PRACTICE DIRECTION – 20.3
Beddoe applications
1. This Practice Direction applies to applications made to the Court under Order 85 rule 2 of the Rules of the High Court for directions as to whether or not the trustees or executors/administrators (“the Trustees”) should bring, defend or take part in, or continue to bring, defend or take part in, proceedings (“the Main Action”) in their capacity as trustees and whether as between the Trustees and the beneficiaries the costs incurred or to be incurred by the Trustees in the conduct of the Main Action should be recovered by them as expenses of the trust or estate (“the Trust”).
Commencement of the applications and parties
2. Beddoe applications should be made promptly.
3. All Beddoe applications should be begun by way of Originating Summons which should be in Form No. 10 in Appendix A of the Rules of the High Court.
4. Normally, all beneficiaries of the Trust should be made parties to the Beddoe proceedings. However, under some circumstances (for example, when an ex parte Mareva injunction application against some beneficiaries is anticipated in the Main Action), the inclusion of those beneficiaries in the Beddoe proceedings may be inappropriate. In such cases, those beneficiaries may be omitted as parties.
5. In the case of a charitable trust, the Secretary for Justice should be joined as a defendant.
Evidence to be relied on
6. All Beddoe applications must be supported by an affidavit/affirmation and a memorandum by the Trustees or the solicitor having the prime responsibility for the case setting out all factual matters and factors which are relevant to the Court’s decision as to whether to give the order sought. As the affidavit/affirmation is to be filed in Court, it should not include or have exhibited to it any confidential or privileged documents or matters, such as Counsel’s advice. Such documents or matters should instead be incorporated separately in a memorandum to be lodged (as opposed to filed) with the Court. This is to ensure that privileged matters are, save and except with the leave of the Court, withheld from those beneficiaries who oppose the Trustees in the Main Action (“Opposing Beneficiaries”).
7. Generally speaking, the following matters must be covered in either the affidavit or memorandum:
(a) the strengths and weaknesses of the Trustees’ claim/defence;
(b) options which are available to cover the Trustees’ costs;
(c) an estimate in summary form of –
(i) the value or other significance to the Trust of the issues in the Main Action;
(ii) the costs likely to be incurred by the Trustees in the Main Action, by reference to the principal stages in the Main Action;
(iii) the costs of other parties to the Main Action for which, if unsuccessful, the Trustees may be exposed to liability;
(d) any known facts concerning the means of other parties to the Main Action;
(e) whether the Trustees have proposed or undertaken, or intend to propose, mediation, if not, why not;
(f) whether the Trustees have consulted with the beneficiaries of the Trust;
(g) in the event that a child is a defendant, in addition to the above, the benefits and disadvantages of the proposed action and any other relevant course of action from the point of view of the child beneficiary (with legal advice thereon if the Trustees are represented);
(h) in the event that any beneficiary is not included as a party, the full reason in support of such omission.
8. The memorandum lodged must be verified by a statement of truth in accordance with Order 41A.
9. Under paragraph 7(a) above, if Counsel’s advice is relied on, the instructions to Counsel should also be annexed to the memorandum so that the Court can see the basis on which the advice was given. If no Counsel’s advice has been obtained, the solicitor’s advice on the Trustees’ case should be so annexed instead. If the Trustees are unrepresented, they should give their own assessment on the merits of their case in the Main Action in the memorandum.
10. Practitioners and Trustees are reminded that the Court must be made aware of all relevant circumstances including the weaknesses of the Trustees’ case in the Main Action. The Court expects that there would be full and frank disclosure in this regard. Any Court order made on the basis of non-disclosure of material facts or matters would not afford the Trustees full and effective protection.
11. Under paragraph 7(f) above, the evidence must explain what, if any, consultation there has been with the beneficiaries, and with what result. The following guidance should be followed:
(a) If the Trust is a private trust where the beneficiaries principally concerned are not numerous and are all or mainly adult, identified and traceable, the Trustees will be expected to have canvassed with all the adult beneficiaries the proposed or possible courses of action before making any Beddoe applications.
(b) If it is a private trust with a large number of beneficiaries including those not yet born or identified, or children, it is likely that there will nevertheless be some adult beneficiaries principally concerned, with whom the Trustees must consult in the same manner as described above before making any Beddoe applications.
