Easton v New Zealand Guardian Trust Company Limited

[2021] NZHC 6

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-454-35

[2021] NZHC 6

UNDER

the Trustee Act 1956 and s 174 of the Companies Act 1993

IN THE MATTER

of the Moutoa Trust

BETWEEN

IAN CHARLES EASTON

Plaintiff

AND

THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED

First Defendant

IAN EASTON LIMITED
Second Defendant

PERPETUAL TRUST LIMITED

Third Defendant

On the papers

Counsel:

D J S Parker for Plaintiff

L J Taylor QC and J B Orpin-Dowell for First and Third Defendants

Judgment:

12 January 2021

JUDGMENT OF ELLIS J

[1]                This judgment relates to a dispute over the quantum of costs payable by the first and/or third defendants, following the joinder of Perpetual Trust Limited (Perpetual) as a defendant in these proceedings.1

[2]The parties are agreed that the matter may be dealt with on the papers.

1      The second defendant is unaffected by this issue and abides.

EASTON v NZ GUARDIAN TRUST CO LTD & ORS [2021] NZHC 6 [12 January 2021]

Background

[3]                The New Zealand Guardian Trust Company Limited (Guardian) is a statutory trustee company constituted by the New Zealand Guardian Trust Company Act 1982 and its predecessors. Perpetual is also a statutory trustee company currently constituted under the AMP Perpetual Trustee Company Act 1988.

[4]                In 2014, Complectus Limited (Complectus) acquired both Guardian and Perpetual. In providing services to private clients, both companies currently operate under the name “Perpetual Guardian”.

[5]                Within the trustee services industry there is a recognised distinction between services provided to private clients and those provided to corporate clients. At the time of their acquisition by Complectus, Guardian provided services to both corporate and private clients but Perpetual only provided services to private clients.

[6]                 As a result of a rationalisation exercise it was agreed that Perpetual should assume responsibility for all trusteeships and other fiduciary responsibilities held by Guardian on behalf of private clients. Perpetual and Guardian considered this proposal would operate to their own advantage and would also provide benefits to their clients. In order to effect this rationalisation, Guardian sought orders substituting Perpetual for Guardian in relation to each of the appointments it held for private clients.²

[7]                After Guardian’s application was made, the Court appointed Mr Andrew Butler (an acknowledged Trust expert) as counsel to assist. In his 8 October 2019 judgment granting the application, Lang J recorded:3

Mr Butler … agrees with Guardian’s assessment that the substitution of Perpetual for Guardian in Guardian’s private business portfolio will result in a “like for like” administrative change that will have no appreciable negative impact for Guardian’s private clients. He therefore confirms Guardian’s view that the proposal does not involve any prejudice to beneficiaries, co-trustees, appointors, creditors or other stakeholders in trusts and estates to which the proposal will apply.

2      At the time the application was made, Guardian acted as trustee for 1,303 private trust clients and as executor and/or administrator of 887 estates.

3      Re The New Zealand Guardian Trust Co Ltd [2019] NZHC 2548 at [22].

[8]                Lang J’s judgment also records that (in response to  suggestions  made  by  Mr Butler):4

(a)Guardian, Perpetual and/or their related entities (and not the trust or estate in question) will meet the reasonable legal costs of advice obtained by settlors, co-trustees, beneficiaries or other stakeholders regarding these issues5 provided that Perpetual, acting reasonably, has first consented to such advice being obtained.

(b)Guardian, Perpetual and/or their related entities (and not the trust or estate in question) will meet the reasonable costs of obtaining new party orders where this is necessary to join Perpetual to litigation in which Guardian is currently involved so long as Perpetual, acting reasonably, has first consented to such orders being sought.

…

[9]                The Judge then went on to note Mr Butler’s satisfaction with Guardian’s proposals and to conclude:6

[26] I am satisfied those stakeholders affected by the application will not suffer adverse effects if the orders are made. It is plainly expedient to make those orders under both s 51 of the Trustee Act 1956 and s 21 of the Administration Act 1969.

