Triezenberg v Mason [2018] NZHC 186 (19 February 2018)

Last Updated: 25 September 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001688 [2018] NZHC 186

BETWEEN	VICKI ANN TRIEZENBERG and PAUL MORLEY DODD Plaintiffs
AND	ALEXANDER CHARLES MASON First Defendant WENDY ANNE MASON Second Defendant

Hearing:	(On the papers)
Judgment:	19 February 2018

JUDGMENT OF VENNING J

APPLICATION FOR PAYMENT OF LEGAL EXPENSES

This judgment was delivered by me on 19 February 2018 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Wilson McKay, Auckland

Gregory J Thwaite, Auckland

Copy to: J McGuigan, Auckland

TRIEZENBERG & ANOR v MASON [2018] NZHC 186 [19 February 2018]

[1] The Registrar has referred this file to me as duty Judge.

[2] In the substantive proceedings the plaintiffs, who are trustees of the Mamari Trust and Mamari Trust No 2 seek orders under the Trustee Act 1956 (the Act) removing the first and second defendants from their position as trustee (in the case of Alexander removal as trustee of both trusts, and in the case of Wendy removal from her position as trustee of the Mamari Trust). The plaintiffs also seek directions from the Court related to the payment for care of Wendy and orders validating other steps taken by them as trustees.

[3] The current application before the Court for determination is the plaintiffs’ application for orders making funds held by the Mamari No 2 Trust available to the plaintiffs and defendants for payment of counsel and solicitors’ fees and disbursements, or in the alternative that funds separately held in the names of the defendants on deposit with a sharebroker, are made available for the same purpose.

[4] The application has been before the Court on a number of occasions. Counsel have filed a number of memoranda on this application and related issues. Counsel are now agreed that the application can be dealt with on the papers, although Mr Thwaite’s memorandum says the waiver is on the basis that no party should receive a sum from either trust for the conduct of the litigation but if the plaintiffs are granted a sum Alexander should be paid a similar sum.

[5] The starting point is that a trustee may reimburse him or herself or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers of the trust.¹ In the present case the trust deed also provides for the trustees to be indemnified for any liability (costs) arising out of or in connection with the trustee acting as a trustee. The clause is broad enough to cover legal expenses properly incurred.

[6] Section 71 of the Act may also apply. It enables the Court to order costs and expenses of and incidental to any application for an order under the Act or of and

¹ Trustee Act 1956, s 38(2).

incidental to any such order to be paid in such manner and by such persons as the Court may deem just.

[7] In the case of legal costs the applicable principles have been considered by this Court before. In Re O’Donoghue Hammond J cited the following propositions:²

The essential concept in both the United Kingdom, and New Zealand, is that of reimbursement. The trustee discharges costs, expenses and even liabilities and then recovers them from the trust property. This is not to suggest that a trustee must always meet these expenses; in practice trustees routinely make payments out of funds readily available from the trust. But of course, all such payments have to be justified on the indemnification principle. The consequence of this general principle is that it is the beneficiaries who are meeting the trustee's expenses. It follows that it is critical that there be a check on those expenses and costs incurred by a trustee.

The classical Chancery principle was, from the outset, that it is only expenses which are ``properly incurred'' which are the subject of a trustee's indemnity. The authority most often cited for this is Re Beddoe [1893] 1 Ch 547 at p 558; but the principle still obtains today – see Holding and Management Ltd v Property Holding and Investment Trust plc [1990] 1 All ER 938 (CA) . The direct consequence of this principle is that improperly incurred expenses fall upon a trustee personally. In that sense, a trustee is always at risk when he or she incurs expenses.

There is a respectable volume of case law authority around in the British Commonwealth as to what may be regarded as ``not improperly incurred expenses''. Necessarily, given the principle, these cases all appear to be determinations on the factual position arising in a particular case. But the principle that expenses must be properly incurred necessarily requires a trustee, if called upon, to demonstrate that the expenses arose out of an act falling within the scope of his trusteeship; whether it was something that his or her obligations required the trustee to undertake; and whether the expense incurred was, in all the circumstances, ``reasonable''.

...

The notion that a trustee must act ``reasonably'' is necessarily qualified in various ways. First, it has never been thought unreasonable for a trustee to hire a properly qualified person to carry out work which the trustee is not qualified to undertake. Second, the trustee does not have a limitless ability to resort to the law: his function is to assert the interest of the beneficiaries only to a point where there is a judicial ruling on something that is properly required, such as the construction of a fairly debatable point in an instrument, or whether the trustee ought to take a certain course. ... Third, a trustee is not entitled to expenses arising out of his own misconduct.

