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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> In the matter of the Piedmont Trust and the Riveira Trust [2016] JRC 016 (21 January 2016) URL: http://www.bailii.org/je/cases/UR/2016/2016_016.html Cite as: [2016] JRC 16, [2016] JRC 016 |
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Before : |
Sir Michael Birt, Commissioner, sitting alone |
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Between |
Jasmine Trustees Limited |
Representor |
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And |
(1) L (2) M (3) N (4) O (5) P (6) Q (7) R (8) S (9) Kairos Trustees (NZ) Limited IN THE MATTER OF JASMINE TRUSTEES LIMITED AND IN THE MATTER OF THE PIEDMONT TRUST And |
Respondents |
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Between |
(1) Jasmine Trustees Limited (2) Lutea Trustees Limited |
Representors |
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And |
(1) L (2) M (3) N (4) O (5) P (6) Q (7) R (8) S (9) Kairos Trustees (NZ) Limited (10) T (11) U IN THE MATTER OF JASMINE TRUSTEES LIMITED AND IN THE MATTER OF THE RIVIERA TRUST |
Respondents |
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Advocate N. M. Sanders for the Representors.
Advocate A. Kistler for the First Respondent.
Advocate F. B. Robertson for the Second Respondent.
Advocate J. P. Speck for the Third and Fourth Respondents.
judgment
the commissioner:
1. This judgment deals with the costs of the proceedings which resulted in the judgment of the Court on 23rd September, 2015, Representation of Jasmine Trustees Limited [2015] JRC 196, ("the September judgment"). The effect of that judgment was to declare invalid the appointments of new trustees and of new protectors in relation to two trusts.
2. The detailed background to the proceedings is set out in the September judgment to which reference should be made as necessary. I propose therefore only to give a very brief summary of the position sufficient to explain the issues in relation to costs. I will use the same defined expressions and terminology as in the September judgment.
3. The proceedings related to two trusts, the P Trust and the R Trust ("the Trusts"). The P Trust is a discretionary trust. The current beneficiaries are the father, the elder son, the younger son, the daughter and their respective children; the elder son and the younger son each having three children and the daughter having one child.
4. The father was at all times the protector of the P Trust and Jasmine was the trustee from October 2008. By deed dated 31st January, 2014, the father purported to exercise his power as protector to remove Jasmine and appoint Kairos as trustee in its place.
5. The R Trust is also a discretionary trust of which the father is the protector and Jasmine and Lutea were the trustees. The class of beneficiaries is the same as the P Trust with the addition of two other named individuals. On 31st January, 2014, the father purported to exercise his power as protector to remove Jasmine and Lutea and to appoint Kairos as trustee in their place.
6. For the reasons set out at paragraphs 21-26 of the September judgment, Jasmine and Lutea were concerned as to the validity of the two appointments of Kairos and accordingly presented two representations (one in respect of each Trust) to the Court on 6th May, 2014, seeking directions as to what if any action they should take in respect of their purported removal and the purported appointment of Kairos. The Court ordered that the various respondents to these two representations be convened.
7. The next significant event was on 16th June, 2014, when the father, the elder son and the younger son executed a deed in relation to the R Trust whereby the father retired as protector and, pursuant to the relevant provisions of the trust deed, appointed the elder son and the younger son as protectors in his place.
8. On 7th July, 2014, the father executed a letter retiring as protector of the P Trust. Under the terms of that Trust, the power to appoint a new protector in such circumstances rests with a majority of the adult beneficiaries of the Trust. On 8th July, 2014, all the adult beneficiaries except the daughter (i.e. the father, the elder son, the younger son and the four adult children of the elder son and the younger son respectively) executed a deed appointing the elder son and the younger son as protectors of the P Trust.
9. On 11th July, 2014, the daughter issued a summons in the existing proceedings instituted by Jasmine and Lutea seeking a declaration that the appointments of the elder son and the younger son as protectors of both the P Trust and the R Trust were invalid, alternatively that the Court should remove them as protectors.
