Forgan v Lee

[2025] NZHC 3212

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-175

[2025] NZHC 3212

UNDER

the Trusts Act 2019 and in the Court’s inherent jurisdiction

IN THE MATTER

of the Blackwood Bay Trust and the Snowden Trust

BETWEEN

REBECCA LUCY FORGAN

Plaintiff

AND

ARTHUR MATHEWSON LEE and

ROBYN ANDREA LEE, as trustees of the Blackwood Bay Trust
First Defendant

AND

ARTHUR MATHEWSON LEE and

ROBYN ANDREA LEE as trustees of the Snowden Trust

Second Defendants

Hearing:

On the papers

Appearance:

J M McGuigan and J I Taylor for Plaintiff J C Woods for Public Trust

C Upton and N C Dodds for Covisory Trust No. 2 Ltd

Judgment:

24 October 2025

JUDGMENT OF OSBORNE J

Introduction

[1]By this judgment I determine matters of costs in this proceeding.

FORGAN v LEE [2025] NZHC 3212 [24 October 2025]

[2]My substantive judgment was delivered on 6 August 2025.1

The proceedings

[3]        The proceedings were heard by way of formal proof and involved claims against Arthur and Robyn Lee (the defendants) as trustees of two traditional discretionary family trusts:- the Blackwood Bay Trust and Snowden Trust (the Trusts), of which the plaintiff, Ms Forgan, was a discretionary beneficiary.

[4]        The Blackwood Bay Trust was settled by David Lee, Robyn’s husband, in April 1973. The Snowden Trust was settled by David and Robyn on May 2016. David is now aged 84 and has been diagnosed with early-stage dementia.

[5]        I found there had been serious breaches of the trustees’ duties.2 Arthur had failed to avoid his conflict of interest and had exercised powers for his own benefit. Both defendants had breached their duty to act for the benefit of the beneficiaries and prudently manage the Trusts’ affairs.

[6]        The breaches of trustee duties involved Arthur borrowing funds for his personal benefit and for his company by giving security over trust assets and causing the Trusts to incur interest liability and to fall into default under the loans. After proceedings were commenced, trust properties were sold by agreement to pay off these loan obligations. The sales were sufficient to pay off the debts with funds remaining and to have an independent, professional trustee accept appointment. Before the financial position of the Trusts was clear, Public Trust was notified it may be appointed as trustee of the Snowden Trust. Although this ultimately was not required, Public Trust’s solicitor filed a memorandum setting out its position.

[7]        Ms Forgan provided extensive evidence in support of the proceeding. The background was complex. Ms Forgan’s affidavits informed of her difficulty in obtaining information about the Trusts due to the defendants withholding requested information and failing to abide by discovery directions.

1      Forgan v Lee [2025] NZHC 2310.

2      Forgan v Lee, above n 1.

[8]        Associate Judge Lester made an order for costs in relation to an application for pre-commencement discovery—the defendants were ordered to meet Ms Forgan’s solicitor-client costs on that matter.3

[9]        Due to the defendants’ breaches, I ordered the defendants be removed as trustees of the Snowden Trust and appointed Covisory Trust No.2 Limited (Covisory) as trustee of the Trusts pursuant to ss 112 and 114 Trusts Act 2019.4

[10]      I ordered the reasonable costs and disbursements of the Public Trust be paid from the assets of the Trusts on a solicitor-client basis.5

[11]      Ms Forgan also sought costs on a solicitor-client basis for all steps in the proceedings to be paid from the assets of the Trusts jointly and severally. I recorded this accords with the recognised principles in relation to proceedings brought by a beneficiary for the removal of trustees.6 But I reserved judgment on the plaintiff’s costs and disbursements to give Covisory the opportunity to make a submission as to the reasonableness of the plaintiff-client costs and disbursements.7

Costs and disbursements sought

[12]      Mr Taylor, for Ms Forgan, by memorandum sought an order for costs and disbursements in the sum of $126,575.03 to be met from the assets of the Trusts on a joint and several basis. That sum represents Ms Forgan’s costs of the proceeding less the costs awarded by Judge Lester for the pre-commencement discovery application. The sum comprises (all figures GST inclusive):

(a)$92,339.34 in solicitors’ legal fees;

(b)$26,208.50 in barrister’s fees; and

3      Forgan v Lee [2025] NZHC 1121.

4      See also Tod v Tod [2015] NZCA 501, [2017] 2 NZLR 145 at [22].

5      Forgan v Lee, above n 1, at [58(e)].

6      At [54] citing Re Buckton [1907] 2 Ch 406 at 413–415; and McCallum Jnr v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [34]–[35]. See also High Court Rules 2016, r 14.6(4)(c).

