SR Hamilton Corporate Trustee Limited v White

[2017] NZHC 1248

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2014-470-189 [2017] NZHC 1248

UNDER	the Trustee Act 1956
AND IN THE MATTER	of an application for directions pursuant to section 66 of the Act
BETWEEN	SR HAMILTON CORPORATE TRUSTEE LIMITED AND LAMB TRUST SERVICES LIMITED Plaintiffs
AND	STEPHEN ROYCE WHITE & ORS Defendants

CIV 2014-419-434

UNDER  the Trustee Act 1956

AND IN THE MATTER     of Deed of Trust establishing the WHR

and ZD WHITE FAMILY TRUST

BETWEEN  STEPHEN ROYCE WHITE AND MAUREEN EDITH PARSONS Plaintiffs

ANDSR HAMILTON CORPORATE TRUSTEE LIMITED AND LAMB TRUST SERVICES LIMITED Defendants

Hearing:	8 June 2017 (by telephone)
Counsel:	E J Hudson for Trustees R Connell for Mr White and Ms Parsons T M Braun for Dr Chambers
Judgment:	8 June 2017

JUDGMENT (NO. 2) OF HEATH J

SR HAMILTON CORPORATE TRUSTEE LIMITED AND LAMB TRUST SERVICES LIMITED v STEPHEN ROYCE WHITE & ORS [2017] NZHC 1248 [8 June 2017]

This judgment was delivered by me on 8 June 2017 at 4.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

[1]      Questions of costs have arisen out of two proceedings with which I dealt in separate judgments, each delivered on 27 June 2016.1

[2]      SR  Hamilton  Corporate  Trustee  Ltd  and  Lamb  Trust  Services  Ltd  (the Trustees) are the trustees of the WHR and ZD White Family Trust (the Trust).  There are three beneficiaries of the Trust, all of whom are children of the late Mr and Mrs White. They are Mr Stephen White, Ms Maureen Parsons and Dr Jocelyn Chambers. Disputes arose among them about the way in which the Trustees were to dispose of a property in close proximity to Mount Maunganui.

[3]      Mr White and Ms Parsons brought a proceeding to remove the Trustees on the grounds that they had mis-conducted themselves in making arrangements for the sale  of  the  Mount  Maunganui  property.    In  short,  they  claimed  inappropriate collusion with the third beneficiary, Dr Chambers.  She had purported to exercise an option to buy the property for a price that her siblings regarded as well below market value.

[4]      The  application  to  remove  the  Trustees  was  formally  dismissed  in  my judgment of 27 June 2016, on that application.  My reasons for making that order are set out in that judgment:2

[3]       During the course of the hearing, it became clear that there was no substitute trustee available.  Public Trust, which had signalled a willingness to assume trusteeship if appointed by the Court, had consented on the basis of a number of conditions designed to protect it from any potential liability arising out of conflict among the three residuary beneficiaries.  Having made further inquiries to ascertain whether Public Trust would accept appointment without conditions, Mr Connell, for Mr White and Ms Parsons, advised me that it would not.

[4]       Although  Mr  Connell  sought  to  obtain  consent  from  alternative trustees, the hearing had reached the point where I was able to put to counsel a means by which the real issues between the parties could be resolved without the need for an inquiry into the conduct of the trustees, and without their removal.   Mr Connell accepted that, in the unusual intervening circumstances, it was appropriate for this proceeding to be dismissed and for

1      SR Hamilton Corporate Trustee Ltd v White [2016] NZHC 1408 and White v SR Corporate

Trustee Ltd [2016] NZHC 1409.

2      White v SR Corporate Trustee Ltd [2016] NZHC 1409, at paras [3] and [4].

the critical issues to be resolved on a separate application for directions that had been made by the trustees, under s 66 of the Trustee Act 1956. Contemporaneously, I am giving judgment on that application.

(footnote omitted)

[5]      Costs  on  the  removal  application  were  reserved,  to  be  addressed  in conjunction with costs on the application for directions.3

[6]      On the application for directions, I held that no enforceable agreement had been entered into between the Trustees and Dr Chambers.   Having regard to the updated valuation of the Mount Maunganui property to which I had been referred, I said:4

[80]     The controlling principle, which accords with the late Mr Royce White’s wishes, is the need to treat each of the three children equally.  They would not be treated equally if only Dr Chambers were given the option to buy at the $945,000 valuation, in circumstances where her original “acceptance” did not give rise to a contractual entitlement to purchase.

[81]     There is a need to adopt a contemporary approach.   All three beneficiaries would be treated equally if each were given the opportunity to purchase at present market valuation.   I do not consider it would be appropriate for such an offer to be made on the basis that, if more than one beneficiary wished to exercise the option, the trustees could choose to whom it should be sold.  In my view, it is in the best interests of the trust estate for the trustees to offer the property for sale, on usual terms for properties of that type, to each of the three beneficiaries at a purchase price of $1,725,000, plus GST if any.  The time for payment of the purchase price would need to be specified, as would the time for payment and interest for late settlement. One of the terms of the offer should be that if more than one beneficiary wished to exercise the option no binding contract will have been entered into.  That avoids the need for choice on the part of the trustees.  All other terms should be determined by the trustees.

