Insights from this recent costs’ decision:
- Conduct is key! Conduct of the parties, particularly pre-action, can have significant consequences on whether the successful party can recover their costs.
- Even successfully removing a trustee may not result in that trustee losing their indemnity from the trust fund nor being ordered to pay the successful claimant’s costs.
- Claims for the removal of trustees are complex and the full range of potential costs consequences must be properly considered when considering and handling such a claim.
Overview
Following its November 2025 decision to remove two trustees, the High Court has now ruled on costs. Although the claimants succeeded in securing removal, they did not recover their costs, and the removed trustees retained their indemnity from the trust fund.
The judgment is a cautionary tale for anyone involved in a trustee dispute: success on the merits does not guarantee success on costs, and costs’ risks in trustee‑removal claims must be carefully assessed.
Background
The dispute concerned a family trust with four trustees. After relations deteriorated, two trustees – Paddy and Malcolm – were removed and replaced with an independent professional. The claimants then sought (1) their costs from the trustees personally and (2) removal of the trustees’ indemnity from the trust fund. The trustees resisted.
Costs: why the claimants did not recover
The court found that, despite their partial success, the claimants’ conduct was unreasonable given:
- Proceedings were issued with little pre‑action engagement.
- Allegations were exaggerated, increasing the cost and complexity of the case.
- The claimants refused or ignored early attempts at settlement, including mediation and an offer for one trustee to retire.
Because the claimants contributed to unnecessary costs, the court ultimately declined to order the removed trustees to pay their costs.
Trustees’ indemnity upheld
The claimants argued that removed trustees should lose their indemnity. The court disagreed, confirming that:
- Trustees are entitled to indemnity for their costs properly incurred, unless they act unreasonably, in bad faith, or purely in self‑
- Here, the trustees behaved reasonably: they defended legitimate allegations, made early settlement offers, and did not act improperly.
As a result, the trust fund will bear the removed trustees’ legal costs.
Why the case matters
- Removal claims are not straightforward. Even justified removal does not guarantee favourable costs outcomes.
- Conduct before and during litigation shapes costs. Failure to mediate, or exaggerating issues, can heavily penalise a claimant.
- Trustees rarely lose indemnity. Removal for hostility or breakdown is not enough in itself to strip indemnity rights.
- The trust may ultimately pay. Even successful claimants may see the trust fund diminished by trustees’ costs.
Key takeaway
Smith v Campbell underscores that trustee‑removal applications require strategic, proportionate conduct and specialist advice. Even successful removal may result in:
- No recovery of costs; and
- Removed trustees retaining indemnity, leaving the trust to shoulder substantial legal fees.
How we can help
Anyone considering or facing such proceedings should seek early expert guidance and engage constructively before issuing claims. Whether you are concerned about trustee conduct, facing allegations yourself, or simply need clarity on your rights and options, we provide clear, pragmatic guidance and robust representation. Our specialist contentious trusts team is here to help.
To speak to Emily Jenkins, or other members of our team, please request a consultation.
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