7      At [56] and [58(f)].

(c)$8,027.18 in disbursements.8

[13]      The costs and disbursements are verified by appropriate documentary records and supporting detail.

[14]      Mr Taylor confirms Ms Forgan is not GST registered—her claim for costs and disbursements is therefore inclusive of GST.9

[15]      Counsel for Covisory by memorandum recorded they undertook an exercise such as was carried out in Bradbury v Westpac Banking Corp in evaluating the type of work undertaken, its complexity, and the time taken for the work in relation to the costs sought.10 They concluded the work undertaken was necessary in the circumstances and the charge out rates were appropriate for the complexity of the work. They accepted the need for an instructed barrister. They recorded:

Although it is acknowledged that the costs incurred were high, stepping back and reviewing the sets of tasks completed against the time spent, it does not seem to counsel or the Trustee that the time spent was inordinate, or the tasks inappropriately undertaken.

[16]      Counsel for Covisory concluded the costs  and  disbursements  claimed by Ms Forgan are reasonable and payable by the Trusts.

Discussion

[17]      The senior courts have continuously upheld the orthodox position as to costs in trust litigation is of that in Kekewich J in Re Buckton.11 As summarised by this

8      These figures have been rounded. Their combined total is $126,575.02 which will be the figure referred to later in this judgment.

9      Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR14.6.03(2)(b)].

10     Bradbury v Westpac Banking Corp 18 PRNZ 859 (HC) at [209]. Decision upheld in Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.

11     Re Buckton, above n 6, at 413–416.

Court in Woodward v Smith, there are three broad categories applicable to trust litigation, the third of which was thus described:12

The third category is where a beneficiary is making a “hostile claim” against the trustees, or another beneficiary. The claim may still involve a point of  construction, or administration. It will often involve a claim to a beneficial interest or entitlement to a part of the trust fund. In the third category, involving a hostile claim against trustees or another beneficiary, the usual principles as to costs apply. Ordinarily they will follow the event.

[18]      The substantive proceedings fall into this third category being a hostile claim against the trustees.13 As the successful party, Ms Forgan was therefore entitled to costs and disbursements payable from the Trusts.14

[19]      It is appropriate Ms Forgan has indemnity costs awarded under r 14.6(4)(c) of the High Court Rules as she is a beneficiary of the Trusts from whose funds the costs are payable. Ms Forgan was a necessary party to these proceedings and has acted reasonably throughout. Ms Forgan brought proceedings for the benefit of the Trusts and to safeguard the Trusts’ assets against the inappropriate conduct of the trustees. It is therefore appropriate that the Trusts bear Ms Forgan’s costs on a solicitor and client basis.15

Order

[20]      I order the plaintiff’s costs and disbursements totalling $126,575.02 be paid jointly and severally from the Blackwood Bay Trust and the Snowden Trust.

Osborne J

Solicitors:

Wynn Williams, Christchurch Counsel: J M McGuigan for Plaintiff

Copy to: Public Trust, Christchurch (J Woods)

12 Woodward v Smith  [2014] NZHC 407, [2014] 3 NZLR 525 at [23(c)] (footnotes omitted) cited with approval in Kain v Public Trust [2022] NZCA 239, (2022) 5 NZTR 32-008 at [12]. See also McCallum Jnr v McCallum, above n 6, at [34]–[35].

13     See McCallum Jnr v McCallum, above n 6, for discussion on the use of the term “self-interested” rather than “hostile”.

14     Woodward v Smith, above n 12, at [21]; and High Court Rules, r 14.6. See also Gorman McGechan on Procedure, above n 9, at [HRPt14.14(1)(a)].

15     See Waitara Leaseholders Association Inc v New Plymouth District Council (2005) 1 NZTR 15-013 (HC); Harsant v Menzies [2014] NZHC 563; and Tetley v Parker [2022] NZHC 1637.