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                  Mussell and Another v Patience and Another [2018] 2 Costs LO 239

                  [2018] 2 Costs LO 239

                  Administration of estates: level of evidence required on an application for approval of estate accounts to prove charges made by an executor were "just allowances" within CPR PD 40A, para 4, the rules on detailed assessment not being applicable to settling an account between executor and beneficiary.

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                  Online Case 15

                  Mussell and Another

                  v

                  Patience and Another

                  [2018] 2 Costs LO 239

                  Neutral Citation Number: [2018] EWHC 430 (Ch)

                  High Court of Justice, Chancery Division, Bristol District Registry

                  8 March 2018

                  Before:

                  HHJ Paul Matthews (sitting as a judge of the High Court)

                  Headnote

                  In a claim by a beneficiary executor and a solicitor executor (whose firm had drafted the deceased’s will) for a declaration that the estate accounts were correct, the rules on detailed assessment were not applicable to settling an account between executor and beneficiary. On taking the account, the executors were entitled to all “just allowances” within CPR PD 40A, para 4, by which was meant whatever had been expended in the “fair execution” of the estate administration. It followed that beneficiaries who disputed the accounts could only do so where they had adduced evidence to rebut these inferences. CPR rule 44.5(1) concerned the assessment of costs and whether charges made had been reasonably incurred or were reasonable in amount. That was what the system of assessment of solicitors’ costs was for, it being well known that third parties (such as beneficiaries) could make an application for that purpose. These were matters which might arise in the assessment of solicitors’ costs (under s 71 Solicitors Act 1974) and, on taking the account, it was not necessary for the executor to defend the charges made by solicitors against the beneficiaries. The parties would, accordingly, be invited to apply that test (being the correct test) to the objections put forward by the dissatisfied beneficiaries and the application for the declaration would be dealt with on paper in the light thereof.

                  Editorial note: Although it is correct that dissatisfied beneficiaries can apply under s 71 Solicitors Act 1974 for detailed assessment of the costs charged to the estate by executors, it is “of limited use” to do so – see judgment of Lloyd LJ at [95] in Tim Martin Interiors Ltd v Akin Gump LLP [2012] 2 Costs LR 325. Where the solicitor’s client (for this purpose, the solicitor executor) has approved and paid the bill and cannot therefore challenge the charges on an assessment under s 70 even if he wanted to, neither can a third party do so under s 71 (see [84]) and “a claim for an account may be the right approach for several situations which can throw up this sort of problem, for example in the case of a trust or administration of an estate” (see [101]). However, in view of Mussell, this potential remedy may also be of limited use to beneficiaries who consider that the estate has been overcharged and that, consequently, their testamentary or residuary gifts have been diminished or reduced.

                  Cases Cited

                  Chadwick v Heatley (1845) 2 Coll 137

                  Re Wright’s Trusts (1857) 3 K & J 419

                  Judgment

                  1. HHJ PAUL MATTHEWS: This is my ruling on a point which has arisen in the course of the trial of a claim, brought by Part 8 claim form, issued on 14 October 2016. The claim is one by executors of the will of the late Louis Patience, who died as long ago as 7 April 1997. The first claimant is one of the four children of the testator, all adult, and beneficiaries under the will, and the second claimant was a partner in the firm of solicitors that drafted the will at the time it was executed, but he had retired from the firm long before the testator died. Probate was granted to the claimants on 15 December 1997.

                  2. The claim as expressed in the claim form is for, first, a declaration that the “final estate accounts” are correct, and second, a direction that the estate be administered accordingly. It is brought against two others of the four children of the testator, who have declined to approve the estate accounts. The first claimant and her sister (Brenda Watts) have approved them. This claim is in fact the third set of legal proceedings brought in respect of this estate. The first was a claim brought by the second claimant against all four of the testator’s children. That claim was stayed on the terms of a Tomlin order following a successful mediation between the four children. The agreement which they came to is scheduled to the order. The second proceedings were brought between the beneficiaries themselves, although I was told that the executors were made nominal parties, and remained neutral.

                  3. The third proceeding is the Part 8 claim in which the present question has arisen. It is supported by the witness statement of the claimants’ solicitor Mr Kevin Wigley, dated 13 October 2017, and opposed by the witness statements of the defendants, both dated 25 November 2017. On 8 June 2017 District Judge Rowe gave directions for trial. Her order also recited that the defendants by their solicitor confirmed that they did not seek a ruling as to whether the claimants had properly observed the “mediation agreement”, or whether land referred to as “the Plot” should have been transferred to the first claimant and Brenda Watts. However, they put these matters forward as reasons for not having agreed the accounts. At the trial before me John Dickinson of counsel, instructed by Brewer Harding and Rowe, appeared for the claimants, and Steven Ball of counsel, instructed by Clarke Willmott LLP, appeared for the defendants.

