A recent case, in relation to the estate of the late Louis Patience, addresses what can be reasonably expected in terms of information on executors’ legal fees incurred during the administration of an estate. It also highlights that any assessment of the level or nature of those legal fees is likely to fall to the beneficiaries.
The administration of the Patience estate was protracted and disputed. The claimant executors were (1) a daughter of the deceased and (2) a partner in the firm of solicitors that drafted the Will.
The defendants were two of the three other children and beneficiaries of the deceased’s Will who were disputing the estate accounts that the claimants had prepared and which had been presented to them for approval.
The claimant executors issued proceedings seeking a declaration that the “final estate accounts” were correct and for a direction that the estate be administered accordingly. However, the Court treated the claim as being one for the taking of an account and seeking the court’s approval in default of approval from the defendant beneficiaries.
The defendants main area of contention was the lack of information provided in support of legal fees charged by two firms of solicitors, some of which were incurred 20 years ago.
They raised four points –
- There is no presumption that the solicitors’ bills approved and/or paid by the executors are automatically the liability of the beneficiaries;
- The liability of the beneficiaries to the executors depends upon the contractual, or otherwise implied, terms;
- There was no term, implied or otherwise, that the beneficiaries shall indemnify the executors for all legal expenses simply because they have been approved/paid and irrespective of whether they were incurred reasonably, appropriately or otherwise, and;
- Being in possession, actual or constructive, of the material evidence as to how such expenses were incurred, it is for the executors, as the solicitor’s clients, to show that they were legitimately incurred.
The claimants submitted that executors have a contractual right to be paid fees for work done and to be reimbursed for their expenses incurred in retaining solicitors and that there is a rebuttable presumption that costs to be reimbursed to the executors are reasonably incurred and reasonable in amount (CPR 44.5(1)).
They also submitted that the rules on detailed assessment of costs are not applicable to settling an account between an executor and a beneficiary. The question to be posed is, instead, whether the legal costs are expenses of the executors properly incurred in the conduct of their office.
The court, in reaching its decision, made reference to Williams, Mortimer and Sunnucks, Executors, Administrators and Probate, 20th edition, “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”. This is supported by Daniell’s Chancery Practice, “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.”
Moreover, and in the absence of case law, in the Trustee Act 2000, section 31 (1), “A trustee (a) is entitled to be reimbursed from the trust funds, or (b) may pay out of the trust funds, expenses properly incurred by him when acting on behalf of the trust”. (Section 35 of the Act extends the above to a personal representative administering an estate.)
The Court found that where executors have the benefit of an express clause giving them remuneration and indemnity for expenses incurred in the administration of the estate they may well have a contractual right within CPR 44.5(1). However, this is a rule concerned with assessment of costs.
The Court agreed that the rules on detailed assessment were not applicable here as the Court was not conducting an assessment of costs. An executor only has to show that (1) the sum was spent and; (2) that it was spent in the fair execution of the estate administration. A solicitor’s bill need not extend beyond the most basic information, that the charges are professional charges to the executor in relation to the administration of the estate.
The Court confirmed that it was not for the executors to defend the legal fees. The questions of whether the legal fees were reasonably incurred and reasonable in amount were questions for an assessment under the Solicitors Act, a remedy that was open to the defendants as parties whose shares of the estate are reduced by paying the fees.
This decision demonstrates that although an executor is entitled to seek an assessment of a solicitor’s bill under s70 of the Solicitors Act 1974, as the addressee of the bill, he/she is not obliged to exercise that right to an assessment. Instead, this is a remedy for the beneficiaries to consider under s71 of the Solicitors Act.