H.M. Attorney General v Zedra Fiduciary Services (UK) Limited

A trustee ordinarily appeals a first-instance decision at its own costs risk. The court may authorise indemnification from trust assets where the appeal is in the interests of the trust as a whole. That question is for the court, not the trustee, although the trustee’s submissions may assist.

For a charitable trust whose original purposes have failed, the relevant interests are those of charity in the general sense, encompassing the possible charitable purposes for a cy-près application. A mere preference for a different charitable scheme is insufficient. A sufficiently arguable contention that the existing scheme fails the statutory requirement that purposes be suitable and effective may justify funding an appeal. Funding may be authorised for both permission proceedings and a subsequent appeal, subject to appropriate cost control.

The Trustee applied for directions concerning a proposed appeal from an earlier decision ordering the National Fund to be applied cy-près by transfer to the National Debt Commissioners. Permission to appeal had been refused at first instance.

The Trustee sought authority to use trust assets to fund an application for permission to appeal and any subsequent appeal. The central issue was whether pursuing the appeal would be in the interests of the charitable trust, and, if so, whether the proposed expenditure should be limited.

1. Applicable approach. In trust-administration proceedings, a trustee should ordinarily accept the first-instance decision and appeal at its own costs risk. The exception is where the court is satisfied that the appeal is in the interests of the trust as a whole. The court, rather than the trustee, decides that question. The trustee’s own view is neither determinative nor materially relevant in itself.
2. Meaning of the trust’s interests. For a charitable trust whose purposes have failed, the relevant interests cannot be equated with the original charity or with the charity identified by the court’s cy-près scheme. They are the interests of charity in the general sense, encompassing the range of possible charitable purposes for which the fund might be applied.
3. Relevant considerations. The factors identified in Airways Pension Scheme Trustee Ltd v Fielder [2018] EWHC 29 (Ch), including prospects of success, benefit to beneficiaries, the significance of the amount at stake, uncertainty created by the decision, and the availability of another party to appeal, provide guidance. A real prospect of success is a necessary starting point, but is not by itself enough. The merits may carry greater weight where the proposed appeal is particularly strong.
4. Application. A sufficiently arguable contention that the existing scheme failed the requirement in section 67(3)(c) of the Charities Act 2011 that charitable purposes be suitable and effective in current circumstances would engage the interests of charity. Such failure could trigger a further cy-près application under section 62(e)(iii). Although the court considered that reducing the National Debt produced practical benefit and that the appeal had no real prospect of success on that issue, there was at least a prospect of persuading a single Lord Justice otherwise.
5. Permission was therefore given to use trust funds for the application for permission to appeal and, if permission were granted, the appeal itself. Funding for the permission application was capped at a further £25,000. No cap was imposed on the appeal, given that its scope would depend on the Court of Appeal’s decision.

The judgment itself states that the Trustee’s application for permission to appeal from the earlier decision was refused at first instance: [2022] EWHC 65 (Ch). Reasons for refusing permission were given in a further judgment dated 19 December 2022: [2022] EWHC 3357 (Ch). The present judgment authorised an application to the Court of Appeal for permission to appeal and, if permission were granted, the appeal itself.