Vincent Family Corporate Trust Limited
[2021] NZHC 3313
•6 December 2021
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV 2021-463-000017
[2021] NZHC 3313
UNDER Part 19 of the High Court Rules 2016 IN THE MATTER
of the ET and P VINCENT TRUSTS
BETWEEN
VINCENT FAMILY CORPORATE TRUST
LIMITED as trustee of the ET and P VINCENT TRUSTS
Applicants
Hearing: On the papers Appearances:
A F S Vane for the Applicant
S D Campbell & J R Halligan for Rosemary Jean Vincent
Judgment:
6 December 2021
JUDGMENT OF VAN BOHEMEN J
[costs ]
This judgment was delivered by me on 6 December 2021 at 1.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Le Pine & Co, Taupo
Wynn Williams, Christchurch
VINCENT FAMILY CORPORATE TRUST LIMITED as trustee of the ET and P VINCENT TRUSTS [2021]
NZHC 3313 [6 December 2021]
Introduction
[1] In my judgment dated 30 August 2021, I dismissed an application by the Vincent Family Corporate Trust Ltd (the Trustee) as sole trustee of the ET Vincent Trust and the P Vincent Trust (the Trusts) for Beddoe orders authorising the Trustee to defend a proceeding brought by Rosemary Jean Vincent (the Substantive Proceeding).1 I also declined to order that the Trustee’s costs in relation to declarations sought and a counterclaim should be indemnified from the Trusts’ funds.
[2] I reserved costs on the Beddoe order application and invited counsel for the Trustee and for Ms Vincent to file memoranda.
Relevant background
[3] In the Substantive Proceeding, Ms Vincent, who is a daughter of the settlors of the Trusts, seeks:
(a)In a first cause of action, declarations that the term “grandchildren” in the deeds establishing the Trusts includes grandchildren of the settlors by whāngai and, as a consequence, that two named children of Ms Vincent’s daughter are beneficiaries of the Trusts; and
(b)In a second cause of action, declarations as to the validity of the appointment of the Trustee and of actions taken by the Trustee as trustee.
[4] The declarations sought by the Trustee and the counterclaim by the Trustee are in relation to the second cause of action.
[5] In my judgment I found that the two causes of action are within categories of dispute identified in Re Buckton2 and in Alsop Wilkinson v Neary3 for which there can be no expectation that a trustee’s costs will be indemnified and for which costs usually
1 Vincent Family Corporate Trust Ltd (as trustee of the ET and P Vincent Trusts) [2021] NZHC 2250.
2 Re Buckton [1907] 2 Ch 406 (Ch).
3 Alsop Wilkinson v Neary [1996] 1 WLR 1220 (Ch), [1995] 1 All ER 431.
follow the event.4 I also found that it was not in the interests of the Trusts to grant Beddoe orders to defend the substantive proceeding because:5
(a)In the first cause of action, the orders would be contrary to the Trustee’s duty to remain neutral as between beneficiaries; and
(b)In the second cause of action, it was neither appropriate nor in the interests of the Trusts for the Trusts’ funds to be used to defend a challenge to the validity of the appointment of the Trustee and actions taken by the Trustee.
Questions for determination
[6] Having considered the submissions of Mr Vane, counsel for the Trustee, and of Mr Campbell and Mr Halligan, counsel for Ms Vincent, it is apparent that the questions to be decided are:
(a)Should the costs on the Beddoe order application be determined now or after the substantive proceedings?
(b)If costs are to be determined now, should the Court order that the costs of both the Trustee and Ms Vincent be met from funds of the Trusts?
[7] Both sets of submissions also raise the issue of costs incurred to date in the Substantive Proceeding.
Should costs on the Beddoe order application be determined now?
[8] Mr Vane submits that the costs on the Beddoe order application should be reserved and should be determined and follow the event at the substantive trial. Mr Vane says this would be consistent with my determination that both causes of action are within categories for which there can be no expectation that a trustee’s costs will be indemnified, and for which costs usually follow the event. Mr Campbell and
4 Vincent Family Corporate Trust Ltd (as trustee of the ET and P Vincent Trusts), above n 1, at [63]
– [71].
5 At [107] – [109].
Mr Halligan submit that Mr Vane’s position conflates costs on the Beddoe order application with costs on the substantive application and that this approach was rejected by the Court of Appeal in McCallum v McCallum.6
[9] I am satisfied that it is appropriate for me to determine costs now. How costs are met on the Beddoe order application should be determined in accordance with the outcome of that application. The outcome of the Beddoe order application will have limited bearing on the outcome of the Substantive Proceeding. That will be determined on the merits of the case before the trial Court. As the decisions in McCallum v McCallum and McLaughlin v McLaughlin demonstrate, it is usual to decide costs on a Beddoe order application when that application is decided.7
Should the costs of the parties be met from the funds of the Trusts?
