[3 Individual Present Professional Trustees of 2 Trusts] v [(1) an infant prospective beneficiary of one trust (2) an adult beneficiary, Mrs A, of the other]
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LINDSAY |
| Judgment Date | 25 July 2007 |
| Neutral Citation | [2007] EWHC 1922 (Ch) |
| Docket Number | Case No: HC06C04217 |
| Court | Chancery Division |
| Date | 25 July 2007 |
[2007] EWHC 1922 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lindsay
Case No: HC06C04217
This is a judgment which I give in private. I have before me an application which arises in the course of a Beddoe application. I shall first explain what a Beddoe application is, if only to illustrate what protection trustees have even where no Beddoe order is made.
In Re Beddoe Downes v Cottam [1893] 1 Ch 547, the Court of Appeal heard an appeal from Kekewich J that dealt with a trustee's costs of his unsuccessful defence to an action in detinue in relation to the custody of deeds. The old Chancery practice (see page 554) had been to give a trustee his costs out of the trust estate almost as of course but the then more recent order 65, Rule 1 of the then RSC, made the award of costs a matter of discretion even in trust cases.
At page 557 Lindley LJ said:
“But a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards costs, even if he acts on counsel's opinion.”
A little later at page 558 he said:
“But, considering the ease and comparatively small expense with which trustees can obtain the opinion of a Judge of the Chancery Division on the question whether an action should be brought or defended at the expense of the trust estate, I am of opinion that if a trustee brings or defends an action unsuccessfully and without leave, it is for him to shew that the costs so incurred were properly incurred. The fact that the trustee acted on counsel's opinion is in all cases a circumstance which ought to weigh with the Court in favour of the trustee; but counsel's opinion is no indemnity to him even on a question of costs. This was decided in Stott v Milne (1884) 25 Ch D 710.”
At page 562 Bowen LJ said this:
“The principle of law to be applied appears unmistakeably clear. A trustee can only be indemnified out of the pockets of his cestuis que trust against costs, charges, and expenses properly incurred for the benefit of the trust—a proposition in which the word “properly” means reasonably as well as honestly incurred. While I agree that trustees ought not to be visited with personal loss on account of mere errors in judgment which fall short of negligence or unreasonableness, it is on the other hand essential to recollect that mere bona fides is not the test, and that it is no answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor told him, if his solicitor has been wrong-headed and perverse. Costs, charges, and expenses which in fact have been unreasonably incurred, do not assume in the eye of the law the character of reasonableness simply because the solicitor is the person who was in fault. No more disastrous or delusive doctrine could be invented in a Court of Equity than the dangerous idea that a trustee himself might recover over from his own cestuis que trust costs which his own solicitor has unreasonably and perversely incurred merely because he had acted as his solicitor told him.
If there be one consideration again more than another which ought to be present to the mind of a trustee, especially the trustee of a small and easily dissipated fund, it is that all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk should be incurred. If a trustee is doubtful as to the wisdom of prosecuting or defending a lawsuit, he is provided by the law with an inexpensive method of solving his doubts in the interest of the trust. He has only to take out an originating summons, state the point under discussion, and ask the Court whether the point is one which should be fought out or abandoned. To embark in a lawsuit at the risk of the fund without this salutory precaution might often be to speculate in law with money that belongs to other people.”
A.L. Smith LJ concurred.
The practice of seeking directions from the court, as these citations suggest, already existed (see also the argument of Mr Cottam at page 549). The Beddoe practice was, no, doubt, thereafter followed on very many occasions without further mention in the reports but it was, in one practical respect, challenged in Re Moritz [1960] 1 Ch 251 per Wynn-Parry LJ. In that case counsel for the trustees, Mr John Knox (later Knox J) argued inter alia that there was a settled practice that where an application, there by summons, is made by trustees for directions of the Beddoe kind, then the proposed defendant beneficiaries under the relevant trust should not necessarily see all the evidence relating to the dispute. The trustees there had denied the defendants a sight of the exhibits to the affidavits.
Mr John Balcombe (later Balcombe LJ), counsel for the beneficiaries, the proposed defendants, accepted that his clients as beneficiaries should be defendants to the summons which was asking for such directions but argued that he should be entitled to attend throughout to present arguments to the court, including ones based on the so-far denied exhibits, and that it should be in the discretion of the Judge whether those arguments were heard in the presence of parties other than the trustees who sought the directions of the court. He took the obvious point, to which Bowen LJ had referred in Re Beddoe, that where one was considering beneficiaries and where their trust estate might bear the expense of the proposed litigation, it was beneficiaries’ money that was being spent or being proposed to be spent.
At page 254 Wynn-Parry J said:
“Speaking for myself, so far as I know, it has been the practice of this court, without exception, over a great many years, that where, in such a case as this, application is made by a trustee ex necessis where there are disputes, for directions from the court as to whether or not proceedings should be brought against the defendants, those defendants are not entitled to be heard upon that application. The court acts upon such evidence as is placed before it and it expresses itself one way or the other.”
