Kain v Public Trust
[2022] NZCA 239
•10 June 2022
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA315/2021 [2022] NZCA 239 |
| BETWEEN | GEORGINA KAIN, GEORGE CHARLES KAIN, GEORGE HARRY COUPER KAIN and GEORGE MICHAEL KAIN |
| AND | PUBLIC TRUST |
| CA316/2021 | ||
| BETWEEN | JACK KAIN, MOLLY KAIN, RACHEL KAIN, STANLEY KAIN, WOLSEY KAIN, GEORGE COUPER MCHARDY KAIN, ASTA KAIN, MADELINE KAIN, GEORGE PAVEY KAIN, MICHAEL KAIN, RUPERT KAIN, SAMUEL KAIN and MARNIE COUPIE FORCER KAIN | |
| AND | PUBLIC TRUST | |
| Court: | French, Venning and Cull JJ |
Counsel: | J W A Johnson and W L Porter for Kain Siblings |
Judgment: | 10 June 2022 at 3 pm |
COSTS JUDGMENT OF THE COURT
AThe Kain interests are to pay the Hutton interests $6,165.30 by way of party/party costs.
BThe Kain siblings are to have costs in the sum of $27,139.77, including GST and disbursements. Those costs may be recoverable from the assets of the Waitaha Trust.
C The Kain grandchildren are to have costs in the sum of $34,500, including GST and disbursements. Those costs are recoverable from the assets of the Waitaha and Middle Road Block Trusts.
DMary Hutton is to have costs of $52,500, including GST and disbursements. Those costs are to be payable from the Waitaha Trust.
EThe Hutton grandchildren are to have costs in the sum of $29,400, including GST and disbursements. Those costs may be recoverable from the assets of the Waitaha and Middle Road Block Trusts.
FPublic Trust is to recover its costs on the appeal from the assets of the Trusts.
____________________________________________________________________
REASONS OF THE COURT
(Given by Venning J)
In a judgment delivered on 16 December 2021,[1] this Court dismissed the appeals by the Kain siblings and the Kain grandchildren (the Kain interests) in relation to the directions given to Public Trust by the High Court at [108(b)], [108(c)], [109(d)] and [134(b)] of its decision,[2] but allowed their appeals in relation to the direction at [134(a)] concerning the wishes of the settlor Tom Couper. The Court set aside the direction made by the High Court at [134(a)] and replaced it with a different direction.[3]
[1]Kain v Public Trust [2021] NZCA 685, (2021) 5 NZTR ¶31-020 [CA substantive judgment].
[2]Public Trust v Kain [2021] NZHC 1000, (2021) 5 NZTR ¶31-002 [HC substantive judgment].
[3]CA substantive judgment, above n 1, at [152].
At the request of the parties, the Court reserved costs and made directions for the exchange of memoranda regarding costs.[4]
[4]At [153].
The parties have now exchanged memoranda as to costs. Consistent with the background to this litigation, there is little measure of agreement between the parties as to costs.
The costs orders sought by the parties in this Court
The Kain siblings seek:
(a)scale costs on a party/party basis against Mary Hutton and the Hutton grandchildren (the Hutton interests) of $19,962.86;
(b)the balance of their actual costs and disbursements to be met from the assets of the Waitaha Trust; and
(c)a reduction of the costs Public Trust is entitled to indemnify itself for.
The Kain grandchildren seek:
(a)scale costs on a party/party basis of $11,711 against the Hutton interests;
(b)the balance of their actual costs to be met from the Waitaha and Middle Road Block Trusts; and
(c)a reduction of the costs Public Trust is entitled to indemnify itself for.
Mary Hutton seeks:
(a)scale costs against the appellants calculated at $11,681;
(b)the balance of her actual costs to be met from the assets of the Waitaha Trust; and
(c)an order that the appellants are not entitled to recover any costs or disbursements from the Trusts.
The Hutton grandchildren seek:
(a)scale costs of $10,701.05 against the appellants;
(b)the balance of their actual costs to be met from the Waitaha and Middle Road Block Trusts; and
(c)an order that the appellants not have any part of their costs met by the Trusts.
