata. The letter stated that the Trustees had “entertained the possibility of a generous settlement” to avoid the estate incurring further legal costs but they had been unable to secure the agreement of remaining beneficiaries in the estate. The letter invited [Lorraine] to withdraw her application and said that, if she did so, the Trustees would not seek costs. The letter went on to state that if [Lorraine] did not file a notice of discontinuance by 26 July 2022, the Trustees would apply to strike out her claim and would seek an award of costs.
[61] [Lorraine]’s solicitors replied by letter dated 11 May 2022. The letter stated that they had been instructed to reject the Trustees’ proposal to [Lorraine] to withdraw her application. It went on to state [Lorraine]’s objective of securing the release of all of the funds that had been set aside for her, plus interest and damages for the pain and suffering she had endured and her disappointment that her family continued to patronise her.
Second letter dated 20 January 2023
[62] In the second letter, the Trustees’ solicitor said they were endeavouring to collate all the information requested by Judge Collin, but it might take longer than the timeframe directed by the Judge. The letter stated that, in any event, the information provided would disclose that the Trustees had been left underfunded with no funds to meet administration costs, including the defence of the proceedings, and the Trustees were having to fund matters personally.25
[63] The letter reiterated that [Lorraine]’s application was misconceived, statute barred and was an attempt to re-litigate matters that had already been litigated. However, “in the interest of avoiding unnecessary cost and purely on an economic and pragmatic basis” the Trustees were prepared “to release” to [Lorraine] $50,951.00 which was described as being “the ordered provision of $60,000.00 less the $9,039.00 already paid to your client to date”.26 This letter stated that, in the interests of settling the dispute, the Trustees were prepared to offer this amount on a full and final basis and on the basis that an acceptable deed of settlement was executed and the proceedings discontinued before 27 January 2023. The letter also asked for confirmation that the solicitors would consent to an extension of time to provide the discovery documentation to the Court.
[64] [Lorraine]’s solicitors replied by letter dated 24 January 2023. The letter advised that [Lorraine] declined the offer of settlement of $50,951.00 and objected to any extension of time for discovery.
Third letter dated 6 March 2023
[65] In the third letter, the Trustees’ solicitors asserted that [Lorraine]’s application was fundamentally flawed. It said the application appeared to be based on the premise that, under the Family Court Order, [Lorraine] was entitled to be paid out all the funds
25 In fact, funds were withdrawn from the Trust administration account throughout 2022 to cover legal fees associated with the proceeding. As at 30 December 2022, the most recent bank statement exhibited to Mr [Green]’s affidavit, the Trust administration account stood at
$56,185.55, which comprised all of the remaining funds held on trust for [Lorraine].)
26 Analysis of the financial statements exhibited to Mr [Green]’s affidavit suggests that this sum comprised $5,431.14, which was described as “drawings”, with the balance comprising payments of tax in 2008, 2009, and 2012.
held on trust for her. That was not the effect of the Order. However, the Trustees acknowledged that they had a discretion to pay out the full amount to [Lorraine], subject to being satisfied that the funds were necessary for [Lorraine]’s maintenance and support.
[66] The letter advised that legal costs invoiced in May and November 2021 and in April, August and October 2022 in relation to [Lorraine]’s application has been deducted from the residuary estate and there was an invoice outstanding for
$18,026.69. It said that if the Trustees’ strike out application was successful, the Trustees would seek an order that costs be paid out of [Lorraine]’s trust fund on a solicitor and client basis. If such an order were made, $34,704.24 would have to be deducted from [Lorraine]’s trust fund.
[67] The letter proposed a settlement on the basis that [Lorraine] provide information on her financial circumstances to the Trustees who, if satisfied the information was sufficient to exercise their discretion, would pay $54,979.13 to [Lorraine] as a lump sum. The letter also stated that the settlement was on the basis that there had been no monies previously paid out for [Lorraine]’s benefit and that all legal costs incurred to date would be borne by the residuary estate and/or the Trustees personally.
Submissions of the Trustees
[68] Ms McDonald submitted that, in accordance with the Family Court Rules and the District Court Rules 2014, the Trustees, having succeeded in their strike out application, were entitled to scale costs on a 2B basis, which would come to $7,926.00.
[69] Ms McDonald said further that, having regard to the without prejudice letters, the Trustees should not be required to bear their actual costs incurred after 20 April 2022, which total $28,741.15, given that:
(a)most of those costs would have been avoided if [Lorraine] had accepted the “walk away” offer in the first letter of 20 April 2022;
(b)the significant costs associated with the discovery ordered by Judge Collin would have been avoided if [Lorraine] had accepted the proposal in the second letter of 20 January 2023 to distribute the funds held for her; and
(c)the remaining costs incurred in preparation for and at the hearing on 10 March 2023 would have been avoided if [Lorraine] had accepted the offer in the third letter to pay out the funds held for her on the basis that the legal costs incurred to date would be borne by the residuary estate or the Trustees personally.
