Lim v Yip
[2022] NZHC 2631
•12 October 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-528
[2022] NZHC 2631
UNDER Part 18 of the High Court Rules, section 66 and 51 of the Trustee Act 1956 and the High Court’s inherent supervisory jurisdiction in relation to trusts IN THE MATTER
Of the C N Lim Family Trust, a trust established by deed dated 1 July 1981
BETWEEN
HONG LIM-YIP (previously known as Hong Lim Yip) and MING LIM-YIP (previously known as Ming Yip Lim) as trustees of the C N Lim Family Trust Plaintiffs
AND
STEVEN YIP LIM as trustee of the C N Lim Family Trust
Defendant
Hearing: 3 October 2022 Appearances:
S A Armstrong and P A Brown for the Plaintiffs
L J Kearns KC and J S Langston for the Defendant
Judgment:
12 October 2022
JUDGMENT OF POWELL J
This judgment was delivered by me on 12 October 2022 at 3 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
LIM & Ors v Yip [2022] NZHC 2631 [12 October 2022]
[1] The defendant, Steven Yip Lim (“Steven”), has applied for orders that he and the plaintiffs, Hong Lim-Yip and Ming Lim-Yip, as trustees of the C N Lim Family Trust (“the trust”):
Appoint an independent chartered accountant to determine what amounts, if any, are owed under mortgage B.328676.2 as transmitted under B.449113.1; and
Are, if any amounts are still owing under mortgage B.328676.2 as transmitted under B.449113.1 (whether principal and/or interest), to pay the outstanding amount to the Estate of Mrs Shue Wah Lim.
[2] Mortgage B.328676.2 (“the mortgage”) to which the application relates is secured over a property in Whenuapai owned by the trust (“the Whenuapai property”) and secured by a loan of $105,000 apparently made by the parties’ parents, Cheok Narn Lim and Shue Whah Lim and dated 17 March 1983. Mr Lim senior subsequently passed away, and his interest in the mortgage was subsequently transferred to Mrs Lim as survivor, the said transmission (B.449113.1) being registered in August 1985.
[3] The orders sought in relation to the mortgage are the remaining matters at issue arising from an application filed by Steven pursuant to a leave reserved clause in consent orders made by me in 2021. In addition to the mortgage issue, costs stand to be considered in connection with other matters raised by Steven in the application but no longer pursued, as well as in respect of further costs incurred by Vicki Ammundsen Trust Law (“VATL”), the Court appointed solicitors on the sale of a property at Hobsonville, (“the Hobsonville property”), which would not have been incurred but for the application.
The settlement
[4] The consent orders dated 7 July 2021 implemented a settlement reached by the parties in the course of the substantive hearing of these proceedings. It is not necessary for the purposes of this judgment to summarise in any detail the agreement reached other than to note that the proceedings were to be discontinued after the completion of various tasks by the trustees, including the sale of the Hobsonville property,1 and
1 Consent orders, 7 July 2021, clauses 2, 3 and 10.
provided a mechanism for leasing and the ultimate sale of the Whenuapai property.2 Clause 6 of the consent orders contains a mechanism for the discharge of the mortgage over the Whenuapai property. This provides:
The trustees shall engage with the executor of the estate of Shue Wah Lim, once probate is granted by the High Court, to obtain a discharge of mortgage B.328676.2 as transmitted under B.449113.1 (“Mortgage”) secured over the Whenuapai Property.
[5] The consent orders also made unconditional a deed of settlement executed by the parties on 6 July 2021 which provided relevantly:3
On becoming unconditional, this agreement shall constitute an immediate full and final settlement of the Proceedings (including any claims arising out of the facts and events referred to in Opening submissions by each of the parties and their affidavits filed in the Proceeding) and any claim or counterclaim any of them may have against any other party or the trustees of the Trust arising out of or under the Trustee Act 1956, Trusts Act 2019, or on any other basis whatsoever under statute, common law or equity, whether presently asserted or not, relating to facts and events occurring on or before the date of this deed.
[6] There is now no dispute that the prerequisites for discontinuance have been met. With regard to clause 6, since the consent orders were made the executors of Mrs Lim’s estate, with whom the parties are required to engage, have been confirmed as being the plaintiffs.4
[7]In addition, investigations have confirmed the following matters:
(a)the mortgage was registered and recorded against the title of the Whenuapai property (Certificate of Title NA 5D/219) in 1984;
(b)in 1991 the mortgage was recorded as having been discharged. This was followed by a subsequent notation on the title as “discharged in error”;
(c)on 23 June 2004 Mrs Lim executed a discharge of the mortgage, which was witnessed by her lawyer, David Snedden. The discharge could not
2 Clauses 4, 5, 6 and 7.
3 Deed of Settlement, clause 5.
4 Wong v Lim-Yip [2022] NZHC 523 at [4].
be registered against the by then computerised record of title because when the title was computerised the mortgage was not recorded;
(d)no attempt was made to rectify the title at the time, but Mr Snedden placed the executed discharge on his file in the event that this was ever needed; and
(e)Mrs Lim passed away in February 2019.
