Pollock v Pollock
[2020] NZHC 1751
•20 July 2020
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV 2017-470-000060
[2020] NZHC 1751
BETWEEN STEPHEN REX POLLOCK
Plaintiff
AND
CHERYL LINDA POLLOCK and PETER
EDMOND WASHER as executors, trustees and administrators of the Estate of R D Pollock
First DefendantsAND
CHERYL LINDA POLLOCK
Second Defendant
AND
CHERYL LINDA POLLOCK and CLM
TRUSTEES as trustees of the Judea Valley Trust
Third Defendants
Hearing: On the papers Counsel:
D Fraundorfer and P R Allan for Plaintiff P J Morgan QC for Second Defendant
K J Catran for First and Third Defendants
Judgment:
20 July 2020
JUDGMENT OF VAN BOHEMEN J
[as to costs]
This judgment was delivered by me on 20 July 2020 at 4.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Holland Beckett Law, Tauranga Neverman Bennett, Hamilton Rejthar Stuart Law, Tauranga
POLLOCK v POLLOCK [as to costs] [2020] NZHC 1751 [20 July 2020]
Introduction
[1] In my judgment dated 25 March 2020 in the proceeding brought by the plaintiff, Steven Pollock, and in two related proceedings brought by Steven’s sister,
Letitia Pollock:1
(a)I dismissed the claims made by Steven and Letitia against the defendants under the Trustee Act 1956, the Administration Act 1969, the Law Reform (Testamentary Promises) Act 1949, and pt 18 of the High Court Rules 2016;
(b)I found that Steven and Letitia had made out their claims for provision to be made for them under the Family Protection Act 1955 from the estate of their father, Rex Pollock, but I was unable to make any awards in their favour because there were no assets in the estate.
[2] Because the defendants had been the overall successful parties, I held that they were entitled to costs against Steven on a 2B basis but recorded that because Letitia had been legally aided, in accordance with s 45(2) of the Legal Services Act 2011, the Court would have to be satisfied that there were exceptional circumstances before ordering costs against her.2 I recorded that if the parties were unable to agree costs, they may file memoranda.3
Memoranda of counsel
[3] As set out in a memorandum dated 28 April 2020 from Mr Morgan, counsel for the second defendant, Cheryl Pollock, Cheryl seeks costs of $108,266.50 plus disbursements of $10,023.77.
[4] As set out in a memorandum dated 29 April 2020 from Mr Catran, counsel for the first defendants, the executors and trustees of Rex’s estate, the executors and trustees seek costs of $32,669.00 and disbursements of $330.00, principally for
1 Pollock v Pollock [2020] NZHC 648.
2 At [332].
3 At [333].
interlocutory steps taken prior to the hearing. The executors and trustees undertook to abide by the decision of the Court and did not take an active part in the hearing.
[5] As set out in a memorandum dated 30 April 2020 from Mr Scott, counsel the third defendant, CLM Trustees Ltd as trustee of the Judea Valley Trust (JVT), CLM Trustees seek costs of $74,928.00 plus disbursements of $220.00.
[6] The costs claims of the three defendants are calculated on a 2B basis and relate only to the costs of the proceeding brought by Steven. None of the defendants seeks costs against Letitia.
[7] As set out in a memorandum dated 27 May 2020, Mr Fraundorfer, counsel for Steven, says:
(a)Steven’s costs of $126,775.50 and disbursements of $27,404.230 should be met from the JVT; and
(b)In the alternative, the defendants’ claims for costs should be refused or reduced.
[8] Mr Fraundorfer says that, in accordance with the statement of principle of Stringer J in Re Paterson,4 as applied recently in Dodssuweit v Olivier,5 Steven’s costs should be met from the JVT because Rex was at fault when he made inter vivos transfers of his assets to defeat Steven’s claim under the Family Protection Act. Mr Fraundorfer also says the JVT should bear Steven’s costs because, in bringing his proceeding, Steven was asking the Court to use its supervisory powers to protect the interests of his children and his interests as a beneficiary. He says further that the award of costs should do justice between the parties. In the alternative, he advances various reasons why the defendants should not be awarded the full costs they claim.
4 Re Paterson (deceased) [1924] NZLR 441
5 Dodssuweit v Olivier [2019] NZHC 2707.
[9] In a reply memorandum dated 9 June 2020, Mr Morgan seeks leave, on behalf of all defendants, to respond to Mr Fraundorfer’s memorandum and submits various reasons why the Court should not accept the arguments advanced by Mr Fraundorfer.
[10] Mr Fraundorfer’s memorandum raises issues that have not been canvassed in these proceedings. It is appropriate, therefore, that the defendants should have the opportunity to respond and I grant leave accordingly. I consider below the arguments advanced in the respective memoranda, as informed by the principles in Re Paterson.
