3 Individual Present Professional Trustees of 2 Trusts v An Infant Prospective Beneficiary of one Trust & Ors

A Beddoe application does not ordinarily determine a beneficiary’s civil rights or obligations for the purposes of Article 6. It authorises or directs trustees’ conduct and may affect the future value of a trust fund, but does not alter the beneficiary’s underlying rights.

Beddoe protection is not necessarily absolute. Trustees must make full disclosure of all relevant matters. Where appropriate, this may include disclosure to a beneficiary who is a prospective opponent, subject to redaction or withholding where disclosure would materially and unfairly prejudice the trustees’ position. The extent and timing of disclosure are matters for the judge’s discretion and must be tailored to the circumstances.

The present trustees of two settlements sought directions before making a Beddoe application for authority to bring proceedings against former trustees, fund those proceedings from the settlements and apportion the resulting costs.

Mrs A, a beneficiary of one settlement and a former trustee, sought further disclosure of counsel’s instructions and opinions, valuation material and related documents. She relied on Article 6 of the Human Rights Act 1998, equality of arms and equitable principles of disclosure. The central issues were whether the Beddoe application involved a determination of her civil rights or obligations, what disclosure should be made to her, and how the application should be heard.

1. The application was dealt with as a preliminary disclosure and hearing-management application. A Beddoe order would ordinarily give trustees exceptionally strong protection against personal liability for authorised litigation costs, but that protection could be undermined if the trustees failed to make sufficient disclosure or had materially misrepresented the position through their own fault.

2. Article 6 of the Human Rights Act 1998 was not engaged merely because the Beddoe process might reduce the value of a trust fund. The process did not determine the beneficiary’s existing civil rights or obligations. Any effect on the fund was prospective and consequential, while the beneficiary’s legal rights in the net trust estate remained unchanged.

3. The usual practice that proposed defendants are not given all the evidence or permitted to remain throughout a Beddoe hearing was not an inflexible rule. The court’s approach had to be tailored to the particular case. The trustees should err on the side of disclosure where this was compatible with fairness, while preserving material necessary to protect their litigation strategy, compromise position or prospects of recovery. Redaction could provide an appropriate solution.

4. For the 1958 Settlement, Mrs A’s status as the only beneficiary able to scrutinise the trustees’ disclosure supported giving her more than the minimum material, subject to safeguards against unfair prejudice. Material concerning the 1978 Settlement could ordinarily be withheld from her as a non-beneficiary, except where it was intermingled with disclosable 1958 material and was necessary to prevent that material becoming unintelligible or misleading.

5. The Beddoe hearing was to proceed in stages. The trustees would first reconsider disclosure and redactions. Mrs A and the infant beneficiary would then have an opportunity to consider the material. The substantive hearing would initially take place privately and confidentially, with participation adjusted according to the settlement and issues under consideration. Questions concerning costs apportionment and borrowing powers were stood over.