Glasgow Harley Trustee Limited v McLaughlin - [2019] NZHC 3385

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2017-442-78

[2019] NZHC 3385

UNDER the Trustee Act 1956

IN THE MATTER

of the Ashley Trust

BETWEEN

GLASGOW HARLEY TRUSTEE

LIMITED AND JOHN MCLAUGHLIN
Applicants

AND

MARK JAMES MCLAUGHLIN AND ANDREW ASHLEY MCLAUGHLIN

Respondents

On the papers

Counsel:

W J Palmer and O D Peers for Applicants

J W A Johnson and G J C Carter for Respondents
J Little for Respondents’ Children (Interested Parties)
J M McGuigan for Brett McLaughlin (Interested Party)

Judgment:

18 December 2019

Reissued:

20 December 2019

JUDGMENT OF THOMAS J (BEDDOE APPLICATION COSTS)

[1] The applicants (Trustees), respondents (Beneficiaries), Brett McLaughlin and the Beneficiaries’ children (Interested Parties) all seek to be indemnified by the Ashley Trust (the Trust) for their costs associated with my decision in McLaughlin v McLaughlin (the Beddoe decision).1 This matter has been made more complex by both the Trustees and Beneficiaries holding themselves out as the successful parties in

1 McLaughlin v McLaughlin [2018] NZHC 3198.

GLASGOW HARLEY TRUSTEE LIMITED v MCLAUGHLIN [2019] NZHC 3385 [18 December 2019]

the Beddoe decision, and by the task of apportioning costs between the Beddoe application and the substantive proceedings. Lengthy and numerous memoranda have been filed on behalf of the main protagonists, the Trustees and Beneficiaries.

[2] Although Mark McLaughlin and Andrew McLaughlin are described as the Beneficiaries, they are not the only beneficiaries of the Trust. The settlors of the Trust, Jim and Edna McLaughlin, had four sons, one of whom, John, is a Trustee. All four sons are discretionary beneficiaries as well as final beneficiaries of the Trust. The fourth son, Brett, is subject to particular provisions under the Trust. The children of John, Mark and Andrew are all discretionary beneficiaries of the Trust.2 John’s children did not seek to be heard in respect of the Beddoe application. Mark and Andrew’s children opposed the application, as did Brett McLaughlin.

[3]The substantive proceedings involve:

(a)An action for the removal and replacement of the Trustees with two new, independent and professional trustees (unspecified). The basis for the claim is that the Trustees have misconducted themselves in the administration of the Trust.

(b)An action for directions as to the management and distribution of the Trust property.3 The sole asset of the Trust is land at Stoke, Nelson (the Ashley Trust Land). The following orders are sought:

(a)A direction for the Trustees to stop work on the Proposed Homestead Development and only do work necessary to enable the land to be sold with consents for subdivision.

(b)A direction that the Trust Property be sold after the relevant consents are obtained (if they have not been already) to maximise its value and provided that Edna’s wish to remain in her home is respected.

(c)A direction for the proceeds of sale, except for any amount required for the continued support of Edna, to be distributed to the sons.

2 Brett McLaughlin does not have children.
3 This cause of action…

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.

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Details

Case: [2019] NZHC 3385
Decision Date: 18 December 2019

CaseChat Overview and Summary

The applicants, Glasgow Harley Trustee Limited and John McLaughlin (the Trustees), and the respondents, Mark James McLaughlin and Andrew Ashley McLaughlin (the Beneficiaries), sought indemnity from the Ashley Trust (the Trust) for costs incurred in the Beddoe application. This was made more complex by the Trustees and Beneficiaries holding themselves out as the successful parties in the Beddoe decision, and the task of apportioning costs between the Beddoe application and the substantive proceedings. Brett McLaughlin and the Beneficiaries’ children (Interested Parties) also sought to be indemnified by the Trust for their costs. The Trustees brought the Beddoe application on the basis of concerns about the Beneficiaries trying to usurp the Trustees’ commercial decisions and prevent future subdivision work. The substantive proceedings involved an action for the removal and replacement of the Trustees, directions as to the management and distribution of the Trust property, and three causes of action alleging breach of trust and fiduciary duty against the Trustees. The primary legal issue was the extent to which the Trustees, Beneficiaries, and Interested Parties were entitled to be indemnified by the Trust for their costs in the Beddoe application. The Court found that the Trustees were reasonable in bringing the Beddoe application against all five causes of action. Although the Trustees succeeded on one cause of action, it was the most important one. The Court found that the Trustees were entitled to full indemnification for reasonable disbursements, as they had a duty to make full and frank disclosure. The Court found that the Beneficiaries were entitled to some indemnity from the Trust for their costs in the Beddoe application, as they had a legitimate interest in defending the application. However, the Court found that the scale costs sought by the Beneficiaries were excessive and awarded them 50% of their costs. The Court also found that the Interested Parties were entitled to some indemnity from the Trust for their costs in the Beddoe application, but awarded them less than the amount they sought. The Court awarded the Trustees $207,025 plus disbursements of $62,143.43, the Beneficiaries $58,918.88, and the Interested Parties $5,000 each.

Orders