10. In the September judgment, the Court considered first the validity of the appointment of Kairos as trustee. By the time of the hearing, no one was seeking to defend the appointment but the Court nevertheless had to consider whether it was invalid. For the reasons set out in the judgment, the Court concluded the father had failed to take into account material matters, namely the expertise, experience, financial standing etc. of the proposed trustee of two substantial trusts, took irrelevant matters into account (namely New Zealand's position vis-à-vis Italy) and in the circumstances had reached a decision which no reasonable appointor could have arrived at. The Court therefore declared the appointment of Kairos to be invalid in relation to both Trusts; this also covered the purported removal of Jasmine/Lutea with the result that they remained as the trustees.
11. Much the greater part of the hearing was taken up with the second issue, namely the validity of the appointments of the elder son and the younger son as protectors in place of their father. The Court accepted that it had been envisaged when the Trusts were established that one or other of the sons might well be appointed as successor protector. However, for the reasons summarised in paragraph 153 of the September judgment, the Court concluded that, as a result of recent events, that was no longer appropriate and that an appointment of the sons as protector in the current circumstances was outside the band of reasonable decisions. The recent events referred to fell broadly under three headings:-
(i) There was litigation in the United States between the daughter on the one hand and the sons (together with the father) on the other. This gave rise to a significant conflict of interest and meant that the elder son and the younger son could not be considered as being in a position to act fairly as protector.
(ii) The sons had not shown themselves to be independent of the father and appeared to have paid little attention to their fiduciary duties in connection with companies in New York and Vermont of which they were directors.
(iii) There had been a breakdown in relations between the daughter on the one hand and the sons on the other which made it impossible for them reasonably to be seen as in a position to act fairly as protector.
12. All parties were agreed that Jasmine and Lutea should be awarded their costs out of the Trusts on the usual trustee basis.
13. Subject to that, on behalf of the daughter, Advocate Robertson asked for the following:-
(i) In relation to the validity of the appointment of Kairos as trustee, the daughter and the sons should be awarded their costs out of the Trusts on the indemnity basis. As to the father, although Advocate Robertson originally contended that there should effectively be an order that the father pay the daughter's costs on the standard basis, he confined his application during the course of his reply to an order that the father simply be left to bear his own costs in connection with this aspect, so that he should not be indemnified out of the Trusts.
(ii) As to the issue of the validity of the appointment of the sons as protector, the sons and the father should effectively be ordered to pay the costs of the daughter on the standard basis, with the difference between those costs and the daughter's indemnity costs being reimbursed to her out of the Trusts. Advocate Robertson submitted that, to achieve this in the most convenient manner, the technical order should be for the daughter to be awarded her costs out of the Trusts on the indemnity basis, but with the sons and the father being ordered to reimburse the Trusts in an amount equal to the daughter's standard costs.
14. The father and the sons, on the other hand, submitted that all the parties should be awarded their costs out of the Trusts on the indemnity basis.
15. In Re The JP Morgan 1998 Employee Trust, [2013] (2) JLR 235 ("JP Morgan"), the Court of Appeal, in a judgment delivered by Nugee JA, emphasised that, when considering costs in relation to trust litigation, different principles apply depending on whether the person whose position is under consideration is a trustee (or other fiduciary) or a beneficiary.
16. The starting point is that a trustee is entitled to be reimbursed for costs he has incurred. As Vos JA said in Alhamrani v JP Morgan Trust Company (Jersey) Limited [2007] JLR 527 at para 39:-
17. The position of a person with fiduciary functions in relation to a trust is the same in this respect as that of a trustee. Thus at para 23 of his judgment in JP Morgan, Nugee JA specifically approved the observation of Clyde-Smith, Commissioner in Re HHH Trust, [2013] (1) JLR 135 at para 20 where he said:-
18. The question therefore is in what circumstances this right of indemnity is lost. I would refer to the following cases which provide some guidance:-
(i) In JP Morgan itself, Nugee JA said this at para 20:-
(ii) MacKinnon v MacKinnon [2010] JLR 508 involved litigation concerning an estate. A beneficiary brought proceedings against the executor of the estate seeking various information etc. This was opposed by the executor, although eventually conceded during the course of proceedings before the Royal Court. The Royal Court ordered the executor to pay the beneficiary's costs and also ordered that the executor could not recover his own costs out of the estate. On appeal, the Court of Appeal overturned those decisions and in the course of doing so, considered the circumstances in which a trustee or executor could be deprived of his indemnity out of the trust or estate. It is clear that the Court of Appeal considered that the principles for trusts and estates were identical. I would quote the following passages from the judgment of Beloff JA:-
(iii) In Re Y Trust [2011] JRC 155A, Clyde-Smith, Commissioner said this at paragraph 10:-
19. Advocate Robertson submitted that the challenge to the appointment of the sons as protector was akin to an application to remove them (indeed that was the alternative prayer in the daughter's summons) and that accordingly the principles as to costs of an application to remove a trustee were helpful.
