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Beddoe Order, Beneficiaries, Beneficiary rights, breach of trust, Directions, Testamentary trusts, Trustees, Trusts, Trusts Act, Will trusts

Disclosure of legal advice

McCallum v McCallum relates to applications for discovery of information including trustee legal fees, trustee resolutions and legal advice received by trustees.

The case considers important procedural aspects of when discovery can be sought, the rules that apply to originating applications and the extent of discretion available to the High Court regarding such matters.  Of interest in this case was that:

  • the trustees were required to disclose gross legal fees paid, but not provide individual invoices
  • discovery of resolutions, correspondence, minutes, trustee memoranda was not ordered
  • prior wills were not required to be disclosed
  • legal advice, with some redaction was required to be disclosed.  Arguments that such advice was subject to litigation privilege were largely unsuccessful.  As noted by Bell AJ at [46] (editor’s emphasis):

“I accept that, in November 2017, the trustees could reasonably apprehend litigation. That is because counsel acting for William had written, threatening litigation if they went ahead with the settlement. I do not, however, accept that litigation was the dominant purpose in obtaining the legal advice. A lawyer had been instructed for William and had given notice that the trustees’ actions would be under scrutiny and could be challenged in court. A trustee who then seeks advice as to what they ought to do and whether they could go ahead with a planned course of action is doing so to ensure that they do so in a lawful manner. Litigation is a secondary consideration in those circumstances. Trustees seeking advice to ensure that the course they intend can be lawfully carried out obtain the advice to make sure that they can do so effectively, independently of any litigation. There may well be litigation downstream, but their purpose is to ensure that they have carried out their transactions in a way that is legally sound. Accordingly, the prospect of litigation is, on my assessment, a secondary consideration in much the same way as it was in the litigation privilege case of Guardian Royal Exchange Assurance of NZ Ltd v Stuart.”

The case is fact specific and is a precursor to a Beddoes and Prospective Costs Orders.  However, it canvasses important procedural considerations and warrants careful reading.

McCallum v McCallum relates to applications for discovery of information including trustee legal fees, trustee resolutions and legal advice received by trustees.

Beddoes Application 

At [11] in the Beddoes application that followed Gwynn J set out the jurisdiction for a Beddoes Order as follows:

The jurisdiction to make a Beddoe order was recently comprehensively reviewed by Thomas J in McLaughlin v McLaughlin. Application for a Beddoe order is made in separate proceedings, usually by a trustee or trustees, for directions as to whether to initiate litigation or defend litigation against them. Those directions insulate trustees against the risk that their decision to engage with the litigation may
be subsequently challenged and they will be held personally financially liable. A Beddoe order does not generally deal with issues of costs as between the parties in the main proceedings. The test for making the order is gauging what is in the best interests of the trust.

In determining what is in the best interests of the trust as noted at [38] requires “requires consideration of the substance of the dispute but necessarily on a preliminary basis.”  See McLauglin v McLaughlin.  However, as stated at [39] there is a caveat to this, which is that “… to the extent that there are allegations of breach of the trust deed(s) or of the obligations owed by the trustees/executors, it is beneficial to have those allegations tested and, if made out, rectified. In the usual course it would not be appropriate for the trustees to actively defend such allegations…”

In McCallum v McCallum the court then went on to consider each cause of action and whether or not, by reference to each of these, a Beddoe order would be made.

References: 

  • McCallum v McCallum [2019] NZHC 1925
  • McCallum v McCallum [2020] NZHC 907
  • McCallum v McCallum [2021] NZCA 237
  • Guardian Royal Exchange Assurance of NZ Ltd v Stuart [1985] 1 NZLR 596
  • Re Beddoe, Downes & Cottam [1893] 1 Ch 547
  • McLauglin v McLaughlin [2018] NZHC 3198, [2019] NZAR 286

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