McGrath v Simson

[2015] NZHC 3310

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-001716 [2015] NZHC 3310

BETWEEN

KAREN JANE MCGRATH,

JOHN GRAEME GARDNER, ANNA LOUISE COOK, SUZANNE JUDI DAVIES First Plaintiffs

KAREN JANE MCGRATH AS EXECUTOR AND TRUSTEE OF THE ESTATE OF SALLY ELIZABETH SIMSON

Second Plaintiff

KAREN JANE MCGRATH AS TRUSTEE OF THE R & S SIMSON FAMILY TRUST

Third Plaintiff

AND

RUSSELL JAMES SIMSON AS EXECUTOR AND TRUSTEE OF THE ESTATE OF SALLY ELIZABETH SIMSON

First Defendant

RUSSELL JAMES SIMSON AS TRUSTEE OF THE R & S SIMSON FAMILY TRUST

Second Defendant

RUSSELL JAMES SIMSON Third Defendant

Hearing:	On the papers
Appearances:	M J Wallace for the Plaintiffs Defendant in person
Judgment:	18 December 2015

JUDGMENT OF DUNNINGHAM J

MCGRATH v SIMSON [2015] NZHC 3310 [18 December 2015]

Introduction

[1]      On 28 October 2015, I issued a judgment rectifying a settlement agreement concluded between the plaintiffs and the defendants, and dismissing the defendants’ claims to have the settlement agreement set aside.1

[2]      As the successful party, the plaintiffs are, in the ordinary course, entitled to an award of costs.  I had hoped therefore that the issue of costs could be resolved by agreement but, failing that, I also made directions for the filing of memoranda on costs.

[3]      Agreement has not been reached on costs, so I now must determine: (a)        whether the plaintiffs are entitled to costs;

(b)      if so, at what level; and

(c)       if costs are awarded, in which defendants’ capacity should Mr Simson

be required to meet any award of costs.

The plaintiffs’ application for costs

[4]      The plaintiffs’ application for costs is conventional.  They say they have been wholly successful in their claim against the defendants and, as is the usual course, costs should follow the event.2

[5]      As the proceedings were categorised as category 2, they submit that a 2B costs categorisation for all steps taken in the proceeding is appropriate.   The memorandum attaches a schedule setting out the plaintiffs’ calculation of the steps taken in this proceeding, and the related claim for costs for each step taking into account the change of daily rate from 1 July 2015.

[6]      The plaintiffs properly note that an application was made by them for entry of

judgment by default on the basis that the defendants’ pleading was deficient and

1      McGrath v Simson [2015] NZHC 2644.

2      High Court Rules, r 14.2(a).

amounted  to  an  admission  of  the  plaintiffs’ claim.    Costs  on  that  interlocutory application were reserved and the plaintiffs do not seek an order of costs in respect of  that  application.     While  the  plaintiffs’  application  was  unsuccessful,  the defendants were self-represented at that hearing so the primary rule is the defendants are not entitled to an award of costs.3

[7]      The plaintiffs also note that Mr Russell Simson is sued in three separate capacities.  As first defendant, he is sued as the executor and trustee of the estate of Sally Elizabeth Simson, as second defendant he is sued as trustee of the R & S Simson Family Trust, and as third defendant he is sued in his personal capacity. They explain that it was necessary for the plaintiffs to bring these proceedings against Mr Simson in those three separate capacities to ensure that the orders for rectification applied to all parties to the settlement agreement and, more particularly, that the orders for specific performance could be enforced against Mr Simson in his different capacities to ensure that the settlement agreement was perfected and performed.

[8]      The plaintiffs go on to note that they do not consider it is appropriate for any award of costs to diminish the assets of the estate of the late Sally Elizabeth Simson, nor to diminish the assets of the R & S Simson Family Trust.  For that reason, the plaintiffs seek an order for costs against Mr Simson in his personal capacity and a ruling that Mr Simson is not legally entitled to seek payment of any such award of costs from the assets of the estate of Sally Elizabeth Simson or from the assets of the R & S Simson Family Trust.

[9]      The plaintiffs seek only a global award for all plaintiffs since all plaintiffs were represented by one solicitor and single counsel.

[10]     The plaintiffs’ calculation of costs claimable on a 2B basis totals $46,053. This is comprised of $38,913 for the various steps taken in the hearing, excluding the interlocutory application for entry of judgment by default against the defendants, as well as fees paid to the Court, totalling $7,140.

