Beddoe orders: important considerations for trustees faced with legal proceedings

A Beddoe order can offer cost protection to trustees when bringing or defending a claim. This article outlines some practical considerations for trustees when considering Beddoe applications.

19 September 2017

Beddoe orders are named after the case of Re Beddoe [1893] 1 Ch 547 which stated that "...a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs….”.

Trustees risk facing cost orders in court proceedings in the same way as any other party would but they are entitled to an indemnity from the trust against all costs, expenses and liabilities that are ‘properly incurred’.

A Beddoe order provides the court’s prior sanction for a trustee to take a specific course of action, effectively confirming that the costs (including those which the trustee may be ordered to pay to another party to the proceedings) will have been properly incurred and authorising an indemnity from the trust.

When should Beddoe applications be made?

Typically, a trustee will make a Beddoe application when there is either:

  • A third party dispute – a dispute between the trustee and persons other than the beneficiaries, such as a dispute between the trustee and an advisor in relation to advice concerning the trust assets; or
  • A trust dispute – a dispute concerning the trust itself, such as a proprietary claim by a third party against trust assets, or a dispute between some beneficiaries and the trustees as to how the fund should be administered.

As the primary purpose of a Beddoe order is to protect the trustee from claims by beneficiaries that legal proceedings should not have been brought or defended, there is no need to make an application if all the beneficiaries are capacitous adults and approve the trustee’s proposed course of action.

A Beddoe application is also unlikely to be suitable where there is a dispute between the trustee and one or more beneficiaries arising out of the trustee’s conduct in managing and administering the trust.

Practical considerations

  • A Beddoe order may give directions allowing the trustee to pursue or defend proceedings all the way to trial. Equally, it may only address a particular stage in the proceedings and require the trustee to renew the application before he takes any further steps.
  • There are no restrictions on what the judge may deem relevant to his decision to grant the order. The recent case of Pettigrew v Edwards (2017) confirmed that all Beddoe cases are notoriously fact-sensitive and hence discretionary. However, the primary consideration for the court will be whether the particular course of action is in the best interests of the beneficiaries as a whole.
  • Trustees should always consider whether to apply for a Beddoe order before costs have been incurred. It is unusual for the court to provide a retrospective indemnity.
  • The size of third party claims should be carefully considered. Where the claim may exceed the size of the trust a Beddoe application is essential but will not be sufficient to protect the trustee. Trustees may persuade beneficiaries to fully indemnify them using personal assets but the court cannot order them to do so. The court can however relieve the trustee of the obligation to defend such a claim, and thus reduce the level of costs incurred.
  • While it may appear that a 'safety first' approach should be adopted, it is worth noting that there can be instances where a matter is so clear cut that the application is not justified and, as a result, the trustee becomes liable for the costs of the Beddoe application itself.

If you would like further guidance on how to approach Beddoe applications, please contact Kevin Kennedy or Caroline Emslie in our trust disputes team.

This article was written by Caroline Emslie.

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Kevin Kennedy

Kevin Kennedy Partner

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