Trustees and Executors may need to bring claims against, or defend claims by, third parties which could affect the estate. Ordinarily, if they bring or defend the claim for the benefit of the trust, they will be entitled to be reimbursed for their costs from the trust even if they lose the dispute, but it may well be sensible to make an application for a Beddoe order for permission to bring or defend those proceedings.
Beddoe orders are named after the case of Re Beddoe, Downes v Cottam  1 Ch 547, CA in which the Court stated 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”
A Beddoe order is a Court order giving approval to an executor or trustee to take court action and that the costs of the action will be recoverable from the trust estate whatever the outcome.
In the recent case of Lines – and- (1) Wilcox and Anors  EWHC 1451 (Ch) the Court considered whether or not a professional executor was entitled to cost protection from an estate for a proposed claim.
An issue had arisen about whether the Deceased’s home had been properly transferred to one of her children during the Deceased’s lifetime. Under her will the Deceased’s estate was to be divided equally between her four children. A challenge was made on the basis that the Deceased did not have capacity to make the transfer and or that the transfer had been obtained by undue influence.
The independent solicitor appointed as executor proposed to issue a claim to set aside the transfer, and applied for a Beddoe order that the costs of bringing a claim were recoverable from the estate.
The Beddoe Question
The Judge asked whether a Beddoe order allowing the costs to be paid from the estate was appropriate.
In reaching his answer, the Judge noted that:
- The matter involved a ‘hostile trust dispute’ about who were the owners of an asset which had once belonged to the Deceased and which may still form part of her estate. As there were rival claimants to the estate, it was the duty of the executor to remain
- The grant of a Beddoe order allowing the costs of a claim to be paid from the estate had potential to cause injustice: if the claim were unsuccessful, the beneficiaries for whom it was brought would not pay any costs; but the successful parties would have to meet a share of the costs.
- As all the beneficiaries were adults; the neutral executor should allow them to fight it out at their own risk on costs.
The application for a Beddoe order was therefore refused.
An executor should always consider objectively whether any steps they propose to take in any proceedings are truly neutral – as if not, then they may find themselves unable to look to the trust fund for reimbursement of their costs.
In addition, in situations such as this, the executors and trustees can leave it to the beneficiaries to make up their own minds about what to do, and to bring claims on their own account. A neutral executor should not feel under pressure to bring a claim on their behalf.
If you need further advice or assistance, please contact our Disputed Wills and Trusts Team on freephone 0800 0931 336 or by email firstname.lastname@example.org for a no obligation chat to see how we can help you.