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 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 sucessful, 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 contex 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 occured and that that self-dealing was not permissible in terms of the relevant deed of trust.
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. However, guidance on likely costs outcomes is available.
- Woodward v Smith  NZHC 407
- Lewin on Trusts (18th ed, Sweet & Maxwell, London, 2008) at [21-119]