Relevant legal principles
[11] For convenience, I adopt the statement of applicable legal principles as set out by Fitzgerald J in Dodssuweit:6
[10] All matters as to costs are at the discretion of the Court. In the context of estate litigation, however, it has long been recognised that what might otherwise be the “ordinary” approach to costs in civil litigation can be displaced in cases of contested wills.
[11] The leading statement of principle in this jurisdiction is that of Stringer J in Re Paterson:
“The Court has a general discretion as to costs in all actions and proceedings before it, but there are certain well-established principles upon which that discretion should be exercised in cases of contested wills. They are as follows: (i.) If the litigation originates in the fault of the testator—eg by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life—or of those interested in the residue the costs may properly be paid out of the estate. (ii.) If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent. (iii.) Unless the circumstances of the case are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail.”
(footnotes omitted)
[12]The Court of Appeal in Loosey v Powell accepted these principles as settled.7
6 Ibid.
7 Loosey v Powell [2018] NZCA 73 at [6].
[13] In Dodssuweit, Fitzgerald J applied the principles to the circumstances of that case, where the plaintiffs had challenged the last will of their mother and inter vivos transactions entered into by the mother at the same time as her will. Because Fitzgerald J was not satisfied that the litigation was due to the fault of the testator, she did not need to consider whether, if such fault had been established, that could justify an order that the plaintiffs’ costs be met from a trust established out of one of the inter vivos transactions.8 However, having regard to the actions of the parties in that case, Fitzgerald J ordered costs against the unsuccessful plaintiffs on a heavily discounted basis, which she considered a fair outcome given the nature and outcome of the litigation.9
Did the litigation originate in Rex’s fault?
[14] Mr Fraundorfer says the litigation arose because Rex, in contemplation of his death and with full knowledge of likely litigation, took active steps to deprive Steven and his siblings of any inheritance to which they would otherwise have been entitled. He says, in particular, that Rex entered into the inter vivos transactions to defeat Steven’s legitimate and successful Family Protection Act claim.
[15] I do not accept that as an accurate portrayal of events. Nor can it be said, having regard to the statement of Springer J in Re Paterson, that Rex’s testamentary arrangements were unclear or affected by eccentric or irrational habits or mode of life. To the contrary, those arrangements were considered and made with full knowledge of the outcomes Rex wanted to achieve.
[16] The summary account in my judgment of Rex’s wills, trusts and memoranda of wishes makes it plain that for at least the last 21 years of his life, Rex did not intend to give his wealth directly to any of his children or step children. From the first will executed on 24 November 1993 to the last will executed on 27 November 2014, Rex made no direct provision in his will for his children but directed that the bulk of his assets should go to the JVT, of which Rex’s children and then his step children were discretionary and final beneficiaries.
8 Above n5, at [14]-[17].
9 Above n5, at [25].
[17] It is common in New Zealand for testators to use trusts in this fashion. It cannot be said that the disposal of Rex’s assets to the JVT was part of a plan to disinherit Steven. Had Steven remained a beneficiary of the JVT, he would have had contingent rights to share in the JVT’s assets. Whether Steven would have made a Family Protection Act claim if he had remained a beneficiary of the JVT and, if he had, whether the claim would have been successful in Steven’s circumstances (as distinct from Letitia’s circumstances), are matters for speculation.
[18] Steven’s removal as a beneficiary of the JVT was a deliberate decision taken by Rex after he and Steven had fallen out for a third time. It occurred some months before Rex was diagnosed with incurable cancer. Accordingly, Steven’s exclusion from the JVT was not made in contemplation of Rex’s death or, as I have found, as a result of undue influence by Cheryl.
[19] Later, after he learned of the cancer, Rex took steps to try to ensure that his will would be protected from claims that Steven might bring under the Family Protection Act 1955. That is clear from the correspondence between Rex and Cheryl on the one hand and Mr Washer, their lawyer and fellow trustee, and Mr Cooney, their accountant, and from the Record of Events that Rex signed in April 2014. To that end, Rex transferred his shares in TP Group Ltd to the JVT, and his shares in Pollock & Sons Ltd to Cheryl, by gift rather than via his estate.
[20] It is not uncommon in New Zealand for testators to gift assets in this way in order to protect their estates from Family Protection Act claims. There is nothing unlawful in doing so. There was nothing unlawful or eccentric or irrational about Rex’s gifts. Just because those gifts meant Steven’s Family Protection Act claim could not bear fruit, even if the claim was made out, did not make the litigation brought by Steven inevitable, even if Steven may have believed he was entitled to share in his father’s assets, regardless of the breakdown in his relationship with Rex.
