Triezenberg v Mason

[2019] NZHC 2125

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1688

[2019] NZHC 2125

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 and JM Matheson for plaintiffs GJ Thwaite for defendants
Judgment:	28 August 2019
Recalled:	6 September 2019
Reissued:	6 September 2019

JUDGMENT (NO. 3) OF FITZGERALD J

[As to the reasonableness of quantum costs]

This judgment was delivered by me on 28 August 2019 at 11am, 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 2125 [28 August 2019]

Introduction

[1]    By a judgment delivered on 17 January 2019 (January Judgment), I made orders removing Mr Mason (the first defendant) and his wife (the second defendant) as trustees of two family trusts (the Trusts).1 There was no dispute Mrs Mason ought to be removed; she suffers from advanced dementia. Mr Mason, however, strongly disputed his removal.

[2]    The plaintiffs (Mr Mason’s daughter and accountant respectively), being the other trustees of the Trusts, sought Mr Mason’s removal due to the serious breakdown in their relationship with him, both personally and in their roles as trustees. The breakdown resulted in significant dysfunction in the trusts and unsustainable dissipation of trust assets. I found that much of this was due to Mr Mason’s actions and attitudes. In a subsequent judgment delivered on 30 April 2019 (April Judgment), I also amended the trust deed provisions concerning the power of appointment of new trustees, to vest that power in the continuing trustees.2

[3]    In my April Judgment, I also made orders as to costs. I ordered that Mr Mason pay the plaintiffs’ costs on a 2B basis, with the difference between the scale costs and the plaintiffs’ actual costs to be met by the assets of one of the Trusts (the Mamari No. 2 Trust). The more contentious issue was whether Mr Mason’s costs liability to the plaintiffs, and his own legal costs, also ought to be met out of trust assets (pursuant to an indemnity contained in the Mamari No. 2 Trust deed (Trustee Indemnity) and/or pursuant to the statutory indemnity contained in s 38(2) of the Trustee Act 1956 (the Act). Because I did not consider it unreasonable for Mr Mason to have defended the action to remove him as trustee (despite the outcome being that he was removed), I made an order that Mr Mason was entitled to be indemnified under the Trustee Indemnity for his costs in relation to these proceedings.

[4]    There remained, however, the issue of the quantum of costs to be subject to indemnification. If the parties could not agree, I reserved leave to any party to file a

1      Triezenberg v Mason [2019] NZHC 14 [January Judgment].

2      Triezenberg v Mason [2019] NZHC 920 [April Judgment].

memorandum setting out any challenge to the quantum of legal costs to be met by the Mamari No. 2 Trust.

[5]    The plaintiffs subsequently filed a memorandum challenging various aspects of Mr Mason’s legal costs. Mr Mason filed a memorandum in response. In short:

(a)The plaintiffs challenge several steps taken by Mr Mason in these proceedings, and accordingly the quantum of costs relating to those steps. Removing those costs, and taking into account an interim payment already made to Mr Mason out of trust funds to pay legal costs, the plaintiffs say no further payment ought to be made to Mr Mason in relation to his costs in these proceedings.

(b)Mr Mason, on the other hand, says that while he was ultimately unsuccessful in the litigation, none of the steps taken by him were improper or unreasonable, and there is accordingly no reason why all his costs should not be met by trust assets.

[6]    Mr Mason also filed a (brief) memorandum challenging certain aspects of the plaintiffs’ costs to be met out of trust assets.3

[7]    Before addressing the parties’ competing positions on legal costs, it is necessary to first summarise earlier orders made in these proceedings relevant to the reimbursement of legal costs from trust funds.

Earlier costs orders/steps

[8]    Fairly early on in the proceedings, the plaintiffs applied for orders making funds held by the Mamari Trust No. 2 available to the plaintiffs and defendants for payment of counsel and solicitors’ fees and disbursements. Mr Mason opposed the application, but took the position that if the application were granted, he should be paid a similar sum to the plaintiffs.

3      The plaintiffs did not file a response.

[9]    By judgment delivered on 19 February 2018, Venning J granted the plaintiffs’ application.4 He made an order that:5

[Trust funds] are to be made available to the plaintiffs and defendants for the payment of their respective counsel and instructing solicitors’ outstanding fees and disbursements and for ongoing fees and disbursements in these proceedings in the first instance.

[Emphasis added]

[10]   Venning J’s order accordingly authorised payment of counsel and instructing solicitors’ fees which had already been incurred by the time of his judgment, and for the payment of legal costs on an ongoing basis.

[11]   The highlighted text of Venning J’s order noted above (that payment of ongoing costs be met by trust assets “in the first instance”) is relevant to a further order made by him, namely that:6

I reserve the issue of 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.

