Kinney v Pardington

[2019] NZHC 2196

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2013-443-058

[2019] NZHC 2196

UNDER

the Family Protection Act 1955

IN THE MATTER

of the estate of KENNETH JOHN PARDINGTON (deceased)

BETWEEN

ERIN MAUREEN KINNEY

Plaintiff

AND

MARGARET MYRTLE PARDINGTON DAVID JOHN PARDINGTON

KENNETH MARK PARDINGTON
Defendants

AND

DAVID JOHN PARDINGTON KENNETH MARK PARDINGTON

Interested Parties

Hearing:

15 and 16 August 2016

5 February 2018 (Discovery and Consolidation hearing) 27 August 2018 (Valuation hearing)

4 December 2018 (Final submissions hearing)
11 June 2019 (Costs submissions received)

Appearances:

C T Gudsell QC and D E G Nielsen for Plaintiff K A McKenzie for Defendants

S W Hughes QC for Interested Parties

Judgment:

3 September 2019

JUDGMENT OF CULL J

[1]    In his will, the deceased left a life interest to his wife of his half-share in the family home, as well as the income from his residuary estate. On her death, the deceased’s residuary estate is to be divided equally between his children. The

KINNEY v PARDINGTON [2019] NZHC 2196 [3 September 2019]

deceased has two children by his marriage, and one child, Ms Kinney, who was unknown to the rest of the family. Ms Kinney has successfully claimed under the Family Protection Act 1955 and she was awarded 70 per cent of the net value of the estate, assessed at $615,000 less the costs of the estate administration.1

[2]    The parties have now filed memoranda addressing party costs in light of the above finding, and the amount of administration costs to be deducted from the net value of the estate. I deal first with Ms Kinney’s costs, then the administration cost deduction.

Party costs

[3]    Mr Gudsell QC for Ms Kinney submits that costs should follow the event. That is, costs should be awarded to Ms Kinney, who has succeeded in her claim. Mr Gudsell submits Ms Kinney’s costs should be met by Ms Margaret Myrtle Pardington, Mr David Pardington and Mr Kenneth Pardington (the Pardingtons) in their personal capacities. He submits the award should be scale costs on a schedule 3C basis (which would be $184,072.50), together with disbursements ($65,459.56), totalling

$249,532.06. Alternatively, Ms Kinney should be awarded increased costs on a 2B basis.

[4]    Ms Susan Hughes QC for the Pardingtons submits that costs should lie where they fall. Ms Kinney did not “win” the proceeding. From the outset, the Pardingtons accepted that Ms Kinney had a valid claim. The issues have been the extent of the estate and the amount of it necessary to compensate Ms Kinney for the deceased’s breach. She submits there is no evidence of unprincipled or unreasonable behaviour of the Pardingtons. In contrast, Ms Kinney brought a number of interlocutory applications which were unreasonable, unjustified and unsuccessful. In the event that the Court considers that Ms Kinney is entitled to costs, Ms Hughes submits the Pardingtons are entitled to an offset caused by a series of interlocutory applications which have improperly extended this proceeding.

1      Kinney v Pardington [2019] NZHC 317.

Legal principles

[5]    All matters as to the costs of a proceeding are at the discretion of the Court.2 The discretion must be exercised in a principled way in accordance with Part 14 of the High Court Rules 2016.3 The usual starting point is that the party who fails with respect to the proceeding ought to pay costs to the party who succeeds.4

[6]    However, there has been a general practice in Family Protection Act claims, albeit with exceptions, for all parties costs to be borne out of the residue of the estate.5 Mr Gudsell points out that this is not the “invariable practice” and particularly in defended family protection claims, the Court will often order that costs lie where they fall.6 It has been observed that this practice has developed “because the courts have appreciated that a costs order against the residue of an estate can impact unfairly on residuary beneficiaries, particularly where the estate is not large”.7

[7]    In recent years, there appears to have been an increasing trend towards costs following the event in family protection cases.8

[8]I therefore approach the assessment of costs, by addressing three issues:

1.    Should costs be awarded?

2.    If so, on what basis?

3.    If awarded, who should bear the costs?

2      High Court Rules 2016, r 14.1.

3      Shirley v Wairarapa District Health Board [2006] NZSC 63; [2006] 3 NZLR 523 at [16].

4      High Court Rules 2016, r 14.2(1)(a).

5      Keelan v Peach [2003] NZFLR 727 (CA) at [7]; Re: Miller (2001) 20 FRNZ 459 at [6]; Mumby v Mumby [2016] NZHC 2836 at [4]; and Wightman v Public Trust [2015] NZHC 1091 at [17]-[19].

