Airways Pension Scheme Trustee Ltd v Fielder & Anor

A trustee has no inflexible rule-based entitlement, or prohibition, concerning an appeal in internal trust proceedings. The question is whether, in the particular circumstances, pursuing the appeal would be in the interests of the trust as a whole. That may be so even where the appeal benefits only some beneficiaries, including a substantial majority, provided the trustee is not taking sides between rival claimants to a beneficial interest.

The court may authorise the trustee to proceed and indemnify its properly incurred costs from the trust fund. The indemnity need not be unlimited. Where estimated costs are excessive, the court may impose a recoverable costs cap at the Beddoe stage.

The claimant trustee sought Beddoe relief authorising it to pursue an appeal to the Supreme Court and indemnifying it from the assets of the Airways Pension Scheme for its appeal costs and any adverse costs order.

The underlying proceedings concerned the validity of amendments giving the trustee a discretionary power to increase pensions. Morgan J upheld the amendments, but the Court of Appeal held by a majority that they were made for an improper purpose: British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533. Permission to appeal to the Supreme Court had been granted.

The central issue was whether pursuing that appeal would be in the interests of the Scheme as a whole and, if so, whether the trustee’s recoverable costs should be limited.

1. Relief granted. The trustee was authorised to pursue the Supreme Court appeal and was entitled to an indemnity from the Scheme’s assets, subject to a recoverable costs limit of £1,034,000.
2. Sections 31(1) of the Trustee Act 2000, 51(1) of the Senior Courts Act 1981, CPR rule 46.3 and Practice Direction 46 reflected the basic principle that trustees may recover expenses properly incurred when acting for the trust. The decisive question was whether the proposed conduct was properly undertaken in the interests of the trust as a whole.
3. The authorities did not establish an inflexible rule that a trustee who had obtained protection at first instance must accept the decision and could not appeal at the trust’s expense. The usual position might be that a trustee should accept first-instance guidance, but an appeal could be justified where the circumstances showed that it served the trust as a whole. Significant uncertainty about the interpretation or operation of the trust was a paradigm, but not exclusive, example.
4. The relevant interests need not be those of every beneficiary. Trustees may balance the interests of different classes, provided they are not taking sides between rival claimants to the same beneficial interest. Here, success would benefit the overwhelming majority of Scheme members, the appeal had a good prospect of success, the sums involved were substantial, and the Court of Appeal’s divided reasoning left uncertainty about the limits of the amendment power.
5. The trustee was the natural and practically realistic party to pursue the appeal. Requiring a representative beneficiary to assume conduct would cause delay and expense and could not realistically be achieved without protective costs relief. BA’s interests were relevant but not determinative.
6. The trustee was not entitled to carte blanche. Its estimated costs of £1,239,063 were excessive in comparison with BA’s estimate of £1,034,000, despite the appeal raising a single point of law. The court therefore capped the trustee’s indemnified costs at £1,034,000.

• High Court (Chancery Division): Morgan J rejected BA’s challenges to the relevant decisions, save for an immaterial issue concerning the date of one decision: British Airways plc v Airways Pension Scheme Trustee Ltd [2017] EWHC 1191 (Ch).
• Court of Appeal: the scope challenge was unanimously rejected, but the Court of Appeal by a majority held that the amendments were made for an improper purpose: British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533.
• High Court (Chancery Division): Beddoe relief was granted for the proposed Supreme Court appeal, with the trustee’s indemnified costs capped at £1,034,000.