[12]   As such, both the quantum of costs to be paid out of trust funds, and the reasonableness of particular steps taken by the parties in the litigation, were to be determined after the substantive hearing. By referring to potential “adjustment”, Venning J envisaged the possibility of a party having to repay previous amounts paid to it in respect of legal costs.

[13]   Despite what ought to have been a straightforward exercise in implementing Venning J’s orders, the parties quickly ran into difficulties in doing so. The plaintiffs say Mr Mason failed and/or refused to respond to their suggestions as to appropriate protocols for payment of the legal expenses. In March 2018, the plaintiffs accordingly applied to have Mr Mason removed as a signatory to the Trusts’ bank accounts with ANZ, and for specific authorisation for payment of certain legal costs then outstanding.

4      Triezenberg v Mason [2018] NZHC 186.

5 At [13].

6 At [14].

[14]   The application was due to be heard by Woolford J on 27 June 2018. By that time however, a measure of agreement had been reached between counsel. In a minute resolving one matter which had not been agreed, Woolford J made orders authorising several specific payments to be made from trust funds.7 He further ordered that:

In respect of all payments to be made pursuant to these orders, the issue of reasonableness as to the quantum of the costs incurred and the steps taken by all parties is reserved for determination and adjustment if necessary following the substantive hearing.

[15]   As a result of Woolford J’s orders, approximately $201,000 was released from the Mamari Trust No. 2 for payment of the plaintiffs’ then outstanding legal costs, and approximately $110,000 for payment of Mr Mason’s then outstanding legal costs.8

[16]   Mr Mason’s counsel, Mr Thwaite, did not issue periodic invoices to Mr Mason over the balance of the litigation.9 Rather, other than that invoice paid as a result of Woolford J’s orders, the only  other  invoice  was  one  issued  by  Mr Thwaite  to  Mr Mason on 18 February 2019 (i.e. well after the September 2018 substantive hearing). This invoice covered all attendances from January 2018 to September 2018.

[17] As noted, the second invoice was issued after the substantive hearing. This is relevant to Mr Mason’s present submission that the plaintiffs have breached Venning J’s order set out at [9] above, in that they have not arranged for payment of this invoice “in the first instance,” pending determination of any adjustments required.

[18]   Nothing in particular turns on this submission for the purposes of this judgment.10 However, for completeness, I do not agree that the plaintiffs are in breach of Venning J’s order. The Judge’s order plainly envisaged the periodic invoicing of legal fees throughout the litigation, i.e. on a regular basis leading up to the substantive hearing. This is confirmed by the Judge’s reference to “ongoing” legal costs being

7      Triezenberg v Mason HC Auckland CIV-2017-404-1688, 28 June 2018 (Minute of Woolford J).

8      Being a (net) sum of $109,894 invoiced to Mr Mason on 27 June 2018. The invoice was for attendances over the period July to December 2017, in a total amount of $144,394, less an earlier (Court ordered) “payment from trust” of $34,500.

9      The particular arrangements between Mr Mason and Mr Thwaite as to billing are of course a matter between them. I do not imply any criticism of the arrangement adopted.

10 Which is limited to the plaintiffs’ challenge to the quantum of Mr Mason’s legal costs.

met from trust funds “in the first instance”, with any adjustments being determined “after” the substantive hearing.

[19]   Had Mr Thwaite invoiced his legal fees on a regular basis over the course of the litigation, they would have no doubt been met out of the Mamari No. 2 Trust “in the first instance”, pending review and possible adjustment after the substantive hearing.11 Venning J’s order did not envisage the only further invoice to be issued to Mr Mason would be after the substantive hearing – i.e. the point at which the reasonableness of steps taken and the quantum of fees to be paid out of trust funds was to be determined. The purpose of Venning J’s order was to facilitate the payment of legal fees actually incurred during the course of proceedings, to ensure all parties had a proper opportunity to be represented and participate in the proceedings.12

[20]   I accordingly do not consider it a breach of Venning J’s orders for the plaintiffs not to have paid Mr Mason in respect of Mr Thwaite’s most recent invoice.13 This is particularly so given the plaintiffs challenge a number of steps taken by Mr Mason and the quantum of costs incurred, across both the 27 June 2018 and 18 February 2019 invoices. Their position is that no further trust funds ought to be paid to Mr Mason in connection with his legal costs.

