Highland v Labraga (No 2)

The case of Highland v Labraga (No 2) involved proceedings initiated by a beneficiary of a discretionary trust, with subsequent amendments to include a trustee. The central dispute centred on the costs associated with the litigation, particularly whether the plaintiffs were entitled to the entirety of the costs incurred or only those that arose post the amendment of the proceedings. Additionally, the case addressed the issue of whether the beneficiary had the requisite standing to pursue a derivative action to remove a trustee in the context of a deadlocked co-trustee scenario.

The primary legal issues the court had to resolve were the scope of the costs recoverable by the plaintiffs and the standing of the beneficiary to initiate a derivative action against the trustee. The court needed to determine if the amendment of the proceedings rendered the original proceedings incompetent or if the plaintiffs were entitled to claim costs from the entire litigation process. Furthermore, the court had to decide whether the beneficiary could legitimately bring a derivative action to remove a trustee, considering the general principle that such actions can only be pursued in special circumstances.

In addressing the costs issue, the court ruled that the plaintiffs were entitled to the entire costs of the suit, not just those incurred after the amendment. The reasoning was that the amendment did not invalidate the original proceedings, and thus the costs associated with the initial litigation were properly recoverable. Regarding the derivative action, the court held that the beneficiary did have standing to bring such an action, given the substantial impediment created by the deadlocked co-trustees which prevented the trustee from effectively managing the trust.

Consequently, the court ordered that the plaintiffs were to receive the full costs of the litigation, including those incurred prior to the amendment of the proceedings. Additionally, the court affirmed the beneficiary's standing to pursue a derivative action to remove the trustee, recognising the impediment to the trustee's ability to act.