20. In support he referred to the following cases and text book.
21. In Re The V R Family Trust [2009] JLR 202, the trustees brought a representation seeking the removal of the protector of the trust. There were a number of criticisms of the protector but the key one was that he had made a personal claim to certain of the trust assets. In the end, the protector did not oppose his removal and the Court duly made an order. However the question then arose as to the costs incurred by the trustees and the convened beneficiaries in connection with the proceedings to remove him.
22. The Court ordered him to pay the costs of the other parties on the indemnity basis, stating that it was hard to envisage a conflict of interest more pervasive than where a protector was actively pursuing claims against the trust assets. Furthermore, the Court could not envisage any circumstances in which anyone in his position could reasonably contemplate remaining in office (para 33). The Court further stated at paragraph 38 that it found the protector's conduct to be 'wholly unreasonable and in flagrant breach of his duty as protector... to the beneficiaries'.
23. Advocate Robertson also referred to Lewin on Trusts (19th Edition) at 27-191 where it states:-
24. The authority given in Lewin for the emphasised passage in the above extract is Re E, L, O and R Trusts [2008] JLR 360. In that case the trustee was trustee of a number of trusts of which some were primarily for the benefit of H and his family and the others were primarily for the benefit of his brother J and his family. The trusts held shares in a substantial trading company. A dispute arose between H and J in relation to that company and there was a real risk of litigation in connection with it where the H trusts would be on one side and the J trusts on the other. H asked the trustee to retire as trustee of the H trusts but it refused to do so. In due course proceedings were instituted seeking the removal of the trustee as trustee of the H trusts. Shortly before the case was due to be heard, the trustee agreed to retire. The question then arose as to the costs of the proceedings to that point.
25. The Court held [paras 34-35] that this was an elementary case of a plain and obvious conflict of interest. The brothers were in dispute, there were complex negotiations on the future of the trading company where the interests of the trusts were obviously adverse, and there was the real prospect of litigation where the H trusts and the J trusts were likely to be on opposite sides of the fence. The position was so obvious that there was no justification for the trustee seeking the directions of the Court. The costs were therefore unreasonably incurred from the point at which the Court held that the trustee should have recognised the impossibility of its position. It therefore ordered the trustee to pay the costs, partly on the standard basis and partly on the indemnity basis having regard to particular factors in relation to the proceedings.
26. However the Court concluded by emphasising this does not mean that an order for costs should automatically follow a decision that a trustee should be removed. The Court said this at paras 41 and 42:-
27. In the passage cited at para 23 above, Lewin draws a distinction between removal because of a conflict of interest and removal on some other ground and suggests that a trustee is more at risk of being deprived of his indemnity and ordered to pay the applicant's costs in the former case than in the latter. I do not consider that the cases cited in the footnotes to this passage justify this proposition and I respectfully disagree with it. Certainly E, L, R and O Trusts does not draw any such distinction. In my judgment, whether the application for removal is based upon a conflict of interest or some other ground, the test remains the same, namely whether in resisting such an application, the trustee has acted reasonably. I consider that paras 41-42 of E, L, R and O Trusts cited in the preceding paragraph are of general application.
28. Finally, Advocate Robertson referred to the well-known case of Alsop Wilkinson v Neary [1996] 1 WLR 1220 where Lightman J stated in passing that trustees could be involved in three kinds of dispute. The first (which he called a 'trust dispute') was a dispute as to the trusts upon which the trustees held the subject matter of the settlement. This might be friendly litigation or hostile litigation. In relation to the second category he said this at 1223-1224:-
29. He went on later at 1224 to say "a beneficiaries dispute is regarded as ordinary hostile litigation in which costs follow the event and do not come out of the trust estate."
