Vincent Family Corporate Trust Limited
[2021] NZHC 2250
•30 August 2021
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV 2021-463-000017
[2021] NZHC 2250
UNDER Part 19 of the High Court Rules 2016 IN THE MATTER
of the ET and P VINCENT TRUSTS
BETWEEN
VINCENT FAMILY CORPORATE TRUST
LIMITED as trustee of the ET and P VINCENT TRUSTS
Applicants
Hearing: 28 July 2021 Appearances:
A F S Vane for the Applicant
S D Campbell & J R Halligan for Rosemary Jean Vincent
Judgment:
30 August 2021
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 30 August 2021 at 12 noon Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Le Pine & Co, Taupo
Wynn Williams, Christchurch
VINCENT FAMILY CORPORATE TRUST LIMITED (as trustee of the ET and P VINCENT TRUSTS) [2021] NZHC 2250 [30 August 2021]
TABLE OF CONTENTS
Para No.
Introduction 1
Background 7
The beneficiaries under the Trusts 8
The trustees of the Trusts 10
Apportionment of Trust property 14
Care and custody arrangements for Dante and Toby Marshall 15
Rosemary Vincent seeks recognition of Dante and Toby Marshall as beneficiaries
17
Substantive proceeding commenced 20
Application for Beddoe Orders 23
Trustee duties, trustee costs and Beddoe orders and applications 26
Trustee duties 29
Trustee costs 30
Classification of proceedings in which indemnity might or might not be given 33
Beddoe applications 38
Submissions of Applicant 42
Submissions of interested party 48
Discussion 53
Preliminary observations 56
Categorisation of causes of action 62
Is it in the interests of the Trusts to grant Beddoe orders? 72
The nature of the claims 73
The nature of the Trusts 76
Merits and prospects of first cause of action 78
Merits and prospects of second cause of action 90
Other reasons why Beddoe orders may be in the interests of the Trusts 101
Conclusion on whether Beddoe derations orders are in the interests of the Trusts 107
Where to from here? 111
Applicant’s request for order that costs incurred to date be met from Trust funds 113
Introduction
[1] The Vincent Family Corporate Trust Ltd (the Applicant), as sole trustee of the ET Vincent Trust and the P Vincent Trust (the Trusts), applies for “Beddoe orders”1 authorising it to defend a proceeding brought by Rosemary Jean Vincent (the substantive proceeding) and to have its costs indemnified from the Trusts’ funds.
[2] The Applicant also seeks a direction that its costs in the Beddoe application are paid for out of funds of the Trusts.
[3]The substantive proceeding comprises two causes of action, seeking:
(a)In the first cause of action, declarations that:
(i)the term “grandchildren” in the deeds of trust (Trust Deeds) establishing the Trusts includes grandchildren of the settlors by whāngai in the context of the trust instruments;
(ii)two named children of Rosemary Vincent’s daughter are beneficiaries of the Trusts;
(b)In the second cause of action, declarations as to whether:
(i)a company can be validly appointed as sole trustee of the Trusts;
(ii)the Applicant has been validly appointed as trustee of the Trusts;
(iii)the actions taken by the Applicant as trustee of the Trusts are valid.
[4] The Beddoe application does not refer to affirmative outcomes sought by the Applicant in its statement of defence in the substantive proceeding or to a counterclaim made by the Applicant. However, in a memorandum dated 11 February 2021,
1 So-called after the decision of the English Court of Appeal in Re Beddoe. Downes v Cottam [1893] 1 Ch 547 (CA).
Mr Vane, counsel for the Applicant, submits that the Applicant’s costs in relation to those outcomes should also be indemnified from Trust funds.
[5] The affirmative outcomes sought by the Applicant, which are identical to the orders sought in the counterclaim, are that, in the event the Court grants the declarations sought by Rosemary Vincent, the Court should also grant:
(a)Declarations that:
(i)the Applicant can be appointed sole trustee of the Trusts;
(ii)the Applicant’s appointments were valid; and
(iii)the Applicant’s actions and decisions as trustee were valid; or
(b)In the alternative, orders:
(i)validating the actions of the Applicant and of former trustees when acting as trustee of the Trusts; or
(ii)appointing the Applicant as sole trustee of the Trusts and:
a. discharging any existing or former trustee from any trusts that have not already been discharged; and
b. relieving the Applicant and any former trustee from any liability arising from their appointment as trustee.
[6] Rosemary Vincent, as an interested party to Beddoe the application, does not oppose the application but raises questions as to the appropriateness of the orders sought, having regard to the principles and practices that have been developed in decisions on Beddoe applications.
Background
[7] The Trusts were settled respectively by Ernest Thomas (Tom) Vincent and Paretekohera (Polly) Vincent (the Settlors) by the Trust Deeds. The Trust Deeds, which are identical in all relevant respects, are both dated 24 June 1985.
The beneficiaries under the Trusts
[8]Under the Trust Deeds, the income beneficiaries of the Trusts were:
(a)Polly Vincent, under the ET Vincent Trust and Tom Vincent under the P Vincent Trust;
(b)Manuka Vincent, a son of Polly Vincent;
(c)Eight named children of the Settlors, including Rosemary Jean Vincent;2
(d)16 named grandchildren of the Settlors, including Theresa Hinemoa Vincent, the oldest grandchild, and Marie Anahera Marshall, the daughter of Rosemary Vincent;
(e)All other grandchildren of the Settlors born within 35 years of the date of the Trust Deeds; and
(f)Any children of Theresa Hinemoa Vincent born within 35 years of the date of the Trust Deeds.
[9] The capital beneficiaries are the grandchildren of the Settlors in [8](d) and (e) above and the children of Theresa Vincent in [8](f) above. Under the Trust Deeds, capital beneficiaries could also be income beneficiaries.
2 The Trust Deeds named Rosemary Jean Marshall as the relevant child, but it is common ground that Rosemary Jean Vincent is that person.
The trustees of the Trusts
[10]Originally, each Trust had three trustees: the relevant Settlor and two others.
[11] The Settlors died in 1991 and the other original trustees retired as trustees in November 1992. However, other individuals were appointed as trustees, including David Wayne Morris, who is now a director of the Applicant but was previously a trustee of both Trusts in his personal capacity.
[12] Between November 1992 and May 2014, each Trust had two trustees: Mr Morris and David Mackersey, until Mr Mackersey died in September 2008, and then Mr Morris and Marian Glazewski, until Mr Glazewski died on 16 May 2014. Following Mr Glazewski’s death, Mr Morris became the sole trustee of each Trust.
