Shine v Green
[2018] NZHC 2869
•6 November 2018
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2017-407-000184
[2018] NZHC 2869
BETWEEN NICOLA MEGAN SHINE as executor of the estate of Ms Jane Fox
Plaintiff
AND
JENNIFER LILLIAN GREEN and MEGAN
FRANCES SHINE as the executors of the estate of Sylvia Lily Fox
First Defendants
DIANA ELIZABETH FOX and WILLIAM
HUGH JONES as executors of the estate of Graham Glyn Fox
Second Defendants
SHANE GOODALL McLAUGHLIN
Third Defendant
Hearing: (On the papers) Counsel:
Tim Conder for the Plaintiff
First Defendants abiding the decision of the Court Second Defendants abiding the decision of the Court David O’Neill for the Third Defendant
Judgment:
6 November 2018
[COSTS] JUDGMENT OF MOORE J
This judgment was delivered by me on 6 November 2018 at 1:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar Date:
SHINE v GREEN & ORS [2018] NZHC 2869 [6 November 2018]
Introduction
[1] On 12 June 2018 I issued a decision on an application brought under s 66 of the Trustee Act 1956, providing the executor of the estate of Paula Fox with directions as to the proper distribution of the residue of Ms Fox’s estate.1 I made the following directions:2
(a)Jordan, Ms Fox’s son, held an absolutely vested interest in the residue under Ms Fox's will, by virtue of the absolute gift made by Ms Fox in her will.
(b)Alternatively, if he did not obtain an absolutely vested interest in the residue under the will, under Part 3 of the Administration Act 1969 the residue was held for him on statutory trust following Ms Fox's death, and he held an absolutely vested interest in the residue held on statutory trust.
(c)Accordingly, at his death the residue of Ms Fox's estate was part of his estate and fell to be distributed as such.
[2] Ms Shine, the plaintiff and executor of Ms Fox’s estate, now seeks for her costs of $19,408.43 to be met by the estate on an indemnity basis. This is opposed by Mr McLaughlin, the third defendant, who submits Ms Shine should pay her own costs and those of Mr McLaughlin personally.
Costs principles
[3] Section 71 of the Trustee Act provides for the court’s power to order costs following an application for an order under the Act, including s 66:
“71 Power of Court to charge costs on trust estate
The Court may order the costs and expenses of and incidental to any application for any order under this Act, or of and incidental to any such order, or any conveyance or assignment in pursuance thereof, to be raised and paid out of the property in respect whereof the same is
1 Shine v Green [2018] NZHC 1382, (2018) 4 NZTR 28-010.
2 At [72]-[74].
made, or out of the income thereof, or to be borne and paid in such manner and by such persons as to the Court may seem just.”
[4]The learned authors of Garrow and Kelly Law of Trusts and Trustees
summarise the approach to trustees’ costs in s 66 applications in the following way:3
“A trustee is entitled to an indemnity for costs reasonably and properly incurred in making an application for directions. However trustees should not be reasonably timid or seek to avoid unpopularity by making unnecessary applications. If they do this they may not be entitled to have their costs paid out of the estate or trust.”
[5] This is broadly consistent with the approach generally applied in the context of trusts-related litigation, which the parties agree I should apply. Under that approach, while the court retains an overriding discretion as to costs, its exercise is guided by a number of well established principles, most famously set out in Re Buckton, where Kekewich J divided trust litigation into three broad categories.4 Kós J summarised them as follows:5
“(a)The first category involves proceedings brought by trustees to obtain the Court's guidance on the construction of the trust deed or some aspect of the trust's administration. In such cases, the costs of all parties necessarily participating are treated as incurred for the benefit of the estate and ordered to be paid out of the trust fund.
(b)The second category involves a similar application, but by someone other than a trustee (such as a beneficiary). However, it is a case which would have justified application by a trustee. The same approach is taken to costs in the second category as to the first.
(c)The third category, however, is where a beneficiary is making a “hostile claim” against the trustees, or another beneficiary. The claim may still involve a point of construction, or administration. It will often involve a claim to a beneficial interest or entitlement to a part of the trust fund. In the third category, involving a hostile claim against trustees or another beneficiary, the usual principles as to costs apply. Ordinarily they will follow the event.”