                  4. The present claim is essentially couched as one by the executors for directions in the administration of the estate, given that the executors do not wish to distribute the estate until it is clear that the accounts are accepted, but the defendants do not agree that these accounts are correct. There is therefore an impasse. However, it seemed to me, during my pre-reading, that this was really a claim by the executors for the taking of an account, in the sense of seeking the court’s approval (in default of that of the defendants) of their estate accounts. The accounts and their supporting material are exhibited to the claimants’ witness statement and the objections from the defendants are set out in their witness statements. At the beginning of the trial, I referred the parties and their counsel to two old cases by way of example: Chadwick v Heatley (1845) 2 Coll 137, and Re Wright’s Trusts (1857) 3 K & J 419. Having read the cases and taken instructions, counsel both agreed that the matter should proceed at present as the taking of an account.

                  5. Mr Ball addressed me on the objections put forward by the defendants to items in the accounts. We dealt with a category of entries relating to invoices for legal services from two different law firms. In the end, some 26 entries were objected to. The basis for the objections was in substance that insufficient information was provided in the underlying documentation to enable the defendants to be advised as to whether the charges made by the executors’ solicitors were or were not reasonable. I should record that there were other entries relating to legal services bills to which the defendants did not object, on the basis either that sufficient such information had been provided or that the amounts in question were too small to be worth arguing about.

                  6. During the course of Mr Ball’s submissions, Mr Dickinson helpfully intervened from time to time to point out where supporting documentation for particular entries could be found. Nevertheless, as I have said, some 26 entries remained objected to. Before I invited Mr Dickinson to respond to the objections, I asked Mr Ball what was the test I should apply in deciding whether an entry could not stand in the accounts. He submitted that his clients were entitled to be advised as to whether the charges made by the solicitors were reasonable, and that in order for them to be so advised they had to have sufficient information for that purpose. He further submitted that the onus was on the claimant executors to provide sufficient information to demonstrate the reasonableness of the solicitors’ charges. Mr Dickinson disagreed with that approach.

                  7. I was concerned that it was potentially inefficient to deal with the question whether sufficient information was provided before it was clear what was the legal test to be applied by the court in deciding whether to strike out an entry from the accounts. However neither counsel had researched the question of what the test was and whether there was any authority or other textbook material bearing upon it. I therefore directed that written submissions for each side be provided to me by 19 and 26 January 2018 respectively, so that I could consider the matter and give this ruling. The ruling would then be supplied to the parties and they would have an opportunity to see whether the matters in dispute could be resolved by reference to it. Any that could not be so resolved could be referred to me in writing and I would deal with them.

                  8. The invoices from the law firms concerned are in a variety of forms and styles. At one end of the spectrum they give no more information than identifying the estate, the addressee of the invoice, the statement that the charge made consists of professional charges (sometimes adding words to the effect that the charges were incurred in the administration of the estate) and then the amount of the charge. At the other end of the spectrum, invoices to which no objection was taken gave the amount, and a breakdown, of time spent, details of the work done in each amount of time spent, the identity of the fee earner, the rate of charge, and other information in the nature of “customer care” such as increases in the rate of charge. Many invoices, however, fell between those extremes. The invoices span some 20 years, and of course the practices of and legal requirements for solicitors in relation to the provision of billing information to their clients have changed significantly during that time. Much more and more detailed information is provided nowadays than was the case formerly.

                  9. The written submissions of the parties were supplied to me in January 2018, as envisaged. I had hoped to be able to deal with them much more quickly than in fact I have been able to. But I have now had an opportunity to consider them. I have also received a further witness statement, dated 18 January 2018, from Mr Wigley, the claimants’ solicitor. In their written submissions, both sides have referred me to decisions on the assessment of solicitors’ costs under the Solicitors Act 1974. Neither side has referred me to any case on the legal test for challenging an entry in an executor’s or trustee’s account. But there are some other materials which may be of assistance.