[13] On 4 July 2014, the Applicant was appointed a trustee of the P Vincent Trust. On 15 August 2016, Applicant was appointed a trustee of the E T Vincent Trust. Mr Morris retired as trustee of each Trust on the dates the Applicant was appointed trustee.
Apportionment of Trust property
[14] Under the Trust Deeds, at the Date of Final Apportionment the Trustees are to hold the capital of the Trusts and any undistributed income of the Trusts on trust in equal shares for the capital beneficiaries who have reached or later survive to 20 years of age. The Date of Final Apportionment is 24 June 2020. As a consequence, the Applicant is preparing for a final apportionment of the capital and any retained income of the Trusts to the capital beneficiaries.
Care and custody arrangements for Dante and Toby Marshall
[15] On 5 August 2003, Dante Marshall was born to Marie Anahera Marshall. On 20 June 2005, the Family Court granted custody of Dante Marshall to his grandmother, Rosemary Vincent.
[16] On 14 July 2009, Toby Marshall was born to Marie Anahera Marshall. On 11 May 2011, the Family Court made parenting and guardianship orders in respect of Toby Marshall in favour of Rosemary Vincent and her partner, Bryan Kumm.
Rosemary Vincent seeks recognition of Dante and Toby Marshall as beneficiaries
[17] In September 2019, Rosemary Vincent advised Mr Morris that she was lodging a whāngai claim for Dante and Toby Marshall for whom, she said, she and Mr Kumm had been parents in every way. Mr Marshall responded that he did not consider that the boys could be considered as beneficiaries of the Trusts. He said he would require a detailed legal opinion from Rosemary Vincent if she wished to pursue the claim because he did not consider Trust funds should be used to obtain legal advice.
[18] By letter dated 30 April 2020 to Mr Morris, Wynn Williams, the solicitors for Rosemary Vincent, set out why they considered Dante and Toby Marshall should be classified as beneficiaries of the Trusts. The letter discussed the history of the Trusts, what that history indicated about the intentions of the Settlors and the extent to which whāngai relationships are recognised in law. The letter also advised that Rosemary Vincent and her partner had applied to adopt Dante and Toby Marshall. The letter suggested that, if the trustees were not willing to recognise the children as beneficiaries, the best way to resolve matters would be for the trustees to apply under s 66 of the Trustee Act 1956 for a declaration regarding the children’s status.
[19] By email dated 15 May 2020, Mr Morris advised Wynn Williams that the trustees considered there was no room for the interpretation contended by Rosemary Vincent and that Dante and Toby Marshall would not be recognised as beneficiaries under the Trusts.
Substantive proceeding commenced
[20] On 24 June 2020, Rosemary Vincent filed the substantive proceeding seeking the declarations set out at [3] above. The Applicant was named as the defendant in the substantive proceeding.
[21] On 17 December 2020, the Applicant filed an amended statement of defence and counterclaim.
[22] On 5 February 2021, Rosemary Vincent filed a response to the amended statement of defence and a defence to the counterclaim.
Application for Beddoe Orders
[23] On 11 February 2021, the Applicant filed its application for Beddoe orders. Mr Morris, as director of the Applicant, swore an affidavit in support of the application.
[24] Twenty-two of the 33 living capital beneficiaries and five of the seven living income beneficiaries of the Trusts have filed identical notices of support for the granting of the Beddoe orders and opposition to the declarations sought by Rosemary Vincent. The notices do not address the affirmative outcomes sought by the Applicant in its amended statement of defence or the Applicant’s counterclaim.
[25] Jessica Vincent, a grandchild of the Settlors and a capital beneficiary under the Trusts, has also filed an affidavit in support of the application. Jessica Vincent provides her estimate of the impact on the expected distribution to the acknowledged 33 living capital beneficiaries if Rosemary Vincent’s interpretation of the Trust Deeds were to be upheld in the substantive proceeding. Jessica Vincent estimates that each beneficiary’s expected distribution of approximately $424,000 would be reduced to approximately $400,000. Jessica Vincent also says that having access to the institutional knowledge of the Applicant is important to the capital beneficiaries as the Trusts are being wound up.
Trustee duties, trustee costs and Beddoe orders and applications
[26]As Kós P said in McCallum v McCallum:3
“Beddoe orders” are directions given by a court approving trustees bringing of defending proceedings at the cost of the trust. With a Beddoe order in place, trustees may pursue or defend claims with the confidence that they will not be
3 McCallum v McCallum [2021] NZCA 237 at [1] (footnotes omitted).
liable personally for costs reasonably incurred. Without such an order, they proceed at risk.
[27] Although Beddoe orders have been developed and used principally in England, in McCallum the Court of Appeal confirmed the availability of Beddoe orders in New Zealand and said that they represent an important protection for trustees in bringing or defending a suit in circumstances where there might be doubt as to the availability of indemnity for costs incurred in proceedings.4
[28] In McCallum, Kós P surveyed the essential principles governing trustee duties, trustee costs and Beddoe applications. For present purposes, it is sufficient to recount the following points from Kós P’s survey.
Trustee duties
[29] Trustees have a duty to protect trust assets for the benefit of the beneficiaries. The duty extends to bringing and defending claims necessary to fulfil that duty, provided there are reasonable grounds for doing so. If there is doubt as to what trustees may do, the trustees should take legal advice, and may seek directions from the court.5
Trustee costs
[30] Trustees are entitled to be indemnified from the trust for costs and expenses incurred in the administration of the trust, provided the costs were reasonable and were necessarily incurred in the interests of the trust. That indemnity extends to the trustees’ own costs and to any costs a trustee may be ordered to pay other parties, unless the Court orders otherwise.6
[31] Misconduct, which can include careless or unreasonable conduct in the conduct of litigation or the management of the trust, may deprive trustees of indemnity. Trustees acting in their own interests or in the interests of only some beneficiaries may also be deprived of indemnity.7
4 At [50].
5 At [28]; see also Pratley v Courteney [2018] NZCA 436, [2018] NZAR 1787 at [18].
6 At [29] – [32].
7 At [32].
[32] There are also other proceedings where the right to indemnity is or is likely to be displaced. This in turn will affect whether it is appropriate to make pre-emptive Beddoe orders.8
Classification of proceedings in which indemnity might or might not be given
[33] Various attempts have been made to classify proceedings in which an indemnity for trustees’ costs may or may not be given. The classic statement is that of Kekewich J in Re Buckton,9 which concerned costs in the event rather than a pre- emptive Beddoe application. As Kós P stated:10
Kekewich J divided trust litigation into three broad functional categories:
(a)Proceedings brought by trustees to obtain the court's guidance on construction of the trust deed or some aspect of the trust administration. The costs of all parties necessarily participating in those proceedings are treated as incurred for the benefit of the estate and will be ordered to be paid out of the trust fund.
