Alternative dispute resolution ordinarily requires the consent of the parties. In trust disputes, however, under s 145 of the Trusts Act 2019 a trustee or beneficiary may ask the High Court to order that parties participate in an ADR process. In other words, the Court can order an unwilling party to attend mediation.

Recently, Fee Langstone acted in one such application.[1] In this article we look at the scope of the Court’s powers, the factors considered, and comment on whether it is a worthwhile ‘tool in the toolbox’ for litigators.

An “internal matter”

The Act defines this as “a matter to which the parties are a trustee and 1 or more beneficiaries, or a trustee and 1 or more other trustees, of the trust”. Trust disputes which do not meet this definition fall outside the scope of s 145.

It is insufficient by itself that a dispute involves trustees or beneficiaries. To be an “internal matter” it must relate to a claim that is brought by a trustee or beneficiary in that capacity. In Innes v Darlow, for instance, the Court found that the dispute was not an “internal matter”, because the plaintiff beneficiary brought her claim (for unpaid services to the trust) as an alleged creditor.[2] It was not a claim by the beneficiary about a breach of any obligation owed to her as beneficiary, nor did it concern the division of trust property. In other words, the plaintiff’s status as a beneficiary was incidental.

However, even where it remains a live issue as to whether a dispute is an “internal matter”, or the dispute includes some aspects that are not “internal”, the Court retains the ability to make orders under s 145. In Addleman v Lambie Trustee Ltd, the party opposing the application argued that some (but not all) of the claims made in the proceeding were not “internal matters”. The Court found that placing a limit on the ability to compel mediation for only those aspects of the claim which were internal was “artificial and contrary to the broad purpose of the legislation”, in circumstances where there was a “core internal dispute” between the parties.

The Court’s discretion

Where a dispute is an “internal matter” the Court must still exercise its discretion to determine whether orders under s 145 are appropriate.

In S v N the Court considered the following, non-exhaustive list of factors as relevant to its discretion under s 145: “cost, confidentiality, speed, the seriousness and complexity of the matter, the suitability of the proposed mediator, the wishes of the parties, the wishes of the settlor (if known), finality and enforceability.”[3] In Innes v Darlow, the Court also considered that the likelihood of ADR’s success in resolving the dispute, and the merits of the case being advanced, were further factors to consider.[4]

Comment by Edward Fox

One of the purposes of the Act is to provide “mechanisms to resolve trust-related disputes”. ADR, and mediation in particular, will often be preferable to litigation as a means of determining trust disputes.

The Court’s power under s 145 to direct the parties to attend ADR at first glance undermines one of the central tenets of mediation – that the parties are there voluntarily. While the Court has declined orders under s 145 in extreme circumstances, such as where attendance at mediation would have involved one of the parties being before her abuser[5], Parliament has empowered the Court to require parties to mediate notwithstanding their unwillingness.[6] Indeed, if everyone agreed to mediate, then the power to order it would not be needed.

As the saying goes, “You can lead a horse to water, but you can’t make it drink.” In the United Kingdom, however, settlement rates for disputes where mediation has been compelled are comparable to those engaged in voluntarily. In other words, if you take a horse to water, it usually does drink.[7]

So, weighing up the pros and cons, applications under s 145 are an extremely useful ‘tool in the toolbox’ for those advising parties on trust disputes.