Jongeneel v Schaake
[2024] NZHC 3198
•31 October 2024
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-303
[2024] NZHC 3198
UNDER The Trusts Act 2019 IN THE MATTER
of the JAG & AJ Schaake Family Trust
BETWEEN
AMANDA JULIE JONGENEEL
Plaintiff
AND
JACK ALLAN GEORGE SCHAAKE
First Defendant
AND
KIM SCOTT THOMPSON
Second Defendant
Hearing: On the papers at Auckland Appearances:
Z T Mora for the Plaintiff
D M O’Neill and F O’Back for the First Defendant
No appearance by or on behalf of the Second DefendantJudgment:
31 October 2024
JUDGMENT (NO.2) OF POWELL J
[Costs]
This judgment was delivered by me on 31 October 2024 at 1.00 pm.
Pursuant to R 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
AMANDA JULIE JONGENEEL v JACK ALLAN GEORGE SCHAAKE [2024] NZHC 3198 [31 October 2024]
[1] On 7 December 2023 I issued a judgment declining the plaintiff, Ms Jongeneel’s application for removal and replacement of trustees (“the judgment”).1 The final paragraph of my judgment provided:2
[31] Mr Schaake is entitled to costs from Ms Jongeneel on the dismissal of her proceedings. My preliminary view is that costs should be paid on a 2B basis. In the event the quantum of costs cannot be agreed between the parties within two weeks of the date of this judgment, Mr Schaake will have until 19 January 2024 to file submissions detailing the costs sought and Ms Jongeneel, until 2 February 2024 to file submissions in opposition. I will then determine costs on the papers.
[2] As it happened the timetable was not complied with. The submissions of Mr O’Neill on behalf of Mr Schaake in relation to costs were not filed until 12 February 2024. Mr Schaake has sought increased costs, being costs on a 2B basis (calculated by Mr O’Neill to be $19,818) uplifted by 50 per cent, a total of $29,617 plus disbursements.
[3] In response, Mr Mora on behalf of Ms Jongeneel submits that no costs should be payable as Ms Jongeneel was prejudiced by the delay in filing by Mr O’Neill. Mr Mora also opposed any uplift on the basis that Ms Jongeneel’s claim was reasonable and had merit, and submitted that in any event, Ms Jongeneel brought her claim in her capacity as a trustee and is therefore entitled to be indemnified by the trust pursuant to cl 21.2 of the Trust Deed. Finally, Mr Mora challenges the 2B calculation undertaken by Mr O’Neill, although it appears that the difference between counsel is only $1,195.
[4] Unfortunately, the parties’ submissions on costs were not forwarded to me until August 2024 by which time I was on extended leave, and I did not ultimately return to New Zealand until the end of August 2024. There has therefore been an unavoidable delay to the production of this judgment for which I apologise to the parties.
[5]I deal with the three issues raised by Mr Mora in turn.
1 Jongeneel v Schaake [2023] NZHC 3568.
2 At [31].
Delay in seeking costs
[6] Mr Mora submits that as a result of the delay in filing the costs memorandum on behalf of Mr Schaake, Ms Jongeneel has been prejudiced and no costs should therefore be granted. Specifically, Mr Mora submitted Ms Jongeneel was “unable to factor in costs exposure when considering whether an appeal should be pursued” and suggested further:
If the Court is minded to still make a costs award then the plaintiff seeks a direction that the first defendant is to support an interlocutory application by the plaintiff pursuant to Rule 29A of the Court of Appeal (Civil) Rules 2005 to seek an extension of time for appealing.
Discussion – Delay
[7] It is noted that at the outset that the judgment had not left open the issue of costs but rather concluded Mr Schaake was entitled to costs from Ms Jongeneel, and the default position was that costs should be awarded on a 2B basis. In such circumstances it is difficult to identify any prejudice of the type submitted by Mr Mora. In particular, it is not clear what Mr Mora meant by being “unable to factor in costs exposure”. At the very least it was clear that the effect of judgment would be that Ms Jongeneel was liable for costs on a 2B basis, which Mr Mora himself calculated as being $18,403. In addition, it is also clear that in the event Mr Schaake had sought increased or indemnity costs, the Court would not have had the opportunity to rule on those costs prior to the appeal period expiring on 25 January 2024.
[8] Given this position, I am therefore satisfied there was no prejudice in the late filing of the costs memorandum by Mr O’Neill, which Mr O’Neill has accepted responsibly for. There is equally no justification for the stipulation proposed by Mr Mora in the event there was jurisdiction to impose it.
Is the indemnity in the Trust Deed relevant to the determination of costs?
[9] Mr Mora relies on cl 21.2 of the Deed of Trust establishing the JAG and JA Schaake Family Trust (“the Trust”). Clause 21.2 provides:
21.2 Indemnity of Trustees: Each Trustee…shall be entitled to a full and complete indemnity from the Trust Fund for any liability which that Trustee…may incur in any way arising out of or in connection with
that Trustee…acting or purporting to act as a…a Trustee of the Trust, provided such liability is not attributable to that Trustee’s…own dishonesty, or to the wilful commission or omission by that Trustee…of an act known by that Trustee…to be in breach of trust.
[10] Mr Mora submitted that in the circumstances it was reasonable for Ms Jongeneel as a trustee to bring proceedings to remove all trustees. Mr Mora then submitted:
…Therefore, if a costs award was to be made, those costs would then be sought from the Trust, further protracting and complicating the dispute.
