JONES v ANGELA O’KEEFFE [2019] NZCA 222

JONES v ANGELA O'KEEFFE [2019] NZCA 222 [13 June 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA634/2018[2019] NZCA 222BETWEEN DAIL MICHAEL JOHN JONESAppellantAND ANGELA O'KEEFFERespondentHearing: 7 May 2019Court: Courtney, Venning and Lang JJCounsel: J W H Little and J K Grimmer for AppellantC E Wiseman for RespondentJudgment: 13 June 2019 at 2.30 pmJUDGMENT OF THE COURTA The order that Mr Jones is to pay the actual and reasonable costs incurredby Ms O'Keeffe in her application to remove him as trustee is set aside.B Ms O'Keeffe is to be reimbursed from the trust for the actual andreasonable costs incurred by her in relation to her application to removeMr Jones as trustee.C Mr Jones is to reimburse the trust for the costs incurred by Ms O'Keeffein relation to all steps in the proceedings after, but not including,the amended application for interlocutory orders dated 6 July 2018,including the costs of the hearing. Those costs are to be calculated on anactual and reasonable solicitor/client basis and are to includedisbursements.D The reasonableness of the above costs is to be assessed by a seniorbarrister in accordance with the direction of the Judge at [29] ofthe judgment under appeal.E Mr Jones is not entitled to be reimbursed from the trust for any costsassociated with his opposition to the application to have him removed astrustee.F Costs on the appeal are to lie where they fall. Neither party is to bereimbursed out of the estate for the costs associated with this appeal.____________________________________________________________________REASONS OF THE COURT(Given by Venning J)[1] Angela O'Keeffe and Dail Jones were appointed executors and trustees ofthe estate of Daniel O'Keeffe. Issues arose between Ms O'Keeffe and Mr Jones as tothe administration of the trust under the will. Ultimately Ms O'Keeffe applied tothe High Court to have Mr Jones replaced as trustee.[2] During the course of the proceedings both Ms O'Keeffe and Mr Jones agreedto their replacement as trustees by the Public Trust. The only remaining issue wascosts. After hearing from both parties Palmer J ordered Mr Jones to pay the costsMs O'Keeffe had incurred on an indemnity basis with the reasonableness of the coststo be assessed by a senior barrister.1[3] Mr Jones appeals that decision.Background[4] Daniel O'Keeffe and his wife Mary (known as Molly) had seven children.Ms O'Keeffe is one of their daughters. Daniel died on 27 March 2009 aged 85.His estate consisted of a large property at Waitakere, cash of $130,000 and personaleffects. He left a life interest in his estate to Molly on condition that she allow another1 O'Keeffe v Jones [2018] NZHC 2482, (2018) 4 NZTR 28-030 [High Court judgment] at [29].daughter, Maria to live in a separate dwelling Maria built on the Waitakere property.He appointed Ms O'Keeffe and Mr Jones, his solicitor, as his executors and trustees.Upon Molly's death Maria was to receive the value of her dwelling as a specificbequest. The residue was then to be divided between five of the seven children,including Ms O'Keeffe.[5] One of the children, Patrick, who was entitled to a share of the residue ofDaniel's estate, died intestate on 20 January 2012. As he left neither partner norchildren his estate went to his mother, Molly.[6] Molly died on 17 July 2017. Under her will she left her estate to be dividedequally between all her children. The main asset of her estate was the interest inDaniel's estate she received following Patrick's death.[7] The combined effect of Daniel's and Molly's wills was that, after the specificbequest to Maria, four children (Maria, Angela, Dennis and Daniel Jnr) were each toreceive 23.33 per cent of the net assets remaining. The other two surviving children(Catherine and Margaret) were each to receive 3.33 per cent.[8] From an early stage and shortly after Daniel's death issues arose betweenMs O'Keeffe and Mr Jones regarding the approach to be taken to the administrationof Daniel's estate. The issues came to a head in 2017.[9] On 13 October 2017 Ms O'Keeffe wrote to Mr Jones, copying her letter to allthe beneficiaries. She said there was a deadlock between them, trust debts were notbeing met, and Mr Jones was in breach of trust by refusing to make payments and bytaking unilateral actions without her agreement. On 20 October 2017, Mr Jonesreplied with a letter to all beneficiaries in which he rejected the accusations.He blamed Ms O'Keeffe for refusing to carry out the ordinary administration ofan estate.