Inthayung v Heimsath Alexander Trustee Limited
[2023] NZHC 1867
•18 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000830
[2023] NZHC 1867
BETWEEN MALIWAN INTHAYUNG
Applicant
AND
HEIMSATH ALEXANDER TRUSTEE
LIMITED and LEX TRUSTEE COMPANY
LIMITED as Trustees of the DW CORRICK TRUST
First RespondentsOFFICIAL ASSIGNEE as Executor of the ESTATE OF DAVID WAYNE CORRICK
Second Respondent
Hearing: On the papers Counsel:
P Napier and R Wang for the Applicant
M Russell and R Bingham for the first named First Respondent A Cupples for the second named First Respondent
No appearance for the Second Respondent
No appearance for the Bank of New Zealand (Interested Party)Judgment:
18 July 2023
REDACTED JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me
on 18 July 2023 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
K3 Legal Ltd, Auckland Wotton Kearney, Auckland Kennedys, Auckland
INTHAYUNG v HEIMSATH ALEXANDER TRUSTEE LTD [2023] NZHC 1867 [18 July 2023]
[1] This is a judgment on an application for costs. The applicant, Maliwan Inthayung, seeks costs of $22,346.50 together with disbursements of $150 (a total of
$22,496.50) against the first named first respondent, Heimsath Alexander Trustee Ltd (Heimsath Alexander Trustee).
[2] Heimsath Alexander Trustee opposes the application. It further says that, if costs are awarded, the most Ms Inthayung is entitled to is $12,736.50 and any costs awarded should be paid from the assets of the DW Corrick Trust (the Trust).
[3] Heimsath Alexander Trustee also seeks its costs in respect of the application with those costs to be paid from the assets of the Trust.
Background
[4] A brief background is as follows. Further details are set out in my substantive judgment in Inthayung v Heimsath Alexander Trustee Ltd (the judgment).1
[5]David Corrick died on 9 November 2021.
[6] Mr Corrick had created the Trust by Deed dated 5 November 2008. The trustees were Mr Corrick and Knight Coldicutt Trustees Ltd. On 9 June 2010, Knight Coldicutt Trustees Ltd was replaced by Heimsath Alexander Trustee, a trustee company operated by the legal firm of Heimsath Alexander.
[7] Ms Inthayung is the widow of the late Mr Corrick. Ms Inthayung was added as a beneficiary of the Trust by Mr Corrick’s last will dated 29 January 2021 pursuant to cl 25 of the Trust Deed.
[8]On 28 April 2023, Ms Inthayung applied to this Court for orders that:
(a)the first respondents, Heimsath Alexander Trustee and LEX Trustee Company Ltd (LEX Trustee) be removed as trustees of the Trust; and
1 Inthayung v Heimsath Alexander Trustee Ltd [2023] NZHC 1240.
(b)Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland be appointed as trustees of the Trust.
[9] Heimsath Alexander Trustee and LEX Trustee agreed to their removal and Mr Kirkland and Ms Edwards consented to being appointed as trustees of the Trust. Despite Heimsath Alexander Trustee saying it would abide by the Court’s decision, it sought particular conditions relating to the principal asset of the estate, the family home (the property), and particular conditions of retirement, which it says were consistent with the Trusts Act 2019 and the Trust Deed. The conditions sought were:
(a)that the replacement Trustees, Mr Kirkland and Ms Edwards, jointly and severally, use their best endeavours to:
(i)have the Bank of New Zealand agree to grant a discharge of the mortgage instrument [redacted], its facility and three housing loans (using identifiers: [redacted]) secured over the property, in favour of the first respondents, by 24 May 2023;
(ii)obtain a replacement mortgage and loan documentation for funding of the property and small business account (using identifier [redacted]) in the name of the replacement trustees with a written release from the Bank of New Zealand for the benefit of the retiring trustees by 24 May 2023;
(iii)provide to the first respondents a written deed of retirement for the benefit of the first respondents recording their retirement from the Trust on terms to be agreed by 24 May 2023 (within this the transfer of the property to the replacement trustees);
(iv)enter into an agreement with Heimsath Alexander Trustee for its unpaid fees (set out in an exhibit), which are to be paid by the Trust;
(v)confirm that the existing Liability and Indemnity of Trustees at clause 21.1 of the Trust Deed dated 5 November 2008, as varied by the Deed of Variation to the Trust Deed dated 29 January 2021, applies as it stands to the current trustees after their retirement; and
(vi)should Ms Inthayung be unable to achieve the matters set out at paragraph (v) above then the matter shall be referred by any party to the Court for further directions.