30. Advocate Robertson argued that this was a beneficiaries dispute and that therefore costs should follow the event. However, in J P Morgan Nugee JA cautioned against treating the observations of Lightman J as a statute. He said this at para 59:-
31. Turning to the costs of beneficiaries, the Court of Appeal in J P Morgan endorsed previous authority to the effect that valuable guidance was to be obtained from the observations of Kekewich J In Re Buckton [1907] 2 Ch 406 at 414-415 where he said:-
32. The facts of Buckton are of some interest. The case was instituted by a beneficiary. There was uncertainty as to whether under the terms of the will, he took a life interest in certain property or an estate in tail male. The beneficiary wished to establish that he took an estate in tail rather than a mere life interest and he therefore brought the matter to court, joining those who would be entitled if he only took a life estate. It was therefore either a category 2 or a category 3 case. Although Kekewich J had initially thought it was hostile litigation (and therefore category 3), having heard it, he decided it was really designed to clear up a doubtful title and more akin to a category 2 case. He therefore ordered the costs of all parties out of the estate.
33. As already stated, the proceedings were begun by Jasmine and Lutea because of the concerns which they had about the appointment of Kairos and their removal. In my judgment, this is just the sort of case envisaged in paragraphs 41-42 of E, L, R and O Trusts. Given the surrounding circumstances described in the September judgment, Jasmine and Lutea were wholly justified in bringing the matter before the Court and indeed none of the parties have suggested that they acted unreasonably in doing so. In my judgment their actions would have been reasonable even if the Court had in the event upheld the appointment of Kairos. It follows that they are entitled to be indemnified out of the Trusts.
34. Turning to the position of the daughter and the sons, they were clearly convened to the representations in their capacity as beneficiaries, as indeed were their adult children. In my judgment this aspect of the case clearly falls within Buckton category 1. It is a matter of the administration of the Trusts in that all parties need to know who is the trustee and whether Kairos has validly replaced Jasmine and Lutea. It is right therefore that the costs of the daughter and the sons should be paid out of the Trusts on the indemnity basis.
35. The position of the father is different. Although he is also a beneficiary, he was the person who as protector exercised his power to appoint Kairos and remove Jasmine and Lutea. He must be regarded as having been convened primarily in that capacity so as to be able to make submissions to the Court in connection with his exercise of the powers of appointment.
36. At the end of the day, he did not seek to uphold the appointments. Nevertheless, the proceedings only became necessary because of his actions in making the appointments. This raises the question of whether he should be deprived of his indemnity (as protector) out of the Trusts and/or whether he should be ordered to pay the costs of any other parties.
37. In my judgment he should not. Although there is a similarity of language in describing one of the tests for finding the exercise of a power of appointment invalid ('irrational' or 'outside the band of reasonable decisions') and the ground for depriving a fiduciary of his indemnity ('misconduct' or 'acting unreasonably'), it is a mistake to consider the tests as being the same. They are not. As the cases referred to above make clear, the mere fact that a trustee has been found to be in breach of trust does not necessarily mean that he should be deprived of his indemnity. By parity of reasoning, the mere fact that an appointment by a fiduciary has been found to be invalid should not lead inexorably to the conclusion that he should be deprived of his indemnity. As Beloff JA said in MacKinnon in the passage cited at para 18(2) above, it is a matter of fact and degree in every case. The Court must have regard to the overall circumstances of the case and decide whether the nature and gravity of his misconduct is such that he should lose his indemnity and/or be ordered to pay the costs of the parties. It is very much a matter of discretion for the Court having regard to the particular facts of the case.
38. In this context, as held by the Court of Appeal in MacKinnon (para 42), an unremunerated family trustee will not lightly be ordered to pay the costs of litigation if he has made an innocent mistake or acted in a manner which has ex post facto been shown to be misguided or even careless. In my judgment, that is the situation here. The father was misguided in the appointment of Kairos. He failed to have regard to relevant factors and took into account irrelevant factors as described in the September judgment. However there is no finding, for example, that he acted in bad faith or for any improper purpose or with reckless disregard for his fiduciary duties. These are of course not to be taken as the only circumstances where a fiduciary may be deprived of his indemnity or ordered to pay the costs of another party but, in the circumstances I do not consider that the nature or gravity of his conduct has reached the level where it is appropriate to deprive him of his indemnity. Nor do I consider that his conduct in connection with the actual litigation was unreasonable. In the circumstances I agree that he should be indemnified out of the Trusts for his costs and should not be ordered to pay the costs of any other party.