[10] The family were not united in their support of Ms O'Keeffe's position.While Maria, Margaret and Daniel Jnr supported Ms O'Keeffe, Dennis and Catherinesupported Mr Jones and considered that Ms O'Keeffe should be the one to step downrather than him.Procedural background[11] As the issues remained unresolved, on 16 March 2018 Ms O'Keeffe filedproceedings. She sought a preliminary order permitting the application to be broughtas an originating application. She then sought a substantive order removing Mr Jonesas trustee and either appointing Ivan Vodanovich or another solicitor of the Court'schoosing in his place or, in the alternative, replacing both Mr Jones and Ms O'Keeffewith the Public Trust.[12] Ms O'Keeffe also sought orders requiring Mr Jones to pay all or part of thecosts of the application on a solicitor/client basis and for any of her costs not paid byMr Jones to be met by the trust.[13] The application was supported by an affidavit and memorandum of counsel.In the memorandum Ms Wiseman confirmed that Ms O'Keeffe sought to removeMr Jones as a trustee and replace him with an alternative solicitor trustee and that costswere sought against Mr Jones personally.[14] Mr Jones responded by a memorandum of 6 April 2018. He said he supportedthe appointment of the Public Trustee as the sole trustee in replacement for bothMs O'Keeffe and himself. He denied misconducting himself in the administration ofthe trust and set out a number of grounds upon which he alleged Ms O'Keeffe hadmisconducted herself as trustee. Mr Jones also filed an affidavit in reply toMs O'Keeffe's affidavit.[15] In an updating memorandum of 11 April 2019 Ms Wiseman, for Ms O'Keeffe,repeated her position that she believed it was in the trust's best interests for her tocontinue as trustee together with a new trustee, noting that the Public Trust was a lastresort alternative.[16] The matter came before the High Court in a duty judge list on 16 April 2018.In the course of that conference Muir J recorded:[3] I have commended to Ms Wiseman careful consideration of Mr Jones'position given that retirement of both trustees and appointment ofthe Public Trust seems to me (provisionally) to be an efficient andcost effective means of dealing with the various difficulties that have thus fararisen in the administration of the Trust. Ms Wiseman will discuss that issuefurther with her client. [17] The Judge then went on to make a number of other orders to advancethe proceeding, including directions as to service. He granted leave forthe proceedings to be commenced by way of originating application (Mr Jones notopposing) and made orders timetabling the substantive application towards a hearingif necessary. Orders were also made by consent in relation to a number of practicalissues that Ms O'Keeffe sought to have addressed relating to the operation of the bankaccount and payments. The Judge also recorded Mr Jones was prepared to activelyco-operate to ensure the payment of accounts.[18] In accordance with the timetable set by the Judge, Mr Jones filed and served aformal notice of opposition on 23 April 2018 confirming his support forthe appointment of Public Trust in substitution for both himself and Ms O'Keeffe.2[19] The Court allocated a fixture for 10 August 2018.[20] On 2 July 2018 Ms Wiseman advised the Court that it appeared the parties mayhave reached substantial agreement. An extension of the timetable was sought.[21] On 6 July 2018 Ms O'Keeffe filed an amended interlocutory application fordirections. In that she sought orders removing her and Mr Jones as trustees andappointing Public Trust. In terms of costs she sought orders that:5. Public Trust is directed to pay the following from Trust funds when fundsbecome available:(i) Reimbursement to Angela O'Keeffe of the solicitor/client costsincurred by her as a trustee in bringing these proceedings,such costs to be first vetted by the Court or Public Trust forreasonableness;2 The respondent takes issue with the notice of opposition not being served on her counsel atthe same time. Nothing turns on that as the notice was served on the respondent's solicitor'saddress for service as required by the High Court Rules 2016, r 6.1(1)(b).In the alternative to the above orders Ms O'Keeffe sought an amended timetable to thefixture.[22] The amended application was accompanied by a further memorandum ofcounsel and a further affidavit in reply to Mr Jones' affidavit.[23] Mr Jones filed a memorandum dated 10 July 2018 confirming that he hadalways consented to the appointment of Public Trust as sole trustee but submittingthat, as Ms O'Keeffe was apparently discontinuing her claim which could have beenwithdrawn when the matter was called before Muir J, she should not be eligible torecover the costs she had incurred either from the estate or any other party.