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Sunde v Sunde

Sunde v Sunde

Case [2019] NZCA 552 13 November 2019

Civil Litigation & Procedure

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IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA5/2019
[2019] NZCA 552

BETWEEN	KEVIN PAUL SUNDE Appellant
AND	ROY MELVIN SUNDE, ANNE VERA SUNDE, MARINA ANNE SUNDE AND KEVIN PAUL SUNDE AS TRUSTEES OF THE LEROY TRUST Respondents

Hearing:	4 September 2019
Court:	Kós P, Duffy and Woolford JJ
Counsel:	J R Wain for Appellant J P Cundy for Respondents
Judgment:	13 November 2019 at 9.30 am

JUDGMENT OF THE COURT

A The appeal is dismissed.

BThe appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Duffy J)

The parties in this appeal are members of the same family. Because they each bear the same surname it is convenient to refer to them by their first names.
Roy, Kevin, and Marina are siblings. Anne is their mother. In 2005 they all agreed to transfer property they each owned to a trust to be known as the Leroy Trust (the Trust). Each became a trustee and beneficiary of this trust. In return the Trust became a debtor of each party for the value of the transferred property. These debts, which were recorded in deeds of acknowledgement of debt, were payable on demand and attracted interest. While the parties remained on good terms no demands for payment were made.
Matters changed in February 2016 when Roy, Marina and Anne began the process to enable them to make demand for payment of interest for certain identified years and in March 2018 Marina and Anne did the same in relation to payment of the principal sum each was owed. The total sum being sought was $2,547,152.05.
Kevin did not agree with the others’ actions. The parties were unable to reach agreement, which led to Roy, Marina and Anne commencing summary judgment proceedings to recover payment of the debts. Because Kevin was not engaged in the recovery process he was chosen to represent the Trust’s interests in the summary judgment proceedings. Kevin chose to oppose the summary judgment, but ultimately, he abandoned all his grounds of opposition. This led to Downs J making an award of 2B costs against Kevin and ordering that he pay them personally as well as not drawing on the Trust’s funds to meet his own costs.[1] Kevin now appeals against those orders.

General principles

[1]Sunde v Sunde [2018] NZHC 3080 [High Court judgment].

The right of a trustee that costs and expenses properly and reasonably incurred in the administration of the trust are compensable out of the assets of the trust is longstanding and well settled.[2] In New Zealand this right has been codified in s 38(2) of the Trustee Act 1956:
38 Implied indemnity of trustees
…
(2)A trustee may reimburse himself or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers; but, except as provided in this Act or any other Act…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Sunde v Sunde

Details

AGLC: Sunde v Sunde [2019] NZCA 552
Case: [2019] NZCA 552
Decision Date: 13 November 2019 at 9.30 am

CaseChat Overview and Summary

In this appeal, Kevin Paul Sunde appeals against a judgment of Downs J in the High Court of New Zealand, which ordered him to pay the respondents' costs for summary judgment proceedings and to refrain from drawing on the trust's funds to meet his own costs. The respondents are members of the same family as the appellant and are either beneficiaries or trustees of the Leroy Trust. The appellant opposed the summary judgment application, but ultimately abandoned all grounds of opposition, leading to the orders made against him. The appellant contends that the Judge applied the wrong legal test and that the existence of an indemnity clause should have precluded him from being liable for the costs. The respondents contend the Judge applied the correct legal test and that the Judge's findings as to the appellant's conduct are unassailable.

The central legal issue in this appeal is whether the Judge applied the correct legal test in determining whether the appellant was entitled to indemnity for the costs he incurred in opposing the summary judgment application. The appellant contends that the Judge imposed the wrong legal test and that the indemnity clause in the Trust Deed should have precluded him from being liable for the costs. The respondents contend that the Judge applied the correct legal test and that the Judge's findings as to the appellant's conduct are unassailable.

The Court held that the Judge did not err in applying the correct legal test. The Court observed that the presence of an indemnity clause does not oust the court's supervisory jurisdiction to review whether costs and expenses incurred by a trustee have been necessarily incurred in the interests of the beneficiaries and are reasonable in amount. The Court held that the Judge was entitled to conclude that the appellant's actions were not consistent with the actions of what equity would regard as an honest trustee placed in the appellant's circumstances. The Court further held that the appellant's opposition to the summary judgment application was futile and that the reasonable approach in such circumstances would have been for the appellant to file an admission of claim and then negotiate with the respondents about the means of payment.

The appeal is dismissed. The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

Orders