Trustee L and Others v Attorney General and Others
| Jurisdiction | Bermuda |
| Judge | Hellman J |
| Judgment Date | 24 March 2016 |
| Neutral Citation | [2016] SC Bda 50 Com |
| Docket Number | COMMERCIAL COURT CIVIL JURISDICTION 2013: No 238 |
| Court | Supreme Court (Bermuda) |
| Date | 24 March 2016 |
[2016] SC (Bda) 50 Com
In The Supreme Court of Bermuda
COMMERCIAL COURT CIVIL JURISDICTION 2013: No 238
Mr Alan Boyle QC, Mr Jonathan Adkin QC and Mr Narinder Hargun, Conyers Dill & Pearman, for the Plaintiffs
Mrs Elspeth Talbot Rice QC, Mr Mark Cran QC, Ms Emma Hargreaves and Mr Rod Attride-Stirling, ASW Law Limited, for the Second Defendant
Costs of Beddoe proceedings — whether Trustees entitled to recover their costs of the proceedings from the Trust fund — whether person resisting Beddoe application entitled to recover their costs from the Trust fund — whether Trustees entitled to recover their costs of the proceedings, including interlocutory applications, from person resisting Beddoe application, and, if so, whether on a standard or indemnity basis
The other Defendants did not appear and were not represented
This is a ruling as to the costs of a Beddoe application. I shall refer to the hearing of the application as ‘ the costs hearing.’ The Plaintiffs are the trustees (‘the Trustees’) of certain Bermuda purpose trusts (‘the Trusts’). The Second Defendant (‘D2’) is a child of the late S.
D2 is heir to a substantial share of S's estate (‘the Estate’). D2 has brought proceedings against the Trustees (‘the Main Action’) in which D2 claims inter alia that all the Trusts are void, or alternatively that the transfers of assets into the Trusts should be set aside (‘the primary case’), and that those assets form part of the Estate. The value of the assets held by the Trusts is very substantial.
The directors of the Trustees include Child 1 and Child 2, who are children of S, and two children of S's late brother, T. For ease of reference, I shall refer to them collectively as ‘the Family Directors’. The remaining director was the late X, a trusted senior employee who was instrumental in setting up the trust structure.
In July 2013 the Trustees issued an originating summons — a Beddoe application — in which they sought directions from the Court in relation to what position they should take in the Main Action and as to the administration of the Trust assets pending its resolution. Following a contested hearing which lasted five days I issued a ruling dated 15 th May 2015 in which I gave the Trustees leave if so advised to defend D2's primary case in the Main Action down to the conclusion of the trial at first instance and granted them an indemnity from the Trust fund for that purpose. I also approved the Trustees' revised proposals for the expenditure of Trust monies pending the resolution of the Main Action. D2 had opposed the Trustees' initial proposals, but did not object to the proposals in their revised form.
The Court's power to award costs is governed by Order 62 of the Rules of the Supreme Court 1985 (‘RSC’). The relevant parts of the rules are as follows:
Order 62, rule 3(3) provides:
‘ If the Court in the exercise of its discretion sees fit to make any order as to the costs of any proceedings, the Court shall order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.’
Order 62, rule 6(2) provides:
‘ Where a person is or has been a party to any proceedings in the capacity of trustee, estate representative or mortgagee, he shall be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by him in that capacity or out of the mortgaged property, as the case may be, and the Court may order otherwise only on the ground that he has acted unreasonably or, in the case of a trustee or estate representative, has in substance acted for his own benefit rather than for the benefit of the fund.’
Order 62, rule 10(1) provides:
‘ Where it appears to the Court in any proceedings that any thing has been done, or that any omission has been made, unreasonably or improperly by or on behalf of any party, the Court may order that the costs of that party in respect of the act or omission, as the case may be, shall not be allowed and that any costs occasioned by it to any other party shall be paid by him to that other party.’