[21]   For completeness, I note Mr Thwaite had suggested that pending determination of the plaintiffs’ present challenge to Mr Mason’s legal costs, the costs should nevertheless be paid in full in the interim. I did not accept that suggested course. The plaintiffs’ challenge to the quantum of Mr Mason’s costs was before the Court and needed to be determined – as envisaged by Venning J’s order itself. In addition, given that other than the (re-issued) June 2018 invoice, Mr Mason was not billed any further legal costs until after the substantive hearing, the fact he did not have access to trust funds for legal fees during the course of the litigation did not prevent him from retaining counsel and fully participating in the proceedings and the substantive hearing. I therefore did not consider it made any practical sense, post the substantive hearing, to order the payment of Mr Thwaite’s (post-substantive hearing) invoice in

11     As was the case with payment of Mr Thwaite’s invoice of 27 June 2018.

12     Triezenberg v Mason, above n 4, at [12].

13     I note Mr Mason’s reliance on observations by me in a minute dated 7 May 2019 (at [4]), though note those were preliminary views only from an “initial review”.

full, then determine the plaintiffs’ challenge, and then possibly order repayment by Mr Mason of any costs considered unreasonable.

Mr Mason’s challenge to the plaintiffs’ costs

[22]   Mr Mason’s overall position to date has been that the Mamari No.2 Trust ought to meet all trustees’ costs, namely both the plaintiffs’ and his own costs.14 Despite this broad overall position, however, Mr Mason raises a number of points in relation to the quantum of the plaintiffs’ costs to be reimbursed.

[23]   First, Mr Mason says, “as a general comment”, that the action should not have come to trial, in effect that the plaintiffs should have accepted settlement offers made by him or at least more fully engaged in that process. This general comment does not, however, translate into any particular discount or reduction Mr Mason says ought to be made from the plaintiffs’ costs to be reimbursed, and as noted, Mr Mason’s broad position is that all trustees’ costs should be met by the Mamari No.2 Trust.

[24]   Irrespective of this, it clear that all parties did engage from time-to-time in efforts to resolve these proceedings. Ultimately, however, they were not able to reach a concluded agreement. Nor do I consider Mr Mason’s general observation warrants a reduction in the quantum of the plaintiffs’ costs which ought to be reimbursed from the Mamari No.2 Trust. This is because the plaintiffs were ultimately successful in their claim to have Mr Mason removed as a trustee; successful in defending the counterclaim brought by Mr Mason based on the 11 March 2018 deeds; and also successful in their application for amendment of the trust deeds’ provisions concerning the power of appointment. I accordingly do not consider it was improper or unreasonable for the plaintiffs to continue with the litigation when they were successful in it.

[25]   Mr Mason also raises some more specific issues in relation to the plaintiffs’ costs. I deal with each in turn.

14     See for example, Mr Mason’s memorandum dated 18 February 2019.

[26]   First, Mr Mason says the plaintiffs’ costs liability to the law firm Sellar Bone, originally the instructing solicitors to former trial counsel in these proceedings, ought not to be met out of the Mamari No.2 Trust, as they were the long-standing solicitors for the first defendant and his business, together with the trusts. Mr Mason says they were accordingly in a position of conflict and the plaintiffs should not have engaged them.

[27]   It would be inappropriate for me to comment on whether Sellar Bone was in a position of conflict, given I have no visibility of the underlying arrangements in that regard, nor for that matter, have I heard from Sellar Bone on this issue. Sellar Bone did ultimately withdraw as instructing solicitors. Despite this, however, I am not persuaded this means the plaintiffs’ costs liability to Sellar Bone was unreasonably or improperly incurred.

[28]   Ultimately, it was Sellar Bone’s obligation, rather than the plaintiffs’, to consider whether they were in a position of conflict and whether it was possible for them to act as instructing solicitors in the circumstances. It was not incumbent on the plaintiffs to make that determination. Further and in any event, even if Sellar Bone had not been instructed, another law firm would have needed to be instructed as    Ms McGuigan’s instructing solicitors. Costs would have been incurred by the plaintiffs in that context in any event. In addition, the costs in relation to Sellar Bone are small in the context of both the plaintiffs’ and Mr Mason’s overall legal costs, totalling $4,0553.28. And on the face of the invoices, there does not appear to be anything improper or unreasonable about these costs. Those costs may accordingly be reimbursed from the Mamari No.2 Trust.

[29]   Mr Mason further says that because Sellar Bone were not properly engaged, they could not engage Ms McGuigan and her fees should not therefore be paid out of the trust. This point is misconceived. It was plainly appropriate for the plaintiffs to have counsel acting on their behalf in these proceedings. Had Sellar Bone not briefed Ms McGuigan, then she would have been briefed by an alternative firm of instructing solicitors. Any concerns in relation to Sellar Bone’s position says nothing in relation

to the briefing of Ms McGuigan or the reasonableness of her fees. A similar point was noted by Whata J in his 2017 judgment in this matter in which he stated:15

Her engagement in these proceedings by the plaintiffs was not disputed. Any issue as to who paid her, or the source of the payments, has nothing to do with Ms McGuigan.