The present proceedings

[10]            These proceedings concern the Moutoa Trust, of which the plaintiff is a beneficiary. At the time the proceedings were filed, Guardian was the sole Trustee of that Trust. As against Guardian, the claim sought:

(a)damages from Guardian Trust alleged breaches of trust; and

(b)directions in relation to the ongoing administration of the Trust.

[11]            The Moutoa Trust is one of the entities affected by Lang J’s  orders.   So on   2 November 2020, Grice J made an order (by consent) joining Perpetual as an additional defendant to the proceedings. The only outstanding issue in relation to joinder is the issue of costs.

4 At [24].

5      The words “these issues” here appear to be a reference to issues relating to the effect of the Court’s orders and any documents they might need to sign as a result of the rearrangement.

6 At [26].

The costs dispute

[12]On 11 November 2020, the plaintiff filed a memorandum seeking:

(a)an order for costs in the amount of $6,800 plus GST in relation to Perpetual’s joinder application; and

(b)an order for costs in relation to the future reasonable costs of the plaintiff amending his pleadings.

[13]            In accordance with Guardian’s advice to Lang J, Guardian and Perpetual accept Mr Easton is entitled to be paid his reasonable costs of taking advice on the substitution of trustee and in relation to the application to join Perpetual as an additional defendant. The only issue is whether the $6,800 costs incurred and claimed are reasonable.

[14]I agree with the defendants that they are not, for the reasons that follow.

[15]            First, it seems Perpetual has had to be joined to proceedings involving 16 other trusts affected by Lang J’s order. In each case, Perpetual advises that it has paid the reasonable costs associated with those joinder applications, with the costs in question ranging from $500 to $1,860 excluding GST. No reason has been advanced on behalf of the plaintiff that would justify payment of an amount more than three times the highest of these.

[16]Secondly, I agree with the defendants that:

(a)The substitution of trustees was (so far as the plaintiff was concerned) no more complex than the typical replacement of a trustee. Lang J recorded that the order for substitution had no adverse effects and noted that the evidence showed that the substitution would not expose clients to any less protection than they currently enjoyed.

(b)Similarly, the joinder of Perpetual as an additional defendant did not give rise to any complex issues. It was a straightforward and necessary

step in response to Perpetual assuming the role as trustee of the Moutoa Trust. Again, there was no prejudice to the plaintiff.

[17]            More specifically, and by reference to the relief sought by Mr Easton against Guardian:

(a)The claim for damages against Guardian is unaffected by the joinder of Perpetual because such a claim is unaffected by Guardian’s subsequent replacement as trustee.

(b)The claim for directions in relation to the ongoing administration of the trust is now made against Perpetual, as the new sole trustee of the Moutoa Trust. It would only be to the plaintiff’s disadvantage if Perpetual was not joined and bound by the Court’s eventual judgment.

[18]            Thirdly, on 20 February 2020, the evidence is that Mr Easton sought and received specific written confirmation from Guardian Perpetual that there would be no prejudice to him as a result of the substitution of Perpetual as trustee for Guardian and/or the application that Perpetual be made a defendant to the proceedings. Again, there is nothing in the material filed on his behalf that suggests that Mr Easton has been told that this advice is incorrect or even raising a reasonable possibility that it might be.

[19]            Nor do I agree that the plaintiff should be entitled now to an order for the future costs of amending the claim as a result of Perpetual’s substitution as trustee. Notwithstanding the apparently extensive advice received, the plaintiff has—in the year that has passed since the substitution order—made no such amendment. Given that Perpetual is simply substituted for Guardian (in relation to the future directions aspect of the claim) it is difficult to see why any substantive amendment might be necessary. If, for some unforeseen reason, that position changes then the issue can be revisited at that point.

[20]            In short, I agree with the defendants that costs of no more than $2,000 plus GST are fair and reasonable here and I make an order for costs in that amount, accordingly.

Rebecca Ellis J

Solicitors:

Parker & Associates, Wellington for Plaintiff
Carlile Dowling Lawyers, Napier for First and Third Defendants