[10] At the hearing on 22 May 2023, counsel came to an agreement as to the wording of a condition if the Court were minded to make the orders sought. In the judgment I made the orders sought removing Heimsath Alexander Trustee and LEX Trustee as trustees of the Trust and appointing Mr Kirkland and Ms Edwards as trustees of the Trust. I made those two orders on the condition as agreed by counsel in the hearing. The condition reads as follows:
(a)Upon becoming trustees of the DW Corrick Trust, Mark Graeme Kirkland of Dunedin and Helen Marie Edwards of Auckland, will use reasonable endeavours to obtain both the release of Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd from any liability under mortgage instrument [redacted], its facility and three housing loans (using identifiers: [redacted]) and the transfer of the property at [redacted] from Heimsath Alexander Trustee Ltd and LEX Trustee Company Ltd to Mark Graeme Kirkland and Helen Marie Edwards by 22 June 2023.
[11]In addressing costs at the end of my judgment I wrote the following:
[45] At the hearing I expressed a preliminary view that this might be a case where costs would lie where they fall. Although all the conditions sought by Heimsath Alexander Trustee were not imposed, that came about in part by the extension of the date in the PLA Notices which was advised only at the hearing by Mr Napier. Further, although the first part of the condition agreed to by counsel was based on a condition proposed by Ms Inthayung, the second part was added to the condition by agreement between counsel at the hearing.
Costs principles
[12] The starting point in any costs assessment is that all matters with regard to costs are at the discretion of the Court.2 This discretion, however, is not an unfettered one and is to be guided by the general principles in rr 14.2–14.5 of the High Court Rules 2016. A fundamental costs principle is set out in r 14.2(1)(a), which provides that the party who failed with respect to a proceeding should generally pay the costs of the successful party. The rules are intended to create a framework for determining costs in individual cases that is both “predictable and expeditious”.3
[13] Ultimately, the overriding consideration when exercising a discretion to award costs is that any award ought to do justice between the parties.4 Success or failure should be determined by a realistic appraisal of the end result.5
Should costs lie where they fall?
[14] Mr Napier, counsel for Ms Inthayung, submits that she was the successful party. He says that Ms Inthayung obtained the order she sought with a condition which she had already largely consented to, except for an addition which he says was the whole point of the application (and therefore not in fact necessary).
[15] Mr Napier takes issue with my statement in [45] of the judgment set out in [11] above that “Although all the conditions sought by Heimsath Alexander Trustee were not imposed …”. Mr Napier submits that is incorrect as none of the six conditions sought were imposed. Perhaps it is a matter of language. The way I expressed myself in the judgment may be capable of more than one interpretation. For the avoidance of doubt, I accept that none of the conditions sought by Heimsath Alexander Trustee were imposed.
[16] Ms Inthayung does not seek costs against LEX Trustee on the basis that Heimsath Alexander Trustee was the only party that maintained that its replacement should be upon conditions.
2 High Court Rules 2016, r 14.1.
3 Rule 14.2(g).
4 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
5 At [6].
[17] Ms Burkhart, counsel for Heimsath Alexander Trustee, submits that Ms Inthayung is not entitled to costs. She says Heimsath Alexander Trustee did not oppose Ms Inthayung’s application for an order and indicated its willingness to voluntarily retire as trustee. Ms Burkhart further says that the conditions sought by Heimsath Alexander Trustee for its resignation were necessary for the due and orderly administration of the Trust in the situation where the Bank of New Zealand was seeking to imminently enforce its Property Law Act 2007 (PLA) Notice over the property.
[18] On a realistic appraisal of the end result, Ms Inthayung was the successful party. The two orders were made for the removal of the existing trustees and the appointment of the new trustees. Although the removal and appointment were not opposed per se, that was on the basis that six conditions were required. The first part of the condition that was imposed (relating to the release of liability for Heimsath Alexander Trustee) is on the same terms as the condition proposed by Ms Inthayung in counsel’s submissions for the application. Mr Napier also points to a joint memorandum sent to Heimsath Alexander Trustee on 17 May 2023 where he also proposed the first part of the condition. The condition Heimsath Alexander Trustee was seeking in relation to its liability under the mortgage used the words “best endeavours” as opposed to “reasonable endeavours” and sought a more distinct process. But in the result, the first part of the condition agreed to at the hearing by both counsel is identical to the condition proposed by Ms Inthayung.