[30]   There is accordingly nothing in principle which means the plaintiffs’ costs liabilities to Ms McGuigan were improperly or unreasonably incurred.

[31]   Nor do I accept the particular points raised by Mr Mason as to the quantum of Ms McGuigan’s fees. He says that she filed affidavits when filing the action which was not a justified procedure, and the affidavits and the pleadings were excessively long and detailed. Turning to the last point first, the affidavits and pleadings were before me on the substantive application, and I did not consider them to be overly long and detailed, certainly not to the degree that costs associated with them would have been improperly or unreasonably incurred by the plaintiffs. As noted, Mr Mason also says Ms McGuigan filed affidavits upon filing the action, which was not a justified procedure. Be that as it may, the affidavits were adduced in evidence at the substantive hearing, and together with a range of further affidavits sworn by the plaintiffs, formed the bulk of their evidence-in-chief. I accordingly do not accept Mr Mason’s submission that the plaintiffs’ costs liability to Ms McGuigan for which they are to be reimbursed from trust funds should be limited to the scale fee for commencing the action with a 50 per cent uplift.

[32]   Mr Mason challenges the costs the plaintiffs have incurred in connection with Ms Bruton appearing as trial counsel (at $700 per hour) rather than Ms McGuigan (at

$300 per hour), and says that a junior was not needed for the trial.

[33]   Again, I do not accept these submissions. While of course Ms McGuigan’s fees were more cost effective, this litigation was anything but straightforward. I do not consider it was unreasonable or improper for the plaintiffs to have engaged, through Wilson McKay, Ms Bruton as senior counsel. As noted, this was hard fought trust litigation in which it would not be unusual for senior counsel of Ms Bruton’s

15     Triezenberg v Mason [2017] NZHC 2271 at [28].

experience to be briefed. It was also entirely appropriate for a junior to be engaged in this matter and appear as junior counsel at the trial. Again, that would be perfectly normal and reasonable in a case such as this. Further, if Ms Matheson did not act as junior counsel, then it would have been wholly inefficient (from a cost perspective) to expect Ms Bruton, as senior counsel, to have attended to all the matters  to  which Ms Matheson attended.

[34]   Finally, Mr Mason says the plaintiffs’ costs should be reduced to the level of his costs. There is no principled basis for such a reduction. Further, this argument has been rejected on two previous occasions in these proceedings.16

[35]   I accordingly do not accept the matters raised by Mr Mason require a reduction in the plaintiffs’ costs to be reimbursed from trust funds.

[36]   Despite there being no global challenge to the remaining quantum of the plaintiffs’ legal costs, I have nevertheless been provided with copies of the underlying invoices which make up the plaintiffs’ legal costs totalling $405,070.07 (up to the substantive hearing) and $33,911.70 (post the substantive hearing).17 On the face of the invoices, and considering the nature of these proceedings (hard fought trust litigation), I do not consider the fees unreasonable in amount. They appear to me to be within the range of fees incurred in significant litigation of this kind, involving senior and experienced counsel.

The plaintiffs’ challenge to quantum of fees/steps taken by Mr Mason

Introduction

[37]   The plaintiffs make three broad challenges to the quantum of Mr Mason’s legal costs to be met by trust assets:

(a)First, some of the legal costs incurred by Mr Mason were not reasonably and properly incurred. These relate to:

16     See Triezenberg v Mason [2018] NZHC 186 at [14] (per Venning J) and my earlier judgment

Triezenberg v Mason [2019] NZHC 920 at [66].

17     The amounts include GST.

(i)Costs associated with a subpoena issued to the plaintiffs’ original trial counsel (Ms Janna McGuigan);

(ii)Costs associated with two deeds dated 11 March 2018 by which Mr Mason purported to remove the plaintiffs as trustees of the Trusts and appoint his son, Mark Mason, in their place; and

(iii)Teleconferences with Woolford J in June 2018 regarding implementation of the order made by Venning J in February 2018.

(b)Second, the costs associated with the two deeds dated 11 March 2018 were not costs incurred by Mr Mason in his role as trustee in any event, but in his role as appointer under the trust deeds.

(c)Third, given the absence of detailed time records by Mr Thwaite, it is difficult to ascertain the extent to which some of the attendances are in fact for steps taken in these proceedings.

