Mahon v Mahon [2014] NZHC 1430 (25 June 2014)

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BETWEEN	SUSAN ELIZABETH MAHON First Plaintiff
AND	DAVID WILLIAM MAHON and RACHAEL JANE MAHON Second Plaintiffs
AND	JOHN ROY MAHON and DONALD COLIN GRANT MACKINNON being the executors of the Estate of Melva Eileen Mahon _Defendants

Hearing:	24 June 2014
Appearances:	C T Gudsell QC for the Plaintiffs M Branch for the Defendants J H Fulton for John Mahon, his children and the J R Mahon Family Trust D M O'Neill for the Melva Mahon Inheritance Trust
_Judgment:	_{25 June 2014}

properties are Ngaruawahia and a diary farm as well as other assets. [2] Melva and Roy had two children, William (Bill) and John.

[3] Bill married Susan (the first plaintiff) and they had three children, Rachel and

[4] Bill died in April 2004 and by the terms of this Will Susan was appointed sole executrix.

[6] By the terms of Melva’s Will cash legacies were provided for grandchildren and daughters in law. Melva’s Will also provided for specific legacies to the J R Mahon Family Trust (John’s Trust), including the two freehold commercial properties at Ngaruawahia and Melva’s principal residence.

[7] Pursuant to a clause of Melva’s Will the residue of her estate was directed to be transferred to the Melva Mahon Inheritance Trust (the Inheritance Trust), a discretionary trust of which John, the second plaintiffs and Paul are the final beneficiaries.

[8] Pursuant to clauses of the Inheritance Trust’s trust deed, the trust income and capital of the Trust is to be distributed as to 60% to John, 10% each to David and Rachel and 20% to Paul.

(b) The Ngaruawahia commercial properties valued at about $700,000. (c) The diary farm which has an estimated value of $6.1M.

(d) Other assets including car, chattels and an unsecured loan to John having a value of approximately $150,000.

[10] The plaintiffs’ statement of claim traces the historical ownership of the estate assets from the time of Roy’s death; and it reviews the terms of Roy and Melva’s Wills before and following Roy and Bill’s deaths. The statement of claim pleads that following the death of her husband Roy and son Bill, the previous intentions of Melva that the residue of her estate be shared equally between her sons or their children were altered, to advantage John or his family.

[11] In a first pleaded cause of action the plaintiffs say that at all material times prior to Bill’s death in April 2004 there was a common intention expressed and understood that after the death of Roy and Melva, John and Bill or their families would receive half of the assets; that following Bill’s death Melva breached the trust imposed on her as a result of that by providing for the Ngaruawahia properties and Melva’s residence to be given to John’s Trust and for the residue of her estate which included the diary farm to be transferred to the Inheritance Trust, which in turn would benefit John or his family to the proportion of 60%.

[12] By a second cause of action on behalf of the second plaintiffs relief is sought pursuant to the Family Protection Act 1955. In that regard it is said Melva breached her moral duty she having failed to make adequate provision for the property maintenance and support of the second plaintiffs.

[13] When filing their statement of claim the plaintiffs filed a without notice application for directions as to service upon:

[14] In a memorandum filed by Mr Walker, solicitor, on behalf of the plaintiffs he notes that it was only with respect to the Family Protection cause of action proceeding that the plaintiffs required orders for directions as to service.

[16] On 9 December 2013 a statement of defence was filed on behalf of John and Philip Hart as trustees of John’s Trust. They denied the existence of any common intention trust as alleged by the plaintiffs first cause of action. In a statement of defence filed by John and children, Anne, Jane, Kate and Christopher defences are pleaded to both the common intention trust and Family Protection proceeding claims.

(a) Giving directions regarding the management or administration of the property in Melva’s estate and in respect of the exercise of powers and a discretion vested in him as an executor and trustee of that estate.

(b) Authorising John to defend as an executor and trustee of the estate the proceeding brought by beneficiaries as the plaintiffs.

(c) Indemnifying John from the assets of the estate for reasonable costs incurred in defending the proceeding as an executor and trustee.

[18] The application refers to both causes of action raised by the plaintiffs’ proceeding. John denies that Melva held her property on the trust as alleged or that she was under any obligation to the plaintiffs in the exercise of her testamentary freedom.

