Triezenberg v Mason

[2019] NZHC 3019

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1688

[2019] NZHC 3019

UNDER

Part 18 of the High Court Rules Trustee Act 1956

BETWEEN

VICKI ANN TRIEZENBERG and PAUL MORLEY DODD

Plaintiffs

AND

ALEXANDER CHARLES MASON

First Defendant

WENDY ANNE MASON

Second Defendant

Hearing:	On the papers
Counsel:	VTM Bruton QC for plaintiffs GJ Thwaite for defendants
Judgment	19 November 2019

JUDGMENT (NO 4) OF FITZGERALD J

[As to quantification of “Excluded Costs”]

This judgment was delivered by me on 19 November 2019 at 3:30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Wilson McKay, Auckland

GJ Thwaite, Auckland

Triezenberg v Mason [2019] NZHC 3019 [19 November 2019]

Introduction

[1]    I have delivered three earlier judgments in these proceedings, the substance of which concerned disputes between the trustees of two family trusts, and whether the first defendant, Mr Mason, ought to be removed as a trustee.1 This followed a spectacular falling out between Mr Mason and the plaintiffs, in the context of broader family disputes. In my judgment dated 17 January 2019, I upheld the plaintiffs’ claims and removed Mr Mason as a trustee.2 I found Mr Mason to have been the primary source of the issues and discord between the parties.

[2]    In a judgment delivered during the interlocutory phases of these proceedings, Venning J had ordered that the parties’ legal costs of the proceedings fell within the scope of a trustee indemnity in the trust deed and thus could be paid out of trust funds “in the first instance”.3 Venning J reserved, however, the issue of the reasonableness of the quantum of the costs incurred and the steps taken by all parties, for determination and adjustment if necessary following the substantive hearing.

[3]    Pursuant to that ruling, the plaintiffs were periodically invoiced legal fees by their solicitors and counsel, which were duly paid from trust funds. Mr Mason’s counsel, Mr Thwaite, however, did not render any further invoices to Mr Mason following Venning J’s decision and prior to trial. Rather, one invoice for all time attendances during 2018, up to and including the September 2018 hearing, was rendered by counsel to Mr Mason after the substantive hearing. That invoice was not, therefore, paid “on the way through” the proceedings (given it was not issued until after trial).

[4]    Following my judgment on the substantive claim, the plaintiffs submitted that, given Mr Mason’s conduct as trustee and the findings made in my judgment, he ought not benefit from the trustee indemnity at all, and thus no costs ought to be paid out of trust funds to him in relation to legal  fees.  In  my second  judgment  delivered  on 30 April 2019, I found that as a matter of principle, Mr Mason could take the benefit

1      The plaintiffs are Mr Mason’s fellow  trustees.  Ms Triezenberg,  the  first-named  plaintiff,  is Mr Mason’s daughter. Mr Dodd, the second-named plaintiff, is the family accountant.

2      Triezenberg v Mason [2019] NZHC 14.

3      Triezenberg v Mason [2018] NZHC 186.

of the trustee indemnity.4 I reserved, however, the question of the reasonableness of the quantum of the fees to be indemnified and invited further submissions on that issue.

[5]    In my third judgment delivered on 6 September 2019, I identified three categories of Mr Mason’s legal costs which I did not consider to have been reasonably or properly incurred by him (and for which he ought not to be indemnified).5 They were:

(a)Legal costs associated with issuing a subpoena to the plaintiffs’ former counsel, and dealing with a subsequent application to set it aside (that application was determined against Mr Mason and he was ordered to pay indemnity costs on it).

(b)Legal costs associated with two deeds  of  March  2018,  by  which Mr Mason purported to remove the plaintiffs as trustees and appoint his son as a replacement trustee; together with steps taken to implement those deeds, such as new trustee meetings (including Mr Thwaite’s costs of preparing for and attending those meetings).

(c)Legal costs in the preparation for and at trial relating to the two March deeds (which I found to be invalid).

[6]    In my third judgment, I referred to the costs referred to at (a) to (c) above as the “Excluded Costs” and will continue to do so in this judgment.