[38]   Before addressing each of these matters, I first deal with some points of principle arising out of my April Judgment and how they relate to the present dispute over the quantum of Mr Mason’s legal costs.

[39]   First, as I found it was not unreasonable for Mr Mason to have defended the attempt to remove him as trustee of the Trusts, I ruled that he was entitled to indemnification for his associated costs and liabilities pursuant to the Trustee Indemnity. The Trustee Indemnity excludes costs attributable to a trustee’s own dishonesty or wilful commission of an act known to be in breach of trust. The plaintiffs did not suggest Mr Mason committed a breach of trust. Rather, as noted, the application for removal was founded on the irretrievable breakdown in the relationship between the trustees. In my April Judgment, I concluded that Mr Mason’s actions in defending the proceedings did not involve any “dishonesty” on his part, in the sense addressed in relevant authorities.18 I accordingly made an order that Mr Mason was

18     April Judgment, above n 2, at [35]-[42] and [59]-[62].

entitled to be indemnified for his costs liability to the plaintiffs, and his own liability to his legal counsel for costs of the proceedings.

[40]   Second, that costs order does  not,  however,  mean  that  the  quantum  of  Mr Mason’s costs to be indemnified is immune from any scrutiny. That is clear from the very fact that in my April Judgment, I reserved the question of any challenge to the quantum of costs to be indemnified (consistent with Venning J’s earlier order). This is also consistent with the Court’s supervisory jurisdiction of trusts, including to review costs and expenses incurred to ensure that they are both necessarily incurred in the interests of the trust and reasonable in extent.19

[41]   I consider this to be the case whether indemnification is sought pursuant to a provision in a trust deed or under the Act. Obviously the terms and proper interpretation of the indemnification provision (and any exclusions to it) will determine what types of costs fall within the scope of the express indemnity. So in this case, as noted, costs attributable to a trustee’s own dishonesty will not. But once the indemnity provision has been triggered, it cannot have been the settlor’s intention that costs improperly or unreasonably incurred by a trustee are nevertheless to be indemnified. Nor would such an outcome be consistent with public policy, particularly where the indemnification of unreasonably or improperly incurred costs erodes trust assets to the detriment of beneficiaries.

[42]In this context, the learned authors of Lewin on Trusts observe that:20

Given that a trust may contain an exemption clause so as to exclude a trustee’s personal liability except for his own fraud, it is difficult to see why a trust should not contain a provision allowing a trustee costs in respect of non- fraudulent acts or omissions, though questions of public policy arise in relation to provisions which purport to allow costs unreasonably incurred or unreasonable in amount. … Terms of the trust entitling the trustee to indemnity in respect of costs incurred by him will be construed so as to cover only costs which are reasonably or properly incurred and so do not operate to enhance the trustee’s rights of indemnity under the general law.

[Emphasis added]

19 Butterfield v Public Trust [2017] NZCA 367, (2017) 23 PRNZ 575 at [21].

20 Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (19th ed, Sweet and Maxwell, London, 2015) at [27-116], citing Gomba Holdings (U.K.) Ltd v Minories Finance Ltd (No. 2) [1993] Ch 171; and Holding and Management Ltd v Property Holding and Investment Trust Plc [1989] 1 WLR 1313.

[43]   For completeness, I note a similar position exists in relation to broadly framed contractual indemnity provisions. As the Court of Appeal observed in Beecher v Mills (in relation to an unqualified indemnity):21

A distinction may be drawn between a person entitled by contract to an indemnity for costs and one who is simply recovering costs as damages. … In the case of a contract it must in the end be a matter of determining what recovery is expressly or impliedly intended. In principle, anything less than a full indemnity for costs properly incurred must leave the indemnitee with part of the liability for which the indemnifer is prima facie responsible. … In the absence of a contrary indication it is not to be assumed that the parties intended such a result. Nor can there ordinarily be any room for the exercise of a judicial discretion to order less costs and thereby erode the contractual protection the indemnity was intended to provide. … A contractual obligation of that kind is enforceable unless contrary to public policy and, as in ANZ Banking Group (NZ) Ltd v Gibson … we are unable to see how requiring the Beechers in this case to meet all costs (calculated on a solicitor/client basis) properly incurred by Mr Mills in relation to the performance of the indemnity under clause 20 could be said to impede the administration of justice or otherwise be contrary to any discernible public policy considerations.

[Emphasis added]

[44]I accordingly proceed to consider the plaintiffs’ challenges on this basis.