6      Barker v Barker HC Auckland CIV-2006-404-000181, 7 December 2006 at [18]; and Weir v Hotham HC Auckland CIV-2005-404-5300, 1 August 2006 at [21].

7      Bones v Wright [2013] NZHC 2093 at [5].

8      Ormsby v Van Selm [Costs] [2016] NZHC 484 at [6]; Fry v Fry [2016] NZFLR 713 (HC) at [14]; Re: Miller, above n 5, at [6]; Bones v Wright, above n 7, at [6]; and R v R [Costs] [2005] NZFLR 461 (FC) at [9]-[11].

Should costs be awarded?

[9]    Success or failure in the costs context has been held to be best assessed “by a realistic appraisal of the end result”,9 and judges have to approach the issue of costs in a broad way, “looking at the end result and the key developments during the course of the proceeding that have led to that result.”10 The overarching consideration must be that any award of costs should do justice between the parties.11

[10]   In assessing “success”, the focus should be on the critical issues in dispute in the proceeding. As Ms Kinney’s entitlement was always acknowledged by the Pardingtons, the key issues at the hearing in August 2016 were the net value of the estate – which was resolved by compromise – and the percentage of the estate that should be awarded to Ms Kinney.

[11]   Dealing first with the net value of the estate, the Pardingtons’ initial figure for the net value began at $191,059.50, in September 2012. Ms Kinney contested this figure, and in August 2018 the parties agreed that the net value of the estate was

$615,000, subject to administration costs. If administrator’s costs are deducted, the estate’s minimum net value is $515,000. The argument for Ms Kinney is that when that figure is compared with the position first advised by the defendants, Ms Kinney has succeeded when it comes to the now-agreed net value. Were it not for steps taken by Ms Kinney, she says her claim would have been determined on a significantly lower estate value.

[12]   On the other hand, Ms Hughes submits that if the administration costs are paid by the estate, as she says they ought to be, the Pardingtons’ movement from

$447,716.67 (which she submits was their initial position) to $515,000 is a movement of only $67,283.33, much lower than Ms Kinney’s movement in her position from
$828,998.17 to $515,000 (equalling $313,998.16). Even if the administration costs were  to  be paid  by the  Pardingtons  themselves,  the  Pardingtons’ movement from
$447,716.67 to $615,000 is an increase of only $167,283.33, compared with Ms Kinney’s reduction from $828,998.17 to $615,000, resulting in a movement in her

9      Packing In Ltd (In Liquidation) v Chilcott (2003) 16 PRNZ 869 (CA) at 871.

10     Fry v Fry, above n 8, at [18].

11     Ormsby v Van Selm, above n 8, at [6].

position of $213,999.16. On either analysis, Ms Hughes submits Ms Kinney did not “win” in ascertaining the net value of the estate.12

[13]   In reaching the net value of the estate, Ms Hughes submits that Ms Kinney substantially changed her approach as to the estate’s value on multiple occasions, requiring the Pardingtons, as the executors, to spend a significant amount of time addressing these different approaches. She points to a change in position in September 2017, where Ms Kinney sought to adjust the net value of the estate upwards by

$557,149 on the basis that none of the estate indebtedness to the Pardington Family Trust or David and Kenneth Pardington should be recognised, including indebtedness previously accepted by Ms Kinney, and that the Pardingtons, as executors, should be personally liable to meet one-half of the costs of the estate administration, estate proceedings, disbursements, and GST. Also in September 2017, Ms Kinney sought to restructure her approach to the indebtedness of the estate by asserting that the Court should approach assessment of the estate’s liability to the Trust on the basis that unless substantiated, loans from the estate to the Trust should not be recognised as debts owing by the estate to the trust.

