Daniel v Cundall

[2017] NZHC 2339

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-3051 [2017] NZHC 2339

UNDER	Part 18 of the High Court Rules
IN THE MATTER OF	a trust settled by CH and JD Cundall under a Deed of Trust dated 13 September 1991 ("the Trust")
IN THE MATTER OF	an application to obtain the Trust's accounts
BETWEEN	DAVID GLOSTER DANIEL Plaintiff
AND	STEPHEN BRUCE CUNDALL Defendant

On thepapers:
Appearances:	R O Parmenter/P Oliver for the Plaintiff L Ponniah/C Orton for the Defendant
Judgment:	26 September 2017

COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 26 September 2017 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

………………………………………………….

Registrar/Deputy Registrar

Solicitors:

Daniel Overton & Goulding (Peter Oliver), Onehunga, Auckland, for the Plaintiff

Corban Revell (Craig Orton), Henderson, Auckland, for the Defendant

Copy for:

R O Parmenter, Auckland, for the Plaintiff

L Ponniah, Auckland, for the Defendant

DANIEL v CUNDALL [2017] NZHC 2339 [26 September 2017]

[1]      The parties cannot agree on costs on the plaintiff’s discontinuance.   The plaintiff and the defendant are trustees of the CH and JD Cundall Family Trust established under a deed  dated 13  September  1991.    Mr and  Mrs  Cundall,  the settlors,  wished  to  provide  for  their  daughter,  Dianne,  and  their  son,  Stephen. Mr Daniel was the family lawyer.  He has now retired but has remained the trustee ever since the trust was established.  Dianne is disabled.  A property in Onehunga for her to live in was settled on the trust.   Mr Daniel says that he left Mr Cundall to attend to the day-to-day administration of the trust.

[2]      Later, he became aware that Dianne had moved into hospital care and was no longer living in the Onehunga property.  Although he had left matters to Mr Cundall for many years, he decided to concern himself actively with the affairs of the trust. He asked Mr Cundall to provide copies of financial records for the trust – first orally, then in writing.   Later, Mr Daniel’s lawyers followed up with written requests. When there was no response, Mr Daniel started this proceeding.  He sought an order for Mr Cundall to give him the trust’s accounts since settlement.

[3]      Once served, Mr Cundall took legal advice and provided Mr Daniel with documents, including financial statements for the trust from 2006-2016.   Having received those documents, Mr Daniel filed a discontinuance.

[4]      He seeks costs because he considers that he has been vindicated in bringing the proceeding.  He has incurred fees as follows:

28 February 2017        Daniel Overton Goulding  $4,690.80 (including disbursements of $1,240.80)

14 July 2017  $2,817.50

7 February 2017         Mr Parmenter  $6,900.00

23 June 2017  $1,955.00

14 July 2017  _$1,725.00

$18,088.30

These are all inclusive of GST.  Mr Daniel is not registered for GST.

[5]      Mr Daniel sought costs under Part 14 of the High Court Rules and claimed indemnity costs, relying on r 14.6(4)(f) – “some other reason”.

[6]      In opposition, Mr Cundall contested the costs claimed, noted that Mr Daniel had disregarded his responsibility as trustee for many years and submitted that  there was no basis for indemnity costs.  He proposed that costs should lie where they fall. He did not seek costs against Mr Daniel on the discontinuance under r 15.23 of the High Court Rules.

[7]      I asked for further submissions.   It was not clear to me that costs for this proceeding should be decided only under the High Court Rules.  Potentially either of the parties might have recourse to trust assets to meet their expenses.  Whatever the position between Mr Daniel and Mr Cundall under the High Court Rules, Mr Daniel might be able to look to trust assets to meet the expenses he incurred as trustee and Mr Cundall might look to trust assets to indemnify himself for any liability for costs. The High Court Rules do not cover those aspects.