² Re O’Donoghue [1998] 1 NZLR 116, at 121–122.

[8] As to the onus of proof where, on their face, the trustees’ actions appear regular enough the burden of proving unreasonableness falls on the party alleging the same.³

[9] More recently the Court of Appeal in Butterfield v Public Trust restated the proposition in relation to indemnity for legal costs:⁴

[20] It is one of the fundamental rights of an honest express trustee that costs and expenses properly incurred in the administration of the trust are compensable out of the assets of the trust. As Danckwerts J explained in Re Grimthorpe:

It is commonplace that persons who take the onerous and sometimes dangerous duty of being trustees are not expected to do any of the work on their own expense; they are entitled to be indemnified against the costs and expenses which they incur in the course of their office; of course, that necessarily means that such costs and expenses are properly incurred and not improperly incurred. The general rule is quite plain; they are entitled to be paid back all that they have had to pay out.

[21] The proposition is so fundamental that it need not be justified. It is a right, probably proprietary in nature, recognised by equity as an incident of trusteeship. The right is to an indemnity for reasonable costs and expenses incurred in the administration of the trust. That is not the same as an award of indemnity costs in litigation. The entitlement in the first instance is against the trust and its assets. A current trustee may therefore deduct reasonable costs and expenses incurred in the administration of the trust from the trust assets, in exercise of a right of exoneration. Former trustees may claim such costs and expenses from their successors or, failing satisfaction, via the court. Exercising its supervisory jurisdiction the court will review costs and expenses incurred to ensure they are both necessarily incurred in the interests of the trust and reasonable in extent. The limitation was set out in New Zeuncil v Foulkes:

The limitation on a trustee’s right of indemnity is, however, that the expenses are “properly incurred”. The duty to seek advice does not extend, for instance, to pose questions the answers to which are perfectly obvious. Nor where no real and substantial dispute exists. Unnecessary proceedings, or the taking of unnecessary procedural steps needlessly increasing costs, may mitigate (or eliminate) the right of indemnity. Again, excessive costs lie beyond the scope of indemnity. Every dollar paid in trustees’ expenses is a dollar denied to beneficiaries of the Trust.

[10] The issue then is the reasonableness of the plaintiff trustees pursuing the current substantive application to the Court. I am conscious that the substantive proceeding is yet to be resolved. Directions have been made to ready this case for a four day hearing allocated on 3 September this year. It is not possible, nor would it be appropriate for this Court, to make definitive findings as to the actions of the plaintiffs

³ Re O’Donoghue, above n 2, at 122.

⁴ Butterfield v Public Trust [2017] NZCA 367, at [20]–[21] (footnotes omitted).

and particularly the actions of the defendants in the present case. That must be for the substantive hearing. Only a very preliminary view can be formed at this stage.

[11] Ms Triezenberg is a daughter of the defendants. Mr Dodd is independent to the extent that he is an accountant who has advised the trust and the defendants, particularly the first defendant in the past. They both separately depose that the first defendant’s action have effectively led to a stalemate in the administration of the trusts, (and the provision of care for the second defendant) so that these proceedings are necessary.

[12] On the basis of the affidavit evidence on the Court file to date there is an evidentiary foundation which supports the actions of the plaintiffs in seeking the directions to remove the defendants as trustees and for the related orders sought under s 66 of the Act. On the face of the evidence which I acknowledge is contested, the plaintiff trustees have acted reasonably in initiating and pursuing these proceedings. Given the impasse and the issues raised, it is important that the trustees have representation for these proceedings. At present on the information before the Court the first defendant fails to satisfy the onus on him that the plaintiffs have acted unreasonably in taking such advice and pursuing these proceedings.

[13] There will therefore be an order in terms of the application before the Court, namely that the funds held on deposit with the ANZ Bank under the name of the Mamari No 2 Trust are to be made available to the plaintiffs and defendants for the payment of their respective counsel and instructing solicitors’ outstanding fees and disbursements and for ongoing fees and disbursements in these proceedings in the first instance.

[14] I decline to make an order in the terms sought by Mr Thwaite that the first defendant have access to a “similar sum”. What may be reasonable in terms of quantum for the plaintiffs may not be reasonable for the defendants. The order is broad enough to allow payment of the first defendant’s legal costs, in the first instance. I reserve the issue of reasonableness of the quantum of the costs incurred and the steps taken by all parties for determination and adjustment if necessary following the substantive hearing.
[15] I make no order for costs on the current application.







Venning J