(b)An application similar in nature to the first category, but brought by someone other than a trustee (such as a beneficiary). It would equally have justified application by a trustee. The same approach is taken to costs in this category as in the first category.
(c)Claims where a beneficiary or third party is making what might be termed a hostile claim against the trustees, or another beneficiary. That claim may still involve a point of construction or administration, but will often involve a claim to a beneficial interest or entitlement to a part of the fund. Here, the usual principles as to costs apply; they follow the event.
[34] Lewin on Trusts identifies seven broad functional categories of proceeding as follows:11
(1)proceedings for the construction of the trust instrument or determination of questions of law as to the validity or scope of the trusts or powers under the trust instrument or imposed or conferred by law;
(2)proceedings in which directions are sought for the guidance of the trustee in the administration or execution of the trust;
8 At [33].
9 Re Buckton [1907] 2 Ch 406 (Ch).
10 McCallum v McCallum, above n 3, at [34].
11 Lyton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) vol II at [48–002]. (footnotes omitted)
(3)proceedings in which the assistance of the court is sought under various statutory provisions, for example under the Trustee Act … in relation to the appointment of trustees and vesting of trust property;
(4)proceedings in which the rights of beneficiaries in the administration or execution of the trusts are sought to be enforced, for example in relation to accounts, provision of information to beneficiaries or distribution of the trust fund;
(5)breach of trust proceedings;
(6)proceedings concerning self-dealing and profits from the trust; and
(7)proceedings for or concerning the removal of trustees.
[35]Kós P said of these categories:12
It is reasonably obvious that the prospects of indemnity for trustees' costs being denied are greater in the latter three categories than in the former three (with the fourth category in no man's land, capable of being seized by either outcome). In the latter three categories, a trustee ought not to expect a pre- emptive determination of indemnity in their favour via a Beddoe order. That order will only be made where doing so is nonetheless in the best interests of the trust.
[36] There is also, as Kós P described it, the “subtly different classification system” developed by Lightman J in Alsop Wilkinson v Neary,13 which is focused on the character of the party opposing the trustees in the litigation.14 That classification is:
(a)a dispute as to the trusts on which they hold the subject matter of the settlement (“a trust dispute”);
(b)a dispute with one or more of the beneficiaries as to the propriety of any action which the trustees have taken or omitted to take or may or may not take in the future (“a beneficiaries dispute”); and
(c)a dispute with persons, otherwise than in the capacity of beneficiaries, in respect of rights or liabilities assumed by the trustees as such in the course of administration of the trust (“a third party dispute”).
[37]Kós P observed of the Alsop and Buckton categories:15
The Alsop classification system is also helpful, as far as it goes, but it is less instructive as to the likely availability or denial of indemnity. That is because the first and second Alsop categories include both non-hostile and hostile proceedings (the latter being far less likely to earn indemnity). In contrast, the
12 McCallum v McCallum, above n 3, at [35].
13 Alsop Wilkinson v Neary [1996] 1 WLR 1220 (Ch), [1995] 1 All ER 431.
14 McCallum v McCallum, above n 3, at [36].
15 At [36].
operating assumption underlying the first and second Buckton categories is that they are non-hostile (and, therefore, likely to earn indemnity).
Beddoe applications
[38] In McCallum, Kós P discussed the procedural history to Beddoe applications and, drawing on the analysis of Thomas J in McLaughlin v McLaughlin,16 summarised the nature of, and requirements for, Beddoe applications as follows:17
[40] Beddoe applications are made, usually by originating application, separately from the substantive proceeding. They seek directions as to whether to bring or defend those substantive proceedings, at the trust's expense. The applicants are usually, but not invariably, trustees. As the effect of the order is to give pre-emptive direction for the indemnification of the applicant's expenses from the trust's funds, full disclosure of the strengths and weaknesses of the proceedings is required.
[39] Kós P discussed the law as it has developed in relation to “hostile” claims, that is, claims generally regarded as coming within the third Buckton category, and said that it was not necessarily the case that a Beddoe order would not be granted in relation to such claims or only in exceptional circumstances. Specifically, Kós P said Thomas J was right in McLaughlin to criticise earlier authority suggesting a Beddoe application brought in hostile proceedings would succeed only in exceptional circumstances.18 On behalf of the Court of Appeal, Kós P endorsed the following observations of Thomas J:19
[29] The test as educed from case law is simply that Beddoe applications are gauged against the fundamental question of what is in the best interests of the trust. The Court must therefore exercise its jurisdiction in the best interests of the trust, and the beneficiaries as a whole, having regard to all the circumstances. This may include the need to balance the interests of different beneficiaries, as well as the interests of beneficiaries and trustees. That basic test conforms to the principle on which such applications are founded, namely that trustees ought to be indemnified for costs properly and reasonably incurred for the benefit of the trust.
[40] As Kós P discussed in McCallum, it is difficult to imagine a truly hostile proceeding involving an allegation of breach of trust with at least some prospect of
16 McLaughlin v McLaughlin [2018] NZHC 3198, [2019] NZAR 286 at [19].
17 McCallum v McCallum, above n 3.
18 At [42] – [43].
19 McLaughlin v McLaughlin, above n 16, at [28]; cited in McCallum v McCallum, above n 3, at [43].
success, where it would be in the best interests of the trust to indemnify pre-emptively the trustees’ costs out of the trust’s assets before determining those allegations.20 There is no absolute rule but the greater the degree of self-interest in a trustee bringing or defending a proceeding, the less likely it is that a Beddoe order should be made. That is because such predetermination is correspondingly less likely to be in the interests of the trust.21 Even so, there can be circumstances where it is right to grant pre- emptive indemnity, even if a trustee defendant is self-interested. Examples are where the substantive proceeding is weak or vexatious and should be tested by way of strike out or summary judgment, or where it is in the interests of the trust that the claim be defended but the trustee lacks the resources to do so.
