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Significant Decision on Trust Law – Court of Appeal


June 14, 2021

The Court of Appeal delivered a significant judgment on trust law this month: ‍McCallum v McCallum [2021] NZCA 237 (link).  

In McCallum v McCallum, the Court of Appeal considered the principles relating to “Beddoe orders”.  Named after the decision of the English Court of Appeal in Re Beddoe [1893] 1 Ch 547, a Beddoe order is a direction given by a court that a trustee may bring or defend litigation at the cost of the trust.  It provides the trustee with an assurance that they will not be personally liable for costs (being costs incurred by the trust opposed to costs between the parties, for which prospective costs orders might be available, see Woodward v Smith [2014] NZHC 407, [2014] 3 NZLR 525).  The key points in the Court’s judgment include:

  • ~The fundamental question will be whether the making of a Beddoe order would be in the best interests of the trust.  This flows from the general principle that trustees ought to be indemnified for costs properly and reasonably incurred for the benefit of the trust.
  • ~The Court will assess, among other things, the strengths and weaknesses of the proposed litigation (in respect of which it can consider the legal opinion of independent counsel) and the potential/likely effects on trust assets.  
  • ~The nature of the litigation will be relevant too.  Beddoe orders are unlikely to be made in self-interested litigation such as a claim for breach of trust against the trustee.  
  • ~The scope of a Beddoe order can be limited to the extent that the litigation is in the best interests of the trust.  It is accordingly important for the application to properly identify the scope of the indemnity sought, particularly in complex cases with features like different causes of action, wide-reaching allegations, and/or the involvement by parties in different capacities.  

For a list of members of Shortland Chambers who act on trust and equity disputes click here.

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