                  10. On behalf of the defendants, Mr Ball submitted (in summary) as follows. First of all, as between third party and client, there is no presumption that the solicitor’s bill approved and/or paid by the client is automatically a liability of the third party. Second, the liability of the third party to the client depends upon the contractual or otherwise implied terms of their relationship. Third, in the case of an executor claiming expenses from a beneficiary there is no “term” (implied or otherwise) that the beneficiary shall indemnify the executor for all legal expenses simply because they have been approved/paid and irrespective of whether they were incurred reasonably, appropriately or otherwise. Fourth, as the legal person with possession (actual or constructive) of the material evidence as to how such expenses etc were incurred it is for the executor (client) to show that they were legitimately incurred.

                  11. On behalf of the claimants, Mr Dickinson submitted, first, that the 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: see CPR rule 44.5(1). The claimants were unable to find any authority as to the level of detail concerning solicitors’ invoices which an executor needed for the invoices to be included in the estate accounts. They submitted 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 the legal costs. The question is simply whether the legal costs are expenses of the executors properly incurred in the conduct of their office.

                  12. Williams, Mortimer and Sunnucks, Executors, Administrators and Probate, 20th ed, say 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.”

                  For this proposition, are cited several authorities, including Daniell’s Chancery Practice, a well-known repository of chancery learning and practice. They also say, at [63-27]:

                  “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.”

                  This is based on caselaw, as codified now by s 31(1) of the Trustee Act 2000, applied to personal representatives by s 35 of that Act.

                  13. Where executors have the benefit of an express clause giving them remuneration and an indemnity for expenses incurred in the administration of the estate, they may well have a “contractual” right within CPR rule 44.5(1). But I do not think that this is the point. CPR rule 44.5(1) is a rule concerned with the assessment of costs. But I agree with Mr Dickinson 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 the legal costs.

                  14. On the taking of an account, the executor will be entitled to all “just allowances”: CPR PD 40A, para 4. What are “just allowances”? They are, as Williams, Mortimer and Sunnucks put it, “whatever a trustee or representative has expended in the fair execution of his trust”. In my judgment, whatever the position on detailed assessment of costs, in relation to accounting to his or her beneficiaries for what has been done with the estate, an 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.

                  15. The former will normally be demonstrated by a document (“the voucher”) showing payment or receipt. The latter will normally be demonstrated by a document such as an invoice referring to the executor as such, to administration of the estate or to some good or service having a connection with the estate (e.g. repairs to estate property). It will of course be open to the beneficiaries to rebut the inference in either case, but unless and until some other evidence is adduced by the beneficiaries to that end, the executor in my judgment need do nothing more.

                  16. In particular, the executor is not required at the outset to prove by his or her voucher(s) that the charge made is reasonably incurred or reasonable in amount. These are matters which may arise in the assessment of solicitors’ costs, but they are not matters which arise – at least initially – in considering whether the executor may put the sum into the accounts. It is not necessary for the executor to defend the charges made by solicitors against the beneficiaries. That is what the system of assessment of solicitors’ costs is for. As is well known, it is not only the direct client (here the executor) who may seek assessment of costs. In addition, third parties who in substance pay such costs may do so too. It would plainly be wasteful if, in every case, for their own protection, executors were to be obliged to engage the costs assessment system down to the last penny before being able to enter the sum concerned in their accounts to their beneficiaries.

                  17. Accordingly, in my judgment, the information required to be provided by way of “voucher” to support an entry in the executor’s account need not exceed the basic information contained in the solicitors’ invoice, that the charges are professional charges to the executor, as executor, in relation to the administration of a particular estate. I do not think it is necessary that the voucher disclose the number of hours worked or the hourly rate used to arrive at the total charged, or give a detailed breakdown of exactly what work was done. This is about showing only that the executors have spent the estate’s money on proper estate business. Moreover, I do not think that, in a case where the estate administration was being carried on through solicitors, there would be any real difference in the information conveyed to the client between (i) an invoice stating that the charge made consisted of professional charges and (ii) one which added words to the effect that the charges were incurred in the administration of the estate. That would be obvious to all concerned.

                  18. Having now resolved the question as to the correct test to be applied, I invite the parties to apply that test to the various objections put forward by the defendants to the account, and (if necessary) to return the matter to me for further consideration on any issues which still remain. In the first instance I will deal with this on the papers. In that case, I direct that the defendants set out in writing the objections that they still wish to persist in, by 19 March 2018, and that the claimants reply to any such objections by 26 March 2018. I will then consider the position and either render a written decision or restore the matter for further hearing.

                  John Dickinson (instructed by Brewer, Harding & Rowe) appeared for the claimants.

                  Steven Ball (instructed by Clarke Willmott LLP) appeared for the defendants.

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