The defendants’ response to the costs application

[11]     Mr Simson’s response does not address the application of the High Court Rules to the exercise of my discretion to award costs.   Rather, it focuses on the substantive effect of the proceedings on him.  He states that the Court’s decision has “cost me hugely already”, stating (erroneously in the Court’s view) “my personal losses amount to well over $1,000,000”.   He characterised the plaintiffs as “the aggressors” and says for them to “ask for more is absurd, unjust and inequitable”.

[12]     As the plaintiffs point out in reply, Mr Simson does not raise any issue with: (a)       the categorisation of the proceedings as 2B;

(b)      the steps taken by the plaintiffs in the proceeding; (c)  counsel’s conduct of the plaintiffs’ case; or

(d)      the calculation in the schedule attached to the plaintiffs’ memorandum

dated 27 November 2015.

[13]     Furthermore, despite Mr Simson’s claim that he has “used up all his reserve funds”, I accept that his inability to pay is not demonstrated on the evidence.  It was clear from the hearing that he holds a number of real estate assets in his own name, and I have no basis on which I could take into account an asserted inability to pay costs, in the exercise of my discretion.

What costs award should be made?

[14]     The exercise of my discretion to award costs is governed by Part 14 of the High Court Rules.   While any costs award is at the discretion of the Court, that discretion must be exercised in a principled way having regard to the principles in High Court Rule 14.2.4  These relevantly include that the party who fails with respect to a proceeding should pay costs to the party who succeeds and that costs should

normally be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding.

[15]     While there are provisions at r 14.6 which govern the award of increased costs, some of which are arguably engaged here, counsel for the plaintiffs have responsibly sought no more than standard costs.  However, equally, the rules make provision for a refusal of or reduction in costs.  These include where the interests or issues at stake were of little value or significance, where the successful party unreasonably incurred or added to the costs, or where some other reason exists which justifies the Court refusing costs or reducing costs, despite the principle that the determination of costs should be predictable and expeditious.  Nothing has been raised which engages any of the principles in r 14.7 which would warrant reduction or refusal.

[16]     I am satisfied that in this case, the costs principles require that 2B costs for all steps, except the interlocutory application seeking judgment by default, should be awarded.

[17]     The next issue to consider is whether all or any of the costs could be payable from the estate of Sally Elizabeth Simson or the R & S Simson Family Trust, given Mr Simson’s role as a trustee of those two trust estates.

[18]     I accept that the cost of a trustee participating in a proceeding to determine some genuine question relating to the terms of administration of a trust are conventionally paid out of the trust fund.  However, it has long been recognised that where a beneficiary makes what may be described as a “hostile claim” against the trustees or other beneficiaries, then costs may be awarded against the trustee in his or

her personal capacity.5

[19]     In the present case, I am satisfied that this case involves hostile litigation, both  among  beneficiaries  and  between  beneficiaries  and  Mr  Simson  as  trustee. Mr Simson’s role in the litigation was primarily motivated by his personal interest in retaining control over the assets of the R & S Simson Family Trust, despite the

requirement in Sally’s will that he work with the new trustee Karen McGrath, who was appointed under the will.  Even in his costs memorandum he refers to the trust assets, such as the family house and bach, as if they were his personal assets which he has been deprived of.  His role can be contrasted with that of the other trustee of the R & S Simson Family Trust, Mr Neil Simson, who simply abided the decision of the Court.   In any event, the issue in dispute was not some aspect of trust administration but whether, in his various capacities, including his personal capacity, Mr Simson had agreed to a settlement on the terms claimed by the plaintiffs.

[20]     For those reasons, I am satisfied that this is a case where the costs should not be met from either the estate of Sally Elizabeth Simson or the assets of the R & S Simson Family Trust, but should be met from Mr Simson personally.

Outcome

[21]     Costs are awarded against the third defendant in favour of the plaintiffs on a

2B basis, calculated as set out in the schedule provided with the memorandum in support of the application for costs dated 27 November 2015.

[22]     For the avoidance of doubt, as I have ordered that these costs are to be paid by Mr  Simson  in  his  personal  capacity,  he  is  not  entitled  to  seek  payment,  or reimbursement, of any such award of costs from the estate of Sally Elizabeth Simson or from the assets of the R & S Simson Family Trust.

Solicitors:

Dawson Innes, Christchurch

Copy To:   Russell Simson, 225 Hoon Hay Rd, Christchurch