Sunde v Sunde

[2020] NZHC 375

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000768

[2020] NZHC 375

BETWEEN

ROY MELVIN SUNDE

First Plaintiff

MARINA ANNE SUNDE
Second Plaintiff

ANNE VERA SUNDE
Third Plaintiff

LEO ZANE SUNDE
Fourth Plaintiff

AND

LEO ZANE SUNDE, ANNE VERA SUNDE, ROY MELVIN SUNDE, KEVIN PAUL SUNDE and MARINA ANNE

SUNDE as trustees of the LEROY TRUST Defendants

Hearing:

On the papers

Counsel:

J Cundy for R Sunde as First Plaintiff

P Moodley and S Philcox for R Sunde as Executor of Estate of L Sunde (Fourth Plaintiff)
J R Wain for K Sunde as Fourth-named Defendant

Judgment:

3 March 2020

COSTS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 3 March 2020 at 4.00 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date: ……………………….

SUNDE v SUNDE [2020] NZHC 375 [3 March 2020]

Introduction

[1]                 In my judgment (No 2) of 22 November 2019,1 I granted summary judgment in favour of the fourth plaintiff, Roy Sunde, as executor of the estate of Leo Sunde and against the defendants (the trustees of the Leroy Trust) in the sum of $3,021,012.

[2]In this judgment I deal with the following issues:

(a)The quantum of costs to be awarded to Roy Sunde, the fourth plaintiff, as the successful party on the summary judgment application;

(b)whether Kevin Sunde is entitled to an indemnity from the Leroy Trust for his costs and, if so, the mechanism for approving those costs; and

(c)an uncontested amendment to the judgment figure being a correction of an accidental slip or omission.

Quantum of costs

[3]                 Despite the preliminary indication I gave in judgment No 2, I find that Roy, as the fourth plaintiff, should be awarded costs on a 2B basis in the total sum of

$16,023.25, as set out in the schedule to the plaintiff’s memorandum of 6 December 2019.

[4]                 Where a plaintiff’s summary judgment application is unsuccessful but the plaintiff is ultimately successful in the proceedings, the plaintiff, in the ordinary course, is still entitled to costs on the summary judgment application. The position is set out by the Court of Appeal in NZI Bank v Philpott:2

As with most questions of costs, they should be approached on broad principles. Whilst a defendant may be regarded as successful in one sense in resisting an application for summary judgment, it is of course not a final determination in the proceeding itself. If, ultimately, the plaintiff does succeed it seems to us in the general run of cases that the defendant should pay for both proceedings, the Court paying particular attention to the reasons why the plaintiff was unsuccessful in the first case. If those reasons include some

1      Sunde v Sunde [2019] NZHC 3056. See also my earlier judgment of Sunde v Sunde [2018] NZHC 2788 (referred to as judgment (No 1)).

2      NZI Bank v Philpott [1992] NZLR 403, (1990) 3 PRNZ 695 at 697.

question of fault on the part of the plaintiff then it may be appropriate to reduce or even eliminate an entitlement to costs for that part of the proceedings so far as the plaintiff is concerned. But where the defendant has raised defences which cannot by their nature be resolved at a summary judgment application but ultimately turn out to have no basis, t hen costs on both sets of proceedings belong to the plaintiff.

[5]                 Here, the plaintiff, Leo was ultimately successful in claiming for summary judgment. I entered judgment for the full amount sought. I accept Leo’s submission that there is no reason why the estate, as the successful party, should not be entitled to costs on the preparation of the proceedings and the summary judgment application, and the two hearings, in the ordinary way.

[6]                 My judgment (No 1) of 29 October 2018 confirmed that the Leroy Trust had no defence to the claim. Even though I did allow an adjournment for a mediation to take place and for Kevin to pursue his Family Court application, every one of the defences that Kevin purported to advance on behalf of the Leroy Trust ultimately failed. The adjournment was in part an indulgence to Kevin.

[7]                 It may be, as Mr Wain submitted, that at the time of the second summary judgment hearing, Roy was an executor. However, I do not see that as an entirely different factual basis upon which the summary judgment was based, nor a reason for declining to award a more modest sum of costs. I agree with Mr Cundy’s submission that there was in fact a single summary judgment application and to submit, as Kevin did, that Roy “applied for summary judgment a second time” mischaracterises the position.

Kevin’s entitlement to an indemnity

[8]                 Kevin contends that he is entitled to an indemnity from the Leroy Trust Fund in relation to the reasonable costs he incurred in the defence of the first summary judgment application. He relies  upon  the  principles  espoused  in  cases  such  as Re O’Donoghue,3 Powell v Powell4 and Triezenberg v Mason.5

3      Re O’Donoghue [1998] 1 NZLR 116.

4      Powell v Powell [2015] NZHC 1984.

5      Triezenberg v Mason [2019] NZHC 920.

[9]                 In related litigation before the Court of Appeal, namely Sunde v Sunde,6 the Court of Appeal set out the general principles that apply. The Court noted that the right of a trustee to compensation out of the assets of the trust for costs and expenses properly and reasonably incurred in the administration of the trust is longstanding and well settled.7 In New Zealand this right has been codified in s 38(2) of the Trustee Act 1956.

[10]              In upholding the decision of this Court to decline an order in Kevin’s favour that he be indemnified from the Leroy Trust, the Court of Appeal held that when Kevin’s actions were viewed objectively they were not consistent with the actions of what equity would regard as an honest trustee placed in Kevin’s circumstances. The Court of Appeal noted that the Deeds of Acknowledgment of Debt at issue in that case were indisputable and the legal position was clear. Kevin’s grounds of opposition to the summary judgment were without foundation.