39. I propose first to consider the nature of this part of the litigation.
40. Advocate Robertson submitted that this was a beneficiaries dispute (using the terminology in Alsop Wilkinson) and was therefore to be treated as hostile litigation. The daughter's summons involved an attack on the validity of appointments made by fiduciaries (the father in the case of the R Trust and the majority of the adult beneficiaries in the case of the P Trust). It followed, he submitted, that the ordinary consequences should follow and that effectively the losing parties should be ordered to pay the costs of the winning party on the standard basis. Thus he effectively asked for an order that the father and the sons should pay the daughter's standard costs. However he also submitted that the difference between standard costs and the daughter's indemnity costs should be reimbursed to her out of the Trusts, although he did not explain why that would be appropriate if it was indeed to be treated as hostile litigation.
41. In my judgment it is right to bear in mind the cautionary words of Nugee JA in J P Morgan (referred to at para 30 above). It is important not to treat the language of Lightman J as if it were contained in a statute. The Court must always stand back, look at the case in the round and decide on the overall nature of the litigation. In my judgment, this aspect of the litigation falls within Buckton category 2. Just as it was a matter of administration of the Trusts for all parties to know who was the trustee, it is equally a matter of administration for the parties to know who the protector is. It seems to me that it would have been open to Jasmine and Lutea if they had thought fit, to have included in their representations (by way of amendment as these events occurred after presentation of the original representations) a request for clarification as to whether there had been a valid appointment of new protectors just as they sought clarification as to whether there had been a valid appointment of new trustees. I do not perceive any significant difference in nature between the issue of the appointment of new trustees and the issue of the appointment of new protectors. They all relate to the administration of the Trusts and the validity of any appointments needed to be resolved in the interests of the beneficiaries as a whole. It makes no difference that, in relation to the appointment of a new trustee, the beneficiaries were not in dispute whereas in relation to the appointment of the new protectors they took up adverse stances. It is often the case that beneficiaries put forward opposing stances in category 1 and category 2 cases but this does not change the nature of the proceedings, nor does it lead to the loss of their normal entitlement to costs out of the trust fund on the indemnity basis unless they have behaved unreasonably (see Re the Dunlop Settlement [2013] JRC 123 at paras 27 and 30-33, approved in J P Morgan).
42. Advocate Robertson reminded me that, before the commencement of the hearing, I had ordered that it should take place in public on the basis that it involved hostile proceedings. That is of course correct. However, just as in Buckton itself Kekewich J retreated from his initial impression that it was a category 3 case and concluded in the end after having heard the case that it was a category 2 case, I have concluded, having now heard the case, that it is more properly to be considered as a matter falling within category 2 (i.e. an administrative matter but one brought by a beneficiary) rather than hostile proceedings. It follows that, with the benefit of hindsight, I would not have ordered that it be held in public.
43. It follows from my analysis as to the nature of the proceedings that, to the extent that any party is convened in his or her capacity as a beneficiary, that party is entitled to his or her costs out of the Trusts on the indemnity basis save to the extent that such party has behaved unreasonably. On this basis, the daughter is therefore clearly entitled to her costs out of the Trusts.
44. The question then is in what capacity the father and the sons were participating in this aspect of the litigation. That is not entirely straightforward. They are of course all beneficiaries of both Trusts. It might be argued therefore that they were simply participating as beneficiaries.
45. However, in relation to the R Trust, the appointment of the sons was made by the father as retiring protector. It seems to me that the father participated as a fiduciary defending the exercise of his power of appointment, in the same way as in relation to the appointment of Kairos as trustee. Advocate Speck argued that the sons were also participating as fiduciaries because they were the putative protectors defending their appointment by the father. I do not agree. The dispute concerned the exercise of an appointment by the father in his capacity as a fiduciary. There was no challenge to any actions taken by the sons as fiduciary. It seems to me therefore that they should be considered as participating in their capacity as beneficiaries rather than as fiduciaries.
46. The position is different in relation to the P Trust. There, the power of appointment of a new protector upon the retirement of the existing protector rested with the majority of the adult beneficiaries. Thus the power of appointment in this case was exercised by the father, the sons and the sons' adult children. All of them were acting as fiduciaries in exercising the power of appointment of a new protector. I accept therefore that, in relation to the P Trust, the father and the sons are to be considered as participating as fiduciaries defending their exercise (as three of the adult beneficiaries) of the relevant power of appointment.
