A Question of Settlement

Beddoes application – In 2016 the trustee sought directions as to how it should deal with a claim brought against an underlying company of a trust. The court ordered that the trustee should authorise the company to fund the defence of the claim up until the discovery stage, when the matter should then return to court. When it was returned to court, a mediation had taken place and a compromise had been agreed. The trustee therefore sought an order from the court to approve its actions in entering into the settlement agreement, and to authorise and indeed order it to implement the settlement agreement.

The court noted that the approach it applies to a Beddoe application involving approval of litigation/settlement is not quite that of Re the S Settlement [2001] JLR Note 37. The three familiar Public Trustee v Cooper questions, (i) Is the proposed action within the trustee’s powers? (ii) If so, is it a proper exercise of that power in the sense that the trustee’s opinion has been formed in good faith and has not been vitiated by any actual or potential conflict of interest; and (iii) Is the Court satisfied that the proposed action by the trustee was reasonable?

Unless the trustees surrendered their discretion to the Court, the Court would normally approach Beddoe applications in this way and had done so on many occasions. However, where the subject matter of the trustee’s application was the compromise or potential compromise of litigation, there was one slightly different feature. In many cases involving actions recommended by trustees, the trustees probably had as much if not more expertise than the Court. However, in cases where the issue was whether or not litigation should be compromised, the Court had a special advantage, because an assessment of litigation risk and the appropriate approach to take in relation to litigation was something which courts did as part of their judicial business day in, day out. In those circumstances the discretion to approve a proposed course of action would be slightly wider and a trustee was entitled to ask the Court whether it was doing the right thing. In answering that question, the Court would normally have regard to any views expressed by the principal beneficiaries of the Trust. In the instant case, two of the three principal beneficiaries had expressed their views – both Respondents had been in touch with the trustee to confirm that the proposed settlement of Mr L’s claims was in their view in the interests of the Trust and the right course to follow.

The court was mindful however that one of the beneficiaries had not been convened to the proceedings ands not had the opportunity to have his say.  However, the trustee is entitled to consider the best interests of a beneficiaries as a whole, taking into account all the circumstances, and in this case, it was deemed not to be in that particular beneficiaries best interests to convene him.  The court was satisfied as to the reasoning for that, and also satisfied in those circumstances that it could nonetheless approve the settlement.

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