National Westminster Bank v Lucas

Costs in trust and estate litigation depend on the substance of the dispute and the parties’ conduct. Applications genuinely concerned with the administration of a trust or estate may justify costs from the fund. Where beneficiaries or other interested parties pursue opposed personal interests in adversarial litigation, the costs should ordinarily follow the event between them. Unreasonable conduct may justify indemnity costs. The court must distinguish between a trustee seeking neutral directions and litigation in which parties contest rights or promote their own interests. Necessary participation in proceedings does not, by itself, entitle a party to have its costs paid from the estate.

This was a consequential costs hearing following the court’s main judgment on two applications concerning the administration of Jimmy Savile’s estate: the Trust’s application to remove National Westminster Bank as executor and the Bank’s application for approval of an administration scheme. The Trust had opposed both applications. The Personal Injury Claimants and the Secretary of State participated because they had direct interests in the Bank remaining executor and in the scheme being implemented. The issues were the appropriate basis and allocation of costs, whether costs should be paid from the estate, payments on account, and whether the orders should be stayed.

The court considered the principles governing trust and estate litigation, including the distinction between administrative applications and adversarial litigation.

1. Costs of the removal application. The Trust’s application to remove the Bank failed. Costs therefore followed the event. The Trust’s unreasonable and misconceived conduct, including its failure to recognise the executor’s proper discretion and responsibilities to possible claimants, justified indemnity costs for the Bank, the Secretary of State and the Personal Injury Claimants.
2. Applicable classification. The categories described in Re Buckton [1907] 2 Ch 406 remained useful, but were guidelines rather than rigid rules. The court had to classify the substance of the proceedings and exercise its discretion to achieve fairness. This was predominantly litigation between parties with opposed interests, corresponding to the third Buckton category. The approach in Davies v Watkins [2012] EWCA Civ 1570, concerning a trustee’s application for directions, did not govern the present circumstances.
3. Costs of the scheme application. The Trust’s opposition substantially increased the Bank’s costs. The Trust was ordered to pay 80 per cent of the Bank’s costs on the indemnity basis, with the remaining 20 per cent dealt with under the agreed validation-order arrangement pursuant to section 284 of the Insolvency Act 1986. The Trust was also ordered to pay the Personal Injury Claimants’ full costs of the application on the indemnity basis.
4. The Personal Injury Claimants were necessary parties, but their participation principally advanced their own interests. They were therefore not entitled to recover their costs from the estate. The Trust and the fifth defendant were likewise refused costs from the estate.
5. The proposed indirect order under Bullock v London General Omnibus Co. [1907] 1 KB 264 was rejected. Payments on account were ordered, including £100,000 to the Bank, £100,000 to the Personal Injury Claimants and £18,000 to the Secretary of State, payable within 21 days. A stay was refused.

This was a first-instance consequential costs ruling following the court’s earlier judgment on the substantive applications, reported as [2014] EWHC 653 (Ch).