47. I turn therefore to consider first the position of the father as fiduciary of both Trusts and the sons as fiduciaries in relation to the P Trust. Advocate Robertson argues that they have been found to have made an irrational appointment. That alone is sufficient to hold that they have been guilty of misconduct such as to lose their indemnity. Secondly, they have behaved unreasonably in connection with the litigation itself by seeking to defend the indefensible. They were aware of the facts giving rise to the conflict of interest, of the sons' conduct in relation to their role as directors of the various US companies and of the breakdown in relations between the daughter and the sons.
48. As to the first of these aspects, I repeat the observation at para 38 above. The father and the sons are unremunerated members of the family exercising fiduciary functions in relation to family trusts. They are not lightly to be deprived of their indemnity. The father was 92 at the time of the appointments and it was entirely reasonable that he should wish to retire. The terms of the P Trust specifically envisaged that one or more of the father's children should be the successor protector and in relation to the R Trust, the letter of wishes requested that the elder son should be appointed as successor protector and that the younger son should be the elder son's successor. On the face of it the elder son and the younger son had the necessary skills and experience through their respective careers to fulfil the duties of protector. The appointments were therefore prima facie not unexpected and perfectly reasonable. Indeed the Court specifically said at para 152 of the September judgment that, were it not for the supervening matters referred to in para 153, there could have been no objection to the sons being appointed as protectors of the Trusts.
49. The question is whether the existence of the supervening matters (i.e. the conflict of interest arising from the litigation, the behaviour of the sons in relation to the US companies and the breakdown in relations between the daughter and the sons) means that the nature and gravity of the misconduct is such that the father and the sons should be deprived of their indemnity as fiduciaries. In my judgment, given the background of a family trust with unremunerated members, they have not been guilty of misconduct of this nature and gravity. Again, there is no finding in the September judgment that any of them acted, for example, in bad faith or for any improper purpose or with reckless disregard of their fiduciary duties. In essence, they made errors of judgment in thinking that the sons could be perceived as acting fairly as protectors in the light of the matters referred to. That was undoubtedly an error of judgment on their part for the reasons set out in the September judgment and it has led to the invalidity of the appointment. But I do not consider that their conduct is such that they should be left to bear their own costs, let alone ordered to pay the costs of the daughter.
50. As to Advocate Robertson's second point, namely that they acted unreasonably in defending the proceedings, I do not consider that that was the case. The facts of this case are far removed from those of VR Family Trust (where the Court stated it was hard to envisage a conflict of interest more pervasive and could not envisage any circumstances in which anyone in the protector's position could reasonably contemplate remaining in office) and E, L, R and O Trusts (where the Court held that it was an elementary case of a plain and obvious conflict of interest and was so obvious that there was no justification for the trustees seeking the directions of the Court). As was made clear in the September judgment, it is not for the Court to substitute its own decision for that of the appointors in each case. Having had the benefit of listening to the case, the Court did not form the view that this was an open and shut case which the father and the sons were unreasonably seeking to defend. In those circumstances I do not consider it would be right to deprive them of their indemnity on that basis or order them to pay the daughter's costs. Nor do I consider, despite Advocate Robertson's submission to the contrary, that the manner in which they conducted the litigation (e.g. minimising their role in the preparation of the General Release) was sufficient to deprive them of their indemnity.
51. Turning to consider the position of the sons as beneficiaries in relation to the R Trust, for the same reasons, I do not consider that they acted unreasonably either in taking the position that their appointment should be upheld or in their conduct of the litigation. There is therefore no reason not to award them their costs out of the Trusts on the indemnity basis in relation to the R Trust.
52. During the course of the hearing on costs, a point emerged as to how the costs to be borne by the Trusts should be allocated as between the P Trust and the R Trust. Hitherto, the trustees have allocated the litigation expenses equally between the two Trusts on the basis that there has been no material distinction in the time spent in relation to each Trust.
53. It was suggested by Advocate Speck that, given the fact that the value of the R Trust is approximately 1/5th of the value of the P Trust, it might be fairer to allocate the costs pro-rata to the value of each Trust. The father was neutral as to the method of allocation and the daughter preferred to continue with a 50/50 split.
