The general rule is that costs follow the event, with the loser paying the winner’s costs, in whole or in part. However, the rules are less clear cut with trust-related litigation and costs remain at the court’s discretion.
Accordingly, beneficiaries are often in a somewhat invidious position. Despite the accepted rights of beneficiaries, access to remedies comes at a price. The case of Woodward v Smith is a relatively rare example of a beneficiary seeking a prospective costs order (also known as a pre-emptive or protective costs order). A prospective costs order is an order that even if the beneficiary is unsuccessful at trial, the beneficiary will not be liable for the trustees’ costs.
While Mr Woodward was not successful, the case provides a useful consideration of the limited situations where a beneficiary might be able to obtain a prospective costs order.
The proceedings on account of the prospective trusts order arose in the context of three trust-related proceedings. Claims to be considered by the court include claims of self-dealing. In the prospective costs application the court heard that senior counsel had provided a strong opinion that self-dealing had occurred and that that self-dealing was not permissible in terms of the relevant deed of trust.
Percy v Percy is another example of an unsuccessful prospective costs order. In that case the discretionary beneficiaries seeking the prospective costs order had filed a substantive action seeking a variety of remedies against the trustees including
(a) declarations of breach of trust, and that they are in breach of their fiduciary duty to the beneficiaries;
(b) the removal of Vance and Mr Lunn as trustees and the appointment of independent trustees;
(c) a declaration that Vance and his wife Denise as partners in the farming partnership known as the Shiloh Santa Gertrudis Stud (the Shiloh Stud) have knowingly assisted Vance to enter into transactions in breach of trust and fiduciary duty, and
(d) enquiries into losses and profits as a result of the above declarations, and various subsequent financial remedies, including compensation and/or account for profits.
The background to the application was based on allegations that Vance had breached the rule against self-dealing and was profiting from the conflict as well as allegations of distributions that were alleged to have been made in breach of trust and the repudiation of a settlement agreement.
Doogue J was of the view that the application for the removal of the trustees was likely to be successful noting at  to  that:
 I consider this is one of those cases where the case for removal of the trustees
is overwhelmingly strong, even in the absence of the trial judge finding any mistaken
belief or misconduct by the trustees.
 I consider that the case for removal of the trustees is strong on the basis that Vance is in a position to self-deal, and that over many years he has failed to adequately provide information to Douglas when reasonably requested to do so. Under the current Act there is no legal obligation on the trustees to provide that information to beneficiaries, but it may have been a measure that would have alleviated the deep level of suspicion harboured by Douglas over the years. Even in the absence of any misconduct and allowing for the fact that Vance and Mr Lunn might have had a reasonable belief that it was Douglas who repudiated the deed of settlement or that the deed did contravene the Act, there is such a high level of distrust and dysfunction that removal of the trustees and the appointment of replacement trustees seems inevitable.
 In fairness to Vance and Mr Lunn, that must be the view they have themselves arrived at. They no longer oppose removal, they simply dispute the mechanism by which successor trustees should be chosen and the appropriateness of the trustees proposed by Douglas and Virginia.
However, as noted at  ” in relation to the appointment of trustees, the deed of settlement provided that any dispute was a matter for arbitration. The fact that neither party invoked the arbitration clause is likely to be a matter considered by the trial judge in relation to costs.”
Notwithstanding the view expressed regarding the removal of the trustees, the court was of the view that as set out at  the case was ” … a clear Buckton category 3 case. The exceptional circumstances necessary to justify a [prospective costs order] have not been made out. Nor have Douglas and Virginia made out a case that Vance and Mr Lunn should bear the costs of these proceedings personally.”
Separately, the court was not satisfied that Douglas and Virginia did not have the means to meet the costs of litigation.
- Woodward v Smith  NZHC 407
- Lewin on Trusts (18th ed, Sweet & Maxwell, London, 2008) at [21-119]
- Percy v Percy  NZHC 828