Kain v Public Trust
[2024] NZHC 864
•19 April 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-485-015
CIV-2023-409-140 [2024] NZHC 864
UNDER the Trusts Act 2019 and Part 19 of the High Court Rules 2016 IN THE MATTER
of the TE MATA PROPERTY TRUST
BETWEEN
GEORGINA KAIN, GEORGE CHARLES KAIN, GEORGE HARRY COUPER KAIN, GEORGE MICHAEL KAIN
Applicants
AND
PUBLIC TRUST as trustee of the TE MATA PROPERTY TRUST
First Respondent
MARY HUTTON
Second Respondent
Hearing: On the papers Counsel:
D R Bigio KC and S T Dymond for Applicants
F C Monteiro and P E Baine for First Respondent
A R Galbraith KC and A V Foote for Second RespondentJudgment:
19 April 2024
COSTS JUDGMENT OF MANDER J
This judgment was delivered by me on 19 April 2024 at 11.30 am pursuant to Rule 11.5 of the High Court Rules 2016
Registrar/Deputy Registrar Date: .
KAIN v PUBLIC TRUST [2024] NZHC 864 [19 April 2024]
[1] The applicants, who are referred to in the substantive judgment as the “Kain siblings”, applied for an order directing the Public Trust, as the trustee of the Te Mata Property Trust (the Trust), to disclose a distribution deed by which it brought forward the distribution date of the Trust and distributed its capital to the second respondent, Mary Hutton. I dismissed that application and awarded costs to Mrs Hutton, as the successful party, and to Public Trust up until the point it took no further active part in the proceeding.1
[2] Initially, the application for disclosure was only served on Public Trust. However, the Kain siblings were directed in a minute of van Bohemen J on 27 February 2023 to serve the application on Mrs Hutton as the vested capital beneficiary of the Trust. The Public Trust made a Beddoe application seeking an indemnity for its costs from the Kain siblings because the Trust had vested and no longer had any resources to reimburse the trustees’ costs. That application was not pursued after Mrs Hutton became engaged in actively opposing the disclosure application.
[3] Both Mrs Hutton and Public Trust seek costs orders against the Kain siblings. For her part, Mrs Hutton seeks recovery of her scale costs of $19,000.50 on a 2B basis, together with disbursements of $110. The Kain siblings acknowledge Mrs Hutton’s entitlement to 2B scale costs as the successful party. However, Mrs Hutton also seeks to recover costs and disbursements for steps taken by Public Trust in respect of the disclosure application on an indemnity basis. Mrs Hutton maintains she is entitled to indemnity costs from the Kain siblings in reimbursement of the amount she has paid Public Trust for the costs it incurred as a result of its involvement as the trustee in the disclosure proceeding. This amounts to $21,128.33, together with disbursements of
$110. Alternatively, she seeks to recover those costs on a 2B basis, being $5,497, together with disbursements of $110.
[4] Public Trust also seeks an award of costs in respect of its withdrawn Beddoe application. Mrs Hutton has paid Public Trust its legal fees in relation to that application. Any costs recovered from the Kain siblings will be refunded to
1 Kain v Public Trust [2023] NZHC 2535.
Mrs Hutton. The sum of $5,535 is sought on an indemnity basis, together with disbursements. In the alternative, $4,780 is sought to be recovered on a 2B scale costs basis, in addition to disbursements.
[5] The Kain siblings oppose any award of costs on account of amounts Mrs Hutton has paid to the Public Trust. In relation to Public Trust’s Beddoe application, the Kain siblings do not accept they have any liability for costs because the application was discontinued by Public Trust.
The disclosure application
[6] Mrs Hutton submits she is entitled to indemnity costs from the Kain siblings for the amount she has paid to Public Trust for its involvement in the proceeding. An analogy is drawn with an application for disclosure of trust information during the life of a trust for which trustees would be entitled to be indemnified by the Trust for its costs. In this case, the Trust was distributed many years ago and Mrs Hutton submits that was known to the Kain siblings when they brought their application. She argues that, plainly, the trustees ought not bear the costs incurred in responding to the disclosure application and that she has paid those costs in recognition of that being so. With the Kain siblings’ application having been unsuccessful, Mrs Hutton raises the question of the extent to which she should be asked to bear the burden of Public Trust’s costs in light of that outcome.