At page 255 he continued:
“As I understand it, the practice in this Division is that where a trustee finds it is compelled to ask for the directions of the court as to whether or not certain proceedings should be taken, while it is proper and indeed necessary to join the parties against whom the proposed relief is sought, those parties should not be present in Chambers when the matter is debated; and they should not be furnished with the evidence upon which the court is asked to act… Very frequently, the leave to proceed is limited, for instance, up to discovery, but it would seem to me to be a quite unjustified inroad upon what I conceive to be a very useful practice if I were to allow this application and to allow the two defendants not merely to be present at the beginning of the proceedings when the originating summons is heard, but to remain there throughout those proceedings and to have all the evidence on which the trustees are asking the court for its directions. I know of no precedent for it, and, in my view, it is completely against the established practice.”
So much for procedural background. Ahead of a Beddoe application, which is shortly to be made by Leading Counsel on behalf of the Trustees of two settlements, I have before me an application by Mrs A, the proposed second defendant, a beneficiary under one only of the two trusts in issue, which I shall call the “1958 Settlement” and 1978 Settlement” respectively. She is a former trustee of both the trusts that are in issue and a person against whom significant relief is intended to be sought in the proposed proceedings intended to be brought as the main proceedings by the Trustees.
Mrs A's informal application moved by Leading and Junior Counsel is twofold and is firstly concerned with disclosure. She argues that she should be able to see not necessarily all, but more than has so far been made available to her, of the material upon which the Claimants, as the present Trustees of both trusts, intend to invite me to act in granting or withholding and if, appropriate, in framing Beddoe relief.
Her Counsel ask to see instructions to the Trustees’ Counsel from the Trustees’ solicitors, the opinions of Counsel which were the response thereto and, I understand, some valuation material. The parties have arranged that as yet I should not see any such material. Mrs A's Counsel points out there is no evidence on the Trustees’ part of any assessment yet made by them of what can be disclosed without their suffering injustice or prejudice, only that a blanket application has been made of that part of Re Moritz that speaks of the beneficiary not being furnished with the evidence (a conclusion against disclosure closer to absolute than Mr Knox had asked for).
A novel point emerges from Mrs A's Counsel's reliance, in aid of more disclosure, upon Article 6, the right to a fair trial, in Part I of the Schedule to the Human Rights Act 1998. That provides:
“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be...
To continue reading
Request your trial
-
Trustee N v Attorney General
...the Trusts in the Main Action would arguably have been a good reason for the Trustees not to disclose it to D2. 29 Re 3 Trustees [2007] EWHC 1922 (Ch) provides a good example of the modern approach to Beddoe disclosure. The trustees of two trusts were shortly to bring a Beddoe application ......
-
Trustee 1 et Al v Attorney General and Respondent et Al
...was their fault, then they may be vulnerable in costs. See the judgment of Lindsay, J. in Re Professional Trustees of 2 Trusts [2007] E.W.H.C. 1922 (Ch) at paras 22–25. 14 Where, as in the instant case, the trustees are seeking not merely the guidance of the court but its approval for a par......
-
Trustee N v Attorney General
... ... Gib LR 211 Midland Bank Trust Co v GreenELR [1980] Ch 590 Re 3 Trustees [2007] EWHC 1922 ... 20 Crest Homes Plc v MarksELR [1987] 1 AC 829 Marcel v Commissioner ... AG v Guardian Newspapers (No 2)ELR [1990] 1 AC 109 ... from using material from the hearing in other proceedings or from disseminating it to the ... held ‘in camera’, which for present purposes is synonymous with ‘in private’, ... is confidential and is bound by professional obligations of confidentiality and non-disclosure ... the entirety of the trust funds of the Trusts on trust for the heirs (‘the Heirs’) of D2's ... claimant to the fund was himself a beneficiary under the trust, he should be allowed a limited ... but, eg, a beneficiary who was a prospective opponent in the main proceedings and who would ... 's children by his first marriage were the adult beneficiaries of some Jersey trusts. They ... ...
-
Ingham v Wardman (Costs)
...Ch 241 Barnsley v Noble [2017] Ch 191 Trustee L v Attorney General [2015] Bda LR 47 Individual Present Professional Trustees of 2 Trusts [2007] EWHC 1922 McDonald v Horn [1995] ICR 685 In re Evans dec'd [1986] 1 WLR 101 In re Dallaway dec'd [1982] 1 WLR 756 Breadner v Granville-Grossman [20......
-
Purpose Trusts: A Perplexing Ruling
...[1893] 1 Ch 547 Lewin on Trusts, 18th ed, (London, Sweet & Maxwell, 2008), paragraphs 23-45 At [73] [1960] Ch 251 [1964] 1 WLR 1269 [2007] EWHC 1922 The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your sp......