Costs associated with issue of subpoena

[45]   The subpoena issued by Mr Mason was the subject of Whata J’s judgment delivered on 19 September 2017.22 The Judge said the following about the rationale for the subpoena and the steps which followed it:23

It appears the main reason for the subpoena was to enable Mr Thwaite, counsel for Alexander, to obtain information relating to invoices rendered by trial counsel. In particular, he wanted to know who they were addressed to, and for what purpose they were rendered. There was an ancillary purpose, namely to show that the plaintiffs’ solicitors were conflicted, because as the Trusts’ lawyers they could not act against Alexander’s interests.

…

Mr Thwaite submitted the subpoena was necessary to support Alexander’s claim that the second defendant’s funds were being used by the plaintiffs for the conduct of the proceedings, and to expose the position of conflict occupied by the plaintiffs’ solicitor on the record, who was also the Trusts’ solicitor. Mr

21     Beecher v Mills [1993] MCLR 19; see also Watson & Son Ltd v Active Manuka Honey Association

[2009] NZCA 595.

22     Triezenberg v Mason [2017] NZHC 2271.

23     At [16], [19]-[21].

Skelton responded that a subpoena was not necessary or appropriate to achieve those outcomes. To illustrate, Mr Skelton offered to supply a copy of Ms McGuigan’s invoices, with appropriate redactions to remove privileged information.

It transpires Mr Thwaite was content to proceed without the subpoena on learning that the Trusts’ solicitors withdrew as solicitors on the record. He did not file a notice of opposition to the plaintiffs’ application, which had only been served on him on the Friday before the call before me.

Mr Skelton nevertheless seeks costs on an indemnity basis given the subpoena process was plainly wrong and the plaintiffs had set out the grounds for opposition in the 4 September letter. Mr Skelton said that because Mr Thwaite refused to concede the point, he was engaged under urgency as with the subpoena activated, Ms McGuigan could not continue to act as counsel.

[46]   Having addressed why the subpoena should not have been issued (including by reference to s 72 of the Evidence Act 2006, pursuant to which counsel are not eligible to give evidence in a proceeding without leave of the Court), Whata J then said the following:24

Mr Thwaite should not have proceeded with the subpoena. In doing so, he acted improperly and unnecessarily. Mr Thwaite was on notice of the main reason for objection. By pressing on regardless, he assumed the risk of failure. Furthermore, the decision by counsel to engage in the subpoena process against trial counsel with the hearing just over one month away was improper without first seeking leave of the Court in terms of eligibility.

[47]   For these reasons, Whata J awarded indemnity costs against Mr Mason on the plaintiffs’ application to set aside the subpoena.

[48]   The plaintiffs say that in finding Mr Mason liable for indemnity costs in relation to the subpoena, it cannot be the case that costs associated with it were properly or reasonably incurred. I agree. Whata J was very clear (and firm) in his view that the issue and pursuit of the subpoena was both unnecessary and improper. Mr Thwaite submits that as matters transpired, Ms McGuigan was not counsel at trial, as was presented to Whata J. At the time the subpoena was issued, however, and at the time of Whata J’s judgment, Ms McGuigan was counsel for the plaintiffs.25 That

24 At [29].

25     This required Mr Skelton QC to step in on an urgent basis to argue the plaintiffs’ application to set aside the subpoena.

she later withdrew and was replaced by Ms Bruton QC is beside the point.26 Further, the only capacity in which Ms McGuigan had any connection with these proceedings was as counsel for the plaintiffs. She could not therefore give helpful or relevant evidence on the subpoena, being bound by privilege to the plaintiffs (unless waived by them).

[49]   Accordingly, even if I had jurisdiction to alter the basis upon which Whata J ordered costs on the application to set aside the subpoena, there is no basis to do so. Given the (high) threshold for awarding indemnity costs, and the contents of Whata J’s judgment, the first defendant’s costs associated with the subpoena, the application to set it aside and Whata J’s judgment cannot be said to have been reasonably or properly incurred. They are therefore to be excluded from Mr Mason’s costs to be reimbursed through the Trustee Indemnity. And as Mr Mason has not paid the indemnity costs awarded against him by Whata J (in the sum of $6,065), that sum is also to be deducted from the costs for which Mr Mason is to be indemnified.

Opposition to the plaintiffs’ application for payment of their costs from trust funds

[50]   As noted earlier in this judgment, in 2017, the plaintiffs sought orders enabling the payment of the parties’ legal costs from trust assets. Mr Mason opposed the application, which was determined (on the papers) by Venning J in February 2018. He did not make any costs orders on the application.

[51]   There is nothing on the face of Venning J’s judgment which indicates that, while Mr Mason was unsuccessful in opposing the application, it was improper or unreasonable for him to have done so. Had the Judge been of the view that the first defendant’s opposition was wholly without merit and/or improper, it is likely he would have observed as such in his judgment, and/or determined costs on the application (including increased and/or indemnity costs). Nor does it appear the plaintiffs sought increased or indemnity costs on the application.