Does clause 6 of the consent orders require the relief sought by Steven?
[8] It is accepted Steven gave up a range of other claims to reach the settlement with the plaintiffs and agree to the consent orders. Ms Kearns however contends Steven understood that clause 6 was wide enough to require the type of investigation he now seeks so that prior to any discharge any amounts still owing on the mortgage would be identified, thereby enabling the trust to pay any such amounts to the estate, and only then would the mortgage be discharged. To this end it is submitted that Steven had, during negotiations leading to the settlement, proposed specific clauses requiring the type of approach he now seeks, albeit he accepts that his drafts were not agreed to, nor included in any of the settlement documentation. Steven argues that his concerns have substance and relies on a report from a forensic accountant, David Osborn, who has questioned whether all principal or interest payable on the mortgage was ever paid by the trust, suggesting indeed that up to $12,775,117 remains owing from the trust to Mrs Lim’s estate.
Discussion – mortgage issues
[9] Having considered the issue I conclude that Steven’s position regarding the mortgage is simply untenable. It is clearly outside the scope of the leave reserved in clause 6 of the consent orders and as a result his application must be, and is, dismissed.
[10] First and foremost, it is clear that clause 6 is very limited in scope. Clause 6 does not envisage any formal investigation. The only requirement on the trustees is that they “shall engage” with the executors of Mrs Lim’s estate “to obtain a discharge of [the] mortgage”. That in fact has already occurred, given the plaintiffs are the
executors of Mrs Lim’s estate. It does not require the trustees, including Steven, to take any further steps with regard to the mortgage following that engagement. As noted, that engagement with the executors has resulted in the discovery of the discharge executed by Mrs Lim in 2004, and ultimately it will be a decision for the executors rather than the trustees as to whether to register the discharge in the event the mortgage is restored to the record of title.
[11] Furthermore, any reliance upon earlier drafts of the settlement documentation which may have imposed any greater obligation on the trustees is clearly misplaced. Not only were such advanced in the course of without prejudice negotiations and therefore inadmissible, but also clauses 14 and 15 of the Deed of the Settlement are clearly engaged. These provide as follows:
Each party acknowledges that, in entering into this agreement they have not relied on:
(a)Any statements, representations or assurances made by any party (separately or jointly) to the other in respect of any matter relating to the Trust and the conduct of the Trust’s affairs or how any party in their personal capacity might use or apply any distributions they receive.
(b)They have acted solely on the basis of information provided by the other party and advice given by their own legal advisers.
The parties acknowledge that they enter into this agreement fully and voluntarily from their own information and investigations. Each party acknowledges and accepts the risk that they, their advisers, agents or lawyer may discover facts or principles of law different from, or in addition to, the facts and principles of law which they know or believe to be true with respect to the subject matter of this agreement.
[12] Together, the without prejudice nature of the negotiations, the terms of clauses 14 and 15 and the settlement of the wider claims between the parties as set out in clause 5 of the deed of settlement provide a complete answer to Steven’s contention that the type of enquiry he now seeks should necessarily be implied into the terms of clause 6.
[13] In any event, any suggestion that Steven thought such an enquiry would take place lacks any credibility. Although there were many matters at issue between Steven and the plaintiffs prior to settlement, the issues now raised in respect of the mortgage
did not form part of these issues, nor did any such issues form part of the inter-entity assets and liabilities table prepared by the trust’s accountants following input from each of the three trustees.
[14] It is equally difficult to see any reason for the application given Steven, like the plaintiffs, is a beneficiary of the trust as well as a trustee. I note that none of the parties were trustees at the time the loan weas advanced. Instead, the loan secured by the mortgage was advanced to earlier trustees. In the circumstances it therefore appears the only purpose of the reconciliation sought by Steven and any consequent payment would be to weaken the trust so as to enlarge the estate of Mrs Lim for reasons that are not explained.
Costs
[15]As noted above the costs have been claimed by:
(a)the plaintiffs with regard to the whole of Steven’s application including those parts no longer pursued at the hearing; and
(b)by VATL in respect of attendances by that firm after the settlement of the Hobsonville property, where but for Steven’s queries their attendances would have been complete.
