Van Ryn v Van Ryn

[2023] NZHC 2414

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1279

[2023] NZHC 2414

IN THE ESTATE

Of ANNA MARIA VAN RIJN, also known as ANNA MARIA LAFLEUR

BETWEEN

FRANCIS EVERARDUS MARIE VAN RIJN, RENE TITUS MARIE VAN RYN, and SIMON JOHN OLDBURY JONES

Plaintiffs

AND

MARIETTE MARIA BERNADETTE VAN RYN

First Defendant

AND

ROSITA ANTOINETTE ALIDA MARIA MURRAY

Second Defendant

AND

SASKIA ROBINA MARIA VAN RYN

Third Defendant

AND

ANTONIA LIDWINA MARIA BYNEVELT

Fourth Defendant

Hearing:	On the papers at Auckland
Judgment:	31 August 2023

JUDGMENT (NO.3) OF POWELL J

[Costs]

This judgment was delivered by me on 31 August 2023 at 3.00 pm pursuant to

r 11.5 of the High Court Rules

…………………..

Registrar/Deputy Registrar

FRANCIS EVERARDUS MARIE VAN RIJN & ORS v MARIETTE MARIA BERNADETTE VAN RYN & ORS [2023] NZHC 2414 [31 August 2023]

[1]                 On 30 September 2022, I granted an application by the defendants to remove Jeremy Goodwin and Jeffrey Meltzer as executors of the estate of Anna Maria van Rijn (“Mrs van Rijn”) and appointed Catherine Atchison in their place (“the removal judgment”).1 The application was unopposed.2

[2]                 I subsequently declined to recall the removal judgment (“the recall judgment”).3

[3]                 The defendants, Mrs van Rijn’s four daughters, seek costs on both the removal and recall applications.

[4]                 With regard to the removal judgment, the defendants seek costs against the former executors personally, being:

(a)indemnity costs in the sum of $22,072.52; or

(b)increased costs in the sum of $11,830.50 (being a 50 per cent uplift on 2B scale costs); and

(c)disbursements of $200 being the court filing fee for the removal application.

[5]The defendants also ask the Court to make orders that the former executors:

(a)are to pay the defendants’ costs in relation to the removal application in their personal capacities; and

(b)are not entitled to be indemnified by the estate for these costs or their own costs and disbursements in relation to the removal application.

[6]In relation to the recall application, the defendants seek:

1      van Rijn v van Ryn [2022] NZHC 2498.

2 At [2].

3      van Rijn v van Ryn [2022] NZHC 2609.

(a)scale costs on a 2B basis of $1,434 against Sandra Grant and Simon Jones, at that time on the record as counsel for the plaintiffs.

[7]                 The former executors oppose any award of costs against them personally and do not seek that their own costs on the removal application be borne by the estate. No steps have been taken by counsel for the plaintiffs in relation to the costs on the recall judgment.

Costs on the removal judgment

[8]                 The defendants submit that the costs associated with the removal of the executors should fall upon the executors personally on the basis that improper or unreasonably incurred costs should not be borne by the estate. Counsel for the defendants submitted three reasons that justify payment by the executors in a personal capacity. First, costs associated with the removal application were not necessarily, reasonably, or properly incurred in the administration of the estate. The costs were incurred because of the former executors’ failure to properly exercise their duties. Secondly, that removal was “the only option” and that the executors had lost the confidence of the beneficiaries. Thirdly, that the beneficiaries should not be penalised and required to “foot the bill” for the removal application.

Personal liability of executors

[9]                 Generally, executors are entitled to reimbursement for costs properly incurred in the course of administering an estate. Section 26 of the Administration Act 1969 provides that the estate shall be “assets in the hands of [the] administrator for the payment of… debts properly incurred by [the] administrator”. The statement of Bowen LJ in the English decision of Re Beddoe remains instructive:4

A trustee can only be indemnified out of the pockets of his cestuis que trust against costs, charges, and expenses properly incurred for the benefit of the trust — a proposition in which the word “properly” means reasonably as well as honestly incurred.

4      Re Beddoe [1893] 1 Ch 547 at 562.

[10]             However, costs may be directed against an executor personally where the executor has acted unreasonably. Executors owe fiduciary obligations and must act within the scope of their duties and in good faith.

