The High Court ordered the beneficiary of a deceased’s estate to pay the costs of the executor, claimants against the estate and other beneficiaries on the indemnity basis, after deciding

that the beneficiary had acted unreasonably. The case is a reminder that beneficiaries making such applications should carefully consider their motives. The courts have made it clear that unmeritorious applications may result in adverse costs consequences.

Costs in trusts and estates litigation

In trusts and estates litigation, costs are generally at the discretion of the court. The case of Re Buckton7 sets out some guidance frequently applied by the courts when making cost orders. Broadly, these cost orders are made with reference to three categories of trusts and estates litigation:

  • Category 1: Proceedings brought by trustees or personal representatives seeking the court’s guidance on the construction of the trust instrument or questions arising in the course of its administration
  • Category 2: Proceedings brought by beneficiaries (but not trustees or personal representatives) raising the same issues as category one above
  • Category 3: Proceedings brought by a beneficiary who is making a hostile claim against the trustees or personal representatives

In both categories 1 or 2, costs are ordered to be paid out of the trust fund or estate. In category 3, the unsuccessful party is ordered to pay the costs.

Facts

The costs application related to proceedings brought by a charitable trust to remove the executor of an estate.

In the proceedings the executor was seeking the court’s approval of a scheme to settle multiple personal injury claims against the estate. The trust, which was one of the beneficiaries of the estate, opposed the scheme and applied for the removal of the executor. The trust ultimately lost its application to remove the executor in the proceedings.

The question of costs was dealt with as a consequential matter in this case.

Decision

An order for costs on the indemnity basis is typically only made when there is some culpability or abuse on the part of the party who has to pay the costs. However, the court ruled that the indemnity basis was just and appropriate in this case because the trust had:

  • accused the executor of misconduct without good reason
  • adopted an unreasonable and misconceived stance on its application by arguing that the executor owed no responsibility to the person injury claimants
  • greatly increased the cost of the administration of the estate because it should have foreseen that the personal injury claimants would want to join the proceedings, and
  • not made the full scope of its objections to the scheme known to the executor or the personal injury claimants until the hearing of its removal application.