Who foots the bill for removing an executor?

 In Probate

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Probate, costs of removal of executor, LIP – Jones v Longley [2015] EWHC 3362

This case is an interesting comment on litigants in person (LIP) and the need to act reasonably in the litigation process. Here, following deadlock in the estate’s administration, one executor had previously applied for the removal of his co-executor, but had himself been removed by the court (without criticism of his conduct, save for some delay in administering the estate). This hearing decided who should bear the parties’ costs of that application and if those costs had been properly incurred. Matthews M noted that there are no special rules for LIP and was not complimentary about the handling of the litigation by the first defendant who acted without legal representation. He encouraged the proper conduct of the solicitor executor in making the application to resolve the deadlock.

Case Summary from LawSkills | Private Client specialist trainersThe facts

Charles Longley died on 9 May 2010 with probate to his Will dated 24 November 1994 being granted to Peter Jones (the claimant and the solicitor who drew up the Will) and David Longley (the first defendant and the eldest of Charles’s three children) as co-executors on 4 May 2012. Following the relationship between the executors breaking down, the administration of the estate stopped.

Peter applied to court initially for David to be removed as an executor and then for both of them to be removed and replaced by an independent third party. At the hearing in 2015 Matthews M had ordered the removal of Peter, although there was no criticism of Peter, save for there being some serious delays in the estate’s administration. Rather, Matthews ordered this due to the deadlock between the executors and the fact that there were only three adult beneficiaries (David, his brother Richard Longley and his sister Jane Eagers) who all wished David to act as the executor. He viewed this as an exceptional step and commented that David had acted unreasonably in demands he had made of Peter regarding the administration of the estate.

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This hearing was concerned only with the issue of the costs for that removal claim and not any further questions, such as David’s complaints about Peter and his firm.

David acted throughout as a LIP without legal representation and had described himself as a former Prison Service psychologist. His initial written evidence ran to some 160 pages. He had then filed a 100 page counterclaim that his removal was unnecessary and that Peter and his firm had acted negligently, both before and after Charles Longley’s death. Close to trial of the removal issue David had added that Peter should be removed as an executor. Before the removal claim had come to trial David’s siblings, Richard and Jane, had been added as the second and third defendants, but took no part in the proceedings.

Regarding the costs issue, Peter applied in the alternative either for his costs to be paid by David on the standard basis and also that he be entitled to recover from the estate on the indemnity basis any costs not recovered from David  or that he should be entitled to recover his costs from the estate on the indemnity basis.

David also made alternative applications: either that Peter pay the defendants’ costs and that the defendants be entitled to recover from the partners of Peter’s former law firm any costs not so recovered from Peter. Or that the defendants’ costs be paid by that firm. In both cases this was sought on the indemnity basis.

The law

s51 Senior Courts Act 1981 provides in part that, subject to rules of court, the costs of and incidental to all proceedings in the High Court are in the discretion of the court, and that the court has full power to determine by whom and to what extent the costs are to be paid.

By Civil Procedure Rule (CPR) rule 44.2(1), the court has discretion as to whether costs are payable by one party to another, the amount of those costs, and when they are to be paid. Then under rule 44.2(2), if the court decides to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court has discretion to make a different order.

In trust and estate litigation there are special provisions in CPR rule 46.3 for the costs of trustees and personal representatives (PRs):

(1) This rule applies where –

(a) a person is or has been a party to any proceedings in the capacity of trustee or personal representative; and

(b) ……

(2) The general rule is that that person is entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate.

(3) Where that person is entitled to be paid any of those costs out of the fund or estate, those costs will be assessed on the indemnity basis.

And in para 1 of the Practice Direction to Part 46:

1.1 A trustee or personal representative is entitled to an indemnity out of the relevant trust fund or estate for costs properly incurred. Whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative (‘the trustee’) – 

(a) obtained directions from the court before bringing or defending the proceedings;

(b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee’s own; and

(c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.

1.2 The trustee is not to be taken to have acted for a benefit other than that of the fund by reason only that the trustee has defended a claim in which relief is sought against the trustee personally.

Matthews M reflected that it is possible (and sometimes happens) “that a trustee/personal representative is ordered to pay the costs of another party, but then recoups these costs – as well as his or her own- from the estate.

The decision

Matthews M firstly noted that as both Peter and David were party to the proceedings in the capacity of personal representative (PR) then to the extent that either could not recover their costs from elsewhere, each could recover their properly incurred costs from the estate on the indemnity basis. If the costs had not been ‘properly incurred’ then the indemnity could be lost under paragraph 1 of Practice Direction 46. All circumstances should be looked at.

In looking at (b) from para 1 PD to Part 46, Matthews M noted that “some things are clear at once. First, the relationship between the executors had completely broken down. Second, and as a result, the administration of the estate was deadlocked, and needed to be unblocked. Three, since the two executors could not agree on what to do, in order for the administration of the estate to be progressed, either one or both of them had to go.” 