[7]    In my third judgment, I noted that based on the materials then before the Court, it was impossible for me to quantify (even on an estimated basis) the Excluded Costs. I accordingly called for further information from the parties and encouraged them to seek to agree the quantum. I made an order that, pending final quantification of the Excluded Costs, the plaintiffs were to arrange for a payment from trust funds of

$80,000 to Mr Mason to be applied to his outstanding legal costs.6

4      Triezenberg v Mason [2019] NZHC 920.

5      Triezenberg v Mason [2019] NZHC 2125.

6      Which at that time totalled $187,182 (incl GST).

[8]    The parties have been unable to agree the quantum of Excluded Costs. The parties filed memoranda setting out their competing approaches to quantification.  Ms Bruton QC, counsel for the plaintiffs, submits Excluded Costs should be quantified at $72,128 (inclusive of GST). Mr Thwaite says they should be quantified at

$25,083.80 (inclusive of GST). This judgment accordingly determines the quantum of the Excluded Costs.

Approach

[9]    In case management conferences with counsel, I raised the process for determining the quantum of Excluded Costs and encouraged the parties to agree on a speedy and efficient mechanism for that to occur. No such agreement was, however, reached. I also discussed with counsel whether potential mechanisms might be for some form of taxation process in this Court, a referral to the Law Society for costs review or some other independent expert review. Ultimately, however, I considered it appropriate that I, as the trial Judge, determine the quantum of Excluded Costs, given my detailed knowledge and history of the proceedings. This is consistent with observations of the Court of Appeal on the process for quantifying indemnity costs pursuant to r 14.6 of the High Court Rules,7 where the Court is to assess whether the actual costs sought have been “reasonably incurred”.8

[10]   As discussed with counsel in prior conferences, and acknowledged by counsel, the process is inevitably somewhat inexact, given the steps taken by Mr Mason to which the Excluded Costs relate are unlikely to have been time-recorded and charged in all instances as individual “line items” in any fee notes rendered to him.

[11]   The process has been further hampered, however, by the fact Mr Thwaite has not provided copies of or other evidence of detailed time-entry recording by him, or any detailed breakdowns in his fee notes as to what his fees relate to. Rather, and using his fee note for 2018 as an example, the invoice simply sets out the total hours billed in relation to the proceedings on a month-by-month basis, and attaches a schedule with a series of bullet points listing various steps in the proceedings to which

7      Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494 at [64].

8      High Court Rules 2016, r 14.6(1)(b).

the fees relate. But there is no correlation between this schedule of steps and the fees charged for any given month. It is not known why more detailed information is not available, particularly given all parties were on notice as of Venning J’s judgment of February 2018 that any legal fees that were, or were sought to be, reimbursed from trust funds would be subject to review and scrutiny after the substantive hearing.

[12]   The combination of the form of the invoices rendered to Mr Mason and the absence of any detailed narrations or time records means the assessment of the quantum of Excluded Costs must be conducted on a broader and high-level estimate basis than might otherwise have been the case. I am also conscious that other than the Excluded Costs, all costs are being met out of trust funds (and therefore to the overall detriment to all beneficiaries of the trust), such that it is important that Excluded Costs are not significantly under-estimated.

[13]   I should note, however, that none of this is to suggest that the overall legal costs charged to Mr Mason in relation to these proceedings are excessive. Rather, in my judgment of 6 September 2019, I noted that when looked at globally, Mr Mason’s legal costs are within the bounds of what one might expect for hard fought trust litigation such as this.9 They are less than the total costs incurred by the plaintiffs (which I have also observed are the sorts of fees one would expect to be incurred in litigation of this kind). But the point remains that given the lack of detail in relation to Mr Mason’s costs, it remains difficult to isolate out and quantify the Excluded Costs.

Parties’ competing positions

Mr Mason’s proposed quantification

Issue of subpoena

[14]   Mr Thwaite estimates 12 hours’ work was involved in relation to the issue of the subpoena to Ms McGuigan and the application to set it aside. At $400 per hour, this totals $4,800. Mr Thwaite submits that this is reasonable, particularly when assessed against the plaintiffs’ counsel’s costs on that application of $6,065.10

9      Triezenberg v Mason, above n 5, at [62].

10     Ms McGuigan quite properly did not appear on the application to set aside the subpoena issued to her. Mr Skelton QC appeared on this application, so these represent his fees.

Preparation of the March 2018 deeds

[15]   Mr Thwaite has estimated 17.3 hours in relation to researching and drafting the deeds, attending to their signing and various letters relating to them. Again, at $400 per hour this produces a cost of $6,920.

Implementation of the March 2018 deeds

[16]   This includes preparing for various trustee meetings, Mr Thwaite’s attendance at them and then attending to follow up matters (such as minutes, correspondence, distributing the minutes etc). Mr Thwaite estimates 17.1 hours associated with these steps. At $400 per hour, this totals $6,840.

