Factual and Procedural Background
This judgment concerns the approach the court should adopt in determining the costs of a claim where the substantive issues between the parties have been resolved or substantially resolved without the need for a trial. The claim involves a family dispute arising from a discretionary family settlement ("the Settlement") established by the parents of the first claimant and sixth defendant, who are siblings. The Settlement includes shares in a private limited company ("the company") that operates residential care homes.
In August 2012, a dispute arose between the first claimant and sixth defendant concerning the conduct of the company and the Settlement. The sixth defendant, as protector of the Settlement, exercised powers to remove the original trustees (including the parents and the first claimant) and appointed the first to fifth defendants as trustees. The claim was issued in December 2013 by the first claimant and the second claimant (the first claimant’s son), seeking removal of the first to fifth defendants as trustees, removal of the sixth defendant as protector, and relief relating to preference shares in the company.
The claim has a complex procedural history including a preliminary trial on the preference share issue in July 2015, which was resolved by a consent Tomlin order. The first to fifth defendants were replaced as trustees by the eighth and ninth defendants following court-appointed nominations due to failure to agree on new trustees. The sixth defendant resigned as protector in January 2016, appointing a replacement without consultation, thus narrowing the remaining issues primarily to costs.
The parties disagreed on the procedure to determine costs: the claimants sought a trial with witness cross-examination ("Trial Lite" proposal as an alternative), while the first to fourth defendants and sixth defendant proposed resolving costs by submissions and limited evidence without a full trial. The new trustees suggested exploring mediation or early neutral evaluation to avoid excessive costs.
The outstanding costs issues include the claimants' costs of the claim (other than the preliminary issue), the first to fourth defendants' costs of the preliminary issue and the claim, the sixth defendant’s costs of the claim, and the costs of the new trustees related to the claim. The first to fourth defendants were not party to the Tomlin order and seek to recover their costs of the preliminary issue from the Settlement.
Legal Issues Presented
- Whether the court should direct a trial with witness cross-examination to determine the costs of the claim, despite the substantive issues being resolved or substantially resolved.
- Alternatively, whether the court should adopt a more limited procedure to determine costs without calling live evidence.
- Whether disclosure of further documents is essential to a fair determination of costs.
- Whether cross-examination of witnesses is essential to determining costs fairly.
- The entitlement of trustees to recover their costs from the trust fund under CPR 46.3.
Arguments of the Parties
Claimants' Arguments
- The claimants, through their attorney, argued that the claim should proceed to trial so that the issues relating to the conduct of the first to fourth defendants and the sixth defendant could be fully determined after disclosure, exchange of witness statements, and cross-examination.
- As an alternative, they proposed a "Trial Lite" procedure involving a short trial limited to one witness per party, capped future costs, and standard disclosure, aiming to reduce time and expense.
- The claimants opposed determining costs without a trial with oral evidence, particularly regarding a claim they wished to pursue about the sixth defendant’s appointment of a replacement protector, which they alleged was a fraud on the power.
First to Fourth Defendants' Arguments
- The first to fourth defendants contended that costs could be determined by submissions and written evidence without a trial.
- They proposed that the claimants file witness statements exhibiting relevant documents, with opportunities for responses, and that the costs hearing be limited to one day.
Sixth Defendant's Arguments
- The sixth defendant supported resolving costs without a trial, endorsing a procedure similar to that proposed by the first to fourth defendants.
Eighth and Ninth Defendants' Arguments
- The new trustees submitted that any lengthy procedure to resolve costs would generate disproportionate costs and suggested considering mediation or early neutral evaluation.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Pathway Resourcing Limited v Kaul [2008] EWHC 3078 (Ch) |
Consideration of how to deal with costs determination where substantive issues are resolved except for costs; recognition of two lines of authority ('BCT line' and 'Brawley line'). |
Used to illustrate the court’s discretion in costs determination and caution against conflating settlement of substantive issues with issues that have fallen away. |
| BCT Software Solutions Limited v C Brewer & Sons Limited [2003] EWCA Civ 939 |
Judicial discretion on costs determination without evidence; the necessity of trial if costs are disputed and facts are unresolved. |
Confirmed that trial may be necessary but is not inevitable; emphasized that parties must settle costs or the action proceeds. |
| Brawley v Marczynski (No. 1) [2002] EWCA Civ 756 |
Power to make costs orders when substantive issues resolved without trial; importance of proportionality and justice in costs decisions. |
Guided the court’s approach to balancing justice and cost-efficiency in deciding whether trial is needed for costs. |
| Philip James Long v Farrer & Co [2004] EWHC 1774 (Ch) |
Paper evidence can only be disbelieved if manifestly incredible. |
Supported the proposition that cross-examination is not always necessary for costs decisions if evidence is credible on paper. |
| Letterstedt v Broers [1884] 9 App Cas 371 |
Principles on removal and replacement of trustees focusing on the welfare of beneficiaries. |
Reinforced that removal of trustees does not require proof of misconduct but depends on beneficiary welfare. |
Court's Reasoning and Analysis
The court analysed the procedural history and substantive background, noting that the main issues of the claim had been resolved or rendered academic, leaving only costs to be determined. The court recognized that while a trial with live evidence and cross-examination is sometimes necessary to resolve disputed facts for costs, it is not invariably required.
The court applied the overriding objective under CPR 1.1, emphasizing proportionality and fairness, and considered the guidance in CPR 44.2 and 46.3 concerning costs and trustees’ entitlements. It acknowledged the risk of incurring disproportionate costs solely to decide costs and the desirability of minimizing further expense in a painful family dispute.
The court rejected the claimants' "Trial Lite" proposal due to concerns about feasibility and insufficient cost savings. It found that sufficient disclosure had already been obtained and that further disclosure would only be ordered if narrowly necessary. The court also concluded that cross-examination was not essential for a fair determination of costs, as the court did not need to decide the truth of the substantive allegations but only to apply costs principles fairly.
Consequently, the court determined that costs could be fairly decided on written evidence and oral submissions without a full trial, thereby avoiding unnecessary delay and expense.
Holding and Implications
The court’s final decision was to determine the costs issues without directing a trial involving live evidence and cross-examination. Instead, the costs will be decided on written witness statements and oral submissions, with each party entitled to file one witness statement exhibiting relevant documents.
This decision directly affects the parties by avoiding a costly and protracted trial solely for costs determination. It does not set new precedent but applies established principles emphasizing proportionality, fairness, and efficient use of court resources in costs disputes where substantive issues have been resolved or become academic.