[19] The second part of the condition agreed upon which relates to the transfer of the property was not suggested by Ms Inthayung. Mr Napier says that if it had been suggested she would have agreed to it. He says that it was unnecessary for Ms Inthayung to suggest it as part of the condition because it is effectively what the application was trying to achieve. The application was brought to achieve the transfer of the assets of the Trust, including the property in question, from Heimsath Alexander Trustee to Mr Kirkland and Ms Edwards. The second part of the condition, that the transfer of the property take place by 22 June 2023, is included in what Ms Inthayung was seeking when making the application.
[20] Therefore, although I suggested in the judgment that costs may lie where they fall, I accept Ms Inthayung was the successful party as she obtained the condition she sought and (notwithstanding what I said in the last part of the last sentence in [45] of the judgment) the second part of the condition was inherent in what she was seeking through the application overall.
Should the first named first respondent’s costs be indemnified by the Trust?
[21] If costs are to be awarded against Heimsath Alexander Trustee, the issue then arises as to whether Heimsath Alexander Trustee should be indemnified by the Trust in respect of those costs.
[22] There are three categories of trust litigation that are traditionally used to determine whether costs should be paid out of a trust. These categories were explained by Doogue J in Percy v Percy:6
[30] The “classic statement” as to the application of costs jurisprudence to trusts litigation is that of Kekewich J in Re Buckton, as described by Hoffmann LJ in McDonald v Horn. In Re Buckton, Kekewich J divided trust litigation into three broad categories:
(a)The first category involves proceedings brought by trustees to obtain the Court’s guidance on the construction of the trust deed or some aspect of the trust’s administration. In such cases, the costs of all parties necessarily participating are treated as incurred for the benefit of the estate and ordered to be paid out of the trust fund.
(b)The second category involves a similar application, but by someone other than a trustee (such as a beneficiary). However, it is a case which would have justified application by a trustee. The same approach is taken to costs in the second category as to the first.
(c)The third category is where a beneficiary is making a “hostile claim” against the trustees, or another beneficiary. The claim may still involve a point of construction or administration. It will often involve a claim to a beneficial interest or entitlement to a part of the trust fund. In the third category, involving a hostile claim against trustees or another beneficiary, the usual principles as to costs apply. Ordinarily they will follow the event.
6 Percy v Percy [2020] NZHC 828 (footnotes omitted).
[23] Ms Burkhart submits that any costs awarded should be paid from the assets of the Trust. She submits that the application was at best, an application to obtain the Court’s guidance on an aspect of the Trust’s administration, and therefore falls into category (b).
[24] It is sometimes difficult to categorise proceedings as being in one of the three categories at [22] above as there may be overlap and aspects of a proceeding which fit into more than one of the categories. In this case, the application to remove trustees and appoint new trustees to the Trust is an aspect of the Trust’s administration. However, the Court’s assistance was required to impose a condition on the replacement of the trustees because the two parties could not come to a prior agreement. Ms Inthayung had already effectively offered the condition to Heimsath Alexander Trustee, which it evidently did not accept prior to the hearing. Therefore, Heimsath Alexander’s insistence on the conditions it sought means the costs awarded against it, and its own costs, cannot be treated as being for the benefit of the Trust. The application does not fall easily into category (b) and errs on the ‘hostile’ claim described in category (c).
[25] The circumstances of this case do not give rise to the kind of situation where a trustee should be entitled to indemnity for costs in proceedings. In Re O’Donoghue, Hammond J held that trustees are only entitled to expenses “properly incurred” and observed:7
There is a respectable volume of case law authority around in the British Commonwealth as to what may be regarded as “not improperly incurred expenses”. Necessarily, given the principle, these cases all appear to be determinations on the factual position arising in a particular case. But the principle that expenses must be properly incurred necessarily requires a trustee, if called upon, to demonstrate that the expenses arose out of an act falling within the scope of his trusteeship; whether it was something that his or her obligations required the trustee to undertake; and whether the expense incurred was, in all the circumstances, “reasonable”.
