Many legal minds making NZ LAW work

We are an association of independent legal practices, proactively sharing ideas and expertise for the benefit of our clients.

Trustees’ personal liability for litigation costs

Published: 26th February 2018

Author: Kimberly Lawrence, Greg Kelly Law Ltd

Published in: Trust e.Speaking | Issue 26

It can be an unpleasant surprise

Trustees and executors are not always entitled to reimbursement for their litigation costs.

While most trustees and executors will assume that costs incurred in the course of their trustee or executorship will be paid from the estate or trust, the recent decision in Courteney v Pratley[2] is an illustration of the perils that trustees or executors can face when they go to court.

Trustees and executors are in charge of the property of others. They are not expected to pay for their own expenses in doing so and, as such, are usually entitled to reimbursement of the costs they incur.

When trustees and executors go to court, however, they are only entitled to be reimbursed for their litigation expenses where those were ‘properly incurred’ in the course of their trustee or executorship. These factors will be relevant to whether the cost was properly incurred:

  • Whether the cost arose from actions taken within the scope of the trustee or executorship
  • Whether the cost was incurred because the trustee or executor’s obligations required them to incur the costs, and
  • Whether the expense incurred was reasonable.[3]

Where trustees are litigating against a third party to protect trust property, they will generally expect to be reimbursed because they are maximising, or trying to maximise, the property available to the beneficiaries.[4]

The need to be careful

Last year’s decision in Courteney v Pratley, however, suggests that executors and trustees may need to be more careful. In this case, Mr Pratley had been appointed by the High Court as executor shortly before a civil claim against the estate was to be heard in the District Court. Mr Pratley sought independent advice as to the merits of defending the claim and instructed lawyers to defend the claim on behalf of the estate. The estate was worth about $500,000 and the claim against the estate was for less than 10% of this. The estate lost the District Court case and was ordered to pay costs.

At a later stage the eventual beneficiary of the estate challenged Mr Pratley’s right to reimbursement of the litigation costs of the lawyers who had been instructed to defend the District Court case. The beneficiary said that the estate should not have defended the litigation and that the expense had not been properly incurred because it was not reasonable in all of the circumstances.

Justice Cull agreed with the plaintiff, Mr Courteney, and found that Mr Pratley was not entitled to reimbursement for the lawyers’ expenses incurred defending the District Court proceeding against the estate. She acknowledged that Mr Pratley had acted in good faith, and on legal advice, and that he believed he was protecting the estate assets.

However, Justice Cull found that executors and trustees should be cautious before proceeding with expensive litigation. She said that Mr Pratley ought to have applied to the High Court for directions as to whether he was to defend the District Court litigation or not. Even though the situation was urgent, and Mr Pratley had not been able to have the District Court case put off, Justice Cull still found that he should have urgently applied to the High Court for authorisation before instructing lawyers to defend the case.

Hostile litigation

When executors and trustees engage in litigation against beneficiaries (known as ‘hostile litigation’) they are often aware of the possibility that they will not be reimbursed for their costs in doing so. Most trustees and executors will assume, however, that if they are incurring legal costs in the course of defending trust or estate assets they will be entitled to reimbursement from the trust or estate.

Instead, the Courteney decision suggests that trustees and executors must carefully consider the size of the trust or estate, the likely costs that are expected to be incurred in the course of any litigation and, if they are unsure whether the steps they plan to take are reasonable or not, they should apply to the High Court for directions as to how to proceed.

It would be wise for executors and trustees to consider doing this at an early stage if litigation is contemplated or has been started against them, in order to avoid finding themselves personally liable for the litigation costs.


[2]    Courteney v Pratley [2017] NZHC 3285.

[3]    Re O’Donoghue [1998] 1 NZLR 116.

[4]    Re Buckton [1907] 2 Ch 406.

 

Related Articles

  • Auckland
  • Bay of Plenty
  • Canterbury
  • Coromandel
  • Gisborne
  • Hawke's Bay
  • Kapiti Coast
  • Manawatu - Wanganui
  • Marlborough
  • Nelson
  • Northland
  • Otago
  • Southland
  • Taranaki
  • Waikato
  • Wairarapa
  • Wellington
  • West Coast

Lowndes Jordan

Lowndes Jordan is a top niche law firm committed to service excellence, achieved through our dedication to understanding our clients' individual needs and requirements, developing tailored solutions and following through to ensure results are delivered.

Our commitment to quality is supported by being the first ISO 9001 certified law firm in New Zealand.

