The Supreme Court of Victoria held that a trustee who defends a production application on arguable grounds — particularly where the underlying legal question (proprietary vs discretionary approach to beneficiary access to trust documents) is unsettled — does not act unreasonably merely because it ultimately loses, and is therefore entitled to its right of indemnity against trust assets for the costs incurred. The Court further held that the question of whether to deprive a trustee of its indemnity is an evaluative determination governed by Re Beddoe principles (whether expenses were reasonably and honestly incurred), not a discretionary one attracting House v The King on appeal. The trial judge erred by effectively applying a 'costs follow the event' approach and by treating the impact of the indemnity on successful beneficiaries as a relevant factor, neither of which forms part of the Re Beddoe test.
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