Costs of Convened Beneficiaries; Beddoe Applications

Representation of VG Trustee Limited re the B Trust [2024] JRC 103

The Court considered the principles governing whether the costs of convened beneficiaries in a Beddoe application, when concerned in the proceedings which were the subject of the application, should be paid out of the trust fund.

The Court had earlier given judgment in December 2023 in relation to two Representations, both concerning the B Trust of which the Representor was the trustee. In the first the Court approved of a settlement agreement compromising claims made by the Representor and companies owned by the Representor as trustee of the Trust against the previous trustees of the trust and directors of the companies. In the second the Court granted the Representor’s application for a Beddoe direction permitting it to continue to cause a Jersey company wholly owned by the Representor as trustee of the trust to pursue proceedings in England to recover sums said to have been wrongly paid away by the directors of a company in which the Jersey company has a 50% interest.

The question of costs of the beneficiaries now arose. Some of the beneficiaries objected to the costs of certain others (the First to Third Respondents) being paid, on the indemnity basis, out of the trust fund. The Representor took a neutral position on this. The judgment is heavily redacted.

Held:

(1) Costs of convened beneficiaries. Costs of convened beneficiaries are entirely at the discretion of the Court, pursuant to Article 51(3) of the Trusts (Jersey) Law 1984 as amended and Article 2 of the Civil Proceedings (Jersey) Law 1956, there are exceptions to the general rule that the costs of convened beneficiaries should be paid out of the trust fund. Lewin on Trusts (20th edition, at 48-054) states: “In a case where a trustee makes an application for directions in consequence of the conduct of a disaffected beneficiary intent on disrupting the administration of the trust, the beneficiary is at risk at least of being deprived of his costs and at worst of being ordered to pay all the costs of the application which was made necessary by reason of his conduct.”

(2) Beddoe applications and Cooper blessing applications. Whilst there may be similarities between Beddoe applications and more general applications by trustees for directions (usually referred to as Public Trustee v Cooper applications) they are separate jurisdictions, albeit that the decision as to whether or not to commence proceedings might also be regarded as a momentous one which the Court is required to “bless” in the Public Trustee v Cooper sense. The Beddoe jurisdiction considerably pre-dates the Public Trustee v Cooper line of cases. Its focus is whether the proposed action by the trustee in commencing, defending or continuing legal proceedings is reasonable and, accordingly, whether the trustee may be indemnified out of the trust fund in so doing. The beneficiaries, who may or may not be party to the contemplated proceedings, clearly have an interest in the application given their interest in the trust fund and are therefore usually made parties so that the court may hear their views. The application is heard by a Court constituted differently from the court hearing the proceedings in question.

(3) Costs of convened beneficiaries in Beddoe applications. In the Matter of the Piedmont Trust and Riviera Trust [2021] JRC 250 the Court said that a beneficiary will not deprived of a costs order simply because he has made an argument to the Court which the Court had not accepted but that if a beneficiary makes unreasonable submissions or otherwise behaves unreasonably in connection with the proceedings, then he may be deprived of his costs out of the trust fund or may even be ordered to pay or contribute towards the costs of other parties. Piedmont was an application for the blessing of a momentous decision and not a Beddoe application but there was no reason why a similar consideration should not apply in relation to a beneficiary’s conduct in a Beddoe application. Thus, if a beneficiary behaves unreasonably in relation to the Beddoe application itself, for example by raising unreasonable points or unnecessarily prolonging the proceedings, they may be deprived of their indemnity from the trust fund of the costs of the application. However, in the present Beddoe application, the relevant beneficiaries adopted a neutral position given their involvement in the English proceedings. They did however highlight to the Court certain points that they felt might be relevant to the Court’s decision, which was of assistance to the Court. Lewin at 148 to 157 states that a beneficiary who has made a bona fide claim against the trustees in third party proceedings “should not, it is thought, be deprived of costs (nor be ordered to pay costs) of the Beddoe application, by reason only that he has commenced the claim and therefore necessitated the Beddoe application.”

(4) Whether the costs decision should be postponed until the English proceedings determined. It was proposed by the Seventh to Ninth Respondents that the Court should in effect postpone the decision until after the conclusion of the English proceedings by giving them twenty-eight days from that date to apply to the Court. The Court considered that to make the costs order dependent on what might or might not happen in other proceedings was clearly unsatisfactory. Not only would it prolong the Beddoe proceedings, but it would ultimately require the Beddoe Court to make decisions as to the culpability of the relevant beneficiaries without having heard the evidence in the main proceedings.

Disposal. A Beddoe application has important consequences for beneficiaries: in particular, if the relief sought is granted, they will not be able to complain if the trustee is unsuccessful in the litigation and the costs are paid from the trust fund. Furthermore, it is important that the Court is able to hear the views of the beneficiaries as they may well be able to identify points that may have been overlooked or omitted by the trustees. Those are all important matters for the proper administration of the trust. A beneficiary who is convened to the application, which is for the benefit of the trustee and in the interest of the trust as a whole, should not, in the circumstances of this case, be deterred from appearing by a risk either of an adverse costs order or of being denied their indemnity as to costs. The Respondents in question had been convened to the Beddoe application in their capacity as beneficiaries of the trust and there was no reason why they should not have their costs in relation to the Representations paid out of the trust fund on the usual indemnity basis.

Bridgeford A, WDJL 19 – 25 February 2024