Beddoe Applications

The Beddoe jurisdiction arises out of the special rules for costs affecting trustees and personal representatives. For a full discussion of the procedure see my book the ‘Contentious Trusts Handbook’ (published by the Law Society in 2020), at 11.2 [Commentary], and Appendix A.1 [Precedent].

The reviews of the law on liability for ‘dishonest assistance’ and Beddoe orders are models of their kind. The author is to be commended on succeeding in providing a portable reference work covering all aspects of the law and practice governing trust disputes in the English courts.’ Book Review by Ian Mayes QC, Head of Chambers, 1 Essex Court, London EC4Y 9AR

See also: Contentious Trusts Handbook – Carl Islam

Recently, in Clyne Conlon, 2021 EWHC 2444 Ch, Master Clark summarised the applicable legal principles as follows:

·       CPR 19.7A provides that: ‘(1) A claim may be brought by or against trustees, executors or administrators in that capacity without adding as parties any persons who have a beneficial interest in the trust or estate (‘the beneficiaries’). (2) Any judgment or order given or made in the claim is binding on the beneficiaries unless the court orders otherwise in the same or other proceedings.’

·       However, as explained Williams, Mortimer & Sunnucks Executors, Administrators and Probate (21st edn) at para 57-14‘If personal representatives, without the sanction of the court, bring legal proceedings against third parties for the benefit of the estate or defend proceedings brought against them as executors they may be held personally liable for the costs if they are unsuccessful and are considered to have acted unreasonably in doing so. They may, conversely, be held personally liable for having failed to pursue a good claim of the estate or for having failed to defend a bad claim against the estate. To protect themselves against this risk the representatives may seek the directions of the court as to whether to take or defend or pursue litigation.’

·       A Beddoe application depends on its own facts and is essentially a matter for the discretion of the judge who hears it: Re Evans [1986] 1 WLR 101.

·       The modern framework for a Beddoe application is found in CPR 46.3 which provides: ‘(1) This rule applies where – (a) a person is or has been a party to any proceedings in the capacity of trustee or personal representative; and (b) rule 44.5 does not apply. 6 (2) The general rule is that that person is entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate. (3) Where that person is entitled to be paid any of those costs out of the fund or estate, those costs will be assessed on the indemnity basis.’

·       This is supplemented by CPR PD 46, para 1.1‘A trustee or personal representative is entitled to an indemnity out of the relevant trust fund or estate for costs properly incurred. Whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative (“the trustee”) – (a) obtained directions from the court before bringing or defending the proceedings; (b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee’s own; and (c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.’

·       The fact that a trustee or executor may also be a beneficiary does not render her capacity unrepresentative: see Re Evans, at 106G-H. 33. As stated in Williams at 57-14, if all the beneficiaries are ascertained, competent and capable of deciding whether or not to pursue or defend a claim, and they are agreed as to the course they want the personal representative to take, then the representatives are completely protected, and there is no need or justification for seeking the directions of the court. Where the beneficiaries are not agreed, then the representative is at risk of her claim to be indemnified from the estate being challenged.

·       In Re Evans [1986] 1 WLR 101, the main claim was to the entire estate of the deceased intestate, which would otherwise have been distributed among his 6 nieces and nephews. One of the nephews obtained a grant of letters of administration. Another of the deceased’s nephews and his wife brought the claim against the administrator. After serving a defence and counterclaim for possession of part of the estate, the administrator applied for permission to continue to defend the claim and pursue the counterclaim, and an order indemnifying him for all the costs of the proceedings. The Master dismissed the application on the claimants’ undertaking to join the remaining nieces and nephews as defendants to the claim. The Court of Appeal reversed the Judge who had allowed the appeal from the Master.

·       The Court of Appeal held that in cases where the beneficiaries were all adult, sui juris and capable of deciding whether or not to resist or pursue a claim, the potential injustice of the indemnity provided by a Beddoe order to a successful claimant or defendant had to be balanced by countervailing considerations of some weight, such as the merits of the case, before it would be right for a claim to be defended or pursued at the cost of the estate. However, the main claim in Re Evans was for the entire estate, so that the order sought would have resulted in the unsuccessful defendant trustees’ costs being met from the assets recovered by the claimants. As Nourse LJ put it, ‘the losers would have started by risking nothing and ended by losing nothing.’

·       In Alsop Wilkinson v Neary [1996] 1 WLR 1220, the claimant solicitors had obtained judgment of £1 million against the first defendant, a former partner in the firm, for dishonest misappropriation of client monies. During the time when the misappropriations were taking place, the first defendant made two settlements, the beneficiaries of which were himself, his wife and their issue. The claimants brought a claim against the first defendant and the trustees of the settlements for declarations that they were void as transactions for the purpose of putting assets beyond the reach of creditor (within s.423 of the Insolvency Act 1986). Again, therefore the entire trust estate was in issue in the main claim, so that if an indemnity were granted, the costs of unsuccessfully defending the claim would have been paid from the assets recovered by the claimants.

·       The judge (Lightman J) held that in a case where the dispute is between rival claimants to a beneficial interest in the subject matter of the trust, the duty of the trustee is to remain neutral and (in the absence of any court direction to the contrary) offer to submit to the court’s directions, leaving it to the parties to fight their battles.

·       However, in Alsop Wilkinson, the rival contenders were parties to the claim, and the trustees’ role could properly be described as mere stakeholders. The position is, in my judgment different where, as here, the claimant choses to sue only the trustee. The beneficiaries cannot defend because they are not parties. If the trustee does not defend the claim, then the claimant may win by default, irrespective of merit.

If the trustee is clearly advised that she has no reasonable prospect of success in defending the claim, then the reasonable course may be not to do so. Otherwise a failure to defend places the trustee at risk of a claim from the beneficiaries. As the editors of Lewin on Trusts (20th edn) state, at para 48-104: ‘The rationale for neutrality on the part of the trustee is not present because there is no rival with whom the claimant might fight his battle. For the trustee to allow the claim to go by default when there is a reasonable prospect of defence, but no effective defendant, would be tantamount to passive support to the claimant against the beneficiaries, not mere neutrality. It is one thing for a trustee to take proper measures for his own protection, but a trustee must not by his acts or omissions set up the right of a third party against the beneficiaries …’

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