Hills v Public Trust HC Auckland CIV 2008-404-2217
[2010] NZHC 826
•30 April 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2008-404-2217
BETWEEN KATHLEEN WINNIFRED HILLS Plaintiff
ANDPUBLIC TRUST First Defendant
ANDTHOMAS IAN GANNON Second Defendant
ANDALEXANDRIA CATHERINE MEDCALF Third Defendant
ANDDOUGLAS GWILLIAM HILLS Fourth Defendant
ANDDONALD ROSS EAGLE Third Party
Judgment: 30 April 2010
JUDGMENT OF POTTER J
as to costs
Solicitors: Taylor Grant Tesiram, P O Box 4039, Auckland 1141
Davenports, P O Box 47500, Ponsonby, Auckland 1144
Foley & Hughes, P O Box 6829, Auckland 1141
Meredith Connell, P O Box 2213, Auckland 1140Public Trust, Private Bag 17906, Greenlane, Auckland 1546
Copy to: S Grant, P O Box 4338, Auckland 1140
S R G Judd, P O Box 3320, Shortland Street, Auckland 1140
T Chubb, P O Box 1128, Auckland 1140
C Townsend, P O Box 47345, Ponsonby, Auckland 1144H Fulton, P O Box 5577, Wellesley Street, Auckland 1141
HILLS V PUBLIC TRUST AND ORS HC AK CIV 2008-404-2217 30 April 2010
[1] At [202] of my judgment dated 15 March 2010 I said that the plaintiff as the unsuccessful party is liable for costs in this proceeding. This determination followed the general principle in r 14.2 of the High Court Rules that the party who fails with respect to a proceeding or an interlocutory application should pay the costs to the party who succeeds. I made timetable orders for the parties to make submissions as to costs. I have now received and considered memoranda as to costs from the second, third and fourth defendants and the third party and from the plaintiff in reply.
[2] The first defendant, the Public Trust, filed a memorandum dated 1 April 2010 which states that the Public Trust would normally charge its costs directly to the estate as an administration expense unless the Court otherwise rules.
[3] The costs and expenses incurred by the defendants and third party in this proceeding demonstrate that the time and resources involved is disproportionate to the amount at stake. On my calculation, actual costs incurred by the second, third and fourth defendants and the third party approximate $241,000. In addition will be the costs of the Public Trust and the plaintiff’s own costs. On a formula 2B basis, costs of the second, third and fourth defendants and the third party total $125,544 and if the Public Trust’s costs were calculated on a 2B basis, a further $15,540 would be added, making a total of $141,000 approximately.
[4] The value of the deceased’s estate is approximately $600,000. At [123] of the judgment I estimated that each of the plaintiff and the third and fourth beneficiaries would received approximately $180,000-$200,000 on the distribution of the estate.
[5] On the evidence, there is a balance of approximately $9,400 in the Norah Hills Family Trust (“the NHF Trust”) available for distribution (refer [178] of the judgment). This will be subject to costs involved in the preparation of final accounts and the winding up of the Trust. In short, the assets available for distribution are modest.
[6] Rule 14.1 provides that all matters relating to costs are at the discretion of the
Court.
[7] I propose in this judgment to determine the basis upon which costs should be paid by the plaintiff. I have not checked the calculations in the various schedules attached to the submissions of the parties and leave the parties to determine quantum in accordance with the approach determined in this judgment. If further directions are required, leave is reserved to apply.
First cause of action : Family Protection Act claim
First defendant : Public Trust
[8] The Public Trust did not take active steps in the proceedings and sought leave to be excused from the hearing. It has acted throughout in accordance with its duties as trustee of the estate of Norah Hills. In accordance with the determination at [202] of the judgment, the Public Trust’s proper and reasonable costs and disbursements are to be paid by deduction from the plaintiff’s share in the deceased’s estate. In the event that the Public Trust’s costs exceed costs calculated on a 2B basis ($15,540) and are not accepted by the plaintiff, an itemised bill of costs may be submitted for my further ruling. I trust this will not be necessary.
Third and fourth defendants
[9] According to counsel’s memorandum dated 8 April 2010 actual costs incurred total $78,345.50 plus disbursements.
[10] The third and fourth defendants seek indemnity costs under r 14.6 on the basis of:
•Failure by the plaintiff to comply with timetabling directions “on numerous occasions”.
•The plaintiff’s case was without merit as has been the consistent stance of the third and fourth defendants.
•A Calderbank offer was made to the plaintiff on 24 October 2008 in the sum of $50,000 to settle the Family Protection claim which was not accepted by the plaintiff.
•A request for an interim distribution was refused by the plaintiff, which caused hardship, particularly to the fourth defendant.
• The plaintiff has been on notice that full indemnity costs would be claimed.
[11] In response the plaintiff places reliance on the principle in Keelan v Peach[1]
[1] Keelan v Peach [2003] NZFLR 727 (CA) at [7].
that:
It is indeed the general practice in Family Protection Act proceedings for costs to be carried by an estate, although there are of course exceptions. Usually an unsuccessful claim will have failed on its merits rather than on issues of standing and often there will be reluctance on the part of the Court and, sometimes the parties, to exacerbate family rifts by personal costs orders. . . .
[12] The plaintiff submits that costs should lie where they fall or in the alternative should be paid from the residue of the estate: Weir v Hotham.[2]
[2] Weir v Hotham HC Auckland CIV-2005-404-5300, 1 August 2006.