[41] As Kós P noted, it may be in the interests of the trust that a partial Beddoe order be made.22 In McCallum, the Court of Appeal upheld in part the decision of Gwyn J in the High Court.23 The Court upheld one general Beddoe order granted in respect of a cause of action that challenged a transfer of assets to a trust, and upheld two partial Beddoe orders which limited the trustees’ indemnity to reasonable costs incurred in providing the Court with factual information and submissions on relevant legal principles but did not extend to actively defending the merits of the claims. In upholding the partial orders, however, Kós J observed that it might be thought there was little point in orders in such limited terms because the trustees were patently entitled to such an indemnity, subject only to any rebate for misconduct.24
Submissions of Applicant
[42] Mr Vane makes the general submission that it is unnecessary to fit the application or its separate causes of action into any particular category and that, in accordance with the test stated by Thomas J in McLaughlin,25 as approved by the Court of Appeal in McCullum,26 it is in the overall best interests of the Trusts that the Beddoe orders as sought be granted.
20 McCallum v McCallum, above n 3, at [44].
21 At [45].
22 At [45].
23 McCallum v McCallum [2020] NZHC 907.
24 McCallum v McCallum, above n 3, at [67].
25 McLaughlin v McLaughlin, above n 16, at [28].
26 McCallum v McCallum, above n 3, at [43].
[43] Mr Vane also says that the first cause of action comes within the first category of Buckton and the first category of Alsop Wilkinson because it is an application to the Court for guidance on the construction of the Trust Deed. However, he also says this cause of action is not limited to the interpretation of the Trust Deeds because, if the Court were to uphold Rosemary Vincent’s interpretation, the result would be a reduction in the distribution of capital to each of the acknowledged capital beneficiaries as set out in the affidavit of Jessica Vincent and there is also the possibility of applications for retrospective allocations of income to Dante and Toby Marshall which would further diminish the Trust funds at the expense of existing beneficiaries. While, as a consequence, there is a “reasonably strong element of being a hostile claim against existing beneficiaries,” Mr Vane submits that this is the kind of case discussed by Kós P in McCallum where a trustee’s costs should be indemnified.
[44] Mr Vane also says the merits of the first cause of action do not favour Rosemary Vincent given the history of the Trusts and alleged discrepancies in the evidence put forward by Rosemary Vincent, as discussed in Mr Morris’s affidavit. He also says that if Rosemary Vincent succeeds, there is a clear prospect of double-dipping by Rosemary Vincent’s daughter and her two children, who will inherit their mother’s share of the capital distribution.
[45] Mr Vane submits that the Applicant, who is acting as a matter of practicality on behalf of the beneficiaries and not in its own interests, is an appropriate contradictor to the first cause of action.
[46] Mr Vane submits that the second case of action also comes within the second category of Buckton and the first category of Alsop Wilkinson because it involves the interpretation of statutory provisions and the Trust Deeds and is procedural and historical. Mr Vane notes that no allegations of misconduct, dishonesty or negligence have been made against the Applicant and that removal of the Applicant as trustee is not sought.
[47] Mr Vane submits that the Applicant has a good arguable defence to, and a good chance of success in opposing, the second cause of action based on arguments he canvasses with regard to the interpretation the Trustee Act 1956 and the Trusts Act
2019. Mr Vane submits that the applicant has a strong case for the affirmative outcomes it seeks and for its counterclaim and that the Applicant should have its costs met from the Trusts’ funds. He also says that if the Court were to decline to make the Beddoe orders sought, it should at least order reimbursement of the Applicant’s costs incurred to date in the substantive proceeding and in the Beddoe application.
Submissions of interested party
[48] Mr Campbell and Mr Halligan, counsel for Rosemary Vincent, submit that the first cause of action is a hostile trust dispute within the first category of the Alsop Wilkinson categorisation and within the second Buckton category. However, it is also effectively a dispute between beneficiaries, which would bring it within the second Alsop Wilkinson category. Because it is a dispute between beneficiaries, they say the Applicant should adopt a neutral position.
[49] Counsel for Rosemary Vincent accept that because of the number of beneficiaries involved, the Applicant is likely to be best placed to test the substantive proceedings but submit that the Applicant has taken a partisan position in favour of one group of beneficiaries and against other claimant beneficiaries. Counsel refer to Alsop Wilkinson in which Lightman J said that, ordinarily a trustee would not be entitled to costs if unsuccessful in defending the position of one group of beneficiaries over that of other beneficiaries. Counsel also refer to other authorities where it has been held that trustees in a dispute between beneficiaries have a duty to remain neutral,27 including in a dispute involving potential beneficiaries.28
[50] Counsel for Rosemary Vincent say the Applicant has also not provided full disclosure of the strengths and weaknesses of its case in the substantive proceeding through the opinion of an appropriately qualified lawyer, usually senior counsel. Nor has the Applicant provided an estimate of the costs likely to be incurred by the trustee or of the trustee’s costs exposure to other parties if unsuccessful in the substantive proceeding, in accordance with the guidance in Lewin on Trusts. However, they also say that, because this cause of action is not susceptible to strike out or summary
27 Re Schroeder’s Wills Trusts [2004] 1 NZLR 695 (HC) at [44].
28 Irvine v Public Trustee [1989] 1 NZLR 67 (CA) at 70.
judgment, it is not appropriate at the Beddoe application stage to make a preliminary assessment of the merits in the substantive proceeding to determine whether a Beddoe order should be granted.
[51] Applying the test stated by Thomas J in McLaughlin29 and approved by the Court of Appeal in McCullum,30 counsel for Rosemary Vincent submit that it would be in the best interests of the Trusts to grant a partial Beddoe order of the kind granted by Gwyn J in the High Court in McCullum; that is, limited to indemnifying the Applicant for the costs of providing relevant factual information and legal submissions but not actively defending the merits of the first cause of action.
[52] Counsel for Rosemary Vincent say the second cause of action seeks the Court’s guidance on a question of law arising from the administration of the Trusts and is a “friendly” trust dispute within the first category of Alsop Wilkinson and is within the second Buckton category. They accept that it is in the best interests of the Trusts to have this issue resolved in a cost-effective manner. However, they say that, by seeking endorsement of its prior conduct through the declarations sought in the affirmative outcomes and counterclaim, the Applicant has converted this cause of action into a third category Buckton claim. They say that a Beddoe order should not be made in such circumstances where the Applicant is seeking to use trust funds for a self- interested purpose. They submit that, as with the first cause of action, the proper approach with respect to the second cause of action would be to grant a partial Beddoe order limited to indemnifying the Applicant for the costs of providing relevant factual information and legal submissions but not actively taking a position on the merits.