[21] Steven’s claims based on undue influence, unjust enrichment, and breach of fiduciary duty, which took up most of the time of the hearing and were the focus of my judgment, were collateral attacks on Rex’s testamentary and other arrangements. As I recorded in my judgment, Mr Fraundorfer acknowledged that because Rex’s
estate was essentially bare, Steven’s prospects of recovering anything meaningful under the causes of action brought under the Family Protection Act and the Law Reform (Testamentary Promises) Act were contingent on Steven’s success under these other causes of action.10
[22] All of these causes of action were unsuccessful. In my view, it should have been clear to Steven from the outset that the prospects of success were not promising, if a dispassionate analysis was made of the events that had led Rex to making his various decisions regarding the JVT and his assets. Such an analysis would have also led to the conclusion that the prospects of the Family Protection Act and the Law Reform (Testamentary Promises) Act causes of action producing meaningful results were also not promising.
[23] For these reasons, I am not satisfied that the proceeding brought by Steven was due to the “fault” of Rex, either wholly or substantially. It was the consequence of a decision by Steven to attempt to disrupt the arrangements that Rex had put in place, even though the prospects of success were not high.
Were there reasonable grounds to put forward an allegation of undue influence?
[24] This question arises from the second of the principles set out by Stringer J in Re Paterson. As is apparent for the preceding discussion, I do not consider that the prospects of succeeding with a cause of action based on undue influence were promising. However, that is not the same as there being no reasonable grounds for bringing the cause of action.
[25] In his support of his submission that there were reasonable grounds for alleging undue influence, Mr Fraundorfer identifies passages in my judgment where I made findings about Rex’s relationship with Cheryl and about Cheryl’s personality. He does not refer, however, to my findings that Rex and Cheryl were not in a relationship of
10 Above n1, at [25].
trust and confidence in the sense discussed by Lord Nicholls in Royal Bank of Scotland plc v Etridge11 and by Winkelmann J in Green v Green,12 or to my findings that Cheryl did not exercise undue influence over Rex in relation to any of the transactions that Steven sought to impugn.13
[26] In my view, the evidence of undue influence was not persuasive once account was taken of:
(a)The reasons that had led to Rex excluding Steven as a beneficiary of the JVT and transferring his shares to the JVT and to Cheryl by gift; and
(b)Rex’s character and his commitment to his business, and the way Rex operated over many years.
[27] I accept that, to an outsider, there was something uncomfortable about Rex apparently preferring his second wife and her children in his testamentary arrangements to his own children. But that was more apposite to the circumstances of Letitia and Nathan than it was to Steven’s situation.
[28] Steven had always been the preferred child and, until October 2013, had always figured prominently in distributions that Rex recommended in his various memoranda of wishes to the trustees of the JVT, even though Steven fell out twice with his father - in 1999 and 2001. Accordingly, Steven was well placed to know why Rex had acted as he did in 2013 and 2014 in excluding Steven as a beneficiary of the JVT and making the inter vivos distributions of shares. Steven did not need litigation to test whether Rex had been acting under the undue influence of Cheryl. Rather, in my view, he used the litigation as an effort to try and get back what he had lost after his relationship with his father had broken down a third time. The allegation of undue
11 At [231]-[245], citing Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 (HL).
12 Green v Green [2015] NZHC 1218.
13 At [246]-[255].
influence, including with respect to the period of Rex’s illness, was the mechanism for Steven’s challenge, not the reason for it.
[29] As far as Steven is concerned, therefore, I am doubtful that it can fairly be said there were reasonable grounds for making the allegation of undue influence. However, even if I accept that there were reasonable grounds for making that allegation, I do not consider that this is a situation where the Court should exercise its discretion and direct that Steven’s costs should be paid, in whole or in part, by the JVT.
[30] If the JVT were made to bear all or some of the costs of Steven’s attacks on the considered arrangements Rex made for the distribution of his assets, that would inevitably encourage others who are disappointed by the arrangements made by their parents to bring proceedings aimed at setting aside those arrangements, even if the litigation did not have a good chance of success. Such proceedings would be to the detriment of those who are the beneficiaries of the trust. As noted by Mr Morgan in his memorandum on behalf of all of the defendants, Fitzgerald J made similar observations in Dodssuweit.14
Is there any other reason for an award of costs to Steven?
[31] Mr Fraundorfer says the JVT should pay Steven’s costs because he was also representing the interests of his children and was successful in obtaining a declaration that his children remained discretionary beneficiaries of the JVT, notwithstanding Steve’s removal as a discretionary and final beneficiary.
[32] I do not accept the first part of that proposition. The interests of Steven’s children did not feature in the pleadings. The asserted impact on the children was advanced primarily as a reason why the Court should not accept Steven’s removal as a beneficiary. By the time of the hearing, the trustees of the JVT and Cheryl had accepted that Steven’s removal as a beneficiary did not affect the rights of his children as beneficiaries. Accordingly, I see no reason why this aspect of the proceeding should bear on costs.
