Mason & Ors v Coleman & Ors

Where proceedings are compromised but costs remain unresolved, the court must avoid deciding costs by effectively trying the abandoned claim. It must identify an agreed or determined factual basis sufficient to decide success, conduct and the appropriate order. Trustees who unreasonably refuse to provide accounts may be ordered to pay the costs of obtaining the account and related applications. Failure to follow a pre-action protocol is relevant but does not automatically deprive a successful claimant of costs. A trustee’s indemnity extends only to costs honestly and reasonably incurred in executing the trust, and may be lost or curtailed by culpable neglect of duty.

The claimants, beneficiaries of trusts, brought proceedings against the defendants, including trustees and fiduciaries, for an account and related information. After almost two years, and shortly before the account issues were to be determined, the parties compromised the taking of the account under a consent order. The compromise resolved the accounting issues but left liability for several categories of costs, and the defendants’ entitlement to an indemnity from trust assets, for determination by the court.

The court considered the costs of the claim, the summary judgment application, applications for information and disclosure, directions hearings, and the application to remove the defendants as trustees.

1. Costs after compromise. The court applied the approach in BCT Software v Brewer [2003] EWCA Civ 939. In a compromised action, the court should make a costs order only where there is a proper basis of agreed or determined facts. It must not conduct a disguised trial of issues which the parties compromised.
2. Entitlement to an account. The beneficiaries were plainly entitled to an account. The defendants had refused to provide one despite requests and maintained in the defence that they were not obliged to give the beneficiaries information. The absence of a formal pre-action protocol letter did not make the application hasty or justify depriving the claimants of costs. The defendants were ordered to pay the costs of the summary account application on the standard basis.
3. Applications connected with the account. The defendants were ordered to pay the costs of the application concerning the unverified account, the extension application, and the application for further information. The claimants were entitled to pursue the action until a reasonable time after an account had been provided, assessed as the end of February 2006.
4. Unresolved accounting challenge. The parties’ compromise left the claimants’ challenge to the account undetermined. Accordingly, there was no order as to costs for the March 2006 application, and no finding that the defendants’ post-account conduct amounted to misconduct. The claimants recovered costs of the action up to the end of February 2006, but not thereafter. The defendants were entitled to an indemnity from the trust assets for costs incurred after that date in connection with the compromised challenge.
5. Removal application and indemnity. The defendants were removed as trustees because removal was expedient, not because misconduct had been established. Each side therefore bore its own costs of that application. The defendants were not entitled to an indemnity for those costs. More generally, a trustee’s indemnity is confined to costs honestly and reasonably incurred in executing the trust and may be lost or curtailed by culpable neglect of duty.

First instance decision. No appellate history is stated in the judgment.