Spencer & Ors v Fielder

Trustees are ordinarily entitled to reimbursement from trust assets for expenses properly incurred in administering the trust and conducting litigation on its behalf. The decisive question is whether, in substance, they are acting in the interests of the trust and its beneficiaries rather than for personal benefit. Traditional categories of trust litigation are not exhaustive. An incidental personal benefit or allegations that trustees acted incorrectly do not by themselves defeat an indemnity. Where proceedings challenge decisions affecting the membership as a whole, the court may grant a protective costs order enabling the trustees to conduct the defence. The order may be limited and later reconsidered.

The trustees of the Airways Pension Scheme sought Beddoe directions concerning proceedings brought by British Airways plc challenging an amendment to the Scheme rules and a discretionary pension increase. They sought authority either to defend those proceedings with an indemnity from Scheme assets or to have a Scheme member joined as a representative defendant with equivalent costs protection.

The defendant was an active Scheme member. British Airways opposed the application in correspondence but did not attend the hearing. The central issue was whether the trustees’ defence was, in substance, litigation for the benefit of the Scheme members as a whole.

1. Protective costs order granted. The trustees were authorised to defend the Main Proceedings through service of the defence and completion of disclosure and inspection. Their costs of those steps, and of the Beddoe proceedings to the date of the order, were to be paid from Scheme assets. The proceedings were to be restored thereafter for further directions.
2. Under the Trustee Act 2000, section 31(1), trustees may pay or be reimbursed from trust assets for expenses properly incurred when acting on behalf of the trust. That provision supplements the general costs discretion under section 51(1) of the Senior Courts Act 1981. CPR 46.3 similarly establishes a general entitlement for a trustee party to proceedings to recover costs from the trust fund on the indemnity basis.
3. The proper inquiry is substantive. The court must assess whether the trustees are acting in the best interests of the trust and its beneficiaries rather than for their own benefit. The categories identified in Re Buckton are not exhaustive, and the classification is not a statutory code.
4. The challenge to the Scheme decisions was an attack on their validity, not a claim for dishonesty, compensation, injunctions or personal relief against the trustees. The defence was therefore undertaken for the benefit of the Scheme membership as a whole. Any personal benefit to trustees was incidental.
5. A representative member could also have received costs protection, but adding such a defendant risked delay, additional expense and a less effective defence. The court therefore granted limited protection to the trustees while preserving the ability to reconsider their role and indemnity after disclosure and inspection. The trustees were given liberty to raise in the Main Proceedings whether clause 17(b) excluded British Airways’ contractual indemnity because of legally wrongful or reckless conduct.