[11]              In opposing Kevin’s application that he is entitled to an indemnity from the trust fund, the plaintiff, Roy, contends that Kevin’s opposition to the applications for summary judgment were unreasonable and that it was open to Kevin as a trustee at the commencement of the litigation to seek a Beddoe order.8

[12]              I note that Kevin has not sought a particular figure for the indemnity costs. Mr Wain has submitted that if the parties are unable to agree on quantum, then the costs should properly be subject to taxation by the Court.

[13]              Roy has sworn and filed an affidavit dated 6 December 2019, stating that in the period since April 2018 when the plaintiffs commenced this proceeding, Kevin has paid $190,192.50 to his solicitors (Atmore & Co), his barrister, Mr Wain, and his accountants (McGregor Bailey). That figure is disputed by Kevin but it is a troubling aspect of this case that the Court is asked to make an order in Kevin’s favour without adequate information as to the actual amount of costs at issue.

6      Sunde v Sunde [2019] NZCA 552 (involving the same Sunde family and the same parties to this proceeding).

7      Sunde v Sunde, above n 6, at [5], referring to Butterfield v Public Trust [2017] NZCA 367, [2017] NZCCLR 27 at [20].

8      See Sunde v Sunde, above n 6, at [16], where the Court notes that it is always open to a trustee, at the commencement of the litigation, to seek a Beddoe order from the Court.

[14]              In judgment (No 1) I recognised the importance of the Sunde family attempting mediation or some other form of alternative dispute resolution, involving all relevant family participants, to try and resolve all outstanding disputes between them. Although mediation was ultimately unsuccessful, I did accept that there was clear merit in Kevin’s position that in a family dispute such as this, the parties should first attempt to resolve all the differences outside of the Court. In judgment (No 1) I also concluded that it was appropriate to give Kevin the opportunity to file proceedings under s 103 of the PPPRA9 in the Family Court.

[15]              In those circumstances, I see this as a different case from the factual scenario before the Court of Appeal in Sunde v Sunde, where the Court concluded that Kevin’s defence of the summary judgment was essentially hopeless.10

[16]              I find that in principle Kevin should be entitled to payment of his costs and expenses reasonably incurred out of the Leroy Trust assets, but only (as he has sought) in relation to the first summary judgment application proceedings of judgment (No 1). Kevin is not entitled to an indemnity for any costs incurred in relation to judgment (No 2).

[17]              There remains, however, the outstanding issue of the quantum of those reasonable costs.

[18]              In Black v ASB Ltd,11 the Court of Appeal held that where a party seeks a detailed vetting of the reasonableness of indemnity costs, three options are open to the Court:

(a)The first avenue is the liable party can ask the Judge to make the order for indemnity subject to taxation, which then engages rr 14.18 – 14.21 and 14.23 of the High Court Rules. While these rules have been used little in recent years, enquiries (i.e. the Court of Appeal in 2012) confirmed that the capacity for tax costs still exists;

9      Protection of Personal and Property Rights Act 1988.

10     Sunde v Sunde, above n 6, at [18]-[20].

11     Black v ASB Ltd, [2012] NZCA 384 at [82]-[85].

(b)The second avenue is that the parties could agree to be bound by the decision of a suitably qualified practitioner who vets the reasonableness of the costs. That agreement could provide for the practitioner’s decision to be referred to the Court for formalising an order;

(c)The third avenue involves referring the fee note(s) to the New Zealand Law Society. The Court suggested that a complaint under s 133(2) of the Lawyers and Conveyancers Act 2006 is a potential avenue for dealing, in a detailed way, with a challenge to the reasonableness of indemnity costs.

[19] I am not suggesting that the last factor at [18](c) above has application in this case. I do not have sufficient information before me to reach any view either way.

[20]              Both parties in this case have submitted that in the event that indemnity costs are awarded, then they should be subject to taxation under rr 14.18 – 14.21 and 14.23. However, I am not attracted to that proposition, at least at this stage not having adequate information as to the amount claimed by Kevin. The taxation rules continue to be sparsely used and in my view the better approach would be to adopt the second avenue, namely engaging (initially at the trust’s expense) a suitably qualified practitioner to vet the reasonableness of the costs, if agreement cannot be reached. The practitioner’s decision should then be referred to the Court for approval and formalising an order. The parties might also agree that the practitioner could recommend to the Court who should pay his/her fee in reviewing the reasonableness of costs.

[21]              The parties will obviously need to reflect upon the findings in this judgment to discuss the best way forward. Ultimately, if the Court (through taxation or otherwise) is to play a role in approving the quantum of fees sought, adequate and comprehensive information to support the amounts charged will be required.

Result

[22]              I order that the defendant, Kevin Sunde, is to pay costs to Roy Sunde, as executor of the fourth plaintiff. Those costs will be on a 2B basis in the total sum of

$16,023.25, as calculated in the schedule attached to the memorandum of Roy Sunde of 6 December 2019.

[23]              By consent, I order that the figure at [22] of judgment No 2 of $3,021,012 is to be amended to provide that the total summary judgment to be entered in favour of the fourth plaintiff, Roy Sunde, is the sum of $3,021,021. The judgment figure is corrected pursuant to r 11.10 of the High Court Rules.

[24] I conclude that in principle Kevin Sunde is entitled to an indemnity from the Leroy Trust for his reasonable costs associated with judgment (No 1), but not the steps taken with respect to judgment (No 2). The parties are to consider the various alternatives outlined at [18] – [20] above in relation to calculating a reasonable quantum for such costs and seek further directions, as necessary.

Associate Judge P J Andrew