He made it clear that he was not dealing with the various complaints about Peter and his firm (to be dealt with at another hearing), nor with the substance of the administration of the estate, except to the extent that they formed part of his assessment of whether the costs had been properly incurred.

There were four key issues in the administration of the estate on which the parties differed:

  1. The terms on which Charles Longley’s house should be assented to David;
  2.  Whether full or limited title guarantee was appropriate for that assent;
  3.  Whether Peter should supply certified or notarised copies of the house deeds; and
  4.  Whether the executors should pursue a claim against a bank in Hong Kong regarding a deposit Charles had had with that bank’s predecessor.

At a previous hearing Deputy Master Mark had decided both the second and third issues in Peter’s favour so the house was to be assented with limited title guarantee and only certified rather than notified copies of the title deeds needed to be given to David.

As he had not heard argument on the first and fourth issues, Matthews M could not decide them, but for the limited purposes of the costs application he did comment on them. He said that he did not think it unreasonable for Peter to have taken his stance on the terms of the assent to David. Again it was not unreasonable for Peter not to pursue a claim against a bank in Hong Kong especially when there was evidence that Charles himself had removed money from the account during his lifetime which explained the discrepancy in its balance at the date of death from that shown in the passbook at a much earlier date.

In looking at whether Peter had begun the proceedings unreasonably and in his own interests, Matthews found that David’s insistence that Peter perform the matters at 1) – 4) above in the way David had specified was “itself unreasonable. The proper course in case of dispute between the executors was to ask the court to decide.  And “for the limited purpose of dealing with costs, the insistence of the First Defendant on the Claimant’s performance of [the matters at 1) – 4)], in the absence of any direction from the court, was itself unreasonable.”

Moreover, he found that “in my judgment, the only way forward was for at least one of the executors to go. The Claimant saw this and acted. The First Defendant did not and objected, saying that both executors should stay in post. In my judgment the Claimant’s application was in the best interests of the estate. It is indeed only in the proceedings started by the Claimant to remove the First Defendant, and as a direct result of starting them, that the court has had the power, which it has now exercised, to remove the Claimant, thus leaving a single executor in post.

Matthews was therefore satisfied that Peter had acted in the best interests of the estate in bringing his claim. It did not change matters that he had ordered that Peter, and not David, be removed as an executor as it was not possible for the estate to be administered while the two executors were in post. Similarly David had not acted in his own interest in resisting Peter’s claim.

Matthews held that Peter had acted reasonably in bringing the claim, but that David had not acted reasonably in his defence of it. He was not complimentary about David’s handling of the litigation, nor of his evidence which stated and restated “the allegations in prolix, quasi-scientific and repetitive language”. He also referred to his “voluminous written materials, most of which are of marginal relevance at best”. He was not impressed that David’s materials ran to nine volumes.

Of importance for practitioners dealing with litigants in person he noted “of course, I accept that the First Defendant is not a lawyer, but he is clearly an intelligent and articulate man, and in any event there are not two sets of rules, one for lawyers and one for laymen. If you embark on litigation without a lawyer, you cannot expect to be judged by rules different from those which apply to litigants legally represented.

As he held that David had not acted reasonably, to the extent that Peter could not recover his costs elsewhere, he held that he should recover them from the estate on an indemnity basis, but David should not.

Although costs normally follow the event and Peter had been unsuccessful in obtaining the removal of David , nonetheless  “in my judgment this is a case where the idea underlying the claim has been vindicated. This is that the two personal representatives cannot be expected to continue to work together, and at least one must go. To launch the claim was the right course to take at the time. The First Defendant resisted that at first, and only later suggested that the proper order was that the Claimant should be removed. The Claimant meanwhile suggested that both should be removed. I am satisfied that this was on the basis, not of seeking to disadvantage the First Defendant, but from a genuine concern that the administration might not be safe in the hands of the First Defendant.

Matthews made it clear that whether or not Peter had been successful in bringing the claim and whether or not he had committed any breaches of duty in administering the estate, “he can be regarded as having done the right thing in the interests of the estate and its beneficiaries in bringing these proceedings. That is conduct to be encouraged. Conversely, he regarded David’s conduct as unreasonable. He therefore ordered David to pay Peter’s costs of the claim on the standard basis if not agreed. Any of Peter’s costs not so recovered were to be recovered from the estate on the indemnity basis. No order was made about David’s costs.

Practice points

  1. Where you are acting as an executor and demands, which you believe are unreasonable, are being made of you by your co-executor, rather than delay the estate’s administration, consider applying to court for directions on the issues.
  1. When considering applying to court for directions as an executor, keep in mind that such an application needs to be in the best interests of the estate and be a reasonable course of action. Failing this, the court may not hold your costs to have been properly incurred.
  1. Remember that if your costs have not been properly incurred, you may not recover them on an indemnity basis.
  2. Although there are no special rules for litigants in person, if you are involved in litigation with one, remember to still act reasonably – keep your written evidence succinct and to the points in question!

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