Steps taken at and in preparation for the substantive hearing in relation to the deeds

[17]   Mr Thwaite’s fees for 1 June 2018 to 8 September 2018 (being the conclusion of the substantive hearing) are $77,240 (exl GST). A proportion of those fees will have involved the preparation of evidence relating to the deeds and their implementation, and researching and preparing legal submissions in relation to those matters, and also a portion of counsel’s time at the hearing itself.

[18]   Mr Thwaite has assessed the proportion of the total hearing time which was devoted to evidence versus legal argument. He calculates that approximately three- and-a-half days out of the four-day trial were devoted to evidence, giving a percentage of 87.55 per cent. He then applies that percentage to his total fees of $77,240, concluding that $67,585 of his fees for June to September 2018 related to evidence. Mr Thwaite submits that the balance of the $77,240 fees, of $9,650, relates to legal argument and preparation.

[19]   Mr Thwaite then calculates (based on a review of the notes of evidence) that of the total evidence given at trial, only approximately 1.67 per cent related to the deeds (or the issues concerning the subpoena). He therefore reduces his June to September 2018 fees for evidence ($67,585) by 1.67 per cent, or $1,128 (the latter forming part of the Excluded Costs).

[20]   Mr Thwaite then analyses Mr Mason’s pleading documents after 19 March 2018, and the extent to which they addressed the March 2018 deeds. By reference to page count, he notes that 5.16 pages out of 23.5 pages relate to the deeds, being 22 per cent. He therefore allocates 22 per cent to the $9,650 (being that proportion of his total June to September 2018 fees said to relate to legal issues), such that the resulting sum of $2,124 forms part of the Excluded Costs.

[21]   Based on the above, Mr Thwaite quantifies total Excluded Costs at $21,812 (excl GST), or $25,083.80 (incl GST).

The plaintiffs’ proposed quantification

[22]   Ms Bruton filed a memorandum in response to Mr Thwaite’s calculations, raising a number of concerns and queries on the approach taken to Mr Mason’s assessment of Excluded Costs. Primarily by reference to Mr Thwaite’s monthly hours charged to Mr Mason as against as what was taking place in the proceedings during the relevant months, Ms Bruton submits that certain assumptions should be made as to the time spent on those items to make up the Excluded Costs, particularly in the absence of proper records being provided. On this basis, Ms Bruton suggests the following.

Issue of subpoena

[23]   Ms Bruton says Mr Mason’s costs attributable to the subpoena should be assessed at $16,000 (40 hours x $400). This is based on Mr Thwaite charging a total of 57 hours work in September 2017, 40 of which should be inferred as relating to the subpoena and the hearing of the application to set it aside.

Preparation of the March 2018 deeds

[24]   Ms Bruton says that the entirety of Mr Thwaite’s time in March 2018 ought to be allocated to preparation of the deeds, given it is not apparent that any other steps were taken in the proceedings at that time. Mr Thwaite charged 61.3 hours for March 2018 (totalling $24,520).

Implementation of the March 2018 deeds

[25]   Ms Bruton assesses Mr Mason’s legal costs associated with the implementation of and reliance on the March 2018 deeds over the period April to August 2018 (inclusive) to total $22,200. This is by reference to the fees charged by Mr Thwaite to Mr Mason for each of these months, and an assessment (based on steps likely taken during those months) of what proportion of those can be referable to the deeds. This includes an allocation for preparation of opening legal submissions in relation to the deeds during August 2018.

Steps taken at and in preparation for the substantive hearing in relation to the deeds

[26]   Based on the total number of hours charged by Mr Thwaite to Mr Mason for the trial of 37.5 hours, Ms Bruton estimates that 10 per cent of that trial time should be attributable to the Excluded Costs. This equates to approximately 4 hours, totalling

$1,600.

[27]   Ms Bruton accordingly submits that a total of $62,720, plus GST of $9,408, namely $72,128, ought to be quantified as the Excluded Costs.

[28]The difference between the parties is accordingly around $47,000.

Assessment

Preferred approach

[29]   A key difference between the parties is the approach taken to assessing the costs associated with the deeds in the months leading up to and at the trial. I have carefully considered both approaches and for the following reasons, I prefer the approach adopted by Ms Bruton.

