Price v Saundry

A costs order requires a proper basis of agreed or determined facts. Where substantive issues are neither decided nor compromised, and the proceedings are simply refocused, the court may be unable to identify a successful party and should make no inter partes costs order. In a common-form account, costs depend on the parties’ success and the circumstances; a beneficiary may recover the costs of taking the account where the account was necessary and materially justified. A trustee’s indemnity is distinct from the Part 36 regime and is lost only on misconduct or another established basis. Engagement of Part 36 does not itself remove the indemnity. Enhanced interest may include an incentivising element, but must remain proportionate and factually justified.

The claimant, a trust beneficiary, brought proceedings concerning the removal of trustees, alleged defects in trust administration and disclosure. Before trial, the parties consented to refocus the proceedings on a common-form account. A separate rectification application concerning a trust property was later decided for the claimant.

The court determined the costs of the abandoned removal claim, the accounting exercise and the rectification application. It also considered the effect of a Calderbank offer, a successful Part 36 offer, the trustees’ indemnity from the trust fund, the rate of interest on costs and whether failure to beat a Part 36 offer deprived the trustee of that indemnity.

1. Removal proceedings. The court had no proper basis to determine success because the removal claim had not been tried, compromised or dismissed. The disputed conduct could not reasonably be tried solely for costs. The later accounting findings did not establish the misconduct necessary to decide the removal issue. No inter partes costs order was therefore made.
2. Trustee indemnity. The trustees retained their indemnity. The court could not find that the first defendant had acted unreasonably, for a personal benefit, or with misconduct in defending an undetermined removal claim. Corrections to the account did not themselves amount to an actionable breach of trust.
3. Account. Applying the approach in Re Skinner [1904] 1 Ch 289, the claimant had shown that an account was necessary and had achieved substantial success on significant items. The first defendant was ordered to pay the costs of taking the account, on the standard basis.
4. Offers and interest. The Calderbank offer did not justify indemnity costs. The Part 36 conditions were satisfied and it would not be unjust to apply the consequences under CPR 36.17(4). Following OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195, enhanced interest could be partly incentivising, but the evidence did not justify more than 4% above base rate.
5. Rectification. The claimant succeeded on the rectification application and recovered its issue-based costs. The first defendant was deprived of her trust-fund indemnity for those costs because she had acted in her own interests.
6. Part 36 and indemnity. The questions whether CPR 36.17 was engaged and whether the trustee lost her indemnity were distinct. Failure to accept and beat the Part 36 offer was not, without more, misconduct or breach of trust causing loss. The indemnity therefore continued, including for costs incurred after expiry of the offer, except for the rectification costs. Permission to appeal was refused.

First-instance costs judgment. The court refused permission to appeal.