[14]   Again, in April 2018, Ms Kinney altered her approach to the value of the estate. The new approach taken was to split deposits and advances from joint funds of Mr and Mrs Pardington between separate advance accounts rather than treating them as having passed to Mrs Pardington by survivorship. The effect of this was that half of the joint advances were retained in the estate thereby increasing its value.

[15]   Ms Hughes submits that further delays and expense were also incurred when Ms Kinney unsuccessfully sought to consolidate the estate proceedings with the Trust proceedings. She says all these changes required the Pardingtons, as executors, to expend a significant amount of time addressing the new matters. Not only should Ms Kinney not be awarded costs for such delays, but these changes that resulted in delay explain why the Pardingtons’ valuation of the estate rose throughout the proceedings.

12     It will be noted that Mr Gudsell does not accept the initial position of the Pardingtons as to the net value of the estate was $447,716.67, as Ms Hughes submits. Mr Gudsell points out that the Pardingtons have propounded an estate value of as little as $149,437.16 in the course of these proceedings. He submits a comparison of the parties’ final positions before agreement was reached does not assist in understanding how the estate value issue evolved over time, nor Ms Kinney’s success on the issue.

As the passage of time elapsed, there was a significant inflation in the value of the estate assets. Therefore, the end figure does not represent a “win” for Ms Kinney: it was a compromise.

[16]   In terms of the percentage of the estate, Mr Gudsell submits that Ms Kinney also succeeded on this issue as the Court awarded her a higher percentage than the defendants submitted was appropriate. In awarding Ms Kinney 70 per cent of the estate (after she claimed for 80 per cent of the estate), Mr Gudsell submits the Court has ultimately held that the defendants’ concession to 50 per cent did not go far enough, to a significant degree. Ms Kinney therefore succeeded on that issue, too.

[17]   Ms Hughes acknowledges that being awarded 70 per cent of the estate was a “win” for Ms Kinney, though submits that the win is limited to the margin between the 50 per cent offered by the Pardingtons and the 70 per cent awarded. She therefore does not accept that there has been such a success for Ms Kinney that Ms Kinney should be entitled to party/party costs.

[18]   I am unable to uphold Ms Hughes’ submission that Ms Kinney cannot be said to have been successful, given the award made. I accept, however, that the net value of the estate was ultimately agreed among the parties as a compromise. In terms of the percentage to which Ms Kinney is entitled, at the outset the Pardingtons were offering Ms Kinney 50 per cent of the estate. Ms Kinney disputed that amount and claimed 80 per cent of the estate. This Court then awarded Ms Kinney 70 per cent of the estate. On any view of the matter, Ms Kinney has succeeded in her claim, even if the amount she claimed for was not the final amount awarded by the Court. In these circumstances, I consider Ms Kinney is entitled to an award of costs, in order to do justice between the parties.

[19]   In making this assessment I am cognisant of the authorities which state that success or failure in the costs context is best assessed “by a realistic appraisal of the end result”.13 Judges must approach the issue of costs in a broad way “looking at the

13     Packing In Ltd (In Liquidation) v Chilcott, above n 9, at 871.

end result and the key developments during the course of the proceeding that have led to that result.”14

[20]   I find that Ms Kinney is entitled to an award of costs. The next issue is on what basis they are to be calculated.

Basis of costs

[21]   Mr Gudsell submits that Ms Kinney should be awarded costs on a schedule 3C basis, following the High Court decisions of Wightman v Public Trust and AB v RT.15 Mr Gudsell submits that a schedule 3C basis is appropriate, for the following reasons:

(a)Actual costs exceed the scale costs claimed.

(b)A large volume of correspondence has been required. This falls outside the “time bands” set out in schedule 3 to the High Court Rules 2016. The 3C categorisation is appropriate for the items claimed to reflect that for every document filed in court, numerous letters have been exchanged.

(c)A 3C basis does justice between the parties. This is in accordance with rules 14.3 and 14.4 of the High Court Rules 2016.

