Solicitors’ costs properly payable out of the estate

 In Probate

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 – Mussell v Patience [2018] EWHC 430 (Ch)

Case Summary from LawSkills | Private Client specialist trainersThis case arose in the course of a trial brought on a part 8 claim form about solicitors’ charges in dealing with an estate and what legal test is to be applied by the court in deciding whether to allow or strike out an invoice paid by the executor and included in his estate accounts.

The facts

The claim was brought by the executors of the late Louis Patience, who were one of the four children of the deceased and a former partner in the firm of solicitors who drafted the Will. The children were all adult and beneficiaries.

Two of the children had declined to approve the estate accounts. The application was for a declaration that the final estate accounts were correct and a direction that the estate be administered accordingly. Previously, there had been two other sets of proceedings one of which had been stayed on the terms of a Tomlin order after a successful mediation between the children.

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In the third set of proceedings the defendants gave their reasons for not agreeing the estate accounts: the claimants had not properly observed the mediation agreement and querying whether land called “the Plot” should have been transferred to the first claimant and Brenda Watts.

So although the claim was couched in terms of the executors asking for directions in the administration of the estate as they did not want to distribute until it was clear the accounts were accepted it was really, in the judge’s view, a claim for the taking of an account in the sense of seeking the court’s approval of the estate accounts. Both counsel agreed to it proceeding in this way.

The specific objections of the defendants were to entries in the accounts relating to some of the invoices for legal services. The defendants alleged insufficient information was provided in the underlying documentation to enable the defendants to take advice whether the charges made by the executors’ solicitors were reasonable or not.

The invoices, which spanned some twenty years since the deceased died in 1997, varied in detail as to whether they showed a breakdown of how time was spent and by whom or whether they simply mentioned professional charges and an amount. Legal requirements relating to billing have changed in that time.

The law

Although counsel for the defendant argued that his clients were entitled to be advised whether the solicitors’ charges were reasonable and in order to be so advised they had to have enough information for that purpose, the judge, HHJ Matthews, felt that the first question to be answered was what was the legal test to be applied by the court in deciding whether to strike out an entry from the accounts?

Neither counsel had researched the question or established whether there was any authority or textbook material on the subject. So the judge had asked for written submissions.

The judge then reported that both counsel in their written submissions had referred the judge to decisions on the assessment of solicitors’ costs under the Solicitors Act 1974. Neither counsel referred him to any case on the legal test for challenging an entry in an executor’s or trustee’s account.

Counsel for the defendants argued there was no presumption that a solicitor’s bill approved or paid for by a client is automatically a liability of a third party. It depended on the relationship of the client and third party. He argued the person with possession of the evidence as to what the expenses were had to show that they were legitimately incurred.

Counsel for the claimants that executors had a contractual right to be reimbursed for expenses incurred with retaining solicitors and that there was a rebuttable presumption that costs to be reimbursed to the executors are reasonably incurred and reasonable in amount – CPR r 44.5 (1).

The judge discounted the latter as he said CPR r 44.5 (1) was a rule on the assessment of costs.  Instead, he referred to Williams, Mortimer and Sunnucks, Executors, Administrators and Probate 20th edition at [63-26] that “the settled rule that whatever a trustee or representative has expended in the fair execution of his trust may be allowed him in passing his accounts”. He said several authorities were cited for this proposition including Daniell’s Chancery Practice.

He pointed out that Williams also states:

“The rule is that a representative is entitled to be allowed all expenses that have been properly incurred by him in the conduct of his office, except those that arise from his own default.”

He said that this was based on case law as codified now by s 31(1) of the Trustee Act 2000, applied to PRs by s 35 of that Act.

The decision

HHJ Matthews agreed that the rules on detailed assessment are not applicable to settling an account between executor and beneficiary because the court is not conducting a detailed assessment of costs.

On the taking of an account an executor is entitled to all “just allowances” as per CPR PD 40A para 4. I.e as Williams says “whatever a trustee or representative has expended in the fair execution of his trust”.

The judge said in relation to accounting to his beneficiaries that the executor has only to show:

(1)        that the sum concerned was indeed spent and

(2)        that it was spent in the fair execution of the estate administration.

The first can be shown by a document or voucher proving payment. The second can be shown by a document such as an invoice evidencing provision of some good or service to the estate.

The judge said the executor is not required at the outset to prove that the charge is reasonably incurred or reasonable in amount. It is not necessary for the executor to defend the charges made by solicitors against the beneficiaries. He said that was what the assessment of solicitors’ costs is for.  He said it is well known that it is not only the client who may seek assessment of costs but third parties who bear the costs may.

He held that the information required to be provided to the beneficiaries need not exceed the basic information contained in the invoice of the solicitor. He did not think it necessary that the voucher disclose the number of hours worked or the hourly rate charged or to give a detailed breakdown of exactly what work was done.

He invited the parties to apply this test to the various objections put forward by the defendants to the estate accounts and then to return the matter to him to consider further if any issues still remained.

Practice points

  1. If you act for beneficiaries who do not wish to approve estate accounts as they are unhappy about the charges of the solicitors acting for the executors then they need to complain to the firm of solicitors in the first instance. If matters are not resolved ask for the solicitors’ costs to be assessed rather than applying to the court for an account to be taken.
  2. Executors themselves are not required to give detailed information to beneficiaries about the costs they have paid.

Pop-up training - 18 July 2018

Mastering Tax during the administration of an estate

Tutor: Gill Steel

Venue: Birmingham

Cost: £250 + VAT per person

Time: 18 July 2018  | 10am – 4.30pm

More information

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