[19] John asserts he has personal knowledge and experience in the management of Melva’s estate and of the properties devised to trusts and of the estate capital; that he desires to continue to exercise the functions of executor and trustee; and seeks directions to administer the deceased’s estate together with the substituted executor (Mr MacKinnon) while defending the plaintiffs’ claims.

[20] In his affidavit in support of these applications John deposes that in addition to himself, Ms McDermott was initially appointed as an executor of Melva’s estate. He deposes that Ms McDermott, a solicitor with Norris Ward MacKinnon had, together with her father before her, for many years been lawyers to his family; that Ms McDermott had elected to resign and retire as an executrix and trustee because she was likely to be an important witness in the claim. John said Ms McDermott had been replaced by Mr MacKinnon “who was independent and new to the affairs of the Mahon family”. Similarly, he notes, the company McDermott McIntosh Trust Management Limited as the trustee of the Inheritance Trust also retired to be

replaced by Mr Graham Finch because Ms McDermott was a 50% shareholder in the trustee management company with other members of her firm.

[21] John deposes it is his wish to continue to be an executor and trustee and that if he was to be replaced he would continue to be the eyes, ears and legs for a substitute, and then probably at some cost and delay. At the same time, he says he has a personal interest in the estate and the proceedings. He says on behalf of his Trust he is defending the claim and he wishes the Inheritance Trust to defend the claim so as to preserve the residuary capital and distributions of the estate capital in accordance with Melva’s intentions.

[16] There was no family arrangement or discussion about Melva’s estate distribution. She simply did not raise the topic within the family. All I would know of her making a Will would be if she told me she was making an appointment for that purpose with her lawyer or if I took her to appointments. She did not convey any further information. I now know from her lawyer’s files that the topic of inequality between Bill’s family and mine was discussed. Melva, however, maintained the scheme and shares as desired by her and without any influence from family or other persons. She must have had her own reasons not discussed with the family. Insofar as they reflect changes in family dynamics, these did occur.

[17] I have been advised of my duty of neutrality as a trustee of the estate. This includes acting fairly in the estate’s response to the claim and to allow it to progress with information shared between the family and participants. I agree, if remaining an executor and trustee, to abide by those requirements and to act in conjunction and agreement with Mr MacKinnon and in accordance with the independent advice of Harness Henry as the new solicitors to the estate and whose appointment is to secure independence.

[23] In the memorandum of Mr Fulton filed in connection with John’s application for directions, he notes that John seeks directions to remain a personal representative in the administration of Melva’s estate while acting neutrally in that capacity, but also defending the plaintiffs’ claim.

[24] Mr Fulton notes that the principles in practice for consideration are based on re Beddoe; Downes v Cottam¹whereby the Court assumes jurisdiction to authorise

participation of trustees in litigation and in certain circumstances to confirm the

[25] Mr Fulton also refers to the authority of Alsop Wilkinson v Neary²wherein three categories of litigation are identified for the purpose of authorising the participation of trustees in the litigation:

(a) A trust dispute; which may be “friendly”; or “hostile” (such as a challenge to the settlement because of undue influence);

(c) Third party disputes with persons otherwise than in the capacity of beneficiaries, in respect of rights and liabilities and where trustees have a duty to defend and preserve the trust estate, and for which they should be indemnified.

[26] Referring to Garrow and Kelly Law of Trusts and Trustees³, Mr Fulton notes that generally beneficiary litigation is hostile and costs follow the event but that trustees, who remain neutral leaving others to engage in the conflict, are normally entitled to indemnity. Also referred to is the judgment of Lord Justice Hoffman in McDonald v Horn⁴where he stated:

In the case of a fund held in trust, therefore, the trustee is entitled to his costs out of the fund on an indemnity basis, provided only that he has not acted unreasonably or in substance for his own benefit rather than that of the fund. Trustees are also able to protect themselves against the possibility that they may be held to have acted unreasonably or in their own interest by applying at an early stage for directions as to whether to bring or defend the proceedings. This procedure... requires the trustee to make full disclosure of the strengths and weaknesses of his case. Provided that such disclosure has been made, the trustee can have full assurance that he will not personally have to bear his own costs or pay those of anyone else.

[27] On 7 March 2014 Mr Finch as trustee of the Inheritance Trust filed an application for orders:

(e) Indemnifying him from the assets of the estate for reasonable costs incurred in defending the proceedings.

(f) Protecting him from liability that might arise as to his role in the substantive proceedings.

