This article considers whether charity legacy officers can challenge charges incurred by personal representatives, who are not solicitors but are acting in a professional capacity and where the Will allows for payment to be received for their time and services. Again, if you are a charity beneficiary who has concerns about the level of charges being levied, there is a means of challenging those charges. We’ve also covered whether charity legacy officers can challenge charges incurred by solicitor executors, read this here.
- The Entitlement to Charge
The first issue for Charity Legacy Officers to consider is whether the Personal Representative is entitled to charge?
The general rule in equity is that a PR is not entitled to charge however a PR is bound by the equitable rule in Broughton v Broughton, 1855 which states that:
“no one who has a duty to perform shall place himself in a situation to have his interests conflict with that duty”
The key element of this is the duty for the PR not to profit from his or her position.
- Exceptions to the General Rule
The general rule in equity does not apply when the Will contains a charging clause entitling the PR to receive payment for his or her services.
Historically charging clauses are construed by the courts strictly, for example “My Executors may charge for their professional services” is not as robust as “My Executors may charge for any services provided by them in connection with the administration of the estate”.
- What about services which a lay executor could perform?
The position before the Trustee Act 2000 was that a charging clause authorising charges for professional services did not authorise charges for services that a lay person could perform.
The position post the Trustee Act 2000, however, is that the Act authorises a PR to charge reasonable remuneration for services performed on or after 1 February 2001, even if they could have been performed by a lay person in certain circumstances.
- So when does the TA 2000 apply?
Where there is a charging clause in the Will and the trustee is acting in a professional capacity or where there is no charging clause in the Will and the PR is either:
- a trust corporation but is not a trustee of a charitable trust arising in the estate or
- is acting in a professional capacity but he is not a sole trustee, a trust corporation or a trustee of charitable trust and MOST IMPORTANTLY all the other trustees agree to the payment in writing.
- So what is the meaning of ‘acting in a professional capacity’?
Section 28(5) Trustee Act 2000 states that:
A PR must be acting in a profession or business that consists of or includes the provision of services with either one of the following:
- The management or administration of trusts generally or a particular type of trust;
- Any particular aspect of the management or administration of trusts generally or a particular type of trust.
But is it enough that a PR belongs to a profession which carries out that kind of work or must he himself carry out practise or be in a firm which practises that type of work? This is unclear.
- Are there any other Exceptions?
Yes, where all the beneficiaries have been ascertained, have legal capacity and agree that the PR may receive payment or where one beneficiary agrees that payment can be made from his share of the estate or where authorised by the court.
- So how do you go about challenging those costs?
If there is an issue of entitlement raise the issue as soon as possible. If the costs seem high - request a breakdown. Raise your concerns and endeavour to negotiate a reduction.
- But what if that doesn’t work?
The Court can order an enquiry as to what the professional executor has charged and whether such charges are reasonable.
The professional executor must file a full account of all remuneration claimed and on what basis. The beneficiary will then be entitled to raise objections to any particular items by notice of objection or affidavit. Further directions will then be given as to the manner of dealing with the objections. For example they may be dealt with by the Master on pleadings or on affidavit.
The Court will disallow any items objected to if it considers that the objection is justifiable.
Examples include items which:
- Fall outside the scope of the charging clause;
- Were charged at an unreasonable rate;
- Were not reasonably necessary for the administration of the estate.
There are several remedies available to beneficiaries and it is particularly important that charity beneficiaries consider what their rights are in any given circumstance. Early legal advice is always recommended to ensure that the charity’s rights are protected at minimum cost, as well as ensuring that strict time limits are not overlooked.