[10] As the Court of Appeal said in McCallum v McCallum, in the absence of misconduct, parties to a Beddoe order application are entitled to be indemnified as to their fair and reasonable costs.8
[11] Mr Vane submits that there was no improper conduct, lack of honesty or unreasonableness on the part of the Trustee. Mr Vane refers to the observation at [90] of my judgment that his submissions on the Beddoe order application did not acknowledge the strength of the case for Ms Vincent in relation to the second cause of action but submits that the Trustee had been hampered by a lack of disclosure on Ms Vincent’s part.9
[12] Mr Vane does not take issue with the claim by Ms Vincent for her costs to be met from the funds of the Trusts.
6 McCallum v McCallum [2021] NZCA 237.
7 At [71]; McLaughlin v McLaughlin [2018] NZHC 3198, [2019] NZAR 286 at [131].
8 McCallum v McCallum, above n 6, at [71]; citing Pratley v Courteney [2018] NZCA 436, [2018] NZAR 1787 at [18]; Davies v Watkins [2012] EWCA Civ 1570; and Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) vol II [Lewin on Trusts] at [48–157].
9 Vincent Family Corporate Trust Ltd (as trustee of the ET and P Vincent Trusts), above n 1, at [90] in which I considered that Mr Vane’s summary of the case for the Applicant without acknowledging the strength of Ms Vincent’s case was insufficient disclosure of the strengths and weaknesses of the Applicant’s case.
[13] Mr Campbell and Mr Halligan do not allege misconduct on the part of the Trustee but question whether the Trustee’s costs were incurred fairly and reasonably having regard to the following:
(a)The Trustee did not take a neutral role in the proceeding;
(b)The Trustee declined my invitation at the conclusion of the hearing for the parties to confer to see if they might agree on compromise orders;
(c)I held that both causes of action were hostile and it is well established that hostile proceedings will not normally justify a Beddoe order;
(d)The Trustee did not comply with its duty of full and frank disclosure in relation to the second cause of action and, contrary to Mr Vane’s submission, was on notice of Ms Vincent’s arguments concerning the second cause of action; and
(e)The above steps were taken in circumstances where the validity of the Trustee’s appointment and thus its authority to act were in issue.
Discussion
[14] I accept there was no impropriety on the part of the Trustee. With regard to the second cause of action, the principal point I was making at [90] of my judgment was that I did not consider there to have been sufficient disclosure of the strengths and weakness of the Trustee’s case. The issue with regard to the strength of the case for Ms Vincent and with regard to the strengths and weakness of the Trustee’s case relates to the interpretation of ss 43(2)(c) and 45(3) of the Trustee Act 1956, as I discuss in my judgment.10 It has nothing to do with disclosure by Ms Vincent, whose statement of claim appropriately identified the relevant issues.
[15]No impropriety has been asserted in relation to the conduct of Ms Vincent.
10 See at [90] – [100].
[16] In considering whether the costs of the Trustee and Ms Vincent were reasonably incurred, I adopt the approach of Thomas J in Glasgow Harley Trustee Limited & Or v McLaughlin,11 in which Her Honour determined the costs of the Beddoe order application she decided in McLaughlin v Mclaughlin. In Glasgow Harley, Thomas J stated:
[10] The questions this Court must answer to decide whether the Trustees, Beneficiaries and Interested Parties should be indemnified by the Trust’s funds are to what extent:
(a)they acted reasonably by making or opposing the Beddoe order application; and
(b)their costs are reasonable
[17]I now consider the same questions with respect to the Trustee and Ms Vincent.
Did the Trustee act reasonably by making the Beddoe order application?
[18] While I held that the Trustee should have adopted a neutral position with respect to the first cause of action, I do not consider the Trustee acted unreasonably in seeking the Beddoe order in relation to that cause of action. Even though I did not accept the Trustee’s submission that that cause of action came within the first Buckton category, namely an application to the Court for guidance on the interpretation of the Trusts’ deeds, there was a reasonable basis for that submission. The resolution of the dispute between the beneficiaries turns on how the Trusts’ deeds are to be interpreted.
[19] In addition, there was no element of personal interest in the Trustee’s position in relation to the first cause of action. It is apparent from the correspondence that in defending Ms Vincent’s application, the Trustee has been acting to give effect to what it considers to be the Settlors’ wishes and to protect the interests of all persons that the Trustee considers to be beneficiaries. In addition, and as the Court of Appeal’s decision in McCallum v McCallum demonstrates, just because a Court disagrees that a Beddoe order is not appropriate does not remove a trustee’s entitlement to having its costs on the application met from trust funds.12
11 Glasgow Harley Trustee Limited & Or v McLaughlin [2019] NZHC 3385 at [10].
12 See McCallum v McCallum, above n 6, at [68], [69] and [71] in which the Court of Appeal granted costs notwithstanding that two of the four limited Beddoe orders made by the High Court were set aside.
[20] I am satisfied, therefore, that the Trustee acted reasonably in making the Beddoe order application with respect to the first cause of action.
[21] There is more difficulty with the second cause of action and the related declarations and counterclaim sought by the Trustee. While I accepted that there was no allegation of wrong-doing, impropriety, dishonestly, negligence or breach of duty in the second claim, I also observed that a finding that the Trustee was not validly appointed might give rise to questions of breach of duty and negligence,13 and that the prospects of the Trustee successfully defending that cause of action were weak.
