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  • 16 December 2020 Adverse Cost Orders in Trust Administration Proceedings by Alison Meek

    It is not often that an appeal court, in a hearing listed for two days, listens to the appellants for an hour, takes a break and then decides that it does not need to hear the arguments of the respondents before dismissing the appeal. In the case of two appeals listed for two days in July 2020 in Guernsey, (the first an appeal against a construction decision and the second relating to Beddoe relief for the trustees to defend the appeal against the construction decision), the court dismissed the construction appeal (In the matter of the R Trust [2020] GCA0 65), and then dismissed the Beddoe appeal (In the matter of the R Trust [2020] GCA 067). It then turned its attention to costs and who should pay for what the court clearly perceived to be a complete waste of their time. This article considers the two costs judgements in the Guernsey Court of Appeal In the matter of the R Trust [2020] GCA 066 and [2020] GCA 068.

    The unsuccessful appellant in the construction appeal submitted that her costs should be borne by the trust fund on the basis that her appeal was reasonably necessary for what she considered to be doubt about the true construction of the declaration of trust. The appellant in the Beddoe appeal, appealed the decisions to grant Beddoe relief to the trustees at first instance on the constructions summons and then to defend the construction appeal. Both appellants submitted that their actions put the case into the first category of cases identified in re Buckton [1907 2 CH 406]. However, the Guernsey Court of Appeal disagreed and held that the litigation was in essence hostile. The court held that the costs of the appeals were not necessarily incurred for the benefit of the trust fund but were instead incurred in pursuing (i) a “hopeless” construction argument; and said that (ii) challenging Beddoe relief given to the trustees to seek the guidance of the court in relation to the construction argument was also “entirely hopeless”.

    The two appeals were in administrative proceedings issued by the trustees in 2013 as part of the Public Trustee v Cooper jurisdiction to separate out the interests of one of the beneficiaries (C, the daughter) from the interests of the other 3 beneficiaries (the mother (A) and two brothers (B and D)). There had been one previous appeal in the proceedings to the Court of Appeal in 2014, a successful appeal by C in relation to a decision at first instance by the Deputy Bailiff. Many years later, after a long drawn out process (largely obstructed by A, B and D), the trustees came to a final decision in relation to the partition of the fund in October 2019 and listed an application to bless their decision for the 25th-27th November 2019.

    The uncontested factual background to the appeals is set out in paragraph 5 of the judgment in the Beddoe appeal ([2020] GCA 067). In summary, on 6th November 2019 (A, B and D) made an application for an adjournment of the November blessing hearing saying they needed more time to prepare and had had problems securing the service of an advocate. Additionally, they claimed there was a conflict of interest which had belatedly appeared requiring separate representation. Reluctantly the Deputy Bailiff agreed to the adjournment and relisted the blessing hearing for 10th-12th February 2020.

    Unbeknownst to: the trustees, the incumbent protector (“the Incumbent Protector”) and C, on 18th December 2019, A executed deeds purporting to appoint companies in the BVI as additional protectors of the trust (“the Purported Additional Protectors”) together with the Incumbent Protector. On 14th January 2020, the Purported Additional Protectors, again without consulting: the Incumbent Protector, the trustees or C, purported to replace the trustees with a Swiss trust company.

    Early on 15th January 2020, the trustees, the Incumbent Protector and C were served with copies of the deeds of appointment of the Purported Additional Protectors and the Swiss trustee company. This was 2 days before skeleton arguments were due to be lodged and served for the relisted blessing hearing. On 15th January 2020 the Swiss trustee company wrote to the Greffier in Guernsey seeking an adjournment of the deadline for the service of skeleton arguments supported by A, B and D and they also asked for the trustees to hand over the trust assets.

    On 16th January 2020, on short notice, the trustees applied to Judge Finch for Beddoe relief to issue an application for a declaration as to the construction of the protector power of appointment in the trust deed. Judge Finch, a man apparently not inclined to mince his words, stated in his judgement that the replacement of the trustees had been conducted “more in the mode of a night time commando raid than a normal procedural step”. He gave the trustees their Beddoe relief.

    On 29th January 2020, the Deputy Bailiff heard the construction application. The Deputy Bailiff concluded on the same day that on a true construction of the relevant power, A did not have the power to appoint the Purported Additional Protectors to the office of protector. It followed that the purported removal of the trustees was also of no effect.

    The two appeals heard in July 2020 related, first to the decision by the Deputy Bailiff in relation to the proper construction of the power of appointment in relation to the protectorship and second in relation to the Beddoe relief which the trustee had sought in January 2020 and again in relation to the construction appeal May 2020 seeking costs protection in relation to both appeals.

