Schischka v McIntosh

[2017] NZHC 2875

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-000359 [2017] NZHC 2875

UNDER	the Trustee Act 1956
IN THE MATTER	of an application for directions under ss 66, 67 and 68 of that Act
BETWEEN	LAURENCE ALLAN SCHISCHKA Applicant
AND	JOHN COLIN MCINTOSH AND GEORGE SCHISCHKA AS TRUSTEES OF THE GEORGE SCHISCHKA TRUST Respondents

Hearing:	On the papers
Judgment:	22 November 2017

COSTS JUDGMENT OF DOWNS J

This judgment was delivered by me on Wednesday, 22 November 2017 at 3.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Alexandra Low & Associates, Auckland. Vicki Ammundsen Trust Law Ltd, Auckland.

SCHISCHKA v MCINTOSH [2017] NZHC 2875 [22 November 2017]

[1]      Mr   Laurence   Schischka   is   a   beneficiary   and   former   trustee   of   the George Schischka Trust.  George is Laurence’s elderly father and one of the trustees of the trust.   Disagreement arose about distribution of trust assets and trust management. Elaboration is unnecessary. It is sufficient to observe Laurence resigned as a trustee in 2016, but continued to raise concern about the trust’s operation.

[2]      On 2 March 2017, Laurence sought leave, without notice, to commence an action for directions under the Trustee Act 1956 by way of originating application. The action alleged, among other things, undue influence.  It sought a Beddoe order— an order permitting the cost of the action to be borne by the trust rather than Laurence.

[3]      On 28 September 2017, the action was withdrawn by consent.  George and John McIntosh, the other trustee of the trust, seek indemnity costs or lesser costs. Laurence opposes the application, which came to me as Duty Judge.

[4]      Indemnity costs are sought on the bases leave was never granted to commence the application by way of originating application; the trustees engaged in settlement discussions in relation to an action for which leave had not been granted; and because the proposed Beddoe order was misconceived.   On behalf of the trustees, Ms Ammundsen observes a Beddoe order has never been obtained by a former trustee who did not contest his removal or resignation as a trustee.

[5]      On behalf of the applicant, Ms Low contends any costs order is unwarranted as the same action will be brought by way of statement of claim; no determination has been made in relation to the abandoned application; and the trustees contested leave (by filing a notice of opposition).  Therefore, it cannot be the case settlement negotiations presupposed leave had been granted.

[6]      There is some merit in each party’s position.  To elaborate, events between

2 March and 28 September 2017 were messy, as the applicant assumed leave had been granted to commence the action by way of originating application, when it had not. Indeed, on 29 June 2017 Ms Low told Ms Ammundsen on the telephone leave had been granted.  Ms Ammundsen had specifically asked about this issue.  However, I

accept Ms Low made a genuine error; she misread a Minute of Courtney J of 17 May

2017 (which followed a Minute of Davison J of 24 March 2017).

[7]      It is likely settlement discussions would have occurred even if the trustees knew leave had not been granted to commence the action by way of originating application, because settlement would have ended the litigation before it generated significant cost. So, there was good reason to have these discussions, especially given the family dimension to the action.  Equally, leave might well have been granted for use of the originating application procedure, which is hardly a novelty in this area.  And, the trustees opposed leave.   Consequently, the cost of settlement negotiations is not directly referable to this issue.

[8]      Whether the Beddoe order is misconceived is not yet known.  It may be. Or not. The material point is that it has not yet been the subject of adjudication.

[9]      As against all this, the applicant de facto commenced an action for which leave had not been granted (through use of the originating application procedure). And, the applicant represented through counsel leave had been granted, albeit that error was made in good faith.

[10]     Indemnity costs are not warranted. Nor increased costs. The applicant has not behaved badly or unreasonably, and the substance of his action is yet to be determined. However, 2B costs  against the applicant  (of $8,920) are proper for the reasons expressed above.

……………………………..

Downs J