Public Trust seeks:
(a)costs and disbursements on a standard appeal band A basis against the Kain interests in the sum of $13,692; and
(b)an order confirming that the balance of its costs be met from the assets of the Trusts.
High Court costs award
There is at least a measure of agreement in that the parties have clarified that none seek to alter the costs award made by Mander J in the High Court.[5] We note no appeal has been lodged from that decision in any event.
Relevant costs principles
[5]Public Trust v Kain [2021] NZHC 2921 [HC costs judgment].
In New Zealand the general principle is that costs are paid to the successful party. Such costs are normally no more than a reasonable contribution fixed in accordance with the relevant scale.[6] The general principle is subject to the Court’s overall discretion which in this case is confirmed by r 53 of the Court of Appeal (Civil) Rules 2005.
[6]Woodward v Smith [2014] NZHC 407, [2014] 3 NZLR 525 at [21].
A number of further principles have developed in the case of trust litigation. Importantly, however, costs in such cases remain at the discretion of the Court.
The “classic statement” as to costs in trust litigation is that of Kekewich J in Re Buckton[7] — so described by Hoffmann LJ in McDonald v Horn.[8] As summarised by Kós J in Woodward v Smith, Kekewich J identified the following three broad categories applicable to trust litigation:[9]
(a)… 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)… similar application[s], 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)… 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.
(Footnote omitted.)
[7]Re Buckton [1907] 2 Ch 406 (Ch) at 413–417.
[8]McDonald v Horn [1995] 1 All ER 961 (CA) at 970. See Woodward v Smith, above n 6, at [22].
[9]Woodward v Smith, above n 6, at [23], citing Re Buckton, above n 7.
In Woodward v Smith Kós J identified, as both Kekewich J in Re Buckton and Hoffmann LJ in McDonald v Horn had noted, that the categories overlap and that it can be difficult to discriminate between the second and third categories.[10] However, in Re Buckton Kekewich J said:[11]
… when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs.
[10]Woodward v Smith, above n 6, at [24].
[11]Re Buckton, above n 7, at 415.
Kós P restated the above principles in delivering the decision of this Court in McCallum Jnr v McCallum,[12] and, when considering the issue of costs sought by a trustee, referred to the case of Butterfield v Public Trust where this Court confirmed that:[13]
It is one of the fundamental rights of an honest express trustee that costs and expenses properly incurred in the administration of the trust are compensable out of the assets of the trust.
[12]McCallum Jnr v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [34].
[13]Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439 at [20].
However, in Butterfield v Public Trust this Court also endorsed[14] the observation of the High Court in New Zealand Māori Council v Foulkes:[15]
The limitation on a trustee’s right of indemnity is, however, that the expenses are “properly incurred”. The duty to seek advice does not extend, for instance, to pose questions the answers to which are perfectly obvious. Nor where no real and substantial dispute exists. Unnecessary proceedings, or the taking of unnecessary procedural steps needlessly increasing costs, may mitigate (or eliminate) the right of indemnity. Again, excessive costs lie beyond the scope of indemnity. Every dollar paid in trustees’ expenses is a dollar denied to beneficiaries of the Trust.
(Footnote omitted.)
[14]At [21].
[15]New Zealand Māori Council v Foulkes [2015] NZHC 489, (2015) 4 NZTR ¶25-003 at [31].
In McCallum Jnr v McCallum this Court went on to observe that trust proceedings may be categorised in a number of different ways, referring to the seven broad functional categories of proceeding identified by Lewin on Trusts:[16]
[16]McCallum Jnr v McCallum, above n 13, at [35], citing Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) vol II at [48-002].
(1)proceedings for the construction of the trust instrument or determination of questions of law as to the validity or scope of trusts or powers under the trust instrument or imposed or conferred by law;
(2)proceedings in which directions are sought for the guidance of the trustee in the administration or execution of the trust;
(3)proceedings in which the assistance of the court is sought under various statutory provisions, for example under the Trustee Act … in relation to the appointment of trustees and vesting of trust property;
(4)proceedings in which the rights of beneficiaries in the administration or execution of the trusts are sought to be enforced, for example in relation to accounts, provision of information to beneficiaries or distribution of the trust fund;
(5) breach of trust proceedings;
(6) proceedings concerning self-dealing and profits from the trust; and
(7) proceedings for or concerning removal of trustees.