[24] On 11 July 2018 counsel for Ms O'Keeffe filed a further memorandum seekingthe Court's directions. She proposed consent orders leaving the issue of costs to bedealt with on a contested basis. Counsel noted that Ms O'Keeffe may seek an orderMr Jones pay the costs "personally, whether directly or by way of indemnity tothe estate".[25] The matter came before Wylie J on 12 July 2018. The Judge issued a minutein which he recorded matters had been largely resolved. He noted that Mr Jonesaccepted that all the orders sought in the amended application could be made withthe exception of Ms O'Keeffe's application to be reimbursed her solicitor/client costs.The Judge directed Ms O'Keeffe to file a draft consent order and made directions fora hearing in relation to Ms O'Keeffe's application for solicitor/client costs, notingthe application was to be heard at 10.00 am on 10 August 2018 (with an estimate ofone hour). The Judge noted the hearing would be of a narrow compass. No orderswere made for the exchange of submissions in advance.[26] Mr Jones then filed an opposition on 18 July 2018 which set out the groundsupon which he opposed Ms O'Keeffe's application to recover her solicitor/client costsfrom the trust on an indemnity or other basis.[27] On the same day the Court also approved the consent orders presented to it.[28] Although Ms O'Keefe and Mr Jones were not required to, they did exchangesubmissions. Ms O'Keeffe submitted Mr Jones should pay the costs personally whileMr Jones argued only the costs relating to a consent application for the appointmentof the Public Trust should come out of the estate and Ms O'Keeffe should bear the restof the costs.Palmer J's decision[29] Palmer J considered Mr Jones had taken an antagonistic approach toMs O'Keeffe.3 He accepted it was appropriate for Ms O'Keeffe to have sought theCourt's directions.4 There was no reason why her costs in bringing the proceedingshould not be payable from the estate.5[30] The Judge referred to the principles derived from the High Court Rules 2016including that a losing party pays a winning party a contribution for costs and alsoreferred to the provisions relating to indemnity costs. The Judge also noted that s 71of the Trustee Act 1956 provided the Court with a broad discretion in relation to costsreferring to previous decisions of his and the decision of Borell v Tangitu.6[31] The Judge considered Mr Jones should personally pay the actual andreasonable costs Ms O'Keeffe had incurred.7 He summarised his reasons for comingto the view as:[27] Given the questionable nature of Mr Jones' administration ofthe estate as a trustee, the deadlock between trustees warrantingthe application, and his conduct prolonging the proceeding unnecessarily,I consider he should pay actual and reasonable indemnity costs toMs O'Keeffe personally. The beneficiaries of the trust should not have to bearthese unnecessary costs.[32] The Judge then noted the overall quantum of the costs sought seemed high.8He made orders requiring Ms O'Keeffe to provide invoices showing the costs incurred3 High Court judgment, above n 1, at [24].4 At [23].5 At [23].6 At [19]–[20]; citing Burnside v Burnside (No 2) [2017] NZHC 1678 at [9]; Aitkenhead vKooperberg [2017] NZHC 3071 at [15]; and Borell v Tangitu (1990) 1 NZTR 0-001 (HC) at 27.7 At [27].8 At [28].in removing Mr Jones as trustee to a senior barrister for review of theirreasonableness.9The appeal[33] Mr Jones says the Judge was plainly wrong to require him to payMs O'Keeffe's costs on an indemnity basis. He seeks an order setting asidethe judgment and awarding him costs on the appeal.Issues[34] The principal issue is whether Mr Jones should be required to personally paythe costs (or part thereof) incurred by Ms O'Keeffe in relation to the application toremove him as trustee, and, if so, whether it should be on an indemnity basis.[35] There is a related issue as to whether the costs order is made under s 71 ofthe Trustee Act or Part 14 of the High Court Rules (and whether there is a differencebetween the two).Mr Jones' case[36] Mr Little submitted the Judge fell into error in a number of ways. First, heconflated two questions, namely:(a) whether Mr Jones should be required to pay Ms O'Keeffe's costspersonally as opposed to them being met from the estate; and(b) if so, whether he should be required to pay those costs on an indemnitybasis as opposed to scale costs with any remaining costs to be met fromthe estate.[37] Second, the Judge was wrong to make and rely on findings of questionableconduct in relation to Mr Jones' administration of the trust prior to the proceeding forthe purposes of justifying his decision to award indemnity costs. If a trustee has acted9 At [29].badly prior to a proceeding and been in breach of their duty as trustee, thenthe appropriate course is to bring an action for breach of trust. In such a casethe allegations can be properly tested and any loss occasioned properly quantified.Because Mr Jones consented to the Public Trust's appointment and Ms O'Keeffeagreed to that during the course of the proceeding there was never a defended hearingin which Mr Jones' conduct could be properly examined.[38] Related to that, Mr Little submitted it was wrong for the Judge to haveapparently drawn an adverse inference from the fact Mr Jones did not offer detailedevidence in rebuttal of Ms O'Keeffe's allegations. Mr Jones never sought to leadevidence in response because the allegations became irrelevant to the proceeding.From the earliest point Mr Jones agreed that he should go. His focus was on whetherMs O'Keeffe should remain as trustee and whether her costs should be paid bythe estate.[39] Next, Mr Little submitted the Judge was wrong to find that Mr Jones prolongedthe proceedings unnecessarily. Mr Jones had always consented to the Public Trust'sappointment. On the other hand, Ms O'Keeffe only accepted the Public Trust optionas a last resort. While accepting that Mr Jones' opposition to the cost orders soughtby Ms O'Keeffe contributed to the length of the proceeding, Mr Little submitted thatMr Jones' opposition to the payment of the costs was reasonable in the circumstances.[40] In summary, Mr Little submitted no order should have been made againstMr Jones; Mr Jones' conduct prior to the proceeding was not relevant to the issue ofcosts and Ms O'Keeffe was not successful in remaining a trustee as she had initiallysought.[41] Alternatively, if a personal costs order against Mr Jones was appropriate forany part of the proceedings, Mr Little submitted costs should be awarded on ascale basis with Ms O'Keeffe to look to the trust for the remainder of her reasonableand actual costs. Mr Jones' conduct fell well short of the threshold required foran indemnity costs award.Respondent's submissions[42] Ms Wiseman submitted that Ms O'Keeffe had incurred legal costs in hercapacity as trustee in bringing the proceedings to remove Mr Jones. She was entitledto be indemnified for those costs.[43] Ms Wiseman then submitted that it was Mr Jones' conduct beforethe proceedings which caused the costs to be incurred. Mr Jones' conduct had madethe proceedings necessary. In her submission the heart of the problem was Mr Jones'insistence that trust funds be transferred to his firm's trust account. She submitted thatthe evidence as to what she characterised as Mr Jones' misconduct was not contestedby Mr Jones.[44] Ms Wiseman submitted the Court should not accept the submission forMr Jones that he would have agreed to retire voluntarily had Ms O'Keeffe proposedthe Public Trust as an option prior to proceedings being brought. She noted that,as Palmer J had put it, Mr Jones "practically dared" Ms O'Keeffe to bringthe proceedings.10[45] Next Ms Wiseman submitted that Mr Jones' conduct during the proceedingsincreased the costs. She characterised his agreement to resign and to the appointmentof the Public Trust as conditional. She noted that Mr Jones took the positionMs O'Keeffe should resign as well and should not receive any reimbursement for hercosts.[46] Ms Wiseman submitted that whether Mr Jones should be required tocompensate the trust for costs caused by his unreasonable conduct was a question tobe determined under trustee law rather than the High Court Rules. She referred to s 71of the Trustee Act, and also to Butterfield v Public Trust.11 In that decision this Courthad noted the right to indemnity from trust assets for administration of the trust is notthe same as an award of indemnity costs in litigation.12 She submitted that10 At [24].11 Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439.12 At [21].the application of relevant trustee law principles supported the order of costs againstMr Jones.[47] In the alternative Ms Wiseman submitted that if the High Court Rules applied,Mr Jones met the threshold for indemnity costs under the rules. Mr Jones was on clearnotice from counsel's reply memorandum that Ms O'Keeffe would be seeking an orderthat he pay the costs personally.[48] Ms Wiseman submitted the appeal should be dismissed together with costs.Approach to the appeal[49] The appeal is against a decision made in the exercise of a discretion. Mr Joneshas to show an error of law or principle, or that the Judge took account of irrelevantconsiderations, failed to take account of a relevant consideration or was plainlywrong.13The scope of the Part 19 proceedings[50] We consider the Judge fell into error in finding that Mr Jones' administrationof the estate was of a "questionable" nature,14 and relying on that finding and hispre-proceeding conduct to impose indemnity costs against him.