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Contested Beddoe Applications - who should pay the costs?

We exist today in an enviroment where the courts are increasingly concerned at the level of costs being incurred by parties and at what they on occasion consider to be the waste of valuable court time and resources in having the court deal with matters it ought not to have had to have dealt with.

The recent case Green v Astor and Others [2013] EWHC 1857 (Ch) concerned a Beddoe application that was contested by a beneficiary and the issue arose as to what costs order the court should make on the application. The claimant, Mrs Green, was the Court appointed administratrix of the estate of Mr Peter Maitland in which Mr Astor, the first defendant, was entitled to a 28% share of residue.

During his life, Mr Maitland, together with Mr Francis Burne had been attorneys to a Mrs Norman. Mrs Norman died in 2002 leaving her residuary estate ("the Norman Estate") as to 25% to Mr Maitland, 50% to Lord Freyberg and 25% to Mr Burne. Mr Maitland and Mr Burne became executors of the Norman Estate.

Mr Maitland became suspicious about Mr Burne having misappropriated assets from Mrs Norman during her life and from the Norman Estate after her death and went to great lengths, assisted by his friend Mr Astor, to investigate this. By the time Mr Maitland died in October 2009, two sets of proceedings had been issued in Switzerland.

After her appointment Mrs Green continued the investigations into Mr Burne's dealings and, following further proceedings in Switzerland and England, the claims against Mr Burne were compromised on terms which included Mr Burne relinquishing his 25% interest in the Norman Estate.

Mrs Green then had to agree with Lord Freyberg the apportionment between the Maitland Estate and him of the Norman Estate and of the significant legal costs incurred in investigating Mr Burne's dealings and of the various legal proceedings.

Terms were eventually agreed by way of a "Partition Agreement" subject to the approval of the beneficiaries of the Maitland Estate, one of whom was Mr Astor.

Mrs Green wrote to each beneficiary on 11 July 2012 seeking their formal consent to the Partition Agreement and adding:

"If I do not receive your unanimous approval to the terms of the Partition Agreement, I must apply to the Court for approval to settle on these terms. This would involve substantial costs to the Maitland Estate, although I will be seeking a Costs Order against any beneficiary who unreasonably withholds consent…"

Mr Astor had initially assisted in bringing the claim against Mr Burne, which claim ultimately resulted in an increase the value of the Norman Estate and thus the Maitland Estate. Yet, subsequently, Mr Astor objected to Mrs Green signing the Partition Agreement, despite all the other Maitland Estate beneficiaries agreeing that she should do so.

He continued to send lengthy emails to Mrs Green in intemperate language requesting voluminous information, considered by leading counsel in formulating his advice and which Mr Astor said he required for his own consideration. Mr Astor also obtained his own Swiss law advice which, contrary to that obtained by Mrs Green, questioned whether Mrs Green, as administratrix of the Maitland Estate, could enter into the Partition Agreement as a matter of Swiss law.

Mrs Green made a Beddoe Application seeking a direction from the Court that she be permitted to enter into the Partition Agreement as drafted.

Mrs Green argued that Mr Astor's conduct had been unreasonable, that all of the other beneficiaries had agreed to the course of action she proposed, that Mr Astor's refusal to consent (until the beginning of the substantive hearing) had necessitated her bringing the application and that, accordingly, he should pay the costs of the application.

Mr Astor argued that, inter alia, he had not sought to block the settlement, but had requested all information that was necessary for him to consider the matter properly.
He said that he had, at the eleventh hour, only consented to Mrs Green entering into the Partition Agreement because of an agreement brokered by Peter Smith J at an interlocutory hearing, to the effect that his entering into the Partition Agreement would be without prejudice to any claim for negligence or breach of duty by Mrs Green which he might bring within specified time limits.

Roth J found as follows:

"In my judgment, a beneficiary cannot expect to be immune from liability in costs irrespective of his conduct. An order of costs is not to be applied as a sanction for the intemperate and frequently insulting language of Mr Astor's correspondence. But in my view, where unreasonable conduct by a beneficiary is responsible for generating substantial costs [here said to be £400,000] on the part of a trustee or personal representative as regards an application to the Court, it is appropriate that the burden of those costs should be borne by the beneficiary and not fall on the trust or estate and thus on the beneficiaries as a whole…"

Mr Astor was ordered to pay 85% of Mrs Green's costs.

Conclusion

The court has a wide discretion as to where costs should fall in proceedings before it. That said, the general practice where Beddoe applications are concerned has long been that the trustees' and beneficiaries' costs be borne by the trust. Even where a beneficiary has questioned the course of action which the trustees seek the court to sanction, provided the court regards the beneficiary's questioning as reasonable the usual order as to costs would be that both the trustees' costs and the beneficiary's costs be borne by the estate.

Understandably beneficiaries who consent to their trustees adopting a particular course of action may feel aggrieved when one of their number does not so consent, with the result that the trustees make a Beddoe application, the cost of which will ultimately be borne by them on the basis that it is paid out of the trust.

Trustees, generally do not wish to appear to having taken against one of their beneficiaries and thus normally do not contest an order that their costs and the contesting beneficiary's costs all be paid out of the trust, even if the course of action they propose is ordered, on the basis that it was reasonable for the beneficiary to raise the issues he or she did. If other beneficiaries take exception to this, then the trustees usually say that they should appear at the hearing and submit to the judge that the contesting beneficiary should pay the costs, rather than (ultimately) them.

However, in the light of Green, if the trustees conclude that the contesting beneficiary has not behaved reasonably in raising issues for the court to consider, they may want to give real consideration to seeking an order for costs against that beneficiary, particularly if other beneficiaries are complaining that the costs should not be borne by the estate.

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