(d)No costs are sought prior to the notice of change of representation and address for service on 23 June 2016, with the exception of commencement of proceedings and inspection.

(e)Not all memoranda have been claimed.

(f)Only half of the scale costs have been claimed in relation to the application for consolidation and discovery.

14     Fry v Fry, above n 8, at [18].

15     Wightman v Public Trust, above n 5; and AB v RT [2016] NZHC 1399.

(g)Costs from three unsuccessful interlocutory applications by Ms Kinney may be deducted from the overall figure.

[22]   Costs on a 3C basis would bring the total costs to $184,072.50. On top of this, Ms Kinney claims disbursements for in-depth forensic costs of $65,157.56 in relation to the expert evidence of Mr Parsons, and photocopying costs of $302, bringing the total figure to $249,532.06.

[23]   If the Court declines to award Ms Kinney costs on a schedule 3C basis, it was argued that in the alternative, Ms Kinney is entitled to costs on a schedule 2B basis, with a 100 per cent uplift for increased costs. The uplift is sought because of the unreasonable conduct of the Pardingtons in the proceedings, and the failure to accept Ms Kinney’s settlement offers. If granted, this would bring the total schedule 2B costs to $105,026.50.

[24]   If 2B costs are awarded, Ms Hughes says Ms Kinney should recalculate her claim for costs addressing the following issues, after which the interested parties should be given a further opportunity to be heard and further copies of invoices rendered should be provided:

(a)Ms Kinney has declined to provide copies of actual invoices rendered. A party cannot seek more than that which has been paid for in each of the steps in question.

(b)Three days’ preparation is sought for the commencement of proceedings. There can be no claim for costs prior to June 2016 when the litigation funder commenced funding litigation, as no payment was made prior to that date.

(c)It is not accepted that the interlocutory application filed on 22 January 2018 can justify an award of costs. The application was primarily one for consolidation of proceedings with a secondary application for discovery in the event the primary application failed. The application

for consolidation was unsuccessful and the application for discovery was successful. No costs should be permitted for the application.

(d)Five days for the preparation of affidavits is unjustified. The scale allows for two and half days.

(e)For the appearance on 2 December 2018, the B scale allows for three days’ preparation, not the five days sought.

[25]   In Wightman v Public Trust, five grandchildren successfully made claims under the Family Protection Act 1955 against their grandfather’s residuary estate.16 Each received $150,000. Their claim was “vigorously opposed” by another grandchild, who had received the entire residuary estate. He refused to engage in mediation with the other grandchildren and ignored a substantial Calderbank offer. The High Court held that costs should be awarded on a schedule 3C basis because the case was significantly complex, involving an assessment of jurisdiction, fact and law spanning more than 50 years. Notably, the sums were to be paid out of the estate.

[26]   In AB v RT, the High Court held that the plaintiff’s mother had breached her moral duty owed to the plaintiff in making a bequest in the amount of $25,000 from an estate of approximately $2.4 million. On the plaintiff’s claim for $1.25 million under the Family Protection Act 1955, the Court made an award of $335,000 which, together with the $25,000 bequest, represented 15 per cent of the estate. The plaintiff’s actual costs and disbursements totalled about $136,500, whereas scale costs on a schedule 2B basis would be $35,838. It was submitted on the plaintiff’s behalf this would leave a significant shortfall and substantially erode the amount of the Court’s award. Indemnity costs were applied for and were not granted. Instead, the Court awarded costs on a schedule 3C basis. It appears from the decision that the sums were to be paid by the defendants personally, not the estate.

[27]   In contrast, the Pardingtons have made compromises throughout the proceeding. The issue before the Court was not, in the end, significantly complex, nor did it involve an assessment of jurisdiction, as was the case in Wightman v Public

16     Wightman v Public Trust, above n 5.

Trust. I accept Ms Hughes’ submission that there is no reason not to allow schedule 2B costs in these circumstances. Similarly, I do not accept there should be any uplift for increased costs.17

[28]   I find that Ms Kinney is entitled to costs on a 2B basis. These have been sought in the sum of $67,513.25. I grant Ms Hughes an opportunity for the Pardingtons to be heard on 2B costs. Copies of Ms Kinney’s invoices should be provided. I make those directions at the end of this judgment.

