Belen Clarisa Velutini Perez v Equiom Trust Corporation (UK) Limited & Anor.

In trustee directions proceedings, the court should identify the overall successful party using a broad-brush, common-sense assessment of the substance and reality of the result. An issues-based costs order requires caution and is generally appropriate only in a clear case.

An adverse inter partes costs order does not automatically remove or further curtail a trustee’s indemnity from trust assets. The court must separately assess the trustee’s conduct, the purpose of the indemnity, and all the circumstances. Indemnity costs require litigation conduct, including pre-action conduct, falling outside the norm.

This was a consequentials judgment following the court’s substantive judgment in the same proceedings, [2022] EWHC 2996 (Ch). The court had declared the Revocation valid, ordered the transfer of trust assets, limited the former trustees’ retention to US$500,000, and curtailed their indemnity.

The court determined liability for legal costs, the basis of assessment, the extent to which the former trustees could rely on their indemnity in respect of an adverse costs order, and whether the claimant could recover any shortfall from the assets.

1. Costs liability. Applying CPR 44.2, the court made a costs order in favour of the claimant. She was the overall more successful party when the declaration, asset transfer, retention and indemnity issues were considered in the round.
2. The court declined to make an issues-based order. The issues overlapped, and the broad-brush assessment required a pragmatic evaluation of the overall result rather than granular issue-by-issue accounting.
3. The proceedings were Buckton type 2 friendly directions proceedings. The usual approach may be that parties recover their costs from the trust fund where their conduct is proper and reasonable, but the court retains discretion to make a different order.
4. Indemnity costs. The claimant’s costs were payable on the standard basis. Indemnity costs require pre-action or post-action conduct involving a significant level of unreasonable or inappropriate conduct falling outside the norm. The former trustees’ wider untrustee-like conduct and the curtailment of their trustee indemnity did not, without more, justify indemnity costs.
5. An adverse inter partes costs order and curtailment of a trustee’s indemnity are distinct matters. An adverse costs order is a strong indicator that the statutory requirements for an indemnity may not have been met, but there is no automatic read-across. The court may apply a different percentage curtailment to adverse costs or remove the indemnity altogether, depending on the circumstances.
6. On the facts, the existing 30% curtailment also applied to the adverse costs. The claimant could recover any unrecovered shortfall in her costs from the assets, if necessary.

First-instance consequentials judgment following the substantive judgment dated 29 November 2022, [2022] EWHC 2996 (Ch). No appeal history is stated in this judgment.