[6] Lightman J in Alsop Wilkinson (a firm) v Neary also set out three categories of proceedings involving trustees and their respective appropriateness for indemnity
3 Greg Kelly and Chris Kelly Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2013) at [24.34(n)].
4 Re Buckton [1907] 2 Ch 406 (Ch) at 413-417.
5 Woodward v Smith [2014] NZHC 407, [2014] 3 NZLR 525 at [23] (footnotes omitted).
costs, which overlap and expand the Re Buckton categories.6 Katz J summarised Lightman J’s approach as follows:7
“He termed these “trust disputes”, “beneficiary disputes” and “third party disputes”, with both beneficiary and third party disputes encompassing the third Buckton category. Lightman J distinguished further between friendly and hostile disputes, stating that in relation to friendly claims regarding the trustee making an application for the correct interpretation of a trust deed, or abiding a dispute between two beneficiaries, the trustees' costs will always be paid out of the trust fund, as they have a duty to remain neutral and await determination of the dispute. If the litigation is “hostile” and the trustee is either pursuing or defending themselves against a beneficiary or third party, then the matter is for the discretion for the court.”
Submissions
[7] Both counsel are agreed that this litigation fits within the first category set out by Kekewich J, having been brought to obtain the Court's guidance on the construction of the trust deed or some aspect of the trust's administration.
[8] However, Mr Conder for Ms Shine submits that in terms of Lightman J’s categorisation this is a “friendly” application. Mr O’Neill for Mr McLaughlin conversely submits that this was hostile litigation, and in such a context Ms Shine’s decision to not adopt a neutral position means she is not entitled to indemnity from the estate.
[9] On the plaintiff’s account, she was faced with two potential beneficiaries each claiming to be entitled to the residue of the estate, and could not have safely distributed the estate without obtaining the court’s directions. Prior to her death, Ms Fox’s mother claimed to be entitled to the residue, as did Mr McLaughlin. Mr Conder submits Ms Shine’s decision to oppose Mr McLaughlin’s position was made to expedite matters; following Ms Fox’s mother’s death, her executors were not represented and her estate could not have participated in proceedings until they were. Mr Conder also submits the position taken by Ms Shine was a reasonable one, not adopted in self-interest, as she is not a beneficiary in her mother’s estate and only a two-eighths beneficiary in her father’s, and that she acted reasonably at all times. Indeed, it appears shortly before her mother’s death they had a significant falling out.
6 Alsop Wilkinson v Neary [1996] 1 WLR 1220 (Ch) at 1223-1224.
7 Fundació Pimjo AC v Aguilar & Aguilar Ltd [2015] NZHC 1402, (2015) 4 NZTR 25-018 at [37].
[10] Mr O’Neill submits that the law was made clear to Ms Shine and her solicitors on a number of occasions prior to proceedings being brought, that there was never any genuine doubt as to the construction of the will, Ms Shine adopted a hostile position, and her decision to do so was not necessary or reasonable.
Analysis
[11] I accept that ordinarily in order to claim indemnity from the estate in a proceeding of this sort, it would be expected that the trustee or executor adopt a neutral position. However, it is not in every case that making submissions will disentitle a trustee to indemnity. As the learned authors of Lewin on Trusts state:8
“… there are cases where the argument presented on behalf of beneficiaries is one-sided, and the court is assisted by the hearing the contrary argument from counsel for the trustee. For example, if unborn beneficiaries are in a position of their own the trustees are under a duty to address the court on their behalf, and likewise where there is a class of beneficiaries with an opposing interest of whom none is willing to participate in proceedings. A trustee who assists the court in this way will not be deprived of costs.”
[12] Despite the oppositional stance taken by Ms Shine in this proceeding, I am satisfied it was one responsibly taken on behalf of the executors of her mother’s estate, who had not yet appointed a solicitor. As Mr O’Neill conceded in his submissions, she was “acting out of the best of motives and an abundance of caution”. Documentary material disclosed by Mr O’Neill in support of his costs memorandum reveals that it was the intention of Ms Fox’s mother, before she passed away, to dispute the meaning of the will, and that it was in the interests of all parties that the proceeding be dispensed with in a timely fashion.
[13] Moreover, while the legal arguments Ms Shine adopted were ultimately unsuccessful, they were not without merit, and concerned complex questions of law.
8 Tucker et al Lewin on Trusts (19th ed, Sweet & Maxwell, London, 2015) at [27-142].
[14]In summary:9
(a)while the executor adopted an oppositional stance, she did so to expedite matters and in order to represent the known position of a party with an opposing interest to the third defendant, rather than in self- interest or without a reasonable justification; and
(b)the application concerned a genuine dispute of construction.
[15] I agree with Mr Conder’s submission that in the circumstances, Ms Shine has acted at all times as a reasonable trustee and is entitled to indemnity for her costs in performing this role.
Result
[16] The plaintiff, Ms Shine, is entitled to indemnity out of the estate for her reasonable costs and disbursements incurred in this proceeding, totalling $19,408.43.
Moore J
Solicitors/Counsel:
Holland Beckett, Tauranga Hamerton Lawyers, Whakatane Mr O’Neill, Hamilton
9 See also Crawford v Phillips [2018] NZCA 351 at [10]-[11], in which comparable factors led to indemnification of the executors’ costs out of the estate.
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