[70] Ms McDonald submitted that Judge Collin erred in his decision not to award costs and that, in accordance with the principle that costs should follow the event, [Lorraine] and not the residuary beneficiaries should bear the costs of [Lorraine]’s decision to continue with her application after the Trustees had made reasonable offers which, if accepted, would have avoided costs being incurred by the estate.
Submissions for [Lorraine]
[71] Mr Depledge said the Judge’s decision on costs was a matter for the Judge’s discretion and it was not plainly wrong. Accordingly, there were no grounds for overturning the Judge’s decision.
[72] Mr Depledge said Judge Collin’s decision showed he had real sympathy for [Lorraine]’s situation and had considered all possible alternatives before he struck out the application. The Judge was aware of the Trustees’ willingness to settle and took account of that willingness in his decision, including his decision not to award costs. He submits that the Judge’s decision on costs would have been no different had he been aware of the without prejudice letters.
[73] Mr Depledge said that [Lorraine] had not acted vexatiously, frivolously, improperly or unnecessarily in commencing the proceeding. He also said the without prejudice letters did not constitute settlement offers as such. They did not include any form of compromise other than allowing for the distribution of funds equal to those
held in 2006 and made no provision for interest. It was not unreasonable for [Lorraine] not to accept the Trustees’ proposals.
Analysis
[74] As both counsel acknowledged, costs are at the discretion of the Court – as is reflected in r 14.1 of both the District Court Rules and the High Court Rules 2016. That remains the position, even in circumstances where the Court may order increased or indemnity costs under r 14.6 of either set of rules.
[75] In accordance with well-established principle, before this Court can interfere with the exercise of a discretion, it must be satisfied that the Court below acted on a wrong principle, took into account irrelevant matters, failed to have regard to relevant matters or was plainly wrong.27
Questions for decision
[76]In the context of this case, two questions arise:
(a)Did Judge Collin fail to have regard to relevant matters?
(b)Was Judge Collin’s decision plainly wrong?
[77] For completeness, I also consider the further question of whether the without prejudice letters would have made any difference to Judge Collin’s decision if he had been aware of them.
Did Judge Collin fail to have regard to relevant matters?
[78] Judge Collin made his decision not to award costs without seeking submissions from counsel for the Trustees. It appears that counsel for the Trustees did not alert the Judge to the fact that they wished to address him on costs before any order on costs was made. For these reasons, the Judge was not aware of the without prejudice letters.
27 May v May (1982) 1 NZFLR 165 (CA) at 169–170.
[79] However, it is not unusual for judges to make decisions on costs, particularly decisions not to order costs, without seeking further submissions. That is especially so when a Judge considers that the justice of the case does not warrant costs being awarded against the unsuccessful party. It is plain that Judge Collin was satisfied that this was a case that did not warrant costs being awarded against the unsuccessful party.
[80] For that reason, I do not consider that the Judge failed to have regard to a relevant consideration.
Was Judge Collin’s decision plainly wrong?
[81] As I have stated, it is plain that Judge Collin was satisfied that this was a case that did not warrant costs being awarded against the unsuccessful party.
[82] The Judge’s sympathies clearly lay with [Lorraine] and not with the Trustees. He recorded that he considered that it was “morally repugnant” that [Lorraine] had received no benefit from her father’s estate and that this moral repugnancy was on- going. The Judge also made it clear that he had concerns about the way the Trustees, including the current Trustees, had discharged their responsibilities to [Lorraine].28
[83] While the Judge accepted that the current Trustees had “acted responsibly” in dealing with the difficulties created by [Bryan]’s misappropriation of funds, he still had concerns about their administration of the trust. He considered that their blame was “diminished” if they had attempted to pay money to [Lorraine]. He did not say the Trustees were blameless.29
[84] The Judge twice stated that it was “unfortunate” that the residuary beneficiaries had blocked a settlement acceptable to [Lorraine]. He might well have asked whether it was appropriate to allow the residuary beneficiaries a veto over payment of the modest amount [Lorraine] sought, given that [Lorraine] was a primary beneficiary and the evidence was that the net value of the estate at 31 March 2015 was $214,126.00.
28 Family Court judgment, above n 1, at [42].
29 At [42].
[85] In addition, the Judge went to considerable lengths to see whether there was a way for [Lorraine] to advance her claim for payment of the trust funds, despite the obvious obstacles. In particular, the Judge considered:
(a)whether there was a basis for setting aside the Family Court Order, based on lack of consent by [Lorraine];
(b)whether he had jurisdiction to deal with the application under s 141 of the Trusts Act; and
(c)whether he should stay the application pending the filing of an application to the High Court under ss 126 and 127 of the Trusts Act.
