Weth & Ors v HM Attorney General & Ors

On a trustee’s application for a Beddoe or pre-emptive costs direction, the court must decide objectively whether the proposed litigation is in the best interests of the trust or charity. A trustee’s sincere belief that litigation will benefit the fund is insufficient. A direction should be refused where the proceedings cannot confer a practical benefit, have poor prospects, or would expose limited charitable assets to disproportionate costs.

An appellate court reviews that discretionary decision on the material available to the judge below. Later events do not ordinarily show an error in that exercise. A trustee may receive costs protection while reasonably seeking the court’s guidance, but may lose it when acting unreasonably or in substance for a personal purpose rather than for the fund.

Members of a charitable trust sought directions that they should appeal the Charity Commission’s appointment of a receiver and manager and be indemnified from the charity’s assets for the costs of that appeal. Mr Lawrence Collins QC, sitting as a deputy High Court judge, refused the indemnity and made a limited adverse costs order after 12 June 1997.

Mr Weth appealed. He also sought an adjournment pending complaints concerning the Charity Commission and related litigation over loans to the charity. The central issues were whether the deputy judge had wrongly exercised his discretion on the indemnity and costs applications, and whether subsequent developments justified an adjournment.

1. Appeal dismissed unanimously; adjournment refused. Lord Justice Mummery held that the deputy judge had adopted the correct legal approach and had properly exercised his discretion on the material then available.
2. The critical question on a Beddoe-type application was whether committing charitable assets to the proposed appeal was in the charity’s best interests. Applying the basic principle in Marley v Mutual Security Merchant Bank and Trust Company Limited [1991] 3 All ER 198, the court had to decide whether it had sufficient material to give the direction sought. It could refuse the application or adjourn it for fuller information.
3. The proposed appeal could not benefit the charity. Even if the receiver’s appointment were set aside, the appellants could not secure their intended objective without also displacing the new trustees and restoring themselves to office. The appeal was therefore pointless. Its formidable legal and factual difficulties, the absence of counsel’s merits advice, and the likely cost relative to the charity’s assets reinforced that conclusion.
4. The Court assessed the deputy judge’s discretionary decision by reference to circumstances in November 1997. Subsequent complaints, litigation, and possible later vindication could not establish that he had erred by failing to consider events which had not occurred. The issue was not academic because substantial costs remained at stake, but later developments gave no basis to interfere.
5. Holman J added that a trustee’s perception of the charity’s interests does not satisfy the Beddoe test. The policy of RSC O.62 r.6(2), and the analogous equitable jurisdiction, protects trustees who reasonably seek guidance for the fund. It does not protect litigation pursued unreasonably or substantially for the trustees’ own interests. Although he queried the precise date from which adverse costs ran, the costs order remained within the deputy judge’s discretion.

The Court ordered Mr Weth to pay the remaining costs of the appeal, subject to the stated exception for the balance of costs relating to earlier hearings.

• Court of Appeal (Civil Division): Appeal dismissed: [2001] EWCA Civ 263.
• High Court (Chancery Division): Mr Lawrence Collins QC, sitting as a deputy High Court judge, refused a declaration that the applicants were entitled to a charitable-assets indemnity for their proposed appeal against the receiver’s appointment. He later made the limited costs order challenged in this appeal.