Lowndes Jordan has access to some of the nation's foremost legal and business advisory experts, allowing us to provide a full range of inputs to assist you in meeting your objectives.

We serve a wide range of clients including listed companies, multinationals, privately held companies, entrepreneurs and business individuals.

All clients have direct access to specialist partners and client service teams comprised of senior practitioners.

Region: Auckland

Phone: 09 309 2500

Attewell Clews & Cooper

Attewell Clews & Cooper is one of Whakatane’s largest and longest standing law firms. Our team embrace a culture of relaxed professionalism and share a common goal to provide high quality legal advice that is both practical and understandable. 

We are committed to being at the top of our game to ensure that our clients receive accurate and up-to-date legal advice.  We understand the world is online and use fore-front technology to achieve greater productivity and efficiency.  We encourage contact via email and text message, use an online legal library, have an intuitive practice management system and encourage our clients to pay online.

It is important to us that we understand your business and your unique individual (and family) situation. We work hard to provide sound legal advice that is tailored to your business industry and your personal goals. You will see us out and about in the community supporting local businesses, schools, community and sporting events. Talk to us today to find out how we can help you.

Region: Bay of Plenty

Phone: 07 307 0570

Malley & Co

Our experienced, solutions-focused team will work hard to get you the best possible outcome, whatever your legal needs.

Region: Canterbury

Phone: 03 379 0712

Purnell Lawyers

There is nothing as inevitable as change. Since opening for business early last century, we at Purnell Lawyers have seen many changes both in name and in the people who have made up the members of our team. We have been privileged to have served the public throughout all of these times. 

We are confident that we will continue to bring top quality legal services to our clients well into the future.

Region: Coromandel

Phone: 07 868 8680

Woodward Chrisp

At Woodward Chrisp we strive to meet the needs of our clients by providing a wide range of high quality legal services within a supportive and collaborative environment.

Woodward Chrisp is the amalgamation of two long established Gisborne legal firms: Woodward Iles & Co and Chrisp and Chrisp. Today’s partners are Ross Revington, Adam Simperingham, Jeff Allen and Ellie FitzGerald.

Region: Gisborne

Phone: 06 869 0900

NZ LAW Limited

NZ LAW Limited is an association of independent legal practices with member firms located throughout New Zealand. There are currently 53 member firms practising in a wide range of legal disciplines ranging from business law, home buying and selling, immigration law and intellectual property to aviation law and viticulture.

The group was established in 1992 when about five law firms met in Auckland to find a way to benefit their clients by replicating the conviviality and the sharing of ideas and expertise that occurs in larger law firms, but still be able to retain client confidentiality and their own independence.

Region: Hawke's Bay

Phone: 06 835 5299

BMC Lawyers

BMC lawyers has built a reputation for providing quality service and delivering real results. Our strength is our broad-ranging legal experience that gives us the ability to match clients with the right mix of legal skills for their particular needs.

Our legal professionals are passionate about what they do and work alongside a talented team of support and administration staff to make a real positive difference to our clients.”

Region: Kapiti Coast

Phone: 04 296 1105

Dorrington Poole

Dorrington Poole Lawyers has a long tradition in Dannevirke and was founded in 1914 by Percy Dorrington. The firm still acts for families of some of the earliest clients. The long term relationship with those clients gives continuity in a fast changing world.

The firm provides quality legal services within New Zealand for its rural, commercial and private clients. We provide services for clients not only in the Southern Hawkes Bay/Tararua area but also throughout the country.

Region: Manawatu - Wanganui

Phone: 06 374 7089

Wain & Naysmith

Based in Blenheim, Wain & Naysmith Lawyers is a full service law firm, and a powerhouse for property, family and business law.

We pride ourselves in providing clear and cost effective legal solutions and practical advice for you, your family and your business.

Region: Marlborough

Phone: 03 520 6103

Knapps Lawyers

As a firm, we promise to look after you and treat you in a manner that we would expect to be treated by a professional services provider; we promise to use every available legal remedy available to us to resolve your issue and to do what you ask us to do in a timely manner.

We will hold in strict confidence all information that we acquire through our work for you and which concerns your business or personal information.  The only exceptions are where you authorise us to disclose such information or where we must do so by law.

Region: Nelson

Phone: 03 544 7888

Thomson Wilson

Thomson Wilson is a full service law firm based in Whangarei. We’ve been trusted lawyers for the Northland community and beyond for 75 years.

We act for individuals and families, businesses, public sector and other organisations. Whether you need no-fuss advice on a simple matter, or a team of legal experts. 

Our staff provide advice in most areas of the law, including property law, business law, trusts and estates, separation and divorce, resource management, criminal law and more.

