Hopkins v Banks
[2021] NZHC 1367
•10 June 2021
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2018-418-000003
[2021] NZHC 1367
IN THE MATTER of the estate of Joyce Eileen Banks BETWEEN
NOELINE HOPKINS AND LORRAINE BANKS FOSTER
Applicants
AND
DOUGLAS BANKS
Respondent
Hearing: On the papers Appearances:
G E Slevin for Applicants Respondent in person
A G Whitcombe, Counsel assisting the Court
Judgment:
10 June 2021
JUDGMENT OF DUNNINGHAM J
RE: Costs Decision
This judgment was delivered by me on 10 June 2021 at 12 noon, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Introduction
[1] Noeline Hopkins and Lorraine Banks Foster (the applicants), as executors of their mother’s estate, apply for their actual and reasonable costs of $45,614.35, to be paid from the estate.
HOPKINS v BANKS [2021] NZHC 1367 [10 June 2021]
[2] The applicants say they do not seek costs against the respondent but request an order that the share of the estate that would have passed to him, but for his bankruptcy, bear a greater share of their costs. The applicants claim that the amount to be paid from his share of the estate is at least the equivalent of 2B costs of $22,741.50 from Mr Banks’ share of the estate plus disbursements of $1,135.33, or reflect increased or indemnity costs to be paid from the estate generally.
[3] Mr Banks (the respondent) and third executor of the estate, seeks costs lie where they fall.
Background
[4] The applicants and the respondent are siblings. Unfortunately, the relationship between the parties broke down after the death of their mother and as executors they could not agree on the appropriate administration of her estate. This was complicated by the fact Mr Banks was an undischarged bankrupt so his interest in the estate passed to the Official Assignee. The applicants applied under s 19 Administration Act 1969 to remove Mr Banks as executor via an order nisi calling upon the executor (the respondent) to show cause why probate should not be granted to the applicants alone.
[5] Instead of granting the order, Davidson J felt there was nothing insurmountable stopping the executors working together to gain probate.1 He suggested a Court imposed framework (the framework) involving a Court appointed solicitor (Mr Whitcombe) to act for all the parties to facilitate the granting of probate. The estate monies were ordered to be paid to the solicitor and no payments were to be made from that account unless the parties agreed or the Court directed. The solicitor was to contact the Court if further direction about administration was required. All parties agreed to this solution.
[6] There were a multitude of issues raised subsequently, generally by Mr Banks, but they were successfully worked through, with the help of Mr Whitcombe and various teleconferences convened by the Court. The major issues involved concerns over transparency and accountability between the parties, whether the freehold of the
1 Re Banks HC Christchurch CIV-2018-418-3, 17 July 2018.
estate’s major asset could be purchased if probate could be in Mr Banks’ name (as an undisclosed bankrupt) and the source of funding to obtain freehold title for the estate property. These issues have now been resolved and the property has been sold. The estate funds can now be distributed subject to the position of Mr Banks as a previously undischarged bankrupt, and costs.
The Official Assignee’s position
[7] The Official Assignee claims the full amount of Mr Banks’ share of the estate. The Official Assignee will abide by the decision of the Court regarding costs to the extent the applicants’ costs are to be met from the estate as a whole.
[8] The Official Assignee does not consider Mr Banks’ share of the estate should be liable for his conduct as executor as his bankruptcy did not disentitle him from being executor. This executorship was personal to him and therefore responsibility for his conduct should also be personal to him. Further, any proportion of costs attributable to his conduct should be borne by him personally, his creditors should not be prejudiced by his conduct as executor.
Submissions on costs
Applicant’s submissions
[9] Mr Slevin, for the applicants, submits although they were unsuccessful in removing Mr Banks as executor, the applicants succeeded in the proceedings overall and are entitled to costs.2 All the procedural orders the applicants sought were made, although they were opposed by Mr Banks. Further, when Davidson J initially proposed an alternative to removing Mr Banks as executor, this was accepted by the applicants based on the respondent’s assurance he would co-operate. This was a success in that it resolved their issues of stalemate and provided for the swift efficient administration of the estate avoiding the possibility Mr Banks would appeal.