Discussion
[53] On the one hand, Mr Vane urges the Court to be pragmatic and to grant Beddoe orders indemnifying the Applicant for costs incurred in defending a cause of action where the Trustee wishes to oppose the claims of prospective beneficiaries and, in response to the second cause of action, seeks positive outcomes to remedy possible technical breaches of trust by the Applicant as trustee. On the other hand, counsel for
29 McLaughlin v McLaughlin, above n 16, at [28].
30 McCallum v McCallum, above n 3, at [43].
Rosemary Vincent raise serious procedural and substantive difficulties with the Applicant’s approach on both causes of action but acknowledge that there is a case for granting Beddoe orders in respect of both causes of action, but not on the terms sought by the Applicant.
[54] At the end of the hearing, I invited counsel to confer to see if they might agree on compromise orders. By memorandum dated 12 August 2021, Mr Vane advised that the Applicant wishes to maintain its application on the terms originally sought.
[55] In order to decide the application, therefore, it is necessary to go back to basic principles on the granting of Beddoe orders.
Preliminary observations
[56] The submissions of counsel for both parties on the law on Beddoe orders largely align with the discussion at [26] – [41] above. One point of difference is that Mr Vane suggests that the test stated by Thomas J in McLaughlin and endorsed by the Court of Appeal in McCallum regarding the best interests of the trust may obviate the need to classify the application according to the categories in Buckton and Alsop Wilkinson. By contrast, counsel for Rosemary Vincent address the categories in Buckton and Alsop Wilkinson before applying the test in McLaughlin.
[57] Thomas J’s observations, although stated generally, were made in the context of hostile proceedings, as Kós P noted in McCallum. Accordingly, while the overall interests of the Trust must be relevant to all decisions on Beddoe applications, I do not consider that Thomas J’s observations, as endorsed by the Court of Appeal, provide a basis for disregarding the categories in Buckton and Alsop. That is apparent from Kós P’s discussion of those and other categories in McCallum.
[58] Another area of difference concerns whether, as submitted by counsel for Rosemary Vincent, there was an obligation on the Applicant to provide the Court with an opinion on the strengths of its case in the substantive proceeding and of the prospects of success and also of costs likely to be incurred and to which the Applicant might be exposed if unsuccessful.
[59] I do not consider there is an obligation as such for an applicant for a Beddoe order to provide an opinion of an appropriately qualified lawyer or an estimate of costs. The passages in Lewin on Trusts to which counsel for Rosemary Vincent refer in support of their submission, reference Practice Directions issued to supplement the English Civil Procedure Rules. There is no equivalent directive guidance in New Zealand.
[60] I agree that it is good practice to provide the Court with an opinion, usually from senior counsel, on the strengths and weaknesses of a trustee’s case when seeking a Beddoe order. However, I consider the obligation on an applicant to be more general. As stated by Thomas J in McLaughlin31 and endorsed by the Court of Appeal in McCallum,32 the obligation is to provide full disclosure of the strengths and weaknesses of the substantive proceeding. How that obligation is discharged may depend on the circumstances of the case. In McLaughlin, Thomas J was satisfied that the trustees had provided sufficient disclosure through the evidence they filed in Court, despite the absence of an opinion from senior counsel.33 I discuss below whether the Applicant has complied with that obligation in this case.
[61] It may assist the Court to be provided with an estimate of costs likely to be incurred by a trustee in the substantive proceeding and of the likely exposure to costs of the other party if the trustee is unsuccessful. However, this is an application for a Beddoe order and not an application for a prospective costs order. Whether or not such an estimate is required in an application for a prospective costs order, I do not accept there is an obligation to provide an estimate of costs when making a Beddoe application.
Categorisation of causes of action
[62] Counsel for both parties made submissions on how the individual causes of action should be categorised in terms of the application for Beddoe orders. This is consistent with the approach taken by Thomas J in McLaughlin and by High Court
31 McLaughlin v McLaughlin, above n 16, at [19].
32 McCallum v McCallum, above n 3, at [40].
33 McLaughlin v McLaughlin, above n 16, at [112] – [113].
and Court of Appeal in McCallum v McCallum. I see no reason to depart from that approach.
[63] In form, the first cause of action comes within the second Buckton category as submitted by counsel for both parties. It is an application by someone other than a trustee seeking the Court’s guidance on the construction of the trust deed. However, the second declaration sought in this cause of action seeks to have Dante and Toby Marshall named as beneficiaries of the Trusts. While that declaration involves a point of construction, it also involves a claim to a beneficial interest in the Trusts’ funds. For that reason, I am satisfied the first cause of action should be considered as a third category Buckton claim.
[64] Similarly, in form, the first cause of action comes within the first Alsop Wilkinson category. It is a dispute as to the trusts on which the Applicant holds the Trusts’ funds. However, while the substantive proceeding has named the trustee as defendant, in substance, the application is a dispute between potential beneficiaries and the acknowledged existing beneficiaries. For that reason, I am satisfied the first cause of action should also be considered as a second category Alsop Wilkinson dispute.
[65] For completeness, I consider that the first cause of action comes within the fourth of the categories in Lewin on Trusts discussed by Kós P in McCallum; it is a proceeding in which the rights of beneficiaries, which must include potential beneficiaries, are sought to be enforced in relation to the distribution of the Trusts’ funds.
[66] In each categorisation, therefore, the first cause of action comes within a category of dispute where there can be no expectation that a trustee’s costs will be indemnified.
[67] In form, the second cause of action, as pleaded by Rosemary Vincent, would appear to come within the second Buckton category, as submitted by counsel for bothb parties. It is intended to seek the Court’s guidance on the administration of the Trusts.
It would also appear to come within the first Alsop Wilkinson category. It is a dispute as to the trust on which the Applicant holds the Trusts’ funds.
[68] However, the second and third declarations sought in the second cause of action require determination of the validity of the Applicant’s appointment as trustee and of the validity of the Applicant’s actions as trustee. The consequences of those determinations could be severe and could result in the setting aside of the appointment of the Applicant and the actions taken by the Applicant as trustee. For that reason, I do not agree that this cause of action is just about getting the Court’s guidance on the administration of the Trusts or is a “friendly” trust dispute. I consider it amounts to a hostile attack on the Applicant and its actions, and a dispute between prospective beneficiaries and the trustee as to the propriety of the trustee’s actions.
[69] For these reasons, and even without taking into consideration the affirmative outcomes and counterclaim sought by the Applicant, I consider that the second cause of action also comes within the third Buckton category and should be considered as a second category Alsop Wilkinson dispute. The Applicant’s affirmative outcomes and counterclaim reinforce those conclusions.
[70] I also consider that the second cause of action has elements of the fifth and seventh of the categories discussed in Lewin on Trusts: breach of trust proceedings and proceedings concerning the removal of the trustee.