[11]             In Re O’Donoghue, Hammond J considered circumstances where a trustee should not be entitled to indemnity for costs in proceedings from the estate but should bear the costs personally. His Honour held trustees are only entitled to expenses “properly incurred” and observed:5

There is a respectable volume of case law authority around in the British Commonwealth as to what may be regarded as “not improperly incurred expenses”. Necessarily, given the principle, these cases all appear to be determinations on the factual position arising in a particular case. But the principle that expenses must be properly incurred necessarily requires a trustee, if called upon, to demonstrate that the expenses arose out of an act falling within the scope of his trusteeship; whether it was something that his or her obligations required the trustee to undertake; and whether the expense incurred was, in all the circumstances, “reasonable”.

[12]             Re O’Donoghue concerned an application brought by the sole trustee for directions on the distribution of the residue under a will. Hammond J found that the proceedings were unnecessary and that the trustee acted unreasonably.6 His Honour observed:

I can discern no proper justification, or even a reasonably arguable one, for [the trustee] having persisted in forcing Health Waikato up to a full defended hearing, and a delayed distribution of some years of the estate. It cannot be right that he should then seek to offload his costs of the proceeding onto the residuary beneficiary.

[13]             The trustee was not entitled to indemnity from the estate for his costs and disbursements. Further, the Court observed that although an order was justified, it did not order that the trustee meet the costs of the beneficiary, Health Waikato. Hammond J noted that during the period of delay caused by the trustee, the value of the assets in the residue had appreciated “sharply”,7 and that some of the responsibility for the proceedings also rested with advisors to the trustee.

5      Re O’Donoghue [1998] 1 NZLR 116 (HC) at 121.

6      At 122.

7      At 122.

[14]             The decision in Re O’Donoghue, and the “volume of case law authority” Hammond J referred to identify reasonableness as the ‘touchstone’ concept when the issue is whether a trustee or executor should bear costs personally.8 However, the question which emerges in the authorities is when does unreasonableness on the part of an executor or trustee justified them carrying costs personally?

[15]             Counsel for the former executors referred the Court to a passage of a recent High Court decision in Smith v Povey.9 The case concerned a successful application under s 21 of the Administration Act 1969 by two of the three executors to remove the other administrator under a will. The executor did not file a statement of defence. As regards the question of costs, Gordon J found it was appropriate for the estate to bear the costs of proceedings. Her Honour held:10

Costs are awarded as a consequence of the outcome of proceedings and also as a reflection of a party’s conduct in the proceeding as opposed to a party’s conduct before proceedings are commenced. Apart from filing an affidavit, Ms Povey has not participated in the proceedings. Mr Sami has not advanced any basis for the alternative order sought, that costs should come out of Ms Povey’s share.

(Emphasis added).

[16]             On the other hand, cases determining whether costs should be borne by a party personally look beyond conduct during the proceedings to conduct prior to the hearing. In The Cats’ Protection League v Deans, Associate Judge Osborne (as he then was) considered “[t]here was a measure of unreasonableness in the position adopted by the defendants which led to this proceedings”.11 However, in finding that the defendants were only entitled to a 50% indemnity, the Judge recognised that “this is not a case where a trustee for years resisted a course of action and defended it to a full hearing”.12

8      Jackson v Coll [2021] NZHC 1768 at [34]. See also The Cats’ Protection League v Deans (2010) 20 PRNZ 584 (HC).

9      Smith v Povey [2020] NZHC 805.

10 At [37].

11     The Cats’ Protection League v Deans, above n 8, at [38].

12 At [38].

Discussion

[17]             The former executors were appointed by consent following a mediation in November 2020. They replaced the plaintiffs, two of Mrs van Rijn’s sons, and Simon Jones.

[18]             As noted in the removal judgment, the former executors failed to keep the defendants informed of relevant information in the course of their duties as administrators of the estate, did not pass on clearly relevant correspondence to the defendants, and failed to develop a strategy for working through the real issues the estate faced.

