Daniel v Cundall
[2020] NZHC 2309
•4 September 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-3033
[2020] NZHC 2309
UNDER Section 51 Trustee Act 1956 and Part 18 High Court Rules IN THE MATTER
of a trust settled by CH and JD Cundall under a certain Deed of Trust dated
13 September 1991 (the “trust”)
AND
IN THE MATTER
of an application to replace the defendant as a trustee
BETWEEN
DAVID GLOSTER DANIEL
Plaintiff
AND
STEPHEN BRUCE CUNDALL
Defendant
Hearing: On the papers Counsel:
R O Parmenter for Plaintiff L Ponniah for Defendant
Judgment:
4 September 2020
COSTS JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 4 September 2020 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
DANIEL v CUNDALL [2020] NZHC 2309 [4 September 2020]
Introduction
[1] I issued a judgment in this matter on 6 July 2020.1 This judgment is to determine costs in the proceeding.
[2] My judgment concerned the CH & JD Cundall Trust (“trust”). The trust was settled by Mr and Mrs Cundall Snr, both deceased.
[3] By his statement of claim, Mr Daniel, a trustee of the trust, sought an order pursuant to s 51 Trustee Act 1956 (“Act”) and the inherent jurisdiction of the Court, substituting another trustee in place of Mr Daniel’s then co-trustee, Mr Cundall. Mr Daniel was the settlors’ solicitor and Mr Cundall is their son.
[4] Of relevance to what follows, Mr Daniel also sought in his statement of claim various orders as to costs. These were that Mr Cundall pay his, Mr Daniel’s, costs in the proceeding on an indemnity basis; and/or he, Mr Daniel, be entitled to recover his costs, or any shortfall, from the trust fund pursuant to s 38(2) of the Act; and Mr Cundall not be indemnified by the trust fund for his own costs in the proceeding.
[5] Mr Cundall defended Mr Daniel’s proceeding, and counterclaimed for an order Mr Daniel be removed as a trustee, with Mr Livingstone, a chartered accountant, to be appointed in substitution. Mr Cundall sought the same orders as to costs as Mr Daniel, and also an order Mr Daniel reimburse the trust more than $18,000 deriving from earlier proceedings between the two referred to in [24] of my judgment. Mr Daniel had applied to the High Court for an order Mr Cundall supply him with the trust’s financial statements, Mr Daniel having requested the same and they not having been forthcoming. Ultimately, Mr Cundall agreed to provide the information, and Mr Daniel discontinued the proceedings and sought costs. In September 2017, Bell AJ ordered Mr Daniel was entitled to be indemnified for all his costs from the trust fund, pursuant to s 38 of the Act.2 Accordingly, this part of Mr Cundall’s prayer for relief was an attempt to revisit the Associate Judge’s order.
1 Daniel v Cundall [2020] NZHC 1590.
2 Daniel v Cundall [2017] NZHC 2339.
[6] I was to hear the proceedings in February 2019. As it happened, the parties thought they might be able to resolve matters, but they were unable to do so and the hearing resumed in October 2019.
Decision
[7] I made the order sought by Mr Daniel and ordered Mr Cundall’s removal as a trustee. This was because Mr Cundall would not engage with Mr Daniel on important trust matters; he was hostile to Mr Daniel; and he had a conflict of interest. Ultimately, a decision as to who should or should not be a trustee is made in the interests of the beneficiaries of the trust. In this case, those interests required Mr Livingstone be appointed in place of Mr Cundall.
[8] I did not consider there was any ground to remove Mr Daniel as a trustee and, in fact, benefit in retaining him. Mr Cundall’s case was Mr Daniel had abdicated his responsibilities entirely in the early years of the trust, had only became active when he learned Dianne was no longer living in the unit, and that Mr Daniel had been negligent as regards a debt owed by the trust to Mrs Cundall’s estate. Mr Daniel had not been negligent in this respect but Mr Cundall was aggrieved by the existence of the liability.
[9] To the extent Mr Daniel had been a “passive” trustee, it was in the circumstances set out in my judgment. When those circumstances changed, Mr Daniel acted as required but Mr Cundall did not co-operate. I also considered it in the beneficiaries’ interests Mr Daniel remain as a trustee.3 Mr Daniel’s “institutional knowledge” is an advantage to be maintained, at least until Mr Livingstone is bedded in as a trustee.
Submissions
[10] For Mr Daniel, Mr Parmenter’s primary objective is to ensure all Mr Daniel’s expenses in the litigation are met in full. As to who should bear those expenses, Mr Parmenter contends Mr Cundall should. Failing that, the expenses, or any shortfall, should be paid by the trust.
3 Daniel v Cundall, above n 1, at [45].
[11] However Mr Daniel’s expenses are met, Mr Parmenter submits Mr Cundall should bear his own costs in the litigation.
[12] For Mr Cundall, Mr Ponniah submits Mr Daniel should have costs on a 2B basis but only for attendances prior to March 2019 plus disbursements. Mr Ponniah proposes 2B on the basis this was fixed by consent in case management arrangements (it was). The significance of the March 2019 date lies in a Calderbank offer at that time. Mr Ponniah also submits the trust should bear all costs — Mr Daniel’s and Mr Cundall’s — with any surplus expense over a 2B calculation to lie where it falls.
[13]I address the Calderbank offer below.
Discussion
[14] There are a number of matters to be taken into account in determining the issues between the parties.