[71] As a consequence, in each categorisation, the second cause of action also comes within a category of dispute where there can be no expectation that a trustee’s costs will be indemnified.
Is it in the interests of the Trusts to grant Beddoe orders?
[72] In considering whether the Beddoe orders sought in McLaughlin were in the best interests of the trust in that case, Thomas J considered the merits of the substantive proceeding, the nature of the claim and the nature of the trust itself,34 as well as any other issues that may make it in the interests of the trusts for the orders to be made.
34 McLaughlin v McLaughlin, above n 16, at [31] – [36].
Gwyn J in the High Court took the same approach in McCallum,35 albeit in a different order. The Court of Appeal took no issue with that approach in its decision in McCallum. Accordingly, I consider those factors in the order considered by Gwyn J.
The nature of the claims
[73] As discussed above, the first cause of action involves both the construction of the Trust Deeds and a claim for recognition of Dante and Toby Marshall as capital beneficiaries. If successful, the claim will entitle Dante and Toby Marshall to their own shares in the final apportionment of Trust funds and may allow a claim for retrospective allocations of income since capital beneficiaries can also be income beneficiaries. Anything Dante and Toby Marshall obtain will be at the expense of the other capital beneficiaries. There is, therefore, a real contest between current and potential beneficiaries.
[74] In these circumstances, the presumption must be that the Applicant, as trustee, should remain neutral in the contest, as noted by Lightman J in Alsop Wilkinson,36 and as reflected in the decisions of Nicolson J in Re Schroeder’s Wills Trusts37 and the Court of Appeal in Irvine v Public Trustee.38 However, that presumption can be displaced. Examples are if the Court is satisfied that the claim is weak or vexatious or if the other beneficiaries support the trustee in defending the claim on their behalf and do not have the resources to defend the claim themselves. Even then, however, the Court must be satisfied that defending the claim would not compromise the trustee’s continuing obligations to all beneficiaries, including potential beneficiaries.
[75] Different considerations apply to the second cause of action. While that cause of action also involves issues of construction, principally of relevant provisions of the Trustee Act 1956, it is also a claim by potential beneficiaries against the Applicant as trustee. As discussed above, the declarations sought by Rosemary Vincent may result in determinations of breach of trust if it is found that the Applicant was not validly appointed. While no allegations of wrong-doing, impropriety, dishonesty, negligence
35 McCallum v McCallum, above n 23, at [18], [28] – [34].
36 Alsop Wilkinson v Neary, above, n 13.
37 Re Schroeder’s Wills Trusts, above n 27, at [44].
38 Irvine v Public Trustee, above n 28, at 70.
or breach of duty have been made, a finding that a professional trustee company was not a validly appointed trustee may well give rise to questions of breach of duty and negligence on the part of the Applicant and, perhaps, by its professional advisers. In such circumstances, a Beddoe order would be unlikely to be appropriate.
The nature of the Trusts
[76] The Trusts were established for the benefit of named children and named and unnamed grandchildren of the Settlors, as well as unnamed children of Theresa Vincent. The Trusts are not, therefore, charitable trusts of the kind discussed in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand.39 In that decision, which concerned an application under a statutory procedure for advice and direction and not a Beddoe application, the High Court of Australia indicated it might be open for the Court to give the trustee an opinion, advice or direction where the trust was for a charitable purpose and where none of the contestants were suing or defending in order to protect personal assets and where the crucial question was the precise terms of the purpose for which the trust existed. Absent those circumstances, however, the Court considered that such opinion, advice or direction would not be appropriate.
[77] In short, the nature of the Trusts does not support the granting of the Beddoe orders.
Merits and prospects of first cause of action
[78] As a preliminary point, I do not accept the submission of counsel for Rosemary Vincent that the Court is precluded from assessing the merits of a claim that cannot be tested by an application for summary judgment or strike out. It is apparent that the example Kós P gave in McCallum of funding such an application as an appropriate use of trust funds40 was not intended to restrict an assessment of the merits of a proceeding to such circumstances.
39 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42, (2008) 237 CLR 66 at [67].
40 McCallum v McCallum, above n 3, at [45].
[79] As discussed above, the Applicant has not provided an independent opinion on the merits of the claims and their prospects of success. There is, however, evidence relating to the first cause of action, in particular. Since the first cause of action will be largely a question of ascertaining the intentions of the Settlors, evidence relevant to those intentions is likely to be more useful than an opinion from appropriately qualified counsel.
[80] The relevant documents before the Court are the Trust Deeds, correspondence between the Applicant and Rosemary Vincent and her solicitors, Wyn Williams, the notices of opposition from existing beneficiaries, and the affidavits of Mr Morris and Jessica Vincent. Bearing in mind that the hearing of a Beddoe application is not a mini-trial, I am satisfied that this evidence provides an adequate basis for reaching a preliminary view on the merits and prospects of the first cause of action.
[81] Drawing on the Wynn Williams letter of 30 April 2020, the question for decision in the substantive proceeding is likely to be: whether, in all the circumstances known to the Settlors at the time the Trust Deeds were executed, it was the Settlors’ intention to include whāngai grandchildren (that is, whāngai children of the Settlor’s children) as capital beneficiaries in the Trusts.
[82] If the answer to that question is yes, there may be a further question as to whether that intention extended to including great-grandchildren of the Settlors who would otherwise be excluded as beneficiaries.
[83] Under the Trust Deeds, the income beneficiaries were, principally, the children of the Settlors. The capital beneficiaries were, principally, the grandchildren of the Settlors. The great-grandchildren of the Settlors were not included as beneficiaries. However, as the letter from Rosemary Vincent’s solicitors and Mr Morris’s affidavit discuss, there are exceptions in the Trust Deeds to those general categories.
[84]The exceptions are:
(a)Manuka Vincent, who was a child of Polly Vincent but not of Tom Vincent, but was named as an income beneficiary;
(b)Shane Vincent, who was named as a grandchild of the Settlors and a capital beneficiary, even though he was a nephew, not a son, of Manuka Vincent and was not directly related to the Settlors; and
(c)The children of Theresa Vincent, who are recognised as being capital beneficiaries, even though they are great-grandchildren of the Settlors.
[85]Mr Morris says that the explanations for these exceptions are that:
(a)Manuka Vincent was formally adopted by Tom Vincent and was brought up as one of the Settlors’ children;
(b)Shane Vincent was brought up by Manuka Vincent and Manuka Vincent’s wife as one of their children, even though Shane Vincent was the child of the sister of Manuka Vincent’s wife;
(c)From an early age, Theresa Vincent was brought up by the Settlors as one of their children and special provision was made to ensure that Teresa’s children were treated the same way as the children of the Settlors’ other children, even though Teresa’s children were the Settlors’ great-grandchildren.