If awarded, who should bear the costs?

[29]   This issue raises the question of whether costs should be borne by the estate or by the Pardingtons personally.

[30]   Mr Gudsell submits it is of real significance that the executors of the estate, providing information as to the net value of the estate, are the same individuals who opposed the percentage entitlement sought by Ms Kinney. He says the conflict between these roles was unavoidable and the position of the executors in response to Ms Kinney’s claim ought to have been essentially non-contentious. Mr Gudsell submits they failed to advise the Court of the assets and liabilities of the estate in a timely, transparent and efficient manner, putting Ms Kinney to significant cost and causing an extraordinary delay in the determination of the proceeding. For that reason, Mr Gudsell submits that Ms Kinney’s costs should be met by the Pardingtons in their personal capacities, in both their interested party and defendant capacities, because the issues on which Ms Kinney succeeded and the “conduct” issues addressed relate to both capacities. In that way, it would mean that Ms Kinney’s share of the residuary estate is not unfairly eroded by costs.18

[31]   Ms Hughes submits that there is no evidence of unprincipled or unreasonable behaviour by the Pardingtons. She says the Pardingtons did nothing to prolong the argument, nor have they been found to have made a submission that was unmeritorious or unprincipled. They did not seek to withhold invoices from Ms Kinney. They were

17     High Court Rules 2016, r 14.6.

18     Donvin-Irons v Harries [2016] NZFC 2612.

aware that provision of invoices would clarify matters. Ms Kinney’s constant changing of her approach as to the valuation of the estate meant that the executors were constantly having to disclose more documents. They did so as efficiently as they could, given the state of Mr Pardington’s and the Trust’s affairs. The documentation provided to Ms Kinney amounted to hundreds of pages of material, including source material which would not ordinarily have been available given its age. This search involved looking for documents stretching back over more than 20 years. Substantial amounts of time were required to locate and provide this information. The conduct of the Pardingtons, as the executors, was timely and as efficient as possible in the circumstances.

[32]   As noted above, there is no longer a general rule that the costs of all parties should be paid out of the estate in a family protection claim.19 Over time, an approach that reflects the philosophy behind the present costs rules in the High Court Rules has developed, whereby the estate does not bear the costs, and scale costs are awarded, payable by the parties in accordance with established costs principles.20 Essentially, the decision as to costs is at the discretion of the Court,21 which must consider what costs outcome would do justice between the parties.

[33]   Ms Kinney has been put to considerable work to succeed in her claim, spanning nearly seven years now. I accept that some of the applications made by Ms Kinney’s counsel earlier in the proceeding have caused significant delay, but equally I accept that the Pardingtons experienced significant difficulties with locating and providing the Court with relevant documents as to both the Trust and the liabilities of the estate.

[34]   I also observe that the Pardingtons’ difficulties in locating relevant documents was a result of the deceased’s omission to keep adequate records. However, there is one issue relevant to conduct and that is the disclosure of documents. I deal with this issue under administrator’s costs, as I consider it is more relevant to the amount of those costs than here. I do not consider either of the parties’ positions outweighs the general  rule  for  present  purposes,  that  costs  should  follow  the  event  in  these

19     Fry v Fry, above n 8, at [13].

20 At [14].

21     High Court Rules 2016, r 14.1.

circumstances. I also consider that it is appropriate that Ms Kinney’s costs be paid out of the estate rather than personally by the Pardingtons. This has been a difficult case for all parties concerned and the fairest approach in my view is that Ms Kinney’s costs are payable by the estate.

[35]   I find that Ms Kinney’s 2B costs are payable by the estate. As noted above, I will allow the parties to be heard on the amount of 2B costs.

