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.