Beddoe Applications - What, When & How?

What is a Beddoes application?

A Beddoes application is an application made by trustees or personal representatives engaged in litigation to ensure that their costs can be met from the trust fund or the deceased’s estate. If no application is made then the trustees or personal representatives risk becoming personally liable for their own costs as well as those of any other party for any proceedings commenced, or defended, if they are ultimately unsuccessful with those proceedings. 

Whilst they could in theory seek to establish that any costs incurred were properly incurred as an expense of the trust or estate, a Beddoes application provides certainty at the outset of the proceedings for trustees, personal representatives and beneficiaries alike.

How and when should a Beddoes application be made?

In any Beddoes application the trustees or personal representatives engaged in litigation seek permission from the court as regards the continuance of proceedings issued, known in the application proceedings as the main action.  In deciding the application, the court determines whether the costs of the main action should be recoverable by the trustees/personal representatives from the trust or estate.  In doing so, the court considers whether it is in the interests of the trust/estate for the action to be brought or, if brought against the trust/estate, for the trustees/personal representatives to continue to defend the same.

The Beddoes application must be made in proceedings separate to the main action.  The beneficiaries of the trust/estate must be made a party to the proceedings as it directly affects them, although they may not receive all documents if they are a hostile party to the main action.

Beddoes applications are brought under Part 64 of the Civil Procedure Rules 1998 (“CPR”).  Although brought as an application for directions as to whether or not the trustees/personal representatives should bring or defend, or continue to bring or defend, proceedings in their capacity as trustees/personal representatives, they are issued by way of a claim form under CPR, Part 8.

Under CPR Rule 46.3(2) the general rule in relation to costs is that the trustee or personal representatives are entitled to be paid the costs of any proceedings brought, insofar as they are not recovered or paid by any other person, out of the relevant trust fund or estate.

When issuing a Beddoes application it is necessary for supporting evidence to be filed which should include details as to what steps the trustees/personal representatives have taken as regards matters generally prior to the issue of the application.  It is important therefore for trustees/personal representatives to ensure they have entered into some form of dialogue with the beneficiaries/third party as regards the main action, even if such consultation has ultimately not proved fruitful.  Such contact should also extend to the possibility of settlement of the main action as well as the question of costs.

CPR PD 46, paragraph 1.1 makes it clear that whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representatives obtained directions from the court before bringing or defending the main action, acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including their own and acted in some way unreasonably in bringing or defending, or in the conduct of, the main action.

A Beddoes application in practice

In the recent case of Clyne v Conlon & Others [2021] Master Clark sitting in the High Court, Chancery Division considered a Beddoes application brought by Maria Clyne (“Maria”) who was now the sole executor of the estate of her uncle, Patrick Conlon (“Patrick Senior”), who died on 4 June 2018 leaving a will dated 8 March 2016.

Background to the claim

A grant of probate was issued to Maria and her sister, Jacqueline on 19 October 2018 but Jacqueline was removed as executor by way of a court order dated 26 October 2020.

Patrick Senior’s will provided for the beneficiaries, Maria and his three sons, Kevin, Martin and Patrick, to receive a 25% share of the residuary estate which had a net value of about £516,000.00.

The estate’s two main assets were properties registered in Patrick Senior’s sole name, being 168 Headstone Drive, Harrow which consisted of two flats and the freehold reversion of 84 Canning Road, Harrow.  Kevin claimed to be beneficially entitled to one half of Headstone Drive and all of Canning Road.

The main action

In February 2021 Kevin issued a claim against Maria in her capacity as executor of Patrick Senior’s estate.  The particulars of claim contended that in the early 1980s Patrick Senior and Kevin agreed to go into business together buying and refurbishing properties with a view to profit and that it was an express or implied term of that agreement that they should retain equal interests, as beneficial tenants in common, in the properties bought pursuant to that agreement.

The particulars then went on to set out a series of purchases and sales, all said to follow a similar pattern, and each resulting in the property in question being held by Patrick Senior and Kevin as tenants in common in equal shares.  Kevin concluded the particulars by asserting that following a discussion between Patrick Senior and Kevin in about 1995 regarding dividing up the properties between them, they had entered into an oral agreement whereby Kevin would retain sole ownership of Canning Road and the upstairs flat at Headstone Drive and Patrick Senior would retain sole ownership of another property, 7 Blawith Road and the downstairs flat at Headstone Drive.

