Beddoe applications: What happens if a trustee forgets to apply?

The Grand Court of the Cayman Islands and the High Court in England and Wales have recently considered two unusual applications for Beddoe relief respectively: an application by a trustee for retrospective Beddoe relief after the conclusion of proceedings, and an application for a trustee for Beddoe relief in respect of bringing an appeal in the Supreme Court of England and Wales. In this article we consider the former which was considered in In the matter of the Stingray Trust (Grand Court, Cayman Islands) in September 2018 (it being well established that while decisions of the Cayman and English Courts will not be not binding in Guernsey the Royal Court may look to them for guidance in the absence of Guernsey precedent). We refer to our article "Beddoe applications: Beddoe relief for appeals" in which the latter application is considered.

Application for Beddoe relief

An application for Beddoe relief (Re Beddoe [1893] 1 Ch 547) enables a trustee to obtain directions from the Court approving its participation in litigation in its capacity as trustee and ordering that the trustee will be indemnified in respect of the costs of the litigation from the trust fund. The relief is a discretionary one.

In the matter of the Stingray Trust: the facts

The Stingray Trust (the "Trust") was settled on 5 July 2005 by two Italian citizens: "CDF" and his sister "IDF". The beneficiaries of the Stingray Trust were CDF, IDF and MF (a charity).

CDF died and IDF began to suffer from ill health and so a public guardian was appointed on behalf of IDF. The public guardian issued proceedings against the trustee in Switzerland alleging that the Trust was not valid. She sought delivery up of the trust assets to IDF and an order preventing the trustee from making any decisions in relation to the Trust. The proceedings included a claim for urgent injunctive relief. The trustee did not seek Beddoe relief prior to embarking on the litigation.

The case was dismissed at first instance and on appeal. Retrospective Beddoe relief was sought. Before the application for Beddoe relief could be determined, the public guardian issued similar claims in the Court of Milan. This time, an application was first made for Beddoe relief in respect of those proceedings.

Decision of the Grand Court in Cayman

The Grand Court heard both of the Beddoe relief applications together and granted the relief sought in both instances.

  • Swiss proceedings - the Court found that it was reasonable for the trustee to have decided to defend the proceedings. The Court took into account the fact that MF was not a party to the proceedings and so there was a substantial risk that the trust assets would have been transferred to the public guardian had the trustee decided not to defend the claims. The Court made an order that the trustee be indemnified against the reasonable costs of defending the litigation. As to the timing of the application, the Court considered that although it was unusual for a trustee to make an application for Beddoe relief after proceedings had been concluded the trustee had acted in a reasonable manner due to the urgency of the injunctive relief sought by the public guardian. Accordingly, the Court made an order for Beddoe relief in favour of the trustee.

  • Milan proceedings - the Court found that there was a significant risk of the trust assets being transferred to the public guardian if the trustee did not defend the claims and made an order for Beddoe relief accordingly. However, the relief was limited to cover permission to pursue, and claim costs for, a jurisdictional challenge in the Milan Court. The Court directed that if that jurisdictional challenge should fail then the trustee may make a further application for directions.


Conclusion

In the matter of the Stingray Trust demonstrates that the courts are willing to be flexible in granting Beddoe relief to trustees as long as trustees are acting in the best interests of the trust as a whole when taking steps in litigation. However, trustees should not assume that they will always be entitled to indemnity costs from the trust and should take detailed legal advice before taking any steps in litigation.

CAYMAN ISLANDS
Shelley WhitePartnerT +1 345 914 4205shelley.white@walkersglobal.com
Lucy DiggleSenior CounselT +1 345 914 4250lucy.diggle@walkersglobal.com

GUERNSEY
Alison OzannePartnerT +44 (0) 1481 748 905alison.ozanne@walkersglobal.com
Katharine DeanParalegalT +44 (0) 1481 748 925Katharine.Dean@walkersglobal.com