[51] The context of the application and the ambit of the hearing before Palmer J areimportant. This was an originating application under pt 19 of the High Court Rulesrather than a proceeding under pt 18. Applications under the Trustee Act are generallyrequired to be brought under pt 18 of the High Court Rules, and to be commenced byway of statement of claim.15[52] The originating application procedure under pt 19 is normally limited to caseswhere particularised pleadings and interlocutory steps such as discovery are not13 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].14 High Court judgment, above n 3, at [27].15 High Court Rules 2016, rr 18.1(b)(xiii) and 18.4(1)(a). See also the discussion in Public Trust vKain [2018] NZHC 1547, (2018) 4 NZTR 28-012 at [12]–[21].necessary for the proper determination of issues. It is not appropriate where factualissues are in dispute.[53] While Muir J granted leave for the proceeding to be commenced by way oforiginating application under pt 19 of the High Court Rules, that was in circumstanceswhere Mr Jones did not oppose that procedure and, importantly, Mr Jones had alsoconfirmed he would stand down in favour of Public Trust. The only substantive issueremaining before the Court was whether one or both trustees should be replaced.[54] Where the issue is limited to whether a trustee should resign or be replacedthe approach that should be taken was explained in Letterstedt v Broers byLord Blackburn as follows:16[I]f it appears clear that the continuance of the trustee would be detrimental tothe execution of the trusts, even if for no other reason than that humaninfirmity would prevent those beneficially interested, or those who act forthem, from working in harmony with the trustee, and if there is no reason tothe contrary from the intentions of the framer of the trust to give this trustee abenefit or otherwise, the trustee is always advised by his own counsel toresign, and does so. If, without any reasonable ground, he refused to do so,it seems to their Lordships that the Court might think it proper to remove him;[55] While there will need to be some consideration of the background tothe relationship between the trustees and with the beneficiaries, as the Full Court ofthis Court said in Hunter v Hunter:17But, in any event, it is of no value to enter upon a meticulous examination ofthe evidence without first ascertaining the principle upon which the Court actsin a proceeding for the removal of trustees. And when that principle isascertained, the case is essentially one, to be considered inmacroscopic and not microscopic fashion.[56] And later, after referring to Letterstedt v Broers:18It is said that the jurisdiction is merely ancillary to the principal duty ofthe Court to see that the trusts are properly executed, and that, therefore,though it should appear that the charges of misconduct are either not madeout, or are greatly exaggerated, so that the trustees are justified in resisting16 Letterstedt v Browers (1884) 9 App Cas 371 at 386.17 Hunter v Hunter [1938] NZLR 520 (CA) at 528 (citation omitted); citing Great Western RailwayCo v Owners of SS Mostyn [1928] AC 57 (HL) at 62.18 At 529.them, and the Court might consider that in awarding costs, yet if satisfied thatthe continuance of the trustees would prevent the trusts being properlyexecuted, the trustees may be removed.[57] The issue of removal was resolved before the hearing in front of Palmer J.It was unnecessary for the Judge to make findings that Mr Jones had acted in aquestionable way and thus effectively in breach of trust to determine the only issuebefore him which was the issue of costs. The Judge fell into error in making such afinding, particularly without Mr Jones having the opportunity to respond to properpleadings, to obtain and provide discovery, or to cross-examine Ms O'Keeffe.[58] To support his conclusion that Mr Jones should pay the costs personallythe Judge referred to his previous decision of Burnside v Burnside (No 2).19 However,in Burnside there had been a three-day hearing during which the parties had litigatedabout a number of aspects of the administration of the estate.20 The case can bedistinguished from the confined nature of the application and hearing in the presentcase.[59] The Judge also referred to the decision of Borell v Tangitu.21 In that decisionFisher J observed that, in appropriate cases, orders can be made that costs be awardedagainst trustees personally where it appears that their own deficiencies have beenthe cause of loss to the estate and considered that must extend also to the costs ofbeneficiaries who, due to the dilatoriness or lack of cooperation of the original trustees,are put to the trouble of having to bring proceedings.22 In general terms that must becorrect. But each case must of course turn on its own facts. In Borell itself there wasno suggestion the costs awarded were other than the costs of the proceedings.Further, the reference to plaintiffs in the decision suggests that the proceedings werebrought under pt 18 of the rules rather than pt 19.