[8]      While proceedings by beneficiaries against trustees to obtain documents and to provide accounts are not unusual, it appears that a proceeding by one trustee against another trustee to obtain trust documents is relatively uncommon.   All the same, case law on costs in beneficiaries’ applications offers guidance. In Heugh v Scard, Sir George Jessell MR said:1

It is a matter of some importance that executors and trustees should understand my rule on the subject of costs.  The question of costs being discretionary, it is impossible to lay down a rule binding on any other branch  of  the  Court.    But  it  is,  nevertheless,  well that  executors  and trustees should understand what I think to be the proper rule.  In certain cases of mere neglect or refusal to furnish accounts, when the neglect is very gross or the refusal wholly indefensible, I reserve to myself the right of making the executor or trustee pay the cost of litigation caused by his neglect or refusal.  But I expressly guard myself from saying that in every case  of  mere  neglect,  even  in  every  case  of  mere  refusal,  an  honest executor or trustee who has fairly discharged his duty – an onerous and thankless  one  –  is  to  pay  costs.    But  when  I  find,  in  addition  to unjustifiable neglect or delay, that there has been misconduct in dealing

1      Heugh v Scard (1876) 63 LT 659.

with  the  trust  fund,  then  I  look  upon  that  neglect  or  delay  as  an aggravation of the latter misconduct; and, although, standing alone, the neglect or delay might not be sufficient to induce me to order the trustee or executor to pay costs, yet, when combined with such misconduct I should order them to do so.

[9]      For examples of the principles in that case being applied, see Re Page.2   The executor and trustee had not provided accounts but there was no evidence that he had converted any part of the trust fund to his own use or obtained any part of it – no costs were ordered.  In Re Skinner the trustees’ failure to provide accounts was held to be gross and indefensible and costs were ordered.3   In Furness v Public Trustee,4 a trustee had failed to perform her duty of keeping proper books.  After her death that made the taking of accounts more protracted and difficult and therefore more costly. It was held that the executor of her estate could not recover the increased costs required because of the failure to keep proper books of account.

[10]     There is no suggestion in this case that Mr Cundall has been less than honest and diligent in keeping the accounts of the trust.  Nor is there any suggestion that he failed to act in the best interests of the trust or dealt wrongly with trust assets.

[11]     As between Mr Daniel and Mr Cundall, it is understandable that one left the other to deal with accounts of the trust.  But, as a co-trustee, Mr Daniel was entitled to inspect the accounts.  That was consistent with his duty to administer the trust in accordance  with  the  trust  deed.    Equally,  Mr  Cundall  was  required  to  provide Mr Daniel with copies of trust records when requested.

[12]   Mr Cundall is a layman without specialised knowledge of trust law. Undoubtedly he breached his duty in not providing trust records to Mr Daniel when asked.  He remedied that promptly once he took legal advice after the start of the proceeding.   In these circumstances it is hard to say that Mr Cundall’s conduct was

very gross or wholly indefensible.  Accordingly, under the test in Heugh v Scard,5 he

should not be ordered to pay costs.

2      Re Page [1893] 1 Ch 304 (ChD).

3      Re Skinner [1904] 1 Ch 289 (ChD).

4      Furness v Public Trustee [1922] NZLR 920 (SC).

5      Heugh v Scard, above n 1.

[13]     At the same time, Mr Daniel cannot be criticised for the steps he took.  His lawyers wrote to Mr Cundall twice before issuing this proceeding.   In the light of Mr Cundall’s silence, Mr Daniel cannot be criticised for beginning a proceeding to obtain copies of accounts, after reasonable requests had not produced a response.  In these circumstances, I see no reason for holding that Mr Daniel is not entitled to recover his  actual  and  reasonable expenses from  the trust under s  38(2) of the Trustee Act 1956.

[14]     For  his  part,  while  he  resists  any  order  for  costs  made  against  him, Mr Cundall does not seek any order that he may recover his costs from the trust.

[15]     In these circumstances, I hold that Mr Daniel is entitled to recover the costs he incurred in this proceeding from the trust assets under s 38(2) of the Trustee Act

1956, but I do not order Mr Cundall to pay costs to Mr Daniel.

Associate Judge R M Bell