[30]   As noted, Mr Thwaite has assessed that proportion of his time from June to August 2018 which relates to the preparation of evidence rather than other legal matters, by reference to the time taken at trial for evidence versus legal submissions.11

11 See [18]-[20] above.

[31]   I do not consider such an approach to be valid. The time taken for evidence during a trial may well bear little correlation to the time taken in preparing that evidence pre-trial. Time spent on evidence at trial includes witnesses reading their briefs, cross-examination by opposing counsel, re-examination and questions from the Court. None of these matters, particularly the last three steps, correlate to how long it might have taken the evidence-in-chief to be prepared. Nor does the time taken at trial in relation to legal submissions correlate to the time to prepare legal submissions. Indeed, based on common experience, one would expect that the time devoted to researching and preparing opening and closing submissions exceeds by some margin the time to deliver those submissions at the hearing.

[32]   Further, the analysis of the pleading documents to calculate trial preparation time other than evidence does not take into account research and preparation of opening and closing submissions in relation to the deeds.

[33]   By contrast, the approach taken by Ms Bruton is a more logical and orthodox approach to costs assessments of this nature. In essence, analysing a solicitor’s or counsel’s fees charged on a periodic basis, and segregating out from those periodic fees amounts attributable to particular steps, is routinely undertaken. Such an assessment can be quite precise, where there is detailed supporting information (such as unit by unit time records), or can be undertaken only at a higher level, where such detailed information is not available (or produced).

[34] For the reasons outlined at [11]-[12] above, a very broad-brush approach only can be taken in this case, given the paucity of detailed time recording and billing information. Because of this, I have considered whether further information should be sought including, for example, seeking expert advice. I do not consider that is necessary or appropriate. The parties have had ample opportunity to set out the materials on which they rely for the quantification of Excluded Costs. And as noted, the residual dispute is relatively modest, being approximately $47,000 difference between them. It is evident that each party has spent considerable time producing their respective analyses, which are summarised briefly only at [14] to [27] above. It is in no party’s interest for additional costs to be incurred in this litigation, in connection with further assessment and/or analysis. And the courts are regularly required to take

relatively robust approaches to cost calculations generally, be that assessing increases or reductions to be made to or from scale costs awards, or reductions to be made to actual costs sought on an indemnity basis to reflect costs reasonably incurred.

Quantification

Subpoena

[35]   Mr Thwaite has estimated $4,800, whereas Ms Bruton estimates $16,000. I propose to round the figure at $5,500 (plus GST).

[36]   I have done so primarily with regard to Mr Thwaite’s own estimate, which I assume has been carried out in good faith and with due care. This is also consistent with the actual costs incurred by the plaintiffs’ counsel (Mr Skelton QC) on this issue, namely $6,065 (which is assumed to include GST). While Mr Thwaite’s hourly rate is understood be less than that of Mr Skelton, Mr Mason, being the party issuing the subpoena, will have incurred additional costs in relation to researching, drafting and serving the subpoena itself.12

Preparation of March 2018 deeds

[37]Mr Thwaite’s estimate is $6,960, whereas Ms Bruton has estimated $24,520.

[38]   Ms Bruton’s estimate is based on the entirety of the fees charged to Mr Mason for March 2018 relating to the deeds, given on the face of the file, there were no other steps taken by Mr Mason/Mr Thwaite in March 2018.

[39]   I do not agree this is an appropriate assumption to make. Simply because as far as the other party is concerned, no active steps have been taken on the proceeding does not mean that work was not going on “behind the scenes” between counsel and their client. In his memorandum dated 28 May 2019, Mr Thwaite noted that in March 2018, work was undertaken considering the plaintiffs’ First Amended Statement of Claim (and the appropriate response). Further, I consider it unrealistic to suggest that

12     As noted in Mr Thwaite’s assessment.

a total of 61.3 hours would have been spent researching, drafting, arranging for execution and distributing correspondence regarding the deeds.

[40]   Nevertheless, I consider it likely that more time was spent on these matters than estimated by Mr Thwaite. Given the absence of appropriate time records/narrations, and that other than the Excluded Costs, the costs are to be met by trust funds, I propose to adopt a higher figure than estimated by Mr Thwaite. I allocate a further 10 hours of time to this estimate, being a further $4,000, resulting in a total of $10,960. I round this to $11,000 (plus GST).

Implementation of the deeds

[41]Over the period April to June 2018 (inclusive), Ms Bruton estimates a total of

$13,400.    For the comparable period (including three days in  late  March 2018),  Mr Thwaite estimates $6,840.

