The applicant was Maria Clyne, the sole executor of the estate of Patrick Conlon, who died on 4 June 2018 leaving a will dated 8 March 2016 which divided his residuary estate equally between Maria and his 3 sons, Kevin, Martin and Patrick. Kevin, Martin and Patrick were named as defendants to the application for Beddoe relief.
The deceased’s estate was valued at just over £500,000 with the principle assets being two properties in Harrow registered in his sole name. After his father’s death, Kevin issued a claim alleging beneficial interests in the Harrow properties. Maria was the only defendant named in Kevin’s claim and it was issued against her in her capacity as executor of the estate only. None of the beneficiaries of the deceased’s estate were named as parties when Kevin’s claim was issued and no steps were taken by him to add them, even after Maria indicated her intention to make an application to Court to seek Beddoe relief.
The principles relating to Beddoe relief are contained in CPR 46.3 and supplemented by CPR PD 46 paragraph 1.1. In summary, these provide that a person who is a party to any proceedings in their capacity as trustee or personal representative will generally be entitled to recover the costs incurred in connection with those proceedings from the trust or estate provided that those costs have been reasonably and properly incurred. Whether or not costs have been properly and reasonably incurred will depend on the circumstances of the case including whether directions were obtained from the Court before proceedings were issued or defended. In the event that an executor or trustee acts unreasonably in bringing or defending proceedings, they may be held personally liable for the costs of the litigation if they are ultimately unsuccessful; the purpose of a Beddoe order is to protect against this risk.
In considering Maria’s application, the Master noted that Kevin did not bring his claim in his capacity as a beneficiary of the estate. Rather, he advanced his arguments as a third party seeking to establish a beneficial interest in assets of the estate. If Kevin had not also been a beneficiary of the estate then it would be a straightforward matter for the Court to consider whether it was reasonable and proper for Maria to defend the claim. However, because Kevin was a beneficiary of the estate, he would stand to bear one quarter of the costs of an unsuccessful defence to his claim if Maria was granted an indemnity from the Court. The Court was therefore tasked with the job of balancing a number of factors including the underlying merits of the claim and the potential risk of injustice to both Maria and Kevin depending on the outcome of the application for Beddoe relief.
Although the Master heard opposing arguments from both parties as to the underlying merits of Kevin’s claim, he was unable to make a judgment on the prospects of Kevin succeeding based on the written evidence alone; this was for the trial judge. He therefore turned to consider the reasonableness of Maria defending the claim, both prior to the date of her application and in the future. In doing so, it was very relevant that Kevin had made no effort to name the beneficiaries of the estate as parties to the claim. Had he done so, they would have been free to decide whether they wished to defend the claim and Maria’s role as executor would have looked very different. As the only defendant to the claim, Maria had no option but to defend it or risk opening herself up to a potential claim for breach of duty by the other beneficiaries; she had therefore acted reasonably.
Finally, the Master weighed up the possible injustice which would be caused to Maria in the event that her application was unsuccessful against the consequences for Kevin if Beddoe relief was granted. He found that there was a real risk of injustice to Maria as if Kevin’s claim was successful and she was personally liable for costs, she alone would face a costs bill of circa £230,000. She would therefore bear the entire risk of defending the claim while Patrick and Martin would only benefit from its success. On the other hand, if Maria’s application was successful then the costs of unsuccessfully defending Kevin’s claim would be paid from the residuary estate. Kevin would therefore have to bear a proportion of these costs from his share of the residue. Therefore, Kevin also faced a potential injustice. However, on balance, it was the Master’s view that the best way to manage the competing risks of injustice was to make an order that Maria be indemnified in respect of her costs insofar as they are not recovered from or paid by any other party. This left it open to Kevin to take steps to join the beneficiaries as parties and to then seek recovery of costs from them in their personal capacities.
This is an interesting case which demonstrates that the Court will not necessarily refuse to make a Beddoe order where the defendants are also beneficiaries of the estate. If there are good reasons for granting relief, as in this case, the Court will take a pragmatic approach to ensure that adequate protection is given to an executor or trustee faced with proceedings. This case also serves as a useful reminder to give very careful consideration to who should be named as parties to a claim and to take action at an early stage to rectify the position if omissions have been made.
This is by no means a straightforward area of law and specialist advice is key if you are an executor or trustee facing court proceedings or a beneficiary concerned about the conduct of someone in a fiduciary role. Please contact a member of our specialist Contentious Trusts and Probate Team if you have any queries on these issues and we will be happy to assist.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2021.