Costs In Trust Proceedings - Further Royal Court Guidance Where Fiduciary Powers Not Validly Exercised: In The Matter Of The Piedmont Trust And The Riviera Trust [2016] JRC016

The Royal Court's judgment in 2015 In the Matter of the Piedmont Trust and In the Matter of the Riviera Trust1 provided guidance with regard to the exercise of fiduciary powers of appointment and removal holding that appointments of trustees and protectors were invalid on the facts of the case (see the Ogier briefing on the substantive judgment which can be accessed by clicking here. The Royal Court has now delivered judgment on the costs of the proceedings, in which it reviewed and applied the key principles concerning the recoverability of costs by fiduciaries and beneficiaries in cases of this kind.

Issues

The focus for the Court on the issue of costs was to consider the position of the parties in their capacities as fiduciaries and beneficiaries. The key issues were:

When might a fiduciary lose its right to an indemnity? When can beneficiaries recover costs in trust proceedings? What basis of award might be granted to a fiduciary or beneficiary - costs on 'the trustee basis' or on 'the indemnity basis'? Costs bases

As part of its broader analysis, the Royal Court, confirmed that:

costs on the trustee basis confer a full indemnity subject only to such costs being reasonably incurred and reasonable in amount; and costs on the indemnity basis are awarded by the Court in exercise of its power to decide who pays the costs of litigation with such costs being subject to taxation by the Greffier if not agreed. A fiduciary's costs

The Royal Court noted the general position confirmed by the Court of Appeal in Re The JP Morgan 1998 Employee Trust2, that different principles apply to whether a party is acting as a trustee/fiduciary or beneficiary and in which judgment the observation in Re HHH Trust3, that a person "exercising fiduciary powers in the interest of beneficiaries cannot, absent a finding of misconduct, be expected to meet the costs reasonably incurred by him or her in the exercise of those powers out of his or her personal assets" was approved. Therefore, the starting point is that a fiduciary will be entitled to a trustee basis indemnity when acting in that capacity. However in this case where, in particular, there had been findings that the exercises of fiduciary powers of appointment by the erstwhile protector and beneficiaries had been irrational or "outside the band of reasonable decisions", the Court needed to consider whether those acting in that fiduciary capacity had lost that right of indemnity.

The Court considered that the...