Kellerman v Kellerman-Thornton
[2020] NZHC 2804
•27 October 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-250
[2020] NZHC 2804
UNDER Sections 21 and 44 of the Administration Act 1969 IN THE MATTER
of an application to remove an executor from office and ancillary orders
BETWEEN
BRENDAN EUGENE KELLERMAN
Applicant
AND
MARGARET YVONNE KELLERMAN- THORNTON
Respondent
Hearing: On the papers Appearances:
J J Pietras and B Sheehan for the Applicant T R Mounsey for the Respondent
Judgment:
27 October 2020
JUDGMENT OF COOKE J
(Costs)
[1] By judgment dated 14 September 2020 I largely upheld the applicant’s claims in this proceeding.1 In particular I accepted that the expenses that the respondent had charged to the estate as executor were unreasonable and that she should be removed. I did not order that she provide an account, however, as the information she provided shortly before the hearing meant that that order was redundant.
[2] By memorandum dated 11 September 2020 the applicant now seeks costs. Counsel for Alexander Kellerman has also sought costs by memorandum dated
1 Kellerman v Kellerman-Thornton [2020] NZHC 2297.
KELLERMAN v KELLERMAN-THORNTON [2020] NZHC 2804 [27 October 2020]
14 September 2020. A memorandum in opposition dated 25 September 2020 has been provided by the respondent.
Assessment by Mr Kelly
[3] I first address Mr Mounsey’s submission that this decision should await Mr Kelly’s assessment in relation to expenses that may be allowed for the respondent, or that leave be granted to file further submissions once that assessment has been completed.
[4] I do not think that necessary or appropriate. I have determined that the respondent’s expenditure was not reasonably incurred, and ought to be disallowed. The issue being considered by Mr Kelly is whether some claim for expenditure should nevertheless be permitted. That has no impact on the costs decision that the Court might make as the costs decision turns on the judgment that has already been issued in the proceeding.
Costs on a 2B basis
[5] The applicant seeks costs on a 2B basis as he is the successful party. The respondent contends that the applicant was not entirely successful in the proceedings, however.
[6] Success on more limited terms is still success.2 Success should also be addressed on a realistic basis. I have little hesitation in concluding that the applicant succeeded in these proceedings. Whilst Mr Kelly has been asked to consider what the level of the respondent’s costs that should be permitted, the applicant established that the respondent charged unreasonable costs to the estate, and that these costs should be disallowed. He also established that the respondent should be removed as executor. Whilst the persons directed to be the replacement executors by the Court are different from the person sought, that did not mean that the proceedings were not successful.
[7] The fact that an account was not directed was a consequence of information that was disclosed late in the proceedings in circumstances where the Court held that
2 Weaver v Auckland City Council [2017] NZCA 330, (2017) 24 PRNZ 379.
the material that had earlier been disclosed was misleading.3 The fact that the applicant did not succeed on this aspect of the claim does not detract from his success overall.
[8] I accordingly accept the applicant’s submissions that costs on a 2B basis should be awarded in his favour. I also accept that the costs sought by Alexander Kellerman in paragraph [7] of Mr Cairns’ submissions should be allowed.
Uplift
[9] The applicant seeks an uplift on the costs awarded on the basis of the correspondence exchanged on a Calderbank basis.
[10] Offers made by a successful plaintiff are in a different category from offers made by a defendant where the plaintiff does not recover more than the defendant offered. That is because the costs of the proceeding cannot be said to arise because of the rejection of the offer. The costs arise because of the defence to the claim. I addressed the difference in Mainzeal Property and Construction Ltd (in liq) v Yan and Others:4
[59] Offers made by successful plaintiffs are in a different category from offers made by unsuccessful defendants that exceed what the plaintiff is entitled to. The latter category is subject to separate rules in rr 14.10 and 14.11 which contemplate that a defendant offering more than the plaintiff is entitled to get costs from the point of the offer. That rationale does not arise in the rejection of offers made by the plaintiffs. A defendant who defends a proceeding is putting the plaintiff to the cost of it, and normally no increased costs are caused because the defendant does not accept an offer to settle for less than is claimed.
[60] The principle in r 14.6(3)(b)(v) recognises, however, there will be situations where the refusal to settle can demonstrate that the party is acting without reasonable justification, and causing unnecessary expense to the claiming party. It has a similar rationale to the other uplift grounds in r 14.6. A plaintiff may offer to accept less than it is entitled to try and convince an obdurate defendant not to put the parties to the cost of a trial, and the failure to accept such an offer may justify an uplift. Without seeking to circumscribe r 14.6(3)(b)(v) that seems to me what the rule is generally directed to.
3 Kellerman v Kellerman-Thornton, above n 1, at [10].
4 Mainzeal Property and Construction Ltd (in liq) v Yan and Others [2019] NZHC 1637.
[11] Although there are some factors in the present case that suggest that the respondent was being obdurate, including the defence of plainly unreasonable expenditure, and the misleading nature of some of her earlier disclosures, I do not accept that her response to settlement offers reaches the point of justifying an uplift.
[12] For the avoidance of doubt I also do not accept that any offers made by the respondent affect the costs outcome.
Should the respondent’s costs be met from the estate?
[13] The respondent contends that her legal expenditure in the defence of this proceeding should be met from the estate. The applicant opposes that course.
[14] I accept Mr Mounsey’s submission that the normal course is that the respondent, as executor is entitled to an indemnity from the assets of the estate.5 But as Mr Pietras has submitted there are limits on the indemnity, particularly when the respondent is incurring unreasonable costs.6
[15] Whilst I have not accepted that there should be increased costs awarded against the respondent, in my view it would not be appropriate for the respondent to be entitled to an indemnity out of the assets of the estate for the legal costs of resisting the orders sought by the applicant. The essential difficulty with this case was that the respondent had charged unreasonable expenditure to the estate, and then resisted any suggestion that the expenditure was unreasonable. She had also provided incomplete and misleading information on request. She was in a conflicted position such that her removal was justified. Her stance then meant the proceedings were necessary. For her to now require the applicant and her disabled brother to share her legal costs of resisting the claims would itself be unreasonable.
[16] Accordingly I decline the respondent’s application to be indemnified out of the assets of the estate.
5 Butterfield v Public Trust [2017] NZCA 367. See also Triezenberg v Mason [2019] NZHC 920.
6 New Zealand Māori Council v Foulkes [2015] NZHC 489 at [31]. See also St Claire v Wright
[2017] NZHC 494 at [43].
[17]I also accept that the respondent should meet the costs of this costs application.
Cooke J
Solicitors:
ARL Lawyers, Lower Hutt for the Applicant MMC Law Ltd, Taupō for the Respondent
Thomas Dewar Sziranyi Letts, Lower Hutt for A G Kellerman
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