High Court Addresses Costs Order in Discontinued Trust Dispute Case

Citation: [2024] EWHC 215 (Ch)
Judgment on

Introduction

In the High Court of Justice case of Herman Baryohai Benjamin v Raymond Ephraim Benjamin ([2024] EWHC 215 (Ch)), the court was tasked with determining the appropriate costs order following the claimant’s discontinuance of a trust dispute claim concerning the family business, Benjamin Pharmacy Limited (BPL). This article delineates the legal principles and key topics addressed in Master McQuail’s judgment, correlating them with the relevant aspects of the case summary provided.

Key Facts

The claimant pursued disclosure and information regarding a family trust and its only assets – shares in BPL – which had been appointed irrevocably to his brother, Benny, through a Deed of Appointment (DOA). The defendants, the claimant’s parents, were the original trustees of the family settlement. Following their failure to adequately respond to pre-action letters seeking information, the claimant initiated legal proceedings. The defendants were later deemed to lack litigation capacity, and disclosure was subsequently provided by their litigation friend. The claimant discontinued the claim and sought an order that differed from the default cost consequences associated with discontinuance under CPR 38.6(1).

The judgment revolved around several pivotal legal principles:

Costs on Discontinuance (CPR 38.6(1))

The court referenced the principle that there is a presumptive responsibility upon the claimant who discontinues proceedings to pay the defendant’s costs incurred until the date of discontinuance. The claimant bore the burden to demonstrate a good reason for departing from this presumption, as outlined in the precedents of Brookes v HSBC Bank ([2011] EWCA Civ 354) and Nelson’s Yard Management Co v Eziefula ([2013] EWCA Civ 235).

Conduct of the Parties (CPR 44.2)

CPR 44.2 was cited, which emphasizes the necessity to consider the conduct of the parties, including pre-action conduct and adherence to pre-action protocols.

Incapacity (CPR 21)

The defendants’ capacity was scrutinized in light of the Mental Capacity Act 2005’s presumption that individuals are assumed to possess capacity unless proven otherwise. The court considered the applicability of CPR 21 protection for individuals lacking litigation capacity.

Indemnity from Trust Assets (CPR 46.3)

The judgment brought to attention CPR 46.3, which permits trustees to seek indemnification for costs from trust assets, barring improperly incurred expenses.

Pre-Action Engagement and Discretion

The defendants’ pre-action engagement was critiqued. The requirement for trustees to unanimously decide to disclose trust documents (Breakspear v Ackland [2009] Ch 32) was also discussed, in relation to the defendants’ (trustees’) capacity to do so.

Outcomes

The Court ordered a departure from the default rule:

  1. Defendants must pay the claimant’s costs:

    • Up to 23 September 2022 on an indemnity basis.
    • From 23 September 2022 to 20 January 2023 on a standard basis.
    • Costs incurred after 20 January 2023 related to the agreement of costs were to be paid by the defendants on a standard basis.

  2. It was noted that the claimant had achieved the substantive aim of the proceedings.

  3. The defendants could not rely on their claimed incapacity to avoid the costs liabilities since such incapacity was not established during the pre-action phase.

  4. The existence of trust assets in Benny’s hands and the defendants’ right to an indemnity for costs were left to be addressed if the parties could not reach an agreement.

Conclusion

In conclusion, the judgment in Herman Baryohai Benjamin v Raymond Ephraim Benjamin presents an instructive scenario on costs consequences upon the discontinuance of a claim. It encapsulates the necessity for trustees to provide information and engage pre-action, the requirements for justifying a departure from the CPR 38.6(1) default rule on costs, and the assessment of a party’s capacity under the MCA 2005. Furthermore, it emphasizes that claimed incapacity cannot retrospectively shield a party from the consequences of non-engagement when such incapacity is not demonstrably established. The judgment affirms that specific circumstances can warrant an exception to the default rule on costs discontinuance, provided there is a compelling justification rooted in the conduct of the defendant and considering the protective measures for incapacitated individuals.