Carmine v Ritchie - [2012] NZHC 2279

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-006375 [2012] NZHC 2279

IN THE MATTER OF a Deed of Trust dated 9 February 2001
AND IN THE MATTER OF the JMC and RA Ritchie Family Trust created by that Deed
AND IN THE MATTER OF a claim under r 18.1(a)(ix) for the determination of a question that arises in
the administration of that Trust, viz whether a Deed of Removal of Trustee signed by the Second Respondent dated 13 December
2010 is of any, or no effect

BETWEEN VINCENT JOHN CARMINE Plaintiff

ANDANDREW JOHN RITCHIE, RACHEL ANNE RITCHIE AND WARWICK KENT PURDIE AS TRUSTEES OF THE JMC & RA RITCHIE FAMILY TRUST
Defendants

Hearing: On the papers

Judgment: 5 September 2012

COSTS JUDGMENT OF GILBERT J

This judgment was delivered by me on 5 September 2012 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar
Date:

Counsel: A P Molloy QC, Auckland: apmolloyqc@shortlandchambers.co.nz
R B Stewart QC, Auckland: rbstewart@xtra.co.nz
K Davenport, Auckland: kate@katedavenport.co.nz

Solicitors: Smith & Partners: ilsaad.razak@smithpartners.co.nz

CARMINE V RITCHIE HC AK CIV 2011-404-006375 [5 September 2012]

[1] Mr Carmine formerly acted as solicitor for John and Rachel Ritchie. They appointed him as a professional trustee of their family trust. Following her husband’s death, Rachel decided to change solicitors and to remove Mr Carmine as a trustee. Mr Carmine refused to resign and she accordingly exercised her power under the Trust deed to remove him. Ten months after his removal he commenced the present proceeding challenging the validity of his removal.

[2] In my judgment delivered on 29 June 2012, I found that Rachel had validly exercised her power to remove Mr Carmine as trustee. Mr Carmine now seeks costs on an indemnity basis out of Trust assets. The defendants oppose Mr Carmine’s costs application. They seek a costs order against him.

[3] It is well settled that a trustee who is concerned that a power removing him or her as a trustee has been exercised contrary to the best interests of the beneficiaries should apply to the Court for directions as to whether the purported removal was valid. A trustee in this position should place the material facts before the Court and outline the nature of his or her concern. A trustee is entitled to an indemnity for costs reasonably and properly incurred in making such an application.

[4] However, a trustee should not actively challenge the validity of his or her removal unless directed to do so by the Court. A trustee who unsuccessfully runs an active case challenging his or her removal without the sanction of the Court is personally exposed to costs, even if he or she acts on counsel’s opinion and in good faith. Such a trustee may not only be deprived of the benefit of the normal
indemnity, but may also be ordered to pay costs to the successful party or parties.[1]

[1] Mowbray et al Lewin on Trusts (18th ed, Sweet& Maxwell, London 2007) at…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Carmine v Ritchie

Details

AGLC: Carmine v Ritchie [2012] NZHC 2279
Case: [2012] NZHC 2279
Decision Date: 5 September 2012

CaseChat Overview and Summary

The High Court of New Zealand was tasked with determining the entitlement of Vincent John Carmine to an indemnity for his costs incurred in a proceeding challenging his removal as a trustee of the JMC & RA Ritchie Family Trust. Carmine, who had been appointed as a professional trustee by the original settlors, John and Rachel Ritchie, was removed by Rachel after John's death. Carmine subsequently sought to have his removal invalidated, arguing it was not in the best interests of the infant, unborn, and adoptive beneficiaries. The court had already determined that Rachel validly exercised her power to remove Carmine, but now the court had to decide whether Carmine was entitled to his indemnity for the costs incurred in this proceeding. The defendants opposed Carmine's costs application and sought a costs order against him.

The court found that while a trustee concerned about the validity of their removal should seek directions from the court, they should not actively challenge their removal without court sanction. Doing so could expose the trustee to personal costs, even if they acted in good faith. Carmine had delayed in bringing the proceeding, acted contrary to the wishes of all adult beneficiaries, pursued his own agenda, and was antagonistic towards the defendants, including making personal attacks on his co-trustee. For these reasons, the court found that Carmine had not acted reasonably and properly in bringing and pursuing the proceeding, and thus was not entitled to his indemnity. Instead, costs should follow the event, and the defendants were entitled to costs on a category 2 basis.

The court found that Carmine's removal as a trustee was valid, and his challenge to that removal was not in the best interests of the beneficiaries. Carmine's actions in pursuing the proceeding were unreasonable and improper, and he was not entitled to the protection normally afforded to trustees. The court held that it would be unjust for the trust to bear the burden of Carmine's costs, and thus costs should follow the event. The defendants were entitled to separate representation and costs on a category 2 basis, with each defendant entitled to a contribution to their costs in accordance with the schedules in the High Court Rules. The defendants were also entitled to costs on a band B basis for most steps, and a band C basis for certain preparatory steps.

Orders