Blades v Isaac & Anor

A beneficiary’s entitlement to information from trustees is governed by the court’s supervisory jurisdiction and the terms of the trust. Where a beneficiary seeks information concerning both an estate and a discretionary trust, the court may permit the beneficiary to enforce, or exercise derivatively, the trustees’ rights against the personal representative. A trustee’s mistaken refusal to disclose information does not automatically deprive the trustee of an indemnity for costs. The relevant question is whether the costs were properly incurred, considering the interests served, the reasonableness of the conduct and whether court directions were obtained. A failure to obtain a Beddoe order is not, without more, decisive in a trustee-beneficiary dispute.

The claimant was an object of a discretionary will trust. The first defendant was the sole proving executor and a trustee; the second defendant was a co-trustee. Both were partners in the firm that had advised the testatrix and administered the estate.

The claimant sought accounts and information concerning the estate and trust, including charges made by the defendants’ firm. The defendants initially refused direct disclosure, citing confidentiality and concerns about the relationship between the claimant and her sister. They offered disclosure to an independent firm and later indicated that they would seek directions. The claimant issued a Part 8 claim. The defendants disclosed the requested information before the hearing, leaving costs as the principal issue.

1. Disclosure and standing. The claimant was entitled to the disclosure sought. The estate and the will trust were separate levels of administration. The trustees could be required to exercise their rights to obtain information from the personal representative. If they could not, or unreasonably would not, do so, the claimant could seek to exercise those rights derivatively on behalf of the trust. The court also identified a possible alternative basis in the trustees’ duties to verify and recover the trust assets.

2. Costs of the proceedings. Although the claimant had substantially achieved the relief sought, the court declined to order the defendants to pay her costs. The defendants had acted in good faith, sought specialist advice, offered a mechanism for independent review, and eventually offered to seek the court’s directions. Their initial refusal was mistaken but was a mere refusal, rather than a wholly indefensible refusal involving misconduct or inexcusable delay. The claimant had acted too hastily in issuing hostile proceedings after the defendants offered to seek directions.

3. Costs order. Applying CPR rule 44.2(2) and the principle in Re Buckton [1907] 2 Ch 406, the court ordered that both parties’ costs be paid from the trust fund on the indemnity basis, as if the matter were a Buckton (2) application.

4. Trustee’s indemnity. Under Trustee Act 2000, s 31(1), and paragraph 1 of the Practice Direction to Part 46, a trustee is prima facie entitled to an indemnity for costs properly incurred. The indemnity is not automatically lost merely because the trustee was wrong in law or was found to have breached a duty not causing loss to the trust fund. It may be lost where the trustee acted for personal benefit, unreasonably or with misconduct.

5. The three matters identified in paragraph 1 of the Practice Direction are relevant but not mechanically decisive: whether directions were obtained, whose interests were served and whether the conduct was unreasonable. In a trustee-beneficiary dispute, failure to obtain a Beddoe order is not ordinarily significant. On the facts, the defendants acted in the interests of the trust and did not act unreasonably. They therefore retained their indemnity for both their own costs and any liability for the claimant’s costs.

Counsel were directed to draw up an appropriate minute of order.