14 Above n5, at [16].
[33] Nor do I accept that Steven was serving some wider purpose in challenging his removal as a beneficiary that should be reflected in the award of costs.
[34] With respect to doing justice between the parties, Mr Fraundorfer refers to the paragraphs of my judgment where I note the consequences for Steven and Letitia of Rex structuring his affairs in a way that meant their Family Protection Act claims could not produce meaningful results, even though I held that Rex had breached his moral duty to both children.15 I did record that that may seem unjust.16 I went on to record, however, that it would be outside the boundaries of trust law as it has developed in New Zealand to hold that transfers of assets to trusts could be set aside to enable Family Protection Act claims and that had not been the basis on which the claims of Steven and Letitia had been advanced.17
[35] In other words, the apparent unjustness of the result was the consequence of well-established parameters of New Zealand law and was not inconsistent with Steven’s pleadings. In those circumstances, I do not accept that any adjustment of costs in Steven’s favour is appropriate.
Should the awards of costs in favour of the defendants be reduced for any reason?
[36] I do not accept the validity of the other grounds on which Mr Fraundorfer argues for a reduction of any costs award against Steven:
(a)I agree with Mr Morgan that the executors and trustees of Rex’s estate had a responsibility to provide the background to Rex’s testamentary arrangements. Responsibly, they did not take an active part in the hearing and undertook to abide by the Court’s decision.
(b)I do not accept that the costs claimed in respect of the affidavits prepared by Mr Washer are excessive given the number of exhibits Mr Washer produced and the account in his affidavits of the history of Rex’s affairs and arrangements, much of which was in issue because of
15 At [327]-[328].
16 At [328].
17 At [329]-[330].
the breadth and detail of Steven’s pleadings and the case advanced by his counsel.
(c)I was unaware of Steven’s success in opposing Cheryl’s application for security for costs. However, since Mr Fraundorfer advises that Steven is unlikely to be able to meet any costs award, Cheryl’s application may be regarded as prudent. I understand Mr Morgan’s submission that some of the costs claimed are overstated. Three days for the preparation of written submissions on narrow points seems generous. More generally, however, in the overall context of this litigation in which Steven was undoubtedly the unsuccessful party, I do not consider an offset is warranted for Steven’s success on these interlocutory steps.
(d)I do not accept that the defendants unreasonably defended the Family Protection Act claims. Those claims were in the background of the cases of Steven and Letitia as well as those of the defendants.
(e)The bulk of the hearing was focused on the many points advanced by Steven, as demonstrated by the length and detail of Mr Fraundorfer’s closing submissions. The case for Letitia differed in only one significant respect from the case for Steven, namely whether Cheryl should be removed as trustee of the JVT. That aspect took up only a small part of the hearing. I see no basis for reducing the costs payable to the defendants just because they do not seek costs against Letitia because she was legally aided.
(f)I do not consider any reduction of costs is warranted because of the number of witnesses called by Cheryl. Given the nature and range of the allegations made by Steven and Letitia against Cheryl, it is not surprising that Cheryl felt it necessary to call the number of witnesses she did. As Mr Morgan says, Mr Fraundorfer’s decision to require most of those witnesses to give oral evidence also contributed to the length of the hearing.
(g)The fact that further documents were produced in response to a request from Steven following initial discovery does not mean there was deliberate concealment that warrants an adjustment of costs.
(h)I see no reason for reducing costs because the defendants refused to attend a judicial settlement conference. Given the background to this proceeding, the nature of the allegations made against Cheryl, and the related proceedings brought by Steven and Letitia and their brother, Nathan, to challenge Rex’s testamentary arrangements, the prospects of settlement would not have been high.
[37] I am also satisfied that the costs claimed by Cheryl, the executors and trustees of Rex’s estate and CLM Trustees as the trustee of the JVT are appropriate and reasonable.
Result
[38]For the above reasons:
(a)I decline the application by the plaintiff, Steven Pollock, seeking that:
(i)His costs and disbursements be met by the Judea Valley Trust; and
(ii)The defendants’ claims for costs be refused or reduced.
(b)I order that Steven Pollock shall pay costs and disbursements to the defendants as follows:
(i)To the first defendants, the executors and trustees of the estate of Rex Pollock, costs of $32,669.00 and disbursements of
$330.00, making a total of $32, 999.00;
(ii)To the second defendant, Cheryl Pollock, costs of $108,266.50 and disbursements of $10,023.77, making a total of
$118,290.27;
(iii)To the third defendant, CLM Trustees Ltd as trustee of the Judea Valley Trust, costs of $74,928.00 and disbursements of $220.00, making a total of $75,148.00.
G J van Bohemen J
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