(c) If it is a charitable trust, the Trustees must consult the Secretary for Justice.
12. The preceding paragraphs on the evidence and materials required to be filed/lodged in support are applicable generally to applications which are made before or at an early stage of the Main Action. In the event that a Beddoe application is made at a late stage of or after the Main Action, necessary changes may have to be made to the items referred to in paragraph 7 above. Practitioners and Trustees should in such circumstances consider carefully and sensibly what should be filed/lodged in support. For example, if an application for Beddoe order is made after the conclusion of the Main Action, the Trustees should exhibit/annex a legal advice which analyses the merits of the Main Action according to the prevailing circumstances at the time the claim or the defence was to be filed and not with the benefit of the outcome of the case.
13. The memoranda relied on by the Trustees in Beddoe applications are not required to be served on the Opposing Beneficiaries. However, if the Trustees consider that no harm would be done by the disclosure of all or some part of the supporting evidence, then such evidence may be included in the affidavit/affirmation which has to be filed and served on the Opposing Beneficiaries.
14. In case justice requires that such evidence adduced be provided to the Opposing Beneficiaries, the Court may give appropriate directions from time to time and if it sees fit, necessary safeguards such as redaction of documents would be imposed.
Hearing of Beddoe applications
15. The applications in the first instance will be heard by a Judge in Chambers (not open to public).
16. The Trustees are obliged to ensure that the Beddoe application would not be fixed to be heard before the judge who has previously heard the Main Action and vice versa (unless the Beddoe application is heard after the Main Action has been totally disposed of by the judge). In the event that the Main Action has been fixed to be heard before the same judge who has been involved in the related Beddoe application (or the other way round, unless the exception above applies), the Trustees or their solicitors (as the case may be) should write to the Court forthwith and ask for a direction that the hearing which takes place later be refixed to be heard by another judge.
17. The hearing should be attended by the Trustees themselves or, if they are represented, by their legal representatives. The legal representative who attends the hearing should be the person responsible for the case and must be familiar with it, and be able to provide the Court with the information it is likely to need to make its decision. If Counsel has been instructed to give a legal opinion as to the merits of the Main Action, the hearing should be attended by such Counsel.
18. Opposing Beneficiaries are entitled to be heard in the Beddoe applications (unless they have been properly omitted as parties to the Beddoe proceedings – see paragraph 4 above). For that purpose, they are required to lodge their skeleton submissions in accordance with Practice Direction 5.4 and demonstrate why the Trustees’ case in the Main Action is wholly devoid of merits.
19. At the hearing, the Opposing Beneficiaries will be entitled to make submissions on the basis of the skeleton submissions lodged. Once that is done, subject to any other directions of the presiding judge, they will be invited to leave the Court so that the judge may discuss the merits of the Main Action with the Trustees (or their legal representatives) further.
20. If the Court gives direction allowing the Trustees to take, defend or pursue the Main Action, it may do so up to a particular stage therein, requiring the Trustees, before they carry on beyond that point, to renew their application to the Court.
21. In a case of urgency, such as where a limitation period or period for service of proceedings is about to expire or where an urgent Mareva injunction application is anticipated, the Court may give directions on a summary consideration of the evidence to cover the steps which need to be taken urgently, but limiting those directions so that the application needs to be renewed on fuller consideration at an early stage of the Main Action.
22. Where an order is made permitting the Trustees to commence, continue or defend proceedings, some important new adverse developments in the Main Action may occur subsequently. These new developments may not be foreseen or taken into account by the Court when the order is made and these may throw serious or at least significant doubt on the propriety or utility of the continuance of the claim/defence in the Main Action. These new developments include but are not limited to: a change or development of the law as a result of amendment of statute or new judicial decisions, or the discovery of important new evidence, or the reluctance of an important witness to testify. Under such circumstances, the Trustees are under an obligation to seek further directions from the Court, so that the Court may consider the impact of the new and adverse development which has occurred on its previous order. If the Trustees fail to do so, they would run the risk of exposing themselves personally in respect of the additional costs which were incurred after the new development, even though those additional costs are, on the face of the previous order, covered.
23. This Practice Direction shall come into effect on 2 January 2014.
Dated this 20th day of December 2013.
| (Geoffrey Ma) Chief Justice |
