VINCENT FAMILY CORPORATE TRUST LIMITED as trustee of the ET and P VINCENT TRUSTS [2021] NZHC 3313

VINCENT FAMILY CORPORATE TRUST LIMITED as trustee of the ET and P VINCENT TRUSTS [2021]NZHC 3313 [6 December 2021]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV 2021-463-000017[2021] NZHC 3313UNDER Part 19 of the High Court Rules 2016IN THE MATTER of the ET and P VINCENT TRUSTSBETWEEN VINCENT FAMILY CORPORATE TRUSTLIMITED as trustee of the ET andP VINCENT TRUSTSApplicantsHearing: On the papersAppearances: A F S Vane for the ApplicantS D Campbell & J R Halligan for Rosemary Jean VincentJudgment: 6 December 2021JUDGMENT OF VAN BOHEMEN J[costs ]This judgment was delivered by me on 6 December 2021 at 1.00pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors/Counsel:Le Pine & Co, TaupoWynn Williams, ChristchurchIntroduction[1] In my judgment dated 30 August 2021, I dismissed an application by theVincent Family Corporate Trust Ltd (the Trustee) as sole trustee of the ET VincentTrust and the P Vincent Trust (the Trusts) for Beddoe orders authorising the Trustee todefend a proceeding brought by Rosemary Jean Vincent (the Substantive Proceeding).1I also declined to order that the Trustee's costs in relation to declarations sought and acounterclaim should be indemnified from the Trusts' funds.[2] I reserved costs on the Beddoe order application and invited counsel for theTrustee and for Ms Vincent to file memoranda.Relevant background[3] In the Substantive Proceeding, Ms Vincent, who is a daughter of the settlors ofthe Trusts, seeks:(a) In a first cause of action, declarations that the term "grandchildren" inthe deeds establishing the Trusts includes grandchildren of the settlorsby whāngai and, as a consequence, that two named children ofMs Vincent's daughter are beneficiaries of the Trusts; and(b) In a second cause of action, declarations as to the validity of theappointment of the Trustee and of actions taken by the Trustee astrustee.[4] The declarations sought by the Trustee and the counterclaim by the Trustee arein relation to the second cause of action.[5] In my judgment I found that the two causes of action are within categories ofdispute identified in Re Buckton2 and in Alsop Wilkinson v Neary3 for which there canbe no expectation that a trustee's costs will be indemnified and for which costs usually1 Vincent Family Corporate Trust Ltd (as trustee of the ET and P Vincent Trusts) [2021] NZHC2250.2 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 grantBeddoe orders to defend the substantive proceeding because:5(a) In the first cause of action, the orders would be contrary to the Trustee'sduty to remain neutral as between beneficiaries; and(b) In the second cause of action, it was neither appropriate nor in theinterests of the Trusts for the Trusts' funds to be used to defend achallenge to the validity of the appointment of the Trustee and actionstaken by the Trustee.Questions for determination[6] Having considered the submissions of Mr Vane, counsel for the Trustee, andof Mr Campbell and Mr Halligan, counsel for Ms Vincent, it is apparent that thequestions to be decided are:(a) Should the costs on the Beddoe order application be determined now orafter the substantive proceedings?(b) If costs are to be determined now, should the Court order that the costsof 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 theSubstantive Proceeding.Should costs on the Beddoe order application be determined now?[8] Mr Vane submits that the costs on the Beddoe order application should bereserved 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 ofaction are within categories for which there can be no expectation that a trustee's costswill be indemnified, and for which costs usually follow the event. Mr Campbell and4 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 orderapplication with costs on the substantive application and that this approach wasrejected 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 costsare met on the Beddoe order application should be determined in accordance with theoutcome of that application. The outcome of the Beddoe order application will havelimited bearing on the outcome of the Substantive Proceeding. That will bedetermined on the merits of the case before the trial Court. As the decisions inMcCallum v McCallum and McLaughlin v McLaughlin demonstrate, it is usual todecide costs on a Beddoe order application when that application is decided.7Should 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 ofmisconduct, parties to a Beddoe order application are entitled to be indemnified as totheir fair and reasonable costs.8[11] Mr Vane submits that there was no improper conduct, lack of honesty orunreasonableness 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 notacknowledge the strength of the case for Ms Vincent in relation to the second cause ofaction but submits that the Trustee had been hampered by a lack of disclosure onMs Vincent's part.9[12] Mr Vane does not take issue with the claim by Ms Vincent for her costs to bemet 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 LePoidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) volII [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 withoutacknowledging the strength of Ms Vincent's case was insufficient disclosure of the strengths andweaknesses of the Applicant's case.[13] Mr Campbell and Mr Halligan do not allege misconduct on the part of theTrustee but question whether the Trustee's costs were incurred fairly and reasonablyhaving 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 forthe 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 establishedthat hostile proceedings will not normally justify a Beddoe order;(d) The Trustee did not comply with its duty of full and frank disclosure inrelation to the second cause of action and, contrary to Mr Vane'ssubmission, was on notice of Ms Vincent's arguments concerning thesecond cause of action; and(e) The above steps were taken in circumstances where the validity of theTrustee'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 thesecond cause of action, the principal point I was making at [90] of my judgment wasthat I did not consider there to have been sufficient disclosure of the strengths andweakness of the Trustee's case. The issue with regard to the strength of the case forMs Vincent and with regard to the strengths and weakness of the Trustee's case relatesto the interpretation of ss 43(2)(c) and 45(3) of the Trustee Act 1956, as I discuss inmy judgment.10 It has nothing to do with disclosure by Ms Vincent, whose statementof 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 werereasonably incurred, I adopt the approach of Thomas J in Glasgow Harley TrusteeLimited & Or v McLaughlin,11 in which Her Honour determined the costs of theBeddoe order application she decided in McLaughlin v Mclaughlin. In