Administration costs

[36]   In relation to the amount of administration costs to be deducted from the net value of the estate, Mr Gudsell submits that only the sum of $33,439.67 can be reasonably deducted, which equates to approximately one-third of the total administration costs claimed by the Pardingtons. Mr Gudsell submits the balance of the sum claimed should not be deducted because such costs were unreasonably incurred by the Pardingtons in relation to discovery and evidential issues. On his calculation, this would bring the estate to a net value of $581,560.33, of which Ms Kinney is entitled to 70 per cent.

[37]   Ms Hughes submits that the costs of administration should be paid by the estate. The costs of the administration were fair and reasonable. Much of the interaction with the parties since the change of counsel has involved arguments over discovery. However, such arguments have occurred in the context that the Pardingtons had no knowledge of Ms Kinney until after the death of Mr Pardington and had not in any way ordered their affairs in a way which sought to adversely affect her interests. The records of the Family Trust – the subject of separate proceedings – were almost entirely the responsibility of Mr Pardington, and the records sought went back 25 years. The Pardingtons should not be personally penalised for their ultimately successful attempts, albeit delayed, in accessing those records.

[38]The administration costs in issue total $99,933.80.22

22     Mr Gudsell submits there is a third invoice from Tania Roberts of $2,857.75 not referred to in the agreed breakdown of administration costs. This brings Ms Roberts’ total costs to $9,841.13.

Legal principles

[39]   The following principles emerge from the authorities cited by the parties. In Pratley v Courteney, the Court of Appeal held so long as the trustee acts honestly and reasonably, he or she is normally entitled to an indemnity for all expenses reasonably incurred in the execution of the trust.23 Similarly, in Rule v Rule, the High Court held that “[t]he general principle in estate litigation is that personal representatives of estates receive full protection for their costs incurred as parties to proceedings where incurring those costs was reasonable”.24

[40]   However, in Boyd v Connolly, Thomas J held that the Court “is not obliged to award indemnity costs to executors and trustees in all circumstances. Where an executor or administrator acts unreasonably in incurring an expense they may not be entitled to full indemnity costs from the estate.”25 It is only expenses which are “properly incurred” which are the subject of a trustee’s indemnity. Improperly incurred expenses fall upon a trustee personally.26 Where a trustee goes beyond the role of an administrative trustee and not acted appropriately in its administration of the estate and conduct of proceedings, the trustee “must carry some liability for their actions and inactions”.27

Ms Kinney’s position

[41]   Mr Gudsell for Ms Kinney submits that, applying the above principles, a full indemnity for administration costs is not justified in the circumstances of the case. Ms Kinney accepts that the Pardingtons, as executors, are entitled to an indemnity for reasonably incurred administration costs. However, Ms Kinney maintains that only the sum of $33,439.67 can be reasonably claimed. That equates to approximately one- third of the total administration costs claimed by the executors.

[42]   Mr Gudsell submits the figure of $33,439.67 is sufficient to cover both the original valuation costs, court filing fees, and birth certificate fees (totally $3,530)

23     Pratley v Courteney [2018] NZCA 436, [2018] NZAR 1787 at [18].

24     Rule v Rule [2017] NZHC 672 at [10(a)].

25     Boyd v Connolly [2016] NZHC 2070 at [31].

26     At [31]; citing Re O’Donoghue [1998] 1 NZLR 116 (HC) at 122.

27     Walsh v Public Trust [2016] NZFC 8163 at [105].

which Ms Kinney accepts are properly claimable disbursements, along with over 60 per cent of legal expenses prior to the change of representation ($29,909.67 of

$47,632).

[43]   Mr Gudsell submits that the executors have failed to demonstrate that the balance of the remaining administration costs are reasonable, for the following reasons:

(a)Ms Roberts is the Trust’s accountant. Her costs should be met by the Trust, not the estate. Further, work from her was required only because the executors failed to provide full discovery when initially asked. In an estate of this nature and size, accountancy fees of approximately

$10,000 in relation to an associated family Trust cannot be justified.

(b)While Ms Kinney has no issue with the costs of the original valuations, and the re-evaluation costs are relatively insignificant, the need for them resulted from the executors’ delay in providing material in relation to the estate value such that by the time of the August 2018 hearing, updated valuations were required. The executors have brought the need for the property re-evaluations upon themselves through their conduct of the litigation, and they should be required to meet those costs personally.