[19]             However, while their removal as administrators was, as I noted in the removal judgment, the only option,13 this was because it was clear on the information available that the defendants (and indeed all of the beneficiaries) could have no confidence in the future performance of the former executors. However, the hearing was not by any means a forensic analysis of the former executors’ performance as executors of Mrs van Rijn’s estate. Moreover, it is clear that when the application was made the position taken by the former executors did not in any way add to the defendant’s costs and certainly does not justify departing from the general rule that costs awarded should be met by the estate not the executors personally.

[20]             Specifically, any suggestion that the former executors unnecessarily prolonged the application or otherwise behaved inappropriately cannot be sustained. The application was filed and dealt with rapidly after the defendants formally raised issues with performance of the former executors on 2 August 2022. After a memorandum in response was filed by the former executors on 5 August 2022, the defendants filed an application for removal and replacement of the former executors, together with a supporting affidavit on 18 August 2022.14 On 22 August 2022 the former executors confirmed that they would abide the decision of the court on the application but considered it appropriate to update the court before the application was heard and

13     van Rijn v van Ryn, above n 1, at [12].

14     A further affidavit of consent from the new proposed executor was filed on 23 August 2022.

reserved in the duty Judge list on 24 August 2022, only six days after the application had been filed.

[21]             As a result, even if I considered the former executives should be personally liable for the costs of the application there is no basis for saying that the former executors delayed the hearing of the applications or were otherwise responsible for any of the matters set out in r 14.6(3) or (4) of the High Court Rules 2016 such that would justify an award of increased or indemnity costs against them.

[22]             If it later transpires that the actions and/or performance of the former executors gives rise to a claim by the estate, that will be a matter for the new executor. It is not something that can be pre-emptively dealt with by way of a claim for costs in respect of the removal judgment.

[23]             Taking these various matters together I am satisfied that costs should not be awarded against the former executors as a result of the removal judgment. Instead I conclude that as the application was not only necessary but in the best interests of all of the beneficiaries of Mrs van Rijn’s estate, that the reasonable costs of the defendants should be met by the estate.

[24]             In order to avoid any subsequent dispute, I have considered the actual costs and disbursements claimed by the defendants and conclude that the sums claimed of

$22,072.52 in legal fees and $200 disbursements are reasonable.

[25]             I accept that the application ultimately had to be made with some urgency and it was entirely appropriate that Mr Miles KC was instructed to effectively expedite the hearing of the application.

Costs on the recall judgment

[26]             Having successfully opposed any recall of the removed judgment the defendants seek costs on the following basis:

As the successful party to the Recall Application, the defendants are entitled to their costs, and seek scale costs on a 2B basis… It is submitted that the costs

of the Recall Application should be paid by the “former lawyers” for the executors ie Ms Grant and Mr Jones

The Recall Application was made under cover of a memorandum dated 4 October 2022 filed by Ms Grant. The basis for “former lawyers” request for recall was to allow further time for all of the beneficiaries, including the plaintiffs, for whom Ms Grant is counsel, “the opportunity to comment before the final order to replace the executors is made”.

The “former lawyers” standing to make the Recall Application is unclear. In any event, the application was without merit and unsuccessful and neither the defendants, not the Estate, should be liable to cover the costs of the unsuccessful application.

Discussion

[27]             As the submissions of the defendants implicitly acknowledge there was in fact no formal application for recall and the memorandum filed by Mrs Grant simply sets out her understanding of what transpired at the hearing on 24 August 2022, including the result of discussions she had had with counsel for the former executors and concluded as follows:

Counsel for the former lawyers for the executors suggests that the judgment be recalled…

(Emphasis added).

[28]             This was understandably opposed by the defendants as if it were an application for recall, but I accept that there was some confusion arising as a result of the discussion that took place at the hearing on 24 August 2022 and I consider Ms Grant acted appropriately as counsel in bringing matters to my attention which she only suggested could be dealt with by way of recall.

[29]             Given these matters, and taking into account also that the hearing had been convened at very short notice, I consider that costs on the recall application should appropriately lie where they fall.

Result

[30]             The defendants are entitled to be paid from the estate of Mrs van Rijn, their reasonable costs in respect of the removal judgment being:

(a)   Costs in the sum of $22,072.52; and

(b)   Disbursements in the sum of $200.00.

[31]Costs in respect of the recall judgment are to lie where they fall.

Powell J