We also offer expertise in specialist areas such as Maori land, local government law, farming and forestry.

Region: Northland

Phone: 09 430 4380

Berry & Co

Berry & Co is a long established, well respected Otago law firm providing a broad range of legal services for our business and personal clients.

We enjoy working closely with our clients, we listen and then we provide practical commonsense legal advice that achieves the outcome that is desired. We have a reputation for obtaining excellent results.

Region: Otago

Phone: 03 433 0007

Sheddan Pritchard Law Ltd

Incorporating traditional values and a fresh perspective, Sheddan Pritchard Law is here to assist you with all your legal needs. 

Our friendly and team-driven approach underpins our firm’s values, recognising the importance of putting people first and allows us to connect and nurture professional relationships with new and existing clients within our local community of Gore, as well as throughout New Zealand and extending overseas.

Region: Southland

Phone: 03 209 0030

RMY Legal

Having been a cornerstone in the New Plymouth and Taranaki legal community since the 1930s we offer in-depth knowledge coupled with legal expertise and always put the needs of you and your business at the heart of what we do.

Not only do we offer a first class service to clients throughout Taranaki, we are passionate about what we do and our success stems from delivering advice in clear and understandable terms.

Region: Taranaki

Phone: 06 769 8080

Norris Ward McKinnon

We are the Waikato’s leading provider of specialist legal services with a national and international perspective.

We provide tailored legal advice to meet the diverse needs of large and small corporates, public institutions, small and medium businesses, individuals and families.

We know that choosing a law firm is not an easy task. We work with our clients to listen, reassure, and resolve their problems simply and cost effectively. From our experience, the best way to do this is through developing understanding and long-term relationships with our clients. Our team of lawyers are highly regarded with a depth of experience that gives them the credibility that underpins Norris Ward McKinnon’s solid reputation in the legal market. Put simply, they are real people dealing with the real issues that affect our clients day-to-day.

Region: Waikato

Phone: 07 834 6000

Gawith Burridge

Gawith Burridge traces its history back to 1875 when Charles Gawith first set up his practice. Since then the firm has undergone many changes, including a merger between Gawith & Co and Burridge & Co in 1998 to form our current practice.

Our firm draws on the breadth of expertise available from some of the region’s most senior legal practitioners, as well as the skills of those who have moved here from larger corporate environments.

As a result, we provide clients with a comprehensive range of legal services right here in the Wairarapa. We can provide you with legal assistance whether you are an individual or a company, with everything from setting up a Will to selling your farming business. 

Region: Wairarapa

Phone: 06 370 0000

Greg Kelly Law Ltd

Greg Kelly Law Limited is a boutique Wellington law firm specialising in trust and elder law. Our practice areas are wills, estates and trusts.

We act for private and institutional clients establishing and administering trusts, wills and estates. We also provide quality advice to legal and accounting firms in New Zealand and overseas. In particular, we can assist with legal opinions, obtaining and resealing probate, and estate and trust litigation.

Region: Wellington

Phone: 04 499 5193

Hannan & Seddon

The Law Firm of Hannan & Seddon dates back to September 1867.

The firm's offices were in Werita Street from 1867 until 1982 when the firm moved to Tarapuhi Street and then to its current spacious premises at 61 Guinness Street in 1998.

The name Hannan comes from Mr Michael Hannan whose son John Hannan (Jack) joined the firm in 1908. Jack Hannan remained in partnership until he passed away in 1974 at the age of 90!

The name Seddon comes from Mr T E Y Seddon (son of Premier Richard John Seddon from Kumara) who joined the firm in the 1920's. The other prominent Solicitor at Hannan & Seddon was Cyril McGinley who joined the firm in the late 1920’s and retired as a Consultant in 1997 aged 87.

Currently we have two Partners within our firm. Tony Sullivan who has been with us for 29 years and Colin Smith, 26 years. The firm also has two long serving Legal Executives Elaine Knowles and Beverley Walsh.  

Region: West Coast

Phone: 03 768 4169

All the information published on this website, or in any article herein is true and accurate to the best of the authors' knowledge. Information on this site should not be a substitute for legal advice. No liability is assumed by NZ LAW Limited, or individual NZ LAW member firms for losses suffered by any person or organisation relying directly or indirectly on information published on this site. Views expressed in any article are the views of the authors individually and do not necessarily reflect the view of NZ LAW or their member firms. Information appearing on this site may only be reproduced with prior approval from NZ LAW Limited Head Office, and credit being given to the source. © NZ LAW Limited