[60] None of this is to suggest that in an appropriate case costs will not be awardedagainst a trustee who is removed. But neither the form of the proceedings nor19 Burnside v Burnside (No 2), above n 6.20 Burnside v Burnside [2017] NZHC 595.21 Borell v Tangitu, above n 6.22 At 26.the matter at issue in the hearing before the Judge supported any detailed inquiry intoMr Jones' pre-proceeding conduct in this case.The High Court Rules[61] When considering costs under the High Court Rules the focus is on how partiesacted during the litigation, not before it. In Paper Reclaim Ltd v AotearoaInternational Ltd this Court set aside a costs judgment where, in awarding costs,the Judge had relied on conduct prior to the issue of the proceedings:23[160] Our third reason for setting aside the costs judgment is that the judgewas wrong to take into account Paper Reclaim's conduct generally from 1999through to February 2001. If that conduct was wrongful, then the remedy isdamages. Aotearoa did not plead any breach of contract relating to that period,save for sales to Carter Holt, which we have found not to have been in breachof the joint venture agreement. So the reasoning of the Judge on this topicwas doubly unfair to Paper Reclaim: His Honour not only took into accountconduct which had never been pleaded as wrongful, but also took it intoaccount with respect to costs, to which it could never have been relevant.[62] The Supreme Court upheld that approach.24 That reinforces our conclusionthat if Ms O'Keeffe wished to pursue allegations of breach of trust or mishandling oftrust finances against Mr Jones, the proper procedure would have been to bring a claimfor breach of trust. The pre-proceedings' conduct of Mr Jones was not relevant tocosts in this case.[63] In Kain v Hutton this Court considered the issue of costs following anapplication to remove trustees for breach.25 It rejected the application insofar as itfocused on past conduct.26 As the Court observed, the decision in regard to costs wasmore related to the parties' conduct in the litigation and their success in the substantiveappeal rather than whether the trustees should have been removed for breach.27Again, in that case the first instance hearing which dealt with the removal issueinvolved a fully contested hearing involving extensive cross-examination.23 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).24 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169 at [40]–[41].25 Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349.26 At [265].27 At [265].[64] Once Mr Jones accepted that it was appropriate he and Ms O'Keeffe should beremoved as trustees and replaced by Public Trust, the only issues left were whetherMs O'Keeffe would agree to be replaced by the Public Trust and costs. As to costs,the only issue was the conduct of the parties in relation to the application. Mr Jones'pre-proceeding conduct was not relevant.The Trustee Act[65] Do the provisions of the Trustee Act affect that position?[66] There are two provisions of the Trustee Act relevant to the issue of costs in thiscase. Section 38(2) confirms that a trustee is entitled to be indemnified or reimbursedfor all expenses reasonably incurred in the administration of the trusts. It is one ofthe fundamental rights of an honest trustee that the costs and expenses properlyincurred in the administration of the trust are payable out of the assets of the trust.28[67] The trustee's entitlement to indemnity is, in the first instance against the trustand its assets.29 Taking unnecessary proceedings or unnecessary procedural steps maymitigate or eliminate the right to be indemnified.30 Excessive or unreasonable costsalso lie beyond the scope of indemnity.[68] As noted, Ms Wiseman referred to the case of Butterfield, to make the pointthat the right to indemnity under the Trustee Act is not the same as an award ofindemnity costs in litigation. That is correct, a trustee's right to indemnification fromthe trust assets is quite different to the discretion residing in the Court to order partyand party costs under the High Court Rules including, in appropriate cases, on anindemnity basis. But with respect, that point does not assist with determining whetherthe provisions of the Trustee Act require a different approach to costs in the presentcase.28 Butterfield v Public Trust, above n 11, at [20].29 Re Grimthorpe [1958] Ch 615 at 623; and Butterfield v Public Trust, above n 11, at [21].30 New Zealand Māori Council v Foulkes [2015] NZHC 489, (2015) 4 NZTR 25-003 at [31]. Seealso Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (19th ed, Sweet& Maxwell, 2014) at [27–113]; Patterson v Wooler (1876) 2 Ch D 586; Re Chapman (1895) 72LT 66 (CA) at 68; and Re O'Donoghue [1998] 1 NZLR 116 (HC) at 121–122.[69] While s 38 provides for reimbursement of all expenses reasonably incurred inor about execution of the trusts or powers, s 71 provides the Court may make ordersrelating to the costs and expenses of and incidental to any application for an orderunder the Act. The Court may order the costs be raised and paid out of the trustproperty or be borne and paid in such manner and by such persons as to the Court mayseem just.[70] Section 71 is broader in scope in relation to costs than the High Court Rules.The rules provide generally for costs inter partes (although costs can in an exceptionalcase be ordered against a non-party),31 whereas s 71 provides both for the source ofthe payment and also expressly confirms the costs and expenses may be paid by anyperson the Court deems it just to fix with costs.[71] Both s 71 and r 14.1 refer to costs of and/or incidental to an application orproceeding.32 In Braeburn Dairies Ltd v McGregor & White Electrical Ltd the phrase"incidental to a proceeding" under the High Court Rules was considered by French Jto require a proceeding to be extant before costs could be incidental to it.33[72] The reference to "costs and expenses of and incidental to any application"under s 71 may enable the Court to award or provide for costs incurred prior to butnecessarily incidental to the issue of the application. In Newall v North-Lewisthe High Court of England and Wales considered the meaning of "costs of andincidental to all proceedings" under s 51(1) of the United Kingdom Supreme CourtAct 1981 and accepted that such costs could extend to work required to investigate theaffairs of the trust prior to making an application to remove a trustee.34 Briggs LJreferred to Re Gibson's Settlement Trust and the principle enunciated therein thatthe Court should investigate whether the product of the relevant expenditureconstituted "materials ultimately proving of use and service in the action".3531 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145at [7] and [25]. See also Andrew Beck and others McGechan on Procedure (online ed, ThomsonReuters) at [HRPt14.09(1)(a)]32 Trustee Act 1956, s 71: "costs and expenses of and incidental to any application"; and High CourtRules, r 14.1 "costs of a proceeding; or incidental to a proceeding".33 Braeburn Dairies Ltd v McGregor & White Electrical Ltd HC Dunedin CIV-2009-412-668,16 December 2011 at [14].34 Newall v North-Lewis [2008] EWHC 910 (Ch).35 At [45]; citing Re Gibson's Settlement Trust [1981] Ch 179 at 186.[73] In Butterfield v Public Trust this Court also acknowledged that the jurisdictionto award costs may be broader under s 71 of the Trustee Act.36 When consideringwhether the Judge was right to reject the former trustee's application for costs thisCourt said:[19] Reliance might instead have been placed on s 71 of the Trustee Act.It is not confined to an award of litigation party and party costs, but extendsto an indemnity for expenses of and incidental to an application. Permittedapplicants are not confined to express trustees. However the provision wasnot relied on here. Perhaps that was because the appellants had in mindseeking costs other than in relation to the three applications. If so, that was nolonger their position before us.[74] Even if s 71 may support a broader approach in some cases, in the present casethere is little practical difference in the outcome between the application ofthe High Court Rules or the Trustee Act. Clearly, some investigation and backgroundwork was required before the application to remove Mr Jones as trustee could be filed.The High Court Rules provide for this by making an allowance for time allocations inrelation to the commencement of proceedings.37 That allowance necessarily includestime for the applicant to take advice and for the preparation of the application. That isall that was required in the present case because Ms O'Keeffe, as the other trustee, wasfully aware of the background facts. There was no need for the type of detailedinvestigation discussed in Newall's case. So far as s 71 of the Trustee Act provides forthe recovery of costs of and incidental to the application it does not add anything inthis particular case.