Cayman courts emphasise the importance of Beddoe relief and its availability in situations where a third party claim is for an amount greater than the Trust assets.

In the case of X (as Trustee of the A Trust) v Y (beneficiary of the A Trust)[1], the court reiterated the importance for Trustees of seeking Beddoe relief before commencing or defending an action. Obtaining Beddoe relief ensures that Trustees are more likely to be indemnified against any adverse costs consequences than without such relief. The court also found that interested non-beneficiary third parties should be provided with informal notice of a Beddoe application but that the interests of the beneficiaries of a Trust outweigh the interest (actual or potential) of any third party in the trust assets in assessing the Trustees’ application.

Background Facts

The Claimant in these proceedings was the Trustee of the A Trust. The Trustee was involved in English proceedings in respect of a Sale and Purchase Agreement (“SPA“) which involved a claim against a consortium of sellers (including the Trustee) in relation to (a) breach of warranty, and (b) the tort of deceit.

The breach of warranty claim related to, amongst others, failure to disclose a dispute between the Trustee and another defendant (in the English proceedings) which was ongoing at the time of the execution of the SPA. The claim for deceit arose on the basis that the defendants (in the English proceedings) allegedly made material misrepresentations to the claimant (in the English proceedings) (“Z“) that no funds had been invested in the ill-fated Madoff Funds. Z avers that such investments were made before the SPA was signed and came to its attention after the SPA was executed.

The Trustee had sought directions from the Court to defend the English proceedings.  It also sought orders permitting it to borrow funds from the C Trust (i.e. another Trust), to discharge the costs of defending the English proceedings and, pre-emptively, for an indemnity for any costs and expenses properly incurred for those purposes, which would have been ultimately reimbursed from the A Trust assets.

Beddoe Relief

The case of Re Beddoe[2] established the principle that Trustees are able to apply to the court to seek permission to commence or defend proceedings using the trust assets while also obtaining an indemnity from the Trust for any adverse cost consequences. (That indemnity can be lost if the Trustees have failed to make full disclosure of all material facts when making the application for relief.)

It is important to note Trustees who do not seek Beddoe relief are not automatically barred from recovering the costs of litigation from the Trust funds.  However, such Trustees do not have the same certainty of protection as they would if they had obtained Beddoe relief.

The importance of seeking Beddoe relief

The Cayman courts have general jurisdiction to provide relief to a trustee in relation to the management or administration of trust money under section 48 of the Trusts Law (2011 revision). The case of Re Beddoe allows for the applicability of such directions specifically on the question of engagement in litigation.

Smellie CJ re-iterated Lindley LJ’s position in Re Beddoe where he stated that “…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, even if he acts on counsel’s opinion” especially given the “ease and comparatively small expense with which trustees can obtain the opinion of the Chancery Division on the question whether an action should be brought or defended at the expense of the trust estate“.

Therefore, the Court found the Trustee had adopted the correct approach in this case by seeking Beddoe relief from the court before proceeding with the litigation.

Rights of non-beneficiary third parties in a Beddoe application

The Trustee had provided Z with informal notice of the Beddoe application. However, Z contested that it should have been provided with formal notice so that it could have made appropriate formal representations to the court.

Smellie CJ found that in circumstances where Z is not a beneficiary in the A Trust, it is merely a third party asserting a disputed personal claim in contract or tort against the Trustee. Therefore, Z’s claim is one which is a dispute between a third party and a Trustee in relation to liabilities assumed by the Trustee in administration of the Trust. In such circumstances there is no need for Z to be provided with formal notice of the Beddoe application. However, Smellie CJ also found that Z would be adversely affected if its claim was successful and the Trustee had defended the claim at the expense of the Trust because the costs of the defence would reduce the value of the assets against which Z would have been able to enforce its judgment. The Trustee had therefore been correct to provide Z with informal notice of the Beddoe application. The court also took into account the representations made by Z in its response letter.


Given that Z’s claim exceeded the value of A Trust, if that claim were to be undefended the A Trust would certainly be exhausted to the detriment of the beneficiaries. However, in deciding how much weight should be given to Z’s interests, Smellie CJ decided that a contingent or putative creditor in Z’s position is not capable of asserting a proprietary claim to the Trust assets, and takes the Trust Assets as it finds them at the time of the judgement. The Trustee obtained Beddoe relief in these proceedings and was allowed to defend the English proceedings and would have had an indemnity from the Trust assets for the costs reasonably incurred in defending the claim.


