Pitfalls of Beddoe Orders when acting on behalf of Personal Representatives

It has become increasingly common for personal representatives of an estate to find themselves in a position where they are required to bring or defend a claim against a third party. In these circumstances, it is possible for a personal representative to be reimbursed from the estate for the costs they incur in bringing or defending a claim. However, this will usually be dependent on whether they are successful in the claim.

The reality is that many personal representatives often leave themselves exposed to being personally liable for costs in legal proceedings and end up with no right to be reimbursed from the estate. A solution that can offer protection for personal representatives against personal liability for costs comes in the form of a Beddoe order.

A Beddoe order is an order made by the court which provides a personal representative with prior approval to take a specific course of legal action and recover the costs of such action from the estate, irrespective of whether they win or lose. The order is named after the 19th century Court of Appeal case Re Beddoe, Downes v Cottam [1893] 1 Ch 547 in which it was stated:

"...a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs"

A personal representative seeking a Beddoe order would need to make an application to court under Part 64 of the Civil Procedure Rules. When considering an application, the court will look carefully at whether the legal action being proposed by the personal representative is in the best interests of the beneficiaries.

Obtaining a Beddoe order may appear to be the perfect solution to protect personal representatives from liability for costs, but anyone making an application should always seek to avoid the pitfalls and consider the following carefully:

• When to make an application - An application for a Beddoe order should always be made prior to any costs being incurred. It is unlikely that a court would provide a retrospective order. With that said, an application on behalf of a personal representative must be justified. It should not be made simply as a "belt and braces" approach to a claim. If the prospects of a claim are clear from the outset, the personal representatives could become liable for the costs of the application itself if a court considers a Beddoe order is not required.

• What the order covers - A Beddoe order can address a particular stage in a litigated claim or the entire proceedings from issue up to the trial stage.

• The value of a claim - If a claim exceeds the size of an estate, it is likely an application for a Beddoe order will be necessary, but it will not sufficiently protect a personal representative. It is however possible for the court to relieve a personal representative of their obligation to defend such a claim and in turn reduce the level of costs incurred.

• The court's discretion - Whether an order is ultimately granted will be at the discretion of the court. The consideration that will undoubtedly be relevant to the court's decision is whether the legal action proposed would be in the beneficiaries' best interests.

At Forbes, we act on behalf of personal representatives bringing and defending a variety of claims against trusts and estates. If you would like further information or assistance, please contact our Contentious Trusts and Probate team.