Costs are an increasingly important consideration of proceedings involving trusts, whether initiated by trustees, beneficiaries or third parties.
Part 14 of the High Court Rules governs the award of costs. Relevantly r 14.2 sets out the principle that relate to costs with the primary principle being that the party that fails with respect to a proceeding should pay costs to the successful party. Costs awarded to the successful party are generally by reference to scale costs in the first instance and may not fully reflect costs actually incurred.
In some circumstances increased costs, that more can be payable. The rules that relate to increased costs are set out in r 14.6(3). A claim for increased costs is calculated on a step by step basis (see Holdfast NZ Limited v Selleys Pty Limited). However, where an arguments was inherently unlikely to succeed, increased costs may apply to all steps in the proceeding (NR v MR  NZCA 623).
Whether an argument is inherently unlikely to succeed will depend on the facts of the matter. In Hillier v Whitewood, the preliminary question before the court turned on the interpretation of a trust deed. In that case the court was of the view that the meaning of the clauses was not entirely clear and although the respondents had a strong case, it did not follow that the applicants’ case was “totally devoid of merit.”
A more favourable costs outcome can arise where parties agree to determining preliminary matters on the papers or early in proceedings particularly where this might be determinative with respect to the substantive proceedings.
Taking steps in a timely fashion
In James v Newton the court ordered that the trustees pay costs on a 2B basis because they failed to approach the caveator Mr James before invoking the lapsing procedure in the Land Transfer Act. The court being of the view that the expenses incurred by both sides could otherwise have been avoided, accepting that Mr James had little alternative but to file an application given the tight time constraints for such a step to be taken. Note that this was notwithstanding the view of the court that Mr James’ claim faces real difficulties including limitation defences and the equitable doctrine of laches.