The trustees' costs of a Beddoe application will generally fall under Order 62, rule 6(2). Thus they are an exception to the general rule in Order 62, rule 3(3). The costs of the other parties to a Beddoe application are generally dealt with in the same way. As Kekewich J stated in In re Buckton [1907] 2 Ch 406 Ch D at 414 — 415:
‘ In a large proportion of the summonses adjourned into Court for argument the applicants are trustees of a will or settlement who ask the Court to construe the instrument of trust for their guidance, and in order to ascertain the interests of the beneficiaries, or else ask to have some question determined which has arisen in the administration of the trusts. In cases of this character I regard the costs of all parties as necessarily incurred for the benefit of the estate, and direct them to be taxed as between solicitor and client and paid out of the estate.… I cannot remember any case in which I have refused to deal with the costs of an application by trustees in the manner above mentioned.
Thus, as Lloyd LJ stated in Davies v Watkins [2013] CP Rep 10; [2012] EWCA Civ 1570 at para 26 in the specific context of a Beddoe application:
‘ the normal rule is that, absent improper conduct, the costs of the trustee and of the beneficiary defendants will be paid out of the trust fund.’
This was the first of three classes of cases which Kekewich J identified in relation to the administration of an estate. The second class at 414 — 415 was in substance the same, but where the application was brought by a beneficiary rather than the trustee. In such a case the costs of all parties would also generally be borne by the estate. The third class at 415 was where a beneficiary brought a claim adverse to other beneficiaries, but using an originating summons rather than a writ. In such a case the court was required to determine the rights of adverse litigants and costs would follow the event. Class three cases involve claims between rival claimants to the fund or part of it, not hostile claims against trustees. See In re JP Morgan 1998 Trust [2013] (2) JLR 239per Nugee JA, giving the judgment of the Jersey Court of Appeal, at para 30.
The Buckton classes are not intended to be exhaustive. See In re Savile [2015] BPIR 450; [2014] EWCA Civ 1632, per Patten LJ at para 110. Eg in Green v Astor [2013] 6 Costs LO 911; [2013] EWHC 1857 (Ch) the administrator sought inter alia the Court's authorisation to enter into a Partition Agreement in relation to the apportionment of costs and the distribution of another estate in which the estate she was administering had an interest. The Court's authorisation was only sought because of the strong opposition of one of the beneficiaries, Mr Astor, to the Partition Agreement. Roth J granted the administrator's application. The administrator sought an order that Mr Astor should pay the costs of the application and the judge agreed. He stated at para 56:
‘ Although in form an application that comes within category (1) of Buckton, I do not think it falls neatly within Kekewich J's tripartite classification. It has far more the character of hostile litigation, in which the other individual beneficiaries support the position of the personal representative, who has faced sustained hostility and opposition from the one beneficiary who has opposed this claim. Having regard to the overall justice of the case, I do not regard this as one where the costs should fall on the estate, and thus be at the expense of all the beneficiaries. The appropriate order, in my judgment, is that the costs referable to the second head of relief should be paid by Mr Astor.’
These authorities speak about the costs of trustees and beneficiaries. However in my judgment all parties who have been properly joined to a Beddoe application or analogous trustees' application for directions should, absent disqualifying conduct on their part, normally be paid out of the trust fund, even if they are not trustees or beneficiaries.
This is a situation which has arisen infrequently in the reported cases. The one authority on point to which I was referred was In re Savile [2015] BPIR 450; [2014] EWCA Civ 1632. The proceedings related to the estate of the late Jimmy Savile, a well known television presenter in the UK. His estate was facing personal injury claims by a large number of people who alleged that he had sexually abused them (‘the PI claimants’). There was no serious dispute that some, perhaps many, of the claims might be well-founded.
The executor brought an application for the approval of a scheme to adjudicate the personal injury claims. The PI claimants were defendants to the application and supported the scheme. The residuary beneficiary opposed it. Sales J not only made an order approving the scheme but also ordered that the residuary beneficiary pay the costs of the executor and the PI claimants on an indemnity basis. The costs order was made on the ground that the approval application was really a piece of adversarial litigation, and that costs should therefore follow the event.
On appeal, the Court held that the residuary beneficiary's opposition to the scheme was not sufficient to convert the approval application from a Buckton class one to a Buckton class three case, and that the residuary beneficiary's costs of the approval application should therefore be paid out of the estate on an indemnity basis. The Court held that so, too, should the costs of the executors and the PI claimants. As...
To continue reading
Request your trial