[86] Mr Morris also offers his opinion as to the intentions of the Settlors based on his experience as their adviser. However, because he was not an advisor to the Settlors when the Trusts were established, I do not consider that opinion evidence, if admissible, to be of significant weight.
[87] It is for the Court hearing the substantive proceeding to decide whether the exceptions provided in the Trust Deeds, together with Polly Vincent’s Māori heritage and the recognition of whāngai relationships in New Zealand law and according to tikanga, are sufficient to conclude that the Settlors intended to include whāngai grandchildren as capital beneficiaries. From the evidence before me, however, I consider that it is at best an open question.
[88] While I accept there is a sufficient basis for the argument to be made, there are a number of apparent difficulties to be overcome. One is that the three exceptions were known to the Settlors who made conscious decisions to include those persons as beneficiaries because of their particular circumstances. The same cannot be said of Dante and Toby Marshall who were born some years after the Settlors died. Another difficulty is that, even though special provision was made for Teresa Vincent’s children in the Trust Deeds, it was not on the basis that Teresa Vincent was a whāngai child of the Settlors or that her children were grand-children of the Settlors. A further difficulty is that the effect of recognising Dante and Toby Marshall as grandchildren of the Settlors would be to advantage them over other great-grandchildren of the Settlors. The Court hearing the substantive proceeding may consider that it must be satisfied that that was also part of the Settlors’ intention in order to grant the declarations sought by Rosemary Vincent.
[89] Given these considerations, on the basis of the evidence before me, I consider that the merits of the first cause of action are not strong and that there is a reasonably good prospect of the Applicant successfully defending that cause of action. At the same time, it cannot be said that the cause of action is frivolous or vexatious. There is a serious question to be tried and the merits of the case may be strengthened or weakened by further evidence at the substantive hearing.
Merits and prospects of second cause of action
[90] The second cause of action is largely a question of interpretation. For that reason, it would have been helpful to have had an opinion from counsel assessing the strengths and weaknesses of this claim. Mr Vane’s submissions summarised the case for the Applicant without acknowledging the strength of the case for Rosemary Vincent. I do not consider that to be sufficient disclosure of the strengths and weaknesses of the Applicant’s case. However, I am aware of the issues from the submissions of counsel for Rosemary Vincent and from an earlier decision where similar issues were said to arise in relation to the application of relevant provisions of the Trustee Act 1956.41
41 Oldfield v Oldfield [2019] NZHC 492.
[91] Because the Applicant was appointed trustee of the Trusts on 4 July 2014 and 15 August 2016 respectively, the appointments were subject to the Trustee Act 1956 which continued in force until 30 January 2021, the date the Trusts Act 2019 commenced.
[92] Section 43(1) the Trustee Act 1956 provided that where a trustee is dead or is unable, unwilling, unfit or incapable of acting as trustee:
… the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustees for the time being, or the personal representatives of the last surviving or continuing trustee, may by deed appoint a person or persons (whether or not being the person or persons exercising the power) to be a trustee or trustees in the place of the first-mentioned trustee.
[93]Section 43(2)(c) provided that on the appointment of a trustee:
… it shall not be obligatory … to fill up the original number of trustees where more than 2 trustees were originally appointed; but, except where only 1 trustee was originally appointed, a trustee shall not be discharged under this section unless there will be either a trustee corporation or at least 2 individuals to act as trustees to perform the trust.
[94] Section 45(1) provided that where there were two or more trustees and one of the trustees decided to be discharged from the trust, and the other trustees and the person with the power to appoint trustees consented, the trustee desiring to be discharged was deemed to have retired from the trust without any new trustee being appointed. However, s 45(1) was subject to s 45(3) which provided:
Except where only 1 trustee was originally appointed, a trustee shall not be discharged under subsection (1) unless there will be either a trustee corporation or at least 2 individuals to act as trustees to perform the trust.
[95] It is common ground that the Applicant is not a “trustee corporation” as that term was defined in s 2 of the Trustee Act 1956.42
42 Section 2(1) of the Trustee Act 1956 provided:
trustee corporation means Public Trust or the Māori Trustee or any corporation authorised by any Act of the Parliament of New Zealand to administer the estates of deceased persons and other trust estates.
[96] Having regard to ss 43(2)(c) and 45(3), a number of questions arise from the fact that the Applicant is the sole trustee of the Trusts:
(a)Because the Trusts each had three trustees initially, should there have been at least two individuals as trustees of each trust?
(b)Because the Applicant is a company, could the Applicant even be one of the two “individuals” required by s 43(2)(c), having regard to the decision of the English High Court in Jasmine Trustees Ltd v Wells,43 which interpreted “individuals” in the largely identical sections of the United Kingdom’s Trustee Act 1925 to include only natural persons?44
(c)If the requirements of ss 43(2)(c) and 45(3) have not been complied with:
(i)Were the decisions of the Applicant with respect to dispositions of trust property valid?
(ii)Do Mr Morris and previously appointed trustees remain liable personally for the decisions of the Applicant with respect to trust property?
[97] Mr Vane submits that s 48(1) of the Trustee Act 1956 offers a way around these questions. After providing that a trustee corporation may be appointed sole trustee even if the trust deed provided for or 2 or more trustees, s 48(1) stated:
Nothing in this subsection shall prevent any other corporation from acting as a trustee in accordance with any authority vested in it in that behalf, whether by its memorandum of association or otherwise … .
[98] Mr Vane submits that the Applicant is an “other corporation” authorised to be a sole trustee because the Trust Deeds do not forbid the appointment of a corporate
43 Jasmine Trustees Ltd v Wells & Hind (a firm) [2007] EWHC 38 (Ch), [2007] 3 WLR 810.
44 As far as the Court is aware, no New Zealand court has decided whether Jasmine Trustees should be applied in interpreting ss 43(2)(c) and 45(3) of the Trustee Act 1956. In CDT 12 Ltd v Millar [2019] NZHC 606, [2019] 2 NZLR 888, at [28], Mallon J observed that it was not inevitable the New Zealand sections would be interpreted in the same way as their British equivalents.
trustee and do not expressly require that there be two trustees. He also submits that, even if there are problems with the Applicant’s appointment, they can be cured by the Court appointing the Applicant as sole trustee under the Trusts Act 2019, which does not restrict the appointment of corporate trustees as sole trustees, and making orders validating the previous actions of the Applicant.
