Dealing with costs in trusts and probate proceedings - Part 1: liability for trustees

26 September 2018

The recent decision in John David Sheffield V (1) John Julian Lionel George Sheffield, Lionel Julian Sheffield & Simon Robert Alexander Sheffield (As The Executors Of John Vincent Sheffield) (2) John Julian Lionel George Sheffield (3) John Julian Lionel George Sheffield, Fergus Hugh Sterling Graham, Nicola Elizabeth Anne Graham, John Frank Ratcliffe & Simon Robert Alexander Sheffield (as past & present Trustees of the 1968 Settlement) (2018) has highlighted the court’s distinctive approach to dealing with costs in trusts and probate proceedings, and is a reminder to trustees in particular as to their potential litigation costs exposure where they are in default. 
In the Sheffield case, the court was referred to the following principles arising out of the standard costs provisions in the CPR: 
1, costs of litigation are in the discretion of the court: CPR 44.2; 
2, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, though the court may make a different order: CPR 44.2 (2); 
3, the court is to have regard to all the circumstances including the conduct of all parties, the effect of partial success or partial failure inadmissible offers of settlement: CPR 44.2 (4) and (5); 
4, a “different order” may include an issue-based approach; and this may well involve using a broad brush: Sycamore Bidco Ltd v Breslin [2013]; 
5, when deciding whether an issue-based approach is appropriate, the court routinely asks itself three questions: 
(i) who has won; 
(ii) has the winning party lost on an issue which is suitably circumscribed so as to deprive that party of the costs of the issue; 
(iii) the circumstances suitably exceptional to justify the making of a costs order in that issue against the party that has one overall: Hospira UK Ltd v Novartis AG [2013]. 
6, the judge should hesitate before making an issue-based costs order because of the practical difficulties which this causes and because of the steer given by rule 44.3 (7): Multiplex Construction (UK) Ltd v Cleveland Bridge UK Ltd [2008]; 
7, in many cases the judge can and should reflect the relative success of the parties on different issues by making a proportionate costs order: Multiplex; 
8, a successful litigant is not to be deprived of his costs (or some of them) simply because he has lost on one or more issues: the courts recognise that in complex litigation the successful party is unlikely to win every point: 2018 White Book at para 44.2.10; 
9, Any offers of settlement (and negotiations generally) will need to be brought into account: Multiplex.
However, the judge held that these principles were not directly applicable in the Sheffield case and instead made it clear that special considerations apply in claims against defaulting trustees. The judge held that when accounts and enquiries are rendered necessary by a breach of trust, the defaulting trustee will be ordered to pay the costs of the claim, which includes the costs of accounts and enquiries made necessary by the breach of trust. 
Further, the claimants in such cases have a substantive entitlement to accurate information as to the state of the trust and to inspection of the trustees’ vouchers for their expenditure. The important principle relied on by the claimant’s counsel in Sheffield is that where a trustee has already been held to be in default, the trustee must prove (at his/her expense) that the breach has been fully remedied. 
The judge agreed and held that the starting point in determining costs of accounts and enquiries ordered against a defaulting trustee is that the trustee should pay those costs. Crucially, the judge made it clear that this principle remains strong even if no sum is found to be payable to the beneficiary, because a beneficiary cannot really know what his/her financial entitlement is until the account is given. Accordingly, the defaulting trustee cannot gain protection against costs liability merely by making a monetary offer, if the account is needed in order for the beneficiary to evaluate that offer.  The judge held that the fact that ultimately no sum may be payable in respect of an account is not of itself a ground for depriving the claimant of the costs of that account.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility