Pettigrew & Ors v Edwards

A Beddoe order is intended to protect trustees who need the court’s direction before prosecuting or defending litigation with a third party. It is generally unnecessary for a friendly trust dispute and inappropriate for hostile litigation concerning an alleged breach of trust. Where litigation is substantively between adult beneficiaries who are sui juris, trustees ordinarily have only a nominal role and need not obtain a Beddoe order. The court must also consider whether using trust assets would impose an injustice on a beneficiary whose interest may fund an unsuccessful claim. A protective costs order is available only where the trial judge could properly exercise the costs discretion only by ordering payment from the trust estate. Those conditions were not met.

The trustees of a will trust sought permission to continue defending a claim by the life tenant and to pursue a counterclaim concerning a promissory note and alleged loan liability. They also sought indemnity from the trust fund by way of a Beddoe order and a protective costs order.

The underlying litigation involved two related but distinct questions: whether the loan and promissory note were valid and enforceable, and whether any resulting liability entitled the trustees to withhold trust income or set it off against the life tenant’s claim. The court had to characterise those issues and decide whether the trustees’ participation should be funded or protected from adverse costs.

1. Characterisation of the litigation. The claim for unpaid trust income was properly viewed, on the evidence, as a hostile breach of trust claim rather than a friendly request for directions. The loan and promissory note issues were a third-party dispute. The set-off and income-payment issues were internal trust matters. Although the proceedings were interrelated, the court analysed them as two separate cases.
2. Beddoe order. A Beddoe order may assist trustees in a third-party dispute where the court can assess, on the information then available, whether participation is reasonable and for the benefit of the fund. It is not normally appropriate in hostile beneficiaries’ litigation, where costs ordinarily follow the event, or where the trustees need only remain nominal parties. The principle in Re Evans deceased applies beyond cases concerning the whole estate. Where the beneficial dispute is substantially between adult and competent beneficiaries, countervailing considerations of sufficient weight are required before trust assets are used for substantive litigation.
3. Here the first two trustees were adult capital beneficiaries and parties to the main proceedings. They could decide whether to fund and assume the risk of the loan litigation themselves. Funding from the trust would also diminish the fund producing the life tenant’s income. That risk of injustice justified refusing a Beddoe order for all three trustees, including the professional trustee, who would remain nominally involved.
4. Protective costs and counterclaim. A protective costs order could be made only if the trial judge could properly exercise the discretion only by ordering payment from the trust estate. That could not presently be established for the loan claim, and the breach of trust claim would not ordinarily be funded from the trust. There was therefore no need to direct the counterclaim.

The application for a Beddoe order, a protective costs order and directions concerning the counterclaim was refused. The trustees remained entitled to nominal costs as necessary parties.