[42]   Given it is apparent from Ms Bruton’s submissions that other steps were taken during these months relating to the deeds, other than simply attending the purported trustees’ meetings, I am satisfied that something higher than Mr Thwaite’s estimate should be adopted. Being unable to do anything more precise, I adopt a position relatively “in the middle” of the parties’ competing assessments, at $10,000 (plus GST).

July and August 2018

[43]   From July 2018 to the commencement of trial, the two approaches cannot usefully be compared. As noted, as a matter of principle, I prefer Ms Bruton’s approach to quantification. In July 2018, Mr Mason prepared a brief in support of his counterclaim. Ms Bruton notes that a portion of that brief concerned the invalid deeds and the steps taken in reliance on them, equating to about 15 per cent. She accordingly allocates 15 per cent to Mr Thwaite’s total hours charged for July (being 56.3 hours). This assumes, however, that no other steps were taken by Mr Thwaite in July 2018 other than preparing the brief of evidence. Given this was proximate to the commencement of trial, I consider that unrealistic. I accordingly apply 5 per cent

rather than 15 per cent. Five per cent of the hours charged is 3 hours (rounded), at

$400 per hour, totalling $1,200 (plus GST).

[44]   Ms Bruton has undertaken a similar exercise to the time billed to Mr Mason by Mr Thwaite in August 2018, and assesses that 18 per cent of the time charged during that month is attributable to the deeds. Again, this assumes that no other steps were taken in that month other than preparing the reply to the plaintiffs’ response to his counterclaim and drafting the opening submissions. It is highly likely that there will have been other attendances with Mr Mason, including in relation to preparing for the trial more generally. I therefore adopt 10 per cent rather than 18 per cent. 10 per cent of the total hours charged in August (of 58.5) is 5.85 hours. At $400 per hour the total is $2,340 (plus GST).

Time at trial relating to the deeds

[45]   Mr Thwaite charged 37.5 hours for trial. Ms Bruton suggests that 10 per cent of that time should be attributable to the Excluded Costs. I adopt a slightly lower figure. I agree with Mr Thwaite that the factual evidence given at trial solely directed to the deeds and/or the subpoena was very limited. Rather, the key time at trial in relation to the deeds was in relation to the interpretation of the trust deeds’ provisions concerning appointment and removal of trustees; and whether as a matter of law, certain conduct by Mr Dodd and Ms Triezenberg evinced an intention on their part to retire or resign as trustees. But the time spent in legal argument on these matters was far, far less than the broader issue of removal of trustees and what factual narrative should be accepted.  I accordingly adopt 7.5 per cent.   This equates to 3 hours of   Mr Thwaite’s time charged for September 2018, being $1,200 (plus GST).

Total Excluded Costs

[46]On this basis, the Excluded Costs are $31,240 plus GST of $4,686, totalling

$35,926.

Calculation of residual payment

[47]   The total amount of Mr Mason’s outstanding legal costs (prior to the earlier distribution of $80,000) was $162,720 plus GST, being $187,182. The interim distribution of $80,000 (which included GST) is to be netted off.

[48]   I am also satisfied that the indemnity costs award against Mr Mason in relation to the subpoena, but not yet paid by him, also ought to be set off any residual payment to Mr Mason. Given Mr Mason did not pay those costs, Mr Skelton’s fees were paid out of trust funds and accordingly need to be reimbursed to the trust by Mr Mason. I do not accept Mr Thwaite’s submission that the payment out of trust funds represents a distribution to Mr Mason by the trustees. There is no resolution to that effect. Ultimately, the trust met Mr Mason’s personal obligation for Mr Skelton’s fees in the absence of him making timely payment. Whether or not there is to be any subsequent reimbursement to Mr Mason of these fees from trust funds by way of a distribution is not a matter for the Court but for the trustees.

[49]   The indemnity costs of $6,065 are accordingly also to be netted off the amount due to Mr Mason.

Result

[50]   I accordingly, make an order that within five working days of this judgment, the plaintiffs (as trustees of the Mamari No. 2 Trust) are to pay to Mr Mason the sum of $65,191.00 (incl GST) from the Mamari No. 2 Trust, such sum to be applied against Mr Mason’s outstanding fees in these proceedings.13

[51]   No party made submissions on the costs of calculating the Excluded Costs. I order that costs lie where they fall. Neither party was fully successful in their assessment of Excluded Costs.

Fitzgerald J

13     Being $187,182 less $80,000, less $6,065, less $35,926.