(Footnotes omitted.)
The Court also noted the “subtly different” tripartite classification system posed by Lightman J in Alsop Wilkinson v Neary.[17]
[17]McCallum Jnr v McCallum, above n 13, at [36], citing Alsop Wilkinson v Neary [1996] 1 WLR 1220 (Ch).
While generally in cases falling within Re Buckton category (1) or (2), costs are paid from the trust fund at first instance, a different approach applies on appeal. An unsuccessful litigant may not generally receive an order for costs from the trust fund. That is even more likely to be so where the case is in Re Buckton category (3).[18]
[18]Lewin on Trusts, above n 17, at [48-048]–[48-050].
With the above principles in mind we address the issue of costs on this appeal. To do so it is necessary to briefly consider the context of this proceeding.
The High Court proceedings
When initially making directions as to the form of these proceedings the High Court noted:[19]
[19]Public Trust v Kain [2018] NZHC 1547, (2018) 4 NZTR ¶28-012 .
[50] It is in the interests of all parties to have preliminary directions resolved which may assist Public Trust in the exercise of its duties as Trustee. Provided the parties take a co-operative and responsible approach to the determination of the issues, their costs should be borne by the Trust funds.
The High Court went on to make the following general directions as to costs:[20]
[20]At [51].
…
(c)If Public Trust pursues an application for directions, its costs of bringing the application and all appearances in support are to be met from the assets of the Trusts.
(d)If Public Trust pursues an application for directions, the costs of all respondents incurred in responding to the application and presenting argument in relation to the directions sought are to be paid from the assets of the Trusts subject to:
(i)the costs must be necessarily and properly incurred for the benefit of the Trust in resolving the issues for determination; and
(ii)the costs are to be confirmed and payable at the conclusion of the proceeding.
…
In his decision on costs following the substantive application for directions, Mander J made the following orders:[21]
[21]HC costs judgment, above n 5, at [46].
…
(a) Costs are awarded to the plaintiff, Public Trust, and the fifth‑named first defendant, Mary Hutton, on a 2B basis less one‑third, to be paid by the first four named first defendants, the Kain siblings, for steps relating to the interlocutory applications determined by Associate Judge Lester in his judgments of 31 October 2019 and 19 June 2020 (see [30]).
(b) The Kain siblings are directed to submit their claim for costs recoverable from the assets of the Waitaha Trust to Public Trust on the basis of the following directions:
(i) they must bear two-thirds of their costs incurred in relation to the interlocutory steps the subject of determination by Associate Judge Lester in his judgments of 31 October 2019 and 19 June 2020 (see [30]);
(ii)they must bear two-thirds of their costs incurred in preparing evidence filed in respect of Public Trust’s application for directions (see [39]); and
(iii) they must make a further five per cent adjustment from their total costs figure to allow for successive changes of counsel (see [43]).
The balance of the Kain siblings’ costs and disbursements after these adjustments, as claimed in their counsel’s costs summary annexed to his memorandum of 14 June 2021, are recoverable from the assets of the Waitaha Trust.
(c) The Kain grandchildren, the children of the first four named first defendants, are to have costs in the sum of $123,735, including GST and disbursements. Those costs may be recoverable from the assets of both the Waitaha Trust and Middle Road Block Trust.
(d) The fifth-named first defendant, Mary Hutton, is to have costs in the sum of $309,383, including GST and disbursements. Those costs are to be payable from the assets of the Waitaha Trust.
(e) The Hutton children, the children of the fifth-named first defendant, are to have costs in the sum of $99,273.16, including GST and disbursements. Those costs may be recoverable from the assets of both the Waitaha Trust and Middle Road Block Trust.
