Gallagher v Gallagher - [2021] NZHC 677

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1996

[2021] NZHC 677

UNDER Section 51 of the Trustee Act 1956 and/or the Court’s inherent jurisdiction

IN THE MATTER

of the Janevine Trust, being a trust settled on 23 May 2007, pursuant to a Deed of Trust executed on that date

BETWEEN

SHERYL JANE GALLAGHER as one of

three trustees of the JANEVINE TRUST Applicant

AND

GLENN NOEL VINING GALLAGHER, as

the second trustee of the JANEVINE TRUST

First Respondent

DAVID GOULD RUSSELL SHORT, as the

third trustee of the JANEVINE TRUST Second Respondent

Hearing: On the papers

Counsel:

T S Gough for Plaintiff

P Craighead for Respondent

Judgment:

31 March 2021

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 31 March 2021 at 12.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: Martelli McKegg, Auckland
Whaley Garnett, Auckland

GALLAGHER v GALLAGHER [2021] NZHC 677 [31 March 2021]

[1] This is an application for costs. It should have been able to be resolved by the parties some time ago.

[2] The applicant brought an originating application seeking orders removing the existing trustees of the Janevine Trust (the Trust) and appointing New Zealand Trustee Services Limited as substitute trustee. She also sought costs.

[3] The applicant and the first respondent were married. They are now separated. They, together with the second respondent, a lawyer and friend of the first respondent, were trustees of the Trust. Given the breakdown in the parties’ relationship, the application to remove the existing trustees and appoint an independent trustee was a reasonable one.

[4] The first respondent’s initial response was also reasonable. Before the first call of the application which was scheduled for 25 November 2020, the first respondent filed a notice confirming that he agreed to the removal of the existing trustees and the substitution of the proposed independent trustee. Given the general nature of the application for costs, he noted he opposed any application for costs against him personally.

[5] For his part, the second respondent filed a memorandum confirming that he had been willing to resign as trustee for some time and that he would abide the decision of the Court.

[6] When the matter was before the Court on 25 November, Hinton J noted that the parties were to file a joint memorandum setting out the orders to be made on a consent basis and otherwise adjourned the proceeding for call on 2 December.

[7] So far so good. However, on 2 December, while Wylie J made an order by consent appointing New Zealand Trustee Services Limited in substitution for the original trustees and noted the parties agreed that each should be entitled to be indemnified for their costs, the Judge noted that they had not been able to agree on quantum.

[8] The issue was not able to be resolved and on 24 February 2021 Duffy J made directions for a…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Gallagher v Gallagher

Details

AGLC: Gallagher v Gallagher [2021] NZHC 677
Case: [2021] NZHC 677
Decision Date: 31 March 2021

CaseChat Overview and Summary

The case of Gallagher v Gallagher involved an application for costs in relation to an originating application to remove the existing trustees of the Janevine Trust and appoint New Zealand Trustee Services Limited as a substitute trustee. Sheryl Jane Gallagher, one of the three trustees of the Trust, sought an order for costs. The application arose from the breakdown of the relationship between Sheryl Gallagher and Glenn Noel Vining Gallagher, the first respondent and another trustee, who were married and now separated. The second respondent, David Gould Russell Short, a lawyer and friend of Glenn Gallagher, was the third trustee of the Trust. The Court found that the application to remove the existing trustees and appoint an independent trustee was reasonable.

The legal issues the Court was required to decide related to the entitlement of the trustees to indemnity costs from the Trust and the reasonableness and necessity of the costs incurred in relation to the application. The Court noted that a trustee has a right to indemnity from trust assets for reasonable costs and expenses incurred in the administration of the trust. The Trust document also provided for a full and complete indemnity from the Trust Fund for any liability incurred by a trustee in connection with their acting or purporting to act as a trustee. However, the Court had a supervisory jurisdiction to review whether the costs and expenses incurred by a trustee were necessarily incurred in the interests of the beneficiaries and were reasonable in amount.

The Court found that the applicant was entitled to be reimbursed for the costs of the application on a solicitor/client basis provided the costs were reasonable and appropriately incurred in relation to the application. Costs outside the application were not recoverable in these proceedings. The Court also found that the first respondent was entitled to take advice about the application and respond to it, and that his costs of $4,809.88 were appropriately incurred. The second respondent was entitled to take legal advice about the application, and the costs of such advice were limited to $1,489.25. The Court ordered that the New Zealand Trustee Service Limited, as trustee, was to pay the applicant's costs of $15,000, the first respondent's costs of $4,809.88, and the second respondent's costs of $1,489.25 from the assets of the Trust when it was in a position to do so. The first respondent was also ordered to pay the applicant's costs of $956.00 on a 2B basis for the costs of filing the memorandum in relation to costs.

In summary, the Court found that the trustees were entitled to indemnity costs from the Trust for the application to remove the existing trustees and appoint an independent trustee, provided the costs were reasonable and appropriately incurred in relation to the application. The Court also found that the first respondent was entitled to take advice about the application and respond to it, and that his costs were appropriately incurred. The Court ordered that the New Zealand Trustee Service Limited, as trustee, was to pay the costs of the application from the assets of the Trust, and that the first respondent was to pay the costs of filing the memorandum in relation to costs.

Orders