Gamble v Schepens

[2024] NZHC 1354

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-488-000086

[2024] NZHC 1354

BETWEEN

DEBORAH ANNE GAMBLE, DEIRDRE JANE LEADLEY and HAYLEE MARIE LEITH
Plaintiffs

AND

JOHN EMILE SCHEPENS and BRUCE

JOSEPH MORRIS in their capacity as
trustees of the estate of LILY JOSEPHINE SCHEPENS
First Defendants

JOHN EMILE SCHEPENS and BRUCE
JOSEPH MORRIS in their capacity as
trustees of the estate of ALLAN VICTOR SCHEPENS

Second Defendants

Hearing:

On the papers

Counsel:

J P Browne and J P Cartwright for Plaintiffs

J P Golightly for First-named Defendant (J Schepens) C Muston for Second-named Defendant (B Morris)

Judgment:

28 May 2024

COSTS JUDGMENT OF ANDREW J

This judgment was delivered by Justice Andrew on 28 May 2024 at 3.00 pm

pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar

Date ……………………………

GAMBLE v SCHEPENS [2024] NZHC 1354 [28 May 2024]

Introduction

[1]    In my judgment of 13 November 2023,1 I made orders removing Mr Bruce Morris and Mr John Schepens as trustees and appointed Schepens Trustee Ltd as trustee of the testamentary trusts at issue.

[2]    The parties have filed written submissions addressing the question of costs. This is my judgment on costs.

[3]The Court apologises to the parties for the delay in considering this issue.

[4]There are two critical issues to determine:

(a)Whether the plaintiffs are entitled to indemnity or increased costs;

(b)The relative liability of Mr John Schepens and Mr Bruce Morris for costs.

Analysis and decision

[5]    The plaintiffs seek indemnity costs of $75,000 together with disbursements (a total of $79,008.55) or alternatively, 2B scale costs with a 50 per cent uplift plus disbursements (a total of $67,104.55).

[6]    Mr John Schepens opposes indemnity or increased costs. He accepts the plaintiffs’ 2B calculation of $46,072.55 (including disbursements) but contends there is no basis for any award of costs beyond that figure.

[7]    Mr Morris supports the plaintiffs’ submissions on costs as “principled and appropriate”. In particular, he supports the plaintiffs’ contention that he should be jointly liable with Mr Schepens to the plaintiffs for 10 per cent of the costs and disbursements ordered. Mr Schepens, on the other hand, says that there should be no joint and several order and that Mr Morris should be liable for 30 per cent of the total costs award (with 70 per cent borne by Mr Schepens).

1      Gamble v Schepens [2023] NZHC 3191.

Issue (a) – Indemnity or increased costs

[8]    I find that the threshold for an award of indemnity costs has not been met. It cannot be said that Mr Schepens has behaved either badly or very unreasonably.2 The truly critical issue is whether there is a proper basis for increased costs.

[9]    Increased costs may be ordered where there is a failure by the party paying to act reasonably.3 However, generally costs are to reflect how parties acted during litigation, not before it.4

[10]   The Court should consider the extent to which the failure to act reasonably contributed to the time or expense of the proceedings. Only to that extent can any percentage uplift from scale be justified.5

[11]   I find that there  is  a  proper  basis  for  an  award  of  increased  costs.  As Mr Browne submitted, Mr Schepens’ objection to his removal was unreasonable. Had he stood back and objectively considered the matter, he would, or should have consented to his removal rendering proceedings to be unnecessary. Instead, he opposed his removal throughout the proceedings and, in circumstances where he should have known that, he had failed to act properly as a trustee. He knew that he had not had any trustee meetings, he knew that he had not involved Mr Morris at all in various decisions and he knew that he owed a substantial amount to the estate. He also knew that he had not kept crucial records, including financial statements. He also had good reason to know that the farm had deteriorated and that the number of animals had declined.

[12]   In making those findings, I acknowledge that Mr Schepens’ whole life has been dedicated to both farms and that he is one of three generations of the Schepens’ family who have broken in the land and worked very hard to achieve that goal. I also accept that the land at issue is difficult country to farm and that there was no allegation of dishonesty against him.

2      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

3      Bradbury v Westpac Banking Corporation, above n 2, at [27].

4      Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].

5      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

[13]   In the circumstances, I find that there should be a 50 per cent uplift of scale costs (plus disbursements) giving rise to a total award in favour of the plaintiffs of

$67,104.55.

Issue (b) – Relative liability

[14]   The usual position with trustees acting in concert is for any costs award to be joint and several. However, where trustees take different steps, separate costs awards are often made. In Tillemans v Tillemans,6 Bell AJ held:

[17] If the trustees were to be personally liable for the costs orders, I would make separate costs orders against them without joint liability. That is because they took different steps.

[15]   Here, the trustees did take different steps. Mr Schepens opposed his removal from beginning to end. By contrast, Mr Morris abided the decision of the Court. However, as Mr Browne submitted, Mr Morris filed his appearance and affidavit late. His late appearance did extend the length of the trial from what was anticipated. Furthermore, due to his stance prior to the proceedings that he wanted written confirmation that he would not be liable for the current state of the trust, it was necessary for the plaintiff to name him as a defendant.

[16]   I accordingly find that it is appropriate for Mr Morris to bear some costs even though he abided the Court decision.

[17]   I conclude that there should be separate costs orders as against both trustees. Mr John Schepens is to pay 80 per cent of those costs and Mr Morris is to pay 20 per cent. There is no joint liability.

Result

[18]   I order that the defendant, Mr John Schepens, is to pay to the plaintiffs 80 per cent of the total costs and disbursements award of $67,104.55.

6      Tillemans v Tillemans [2020] NZHC 1907, at [17].

[19]   I order that the defendant, Mr Bruce Morris, is to pay the plaintiffs by way of costs 20 per cent of the sum of $67,104.55.

Andrew J