[7] In opposition to Mrs Hutton’s claim to be reimbursed for paying Public Trust’s costs, the Kain siblings submit this was a private arrangement entered into between those parties that resolved the cost issues between themselves. There is no authority for the proposition that an unsuccessful litigant should be made to pay indemnity costs on the basis of another party’s private arrangements with a third party. Reliance is placed on r 14.6(1)(b) of the High Court Rules (the Rules) that provides the Court with jurisdiction to make an order that the costs payable “are the actual costs, disbursements, and witness expenses reasonably incurred by a party”. It is argued the reference to “a party” relates to the party claiming the costs, in this case Mrs Hutton, and not the costs incurred by a separate party which the claimant party has chosen of their own volition to indemnify.
[8] The Kain siblings submit that Mrs Hutton’s claim was incongruous with the indemnity cost regime set out in r 14, which reserves such an award for exceptional situations where ordinarily a party has conducted themselves in an inappropriate manner. This is not the situation and it is argued the Kain siblings should not face a liability for indemnity costs because of an arrangement entered into between other parties to which they were not privy.
[9] Mrs Hutton places reliance on r 14.6(4)(f), which provides that the Court may order a party to pay indemnity costs where some other reason exists beyond those expressly stipulated which would justify a court making an order for indemnity costs, notwithstanding the principle that the determination of costs should be predictable and expeditious. I consider that jurisdiction could possibly extend to include a situation where a party should be reimbursed for costs incurred in indemnifying a third party in a scenario akin to the ordering of costs to a non-party to the proceeding who has acted reasonably in relation to it, as provided by r 14.6(4)(d). However, the arrangement entered into by Mrs Hutton with Public Trust was a unilateral one.
[10] I accept, with the Trust having been distributed in its entirety, the question of the payment of costs incurred by the trustee, as a result of the Kain siblings’ disclosure application, needed to be addressed and the Public Trust’s Beddoe application was properly made. In all likelihood, once Mrs Hutton had actively joined the proceeding, liability for the trustee’s costs would fall to either herself and/or the Kain siblings. However, the potential outcome of the Beddoe application, which was not pursued, was superseded by the agreement reached between Public Trust and Mrs Hutton regarding the former’s costs.
[11] In the absence of the Kain siblings’ participation in the discussions between Mrs Hutton and Public Trust, or, as far as I am aware from the record, any invitation to do so, or notice regarding this arrangement, I do not consider they can be required to reimburse Mrs Hutton for the undertaking she entered into to pay Public Trust’s costs. She did so alone without reference to the Kain siblings. It follows that this part of Mrs Hutton’s claim for costs is declined.
[12] There remains the alternative claim made by Mrs Hutton, in the event she is declined an indemnity award in respect of her payment of Public Trust’s costs, that she recover that expense on a 2B basis for the steps which Public Trust took in respect of the disclosure proceeding. In accordance with my finding that Public Trust is entitled to costs up to the point it took no further active part in the proceeding, I consider that claim is valid.2 Strictly, Public Trust is the party entitled to those costs. However, as indicated by Public Trust, they will be used to partially reimburse Mrs Hutton. In the circumstances, I consider it appropriate that those scale costs of $5,497 (on a 2B basis) and disbursements of $110 be paid directly to Mrs Hutton.
The Beddoe application
[13] Public Trust seeks costs in relation to the Beddoe application it made when it was the only named party to the Kain siblings’ disclosure application. On 14 April 2023, it brought the Beddoe application seeking directions as to whether it ought to substantively defend the disclosure application and directions concerning the funding of its costs already incurred and in the future. As previously noted, the Trust had vested in Mrs Hutton in 2008 and the capital subsequently distributed in its entirety. Ordinarily, Public Trust, as trustee, would have expected to have been indemnified by the Trust had any funds still existed. The Beddoe application was brought to address that difficulty.
[14] Shortly after this application was filed, Mrs Hutton, despite not formally being a party at that stage, filed a notice of opposition to the disclosure application. The Public Trust then filed a memorandum, dated 5 May 2023, noting that its Beddoe application had been filed prior to steps taken by Mrs Hutton to oppose the disclosure application. With her now having taken up that role, it was not considered in the best interests of the Trust or its vested beneficiary, Mrs Hutton, for Public Trust to incur costs by continuing to take an active role in respect of the disclosure application. Public Trust advised that the Beddoe application did not need to be progressed and took the view the issue of costs could be addressed following the substantive hearing of the disclosure application.
