A High Net Worth Divorce & Family Trust Saga (Part 6)

Costs of a trustee’s application out of the Trust

Following the Trust Court’s decision in relation to the trustee’s application as to whether it (or its directors) should resign (in which it held they should remain), the Trust Court was asked to make various cost orders. The main cost order in dispute was whether (in relation the substantive application by the trustee) the wife should not be paid her costs out of the Trust and/or that she should be ordered to pay the trustee and the other parties’ costs. This was supported by the husband and his eldest children (from a previous marriage). The trustee was neutral, and the wife opposed such a cost order, arguing that her costs should be paid from the Trust.

The Trust Court held that the trust proceedings fell within category (1) of Buckton, where the trustee “had brought the application as trustee for the [Trust] Court to determine an issue which has arisen in the administration of the trust, namely whether it was in the best interests of the beneficiaries for it to resign or for its directors to resign.”

Further, that having “brought the application and convened the beneficiaries, the starting point, therefore is that pursuant to category (1) of Buckton all of the beneficiaries should have their costs out of the trust fund on the indemnity basis.”

The question for the Trust Court was whether the wife would be deprived her costs from the Trust (and/or ordered to pay the costs of the other parties) on the basis that she acted unreasonably.

In rejecting the position of the husband and his eldest children, and deciding that the wife was entitled to her costs out of the Trust, the Trust Court stated that the wife was not opposing the trustee’s application for directions nor was she making claims adverse to the other beneficiaries but, rather, she was putting forward her views as she is entitled to do as a convened beneficiary, and that was the point behind beneficiaries being convened to such applications.

The Court further stated that it was “concerned with the conduct of the parties in this application and not with the conduct of the parties in the matrimonial and trust proceedings more generally” and that “Beneficiaries must be free to give voice to their concerns genuinely held about their trustee, and if appropriate to do so in strong terms, without fear of being penalised in costs in subsequent applications made by the trustee for directions to which they are convened”.