[75] Further, where the issue is whether indemnity costs should be awarded againsta trustee because of their actions during the course of a proceeding, it is unlikely acourt would order indemnity costs under s 71 unless the trustee had acted in a waywhich would also support an award of indemnity costs under r 14.6(4).The costs of the proceedings[76] Against that background, we approach the issue of costs afresh.36 Butterfield v Public Trust, above n 11.37 Schedule 3 to the High Court Rules provides for a time allocation for commencement ofproceedings.[77] Ms O'Keeffe's application to replace Mr Jones, or for both Mr Jones and herto be replaced, was a proper application for her to have brought. The relationshipbetween the two had broken down. It was affecting the administration of the trust.The beneficiaries were divided as to which one of them should retire. Unfortunately,the application was complicated by the costs order she sought at the outset, namelythat Mr Jones should personally pay the costs of the application.[78] Mr Jones acted reasonably in response to the application by immediatelyagreeing to his removal and replacement by Public Trust on the basis Ms O'Keefferesigned as well. It was also reasonable for Mr Jones to oppose the aspect ofthe application that sought an order he pay the costs personally. At that stage ofthe proceedings an order that Ms O'Keeffe's costs be met out of the estate would havebeen appropriate. An order that Mr Jones be required to pay the costs could not havebeen justified, particularly given the division between the beneficiaries and the supportby some of them for Mr Jones.[79] Unfortunately, Ms O'Keeffe did not accept that. In counsel's memorandum of11 April 2018, she confirmed her preference to remain as trustee and persisted withthe allegation that Mr Jones had misdirected himself in the administration of the trust.Her counsel said that misconduct had caused loss to the trust. For the reasons givenabove, the originating application before the Court was not the appropriate vehicle forsuch an allegation.[80] Further, despite Muir J's indication, Ms O'Keeffe still, for some timethereafter, continued to oppose the suggestion she be replaced as trustee.[81] Ultimately however, Ms O'Keeffe agreed that she and Mr Jones should bereplaced by Public Trust and brought the amended application on 6 July 2018 seekingsuch an order. The amended application accepted both trustees would resign in favourof the Public Trust. Ms O'Keeffe sought reimbursement of her costs in bringingthe proceedings with the costs first to be "vetted by the Court or Public Trust forreasonableness".[82] Mr Jones' opposition to that amended application was itself unreasonable.He opposed the order in its entirety and on a number of irrelevant and argumentativegrounds. That opposition meant the costs hearing before Palmer J was required.[83] Mr Jones should bear the costs of the proceedings after (but not including)the amended application dated 6 July 2018. Those costs are to be on an indemnitybasis (actual and reasonable) as a consequence of Mr Jones' unreasonable oppositionto the proposal in the amended application and his unreasonable refusal to accept(until belatedly in his submissions for the hearing) that Ms O'Keeffe should have anycosts at all from the trust.Result[84] The order that Mr Jones is to pay the actual and reasonable costs incurred byMs O'Keeffe in her application to remove him as trustee is set aside.[85] Ms O'Keeffe is to be reimbursed from the trust for the actual and reasonablecosts and disbursements incurred by her in relation to her application to removeMr Jones as trustee.[86] Mr Jones is to reimburse the trust for the costs incurred by Ms O'Keeffe inrelation to all steps in the proceedings after, but not including, the amended applicationfor interlocutory orders dated 6 July, including the costs of the hearing. Those costsare to be calculated on an actual and reasonable solicitor/client basis and are to includedisbursements.[87] The reasonableness of the above costs is to be assessed by a senior barrister inaccordance with the direction of the Judge at [29] of the judgment under appeal.[88] Mr Jones is not entitled to be reimbursed from the trust for any costs associatedwith his opposition to the application to have him removed as trustee.3838 Mr Jones would have been entitled to seek costs as a practising solicitor: McGuire v Secretary forJustice [2018] NZSC 116, [2019] 1 NZLR 335.Costs of the appeal[89] Given that both parties have had a measure of success in relation to this appealcosts on the appeal are to lie where they fall. To clarify, neither party is to bereimbursed out of the estate for the costs associated with this appeal.Solicitors:Kemp Barristers & Solicitors, Kumeu for AppellantVodanovich Law Limited, Kumeu for Respondent