As a result, Kevin asserted that Headstone Drive had continued to be held on trust for him and Patrick Senior as beneficial tenants in common in equal shares with Canning Road being held on trust for him absolutely.

Maria was the only defendant to the proceedings and was sued solely in her capacity as executor, not beneficiary.  None of the other beneficiaries were originally parties to the main action.

The Beddoes application

In April 2021, Maria filed a defence and counterclaim in the main action and at the same time issued a separate Beddoes application, pre-action correspondence between the parties’ solicitors having failed to resolve matters.  All three sons were joined as defendants to the application.

Kevin opposed the application on the grounds that all the beneficiaries in the estate were adults and his claim to ownership of assets could properly be carried on between them as substantive parties to the main claim, with each deciding if they wished to defend it.  To this end, Kevin confirmed his willingness to join Patrick and Martin to the main action.

As to Patrick and Martin, Patrick filed an acknowledgment to the Beddoes application confirming that he did not oppose it.  Martin did not do so but did write to Maria’s solicitors shortly prior to the issue of the application stating that he did not believe Maria should be entitled to an indemnity from the estate in respect of her legal costs.  He further stated that he agreed with Kevin’s claim and would not be challenging it.  He went on to say that Maria and Patrick had already received inheritances from the estates of their parents (in the case of Patrick from his adoptive parents) and so he and Kevin had a legitimate legal natural right to inherit Patrick Senior’s estate.

Conclusions

In deciding whether it would be right to make the order, Master Clark, hearing the application considered the following factors:

• The merits of the main action;
• Whether Maria had acted reasonably in defending the main action to date;
• Whether by continuing to defend the main action she would be acting reasonably;
• The risk of injustice to Maria if the order were not granted;
• The risk of injustice to Kevin if the order were granted; and
• Whether there were other ways of managing the risk of injustice to the parties.

Having considered the above matters, and relevant evidence referred to by both parties, Master Clark held that in his judgment the merits of Maria’s defence were not insufficiently strong to justify the main action being defended by the estate.  He also concluded that as Maria had been sued in her representative capacity only she had acted reasonably in defending the claim to date – had she not done so Maria would have been open to a claim of breach of duty by Patrick, Patrick being unable to defend the main action himself as he was not a party to the same.  In Master Clark’s view therefore, Maria ought to be indemnified for her costs to date by the estate.  Going forward, unless and until the beneficiaries were added to the main action, in Master Clark’s judgment Maria would be acting reasonably by continuing to defend the claim.

The Master found that without the protection of a Beddoes order if Kevin were successful with his claim then Maria alone would be liable for total combined costs of about £230,000.00 (having regard to the costs budgets filed by the parties in the main action).  She would therefore be burdened with the entire risk of the defence, the value of Kevin’s claim being £240,500.00 (£212,500 for half the value of Headstone Drive and £28,000.00 for the value of Canning Road).  This would be the case despite the fact Patrick and Martin, notwithstanding his support of Kevin, would benefit from its success in that the share of each of the beneficiaries in the residuary estate would not be diminished by the amount of the value of the properties.

As against this, if successful, Kevin would recover assets worth £240,500.00 but if he obtains the normal order that Maria, as the unsuccessful party, pay his costs of the main action with her own costs being paid from the estate, he would bear one quarter of those costs from his share of the residuary estate, some £57,500.00, notwithstanding his success.

In Master Clark’s judgment the order that most appropriately managed the risk of injustice for both parties is one that provides for Maria in her capacity as executor to be indemnified in respect of all costs of the main action, insofar as they are not recovered from or paid by any other party.  If Kevin joins in the other beneficiaries (including Maria in her personal capacity) to the main action, such an order will not prevent him from seeking an order for costs from one or more of them in their personal capacities and/or an order that the costs in respect of which Maria is indemnified should be paid from specific beneficiaries’ shares of the residuary estate.  If, on the other hand, Kevin does not join in the other beneficiaries (or more accurately fails in an application seeking permission to join them), then the position as to seeking costs from them may be less straightforward but in Master Clark’s view that would be as a consequence of his own decision not to join them at an earlier stage.

Judgment

For those reasons, Master Clark made a Beddoes order in Maria’s favour.