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Beddoe Order, Charitable trusts, Directions, Indmenity, Removal of trustees, trust, Trustee Act, Trustees, Trusts

Proper and reasonable

Until his removal in 2014 Toni Waho was a trustee of the Te Kōhanga Reo National Trust (the Trust), a trust that promotes the use and retention of Te Reo.  Me Waho was removed as a trustee on grounds that he had brought the Trust into disrepute by raising matters relating to the Trust and its commercial arm with the Minister of Education.

Mr Waho was able to establish that he was unlawfully removed from office and a declaration was made to that effect in the substantive judgment in Waho v Te Kōhanga Reo National Trust.  The matter of costs was the subject of a subsequent costs decision.  Mr Waho sought $549,000 indemnity costs.

Mr Waho relied on the indemnity in the trust instrument, s 38(2) of the Trustee Act 1956 and the Supreme Court decision in Fenwick v Naera (specifically, that an indemnity from trust funds is available to someone who brings before the Court a matter that is in the interests of the trust to have brought before the Court).

The Trust resisted Mr Waho’s claim to indemnity costs (suggesting that a 2B award of $79,990 would be appropriate), questioning whether his costs were properly incurred.  The Trust also resisted the claim on the basis that Mr Waho had not sought compensation pursuant to the trust deed and because any claim for indemnity costs would required the Court to make determinations of fact as to whether the costs were properly incurred.

In finding that Mr Waho was entitled to indemnity costs (but not finding what that amounted to), the Court considered the principles that apply with respect to costs.  Specifically:

  • trustees have been permitted to recover out-of -pocket expenses since at least 1802 (following Worrall v Harford) and in accordance with s 38(2) of the Trustee Act
  • s 71 of the Trustee Act empowers the Court to order that the costs of any application be paid out of the property in respect of which it is made “or to be borne and paid in such manner and by such persons as to the Court may seem just.”
  • a trustee concerned as to the validity of a power of removal should apply to the Court for directions placing all material facts before the Court.  See Carmine v Ritchie. 
  • A trustee is entitled  to an indemnity for costs reasonably and properly incurred.  The assessment of reasonableness of costs is fact-dependent.  See Re O’Donoghue.
  • Costs are reasonably incurred if a reasonable observer would expect those costs to be incurred. Reasonable costs are assessed by reference to the appropriate time for each step and the reasonably applicable median hourly rate. The result must be fair and just. See Bradbury v Westpac Banking Corporation.
  • Where a trustee’s actions appear regular it is up to the party asserting unreasonableness to prove this.  See  Re O’Donoghue.

Clark J held at [19] that Mr Waho is entitled to indemnity costs. “Critical to [this] assessment” was her finding in the substantive judgment where she notes at [103] that:

“The evidence has satisfied me that Mr Waho acted not only with a sense of personal integrity but in conformity with the contractual and fiduciary obligation on each member of the Board to disclose to the relevant Ministers allegations of serious wrongdoing by TPO and trust Board members, and to take timely steps to address the allegations. There was no objectively supportable factual foundation for the Board’s assertion Mr Waho had brought the Trust into disrepute.”

However, the next step is to determine whether the indemnity costs sought were reasonable. In this regard the court was critical of the Trust’s submissions, which did not identify the costs the Trust maintains are unreasonable.   Clark J considered the Trust’s approach to the matter of costs “perplexing”.  To progress matters the Trust has been asked to:

  • identify the costs it considers unreasonable
  • identify which aspects of the three-paragraph summary of settlement discussions is inaccurate. As noted at [36], unreasonable refusal to settle will be taken into account in determining costs awards.  See High Court Rules 2016, r 14.6(3)(v)
  • unless a valid objection is made, disclose its full legal costs and those of (former trustee) Mrs Olsen-Rātana. In this regard reference was made to the fact that the level of costs incurred by the unsuccessful party is a potentially useful comparator in assessing the reasonableness of costs claimed by a successful party.  See Williams v Waimate District Council.

Parting comments made “to inform counsel’s approach” included Her Honour’s observations regarding timetable defaults and late discovery that affected the formulation of Mr Waho’s claim and the relief sought.

Aspects of the decision are fact specific.  However, the important message is the need for proportion in the approach to costs sought to be recovered by trustees, on whichever side of a dispute one might sit.

References:

  • Waho v Te Kōhanga Reo National Trust [2018] NZHC 3388 (Costs judgment)
  • Waho v Te Kōhanga Reo National Trust [2018] NZHC 1935 (Substantive judgment)
  • Fenwick v Naera [2015] NZSC 68
  • Worral v Harford (1802) 8 Ves 4
  • Carmine v Ritchie [2012] NZHC 2279
  • Re O’Donoghue [1998] 1 NZLR 116
  • Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859
  • High Court Rules 2016, r 14.6(3)(v)
  • Williams v Waimate District Council [2013] NZHC 2922

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