[1] A plaintiff challenges actions of the trustees of two family trusts. The plaintiff is a discretionary beneficiary of both trusts. The basis of challenge is alleged breach of the rules against self dealing and unfair dealing by trustees. Trial is to occur at the end of April.

[2] Now the plaintiff asks the Court to make an order, known as a “prospective costs order” (PCO), that should his claims fail at trial, he should not be liable to pay
costs to the defendants.1 He cites the “chilling spectre of bankruptcy” should he

1 These orders are also known as “pre-emptive costs orders” or “protective costs orders”. The letter “p” dominates the field for some reason. I shall follow the form adopted by Mowbray et al Lewin on Trusts (18th ed, Sweet & Maxwell, London, 2008) at [21–119].

WOODWARD v SMITH [2014] NZHC 407 [7 March 2014]

have to pay costs. Costs incurred in challenging actions, he says, which the trustees

should have sought the Court’s approval of in the first place.

[3] Should the Court grant a PCO here?

Background

[4] Litigation involving these parties has now entered its second decade. A

family tree will assist explaining the background:

Arthur Percy Lionel Jon Smith = Coral Elaine Smith

Elaine Coral Smith = Gordon Woodward Jon Philip Smith = Shelley-Lou Smith
(Jon Sr)

Ashley Woodward = Sharni Woodward Jon B D Smith Philip S Smith Elizabeth A Smith
(Jon Jr)

Petra Charlotte Ethan

[5] Arthur and Coral Smith emigrated from England in 1965. Arthur Smith had been at sea. Later he became a London policeman. Then he went into business, and prospered. The family owned property in London, and in New Zealand. Two children were born to the couple. The elder child, Elaine Woodward, is the plaintiff Ashley Woodward’s mother. She was at one stage a co-plaintiff in this proceeding. The younger child, Jon Smith Sr, is the principal defendant in the various proceedings, which currently number three.

[6] In November 1980 Arthur Smith’s mother settled the APLJ Smith Family Trust. The following summary draws on the judgment of Mallon J in an earlier unsuccessful summary judgment application brought by Mr Woodward:2

(a) The APLJ Smith Family Trust was established in November 1980.

(b) The settlor was Grace Elgram, Arthur Smith’s mother.

2 Woodward v Smith [2013] NZHC 1226.

(c) The initial trustees were Arthur and Coral Smith (both now deceased).

(d)The present trustees are Jon Smith Sr, his wife Shelley-Lou Smith, and their…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Woodward v Smith

Details

AGLC: Woodward v Smith [2014] NZHC 407
Case: [2014] NZHC 407
Decision Date: 7 March 2014

CaseChat Overview and Summary

Ashley Woodward challenges the actions of the trustees of two family trusts, alleging breaches of the rules against self-dealing and unfair dealing. The defendants are Jon Smith and the trustees of the APLJ Smith Family Trust. The plaintiff is a discretionary beneficiary of both trusts. The court must decide whether to grant a prospective costs order (PCO) that, if the plaintiff's claims fail at trial, he should not be liable to pay costs to the defendants. The court's reasoning is that the proceedings fall within Buckton category 3, which involves hostile litigation between beneficiaries and trustees or other beneficiaries. In such cases, prospective costs orders are rarely made. The court considered the strength of the plaintiff's case, the likely order as to costs at trial, the justice of the application, and any special circumstances. The court found that the plaintiff's claims have strong prospects of success, but it is not certain that the trial judge could only properly exercise their discretion by making costs orders in favor of the plaintiff. The court also found that there are no special circumstances that would justify a PCO in this case. Therefore, the application for a prospective costs order is dismissed. The costs in respect of this application are to be dealt with by the trial judge in due course.

Orders