Analysis
The claimant was the child of the first defendant (his father) and the second defendant (his mother). On 5 March 1999, the defendants settled shares in the family company (BPL) on themselves as trustees of a discretionary trust for the benefit of the claimant and his brother and their issue.
The claimant’s case was that the defendants had assured him that half of the family business would eventually pass to him, but that he suspected that something had happened which was inconsistent with those assurances. In March 2021, the claimant requested from BPL’s accountants a copy of its register of members. The response showed that the claimant’s brother had been the sole shareholder since November 2017, though Companies House records indicated that the brother only held 2550% of the ‘voting rights’.
The claimant’s solicitors wrote to the defendants seeking information about the trust on 14 March 2022. The first defendant acknowledged receipt of the letter and said ‘we do not need lawyers’. However on 31 March 2022, the defendants’ solicitors confirmed that they were acting. A copy of the letter of 14 March 2022 was sent to the solicitors but there was no response. A detailed letter of action (including an agreement to pay the costs of disclosure) was sent on 26 April 2022 but there was still no response. Letters to the brother and to BPL’s accountants disclosed an updated share register but said nothing about the trust.
On 1 September 2022, the claimant issued a claim for disclosure of documents and information about the trust. The defendants were both assessed as lacking capacity so acted by a litigation friend.
By letter dated 7 December 2022, the defendants’ litigation friend provided the disclosure and information sought – namely a deed of appointment dated 9 November 2017 appointing the entire fund to the claimant’s brother. The letter explained that the only trust asset was the BPL shares which produced no income, that the only trust event was the appointment and that there were no further documents, accounts or information.
By letter dated 20 January 2023, the claimant acknowledged that there was no benefit in pursuing the claim, but claimed that the defendants’ original failure to engage entitled him to indemnity costs. On 5 July 2023, the claimant discontinued and applied for an order departing from the default costs rule in r38.6(1) Civil Procedure Rules 1998.
Held (granting the application):
Disapplication of the default rule in r38.6(1) Civil Procedure Rules 1998
The claimant was entitled to the disclosure and information sought. At the time that he issued proceedings he did not know the full extent of the matters revealed by the deed and information provided on 7 December 2022 (though he had suspected what had happened). While not all of the documents originally sought existed, they were sought because the claimant was unaware of what dealings had occurred and needed to cover all bases.
The provision of the deed and information amounted to a change of circumstances which was brought about by the defendants’ unreasonable failure to engage in preaction correspondence. The failure to provide information fairly led the claimant to conclude that he had no option but to issue proceedings.
The claimant’s discontinuance could not be equated with an admission that the proceedings should not have been commenced. The court had in mind also that if a trustee failed to provide requested information to which a beneficiary was entitled, there was no doubt that the trustee would usually be ordered to pay the beneficiary’s costs of proceedings to obtain it. The high hurdle to justify departing from r38.6(1) had therefore been reached.
No proper explanation (other than possible incapacity) had been given for the failure to provide disclosure and information earlier. The defendants did not seek directions from the court. The issue of capacity was not raised until 23 September 2022, after which the defendants and those acting for them did not do anything unreasonable. The court’s view was therefore (subject to the capacity issue) that the defendants should pay the claimant’s costs up to 23 September 2022 on the indemnity basis and thereafter until 20 January 2023 (when the claimant was in a position to make an informed decision to discontinue) on the standard basis.
Incapacity
A person must be assumed to have capacity unless it is established that they lack capacity (s1(2) Mental Capacity Act 2005). Capacity is also decision and time specific. The capacity assessments provided only related to litigation capacity and were not backdated. The court could not conclude from them that the defendants lacked capacity for any particular act or decision at any time before they were assessed to lack litigation capacity in late 2022.
The fact that the claimant was aware of the second defendant’s memory problems and diagnosis of dementia did not entitle the court to conclude that the claimant should have appreciated that she lacked capacity to act as trustee and respond to correspondence, absent any evidence enabling the court to decide that question. The first defendant had engaged at least to some extent by saying that lawyers were not necessary and had remained a company director and registered pharmacist. The court was therefore also unable to conclude that the claimant should have appreciated that the first defendant lacked capacity to act as trustee and respond to correspondence.
It was notable that the defendants’ solicitor had indicated that he was instructed and that the defendants said nothing until September 2022 to cast doubt on their capacity to provide instructions in relation to the affairs of the trust.
Nothing in Part 21 prevented a costs order being made.
Disposal
The defendants should pay the claimant’s costs up to 23 September 2022 on the indemnity basis; thereafter to 20 January 2023 on the standard basis, and the remaining costs on the standard basis. The claimant should pay the costs of producing a copy of the deed of appointment. The costs of providing the other trust information should be borne by the trust.
JUDGMENT MASTER McQUAIL: Introduction [1] On 6 November I heard the claimant’s application for an order departing from the default rule in CPR 38.6(1) as to the costs consequences upon discontinuance of a claim. The claimant filed a notice of discontinuance in respect of the whole of his claim on 5 July 2023 and filed …Continue reading "Benjamin v Benjamin & anr [2024] WTLR 411"