This case involves long-running matrimonial proceedings where Franckel Law has been instructed to represent a number of the children and remoter issue of the husband to the marriage from his previous marriage. A successful application was made by Franckel Law for leave to intervene, as beneficiaries in the trust which is expected to be the main source of any payment to the wife to the marriage.
At a previous hearing, the wife had successfully applied to be added as a beneficiary of the trust in her own right. The Royal Court found that in all the circumstances the trustee had acted unreasonably in declining to do so (the ‘Decision’), and she was subsequently added.
This hearing concerned the appropriate costs order to make.
Costs arguments often arise in hard-fought trust proceedings. Given the number of parties, number and complexity of issues and level of documentation, the costs might have been expected to be significant. That was certainly the case in relation to this matter.
The Court first considered whether the trustee ought to be deprived of its usual indemnity as to the costs of and in connection with the matter, given that its Decision under consideration had been found to be unreasonable. The starting point is that a trustee would nevertheless be entitled to its costs.
The applicant asserted that in addition to the Decision itself, the trustee’s conduct had been partisan and inappropriately adversarial.
Noting that the Court does not wish to discourage persons from becoming trustees, the Court noted that to lose its indemnity the trustee had to be guilty of ‘misconduct’. Mere negligence or honest mistake will not be sufficient.
The necessary level of misconduct was a question of degree and the facts of each case. The mere fact that the Court had found the Decision to have been unreasonable was not sufficient in itself, despite the similarity in language of the tests.
The Court concluded that there was no or no sufficient level of misconduct from the trustee and it was entitled to its indemnity.
Further, given the conduct of the applicant, which the Court agreed was not reasonable and proportionate, she was deprived of 40% of her costs. The Court indicated that it was arguable that an order should be made against her to pay 40% of the costs of the other parties on the indemnity basis.