Jersey Unreported Judgments

[2008]JRC098

royal court

(Samedi Division)

20^th June 2008 

COSTS JUDGMENT

Advocate J. M. P. Gleeson for the Representor.

Advocate B. J. Lincoln for W.

Advocate M. L. Preston for X, Y and Z.

judgment

the COMMISSIONER:

1.        This short judgment on costs arises from the decision of the Court handed down on 16^th June 2008 and I adopt the definitions contained in that judgment.  It has been agreed by the parties that any costs ordered should be paid out of the new trust to which the assets of the Fund have now been appointed. 

2.        The Court approved two decisions put to the Court by the Trustee prior to implementation but not a third decision in relation to a proposed capital distribution to W.  The Court found that the decision in relation to the amount of the proposed capital distribution was not one which any reasonable body of trustees could have taken and went on to direct the Trustee to make the distribution in the amount requested by W.  Notwithstanding, I indicated in paragraph 31 of the judgment that I was minded to grant the Trustee its costs of the application out of the trust fund in the ordinary way unless any of the parties wished to submit otherwise.

3.        W asked to be heard on the issue of costs.  She was not seeking any order against the Trustee personally, but sought an order that if the Trustee's costs were not agreed by her, they should be submitted to taxation on the basis set out in the Court of Appeal decision of Alhamrani v Alhamrani and others [2008] JCA 164, which I will refer to as the "trustee basis".

4.        W applied for this order on the basis that any costs associated with an unreasonable stance taken by a trustee cannot be costs that are reasonably incurred.  The issue of what aspects of the Trustee's costs have been unreasonably incurred was a matter which was best resolved by the Judicial Greffier on the trustee basis for taxation rather than the Court.

5.        Whilst I concede that as a general proposition a trustee which has acted unreasonably would not ordinarily be entitled to its fees, this was not an ordinary case.  The Trustee had been requested to make a very substantial distribution (over half of the trust fund) against a tight deadline, and in circumstances in which the proposed changes to the fiscal system of the UK were evolving.  There is, and in my view can be, no criticism of the steps taken by the Trustee prior to making its decision.  It made the requisite enquiries and sought the necessary advice.  With the support of W, it prepared and tabled a representation to enable its decision to be approved by the Court prior to implementation.  The date reserved was 3^rd April 2008 - one working day before the UK budget deadline of 6^th April 2008.

6.        The decision was taken on 2^nd April 2008, the day before the hearing.  The Trustee resolved to make a capital distribution but in a sum substantially less than that requested.  It is not possible to extrapolate from the costs it had incurred in coming to its decision that element which is applicable to the quantum of the distribution.

7.        Mr Lincoln, acting for W, was unable to persuade me that there could have been any costs which had been unreasonably incurred by the Trustee.  He pointed to the following:-

(i)        The possibility of time having been incurred by the Trustee in communicating with V, who was not a beneficiary of the Fund.  However, V had been formally notified of the representation and had a legitimate interest in Proposal 2 (the property in Bermuda) in respect of which the Trustee and its advisers had a duty to consult.  Mr Gleeson informs me that his firm had one telephone conversation with V in relation to this property, in which V had proffered his views in respect of the capital distribution, but it was difficult and unreasonable to expect his firm to have prevented him from doing so.

(ii)       The fact that the Trustee had filed a second short affidavit with the Court which had not been disclosed to W.  As it transpired, the Court was able to proceed without having regard to the second affidavit, but that is not to say it was unreasonable for the Trustee to have filed it.  Trustees have an obligation to make full disclosure to the Court in applications of this kind and it is sometimes necessary and desirable that such disclosure should not be extended to one or more of the convened parties. 

(iii)      The fact that some of the advice given by counsel had been criticised by Saffery Champness.  The Court was not able to resolve the differences between the advisers but even if the advice of counsel can be criticised, it was proper for that advice to have been obtained and it would not be reasonable in my view to penalise the Trustee for any deficiencies in that advice by effectively requiring it to discharge counsel's fees personally.

8.        The decision of the Trustee did result in W's advisers incurring time in preparing evidence for the hearing but no personal order is sought in this respect against the Trustee and W's costs will be paid out of the trust fund on an indemnity basis.  It might be possible to argue that the hearing took longer than was necessary as a result of the challenge by W to the Trustee's decision, but only one afternoon had been set aside for the application, much of which would have been taken up in any event in explaining the background to and seeking the Court's approval of a distribution in the sum requested by W.

9.        In my view, the order sought by W, namely that to the extent she disagrees with the Trustee's costs, they should be submitted to taxation on the trustee basis, places her in a far stronger position than that to which she is entitled following the principles laid down in Alhamrani.  Mr Lincoln has not raised any complaint before me in relation to the costs incurred by the Trustee which would properly be the subject of proceedings and thus has not surmounted the threshold laid down in Alhamrani.  I therefore decline to make the order sought by W.

10.      Having considered the submissions of the parties, it is my view that the costs incurred by the Trustee have been reasonably and properly incurred.  I order that the Trustee shall be indemnified out of the trust fund of the new trust for its costs of and incidental to the application and to this hearing in relation to costs.  The costs of the parties convened to the application, both in relation to the application and to this hearing on costs, shall be paid out of the new trust on the indemnity basis.

Authorities

Alhamrani v Alhamrani and others [2007] JCA 164.