Mason & Ors v Coleman & Ors

Where beneficiaries compromise trust-account proceedings but leave costs unresolved, the court may determine costs by reference to the issues resolved and the parties’ conduct. Trustees and agents must keep clear and distinct accounts and provide them when properly requested. A refusal to account can justify an order for the costs of obtaining and preparing the account. Where allegations of trustee misconduct have not been tried, the court should not treat them as established. Costs may be divided by period and issue, and a trustee’s indemnity from trust assets is limited to costs honestly and reasonably incurred in executing the trust.

The claimants, beneficiaries of several trusts, sought an account and related information from the defendants, who included trustees and persons involved in administering trust assets. Orders were made for accounts, verification, disclosure and further information. The defendants were also removed as trustees, although professional trustees were appointed instead of the claimants’ nominees.

Before the taking of the account, the parties compromised that process in a Tomlin-form consent order. They agreed that the court should determine liability for several categories of costs and whether the defendants were entitled to an indemnity from the trust funds.

1. Construction of the consent order. “The costs of the claim” included all costs of the claim except the accounting costs, compromised costs and costs specifically identified elsewhere in Schedule 2.
2. Right to an account and costs. The beneficiaries were entitled to an account. The defendants’ refusal to provide one justified ordering them to pay the costs of the summary-account application, preparing the account, later verification and disclosure directions, and obtaining further information. Those costs were to be assessed on the standard basis. The defendants were not entitled to an indemnity for them.
3. Pre-action conduct. The claimants had not sent a compliant pre-action letter. That failure did not deprive them of costs because the defendants had already refused requests for information and maintained that they were not obliged to provide accounts.
4. Unresolved objections and trustee removal. The court could not determine that alleged misconduct had occurred because the account dispute had been compromised and there had been no trial. The costs of the unresolved account issues and the trustee-removal application were therefore each ordered to lie where they fell. The defendants were not entitled to an indemnity for the removal application.
5. Costs of the action. The claimants were entitled to their costs up to the end of February 2006. They were not entitled to costs after that date because their challenge to the account was ultimately abandoned under the compromise. The defendants were entitled after that date to an indemnity from the trust assets for their costs.

First-instance determination of outstanding costs and trust-indemnity issues under a consent order compromising the taking of the account.