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Beneficiary rights, Trustee liability

Cost of failure

The proceedings in Bone v Tuck relate to an application for the removal of Mr Tuck as a trustee of the Tuck Family Trust (the Trust).  The background can be explained as follows:

[3] Ms Bone alleged that Mr Tuck had not acted appropriately as a trustee and ought to be removed.

[4] Mr Tuck agreed to his removal as a trustee in a memorandum of admission of cause of action, dated 11 February 2019. That admission was filed not long after Jagose J, on an ex parte application by Ms Bone, suspended Mr Tuck as a trustee of the trust. Jagose J concluded that Ms Bone had a serious case for trial that Mr Tuck had failed to properly manage trust assets and to treat all beneficiaries equally and impartially.

[5] On 22 November 2019, there was an examination hearing of Mr Tuck before me and in relation to monies paid by the trust to Mr Tuck and alleged impropriety and failure by Mr Tuck properly to account for monies paid to him.

On the matter of costs Associate Judge PJ Andrew order that Mr Tuck pay costs on a 2B basis, which amounted to $32,026, the reasons for this set out as follows:

[12] I acknowledge that Mr Tuck has made a genuine effort to try and resolve was is essentially an internal family dispute, but that provides no justification for his reluctance to provide the information sought or to account for his actions as a trustee to the beneficiaries of the trust.

[13] I conclude therefore, that Mr Tuck should pay costs to the plaintiff, Ms Bone, on a 2B basis in the sum of $32,026 as calculated in the costs schedule to the plaintiff’s memorandum of 19 December 2019. I am not persuaded that there should be an uplift of costs, although the grounds advanced for such an uplift by Ms Bone were not without merit.

[14] In his affidavit of 18 February 2020, Mr Tuck has requested that the Court not order him to pay Ms Bone’s costs but that the costs should instead come out of the estate “as a cost of the estate”. However, “the estate” is not a party to the proceedings before me and I am unclear as to whether Mr Tuck in fact meant that costs should come out of the Tuck Trust.

[15] In a recent decision of the Court of Appeal, Sunde v Sunde, the Court confirmed that the general principle that the right of a trustee to compensation from the assets of the trust for costs and expenses properly and reasonably incurred in the administration of the trust is longstanding and well settled. In New Zealand this right has been codified in s 38(2) of the Trustee Act 1956.

[16] I doubt that the test of expenses properly and reasonably incurred has been made out in relation to Mr Tuck. In any event, the new trustee, namely the Public Trust, would need to be given the opportunity to express a view, before I could properly determine that matter.

For a wide-ranging consideration of beneficiary rights see Trust Series 2020 – Beneficiary Rights, which will be presented by Vicki Ammundsen

References:

  • Bone v Tuck [2020] NZHC 393
  • Sunde v Sunde [2019] NZCA 552

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