Discussion – Indemnity
[11] There is no dispute that a trustee may have recourse to trust property for expenses and liabilities occurred in acting reasonably on behalf of a trust.3
[12] As Mr O’Neill has pointed out, however, without a Beddoe order obtained in advance of any litigation, trustees incur litigation expenses at their own risk.4 The Court of Appeal in McCallum v McCallum stated that the proceedings for removal of trustees was one of the categories of cases where, “[i]t is reasonably obvious that the prospects of indemnity of the trustees’ costs being denied are greater”.5
[13] Ultimately, however, the existence of the indemnity is not a matter bearing on whether an order for costs should be made and in particular is not a matter for me to determine in the context of the present application. Instead, as Mr Mora acknowledged it is an issue that at some point may further protract and/or complicate the dispute between the parties if an indemnity is sought by Ms Jongeneel. In the circumstances, I therefore put it to one side in determining whether a costs order should be made on the proceedings determined by the judgment.
3 For example, see Trusts Act 2019, s 81; and cl 21.2 relied on by Ms Jongeneel effectively reflects this position.
4 Lindsay Breach Nevill’s Law of Trusts, Wills and Administration (14th edition, LexisNexis, Wellington, 2023) at [347].
5 McCallum Jnr v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [35].
Calculation of 2B Costs
[14] I have checked both counsels’ calculation of the costs properly payable on a 2B basis. Mr O’Neill calculated 8.2 days and Mr Mora 7.7 days at the daily rate of
$2,390. It appears that the 0.5 days difference on this issue is that Mr Mora did not allow 0.4 days for preparation for the case management conference; and Mr O’Neill incorrectly allowed 0.3 of a day for his appearance at the case management conference instead of 0.2 days. I am therefore satisfied the correct calculation should be 8.1 days at $2,390, a total of $19,359.
Should the 2B costs be uplifted by 50 per cent?
[15] There is no dispute as to the jurisdictional basis for increased costs. Rule 14.6(3) of the High Court Rules 2016 provides that costs can be increased from scale if:
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i)failing to comply with these rules or with a direction of the court; or
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[16] In this case, Mr O’Neill submitted that the reasons set out in the judgment for dismissing Ms Jongeneel’s application had been foreshadowed by a letter sent by Mr Schaake’s solicitors on 23 November 2022. In that letter, particulars were requested of the allegations made in support of the proceedings and set out in any statement of claim and the letter then stated:
4.The purpose of requiring particulars is to ensure that the defendants are adequately informed.
5.The fact that our client and you client are separated is not a ground for removal of a trustee.
6.You have said the trustees are deadlocked. Both the defendants want to know on what grounds the claim is made. In our view, they are entitled to know this. If they do not know where the deadlock arises, they cannot answer that.
7.You have claimed Mr Thompson is not an independent trustee. This assertion seems to us to be solely reliant on the fact that he is a long- term associate of our client.
8.The fact that he knows our client, does not necessarily demonstrate a lack of independence. Mr Thompson is an experienced accountant, who has been a trustee on many trusts and is fully aware of his obligations and duties as a trustee. Mr Thompson has no beneficial interest in the Trust and his ability to operate independently as a prudent trustee is not prevented by him knowing our client. Therefore, again, we request that you provide us with the information we seek.
9.Lastly, in relation to paragraph 3.2, where you plead that it is necessary or desirable to remove the trustees and its impracticable to do so without the assistance of the Court, we again query what it is that makes this action necessary.
10.The defendants are entitled to know what acts have endangered the Trust property or how they lack proper capacity to execute their duties. They would like to know also what it is they have done which impacts on the trust property and/or the beneficiaries’.
11.In our view, your statement of claim is vague, nonspecific and lacks detail. We do not accept that we are not entitled to such particulars.
12.We invite you to reconsider the position you have taken in your letter of 16 November 2022. We would like to hear from you by 5.00 pm Friday 25 November 2022, failing which we will be at liberty to take whichever steps we believe are necessary to ensure our client is suitably advised on the claim against him.
Discussion – Increased costs
[17] As Mr Mora noted, the letter relied on by Mr O’Neill was not couched in terms of the potential costs consequences of the proceeding in the absence of further particulars being provided by Ms Jongeneel.6 Instead, the letter appeared to be a genuine request for further particulars. As Mr Mora noted, further particulars were in fact provided under the cover of an amended statement of claim dated 23 June 2023. No subsequent indication that the particulars provided were inadequate was given on behalf of Mr Schaake. Moreover, as Mr Mora noted, while Ms Jongeneel could not demonstrate a deadlock as at the date of hearing and the application was therefore premature, nothing in my judgment ruled out a subsequent application in the event of an actual deadlock between the trustees. Given this position, I conclude that the letter of 22 November 2022 does not provide a basis for increased costs, on the contrary, I am satisfied that 2B costs appropriately reflect the premature nature of the application and the inability of Ms Jongeneel to establish a basis for the removal and replacement of the trustees.
Decision
[18] Ms Jongeneel is to pay Mr Schaake costs in the sum of $19,359 together with disbursements in the sum of $220.
Powell J
6 For example, as Mr Mora noted there was nothing about the letter that suggested it was without prejudice save as to costs in terms of r 14.10 of the High Court Rules 2016.
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