[22] It was plain from the statement of claim that Ms Vincent was alleging that the Trustee had not been validly appointed. It should have been apparent from the outset that these allegations related to the Trustee’s position and the validity of the Trustee’s actions and that the costs of defending that cause of action could not properly be indemnified from the funds of the Trusts. Still less could the costs of the declarations and counterclaim be indemnified from the funds of the Trusts.
[23] For these reasons, I do not consider that the Trustee acted reasonably in seeking a Beddoe order with respect to the second cause of action, the declarations and counterclaim. As a consequence, I do not consider that the Trustee’s costs in relation to the second cause of action and associated declarations and counterclaim should be met from funds of the Trusts.
Did the Ms Vincent act reasonably by opposing the Beddoe order application?
[24] It is apparent that Ms Vincent acted reasonably in opposing the Beddoe order application. Her opposition was upheld by the Court. As Mr Campbell and Mr Halligan submit, Ms Vincent was entitled to be involved in the Beddoe order application as an interested party, as she is the applicant in the substantive proceedings. While Mr Campbell and Mr Halligan clearly enjoyed the opportunity to explore the ambit of the law on Beddoe orders, I accept that Ms Vincent did not adopt an excessive role in the proceedings and that her involvement was necessary as a contradictor to the case presented by the Trustee.
13 Vincent Family Corporate Trust Ltd (as trustee of the ET and P Vincent Trusts), above n 1, at [75].
Were the Trustee’s costs incurred reasonable?
[25] The Trustee does not seek an indemnity for its actual costs. Rather, it has sought scale costs calculated on a Category 2B basis as set out in schs 2 and 3 of the High Court Rules 2016. These costs come to $23,541.50 (excluding GST).
[26] The Trustee also seeks disbursements of $5,604.65. The disbursements are principally for Court fees totalling $5,200.00. Also claimed are travel costs of $154.65 and photocopying costs of $250. No invoices have been provided.
[27] Although Mr Campbell and Mr Halligan criticise the Trustee for not submitting actual costs that can be scrutinised, I consider it reasonable to infer that actual costs are likely to be greater than those claimed, given that scale costs are assumed not to provide for recovery of actual costs. However, the failure to provide invoices means the Court cannot determine how costs should be divided between the two causes of action. In these circumstances, and in the absence of any other information from the Trustee, I propose to allocate 60 per cent of the costs claimed to the first cause of action and 40 per cent to the second cause of action.
[28] Although no invoices were provided in support of the claim for disbursements, I accept that the amounts claimed for Court fees are standard and the amounts claimed for travel and photocopying are modest. I also accept that costs of that order would have been incurred even if the Trustee had limited its Beddoe order application to the first cause of action.
[29] For these reasons, I consider that the Trustee’s costs of $14,124.90 (being 60 per cent of $23,541.50) plus disbursements of $5,200.00 should be met from funds of the Trusts.
Were Ms Vincent’s costs incurred reasonable?
[30] Ms Vincent seeks $20,503.71 (GST inclusive), reflecting actual costs calculated on a solicitor client basis as incurred between 26 February 2021 and 30 July 2021. Mr Campbell and Mr Halligan submit that the costs incurred are reasonable and reflect Ms Vincent’s involvement in the proceedings. This is supported by an affidavit
dated 1 October 2021 from a solicitor of Wynn Williams affirming the costs and disbursements claimed by Ms Vincent. The affidavit attaches four invoices rendered by Wynn Williams for a total of $29,527.36. However, the solicitor advises that she has reviewed the time entries and has excluded entries that did not relate to work on the Beddoe order application.
[31] The claim made on behalf of Ms Vincent is exemplary. I am satisfied Ms Vincent’s costs are reasonable and should be paid from the funds of the Trusts.
Costs incurred to date in the substantive proceeding
[32] In his submissions, Mr Vane proposes that I should reserve the costs incurred to date in the Substantive Proceeding as well as the costs of the Beddoe order application. However, as Mr Campbell and Mr Halligan point out, the issue of party and party costs in the Substantive Proceeding is not before me and will be for the trial judge to determine. Accordingly, I make no order in relation to costs incurred in the Substantive Proceeding.
[33] Mr Campbell and Mr Halligan also point out that, as a result of my dismissal of the Trustee’s Beddoe order application, the Trustee costs in the Substantive Proceeding are not indemnified. They say that, if such costs have been met from the Trusts’ funds, they should be repaid.
[34] Mr Campbell and Mr Halligan are correct, and I record that I expect the Trustee to act accordingly. I do not consider it appropriate to make an order in relation to that issue, however, because there is no evidence as to whether the Trustee’s costs in the Substantive Proceeding have been met from funds of the Trust.
Result
[35] I order that the following costs in relation to the Beddoe order application be met from the funds of the Trusts:
(a)Of the costs claimed by the Trustee: $14,124.90 (GST exclusive) plus disbursements of $5,200.00;
(b)Of the costs claimed by Ms Vincent: $20,503.71 (GST inclusive).
G J van Bohemen J
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