[28] As Mr Finch’s application notes the Inheritance Trust has no assets and that it is a beneficiary under Melva’s Will whereby it was to receive the diary farm. Mr Finch states:

(a) The Trust has two beneficiaries who are plaintiffs and who are taking active steps in pursuit of their claims; and that the Trust also has a beneficiary, John, as a defendant as executor in his mother’s estate. John was also taking an active role as a beneficiary in the proceedings.

(b) The Trust has no assets from which to pay costs should they be awarded and it cannot afford to pay its legal advisors and therefore it seeks a direction as to the role the Trust is to take and requests an indemnity from the assets of Melva’s estate for any costs awarded

against it and in relation to any liability that may arise from steps taken by Mr Finch in this proceeding.

[29] A notice of opposition was filed by David and Rachel as plaintiffs in relation to the Beddoe application filed by John, and as respondents to the Beddoe application filed by Mr Finch. As to the opposition filed to the application by John it is noted that it was only in connection with the Family Protection Act proceeding that the plaintiffs required an order for directions as to service; that whilst John was served as a defendant as an executor of Melva’s estate, and as a trustee of the J R Mahon Family Trust, and in his personal capacity as a son of Melva being an eligible claimant in relation to the Family Protection Act proceeding, he was only served in those capacities in respect of the second cause of action because, it is claimed, John does not have standing to defend the first cause of action in those capacities. The notice of opposition avers that given John’s acknowledged personal interest in administering the estate as well as his personal interest in the estate, it was inappropriate that he be authorised “to defend as an executor and trustee the proceeding; because any order authorising him “to defend as an executor and trustee of the estate in this proceeding” is inconsistent with the undertaking he gave to exercise his authority and discretions and powers as an executor and trustee of the estate relating to this litigation and a determination of the issues only with the agreement a concurrence of Mr McKinnon.

[30] Concerning the Beddoe application of Mr Finch the second respondents David and Rachel state that Mr Finch has no standing to defend the first cause of action and nor is there any need for him to take an active role with respect to the second cause of action. This position notwithstanding the second respondents would consent to orders:

(a) That Mr Finch as a trustee of the Inheritance Trust be indemnified from the assets of the estate for his reasonable costs incurred.

(b) That Mr Finch is granted an order protecting him from any liability which might arise as a consequence of the substantive proceeding.

[31] In David’s affidavit in support of the opposition to the Beddoe applications of John and Mr Finch he notes the second plaintiffs oppose John’s application and partially oppose that of Mr Finch. He notes John considers he holds an integral position in administering his mother’s estate, and that as a major beneficiary of both the estate and the Inheritance Trust he should remain executor to oversee his position and in those respects he should be protected for his costs.

[32] David in an affidavit opposing both applications, that by John in whole and that by Mr Finch in part, deposes inter alia:

(a) John is unable to exercise any neutrality and should resign as an executor because he is a major beneficiary of the estate and the residuary estate and has every motivation to protect his entitlement.

(b) That John’s claim that the Ngaruawahia properties and the diary farm were acquired by Melva from her own funds and finances, is unsupported by the facts and that instead the transfer of those assets was an integral part of a family strategy and that they followed the

1990 matrimonial property agreements prepared by solicitors acting for the families in a tax investigation.

(c) That John has not addressed the fact that immediately following Roy’s death there were significant changes to Melva’s previous wills whereby the entire capital of her estate would be divided equally between John and Bill.

(d) That within a month of Roy’s death John had communicated with the family solicitors “in order to review and presumably seek changes” to Melva’s Will.

60% of the residue she executed in John’s favour an enduring power of attorney “all of which confirms his involvement in taking over his mother’s affairs”.

(f) That the plaintiffs have now seen a memorandum dated 9 June 2008 prepared by Melva’s solicitors which stated:

Melva said she was worried that she was not doing what Roy had said i.e. leave her estate equally to Bill and John which would mean that Bill’s share would go to Bill’s three children.

(g) John’s actions give rise to the presumption that Melva was being influenced to change her Will’s contrary to the planning and intention which had prevailed for over 20 years previously.

(h) That the plaintiffs proposed filing an amended statement of claim to introduce further causes of action under which John is to be the sole defendant.

[33] Regarding Mr Finch’s application the plaintiffs’ position is that the trust should take no part in the proceeding and remain neutral and abide by any final agreement or order of the Court.