While the proceeding before the High Court was brought by Public Trust seeking directions, the appeals before this Court by the Kain interests fall into the third category identified by Kekewich J in Re Buckton. Rather than accept the interpretation and directions of the High Court, the Kain interests chose to pursue the appeals to this Court. While the appeals still involved points of construction they are properly regarded as a claim against the interests of the other beneficiaries, the Hutton interests. In such a case, the usual principles should apply. While such claims were described as “hostile” litigation by Kekewich J, as Kós P observed in McCallum Jnr v McCallum:[22]
The expression “hostile” is a convenient but crude shorthand for cases … A better (but still not wholly accurate) label would be “self‑interested” litigation.
[22]McCallum Jnr v McCallum, above n 13, at [42].
In the present case, the nature of the challenges by the Kain interests to the directions made by the High Court can be described as self-interested and a direct challenge to the position of the Hutton interests. We regard the competing parties in this case to be the Kain siblings and grandchildren on the one hand, and the Hutton interests on the other. The contest was primarily between those interests.
At this point we note the Kain interests’ criticism of Public Trust’s involvement in the appeal. Public Trust was properly interested in the issues raised by the appeal as it had originally sought the directions before the High Court. We consider this case to be quite different to the cases of Re Schroder’s Wills Trusts and Public Trust v Dollimore, referred to by the Kain interests, where the High Court criticised the involvement of the trustee.[23] In the present case the Court was assisted by the submissions made on behalf of Public Trust. Mr Gray QC clarified Public Trust’s position, which was appropriate given the criticism of it by the Kain interests. Public Trust is entitled to be indemnified for its costs from the trusts in accordance with the earlier direction of the High Court.
The success or otherwise of the appeals
[23]Re Schroder’s Wills Trusts [2004] 1 NZLR 695 (HC); and Public Trust v Dollimore [2019] NZHC 607, [2019] 2 NZLR 901.
As noted in our substantive judgment, the Kain siblings and grandchildren appealed on the following points:[24]
[24]CA substantive judgment, above n 1.
The Kains’ appeals
[17] The Kain siblings appeal. They say the High Court erred by:
(a)making the direction that Public Trust is not required to take into account what the beneficiaries who are beneficiaries of other trusts have received from the other trusts in the Couper‑Kain Group (the [108](c) direction); and
(b)making (or appearing to make) findings relating to the 1997 deed and the principle of equality despite the apparently legal nature of the directions application, and the agreement between the parties that affidavit evidence would be used for contextual purposes only;
(c)as a result of the above, qualifying the direction that Public Trust is required to recognise the principle of equality derived from the equality clause of the 1997 deed, by including the proviso, “but only so far, in its assessment, as it is reasonably able to do”. Such a qualification adds an additional requirement not found in the 2004 judgment (the [108](b) direction);
(d)making a direction that: “Public Trust is required to take into account the wishes and subsequent wishes of the settlor, Tom Couper, provided they are not inconsistent with the terms of the Trust and its purpose” (the [134](a) direction); and
(e)making a direction that: “[w]here subsequent wishes are inconsistent, Public Trust is in principle entitled to consider the most recent wishes as overriding earlier wishes. However, it remains a matter for Public Trust’s assessment … whether in the circumstances of the subsequent wishes of the settlor, Tom Couper, should have that effect” (the [134](b) direction).
[18] They seek to have the directions made at [108](b) (but only to the extent noted above at (c)), [108](c), [134](a) and [134](b) set aside and alternative directions made as the Court sees fit.
[19] The Kain grandchildren also appeal. They say the High Court erred by:
(a)Making a direction that Public Trust is not required to take into account what the beneficiaries who are beneficiaries of other trusts have received from the other trusts in the Couper‑Kain Group.
(b)Making a direction that: “Public Trust is required to take into account the wishes and subsequent wishes of the settlor, Tom Couper, provided they are not inconsistent with the terms of the Trust and its purpose” (the [134](a) direction).
(c)Making a direction that: “[w]here subsequent wishes are inconsistent, Public Trust is in principle entitled to consider the most recent wishes as overriding earlier wishes. However, it remains a matter for Public Trust’s assessment … whether in the circumstances of the subsequent wishes of the settlor, Tom Couper, should have that effect” (the [134](b) direction).