(c)With regard to legal expenses before the change of representation, Ms Kinney does not challenge the majority of these expenses prior to the change of representation. However, legal costs exceeded what was reasonable. It is unclear precisely what work invoices cover and what was being done by the executors that necessitated the legal costs incurred. In a relatively simple estate such as this, legal costs of approximately $30,000 are more than reasonable.

(d)With respect to legal expenses after the change of representation, by mid-2016, nearly five years after probate was granted, it should not have been necessary for the estate to incur further legal costs. The costs

incurred post-change of representation relate to the unnecessary, unwarranted and unjustifiable delays in providing documentation that ought to have been provided prior to the August 2016 hearing. Those costs were unreasonably incurred, and the Court should not condone the executors’ conduct by granting them an indemnity for the same.

[44]   Mr Gudsell submits therefore that the Court should allow administration costs of $33,439.67 only, bringing the estate to a net value of $589,560.33.

The Pardingtons’ position as executors

[45]   Ms Hughes submits that a useful summary of the principles applying to an application for indemnity costs can be found in R v R.28 The Court should take account of the outcome of the proceedings; the matters in issue; the way the parties have conducted the proceedings; whether proceedings were made unnecessarily complex and protracted because of stalling tactics or procedural ploys adopted by a party; the means of the parties; the actual costs incurred by the parties; and the overall interests of justice.

[46]   Beyond such a statement of general principle, the Court has an unfettered discretion to do justice when dealing with costs, and unless costs are unreasonably incurred by an administrator, such costs should be met by the estate.

[47]   Ms Hughes submits that in this case, the executors have taken no active part in resisting Ms Kinney’s claim, but have been engaged while Ms Kinney was represented by former Counsel, in responding to numerous unsuccessful interlocutory applications and, under Ms Kinney’s current representation, responding to requests for disclosure.

[48]In answer to the principles outlined in R v R, Ms Hughes submits:

(a)The executors took no part in the proceeding resolving Ms Kinney’s entitlement, nor did they attend the quantum hearing in August 2018, preferring to abide the decision of the Court.

28     R v R, above n 8, at [10].

(b)The single matter at issue was the extent of the compensation due to Ms Kinney. The executors did not dispute her entitlement, the quantum of the estate was resolved by negotiation and compromise.

(c)Up until Ms Kinney’s change of counsel, considerable costs were incurred by the estate due to the manner in which Ms Kinney conducted her case. While Ms Kinney criticises the executors for delays in discovery, the executors experienced challenges in providing the same. There is no evidence of deliberate obstruction or misconduct.

(d)In terms of the means of the parties, the administrators’ costs should be met by the estate.

(e)Despite requesting them, Ms Kinney has not provided copies of invoices received by her litigation funder.

(f)The overall interests of justice require that all administration costs met by the estate.

[49]   Ms Hughes submits the issue confronting this Court is whether the costs of administration were fair and reasonable. She submits there were. The fact that David and Kenneth Pardington were both the executors and interested parties in these proceedings is not remarkable or unusual, and is not evidence of bad behaviour justifying an order of costs against the Pardingtons. The Pardingtons have on various occasions simply abided the decision of the Court. Their presence has been required only to address the questions of discovery and otherwise they have not taken an active part in the proceedings since Ms Kinney’s change of counsel. They have simply fulfilled their duty to protect the estate assets for the benefit of the beneficiaries, and acted honestly and reasonably throughout.

[50]   In response to Mr Gudsell’s submission that the executors have failed to demonstrate that the whole of the administration costs should be paid out of the estate, Ms Hughes makes the following comments:

(a)Ms Roberts’ costs totalled $9,841.13; Mr Parsons’ costs totalled

$65,175.16. Mr Parsons’ responsibility was to provide advice on accounts prepared by Ms Roberts from acknowledged inadequate and incomplete information. Ms Roberts had to create the accounts and respond to issues raised by Mr Parsons. These accountancy fees are justified. It was Ms Kinney who sought to bring issues involving the Trust into the family protection claim. The Trust’s accountant was therefore required to provide this evidence. These costs should be met by the estate.