[99] While it will be for the Court hearing the substantive proceeding to decide the question, it would seem unlikely that the Court would hold that the fact that the Trust Deeds do not forbid the appointment of a corporate trustee meant that the appointment of the Applicant as sole trustee was permitted, given the clear terms of 43(2)(c) and 45(3) of the Trustee Act. It would also seem unlikely that the Court would hold that the provisions of the Trusts Act 2019 are relevant to the declarations sought by Rosemary Vincent.
[100] For these reasons, I consider that the merits of Rosemary Vincent’s case in the second cause of action are strong and that the prospects of the Applicant successfully defending that cause of action are correspondingly weak.
Other reasons why Beddoe orders may be in the interests of the Trusts
[101] Mr Vane submits that because the beneficiaries are geographically scattered, have limited knowledge and experience of litigation and, in some cases, have limited funds, it is practical and efficient for the Applicant to act on the beneficiaries’ behalf in defending the first cause of action. He also says the Applicant has no personal interest in the first cause of action and is only marginally self-interested in the second cause of action because no allegation of wrong doing, impropriety, dishonesty, negligence or breach of duty by the Applicant has been made and no order has been sought for the removal of the Applicant. Mr Vane also points to the strong support for the Applicant’s position as demonstrated by the 27 notices of opposition to Rosemary Vincent’s application and the lack of opposition from any of the other beneficiaries.
[102] As noted above, counsel for Rosemary Vincent accept that the Applicant is likely to be best placed to test the substantive proceedings and that it is in the best interests of the Trusts to have the second cause of action resolved in a cost-effective manner. However, they submit that any Beddoe orders should be limited to ensuring
that the Applicant does not take a partisan position between acknowledged and prospective beneficiaries in the first cause of action and does not actively defend the challenge to the Applicant’s appointment and actions in the second cause of action.
[103] I accept that it would be pragmatic and efficient for the Applicant to act on behalf of the beneficiaries in defending the first cause of action. However, I do not consider that pragmatism and efficiency outweigh the obvious difficulties of a trustee acting for one group of beneficiaries in opposing the claims of prospective beneficiaries. To do so would risk compromising the neutrality that trustees must maintain between beneficiaries. That will be particularly important if Rosemary Vincent is successful on the first cause of action and decisions must then be made about the extent to which Dante and Toby Marshall should share in the Trusts’ funds.
[104] I do not consider these issues would be cured by granting a partial Beddoe order. It would not be helpful for the judge considering the first cause of action not to have a full presentation of the case against the claim to include Dante and Toby Marshall in the pool of capital beneficiaries. Resolution of the claim is not just a technical question of interpretation. It will require evidence and submissions on the intentions of the Settlors.
[105] In addition, I do not consider that the Applicant is best placed to make the case that the Settlors did not intend to include whāngai grandchildren as capital beneficiaries. When the Trusts were established, the Applicant did not exist and it appears that Mr Morris was not an adviser to the Settlors at that time. On the other hand, six of the Settlors’ children, not including Rosemary Vincent, are still alive. All of them were older than 20 at the time the Trusts were established. They are likely to be better placed than Mr Morris to offer evidence of the intentions of their parents and the circumstances surrounding the establishment of the Trusts. Their children, as capital beneficiaries, have a direct interest in the outcome of the proceeding.
[106] The second cause of action is against the Applicant as Trustee. In defending that cause of action, the Trustee is not acting on behalf of the beneficiaries. For that reason, I do not consider that considerations of pragmatism and efficiency are relevant. Even if they were, they would not outweigh the reality that it is not appropriate for the
Trusts’ funds to be used to defend a claim where breaches of trust are involved, even if those breaches were unknowing and technical.
Conclusion on whether Beddoe derations orders are in the interests of the Trusts
[107] My conclusion is that it is not in the interests of the Trusts to grant Beddoe orders with respect to either cause of action.
[108] For the reasons given, for the Applicant to defend the first cause of action would be contrary to its duty as trustee to remain neutral as between beneficiaries. While the potential beneficiaries’ claim does not appear to be strong, it is not frivolous or vexatious. Considerations of pragmatism do not outweigh the obvious difficulties of a trustee acting in a partisan way between these two groups of beneficiaries.
[109] It is neither appropriate nor in the interests of the Trusts for the Trusts’ funds to be used to defend the second cause of action which challenges the validity of the appointment of the Applicant as sole trustee and of actions taken by the Applicant as trustee. While no wrongdoing or negligence is alleged, questions of breach of trust and, perhaps, negligence may arise if the declarations sought in the substantive proceeding are granted. In addition, the Applicant’s prospects of defending this cause of action do not appear to be strong.
[110]For these reasons I dismiss the application for Beddoe orders.
Where to from here?
[111] Mr Vane has advised that a number of the capital beneficiaries have indicated a willingness to defend the substantive proceeding and have asked and obtained the agreement of the Applicant for an advance on their funds in the Trusts for that purpose.
[112] While it is not for this Court to rule on those matters, I consider that would be an appropriate means of defending the first cause of action. I recognise that Rosemary Vincent cannot obtain a similar advance because, as an income beneficiary only, she has no right to the Trusts’ funds after the date of apportionment. I also recognise that an advance cannot be obtained on behalf of Dante and Toby Marshall unless and until
they are declared to be capital beneficiaries. I do not consider, however, that those circumstances preclude an advance to acknowledged capital beneficiaries who are seeking in an advance on funds that they will receive in any event.
Applicant’s request for order that costs incurred to date be met from Trust funds
[113] Mr Vane submits that even if the Court declines the Beddoe application it should order that the Applicant’s reasonable costs incurred to date in relation to the first cause of action in the substantive proceeding and in the Beddoe application be met from the Trusts’ funds. Mr Vane says such orders would be appropriate in all the circumstances of the Trusts.
[114] Counsel for Rosemary Vincent submit that the costs in the Beddoe application should be reserved and should be the subject of brief written submissions by the parties. They note that the starting point is that all costs incurred on Beddoe applications, including those of respondents, are met from trust funds. Subject to the outcome of the Beddoe application, they submit that the costs of the capital beneficiaries who wish to oppose the substantive proceeding should be left for determination in that proceeding.
[115] In the light of these submissions, I reserve costs in the Beddoe application and ask counsel for the parties to file and serve submissions of no more than eight pages. If counsel wish to make submissions on whether I should make an order with respect to costs to date in the substantive proceeding, they may do so.
[116] Counsel for the Applicant is to file and serve submissions by 17 September 2021. Counsel for Rosemary Vincent are to file and serve submissions by 1 October 2021.
G J van Bohemen J
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