Analysis
In an earlier judgment (p1351 of this edition), the court had dismissed the main claim seeking rectification of a deed of appointment made by the claimant and first defendant as executors and trustees of a will trust. The claimant’s position was that there should be no order as to costs, but the court should order that she be indemnified from the estate in respect of her costs. The claimant was neutral in respect of whether the court should order the defendants’ costs be paid out of the estate. The first defendant sought an order that the claimant pay her costs and submitted that the claimant was not entitled to an indemnity from the estate for her costs or the defendants’ costs. Alternatively, the first defendant sought an order that her costs be paid from the estate. The second to fourth defendants sought an order that the claimant pay the defendants’ costs and that she should not be indemnified by the estate. If the claimant was not ordered to pay the first defendant’s costs, the first defendant should bear her own costs and they should not be paid out of the estate.
Held:
The principles
Costs are in the discretion of the court, subject to the rules of the court (s51 Senior Courts Act 1981).
CPR r44.2(1) gave the court discretion as to whether costs are payable by a party, the amount, and the time for payment.
CPR r44.2(2) provides that the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. The general rule is subject to special rules in trusts and estates litigation: a trustee is entitled to be reimbursed from the trust fund or may pay out of the trust fund expenses properly incurred when acting on behalf of the trust (s31(1) Trustee Act 2000 and Price v Saundry [2019] applied).
CPR r46.3 applies to costs of proceedings in which a trustee is or has been involved and provides that the general rule is that the trustee is entitled to be paid their costs of the proceedings, insofar as they are not recovered from others, out of the trust or estate assessed on the indemnity basis. This is supplemented by para 1 of CPR PD46 which provides that the trustee or personal representative is entitled to an indemnity out of the trust fund or estate for costs properly incurred. This is a question to be determined having regard to all of the circumstances including whether directions were obtained from the court before bringing or defending the proceedings, whether the trustee or personal representative acted in the interests of the fund or estate or in substance for a benefit other than of the estate, including the trustee’s own, and whether they acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.
The test for whether an indemnity is available is best expressed by asking two questions:
- (a) Were the expenses properly incurred?
- (b) Were the expenses incurred by the trustee when acting on behalf of the trust?
The answer depends on all the circumstances. Properly incurred means not improperly incurred such that any doubt is resolved in favour of the trustee. Whether the trustee has committed misconduct is to be construed widely and may include neglect, negligence, carelessness or unreasonableness in the circumstances, although dishonesty is not necessary. Poor drafting by the settlor or testator or their professional advisers will not in itself affect the trustee’s entitlement to costs, though where it is the professional advisers at fault the trustees may have a claim against them, and in exceptional circumstances in the case of a testamentary trust, if the liability is clear, the court may consider making an order against the adviser’s insurers. Whether or not the trustee is personally at fault, the court should consider whether the trustee has a professional negligence claim against the drafter of a poorly drawn instrument prepared for the trustee, so that the costs may ultimately be borne by the drafter’s insurers rather than the trust fund or the trustee personally.
Application
The claimant’s signing of the deed showed a sufficiently high level of carelessness to justify depriving her of her indemnity and to order her to pay the defendants’ costs. She signed the deed lacking knowledge of the provisions of the will, the nature of the estate, what assets were being appointed, or what was intended to be achieved by it. Her conduct after the deed was executed was to be criticised. This included the belated acceptance that there had been a drafting error in the deed, the initial lack of evidence from the claimant or the first defendant in support of the claim, and the inconsistency in her evidence. Further, the claimant’s solicitors had agreed to pay the defendants’ costs of the claim if unopposed. It was the claimant’s failures that caused the need to make an application, which would have been unnecessary and the costs would not have been incurred without those failures.
It was possible to make a finding of improper conduct following a disposal hearing in an unopposed claim. In order to determine the rectification claim, it was necessary to make findings about the events leading up to and including the execution of the deed. That did not require the court to make evaluations from those facts as to the propriety of the claimant’s conduct, but the court was entitled to take those facts into account when deciding the appropriate costs order. The court can still make findings of fact on the evidence before it, and it was not a requirement for allegations to be formally pleaded or proved. The court’s determination on costs was not to be conducted as a trial within a trial.
Order
The jurisdiction as to costs was limited to the costs of and incidental to the claim. The relevant costs are the costs of the litigation, but those costs are not confined to those incurred after the issue of the claim (Re Gibson’s Settlement Trusts [1981] applied). The question is one of fact and degree. In this case the recoverable costs did not extend to the preparation and execution of the deed itself as they were not referable to the dispute and were non-contentious. Those costs may be recoverable as damages in a negligence claim. Part of the correspondence relating to the effect of the deed that gave rise to rectification was recoverable. The breakdown in the relationship between the first defendant and the second to fourth defendants and the resulting correspondence and applications were not sufficiently relevant to the proceedings to make a costs order.
JUDGMENT MASTER CLARK: Introduction [1] This is my judgment on the costs of this claim to rectify a deed of appointment dated 31 December 2019 (‘the Deed’), following my judgment on 27 July 2022, in which I dismissed the claim: [2022] EWHC 1865 (Ch) (‘the main judgment’). Parties’ positions Claimant [2] The claimant’s position is …Continue reading "Laird v Simcock & ors (costs) [2022] WTLR 1365"