Master lays out special costs rules in cases involving defaulting trustees

Special considerations apply to deciding costs orders when there are accounts and inquiries ordered against trustees, a High Court master has ruled.

In Sheffield v Sheffield and Ors [2018] EWHC 2360 (Ch), the claimant sought to establish his rights as a direct or indirect beneficiary of a trust in respect of an estate in Hampshire. After complicated proceedings, agreement was reached to pay him £1.26m.

On costs, the claimant’s counsel argued that, as the court has not made any determination of any of the rights of the parties in the relation to the issues, it had no material with which to assess whether the outcome agreed under any particular head of the account was a just or unjust disposal.

Master Clark said: “I accept that in a claim resolved by agreement, the court necessarily adopts a more broad-brush approach to costs, reflecting the fact that there has been no judicial determination of the issues. But the task is nonetheless to be undertaken, and done so in accordance with the guidance set out in Powles.

“In addition, in the case of accounts and inquiries ordered against trustees, special considerations apply. When the accounts and inquiries are rendered necessary by the breach of trust, then the defaulting trustee will be ordered to pay the costs of the claim; and those costs include the costs of accounts and inquiries made necessary by the breach of trust.

“In addition, in this case, the order for the accounts also reflected the claimant’s substantive entitlement to accurate information as to the state of the trust and to inspection of the trustees’ vouchers for their expenditure. In In re Skinner [1904] 1 Ch 289, the relevant costs to be paid by the trustee were the costs of ‘taking and vouching’ the accounts.”

As a result, the master said the starting point in determining the costs of accounts and inquiries ordered against a defaulting trustee was that the trustee should pay those costs.

“This would remain the case even if the accounts established that no sum was payable to the beneficiary. This is because the beneficiary’s primary right is to information about the trust assets and their exploitation; with an accompanying entitlement to be paid the appropriate share of the fruits (if any) of that exploitation. And, until the account is given, the beneficiary does not know what that financial entitlement is.

“It follows from this that a defaulting trustee cannot protect her/himself from costs of providing the account merely by making a monetary offer. Without the information which is solely in the trustee’s possession, the beneficiary has no means of evaluating the offer.”

But Master Clark said later that even if the accounts established that no sum was payable, it did not follow that the court was unable to look at particular accounts, “and the factors relevant to incidence of costs in respect of each of them”, in deciding the appropriate order to make as to costs overall.

He said the costs principles in the CPR “form part of the background against which I should consider the appropriate costs order to make, but are not directly applicable, because of the considerations set out above.

“In particular, in my judgment, if a defendant makes a part 36 offer in respect of an account without having provided the information the claimant needs to evaluate that offer, then if the claimant fails to beat the offer, it would not normally be just to order the claimant to pay the defendant’s costs.

“This is because the claimant is not just entitled to payment of what is due to him, but also to the information and documents which enable him to satisfy himself that the sums paid reflect his true entitlement.”

The master went on to make costs orders relating to each of the accounts taken.

Christopher Pymont QC (instructed by Trowers and Hamlins) for the claimant; Richard Dew (instructed by Farrer and Co) for the first and second defendants.



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Costs News
Published date
26 Sep 2018

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