ELIJAH JAMES CHARLES SHARPLES a minor by his litigation guardian SABRINA ANN SHERWOOD AND ANTHONY JAMES SHARPLES

[2024] NZHC 2261

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2281

[2024] NZHC 2261

UNDER

Sections 112, 114, 115 and 126 of the Trusts

Act 2019

IN THE MATTER

Of the Elijah James Sharples Trust

BETWEEN

ELIJAH JAMES CHARLES SHARPLES a

minor by his litigation guardian SABRINA ANN SHERWOOD

Plaintiff

AND

ANTHONY JAMES SHARPLES

Defendant

Hearing:	On the papers
Appearances:	A J Steele and N S Tabb for the Plaintiff P Kennelly for the Defendant
Judgment:	13 August 2024

COSTS JUDGMENT OF MOORE J

This judgment was delivered by me on 13 August 2024 at 4.00 pm Pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………

Solicitors:

Natalie Tabb, Auckland Kennelly Law, Orewa

SHARPLES v SHARPLES [2024] NZHC 2261 [13 August 2024]

Introduction

[1]    The plaintiff, Elijah Sharples (“Elijah”), is aged 11 years. He is the sole beneficiary of the Elijah James Sharples Trust (“the Trust”). The defendant and Elijah’s father, Anthony Sharples (“Anthony”), was until recently the Trust’s sole trustee.

[2]    Through his litigation guardian and sole caregiver, Sabrina Sherwood, Elijah commenced proceedings to remove Anthony as trustee. He sought to replace his father with Ms Sherwood (who was previously in a relationship with Anthony) and Perpetual Guardian, an independent corporate trustee. He also sought an order requiring Anthony to repay misapplied Trust moneys with interest.

[3]    Ahead of the hearing of this matter in February this year, Anthony’s counsel advised in a memorandum dated 11 December 2023 that:

[Anthony] would agree to an Independent Trustee being appointed. The issue for trial is whether [Ms Sherwood] should also be appointed [which] is opposed.

[4]    The hearing of Elijah’s applications took place earlier this year on 26 February 2024. During the course of that hearing, it became apparent that Anthony did not oppose his removal and replacement with Perpetual Guardian. Consistent with his memorandum of December 2023, what he continued to oppose was Ms Sherwood’s additional appointment as a trustee.

[5]    After the luncheon adjournment and following my questions to her during cross-examination, Ms Sherwood advised that she was content, as Elijah’s litigation guardian, for the Court to make orders that Perpetual Guardian be appointed sole trustee. The parties also agreed to orders that Anthony repay $108,120.40 to the Trust, together with interest calculated at $34,800.51. Until that point, Anthony had accepted that he had misapplied Trust money, but disputed the quantum involved.

[6]    I accordingly issued a minute as to settlement to that effect.1 This judgment now deals with the outstanding question of costs: namely, whether the Court should

1      Sharples v Sharples HC Auckland CIV-2022-404-2281, 12 April 2024 (Minute of Moore J).

award indemnity or 2B costs against Anthony or whether costs should lie where they fall.

Should costs be awarded against Anthony?

[7]    Mr Steele, for the plaintiff, submits that indemnity costs should be awarded against Anthony. He emphasises that the proceeding was initiated solely because Anthony refused to supply trust information to Ms Sherwood, as Elijah’s representative, and that it was only at trial that he finally agreed he was liable to repay

$108,120.40 to the Trust with interest. He says that the indication Anthony gave in December 2023 did not state that he himself would resign, and that his removal therefore remained in issue until the hearing commenced. Given Anthony was removed as a trustee, replaced with Perpetual Guardian and ordered to repay misappropriated trust moneys, he submits that Elijah achieved overwhelming success, notwithstanding that these matters were ultimately reached through settlement.

[8]    Mr Steele submits that indemnity costs should be awarded so that the Trust does not suffer a shortfall. He says that anything less would result in a reduction in Elijah’s Trust in circumstances where Elijah has done nothing wrong and has been forced to bring this proceeding (through Ms Sherwood as litigation guardian) to recover funds wrongfully taken by Anthony as trustee.