[34] In a reply affidavit John confirms that his request for an endorsement of his continued appointment as executor and trustee is subject to his acting together with Mr McKinnon insofar as it relates to the duties obligations and rights of the estate concerning procedural questions about the defence to the plaintiffs’ first cause of action. He says the estate is not defending in that capacity and confirms that the

beneficiaries of the estate being his family and his family trust do not have standing to defend because their interest is only in the family protection proceeding claim.

[35] John says those are legal arguments and that it has always been intended that the plaintiffs’ claims be defended and that there are good grounds for that defence. He said that if his family interests including his Trust and his children and he, were not entitled to defend the whole of the proceeding then it will be for the defendant executors to defend. He believes the appropriate procedure should enable the defence to be managed by his interests as beneficiaries together with any other beneficiary opposing which would then leave he and Mr MacKinnon as executors and trustees to be neutral.

[36] John says there has been no conflict of interest or duty by reason of his interests as a beneficiary or in the conduct of the litigation as an executor and trustee. He says there have been no complaints in the conduct of the family business that he administers. He believes that if the defendants are to defend the plaintiffs’ claim then it is proper they be authorised to charge fees and expenses to the estate. He says it is his responsibility to protect the wishes and desires of his mother. Regarding claims of his connection to various testamentary instructions given by his mother to her lawyers he says there were occasions when he made appointments or arrangements for his mother to attend her lawyer but that he was not present when his mother gave her actual Will instructions and that when it came to her dispositions her lawyer would ask him to leave. John rejects claims that he influenced the making of the two Wills in 2004. He said Melva made her Wills as she saw fit. He said she had formed her own opinion of her Will and estate plan and that such was not promoted by him.

[37] In his reply affidavit Mr Finch reiterates that it is the position of the Inheritance Trust that it obtains directions from the Court as to the role it is to take in these proceedings. Also it asks that any costs involved be met by Melva’s estate.

[38] Regarding the plaintiffs/respondents opposition to his application he says he considers the plaintiffs position to be that his costs be paid so long as they do not oppose them. He thinks that is inappropriate and he believes he does have an active

role to play and to accede to the plaintiffs conditions would be contrary to that role and may potentially put him in breach of his obligations as a trustee.

[39] On behalf of the Inheritance Trust Mr O’Neill notes that it is a beneficiary under the Will and consequently would be entitled to oppose the claim by Rachel and David.

[40] Mr O’Neill says that Mr Finch can add nothing to the factual matrix relating to the transfer of the farm for he has no knowledge to the background to the claim and how the farm was transferred or the reasons behind that transfer.

[41] Mr O’Neill observes that if the constructive trust argument failed that would mean that the farm would transfer to the Inheritance Trust and Rachel and David would, in an indirect way, receive a significant legacy from their grandmother. However, if the constructive trust claim succeeded then matters would undergo a radical transformation in relation to the family protection application because the Inheritance Trust would receive nothing and therefore it would have nothing to distribute. It follows that Rachel and David would receive nothing under Melva’s Will and this would strengthen their argument that there has been a breach of moral duty.

[42] Regarding Mr Finch’s Beddoe application Mr O’Neill observes that there is power in the trust deed for the trustees to apply to the Court in regards to any dispute. He submits and the Court agrees that Mr Finch’s application is properly brought and leave to bring it is accordingly granted.

[43] More difficult for consideration is in defining the role Mr Finch is to take in this proceeding. Mr O’Neill refers to the authority of Beddoe where the Court held that a trustee was entitled to full indemnity out of his trust estate against all of his costs, charges and expenses properly incurred. Referring to the authority of Alsop

_Wilkinson⁵_{Mr O’Neill says the
trustees have a duty to preserve and protect the Trust}

for the benefit of the beneficiaries and to represent the Trust in the third party dispute; that to avoid the risk of a challenge to their taking steps the trustees ought to seek Court authorisation before they sued or defended.

[44] As Mr O’Neill notes in that same case the Court held that where the dispute is between rival claimants to a beneficial interest the duty of the trustee is to remain neutral and offer to submit to the Court’s directions leaving it to the rivals to fight their battles.

[45] Complicating the present case is the fact that the dispute is between beneficiaries in the same Trust; that it is proper for the trustee to take a neutral stance and abide the decision of the Court leaving it to the beneficiaries to fight their battles.

[46] In this case, as earlier noted, Mr Finch has said he is unable to comment one way or the other because he has no knowledge of the factual matrix behind the constructive trust claim. If then he was directed to defend the constructive trust claim (because it would impact on the inheritance to be received by the trustee) then he would have to spend considerable time in putting together evidence to assist that defence.