[10] Mr Slevin notes the need for the application is clear considering the numerous issues which the Court and Mr Whitcombe have dealt with since the framework was
2 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
adopted. He cites examples of the delays caused by Mr Banks refusing to sign affidavits, his objections to Mr Whitcombe’s conduct and his refusal to agree to finance the freehold purchase until his son was engaged to finance it.3 This latter issue was only resolved after directions for a hearing of the application to remove Mr Banks if he would not sign loan documents requested by Mr Whitcombe.
[11] At the least, scale costs on a 2B basis of $22,741.50 are sought because it was necessary to respond to Mr Banks’ memoranda seeking court intervention. While costs may be awarded against litigants personally in estate litigation they may be paid from the estate provided they were properly incurred. As a recently discharged bankrupt the applicants do not wish to impede the respondent’s recovery and do not seek costs from him personally. Instead, Mr Slevin submits scale costs should be paid from Mr Banks’ portion of the estate based on Andrews v Martin.4 In Andrews v Martin a bankrupt executor obstructed probate, and scale costs were awarded to the applicants to be paid from the bankrupt’s share of the estate.5 This reflects that a costs award is likely to be unenforceable and that funds received by a bankrupt are of benefit in that they may result in the discharge of his debts.
[12] Mr Slevin also submits indemnity costs should be paid from the estate generally after scale costs are deducted from the Official Assignee’s share. This recognises the Official Assignee’s lack of control over Mr Banks’ conduct but that he benefits from the resolution of matters preventing distribution of the estate. Mr Slevin submits these costs are appropriate both under r 12.6(4)(a) based on Mr Banks’ vexatious conduct, and r 14.6(4)(d) as the applicants were necessary parties and the proceedings were properly brought by them.6 These costs amount to $45,614.35. He suggests that the excess over 2B costs (being $22,872.85) is paid from the estate, thereby effectively requiring the applicants to meet $15,248.57 of the costs themselves. Mr Slevin submits this would be a “fair and just outcome”.7
3 This finance issue alone involved 10 memoranda from Mr Banks, seven from Mr Whitcombe, three from the applicant’s counsel, seven minutes by the Court and one teleconference.
4 Re Estate of Andrews [2012] NZHC 2491.
5 At [20].
6 High Court Rules 2016.
7 These figures have been amended to take account of Mr Slevin’s recalculation of scale costs as set out in his memorandum of 12/5/21.
[13] Alternatively, if indemnity costs are not awarded, Mr Slevin submits increased costs are appropriate as Mr Banks has contributed unnecessarily to the time and expense of the proceedings.8 Mr Banks rejected the applicants’ offer to settle at an early stage.9 The proceeding was also of general importance to the Official Assignee so it was reasonably necessary for the applicants to bring the proceedings. A 50 per cent uplift from scale is appropriate resulting in a costs award of $34,112.25 with $11,370.75 of which paid to the applicants from the estate generally, after the deduction of scale costs from the Official Assignee’s share.10
[14] Finally, Mr Slevin requests disbursements of $1135.33 are awarded from the estate.
Respondent’s submissions
[15] Mr Banks’ submits costs should lie where they fall because the applicants failed to remove him as joint executor. He notes he did not employ counsel, but his sisters continued to engage lawyers, which was not for the benefit of the estate, after the Court ordered framework made that unnecessary. The estate should not bear the costs for unnecessary engagement of counsel when all three executors had access to an assisting lawyer.
[16] Mr Banks provided memoranda to the Court to address on-going delays, a lack of responses, transparency or information after the Court appointed framework was imposed. Mr Banks submits these issues were caused by the applicants’ hostilities, as seen in an affidavit of Noeline, their refusal to involve him in the estate’s financial matters, ongoing avoidable delays and their rejection of valid solutions. Mr Banks utterly rejects he ever acted vexatiously improperly or unnecessarily.
