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Court costs in disputes as to who should be trustee

By Terri Gough - 10 Nov 2019

The recent Court of Appeal decision in Guest v Guest [2019] NZCA 64 stands as a reminder to trustees that if they do not act reasonably, then they may be exposing themselves to a significant costs liability.

Guest v Guest involved a bitter family dispute surrounding the Martin and Anne Guest Family Trust. The family's multiple claims involved the trustees, beneficiaries and professionals connected with the trust. The disputes were put to one side, however, while the High Court separately and first set about deciding who should be the ongoing trustee(s).

Of the warring parties, one faction sought to keep the existing trustees in place although they were deeply involved in the dispute and the other faction wished to have an independent trustee appointed who could administer the trust in an objective and impartial way.

Inevitably, the High Court appointed an independent trustee. In regard to court costs, the Judge in the High Court took the view that no-one could truly claim to be the successful party in the proceeding, so he ordered that costs lie where they fall. In other words, each party bore their own costs.

The costs ruling was appealed. The Court of Appeal reaffirmed the most basic principle in relation to costs that they are normally awarded to the party who has the success.

In this case the existing trustees ought to have recognised their lack of independence and agreed to step aside in favour of an independent trustee. Their rejection of that course was unreasonable, so costs ought to 'follow the event'.

The result was that those parties who refused appointment of the independent trustee were ordered to jointly and severally bear costs of $ 104,367 in favour of the other party to the dispute. It is interesting to note that one of the hitherto trustees was a company, but the costs were awarded directly upon the director of that company rather than the company itself. This recognised the director's close connection to the proceedings.

Martelli McKegg specialises in trust litigation. If you are unsure of your duties as a trustee, then contact one of our team and we will be able to advise you.


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