(b)The cost of the updated valuations was $1,518. This sum is modest, appropriate and reasonable, and should be met by the estate.

(c)Legal expenses prior to the change of representation should be a straightforward matter. However, Ms Kinney’s previous representation was anything but reasonable and straightforward. There were unsuccessful applications and voluminous submissions, which involved various appearances. The executors had no option other than to incur the costs listed because Ms Kinney brought unmeritorious and unprincipled interlocutory applications. Such costs were higher than expected, but caused entirely by Ms Kinney’s conduct and therefore properly paid by the estate.

(d)After the change of representation there was a complete change of focus. The executors did not obstruct discovery: Ms Kinney’s requests were ever-evolving, it was a challenge to identify the ambit of discovery, and Mr Pardington had effective control of the Trust and its records had to be sourced from primary documents. While there may have been delays with the provision of discovery it was due to the challenges in locating the documents. There is therefore no justification for any award against the executors in requiring them to meet any costs.

Decision

[51]   As noted, the general principle is that executors of an estate are entitled to an indemnity for all expenses reasonably incurred in the execution of their role, while improperly incurred expenses fall upon the executor personally.29

[52]   I have traversed the detail of both parties’ submissions in detail and have come to the conclusion that the majority of the administration costs should come out of the estate, as they were properly incurred, but for the disclosure issue, which I canvass below.

[53]   I accept the submission of Mr Gudsell that not all the legal expenses incurred after the change of representation were reasonably incurred. I acknowledge that the state of the Trust and estate documents made it difficult for the Pardingtons to locate and provide documents. However, some critical documents, such as the Trust’s unredacted financial statements and the estates liabilities, needed to be discovered much earlier in the process. In particular, in the estate’s Administration Statement a Deed of Assignment dated 20 December 2013, a date after the filing date of Ms Kinney’s claim, recorded a loan of $131,680 owing by the estate to the K J Pardington Trust, with an assignment of the loan to the interested parties as a liability of the estate.

[54]   The delays in providing these documents and information was unacceptable in Family Protection proceedings, as I had to make clear in a teleconference call and in my Minutes.30 Therefore, I consider the executors’ costs claimed for providing these documents post-August 2016 should not be recovered in full, as I consider the executors’ stance towards disclosure of the Trust’s records was unreasonable. Aside from that aspect, I accept Ms Hughes’ submission that indemnity for the rest of the administration costs is justified in the circumstances.

[55]   It is not clear from the appendices provided which parts of the legal expenses after August 2016 are attributable to discovery issues. Given they were a substantial

29     Pratley v Courteney, above n 23, at [18]; Rule v Rule, above n 24, at [10(a)]; and Boyd v Connolly, above n 25, at [31].

30     Kinney v Pardington HC New Plymouth CIV-2013-443-58, 2 December 2016; and Kinney v Pardington HC New Plymouth CIV-2013-443-58, 19 July 2017.

focus of the hearing and negotiation between the parties, I consider it appropriate to order that 20 per cent of the executors’ costs post-August 2016 not be paid out of the estate, but by the executors personally. On my calculation, the executors’ costs post- August 2017 amount to $47,900.17.

[56]   Of the $99,993.80 total of administration costs then, I order that $90,413.80 be paid by the estate, while $9,580.00 is to be paid by the executors in their personal capacities.

Result

[57]Ms Kinney is entitled to costs on a 2B basis to be paid by the estate.

[58]The administration’s costs are to be paid by the estate, with the exception of

$9,580.00 to be paid by the executors in their personal capacity.

[59]   The defendants and interested parties can be heard on the 2B costs claim by the plaintiff.

[60]I make the following directions accordingly:

(a)The plaintiff is to address the issues set out in [24] within 10 working days of this decision.

(b)The defendants and interested parties are to file their response within a further 10 working days.

(c)The plaintiff is to file a response, if any, within a further five working days.

Cull J

Solicitors:
Nielsen Law, Hamilton for Plaintiff

Govett Quilliam, New Plymouth for Defendants