Beddoe orders
An article referring to trustees’ costs would not be complete without mentioning Beddoe orders. Named after the 1893 decision of Re Beddoe (Downes v Cottam) [1893] 1 Ch 547 trustees can, if they are unsure about whether to pursue or defend proceedings, seek the court’s directions about what to do. If Beddoe relief is granted, the trustees are fully protected as to their costs from the trust fund (assuming full disclosure was made in the first place).
Applications for Beddoe orders are relatively rare in New Zealand, but much more common in England, particularly in the context of pension schemes. It may be that they are not sought as often as they should be here. If trustees can take advantage of the ADR provisions in the Trusts Act at an early stage, any need for Beddoe orders will be further reduced.
Power to compromise
The specific power to compromise contained in current trust legislation is being subsumed into the ADR provisions in the Trusts Act. However, the power remains a broad one, with trustees essentially being able to compromise anything as long as they have acted honestly and in good faith (or any higher standard the trust deed imposes).Interestingly, trustees will not be liable by reason only that the ADR settlement was not consistent with the terms of the trust. It will be interesting to see how this provision is interpreted, but one possibility is that the common law restrictions regarding variation of trusts may be relaxed.
Ultimately, trustees have an obligation to preserve and safeguard trust property for the benefit of the beneficiaries. Mediation is a flexible confidential process able to deal with even extreme hostility. In McLaren v McLaren [2017] NZHC 161 and referred to above, at [94] Dobson J then said: “However embittered each side’s view of the other might now have become, putting differences aside and making every possible endeavour to objectively recognise the concerns of the other side is now required. The alternative is to commit disproportionate personal and trust resources for the benefit of the lawyers.”
Let’s see if we can really help parties to trust disputes achieve an outcome that is in everyone’s best interests.
About the Author
Carole Smith
Barrister
Carole is an experienced litigator, mediator and negotiator with a special interest in trusts (including relationship property disputes involving trusts) and estates. She is also interested in equitable areas of law, and how negotiation and/or mediation may be used to align with the underlying concept of fairness in equity.