[86] It was only after the Judge had satisfied himself that none of the courses of action was viable that he “reluctantly” concluded that he must strike out [Lorraine]’s application.30
[87] Given that analysis, the Judge’s decision not to award costs against [Lorraine] is not at all surprising. Indeed, given the tenor of the Judge’s analysis, with which no issue was taken by counsel for the Trustees, and with which I see no fault, it would have been very surprising if the Judge had awarded costs against [Lorraine].
[88] Accordingly, I am more than satisfied that Judge Collins decision not to award costs was not wrong.
Would knowledge of the without prejudice letters have made any difference?
[89] Even assuming that the Judge should have offered counsel an opportunity to address him on costs, the question then arises as to whether the without prejudice letters would have made any difference to his decision.
[90] The first letter of 20 April 2022 was, as Ms McDonald described it, a “walk- away” proposition. It offered an accurately pessimistic assessment of [Lorraine]’s
30 Family Court judgment, above n 1, at [43].
prospects of success with her application and referred to the fact that there had been a settlement on the table but that had been prevented by the unwillingness of the residuary beneficiaries to agree. It contained no information and no proposal that was not known to Judge Collin. For that reason, I am satisfied that this letter would have made no difference to the Judge’s decision not to award costs against [Lorraine].
[91] The second letter of 20 January 2023 was a significant improvement on the first letter in that it offered a substantial sum to [Lorraine]. However, it was less than the $60,000 that had been set aside for her in the Family Court Order and it asserted, wrongly, that [Lorraine] had already been paid over $9,000 when, in reality, she had not been paid anything. It also made no mention of interest, which was an obvious omission. In addition, the tone was patronising and continued to manifest the attitude about which [Lorraine] had complained in her solicitors’ reply to the first letter. In addition, the letter asserted, wrongly, that the Trustees had been meeting the costs of the proceeding personally when, in fact, they had already deducted over $13,000 from the Trust administration account – the account in which [Lorraine]’s trust fund had been placed. The letter also sought to place responsibility on [Lorraine] for the discovery ordered by Judge Collin when it is clear that discovery was ordered because, as the Judge put it, he had “smelt a rat” over the way [Lorraine] had been treated.31
[92] I accept that Judge Collin would probably have wished that [Lorraine] had accepted the offer because it was in her overall interests to do so. However, given the way that [Lorraine] had been treated by the family and by the Trustees over the then 19 years since her father had died, I am satisfied that the Judge would have understood [Lorraine]’s position and would not have ordered costs against her for refusing the offer in the second letter.
[93] The third letter of 6 March 2023 was a slight improvement on the offer in the second letter, but it came with the rider that [Lorraine] had to satisfy the Trustees as to her financial circumstances. The Trustees may assert that this was a reasonable request, given the terms of [Ronald]’s will – that the funds were to be used as the Trustees thought necessary for the maintenance and benefit of [Lorraine]. But, given
31 [Giles] v [Cain], above n 11, at [5].
the history of what had happened, it is almost inevitable that this condition would have been seen by [Lorraine] as another example of patronising behaviour by Trustees who, from [Lorraine]’s perspective, had looked for ways to avoid giving her the funds that had been set aside for her since [Ronald]’s death.
[94] As with the second letter, I am satisfied that the Judge would have understood [Lorraine]’s position and would not have ordered costs against her for refusing the offer in the third letter.
[95] In conclusion, I am satisfied that there is nothing in the without prejudice letters that would have made any difference to Judge Collin’s decision not to order costs against [Lorraine].
Result
[96] There is no basis for interfering in Judge Collin’s decision not to order costs and no basis for sending that decision back to the Judge for reconsideration.
[97]The Trustees’ appeal is dismissed.
[98]Because [Lorraine] is legally aided, I make no order as to costs.
Comment and order
[99] The Trustees and their counsel should have realised that this appeal was bound to fail. The appeal is another example of how [Lorraine]’s interests have not been served by the Trustees.
[100] The amount at issue probably makes it uneconomic for [Lorraine] to take action in the High Court under ss 126 and 127 of the Trusts Act. However, in the exercise of this Court’s inherent jurisdiction, I order that:
(a)the Trustees must not deduct the costs of this proceeding from [Lorraine]’s trust fund; and
(b)to the extent that the costs of this proceeding have been deducted from [Lorraine]’s trust fund, those costs are to be reimbursed from the residuary estate.
[101] I also direct the Trustees to have proper regard to their obligation to make appropriate provision for [Lorraine] in the discharge of their functions.
G J van Bohemen J
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