26 Ms McGuigan was still counsel acting as of 3 October 2017, filing a memorandum with the Court that day in that capacity. I note that she withdrew on the basis that her fees were not paid; see minute of Woolford J dated 5 October 2017.

[52]   Accordingly, the opposition, while unsuccessful does not, on the materials available to the Court, appear to have been unreasonable or improper, at least in the sense required to exclude costs which otherwise fall within the scope of a trustee’s indemnity. I accordingly decline to order that the first defendant’s costs associated with the opposition fall outside the indemnity.

Orders of Woolford J

[53]   I have reached a similar conclusion in relation to the teleconferences before Woolford J and the related application for payment filed by the plaintiffs. Again, costs were not dealt with at the time of the application being disposed of. That makes it somewhat difficult for me, more than a year later, to assess whether the steps taken by Mr Mason at the time were improper or unreasonable.

[54]   Given the nature of Venning J’s order, it ought to have been a relatively straightforward exercise to obtain payment; the parties’ respective solicitors/counsel would present their (periodic) invoices for payment by the Mamari No. 2 Trust, and the trustees would authorise payment. Mr Mason’s steps in relation to arrangements to enable payment do not appear to have been particularly conducive to what ought to have been a straightforward exercise. And ultimately, orders were made by consent in terms of the application.  But equally,  the  application also unsuccessfully sought  Mr Mason’s removal as a signatory of the Trusts’ bank accounts. There also seems to have been some delay in the provision of invoices to Mr Mason (as co-trustee) in the context of the payment arrangements. Further, at least one teleconference before Woolford J was required to resolve one relatively minor matter on which the parties could not agree, which was resolved in Mr Mason’s favour.27 A second telephone conference before Woolford J was to consider whether Mr Mason could file a second amended counterclaim, which was also resolved in his favour.

[55]   In these circumstances, and again given Woolford J did not consider the first defendant’s actions warranted an increased or indemnity costs order at the time (and none appears to have been sought by the plaintiffs), I cannot conclude the steps taken

27     Namely whether payment of funds in accordance with Venning  J’s orders ought to be paid  to Mr Mason, for on-payment of legal fees, or paid direct to Mr Thwaite.

by Mr Mason were improper or unreasonable. I accordingly decline to exclude costs associated with the two teleconferences before Woolford J and the plaintiffs’ application for payment under the Trustee Indemnity.

Costs associated with two deeds dated 11 March 2018

[56]   The plaintiffs’ object to costs associated with the two deeds dated 11 March 2018 by which Mr Mason purported to remove the plaintiffs as trustees and appoint Mr Mark Mason in their place. They do so on the basis the costs were unreasonably or improperly incurred, and/or were not incurred by Mr Mason in his capacity as trustee in any event.

[57]   Mr Thwaite submits the deeds were prepared in the context of the litigation, as they flowed from the plaintiffs’  (purported)  request  to  be  removed  as  trustees. Mr Thwaite says the “legal services were an integral part of the litigation, in which the first defendant was sued as trustee”. Mr Thwaite further says that the April Judgment “makes clear that no argument considered in the [January Judgment] was outside the indemnity.”

[58]   There is a short answer to the dispute over this aspect of Mr Mason’s costs. Legal fees charged to Mr Mason in connection with the 11 March 2018 deeds are not costs incurred by him in his role as trustee. They are costs incurred in connection with his (then) role as appointer under the trust deeds. It is wrong to seek to characterise the April Judgment as sanctioning indemnification of costs not incurred by Mr Mason in his capacity as trustee. The very purpose of the April Judgment was to determine whether the first defendant could benefit from indemnification, either pursuant to the Trustee Indemnity or s 38(2) of the Act. By definition, both forms of indemnity apply only to costs incurred by Mr Mason in his role as trustee.

[59]   Mr Mason’s costs associated with the 11 March 2018 deeds (including their preparation, purported implementation and any steps in the proceedings directed to those deeds) are accordingly excluded from indemnification pursuant to the Trustee Indemnity.

[60]   Similarly, it appears Mr Thwaite was present at and has presumably billed  Mr Mason for attendances in relation to (purported) meetings of trustees held pursuant to the 11 March 2018 deeds. Legal costs associated with those trustee meetings are not costs relating to these proceedings. Accordingly, any legal costs associated with preparation for and  attendance  at  (purported)  trustee  meetings  pursuant  to  the  11 March 2018 deeds are also to be excluded.

