Guernsey: Beddoe Applications: Beddoe Relief For Appeals

The Grand Court of the Cayman Islands and the High Court in England and Wales have recently considered two unusual applications for Beddoe relief: an application by a trustee for retrospective Beddoe relief after the conclusion of proceedings, and an application for a trustee for Beddoe relief in respect of bringing an appeal in the Supreme Court of England and Wales. In this article we consider the latter it having been considered earlier this year in Airways Pension Scheme Trustee Limited v (1) Mark Owen Fielder and (2) British Airways Plc [2019] EWHC 29 (CH) and it being well established that whilst decisions of the Cayman and English Courts will not be not binding in Guernsey the Royal Court may look to them for guidance in the absence of Guernsey precedent. Application for retrospective Beddoe relief is considered in our article "Beddoe applications: What happens if a trustee forgets to apply?"

What is Beddoe relief?

An application for Beddoe relief (Re Beddoe [1893] 1 Ch 547) enables a trustee to obtain directions from the Court approving its participation in litigation in its capacity as trustee and ordering that the trustee will be indemnified in respect of the costs of the litigation from the trust funds. The relief is a discretionary one.

Airways Pension Scheme Trustee Limited v (1) Mark Owen Fielder and (2) British Airways Plc: the background

In 2013, British Airways Plc brought a claim against the then trustees of the Airways Pension Scheme (the "Scheme") challenging two trustee decisions to:

  1. exercise a unilateral power of amendment to provide trustees with the power to augment the members' benefits by award of discretionary increases; and
  2. use this power to make a discretionary increase of 0.2%.

The challenges to the decisions were dismissed at first instance. On appeal, it was held that the first decision above was invalid on the basis that the amendment had been made for an improper purpose. It therefore followed that the second decision was invalid. The decision is to be appealed to the Supreme Court of England and Wales and the trustees of the Scheme applied for Beddoe relief in relation to that appeal. The substantive appeal is due to be heard in July 2019.

The applications for Beddoe relief

In relation to the proceedings at first instance, the Court had given directions that the trustee was entitled to Beddoe relief in relation to disclosure and inspection and British Airways had subsequently conceded liability under the indemnity in the trust deed. The Beddoe proceedings were stayed and a consent order made. Then, after the decision in the first instance proceedings, the Beddoe order was extended to cover the trustee's response to the British Airways appeal. A separate application was then made by the trustee seeking directions to approve pursuing an appeal to the Supreme Court and an indemnity in respect of costs of such appeal from the Scheme.

Decision of the High Court: application for Beddoe relief in respect of appeal to the Supreme Court

The High Court approved the trustee's pursuit of the appeal and held that it was entitled to an indemnity in relation to its reasonable costs from the Scheme funds. Arnold J found that that there was no inflexible rule against awarding Beddoe relief in such circumstances and said that the trustee would be entitled to such relief if the trustee was acting in the best interests of the trust as a whole. Significant factors in determining whether the trustee would be acting in the best interests of the Scheme as a whole included that:

  • the appeal had a good prospect of success;
  • the appeal would benefit the vast majority of members of the Scheme;
  • the costs of the appeal would be a small fraction of the amount at issue as a result of decisions (i) and (ii) above;
  • the decision of the Court of Appeal had not clarified the circumstances in which the trustees could properly use their power of amendment under the Scheme and it would be for the benefit of the Scheme for the Supreme Court to clarify this;
  • the trustee was the only party practically capable of bringing the appeal; and
  • the order sought by the trustee may result in significant costs to British Airways as it may be required to make contributions to the scheme but these costs were justified.

The Judge was not prepared to provide a limitless indemnity to the trustee against costs of the appeal due to the significant costs already incurred in relation to the appeal by all parties and the large cost estimate for the appeal. The costs that the trustee is entitled to by way of indemnity from the Scheme were therefore capped.

Conclusion

The Airways Pension Scheme Trustee Limited v (1) Mark Owen Fielder and (2) British Airways Plc case demonstrates the courts are willing to be flexible in granting Beddoe relief to trustees as long as trustees are acting in the best interests of the trust as a whole when taking steps in litigation. However, trustees should not assume that they will always be entitled to indemnity costs from the trust and should take detailed legal advice before taking any steps in litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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