[26]Hammond J further observed:8
… I can discern no proper justification, or even a reasonably arguable one, for [the trustee] having persisted in forcing Health Waikato up to a full defended
7 Re O’Donoghue [1998] 1 NZLR 116 (HC) at 121.
8 At 122.
hearing, and a delayed distribution of some years of the estate. It cannot be right that he should then seek to offload his costs of the proceeding onto the residuary beneficiary.
[27] On that basis, I turn to consider whether the conditions sought by Heimsath Alexander Trustee were reasonable ones and whether it can “offload” its costs onto the Trust and in effect, the residuary beneficiaries.
[28] Ms Burkhart submits the conditions sought for Heimsath Alexander Trustee’s retirement or resignation were necessary for the due and orderly administration of the Trust. However, it appears they were not as necessary as stated because they were abandoned in the hearing when counsel agreed with the condition that was eventually imposed by the Court.
[29] Ms Burkhart says that in the hearing Mr Napier gave the assurances that Heimsath Alexander Trustee was effectively seeking in the conditions it had sought and Heimsath Alexander Trustee could then agree to the one condition imposed.
[30] I consider that Mr Napier expressed a view but made it clear that the conditions sought for the benefit of Heimsath Alexander Trustee were not for him to answer in the hearing. In particular, and in line with written submissions, his position was that:
(a)the condition sought for a written deed of retirement for the benefit of Heimsath Alexander Trustee was unnecessary because the application arose out of the parties not being able to agree on the terms of the first respondents’ retirement;
(b)any fees validly due and owing to the first respondents would constitute a debt owed by the Trust and was not a matter to be determined at that stage because neither Ms Inthayung nor the proposed trustees were in a position to ascertain the validity of the fees; and
(c)the confirmation sought for the existing liability and indemnity of trustees to remain even after retirement was a question of law. Having said that, Mr Napier submitted that the law is quite clear that the indemnity does survive after retirement, but he also made it clear it was
not for Ms Inthayung to try and fetter what the new trustees may or may not do in that regard.
[31] As noted in [45] of the judgment set out in [11] above, the extension of the date for the PLA notices gave the parties the opportunity to implement the one condition agreed to. But otherwise, there was no material difference in the circumstances or assurances given between Heimsath Alexander Trustee rejecting Ms Inthayung’s proposed condition and then eventually agreeing to a condition of an extremely similar nature at the hearing. I do not consider these circumstances to be of the kind where Heimsath Alexander Trustee’s costs (including the costs awarded against them) should be indemnified by the Trust.
Costs claimed by Ms Inthayung
[32] Ms Inthayung claims scale 2B costs as set out in a Schedule attached to counsel’s submissions on costs. Total costs and disbursements sought are $22,496.50.
[33] Heimsath Alexander Trustee submits Ms Inthayung is not entitled to the amount of costs sought. It says items 37 (filing application and supporting affidavits x 3) and 29 (sealing order or judgment) are wrongly claimed and at most, Ms Inthayung is entitled to $12,736.50.
[34]Ms Inthayung has calculated costs for item 37 with six allocated days at
$2,390.00 per day. However, under scale 2B costs, two days is allocated for the filing of an application and supporting affidavits. The number of days allocated does not increase per affidavit. Therefore, the amount claimed for item 37 should only be
$4,780. This is a reduction of $9,560 from the $14,340 claimed by Ms Inthayung.
[35] Ms Inthayung seeks costs for the sealing of the judgment under item 29, and the disbursement fee of $50 to effect sealing of the judgment. Ms Burkhart submits that the sealing of the judgment has not been undertaken and the disbursement fee of
$50 has not been incurred, therefore, a deduction of $50 should be made.
[36] I accept that the sealing of the judgment will inevitably occur and I am prepared to approve the disbursement of $50. In the unlikely event that the judgment is not sealed, Ms Inthayung is to reimburse Heimsath Alexander Trustee the amount of $50.
[37] Based on the reduction I consider should be made for item 37, the total costs come to $12,786.50 and the total disbursements come to $150. Therefore, the total costs and disbursements Ms Inthayung can claim is $12,936.50.
Result
[38] I award $12,936.50 in standard scale 2B costs to Ms Inthayung against Heimsath Alexander Trustee.
Gordon J
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