[47] As Mr O’Neill observes in the family protection claim Mr Finch’s position is a lot simpler in that whilst the Trust is the major beneficiary it is only as a vehicle to distribute the Trust’s assets in accordance with the trust deed.

[48] By his application Mr Finch seeks an order that his costs and expenses be met from Melva’s estate and not from the Trust because it is a shell and has nothing in it.

[49] In summarising his submission Mr O’Neill observes that given the beneficiaries of the same Trust are taking sides against each other in the substantive dispute it is appropriate for the Court to direct that Mr Finch remain neutral and abide the decision of the Court.

[50] Mr Finch seeks indemnity costs upon his Beddoe application. Mr Gudsell for the second plaintiffs questions the need for a formal application for leave to have been filed. Because the Trust seeks leave to take a neutral position and abide the decision of the Court that position could easily have been arrived at without the need for a formal originating application. That said Mr Gudsell acknowledges that the second plaintiffs do not dispute, in principle, that Mr Finch should be indemnified for his reasonable costs to-date and be protected from any future liability in relation to the substantive proceedings. However, they reserve their position with respect to Mr Finch’s “reasonable costs” for no details of those have been provided.

[51] Mr Gudsell records that the second plaintiffs accept that it is appropriate for an indemnity to be granted against the assets of the estate.

[52] An initial question arises regarding whether there is a defence to the first cause of action (the common intention claim) and if so by whom is this conducted. The plaintiffs contend the only defence must be by the defendants as executors and trustees; that as the executors have only filed an appearance, no defence has been filed.

[53] Mr Gudsell observes that the plaintiffs say the order directing service on beneficiaries entitled in the estate was limited to the second cause of action under the Family Protection Act.

[54] Mr Fulton challenges whether that position was indeed directed by the service order made by Associate Judge Doogue. He observes that upon service the trustees of John’s Trust and John and his family filed statements of defence to both causes of action and they did this to ensure a defence was filed within time and in that result the executors of the estate filed an appearance in the belief the plaintiffs’ claims were being defended by the beneficiaries served under the Court’s direction.

[55] Mr Fulton observes the plaintiffs have not filed applications to strike out the defences of John and his interests as beneficiaries.

[56] Mr Fulton requests that if the defence rests only with the named defendants then the mistake or error of others in filing defences requires correction to allow the executors to file a statement of defence.

[58] Regarding claims that John should not remain in office because he has an interest in the estate and conflict with the plaintiffs’ claim, Mr Fulton submits there has been no criticism of the duties he has discharged in that capacity, nor has there been any application for his removal as executor and trustee. As for other unpleaded contentions contained in the plaintiffs’ affidavits, Mr Fulton submits those are speculation and implausibly derived from discovered documents. He submits if John was removed or forced to retire the estate would lose its principal as well as practical administrator.

[59] It is the case for John that his costs as trustee and an executor be paid by the estate whilst he is acting neutrally in both those capacities.

[60] Mr Fulton submits that the executors and trustees are entitled to an order that their costs in this capacity be met (in the first instance) by the estate with recourse to the plaintiffs if their first cause of action does not succeed. He notes that the second cause of action under the Family Protection Act can only follow the conventional course.

[61] Mr Fulton submits the John Mahon interests have a meritorious defence and one that is not vexatious or otherwise unreasonable. That defence denies there was ever a “common intention” regulating the disposition of the estates of Roy and Melva. It is John’s evidence as one of the four parties alleged to be participating in the “common intention” that he had no knowledge of or involvement in such a scheme or arrangement.

[62] Mr Fulton provides his assessment of reasons why the common intention claim cannot succeed. He notes that while parents are alive it is common place to share each of their estates with the next generation; that it is an exercise in

testamentary freedom but for which no duty is owed by the parents or their estates to their children. Mr Fulton says testamentary freedom was not restrained in the mind of the lawyers acting for all members of the family and that if Melva was under legal or equitable obligations it would certainly be known and advised.

[63] Mr Fulton is critical about the lack of evidence to support claims which are expressed in somewhat general terms. He says the defendants have amply demonstrated that there is a proper case for a defence and that they are not acting unreasonably by defending it if that is to be their role.

[64] Mr Fulton submits this is a proper case to ensure the executors and trustees are protected for costs and for John to retain his office as one of those.

