Officer v CM Law Trustees (2010) Limited

[2022] NZHC 1098

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2022-425-000010

[2022] NZHC 1098

BETWEEN

CHERYL FAY OFFICER

Applicant

AND

CM LAW TRUSTEES (2010) LIMITED

First Respondent

AND

KIM PAUL GWILLIAM

Second Respondent

AND

JOHN BARRY GWILLIAM

Third Respondent

AND

ARTHUR JAMES GWILLIAM

Fourth Respondent

Hearing:	On the papers
Judgment:	19 May 2022

JUDGMENT OF NATION J

Introduction

[1]                 Ms Officer, the applicant and intended plaintiff in the proceedings, has applied for a Beddoe order to approve her commencing and pursuing the intended proceedings and to indemnify her for costs she is likely to incur in the proceedings.1 The application is unopposed.

1      Re Beddoe [1893] 1 Ch 547 (CA); High Court Rules 2016, rr 19.4 and 19.4A.

OFFICER v CM LAW TRUSTEES (2010) LTD [2022] NZHC 1098 [19 May 2022]

Background

[2]                 Ms Officer is a solicitor in Invercargill. She is an executor and trustee of the estate of Piuaterangi Gwilliam (Mrs Gwilliam). Her co-executor is Kim Paul Gwilliam.

[3]                 Mrs Gwilliam died on 14 June 2019, leaving a will dated 21 January 2019. Probate of the will was granted to the applicant and Kim Gwilliam on 26 August 2020.

[4]                 Ms Officer has signalled her intention to file proceedings; the respondents to those proceedings are as named above. CM Law Trustees (2010) Ltd, Kim Paul Gwilliam and John Barry Gwilliam are named as trustees and beneficiaries of the Piuaterangi Gwilliam Family Trust (the Trust). Arthur James Gwilliam of Wanaka is a beneficiary of the Trust. CM Law Trustees (2010) Ltd wishes to retire as a trustee.

[5]                 In a draft statement of claim filed in connection with these proceedings, the applicant asserts that Mrs Gwilliam’s will provided for the residue of the estate, after costs, to be paid to the Trust. On 21 January 2019, Mrs Gwilliam signed a memorandum of wishes expressing her wish that, after her death, the Trust assets be divided into three equal parts and distributed one part each to Kim and his brothers John Barry Gwilliam and Arthur James Gwilliam. In the draft statement of claim, Ms Officer asserts that, following the sale of the trust property and partial repayment of a loan from Mrs Gwilliam to the Trust, the net value of Mrs Gwilliam’s estate is

$1,457,232.50. The assets in the estate include a loan to the Trust of $1,340,858.26. The estate has a liability to the Trust of $538,236.

[6]                 In the draft statement of claim, Ms Officer asserts that Kim Gwilliam has failed to carry out his duties as executor and trustee of the estate by failing to properly administer the estate and progress the distribution of the estate assets to the Trust in accordance with the will. Ms Officer also asserts that Kim Gwilliam is estranged from John Barry Gwilliam and Arthur James Gwilliam and that to allow him to continue as executor and trustee of the estate would prejudice the interests of the beneficiaries of the estate and the Trust. She asserts there is a conflict between Kim Gwilliam’s duty as executor and trustee and his personal interest in objecting to the transfer of estate assets to the Trust and signalling a claim against the estate.

[7]Ms Officer has signalled her intention to file proceedings for:

(a)        the removal of Kim Gwilliam as a co-executor and trustee of the estate; and

(b)        the removal of Kim and John Gwilliam as trustees of the Trust and the appointment of the Public Trust as trustee.

[8]                 Ms Officer has applied for a Beddoe order before filing the intended proceedings to approve her commencing and pursuing the intended proceedings and to indemnify her for costs she is likely to incur in the proceedings. She seeks:

(a)        reimbursement of her legal costs, incurred in the present proceedings, from the assets of the estate;

(b)        payment from the estate of her reasonable costs and expenses incurred in proceeding with her application for removal of Kim Gwilliam as co- executor of the estate; and

(c)        payment from the Trust of her reasonable costs and expenses incurred in proceeding with her application for removal of Kim Gwilliam and John Gwilliam as trustees, and the appointment of the Public Trust as sole trustee, of the Trust.

[9]                 All respondents have been served with the application for a Beddoe order. No notices of opposition were filed before the hearing of the application scheduled for 9 May 2022. The Court agreed to the applicant’s request that the application be determined on the papers.

Analysis

[10]              As recently confirmed by the Court of Appeal, one of the fundamental rights of an honest express trustee is that costs and expenses properly incurred in the administration of the trust are compensable out of the assets of the trust.2 The purpose

2      See McCallum v McCallum [2021] NZCA 237 at [29] citing Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439 at [20] in turn citing Re Grimthorpe [1958] Ch 61 (Ch) at 623.

of a Beddoe order is to confirm the propriety of the actions in litigation of the trustees of a trust and to confirm the trustee’s entitlement to indemnity for costs to be paid out of the trust’s assets.3 These costs must be reasonably and properly incurred for the benefit of the trust.4 A Beddoe order will be granted by the Court if it is in the best interests of the trust and the beneficiaries as a whole, having regard to all the circumstances.5 Beddoe orders are not made, save for exceptional circumstances, where the applicants are “self-interested”, which commonly includes claims for breach of trust proceedings, proceedings concerning self-dealing and profits from the trust, and proceedings for or concerning the removal of trustees.6 A Beddoe order can still be made for one of the claims just listed only where the trustee seeking that action is nonetheless doing so in the best interests of the trust.7

Conclusion

[11]              I have read the applicant’s affidavit, the draft statements of claim and the applicant’s memoranda and I consider the intended proceedings are being brought in the best interests of the trust. There will accordingly be orders:

(a)        approving the applicant in her capacity as both trustee of the Estate of Piuaiterangi Gwilliam (the Estate) and a person holding a power of appointment and removal of trustees of the Piuaiterangi Gwilliam Trust (the Trust) bringing applications for:

(i)the removal of her co-executor, Kim Paul Gwilliam, as executor of the Estate pursuant to s 21 of the Administration Act 1969 and s 114 of the Trusts Act 2019; and

(ii)the removal of Kim Paul Gwilliam and John Barry Gwilliam as trustees, and the appointment of the Public Trust as sole trustee, of the Trust pursuant to ss 112 and 114 of the Trusts Act 2019;

3      McCallum v McCallum, above n 2, at [28].

4 At [28].

5      McLaughlin v McLaughlin [2018] NZHC 3198, [2019] NZAR 286 at [29], as cited in McCallum v McCallum, above n 2, at [43].

6      McCallum v McCallum, above n 2, at [35] citing Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) vol II at [48-002].

7      McCallum v McCallum, above n 2, at [35].

(b)        that the Estate will reimburse the applicant for legal costs and expenses incurred in bringing this application for a Beddoe order;

(c)        that the Estate will indemnify the applicant for her reasonable costs and expenses incurred in proceeding with her application for removal of Kim Gwilliam as co-executor of the Estate; and

(d)        that the Trust will indemnify the applicant for her reasonable costs and expenses incurred in proceeding with her application for removal of Kim Gwilliam and John Gwilliam as trustees, and the appointment of the Public Trust as sole trustee of the Trust.

Solicitors:

Duncan Cotterill, Wellington.