Mackie Law Independent Trustee Limited v Chaplow

[2017] NZHC 2966

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-003187 [2017] NZHC 2966

UNDER

Section 51 of the Trustees Act 1956 and s

76 of the Public Trust Act 2001

BETWEEN

MACKIE LAW INDEPENDENT TRUSTEE LIMITED, CARROLL JEAN MUIR AND ANNE RUTH HASTIE AS TRUSTEES OF THE DONALD TRUST Applicants

AND

JOANNE FLEUR CHAPLOW Respondent

Judgment:                1 December 2017

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 1 December 2017 at 3.00 pm

pursuant to r 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date……………………..

MACKIE LAW INDEPENDENT TRUSTEE LTD & ORS v CHAPLOW [2017] NZHC 2966 [1 December

2017]

[1]      In the substantive proceeding of this matter the applicants, who were trustees of the Donald Trust, applied for orders removing them as trustees, appointing the Public Trust in their place, requiring the legal fees they had incurred to be met from the assets of the trust and costs on the application. The respondent, Ms Chaplow, who was the primary beneficiary under the Donald Trust, cross-applied for orders that the only asset of the trust be re-settled on her family trust, that a mortgage granted by the trustees to secure payment of legal fees to date be discharged, fixing the amount of the costs for which the trustees were entitled to be indemnified from the trust assets and costs on her application.

[2]      Ms Chaplow prevailed overall.  In my decision of 10 July 2017 I concluded that the amount for which the trustees were entitled to be indemnified by the trust, was much less than that claimed.  I directed the trustees to discharge the mortgage.  It was clear that the trustees should be removed but I was not able to make an order because of the uncertainty as to who the new trustees would be.   Subsequently, the parties conferred and I made consent orders removing the trustees, appointing new trustees and vesting the trust property in Ms Chaplow and Mr Patterson as trustees of Ms Chaplow’s family trust.

[3]      This leaves the issue of costs on the substantive application.  Counsel advised at a telephone conference on 10 November 2017 that the only outstanding matter was Ms Chaplow’s application for costs against the former trustees.  Ms Chaplow, seeks indemnity costs from the trustees personally.  She relies on a letter from her counsel, Ms Allan, to the trustees’ counsel, Mr Taylor, 17 May 2017 in which she suggested that the then trustees’ application for orders removing them was premature and that the parties would be better served by discussing the terms on which re-settlement of the Donald Trust could occur.  She sought an adjournment of the hearing to allow Ms Chaplow to assess the position.   The letter was an open letter in which Ms Allan reserved the right to rely on it in support of an application against the trustees personally.

[4]      In the normal course, the costs of the trustees’ application to be removed would be met from the trust.  This case is unusual because of the findings in my substantive judgment that the trustees had, in their efforts to administer the trust, acted in breach of their obligations in relation to re-settlement of the trust asset on Ms Chaplow’s family trust and incurred substantial fees that could not be justified as being connected with the administration of the trust. Moreover, Ms Allan was right to express the view that the application was premature and to seek a resolution that did not involve litigation.  Had the former trustees stood back from the problem it would have been clear that the outcome which eventuated was inevitable and could have been reached through negotiation rather than expensive litigation.  So, although it was necessary to remove the former trustees, the circumstances in which the application was made would not have justified the trustees having their actual costs met from the trust.

[5]      However,  the  trustees’ conduct  was  not  the  only  problem;  Ms  Chaplow contributed to the difficulties by dealing with the trust property herself rather than through the trustees and not properly accounting for rent received from it.

[6]      Taking the circumstances overall, I consider that the appropriate result is to allow Ms Chaplow costs on a 2B basis with a 25 per cent uplift to reflect the trustees’ unreasonable conduct in relation to the application.  I will leave it to counsel to agree

on the calculation.  Leave is reserved to seek directions if that is not possible.

P Courtney J