54. In my judgment, given that there is no distinction in the time spent on each Trust, the basis upon which the trustees have allocated costs so far and the fact that there is essentially a common class of beneficiaries (with minor exceptions), I think it would be simplest if costs continued to be allocated on a 50/50 basis.
55. Finally, I should deal with a technical point which arises as a result of my decision. There is an important difference in principle between a trustee or other fiduciary being indemnified as to costs which he has incurred and costs which are awarded to a party on the indemnity basis. The former arises as a matter of right (subject of course to the Court's power to deprive a fiduciary of such indemnity as discussed earlier) and confers a full indemnity subject only to such costs being reasonably incurred and in a reasonable amount, whereas the latter is awarded by the Court in exercise of its power to decide who pays the costs of litigation. Such costs are subject to taxation by the Greffier if not agreed. The former is commonly referred to in this jurisdiction as 'costs on the trustee basis' whereas the latter is referred to as 'costs on an indemnity basis'.
56. In practice, given the recent changes to the method of taxing costs awarded on an indemnity basis, there is unlikely to be a great difference in quantum between the two levels of costs, but there may well be some difference.
57. In order to remain true to the principle involved, so far as the costs of the proceedings in relation to the appointment of protectors is concerned, the sons should be indemnified on the trustee basis in respect of the P Trust and awarded costs on the indemnity basis in respect of the R Trust in order to reflect the fact that they were participating primarily as fiduciaries in relation to the former and were beneficiaries in relation to the latter. In relation to the issue of the trustee appointment, they were, as stated earlier, beneficiaries and therefore entitled to costs on the indemnity basis.
58. It would not be proportionate for there to be a taxation trying to allocate costs incurred between the P Trust and the R Trust or between the trustee issue and the protector issue. My view therefore is that I should take a broad view. I propose to allocate 10% of the overall costs to the trustee issue and 90% to the protector issue (attempting to reflect the course of the proceedings before the Court) and, as already stated, to allocate costs equally between the P Trust and the R Trust. The effect of this in relation to the sons would be that 45% of their costs would be recovered from the P Trust on the trustee basis and 45% out of the R Trust on the indemnity basis, with the remaining 10% being payable equally out of the P Trust and the R Trust on the indemnity basis.
59. In summary, for the reasons given, my conclusion is as follows:-
(i) Jasmine and Lutea may recover their costs on both the trustee and protector issue on the trustee basis, such costs being allocated equally between the Trusts.
(ii) The daughter is awarded her costs in relation to both issues on the indemnity basis out of the Trusts, such costs to be allocated equally between the Trusts.
(iii) The father may recover his costs on both issues on the trustee basis from the Trusts, such costs to be allocated equally between the Trusts.
(iv) The order in respect of the costs incurred by the sons is as follows:-
(a) 10% (being the amount I have attributed to the trustee issue) is awarded on the indemnity basis, such costs being allocated equally between the Trusts.
(b) 45% (being half the amount I have attributed to the protector issue) is awarded to the sons on the indemnity basis, such costs to be recovered from the R Trust.
(c) 45% (being the other half of the amount I have attributed to the protector issue) may be recovered from the P Trust on the trustee basis.
60. All the costs awarded on the indemnity basis are to be taxed if not agreed. In that respect the paying party is the trustee of the relevant Trust and it alone therefore has the right to demand a taxation. Nevertheless, in the interests of transparency, it would be well advised to circulate any bill of costs submitted by a party to all the other parties and invite comments, so it can take these into account when deciding whether or not to seek to negotiate a reduction in the bill submitted or require a taxation.
61. I have reached the above conclusions by application of the principles and for the reasons set out above. However, I am not unhappy to have come to this conclusion. During the course of submissions on the costs issue, Advocate Kistler asserted that, if the father were ordered to pay costs, he would be unable to do so because of restrictions imposed as a result of the US litigation and he would have to seek a distribution from the Trusts in order to pay such costs. No evidence was produced in support of this assertion and I have ignored it. Nevertheless, it is an indication of the sort of thing which, if it were to occur, would no doubt lead to fresh disputes within the family. It was sad to see the daughter sitting at the opposite end of the Court from the sons during the hearing when it is clear that, in the past, relations between them have been good. Now that this aspect of the case has been concluded, I would urge the parties to see if they can put these events behind them and move forward more harmoniously, if not for themselves then for their children, who are of course cousins and would no doubt benefit from harmony within the wider family.