1st February, 2022
Challenging executors and trustees costs: to charge or not to charge?
Two recent decisions from the High Court and Senior Courts Cost Office have provided clarity for clients and practitioners alike, on the question of challenging executor and trustee costs when charging clauses are, and are not, included in wills.
Dealing with the first, the High Court in Da Silva v Heselton & others, perhaps surprisingly on first glance, refused to allow a former executrix to charge for administrative work she undertook while administering the estate, despite the deceased’s will including a standard charging clause.
While the decision may, in equal measure, cause alarm for executors and comfort for aggrieved beneficiaries facing large estate costs, there is more to this matter than first meets the eye.
In order to understand the situations when executors’ costs could be set aside, even when there is a charging clause, the facts of the case need to be considered.
Sandra Heleston and Ronald Armour, were appointed as the deceased’s executors. They obtained a grant of probate on 2 December 2004. The residuary beneficiary, Jacqueline da Silva, issued a claim in 2015 to remove them both as executors, in favour of Peter Bruton, a solicitor: their replacement was ordered in 2016.
Peter then sought a declaration from the court that Sandra, as a non-professional executor, was not entitled to charge the estate for her time and work in that capacity.
Between 2003 and 2016, Sandra had charged a monthly fee of £300, which equated to £43,350. It was noted that during that same period, the estate generated income of £48,900.
Sandra sought to rely on the following charging clause, synthesised to show the relevant wording, below:
“[My Trustee shall have power] for any of my Trustees who shall be engaged in any profession or business [to] charge and be paid … all usual professional and other fees … for work or business … done or time spent by him … in connection with the administration of my estate … including work or business outside the ordinary course of his profession and work or business which he could or should have done personally had he not been in any profession or business”
Pausing here, it is clear that the clause is not restricted to a trustee who is pursuing a profession, for example a solicitor or accountant, but actually extends to a person engaged in a profession or business. This, therefore, could apply to any professional.
However, the court at the first hearing deemed that the business or profession has to have some relevance to the matter of administering estates and crucially, the administration time spent, which is being charged, should be part and parcel of that business.
In support of her submission that she had been engaged in a profession or business, Sandra stated that:
- she had been engaged in, what the court called, ‘a wholly unspecified “business” since 1991 which enabled her to establish a law scholarship’;
- she had an unspecified interest and role in debt recovery companies since 1992;
- she acted as a practice manager of her husband’s firm of solicitors since 1992;
- she established a French Art Café and Gallery” in 2014; and
- she engaged in business and management of commercial and residential properties before the deceased made her will.
Ultimately, the court was not satisfied that Sandra’s activities in administering the deceased’s estate were done in the course of those businesses.
Sandra appealed, which was heard in the High Court.
Mr David Rees QC, the presiding judge, deemed the wording “usual professional and other fees” as the key to interpreting the charging clause. He confirmed that there has to be a link between scope of the profession or business in question versus the work that the trustee has carried out in connection with the estate administration that they are seeking to charge.
Put another way, a trustee whose business or profession does not relate to the administration of estates or trusts, may charge for the work they carry out in administering an estate, only if a charge for the activities carried out would arise in the usual scope of their business or profession.
The court considered that the deceased did not intend any executor or trustee, engaged in any profession, to charge for any act they carried out in respect of her estate, irrespective of the nature of the business or time spent. Naturally, the court wanted to protect against a trustee (with the benefit of this charging clause,) setting up a business, unconnected to the administration of estates, who then devoted negligible time but sought to charge their “usual” rate.
In summary, charging clauses are likely to be restrictively construed, so a trustee seeking to rely on a charging clause, especially one whose profession or business does not involve the management or administration of trusts, would be well advised to first seek legal advice.
The second case, Brealey v Shepherd & Co heard in the Senior Courts Cost Office, related to a beneficiary’s challenge to the fees, Mr Shepherd, the professional executor named in the will, charged the estate. Here, crucially, there was no charging clause for the executor to rely on so the court had to decide whether or not the beneficiary consented to the executor raising those charges.
The beneficiary said no consent had been provided such that the executor’s costs could not be recovered from the estate. The beneficiary had engaged Shepherd & Co to administer the estate, but the retainer stated that Mr Shepherd could charge for legal work in administering the estate but there was no mention of Mr Shepherd’s role as executor or of charges being raised.
Importantly, the Law Society has provided guidance on this topic, stating that “it should be made clear whether the amount quoted is for the work involved in administering the estate or whether it is simply the fee for acting as executor and supervising others doing the necessary work”.
During the assessment of the bill prepared by Mr Shepherd, 70% of the fees charged related to Mr Shepherd’s role as executor.
Mr Shepherd submitted that the remaining executors had signed his invoices and that the beneficiary knew of the charges being raised over the seven year period it took to administer the estate.
However, the court was not persuaded by these submissions, noting that only executor had signed the invoices and the other had not. The court dismissed the beneficiary’s knowledge of Mr Shepherd’s involvement, without more, as amounting to consent of Mr Shepherd’s fees.
Ultimately, the court ruled that where a will does not contain a charging clause, it is up to the professional executor to demonstrate why fees should be paid, rather than for beneficiaries to show why they should not be paid.
It is likely that the principle of this decision will have limited, but important, scope, acting as salutary tale for professional executors charging estates, without first making it clear to executors and beneficiaries alike of their proposed charges.
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