GlasgowHarley, 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 fundsare to what extent:(a) they acted reasonably by making or opposing the Beddoeorder 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 withrespect to the first cause of action, I do not consider the Trustee acted unreasonably inseeking the Beddoe order in relation to that cause of action. Even though I did notaccept the Trustee's submission that that cause of action came within the first Bucktoncategory, namely an application to the Court for guidance on the interpretation of theTrusts' deeds, there was a reasonable basis for that submission. The resolution of thedispute 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 positionin relation to the first cause of action. It is apparent from the correspondence that indefending Ms Vincent's application, the Trustee has been acting to give effect to whatit considers to be the Settlors' wishes and to protect the interests of all persons that theTrustee considers to be beneficiaries. In addition, and as the Court of Appeal'sdecision in McCallum v McCallum demonstrates, just because a Court disagrees thata Beddoe order is not appropriate does not remove a trustee's entitlement to having itscosts on the application met from trust funds.1211 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 grantedcosts notwithstanding that two of the four limited Beddoe orders made by the High Court were setaside.[20] I am satisfied, therefore, that the Trustee acted reasonably in making theBeddoe order application with respect to the first cause of action.[21] There is more difficulty with the second cause of action and the relateddeclarations and counterclaim sought by the Trustee. While I accepted that there wasno allegation of wrong-doing, impropriety, dishonestly, negligence or breach of dutyin the second claim, I also observed that a finding that the Trustee was not validlyappointed might give rise to questions of breach of duty and negligence,13 and that theprospects 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 theTrustee had not been validly appointed. It should have been apparent from the outsetthat these allegations related to the Trustee's position and the validity of the Trustee'sactions and that the costs of defending that cause of action could not properly beindemnified from the funds of the Trusts. Still less could the costs of the declarationsand counterclaim be indemnified from the funds of the Trusts.[23] For these reasons, I do not consider that the Trustee acted reasonably in seekinga Beddoe order with respect to the second cause of action, the declarations andcounterclaim. As a consequence, I do not consider that the Trustee's costs in relationto the second cause of action and associated declarations and counterclaim should bemet 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 orderapplication. Her opposition was upheld by the Court. As Mr Campbell andMr Halligan submit, Ms Vincent was entitled to be involved in the Beddoe orderapplication 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 theambit of the law on Beddoe orders, I accept that Ms Vincent did not adopt an excessiverole in the proceedings and that her involvement was necessary as a contradictor to thecase 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 hassought scale costs calculated on a Category 2B basis as set out in schs 2 and 3 of theHigh Court Rules 2016. These costs come to $23,541.50 (excluding GST).[26] The Trustee also seeks disbursements of $5,604.65. The disbursements areprincipally for Court fees totalling $5,200.00. Also claimed are travel costs of $154.65and photocopying costs of $250. No invoices have been provided.[27] Although Mr Campbell and Mr Halligan criticise the Trustee for not submittingactual costs that can be scrutinised, I consider it reasonable to infer that actual costsare likely to be greater than those claimed, given that scale costs are assumed not toprovide for recovery of actual costs. However, the failure to provide invoices meansthe Court cannot determine how costs should be divided between the two causes ofaction. In these circumstances, and in the absence of any other information from theTrustee, I propose to allocate 60 per cent of the costs claimed to the first cause ofaction 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 claimedfor travel and photocopying are modest. I also accept that costs of that order wouldhave been incurred even if the Trustee had limited its Beddoe order application to thefirst cause of action.[29] For these reasons, I consider that the Trustee's costs of $14,124.90 (being 60per cent of $23,541.50) plus disbursements of $5,200.00 should be met from funds ofthe Trusts.Were Ms Vincent's costs incurred reasonable?[30] Ms Vincent seeks $20,503.71 (GST inclusive), reflecting actual costscalculated on a solicitor client basis as incurred between 26 February 2021 and 30 July2021. Mr Campbell and Mr Halligan submit that the costs incurred are reasonable andreflect Ms Vincent's involvement in the proceedings. This is supported by an affidavitdated 1 October 2021 from a solicitor of Wynn Williams affirming the costs anddisbursements claimed by Ms Vincent. The affidavit attaches four invoices renderedby Wynn Williams for a total of $29,527.36. However, the solicitor advises that shehas reviewed the time entries and has excluded entries that did not relate to work onthe Beddoe order application.[31] The claim made on behalf of Ms Vincent is exemplary. I am satisfiedMs 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 incurredto date in the Substantive Proceeding as well as the costs of the Beddoe orderapplication. However, as Mr Campbell and Mr Halligan point out, the issue of partyand party costs in the Substantive Proceeding is not before me and will be for the trialjudge to determine. Accordingly, I make no order in relation to costs incurred in theSubstantive Proceeding.[33] Mr Campbell and Mr Halligan also point out that, as a result of my dismissalof the Trustee's Beddoe order application, the Trustee costs in the SubstantiveProceeding are not indemnified. They say that, if such costs have been met from theTrusts' funds, they should be repaid.[34] Mr Campbell and Mr Halligan are correct, and I record that I expect the Trusteeto act accordingly. I do not consider it appropriate to make an order in relation to thatissue, however, because there is no evidence as to whether the Trustee's costs in theSubstantive Proceeding have been met from funds of the Trust.Result[35] I order that the following costs in relation to the Beddoe order application bemet from the funds of the Trusts:(a) Of the costs claimed by the Trustee: $14,124.90 (GST exclusive) plusdisbursements of $5,200.00;(b) Of the costs claimed by Ms Vincent: $20,503.71 (GST inclusive).______________________G J van Bohemen J