Dunham v Chambers [2014] NZHC 9 (15 January 2014)

Last Updated: 14 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-002760 [2014] NZHC 9

IN THE ESTATE OF ELSIE ANNE CHAMBERS Deceased

BETWEEN RACHEL DUNHAM Applicant

AND CHRISTOPHER EDWARD CHAMBERS Respondent

Hearing: On the papers

Counsel: R J Connell for Applicant

C R Andrews for Respondent

Judgment: 15 January 2014

JUDGMENT OF KATZ J [Costs]

This judgment was delivered by me on 15 January 2014 at 3:00pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Connell & Connell, Auckland

McVeagh Fleming, Auckland

DUNHAM v CHAMBERS [2014] NZHC 9 [15 JANUARY 2014]

Introduction

[1] Elsie Anne Chambers died in April 2011. Probate was granted in May 2011, appointing the respondent, Mr Christopher Chambers, as sole executor of the deceased’s estate. The applicant, Mrs Rachel Dunham, is Mr Chambers’ sister. She is a residuary beneficiary of the estate, along with Mr Chambers and their other siblings.

[2] On 25 July 2013, Mrs Dunham’s solicitor wrote to Mr Chambers asking him to provide a full accounting of his administration of the estate to date, within

10 working days of receiving the letter. Mr Chambers subsequently provided

Mrs Dunham’s solicitors with a statement of financial accounts on 13 August 2013.

[3] Mrs Dunham considered that the statements were neither full nor correct, and she filed an application under r 27.32 of the High Court Rules on 21 August 2013, seeking an order for the filing of accounts (“first application”). Mr Chambers consented to the orders sought and requested 20 working days to complete the accounts. Mrs Dunham agreed. Orders were made to that effect, by consent. The time for filing the accounts was subsequently extended to 30 working days, also by consent.

[4] Mr Chambers enlisted the services of a chartered accountant to assist, and provided an inventory and financial accounts of the estate on 29 October 2013. In Mrs Dunham’s view those accounts were also incomplete and incorrect. Her solicitor filed a further application on 5 November 2013, seeking the removal of Mr Chambers as an executor and the appointment of a replacement executor/administrator (“second application”). A complete audit of the administration of the estate from the date of the deceased’s death was also sought.

[5] The following day, Mr Chambers’ counsel filed a memorandum in reply. He advised that, prior to receipt of Mrs Dunham’s memorandum, Mr Chambers had been in the process of preparing an application to remove himself as an executor. This was not because he accepted the allegations of incompetence, but was rather due to the stress and tensions the office had caused him, including tensions with his sibling beneficiaries. The memorandum advised that Mrs Dunham had been advised

that such an application was imminent prior to filing her own application, which she acknowledges. Nevertheless, she proceeded to file and serve her own application to remove Mr Chambers as the executor.

[6] Mrs Dunham now claims costs for both applications and seeks costs against Mr Chambers personally on an indemnity or increased costs basis. Mr Chambers opposes Mrs Dunham’s application and seeks that his costs be paid by the estate.

Mrs Dunham’s costs

[7] Mrs Dunham seeks indemnity costs of $17,387.50 against Mr Chambers in relation to the first and second applications. In support of this claim she alleges that there were serious shortcomings in Mr Chambers’ administration of the estate. Essentially, she makes accusations of gross misconduct. In her view this justifies an award of indemnity costs against Mr Chambers personally in respect of both applications.

[8] Mr Chambers opposes the costs orders sought by Mrs Dunham. In relation to the misconduct allegations he submits that there is insufficient evidence before the Court of any shortcomings on his part. Further, the alleged misconduct is irrelevant to the costs issues before the Court. Mr Chambers submits that his conduct in relation to the two applications was appropriate and reasonable and there is no justification for a personal costs award against him.

[9] Firstly, I note that there have been no findings by this Court of any misconduct by Mr Chambers or any other serious shortcomings in relation to his administration of the estate. Further, there is little or no basis on which such findings could be made on the information before the Court in the context of this costs application. For costs purposes the focus must primarily be on Mr Chambers’ conduct in relation to the first and second applications.

[10] In relation to the first application, I note that Mrs Dunham did not appear to raise any concerns regarding the financial information provided by Mr Chambers directly with him. Rather, she proceeded straight to the filing of a court application. She was entitled to do so. I accept however, Mr Chambers’ submission that it cannot

be concluded that he would not have voluntarily provided the more detailed financial information sought, without the necessity of a court application. Indeed, his response to the application was co-operative and orders were made by consent.

[11] In relation to the second application, Mr Chambers’ solicitor had already advised Mrs Dunham of Mr Chambers’ intention to seek to be removed as executor at the time of her application. She elected to file an application regardless. Again, the matter was resolved by consent.

[12] Mr Chambers appears to have behaved co-operatively and reasonably in relation to both applications. Unproven allegations of misconduct in relation to the administration of the estate in a more general sense cannot justify a personal indemnity costs award against Mr Chambers in relation to the two specific applications before the Court. Indemnity costs awards are exceptional, as are costs awards against an executor personally. Mrs Dunham has not established that sufficient grounds exist for the making of a personal indemnity costs award against the executor in this case.

[13] The appropriate course is an award of scale costs on a 2B basis, to be paid out of the estate, in respect of both applications. In respect of the second application this is possibly generous, given that Mr Chambers had already foreshadowed an intention to apply to be removed as executor and replaced by the Public Trustee prior to the next Court hearing date (the following week). Mrs Dunham concedes that she was aware of this. It was therefore unnecessary for her to file her own application to remove Mr Chambers. I note that Mr Chambers would, however, have incurred costs in applying to remove himself as executor. These would have been met by the estate. I therefore consider that while it was unnecessary (or at least premature) for Mrs Dunham to make the second application, her costs in doing so may not have been entirely wasted. It is likely however, that at least some duplication of costs was included, as Mr Chambers own application was presumably well advanced.

Mr Chambers’ costs

[14] Mr Chambers seeks be indemnified for his legal costs in relation to both applications, consistent with the principle that executors and administrators are entitled to be indemnified for costs properly incurred in the exercise of their duties.

[15] Mr Chambers submits that s 21 of the Administration Act 1969 is largely similar to s 51 of the Trustee Act 1956. Generally, a trustee’s retirement should be met from the trust fund. Mr Chambers submits that this should also be the case when it comes to an executor’s costs. He refers to the case of Re Estate of Parker¹ where Brewer J granted an application removing executors of an incompletely administered estate and appointing a replacement sole executor in their place, and ordered that the outgoing executors’ reasonable costs for that application should be paid out of the estate.

[16] Executors are generally entitled to have their actual and reasonable costs meet by the estate.² I have found that Mr Chambers’ conduct in relation to both applications was reasonable. Any costs he incurred in preparing an application to be removed as an executor were also incurred reasonably, notwithstanding Mrs Dunham effectively pre-empting that application by filing her own application. In accordance with the usual principles, such costs are appropriately met out of the estate.

Result

[17] I order as follows:

(a) Mrs Dunham’s costs in relation to the first application are to be met by the estate on a category 2B basis.

(b) Mrs Dunham’s costs in relation to the second application are to be met by the estate on a category 2B basis.

(c) Mr Chambers’ actual and reasonable costs and disbursements in relation to both applications, together with any costs associated with

¹ _{Re Estate of Parker [2012] NZHC 569.}

² Keelan v Peach [Costs] [2003] NZFLR 727 at [7].

his proposed application to remove himself as a trustee, are to be met

_{by the estate, on an indemnity basis.}

Katz J