[82]      In the event that either no beneficiary accepts the offer or more than one does, the trustees shall place the property on the open market for sale by real estate agents that they engage.   If the property is not sold by private treaty  within  a  period  to  be  assessed  by  the  trustees  as  reasonable, instructions shall be given by the trustees to enable the property to be sold at auction, with a reserve price to be fixed by them in light of prevailing market conditions.

(footnote omitted)

3 Ibid, at para [5].

4      SR Hamilton Corporate Trustee Ltd v White [2016] NZHC 1408, at paras [80]–[82].

[7]      In my judgment on the directions application, I made some preliminary observations on the question of costs, in respect of both it and the removal application.  I said:5

[84]     Formally, I reserve questions of costs.  My provisional view is that reasonable costs and disbursements incurred by all parties to the application for  directions  shall  be  paid  out  of  trust  funds,  so  that  the  net  amount available  for  distribution  is  adjusted  to  ensure  no  beneficiary  is  out  of pocket.  I incline to the view that such costs would include those incurred both in the present proceeding and Mr Stephen White’s and Ms Parsons’ separate application to remove the trustees.    If this approach were adopted by the parties any dispute about the reasonableness of costs incurred by any of them could be referred to me for determination.

[85]      A joint  memorandum  shall  be  filed  on  or  before  29  July  2016 advising whether agreement has been reached on costs and, if not, what (in summary form) are the positions taken by each.  If questions of costs remain live, the Registrar shall allocate a telephone conference before me at 9.00am on the first available date after 5 August 2016 so that further directions can be made for all questions of costs in both proceedings to be resolved.

[8]      Dr Chambers appealed against my decision on the Trustees’ application for directions.  For all practical purposes, the appeal failed, though the Court of Appeal did allow the appeal to the extent that it substituted a contemporary valuation of the Mount Maunganui property for the amount that I had fixed for the sale process. Delivering  the  judgment  of  the  Court  on  26 April  2017, Asher J  increased  my

assessment of $1,750,000 to $2,025,000, based on a valuation as at January 2017.6

Questions of costs were resolved in the Court of Appeal but those arising in the High

Court were left for determination by me.7

[9]      I  heard  further  from  counsel  by  telephone  on  8  June  2017.    Generally speaking, counsel were content to adopt the provisional approach suggested in my judgment on the application for directions.8    The only point of difference between them was whether I should order Mr White and Ms Parsons to pay costs on a 2B basis to the Trustees on the dismissed removal application.   Mr Hudson, for the Trustees, submitted that an order was justified so that any prejudice to Dr Chambers

caused by a depletion of the trust fund through the payment of all costs incurred by

5      Ibid, at paras [84] and [85].

6      Chambers v SR Hamilton Corporate Trustee Ltd [2017] NZCA 131, at paras [55] and [58].

7      Ibid, at paras [60] and [62].

8      SR Hamilton Corporate Trustee Ltd v White [2016] NZHC 1408, at paras [84]–[85], set out at para [7] above.

Mr White and Ms Parsons on that application could be remedied.  Mr Connell, for Mr White and Ms Parsons, opposed an order to that effect. As Dr Chambers was not a party to the removal application any order that permitted all of her costs to be met out of trust funds would be beneficial to her, as they would include costs incurred in dealing with the allegations that she engaged in inappropriate collusion with the Trustees.

[10]     Having  considered  the  respective  positions,  I adhere  to  the  views  that  I

expressed provisionally in my judgment on the Trustees’ application for directions.9

I do not consider it is necessary to make any order for costs against Mr White and

Ms Parsons on the withdrawn removal application. [11]        My reasons for reaching that view are:

(a)      Although I have some doubts as to whether allegations of misconduct against  the Trustees  were warranted, it  is  inappropriate for me to resolve them on the basis of the affidavit evidence proffered for trial. No cross-examination took place on that evidence.   For present purposes, I assume a sufficient factual foundation was available to make the allegations, albeit that I consider that Mr White and Ms Parsons may have had significant hurdles to overcome to succeed on the removal application.

(b)The  reason  why  Mr  Connell  elected  not  to  proceed  with  the application for removal was pragmatic in nature and did not reflect any lack of confidence on his part about the quality of his clients’ case. Although it is true that no substitute trustee was available, it was always open to the Court to defer any removal order it was minded to make until one had been found.

(c)       The impact  of payment  of  any order  for  costs  by Mr White and

Ms Parsons would have a minimal effect on the value of the trust fund available for distribution to Dr Chambers.  That is because they will

9      Ibid, set out at para [7] above.

share in the distribution of that amount, as to two-thirds.   The difference that payment of costs would make to the amount to be distributed to Dr Chambers does not justify the administrative costs that would incur.

(d)Although Dr Chambers was not a party to the removal application, all costs she incurred in relation to it will be paid out of the trust fund in any event. That is the best position into which she could be put.

[12]     For  those  reasons,  I  order  that  the  reasonable  costs  and  disbursements incurred by the Trustees, Dr Chambers and Mr White and Ms Parsons respectively, in respect of attendances involving both proceedings, shall each be paid out of the trust fund.  In the event that there are any issues as to the reasonableness of costs and disbursements claimed, leave to apply is reserved.

[13]     I thank counsel for their assistance.

P R Heath J

Delivered at 4.00pm on 8 June 2017

Solicitors:

Lamb Bain Laubscher, Te Kuiti Connell & Connell, Auckland Whitehead Braun, Hamilton Counsel:

E J Hudson, Hamilton