Concern at costs not relating to these proceedings being included

[61]   The plaintiffs also raise a general (but largely unparticularised) concern that in the absence of details from Mr Thwaite, some of the attendances for which Mr Mason seeks indemnity are not in fact steps taken in these proceedings.

[62]   Given the materials before the Court, it is not possible to engage on this submission other than in a broad and high-level way. I note, however, that save for excluding those matters raised at [49], [59] and [60] above, the overall scope and quantum of the first defendant’s legal costs do not on their face appear to be excessive. Again, like the plaintiffs’ fees, they would appear to fall within the range of the types of fees to be incurred on long-running and hard-fought trust litigation such as this.

[63]   Further, Mr Thwaite has been alive to the need to exclude from his invoices (at least those to be subject to indemnification from trust assets) attendances which do not relate to these proceedings (such as attendances in relation to the Family Court proceedings; the appeal of the Family Court judgment to this Court; and the District Court proceedings against Mr Mason). Mr Mason notes in his affidavit sworn 9 May 2019 that the reason Mr Thwaite’s invoice of 2 February 2018 was superseded by the re-issued invoice of 27 June 2018 (for the same period but in a slightly lower amount), was to exclude time not relating to these proceedings (given the intervening judgment of Venning J). The Court proceeds on the basis that Mr Thwaite has taken care to ensure that his fee invoices of 27 June 2018 and 18 February 2019 do not include time attendances relating to the other litigation streams involving these parties, or other work for Mr Mason unconnected with these proceedings.

[64]   I therefore do not make any formal orders on this aspect of the plaintiffs’ challenge.

Next step

[65]   I do not consider it appropriate (or indeed possible) to engage in this judgment on the actual quantum of fees that will need to be excluded from Mr Thwaite’s fee notes to remove those costs discussed at [49], [59] and [60] above (the Excluded Costs). For example, the month-by-month analysis undertaken by counsel for the plaintiffs at [17] of their memorandum dated 15 May 2019 involves some “guesswork”, and the first defendant’s memorandum provides (some) explanation for the time incurred in various months.

[66]   Accordingly, some process will need to be put in place for any “line by line”, or at least reasonably reliable, determination of the quantum of Excluded Costs – in the event the parties cannot agree. I would encourage the parties to engage constructively on this quantum assessment however, and in a pragmatic, transparent and realistic way. It is in all parties’ interests to enable a line to be drawn under this litigation (at least at this level, given the impending appeals), including on the question of costs.

[67]   Finally, I have excluded some, but not all, of the costs challenged by the plaintiffs. In addition, it strikes the Court that the Excluded Costs are likely to be well less than the costs the plaintiffs sought to be excluded. I have already made an order that Mr Mason is entitled as a matter of principle to the benefit of the Trustee Indemnity in relation to his role as trustee in these proceedings. Because final resolution of the quantum of Excluded Costs may take some further time, I propose to make an order that an interim payment of $80,000 be made from the Mamari No.     2 Trust to Mr Mason to be applied against his outstanding legal costs in relation to these proceedings. The parties will be expected to take reasonable steps to enable final quantification of the Excluded Costs to be determined promptly.

Result

[68]I accordingly make the following orders:

(a)Mr Mason’s legal costs associated with those matters set out at [49],

[59] and [60] above are to be excluded from reimbursement from the Mamari No. 2 Trust’s assets pursuant to the Trustee Indemnity.

(b)The plaintiffs, as trustees of the Mamari No. 2 Trust, are to arrange for an interim payment of $80,000 to be made to Mr Mason from the Mamari No. 2 Trust, for the purpose of payment of Mr Mason’s outstanding legal costs in relation to these proceedings. This payment is to be made within five working days of the date of this judgment.

[69]   The parties are to engage on and seek to agree a process for the final quantification of the Excluded Costs, to enable a final residual payment (if any) to be made to Mr Mason without further delay. Leave is reserved to either party should further orders of the Court be required in this context.

Fitzgerald J

Addendum

I recalled my judgment delivered on 28 August 2019,28 as counsel for Mr Mason rightly noted that I have overlooked a memorandum filed by Mr Mason challenging certain aspects of the plaintiffs’ costs. As a result, those matters (which were properly before me) were omitted from my judgment. This is a recognised basis for recall of a final judgment.29

The judgment has accordingly  been  reissued  to  address  the  matters  raised  by  Mr Mason, which are now discussed at (new) paragraphs [22] to [35] of this reissued judgment.

28     See my minute dated 6 September 2019 in which I recalled this judgment.

29     See R Osborne and others, McGechan on Procedure (Online loose-leaf ed, Thomson Reuters) at [HCR11.9.01(5)].