A beddoe order is a court order that gives permission to a trustee or executor to take or defend legal action with the assurance that their legal costs will be reimbursed from the trust or estate, under their right to an indemnity whatever the outcome. This protection is crucial, otherwise trustees risk personal liability for costs.
The term 'beddoe order' derives from the case of Re Beddoe, Downes v Cottam where the court ruled that '…a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs, even if he acts on Counsel’s opinion.'
A beddoe order provides the court’s prior sanction for a trustee to take a specific course of action, effectively confirming that the costs, including those which the trustee may be ordered to pay to another party to the proceedings, will have been properly incurred, so giving the trustee an indemnity from the trust and providing protection to the trustees.
It follows that the more risky and expensive the litigation is likely to be, the greater the need to consider applying for a beddoe order. Failure to apply for such an order can leave trustees dangerously exposed as if they lose the action they may have to personally pay costs with no right to reimburse themselves from the trust.
If all of the beneficiaries are legally competent adults and consent to the proposed action, a beddoe order is usually unnecessary. However, without consent, the trustee may be personally liable to costs, especially if the court later finds that the litigation was not justified.
Broadly, a beddoe order is typically appropriate in the following situations:
An application for a beddoe order is most likely to be suited to a third party dispute or a trust dispute. An order is least likely to be appropriate in the case of beneficiary disputes, although it is not unheard of – see case study below, particularly where there is a dispute between the trustee and one or more beneficiaries arising out of the trustees conduct in managing and administering the trust.
A beddoe order is obtained by an application to court under Part 64 of the Civil Procedure Rules seeking the court’s directions. The application must be made using the Civil Procedure Rules part 8 procedure.
When applying for a beddoe order, the trustee must put all of the facts before the court and provide the court with a barrister’s opinion on the merits of the proposed action or defence. The court will not become involved in the substantive proceedings to which the application relates as it's simply being asked whether the issue in question is one which should be fought or abandoned. If the court gives permission to bring or defend the proceedings, or proposed proceedings, then the trustee will be entitled to an indemnity for legal costs out of the trust funds whether the case is won or lost, assuming always that the trust funds are sufficient.
The beneficiaries will be defendants to the application for a beddoe order and may choose to oppose or support it. If the beneficiaries participate actively and wish to make representations, the court may require a hearing. Despite being more burdensome to deal with, and of course more expensive, this ultimately makes it even more necessary for the application to be made in order for the trustee to protect their position. Otherwise, the application may be dealt with on paper by the judge.
The court will expect evidence to be filed in support of the application. Should the trustee not give full disclosure and the court makes the order on partial evidence, the order could be challenged and may subsequently be unenforceable or set aside.
Even if the beddoe order application is refused, trustees are usually still entitled to recover the costs of making the application itself out of the trust funds unless the application was plainly misguided.
Trustees of charitable trusts must first seek authorisation from the Charity Commission before applying to the court for a beddoe order. This is because such proceedings fall under the definition of ‘charity proceedings’ in the Charities Act 2011 (as amended by the Charities Act 2022), and so cannot be initiated without the Charity Commission’s consent.
If the substantive litigation in question are ‘charity proceedings’ then a trustee has no option but to make an application to the Charity Commission in any event.
The Charity Commission will not always authorise an application to court for a beddoe order, particularly if it can use it’s powers to achieve the same result. Instead, it may provide advice to the trustees which achieves the same result as a beddoe order, meaning that if the trustees act on the Charity Commission’s advice, they will be protected from actions. However, where the case involves complicated legal or factual issues, the Charity Commission may be reluctant to give advice in a way that will adequately protect the trustees.
The Charity Commission has the authority to approve an application to court by the trustees. It might give directions to pursue the action up to a certain level of costs or to a particular stage in the proposed court proceedings. Such a decision may remove the need to make an application to the court for a beddoe order altogether. However, the Charity Commission might simply advise that the trustees should consider making an application for a beddoe order.
A beddoe order protects trustees and executors from personal liability for legal costs by confirming in advance that litigation costs can be paid from the estate or trust. It's therefore generally advisable to consider a beddoe order in most third-party or trust related disputes, and in some beneficiary disputes.
If all beneficiaries consent, a beddoe order may not be necessary.
Charitable trustees should seek advice from the Charity Commission before making an application for a beddoe order. In some cases, this may negate the need to apply to the court for a beddoe order.
In making an application all trustees should ensure that:
Baker v Dunne
This is an example of a successful application for a beddoe relief by trustees of a will trust.
The claimants were the trustees of the trust of the will of the late Jean Montgomery, who died in 1997. The defendants were the deceased’s three children who were all equal beneficiaries under her will trust.
The Albert Arms Pub was an asset belonging to the trust, from which the first defendant Jonathan had been running a business for several years. He had been doing so on an informal basis, without paying any rent. Having obtained a possession order the trustees sought a sale with vacant possession and applied for a further beddoe order to take that action. The trustees’ application was opposed by Jonathan but supported by the two other siblings.
Jonathan alleged that it would be breach of trust for the trustees to recover possession of the pub.
In light of Jonathan’s allegations of breach of trust, the trustees sought the approval of the court to obtain vacant possession of the pub and sell it. The trustees provided specialist valuation evidence which confirmed that if Jonathan remained in occupation on the current basis the value of the property would be nil. The court concluded that Jonathan’s claim for breach of trust was little more than a complaint that the trustees had decided not to sell the Albert Arms to him, and authorised the trustees to proceed as proposed, with entitlement to an indemnity for their costs from the trust.
If you would like to seek further information about the matters discussed in this article then please get in touch with our disputed wills and trusts team today.