[15] The first is that costs follow the event. Mr Cundall, as the unsuccessful party, must pay costs to Mr Daniel, and disbursements. Costs are to be calculated on a 2B basis. As Mr Ponniah submitted, this was the costs category attributed to the proceedings by consent and not a case in which the defendant’s conduct warranted an award of indemnity costs.4 I am not bound by the 2B categorisation and I consider there is scope for an award of increased costs, given what I say about the Calderbank offer below. Regardless, I have decided to leave it at 2B.
[16]The second matter to consider is s 38(2) of the Act, which provides:
38 Implied indemnity of trustees
...
(2) A trustee may reimburse himself ... out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers; ...
4 Daniel v Cundall HC Auckland CIV-2017-404-3033, 26 March 2018 (Minute of Christiansen AJ).
[17] This provision entitles a trustee to reimbursement from the trust fund of all expenses reasonably incurred in or about the execution of the trust.
[18] I am satisfied Mr Daniel was acting reasonably, and in or about the execution of the trust, in bringing his claim and defending Mr Cundall’s. As a matter of principle, he is entitled to reimbursement of all his expenses, subject to quantum.
[19] Mr Daniel’s expenses to date are $56,666.25 including GST, and disbursements of $10,465.81. The $56,666.25 comprises Mr Parmenter’s fees to Mr Daniel for the period from 25 October 2017 to 24 July 2020. Mr Parmenter also seeks $478 for sealing the costs order.
[20] From Mr Parmenter’s invoices, it appears Mr Daniel began to incur the cost of drafting the statement of claim in December 2017. The costs claimed for the period prior to the litigation commencing are relatively modest and, from the entries, appear to relate to the litigation over the financial statements, requests for payment of the sum Bell AJ had ordered, and further requests for the trustees to meet. Given that, I am not going to separate pre and post litigation costs. I am satisfied the expenses were properly incurred, or will be incurred in the case of the costs of sealing the order. At first glance the total sum charged does not appear to be excessive and I do not propose to add to everyone’s costs by ordering any form of taxation.
[21] I am not persuaded Mr Cundall’s own expenses were reasonably incurred in or about the execution of the trust. Mr Daniel’s litigation was a measure of last resort. It followed numerous requests for meetings with Mr Cundall to discuss important issues confronting the trust. The proceedings would not have been necessary had Mr Cundall acted reasonably. It was open to Mr Cundall to resign when he was served with the proceeding, or simply to leave the matter in the hands of the Court. In those circumstances, he must bear his own costs.
[22] The same reasoning applies in respect of the sum I have ordered Mr Cundall to contribute to Mr Daniel’s costs.
[23]This brings me to the Calderbank offer.
[24] Mr Ponniah has provided copies of emails between counsel between February and September 2019 as to how the impasse between the trustees might be resolved.
[25] On my reading of the emails, including that on which Mr Ponniah particularly relies, Mr Cundall was willing to resign if Mr Daniel would do so. Mr Daniel was willing to resign if Mr Cundall agreed the trust would reimburse Mr Daniel for the expenses he had incurred. Mr Cundall would not agree to this. Mr Cundall’s best offer was the Court should decide costs, alternatively he would agree to the trust bearing both parties’ costs on a 2B basis. Costs on a 2B basis at that time would have left Mr Daniel, who is retired and receives no benefit from the trust, with a shortfall of at least $3,500.
[26] Mr Daniel declined this offer, as he was not willing to be at risk for any part of his costs. That was a reasonable position for Mr Daniel to take.
[27]Mr Cundall’s offer confuses two matters as regards costs
[28] The High Court Rules 2016, including a 2B categorisation, concerns costs between the parties to litigation.
[29] Section 38(2) of the Act operates independently of the Rules. The Rules do not affect a trustee’s right of indemnity pursuant to s 38(2) in respect of expenses properly and reasonably incurred.
[30] Much was made in the emails from Mr Cundall’s legal advisers that Mr Daniel was forcing the parties back to Court for the sake of $3,500. I do not accept that. Mr Daniel was entitled to reimbursement in full. If Mr Cundall and his legal advisers were in any doubt about this, they needed only refer to the decision of Bell AJ discussed above, which made the legal position clear. When I said above there was a case for ordering Mr Cundall to pay increased costs, I was referring to the failure to allow Mr Daniel to have that to which he was entitled under the Act.
Closing remarks
[31] The effect of this decision on costs is that the trust will bear the shortfall between the sum Mr Cundall is to pay Mr Daniel and Mr Daniel’s full expenses. This is in addition to the $18,000 odd to which I referred above. Hopefully this will be the last of the litigation costs which, ultimately, are borne by the beneficiaries.
Result
[32] The defendant and counterclaim plaintiff, Mr Cundall, is to pay the costs of the plaintiff and counterclaim defendant, Mr Daniel, on a 2B basis, plus all usual disbursements. Costs and disbursements are to be fixed by the Registrar in the event of dispute.
[33] Mr Cundall is to pay the sum due to such bank account as Mr Daniel may nominate in writing, or to the bank account of the CH & JD Cundall Trust if the order in the next paragraph has already been satisfied.
[34] Pursuant to s 38(2) Trustee Act 1956, Mr Daniel is entitled to reimbursement from the trust fund of the sums referred to in [19] above, including the $478 for sealing the costs order.
[35] Mr Cundall is not entitled to reimbursement from the trust fund in respect of the costs referred to in [32] above or in respect of his own costs in the proceeding.
[36]I reserve leave to apply.
Peters J
Solicitors: Graham & Co, Auckland
Corban Revell, Auckland
Counsel:R O Parmenter, Auckland L Ponniah, Auckland
Copy for: Kiely Thompson Caisley, Auckland
A R Gilchrist, Auckland
T G Livingstone, c/- Corban Revell, Auckland
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