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Rosie Duplessis

Chartered Legal Executive - Brighton

14th September 2021

Beddoe Applications – Protecting your Financial Position as a Trustee

Beddoe Applications – Protecting your Financial Position as a Trustee

A Trustee is required to act in the best interests of the Trust. Much of the time this can be achieved with awareness of the usual duties imposed on a Trustee. On occasion, the requirement for litigation may occur (whether to be brought or Defended) and the Trustee will be in the position of dealing with this.

In this blog we will consider the availability and applicability of a Beddoe Application and its importance in protecting a Trustee against the potential for personal cost exposure.

This is not intended to be an exhaustive comment and if you are unsure whether this applies to your situation, please do get in touch with our specialist team to advise you. Early advice is strongly recommended if cost protection is required for a Trustee.

What is a Beddoe Application?

In the case of Re Beddoe [1893] 1Ch 547, Lindley LJ held at p [557]:

‘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 the costs, even if he acts on counsel’s opinion’

A Beddoe Application is, in basic terms, an application to the Court to seek an indemnity for Trustees costs in Defending or bringing a litigation action. This could be described as an enhanced indemnity, to further the usual indemnity a Trustee benefits from in the general course of their role as Trustee (ie for properly incurred. reasonable expenses). The application seeks confirmation from the Court, in advance, that the litigation costs are ‘proper’.

Without a Beddoe Application, a Trustee is placing themselves at very real risk of being personally liable for the costs of the litigation and without recourse to recover these from the Trust itself.

Given the potentially high costs which can be incurred in litigation, it would be extremely unfortunate for a Trustee to unwittingly carry this level of risk, when the mechanism exists for them to seek protection.

When is a Beddoe Application Appropriate?

In Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220, Lightman J categorised three types of dispute involving Trustees (Third Party, Trust and Beneficiary).

It is widely accepted that a Beddoe Application can be made in Trust and Third-Party disputes, but not Beneficiary disputes.

How to make a Beddoe Application

Procedurally, a Beddoe Application must be made in separate proceedings to the underlying proceedings to which it relates. If there is a failure to do this, the relief will be refused.

As this blog sets out, the usual applicant is the Trustee seeking the protection of the Beddoe Order (there are instances where the applicant may be a beneficiary of the Trust, but we will not consider these here).

The Application is (almost always) made by Part 8 Claim to the High Court, following Part 64 of the civil Procedure Rules and related Practice Directions. The Application will be accompanied by a Witness Statement and all relevant information must be included.

Most Beddoe Applications will be heard in private and may be heard by a Master or a Judge.

Who pays for a Beddoe Application?

There is no hard and fast rule that the costs of the application come from the Trust, However, it is usual for the common law Trustee indemnity to apply; so it is likely that the costs of the application will come from the Trust, provided the Beddoe Application was in itself a reasonable choice for the Trustee to make.

Risks of proceeding without a Beddoe Application

As detailed above, the risks of proceeding without a Beddoe Application (and resulting Order) are that the costs of the litigation may be passed to the Trustee directly and they will not be able to recover these from the Trust itself.

This is not an eventuality which any Trustee would want to face and the importance of a prompt Beddoe Application in the face of applicable litigation is not to be taken lightly.

Is a Beddoe Application always successful?

The short answer is no. However, the Court has wide ranging discretion in the scope of an Order made and is often not a stark success or failure. If the Beddoe Application is warranted but the Court is not fully convinced, they may award a partial or limited Order. This may cover litigation up to a specific stage and then require the Trustees to re-apply for the next stage.

If you have any concerns over your position as Trustee or if you are faced with potential litigation, talk to our specialist Dispute Resolution team to ensure you are optimising the level of financial indemnity you may be entitled to.

Alistair Rustemeyer

Partner, Solicitor

01273 329797

AlistairRustemeyer@rixandkay.co.uk

 

Rosie Duplessis

Chartered Legal Executive

01273 329797

RosieDuplessis@rixandkay.co.uk

 

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