[65] In his submissions in response to John’s application Mr Gudsell notes that upon commencement of the substantive proceedings the plaintiffs made application to the Court for directions as to service, on a without notice basis and that orders were sought that the proceedings be served on:

(c) John and his four adult children, together with Paul, the brother of the second plaintiffs, being “persons entitled to claim” under the Family Protection Act and being beneficiaries of the Inheritance Trust.

[66] The plaintiffs’ memorandum filed with that application noted that it was only with respect to the Family Protection Act proceeding that the plaintiffs required an order for direction as to service. A statement of defence was filed on 4 December

2013 by John and his children who were described as being “a defendant and parties ordered to be served in response to the statement of claim”.

[67] The memorandum at the end of that statement of defence stated it was filed by Mr Bell-Booth solicitor for the defendants and gave Mr Bell-Booth’s address as the address for service.

[68] That statement of defence pleaded to both the plaintiffs’ causes of action.

[69] On 12 December 2013 a statement of defence was filed by John and Mr Hart as trustees of John’s Trust. That statement of defence also contained a memorandum identifying Mr Bell-Booth as solicitor for the defendants and his office as the address for service.

[70] The statement of defence pleaded to both of the plaintiffs’ causes of action.

[71] On 30 January 2014 an “appearance by defendants for ancillary purposes” was filed by Mr Scotter solicitor for the defendants of the firm Harkness Henry. It noted the named defendants John and Mr MacKinnon filed the appearance notice to be heard on “any steps this Court may require them to take to assist the Court” and costs.

(a) They abide the Court’s decision with respect to the two applications. (b) If the orders sought by John authorising him to defend both causes of

action is declined, the defendants will likely make their own Beddoe application in relation to the constructive trust cause of action and will seek leave to file a statement of defence out of time.

[73] Mr Gudsell questions the authority of Mr Bell-Booth’s law firm to file documents as “solicitor for the defendants”. He submits there can be no question that Harkness Henry acts for the named defendant and that Mr Bell-Booth acts for John in other capacities in which he was served. Mr Gudsell submits the present case is not one where separate legal representation of Melva’s executors is required. Rather that this is a case where one of the executors, John, is involved in the

proceedings in other capacities. Mr Gudsell notes that John acknowledges he has a personal interest in the estate and the proceeding and that John states “I agree, if remaining an executor and trustee, to abide by those requirements and to act in conjunction with Mr MacKinnon and in accordance with the independent advice of Harkness Henry as the new solicitors to the estate and whose appointment is to secure independence”.

[74] Mr Gudsell submits that it would be entirely inappropriate for Mr Bell- Booths firm to represent John in both his personal capacity and in his capacity as a defendant; that there is clearly a conflict between those two capacities; and in any event because the different firms of solicitors cannot both act for “the defendants” at the same time.

[75] Mr Gudsell also questions John’s standing to defend the two causes of actions

[76] Mr Gudsell refers to rr 18.5(3) and 18.7(3) – (5) of the High Court Rules wherein it is stated that the only defendant that may be named in the statement of claim is the personal representative of the deceased against whose estate the claim is brought. It is also there stated that the plaintiff must provide all necessary information regarding persons prospectively affected and also as to the estate and circumstances of the deceased. Finally those provisions require an application for directions to be sought.

[77] The plaintiffs followed that practice and John was served with the family protection claim because he was a defendant (being an executor of the estate), and as a beneficiary (as trustee of the J R Mahon Family Trust) and as a person entitled to claim under the Family Protection Act.

[78] With regard to the constructive trust cause of action Mr Gudsell refers the

(1) Trustees, executors, and administrators may sue and be sued on behalf of, or as representing, the property or estate of which they are trustees, executors, or administrators.

(2) There is no need to join persons beneficially interested in a trust or an estate to a proceeding because the trustees, executors, and administrators represent those persons.

(3) However, the Court may, at any stage, order that a beneficially interested person be made a party, either in addition to or instead of the trustees, executives, or administrators.

[79] It is clear Melva’s executors represent the beneficiaries of her estate with respect to the constructive trust cause of action. However it appears by the documents filed through Mr Bell-Booth’s office that the statements of defence cannot be described as non-contentious, as statements of defence for executors ought to be. This Mr Gudsell says demonstrates the clear conflict between John’s position as defendant and as a beneficiary/person entitled to claim.