[16] Both the plaintiffs and VATL seek costs on a solicitor/client basis, the plaintiffs as indemnity costs pursuant to r 14.6(4) of the High Court Rules 2016 and VATL on the basis that while their solicitor/client costs would normally be met from the trust and thereby borne by the beneficiaries equally, in this case costs should be met by Steven personally.
[17] In response and opposing any award of costs against Steven personally, Ms Kearns submitted that the approach taken by Steven in making the application and seeking information from VATL was reasonable throughout. In addition to the basis for seeking orders in respect of the mortgage, Ms Kearns submitted that it was necessary for Steven to seek copies of the full VATL file and that he was also required
to seek his own independent tax advice, which ultimately led to him not having to pursue the remainder of the application.
Discussion – costs
[18] I begin my analysis with the claim by the plaintiffs for indemnity costs against Steven.
[19] Rule 14.6(1)(b) of the High Court Rules 2016 defines indemnity costs as the “actual costs, disbursements and witness expenses reasonably incurred by a party”. Rule 14.6(4) gives a Court discretion to order a party to pay indemnity costs if:
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[20] The leading authority on indemnity costs is the decision of the Court of Appeal in Bradbury v Westpac Banking Corporation.5 In particular the Court noted that there are three broad approaches to costs:6
(a)standard scale applies by default where cause is not shown to depart from it;
(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and
5 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.
6 At [27].
(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[21] With regard to indemnity costs, the Court recognised the categories in respect of which the discretion to order indemnity costs may be exercised were not closed but identified a number of circumstances in which indemnity costs have been ordered:7
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law; or
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J's “hopeless case” test.
[22] The Court noted that in the High Court decision, the Court had applied the test of hopelessness and misconduct and observed that “if sustained on the evidence each was a proper basis for indemnity costs”.8
[23] In this case I am satisfied that none of the matters raised in the application were appropriately raised but rather engage the types of issues identified in [21](c) – (e). In particular, it is clear from my analysis that the attempt to use clause 6 to re-open the mortgage was not only hopeless but made in wilful disregard of the facts and law (noting in particular the attempt to rely on documents said to have been provided in the course of without prejudice negotiations, and the fact the application appears to have been pursued for the ulterior motive of weakening the trust and enlarging the estate of Mrs Lim).
[24] Likewise, while Steven ultimately relied upon his own tax advice, this simply confirmed that the approach taken by VATL on the sale of the Hobsonville property was correct. Taking these matters together I am satisfied that the plaintiffs are entitled to costs on an indemnity basis with regard to their costs and disbursements reasonably
7 At [29].
8 At [33].
incurred in opposing Steven’s application. As indemnity costs are however the “actual costs, disbursements and witness expenses reasonably incurred by a party” and no evidence of the costs incurred by the plaintiffs have yet been provided, I direct that the plaintiffs are, within two weeks of the date of this judgment, to file a further memorandum setting out the details of the costs and disbursements claimed in respect of the application. Steven will then have a further two weeks in which to respond, following which I will determine the reasonableness of the plaintiffs’ costs on the papers.
[25] Given my conclusion with regard to the costs sought by the plaintiffs it follows that the additional fees sought by VATL are also appropriately paid out of Steven’s share rather than from the Trust funds generally. Unlike the costs claimed by the plaintiffs, no issue has been raised with the quantum of the costs sought by VATL, being a proposed invoice in the sum of $5,085.88. In the circumstances I consider the orders sought by VATL are appropriate and order as follows:
(a)VATL shall immediately render a final account to the trustee of the C N Lim Family Trust for its reasonable costs for all the work carried out since 7 March 2022 (the Final Account);
(b)Steven Yip Lim is directed to personally meet the Final Account;
(c)VATL is authorised to deduct from the monies held in its trust account on behalf of Steven Yip Lim, the amount required to meet the Final Account;
(d)VATL shall continue to hold monies in its trust account on behalf of Steven Yip Lim subject to his direction and instruction;
(e)VATL’s obligations on behalf of the C N Lim Family Trust are finally complete and discharged.
Consequential orders
[26] As will be apparent in my analysis of the mortgage issue at the present time the executed discharge cannot be registered because, as all parties agree, the mortgage has in error been omitted from the computerised record of title for the Whenuapai property. It is therefore appropriate in terms of the leave reserved provision in the consent orders to direct that mortgage B.328676.2 be place on the computerised record of title pursuant to s 16 of the Land Transfer Act 2017.
Powell J
Solicitors/Counsel:
Shieff Angland Lawyers, Auckland Lynda Kearns KC, Auckland
Priscilla Brown, Auckland
Sarah Armstrong, Shortland Chambers, Auckland
Copy:
Vicki Ammundsen Trust Law Limited, Auckland (M Phillipps)
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