[9]    Mr Kennelly, for the defendant, submits that costs should lie where they fall, emphasising that Anthony has met his own costs in respect of these proceedings to date. He says that these matters should have been capable of settlement following Anthony’s memorandum of December 2023 which, he says, indicated he would resign. If there was confusion as to whether Anthony would resign, this should have been explored with him. Moreover, he submits that it was Ms Sherwood who proceeded unnecessarily with the proceeding through her insistence at also being appointed a trustee, despite Anthony’s opposition. Given their past relationship and evident animus towards each other, he submits it was unreasonable for Ms Sherwood to have pursued appointment as a trustee. He also says it is relevant that Ms Sherwood admitted in the course of evidence that she had received assistance to pay her legal fees.

[10]   I do not accept that Ms Sherwood’s continuation of the proceedings was unreasonable or sufficient to disturb the principle that the party who fails should pay costs to the party who succeeds. It was only well into Mr Kennelly’s cross- examination of Ms Sherwood that it became clear that Anthony agreed to his removal. Up until that point, the issues in dispute included whether Anthony should be removed as a trustee, and the specific quantum of moneys he was obliged to restore to the Trust. While Anthony may have indicated agreement to the appointment of an independent trustee in December 2023, the memorandum was conspicuously ambiguous as to whether he would also agree to his own removal. Furthermore, the quantum of what he needed to repay the Trust was also in issue until he eventually conceded after the luncheon adjournment to the amount stipulated for the plaintiff.

[11]   Furthermore, I disagree that costs should not be awarded against Anthony because he has paid his own costs personally, or because Ms Sherwood has received support from others to fund her own legal expenses as Elijah’s litigation guardian. Plainly in taking the course that he has, Anthony would not be entitled to reimbursement from the Trust in defending these proceedings. The fact that he has paid his own legal fees is of no moment. So too is the fact that Ms Sherwood may have received assistance in paying her own legal fees. I see no reason for why that should disentitle her to an award of costs in her favour when she, on behalf of Elijah, has been successful.

[12]   In these circumstances, I consider that Ms Sherwood, as Elijah’s litigation guardian, is plainly entitled to costs against Anthony as the successful party in these proceedings. The question is whether Ms Sherwood is also entitled to indemnity costs.

[13]   Rule 14.6(4) of the High Court Rules 2016 relevantly provides that the Court may order a party to pay indemnity costs if:

(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

…

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[14]   I am satisfied that indemnity costs should be awarded against Anthony here. As with trustees, beneficiaries who properly incur litigation expenses in their capacity as beneficiaries are entitled to be reimbursed for such expenses from the trust fund.2 The fact that the costs were ultimately incurred by Ms Sherwood as litigation guardian does not displace this.

[15]   Here, Ms Sherwood has incurred the costs of bringing proceedings for Elijah as his litigation guardian in order to remove a trustee who committed a blatant breach of trust, and to recover trust moneys that were wrongly misappropriated. All of those actions were advanced in Elijah’s best interests. That was a proper and necessary course to take, notwithstanding her eventual agreement that she should not also be appointed as a trustee with Perpetual Guardian given the animus between her and Anthony. It follows that she is entitled to be reimbursed for these expenses from the trust fund itself.

[16]   However, as Mr Steele submits, this is also unsatisfactory because it means the Trust will be depleted in circumstances where proceedings have rightly been brought in Elijah’s best interests. Elijah should not have to suffer such a depletion when such costs have ultimately been incurred to ensure the preservation of Trust property for his benefit. As the proceedings were necessitated by Anthony’s conduct in misappropriating trust property, failing to discharge his obligations as a trustee and obliging Ms Sherwood to bring the matter to hearing before his key concessions were made, I agree that indemnity costs against him personally are warranted.

Result

[17]   Mr Steele’s memorandum as to costs advises that a total sum of $42,962.82 has been incurred by Ms Sherwood. I am satisfied these costs are reasonable.

2      Powell v Powell [2015] NZHC 1984 at [16]–[17].

[18]   I accordingly order that, as Elijah’s litigation guardian, Ms Sherwood is entitled to indemnity costs in the amount of $42,636.25 together with disbursements of $326.57, to be paid by Anthony personally.

Moore J