[80] In this proceeding John has brought a Beddoe application. He has no standing to do so in his personal capacity but that is what it appears he is doing. Mr Gudsell submits and the Court agrees that it appears from the manner in which the Beddoe application is framed that John is seeking indemnity for costs to defend the claim in his personal capacity. Added to this confusion is who Mr Bell-Booth is acting for.

[81] In the course of submissions from counsel the Court asked Mr Fulton whether John had given consideration to retiring from his position as an executor. The Court expressed concern that in that capacity it appeared he wished to defend the interests of himself and others whereas in the capacity as an executor he ought to take a neutral position.

[82] The Court expressed the view that it appeared clear from case authority that it was only by taking a neutral position could an executor expect indemnity costs.

[83] Later and in discussion with all counsel it was readily conceded there would be no objection to the grant of reasonable indemnity costs provided those were confined to the proper actions of an executor/trustee who was assisting the Court but only to the extent necessary to provide that assistance.

[84] Some confusion has arisen because it appeared John was asking the Court to fund his personal defence of the constructive trust first cause of action.

[85] The primary position with respect to the constructive trust claim is that it is against the executors who should only receive the benefit of a Beddoe order to cover services for actions completed in a neutral capacity for services provided to assist the Court.

[86] As to what actions should be taken by individuals in connection with that claim, is very much a matter for the beneficiaries to determine. But, as a matter of course the Court will not agree for any of those costs borne by the beneficiaries to be reimbursed by the estate. In that case, any costs John should incur on his own behalf and not strictly for estate administration purposes to assist the Court, will be John’s responsibility.

[87] In the case of Mr Finch’s application that concession was made on his behalf by Mr O’Neill who properly conceded the Inheritance Trust ought to take a neutral position and abide the decision of the Court.

[88] Mr Gudsell submitted that position could have been taken without the need of a formal application.

[89] In the Court’s view Mr Finch’s application was properly brought. A direction from the Court was still required and the Court should direct the trustees to what steps (if any), should be taken in relation to the proceedings. For the Inheritance Trust to have the protection of an indemnity order it requires the direction of the Court regarding any steps to be taken by it. It is only in accordance with those the Court enables the indemnity to function.

[90] In that regard in this case upon Mr Finch’s application reasonable indemnity costs will be granted upon Mr Finch’s Beddoe application.

[91] John’s case is quite different. The constructive trust claim if successful will materially and significantly affect John. Also it is John who is very much in the focus of the plaintiffs’ claims of material influence.

[92] It is now properly conceded that an order for indemnity costs be strictly confined in the manner the Court has already identified. It follows that any costs incurred by John or his interests shall be borne by them and not the estate. Reasonable indemnity costs will only be paid for the neutral actions of the executors for the strict purpose of assisting the Court with the information it requires for its purposes.

[93] It appears to this Court that that order is far more limited and constrained than that which John, alone, sought by his Beddoe application.

[94] The Court gave consideration to refusing him any Beddoe application by or on behalf of the executors because of the dual capacity which John bears by his respective responsibilities. But, the Court believes there is an element of control available to check any claim for indemnity costs and hence reserves leave to the executors to apply for certification of those as reasonable indemnity costs. Any such application is to be served on the plaintiffs who shall have one week thereafter to file and serve a memorandum in response.

[95] If the plaintiffs continue to have concerns about John’s dual function in these proceedings then in due course the plaintiffs can make application for John’s removal as an executor.

[96] It seems to the Court that some degree of success has been achieved by all parties represented upon the Beddoe applications. The Court’s inclination is to award reasonable indemnity costs to all parties. However, and because no submissions were called for on the matter the Court reserves leave to any party to file submissions if they are dissatisfied with that suggestion.

[97] Leave is reserved to the parties to apply if further clarification is required regarding any orders made herein.

[98] At the conclusion of the hearing upon the Beddoe applications the Court convened a case management conference. In that, there was some discussion regarding time needed to complete discovery obligations. Also the plaintiffs wished to consider filing an amended pleading.

(d) Any statement of defence to the amended pleadings is to be filed and served by 12 September 2014.

(e) Any interlocutory applications and as well any applications for non party discovery are to be filed and served by 19 September 2014.

(f) A further case management conference is to be convened on the first available date after 19 September 2014 as is advised to counsel by the Registry. Memoranda from counsel for that conference are to address

High Court of New Zealand Decisions

Mahon v Mahon [2014] NZHC 1430 (25 June 2014)