    The construction appeal was listed first and was heard on the afternoon of 22nd July 2020. The three Court of Appeal judges, Clare Montgomery QC, George Bompas QC and Helen Mountfield QC listened to the advocate on behalf of appellant A supported by the advocate for D for an hour and then sought a short adjournment after which they dismissed the appeal. The respondents were not required to provide a formal response to the appeal by the tribunal. In their judgment given the following day, the judges confirmed that the issue related to a pure point of law on a point of interpretation. In their judgment they concluded that “the meaning that the appellant contended for [was] “implausible. It [was] both linguistically strained, being contrary to an ordinary understanding of the words “subject to” or “subject thereto” and [would have] had an obviously unintended and unreasonable result”. They explained their reasoning at length.

    A costs judgment was given the following day in relation to the construction appeal. The court expressed concern that the construction argument and appeal might have been pursued for the collateral purpose of derailing the blessing hearing in relation to the partition. Fortunately, they said they did not have to decide that motivation. However, if they had established that, it would provide a further ground for refusing the application for costs to come out of the trust fund. They added that the pursuit of the appeal was not to resolve some point of uncertainty in the declaration of trust but in order to give validity to the pre-emptive step of having additional persons seemingly added to the office of protector with a view to bypassing the Incumbent Protector as the protector and to secure the replacement of the trustees. The Court of Appeal concluded it was hostile litigation involving an attack on the position of the Incumbent Protector as protector and on the standing of the trustees. As a result, the Court of Appeal took the view that A, B and D’s costs and indeed the costs of D’s minor and unborn beneficiaries (who supported the appeal) should be borne by them personally. In addition, the appellant was ordered to pay personally the recoverable costs of the Incumbent Protector and the respondent trustees on the standard basis. There was some surprise expressed by the bench that the trustees were not seeking indemnity costs. The impression given being that these would have been ordered if sought. The court took the view that although the appeal was brought within the administrative proceedings it should be treated as if it were ordinary adversarial litigation in substance and, as a result, the rules that costs should follow the event should apply.

    C was in a position to seek an order against A for payment of her costs. However, she preferred not to inflame the family dynamics further and the Court of Appeal was prepared to make an order for her costs to come out of the trust fund, it being abundantly clear that it would be unfair for her to have to bear her own costs of the appeals.

    So far as the Beddoe appeal was concerned this was mounted by D and it followed the construction appeal. Criticism was made by the Court of Appeal as to the point of pursuing the Beddoe appeal once the construction appeal had been dismissed the previous day; this did not assist D on costs. The Court of Appeal stated that the “unheralded steps” taken in January 2020 had left the trustees in a very difficult position with urgent procedural steps in preparation for the blessing hearing to be taken. The Court of Appeal concluded that it was “entirely hopeless” to impugn Judge Finch’s decision to grant the trustees Beddoe relief on 16th January 2020 and to confirm that this relief would extend to the construction appeal and the present appeal on 12th May 2020. The Court of Appeal said that “the commando raid description pithily encapsulated the problem with which [Judge Finch] had been confronted and the reasons for his decision.” They agreed with C, that the urgency of the matter was caused by the last minute tactics of those who opposed the partitioning of the trust.

    The Court of Appeal said “there was no possible basis for allowing the appeal against the 16th January decision, especially bearing in mind the high threshold in setting aside an exercise of discretion by a court in a case management context, operating in Guernsey on the same basis as articulated by the Court of Appeal in England and Wales” in Royal and Sun Alliance Insurance PLC v T and N Limited (in administration) [2002 EWCA CIV 1964] (para 18B).

    The court summarised the points taken against the making of the Beddoe order as “entirely technical” and without any substantive merit.

    The short costs judgement stated that the appeal was both hopeless and hostile. That those supporting the construction appeal as well as the Beddoe appeal had pursued the appellate litigation in this case in a matter that was hostile (at least) to the trustees and the Incumbent Protector. They added that the pursuit of the appeal was at all times likely to be academic, and was rendered wholly academic by the judgment in the construction appeal. There was no reason for the trust fund to bear the costs.

    The costs order made by the Court of Appeal followed that of the construction appeal. A, B and D and D’s minor children were left to bear their own costs. C received her costs out of the trust fund and D was ordered to pay the trustee and the Incumbent Protector’s costs on the standard basis.

    What can be taken from these two costs decisions of the Guernsey Court of Appeal is where it is apparent (as in this case) that the argument is plainly hopeless (as here) and the issues before the Court are there for transparently ulterior motives, the fact that the main proceedings are administrative proceedings will not protect the appellants in terms of adverse costs orders if the Court deems particular applications to be in their nature hostile and not in the interests of the beneficiaries of the trust. The parties are, in those circumstances, fully at risk as to costs and should not assume that they will necessarily get costs out of the trust fund or indeed that they will not be ordered to pay the costs of the party winning the argument.

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