As this case illustrates, it is important for trustees to ensure that:

  1. they seek the court’s permission before bringing or defending claims in relation to the trust assets (i.e. seek Beddoe relief); and
  2. to the extent that there are third parties interested in the trust assets who would be adversely affected by the outcome of any litigation, they should be provided with informal notice of any application for Beddoe relief.


[1] in the Grand Court of the Cayman Islands, Financial Services Division (unreported) 15 March 2017, Smellie CJ

[2] [1893] 1 CH 547

Widow removed as administratrix after persistent breaches in administering the estate

The Hong Kong Court has recently ordered the removal of an administratrix, who was the widow of the deceased, after finding she had misappropriated and converted the estate to her own use, repeatedly breached Court orders and had failed to render a proper and accurate account.[1] This case is a reminder to all administrators to fulfil their duties or face removal.

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Deceased’s “husband” and daughter both unable to obtain letters of administration

The English High Court has recently refused to grant letters of administration to a deceased's daughter (the "Claimant") despite her having the highest entitlement to the deceased's estate.[1] The dispute involved a challenge by the alleged widower of the deceased (the "Defendant"), who was found not to have been validly married to the deceased. Therefore the Court declined to grant the Defendant letters of administration. Nonetheless, the Court found that the Claimant had deliberately lied to Court and thus also declined to grant her letters of administration. Instead, the Court exercised its jurisdiction to appoint "some other person" as administrator. This case is a reminder that all parties need to act lawfully and properly when presenting evidence or face the consequences.

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BVI Court of Appeal Comment on Trustees’ Duty to Account and Evidential Presumptions in Trusts

The BVI Court of Appeal has recently allowed an appeal concerning a trustee's failure to account and breach of trust.[1] The breach of trust arose as a result of the trustee making an appointment of the trust assets without considering all relevant circumstances. In overturning the decision, the Court noted that if a settlor transfers further property to the trustee, a presumption arises that such property is to be held on trust under the same terms as the original trust. Such presumption can be rebutted, but the burden of proof rests with the trustee to do so.

The case has interest for private wealth matters regardless of jurisdiction, given the popularity of the BVI when structuring assets.

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Hong Kong court rules on estate administrator’s breach of fiduciary duties

In Tang Ying Loi v. Tang Ying Ip alias Tang Ying Yip and others (HCA 2487/2009), the Court of First Instance held that the defendants, who were appointed as estate administrators, breached their fiduciary duties by (i) unlawfully withdrawing money from the estate’s bank account to purchase property for their own benefit and (ii) failing to collect money due to the estate. The court ruled that the defendants were liable to compensate the estate accordingly. Continue reading

English Court of Appeal confirms account of profits available as remedy for dishonest assistance

Some, if not quite born trustees, are appointed as such at the outset of a trust. Some achieve trusteeship at some later stage. And some have some aspects of trusteeship thrust upon them.

Within this third category are strangers to a trust who “dishonestly assist” an express trustee in a breach of the trustee’s fiduciary duty. Through this dishonest assistance, the stranger will be liable to the injured beneficiary, even though no fiduciary relationship exists between them. Although not sued as fiduciaries, such strangers can be held liable to account in equity as if they were a trustee of the beneficiary. Commonly, for convenience (which more often leads to confusion), the stranger is called a “constructive trustee”.

Previously, there was some uncertainty as to the scope of the remedies available for dishonest assistance: specifically, whether the claimant-beneficiary could obtain an account of profits against the dishonest assister, even though no loss was suffered. The unanimous decision of the Court of Appeal in Novoship (UK) Limited & ors v Nikitin & ors [2014] EWCA Civ 908 confirms the availability of the remedy in claims against third parties for dishonest assistance and also the circumstances in which the remedy will be available, namely where there is a sufficient causal connection between the dishonest assistance and the profit and where it would be not be disproportionate to grant the remedy. Robert Hunter and Tom Wood consider the decision here.