[17] Mr Banks submits placing the greater burden of costs on one beneficiary who loses a part of their financial entitlement through no fault of their own appears improper. Beneficiaries are not executors and one of three beneficiaries should not be
8 High Court Rules, r 14.6(3)(b)(ii).
9 Rule 14.6(3)(b)(v).
10 Again these figures are amended to reflect the applicants’ revision of scale costs.
expected to pay costs for an executor. Mr Banks argues the applicants are acting out of self-interest.
[18] He also submits if unequal costs are awarded he would be personally accountable for that debt to the Official Assignee, if costs were recovered from him he would be bankrupt for a second time. Mr Banks rejects that his refusal to engage with his sister’s settlement offer removing him as executor should lead to increased costs. He was entitled to refuse a framework which was against his mother’s will.
[19] Mr Banks submits all of these costs were avoidable if the applicants had continued with their application for joint probate with all three of them, as the will required. For all these reasons he submits costs should lie where they fall.
Discussion
[20] This is an unusual case. The application to have Mr Banks removed as an executor of the estate did not proceed to a hearing. However, it is clear the concerns raised by the applicants were legitimate, and in my view, these were exacerbated by the fact Mr Banks had not instructed a lawyer (who might have been able to resolve many of Mr Banks’ concerns). Instead, counsel for the applicants and Court-appointed counsel, were put to additional trouble to work through the issues which arose during the administration of the estate.
[21] I consider there was a sound basis for the applicants’ application which was reflected in the decision to adopt the framework. It reflected the validity of the applicants’ concerns, while nevertheless endeavouring to respect the various views of the parties, and the familial context in which the dispute arose.
[22] Accordingly, although the application was not resolved in the way the applicants envisaged, ensuing events showed the application was justified, but the Court encouraged the parties to address those concerns through a different mechanism (the framework) from that proposed by the applicants, and they sensibly agreed to that course of action.
[23] In summary, I see the applicants as, in substance, the successful party. Their application led to a resolution of the stalemate and enabled the administration of the estate to proceed. I consider their pragmatism in agreeing to the Court’s framework reflects well on them, and was intended to avoid the cost of a defended application.
[24] Regrettably, the administration of the estate was still not smooth and I consider Mr Banks contributed to the delays, including by refusing to sign affidavits and by creating unnecessary difficulties over the provision of finance in order to freehold the property for sale. This last issue was only resolved after I made directions to progress a hearing on the application to remove Mr Banks if he would not sign the loan documents requested by Mr Whitcombe. While I do not believe Mr Banks was intentionally vexatious, he was, at times, misguided and intransigent on matters which arose in the course of the administration of the estate.
[25]In light of these matters, I consider it is appropriate to award scale costs of
$22,741.50, and I direct that that sum is awarded from Mr Banks’ share of the estate with the balance to be borne by the applicants.11 This outcome reflects:
(a)the applicants were, in substance, the successful party;
(b)Mr Banks’ lack of understanding of the mechanics of administering the estate and consequent lack of co-operation led to unnecessary delays, and could have justified a much higher costs award; and
(c)the family context in which this litigation arose, where the Courts may be reluctant to aggravate tensions by making increased awards of costs.12
[26] While the Official Assignee does not consider Mr Banks’ share of the estate should be liable for his conduct, saying that responsibility for his conduct should be personal to him, and his creditors should not be prejudiced by his conduct as an
11 I acknowledge the applicants sought costs to be awarded from the estate, with Mr Banks being the larger share of them from his share, but I think it more appropriate to award costs on an orthodox basis as between the parties.
12 Ware v Reid [2019] NZHC 1706 at [53] citing Keelan v Peach [2003] NZFLR727 (CA) at [7].
executor, I do not agree. Had this litigation occurred just before bankruptcy, and an award made for Mr Banks’ share of the estate, his creditors would be in no better position. In any event, I consider there is some force in Mr Banks’ submission that, if the costs were directed to be paid by him personally, he would be made bankrupt for a second time, with no overall benefit to creditors.
Result
[27] The applicants are awarded costs in the sum of $22,741.50 plus disbursements of $1,135.33. These costs are to be paid from Mr Banks’ share of the estate.
Solicitors:
White Fox & Jones, Christchurch
Copy To:
Douglas Banks, Greymouth
0
3
1