[20] The Kain grandchildren seek orders setting aside the directions made at [108](c), [109](d), [134](a) and [134](b) of the judgment.
(Footnote omitted.)
In the end result the Kain interests have had some limited measure of success in that the Court allowed the appeal in part.
We do not accept the submission by the Hutton interests and Public Trust that the Kain siblings’ success was semantic only. The direction which the Kain interests successfully had changed on appeal may prove to be important to Public Trust in its administration of the Trusts. Given the background to the relationship between these parties a degree of precision in the direction was required. The suggestion that there was no merit in the appeal because the direction made in the High Court, when read with the reasoning in that Court’s decision, leads to the same result is, with respect, unrealistic in this case. Given the background to this case and the complete breakdown in the relationship between the families it would have been fraught if the matter were left on that basis, and may have led to further issues for Public Trust in the future.
Our best assessment is that the issue upon which the Kain interests succeeded was the focus of something between a quarter and one-third of the appeal, which we calculate at 30 per cent. On the balance 70 per cent they were unsuccessful. For the purposes of party/party costs we make no distinction between the Kain siblings and Kain grandchildren on the one hand, and Mary Hutton and the Hutton grandchildren on the other. The collective interests of the two camps were quite clear in the way the appeals were presented.
Having regard to the relevant principles and the comments of the High Court when approving the initial application for directions we do not consider that either the Kain or the Hutton interests should have an indemnity from the Trusts for all their costs. It is time the parties realised there are consequences for their actions. It is also necessary to preserve the assets of the Trusts for all beneficiaries.
Recognising the measure of success the Kain interests achieved, the Kain interests are to recover 30 per cent of their actual costs from the Trusts but are to bear 70 per cent of their actual costs themselves.
Similarly, the Hutton interests are to recover 70 per cent of remaining actual costs from the Trusts but are to bear 30 per cent of their costs themselves.
Public Trust has acted reasonably throughout. The Court was assisted by the submissions made on behalf of Public Trust. It was appropriate for it to be represented before this Court, particularly given some of the criticism raised against it. Public Trust is to recover all its reasonable costs of the appeal from the Trusts. We do not consider that it would serve the interests of the parties generally to direct that the Kain interests contribute to Public Trust’s costs.
Further submissions
On 13 May 2022, without any provision being made for it and without first seeking leave, the Kain siblings filed a further memorandum. In it they sought to challenge the quantum of Public Trust’s costs for the appeal, sought a further order in relation to enforcement of the High Court costs award and challenged how Public Trust attributed costs between the two trusts. We decline to take the matters raised in the memorandum into account. The Court was clear in its direction as to how costs were to be dealt with. Further, the matters raised go beyond the ambit of this Court’s judgment as to costs.
Result/orders
Thirty per cent of the Kain interests’ combined costs on a party/party basis is $9,502.16. Seventy per cent of the Hutton interests’ combined costs on a party/party basis is $15,667.44. The difference is $6,165.30.
The Kain interests are to pay the Hutton interests $6,165.30 by way of party/party costs.
The Kain siblings are to have costs in the sum of $27,139.77, including GST and disbursements. Those costs may be recoverable from the assets of the Waitaha Trust.
The Kain grandchildren are to have costs in the sum of $34,500, including GST and disbursements. Those costs are recoverable from the assets of the Waitaha and Middle Road Block Trusts.
Mary Hutton is to have costs of $52,500, including GST and disbursements. Those costs are to be payable from the Waitaha Trust.
The Hutton grandchildren are to have costs in the sum of $29,400, including GST and disbursements. Those costs may be recoverable from the assets of the Waitaha and Middle Road Block Trusts.
Public Trust is to recover its costs on the appeal from the assets of the Trusts.
Solicitors:
Izard Weston, Wellington for Kain Siblings
Wilson Harle, Auckland for Public Trust
Duncan Cotterill, Christchurch for Mary Hutton
Vicki Ammundsen Trust Law Ltd, Auckland for Hutton Grandchildren
LeeSalmonLong, Auckland for Kain Grandchildren
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