2 Kain v Public Trust, above n 1, at [55].
[15] In July 2023, Public Trust advised the Court that a resolution as to costs had been reached between itself and Mrs Hutton, and that she had indemnified it for its costs in respect of both applications. The Beddoe application has now been formally discontinued.
[16] The Kain siblings oppose Public Trust’s claim for costs in respect of the Beddoe application. They invoke r 15.23 which provides that, unless the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs. They point out Mrs Hutton was served with the disclosure application on 17 March 2023 and that Public Trust’s Beddoe application was not filed until 14 April, giving Mrs Hutton almost a month within which to formulate and file her own opposition to the disclosure application.
[17] The Kain siblings argue the sequence of events does not bear out Public Trust’s claim that its Beddoe application was filed out of necessity. They submit that Public Trust was not obliged to “intervene on behalf of the vested beneficiary (Mrs Hutton)” where she had been given the opportunity but had failed to take a position in respect of the disclosure application. It was argued that Mrs Hutton’s inaction has been the cause of Public Trust having to file its Beddoe application and that this was borne out in the application itself, where Public Trust advised that it had requested Mrs Hutton to formally provide her position on disclosure but that she had not yet done so. It was submitted that the Kain siblings had not put Public Trust to the expense of making the Beddoe application and should not now be required to pay Public Trust’s costs in relation to it.
[18] I do not accept the Kain siblings’ analysis of the position Public Trust found itself at the time it filed its Beddoe application. As is apparent from the wider background, there were no trust funds available to pay for the trustees’ expenses in dealing with the Kain siblings’ disclosure application. This obvious issue had simply not been addressed. I do not consider the fact there may have been some delay by Mrs Hutton in declaring her position rendered Public Trust’s decision to file a Beddoe application unreasonable or inappropriate. It appears Mrs Hutton was the only party prepared to address Public Trust’s predicament. I do not consider that initiative, which essentially resolved Public Trust’s concern regarding the payment of its expenses,
absolved the Kain siblings’ potential responsibility for the costs incurred by Public Trust in having to make its Beddoe application when it did.
[19] I consider Public Trust has rebutted the r 15.23 presumption. As acknowledged earlier in this judgment, it was inevitable that Public Trust’s costs arising from the disclosure application would have to be met in some way. It is appropriate that Public Trust’s costs in respect of the Beddoe application be sourced from the unsuccessful party that triggered the need for that application and the expenditure of those costs.
[20] Because Public Trust is the applicant seeking its costs, no question arises regarding the Kain siblings not being a party to or having been placed on notice of any arrangement between Public Trust and Mrs Hutton regarding the payment of its expenses. I have had regard to the possibility of making an indemnity order in respect of the Beddoe application. However, while the Kain siblings filed a memorandum critical of the application, it did not formally take a position in opposition to the Beddoe application before it effectively became dormant. In the circumstances, I consider the Kain siblings should contribute to Public Trust’s costs on a 2B basis.
Result
[21] Accordingly, I consider a 2B scale costs award in the sum of $4,780, together with disbursements totalling $750.93 is appropriate and an order is made in those terms. I understand that sum will be refunded to Mrs Hutton. I make a further award to Public Trust on a 2B basis in the sum of $956 for preparation of its costs memorandum, it having written to the Kain siblings inviting them to pay scale costs and disbursements in the sum now ordered.
Orders
[22]The Kain siblings are ordered to pay Mrs Hutton’s costs on a 2B basis:
(a)in the sum of $19,000.50, together with disbursements of $110; and
(b)in the sum of $5,497, together with disbursements of $110.
[23]The Kain siblings are ordered to pay Public Trust’s costs on a 2B basis:
(a)in the sum of $4,780, together with disbursements of $750.93 to be refunded to Mrs Hutton; and
(b)in the sum of $956 for preparation of its costs memorandum.
Solicitors:
Izard Weston, Wellington Wilson Harle, Auckland
Duncan Cotterill, Christchurch
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