[13] The overall aim of the Court in relation to costs is to do justice between the parties. There is no reason in my view to depart from the general principle relating to costs that they should be paid by the unsuccessful party, as ordered in the judgment. However, I accept that while the plaintiff was unsuccessful, she had a genuine belief that the provision made to her siblings from the NHF Trust placed the deceased in breach of her moral duty to her as one of three siblings and was not consistent with the clearly expressed intention of Mrs Hills to treat her children equally. She was not unjustified in seeking to test her case in Court, although as I stated in the judgment, aspects of the way in which the claim was pursued and family rifts and animosity explored in evidence, were inappropriate and unfortunate. This is not a case where application of the Keelan principle would avoid or ameliorate family dissention.
[14] I consider substantial justice between the parties will be best achieved by an order that the plaintiff pay the costs of the third and fourth defendants on a 2B basis ($41,120) plus disbursements. I also order that these costs are to a charge against the plaintiff’s share in the estate of the deceased and are to be paid by the Public Trust as administrator in priority to any distribution of the plaintiff’s share in the estate.
Second cause of action against second defendant : wrongful conduct, breach of trust and undue influence
[15] The second defendant, Mr Gannon, claims costs on an indemnity basis totalling $87,675 plus disbursements.
[16] Counsel refers to the trustees’ entitlement to indemnity out of the trust fund as provided in cl 20.2 of the trust deed dated 12 May 1997. If I am correct in my estimate at [178] of the judgment that the balance of the trust fund is approximately
$9,400 (less costs and expenses), then the indemnity is of little value to the trustees. I propose therefore to deal with the issue of costs independently of the indemnity.
[17] All the claims of the plaintiff in the second cause of action were dismissed. At [180] of the judgment I found there was no evidence of misconduct by the trustees Mr Gannon and Mr Eagle in relation to the NHF Trust.
[18] However, I went on to make observations critical of Mr Gannon relating to certain of his actions in relation to Norah Hills’ personal bank accounts shortly before and after her death and the mixing of personal and Trust funds (at [171]-[172] of the judgment). Such conduct also contributed to the decision I made that because of the lack of confidence and trust that existed between Mr Gannon and Mr Eagle, they should be substituted as trustees by the Public Trust.
[19] To reflect as best I can the justice of the situation, I order that the plaintiff should pay the costs of the second defendant on a 2B basis ($47,840 according to the calculations of counsel for Mr Gannon) plus disbursements. I also order that these costs are to a charge against the plaintiff’s share in the estate of the deceased and are
to be paid by the Public Trust as administrator in priority to any distribution of the plaintiff’s share in the estate.
Third party’s costs
[20] The third party Mr Eagle, seeks costs on an indemnity basis against the second defendant who joined him as the third party.
[21] Counsel submits that as the second defendant’s claims against the third party were dismissed the second defendant should be liable for the third party’s costs: Money World New Zealand 2000 Limited v KVB Kunlun New Zealand Ltd.[3]
However, the third party also submits that given the Court’s findings, it may be appropriate that the plaintiff bear all or a portion of Mr Eagle’s costs on an indemnity basis: Money World and Mainland Products Ltd v BIL (NZ) Holdings Ltd.[4]
[3] Money World New Zealand 2000 Ltd v KVB Kunlun New Zealand Ltd HC Auckland CIV-2003-
404-2542, 23 September 2005.
[4] Mainland Products Ltd v BIL (NZ) Holdings Ltd HC Auckland CIV-2002-404-1889, 21 October
2004.
[22] I consider the plaintiff’s claims against the second defendant had the inevitable result of the third party, Mr Eagle, a co-trustee, being joined. The breaches of duty alleged against the second defendant in the second cause of action, namely breach of duty to account, distribution exceeding the amount of the trust fund and preferring of beneficiaries were all breaches which, if established, would have been breaches by both the trustees. Indeed, Mr Eagle specifically authorised the distributions and the payments to two of the three beneficiaries which were the subject of the second and third alleged breaches.
[23] The second defendant’s claims against the third party fell with the plaintiff’s claims against the second defendant which were unsuccessful, and were accordingly dismissed ([201]b) of the judgment).
[24] In those circumstances the plaintiff must meet the third party’s costs which, consistent with the orders for costs made above, I award on a 2B basis (calculated at
$37,920 in Appendix B to the memorandum of counsel for the third party) plus disbursements.
[25] However, counsel’s memorandum advised that the plaintiff has advanced the third party $32,281.88 for payment of costs. The plaintiff’s memorandum states the amount paid by the plaintiff in respect of the third party’s costs to be $40,000. Whatever the amount paid or advanced by the plaintiff to or on account of the third party’s costs, it should be deducted from the costs ordered in favour of the third party against the plaintiff.
[26] If there is a residual liability for costs this amount should be paid out of the plaintiff’s share in the estate of the deceased, to be paid by the Public Trust as administrator in priority to any distribution of the plaintiff’s share in the estate.
Third and fourth causes of action against the second, third and fourth defendants
[27] The plaintiff is ordered to pay costs on a 2B basis.
Summary
[28] The plaintiff is to pay costs to the other parties on a 2B basis as set out above, plus disbursements. The costs so awarded are to be paid from the plaintiff’s share in the estate of Norah Hills and are to be paid by the Public Trust to the parties entitled, prior to distribution of any remaining balance to the plaintiff. If the plaintiff’s entitlement on distribution of the estate (and in respect of the second cause of action, her share on distribution of the NHF Trust) were to be less than the total of the costs and disbursements awarded, then the respective payments would need to be rebated proportionately and the plaintiff would remain liable for the unpaid balances to the parties concerned. However, the indicative figures do not suggest that this situation will arise.
0
0
0