Will an Executor always get their Costs from the Estate?

The case of Brealey v Shepherd & Co [2024] EWCA Civ 303 and the case of Kenig -v- Thomson Snell Passmore [2024] EWCA Civ 151, are two very important cases which have highlighted some important facts when dealing with executor costs.

I have set out below the factual background to the cases and the legal principles arising from them.

Kenig -v- Thomson Snell Passmore

In summary, it was confirmed that beneficiaries are able to dispute the costs concerning the administration of an estate or trust under s.71(3) The Solicitors Act 1974 (“the Act”).

Overview

Before the above case, it was assumed under the case of Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574, that those who could dispute their solicitors’ costs concerning the administration of an estate or trust, were only third parties (i.e. executors/administrators) who do not have an interest in the trust fund or the charges, under s71(1) the Act. However, this assumption was incorrect and was put right in the above case, where it was stated that s.71(3) of the Act also applies to beneficiaries of estates and trusts.

S71(3) of the Act applies completely differently to s71(1). There are 2 questions which you can now ask:-(1) Is this a thing which is properly chargeable to the estate, and (2) can I challenge the amount that is charged for that piece of work? Before the Court of Appeal case, only challenges under the first heading were allowed, but now you can challenge the amount charged for that specific work.

The court is willing to consider that even where the executor/trustee has given informed approval of charges to the solicitors, the beneficiary may still be permitted to bring a challenge to the amount of costs incurred. This means beneficiaries are likely to be able to challenge a lot of costs that have incurred.

It was reported that solicitors acting on behalf of the executors/trustees are faced with far greater risk when it comes to their costs, as they need to think about how much information do the beneficiaries receive during the course of the retainer, do they have instructions to provide them with that information and would solicitors even encourage trustees to provide the bills of the estate on an interim basis during the course of the administration, as this may cause more trouble with the decision making and could mean even more costs to incur.

Brealey v Shepherd & Co

The dispute in this case was brought forward by the Claimant and made a broad challenge to the level of costs claimed and to the approach taken by the Defendant firm to the administration of the estate.

In summary, the Appeal Court found that there was no charging clause in the Will and remuneration under section 29 of the Trustee Act 2000, was only available to an executor acting in a professional capacity if each of the executors had agreed to it in writing.

Background

This case concerned the estate of the late Mrs Ann Brealey (“the Deceased”) and her last Will, dated 21 March 2014 (“the Will”), which had been created by the Defendants, Shepards & Co Solicitors (“Defendants”).

The Will appointed the Deceased’s brother, Mr Hayward (“Mr Hayward”), a solicitor who helped with the creation of the Will, Mr Shepherd (“Mr Shepherd”) and the partners at the Defendant firm, who at the Deceased’s death was Mr Smyth ("Mr Smyth").

Probate was granted to Mr Hayward and Mr Shepherd on 23 June 2014, with power reserved to the third executor, Mr Smyth.

Costs

The issue here is whether the fees claimed can properly include a charge by Mr Shepherd for acting as an executor during the period when the administration of the estate (for which he was responsible and for which he also charged) was being dealt with by Ms Sibley, another partner in the firm.

In the absence of a charging clause the Defendant must rely either on the provisions of section 29 of the Trustee Act 2000 or in the alternative on the court exercising its inherent jurisdiction to permit Mr Shepherd to be remunerated for his time and services out of the estate.

The judge held that the written consent of Mr Smyth, the non-intermeddling executor was required under s. 29(2) and therefore section 29 cannot be upheld. The Cost Judge declined to exercise the court's inherent jurisdiction and stated there is no charging provision in the Will and there is no agreement by the beneficiaries to Mr Shepherd for charging fees as an executor.

This case highlights the requirement for explicit consent from all executors for a professional executor to charge for their services and how the court will decline to exercise the court's inherent jurisdiction, if the beneficiaries have not agreed to the costs.

Summary

These two cases have identified that beneficiaries can now dispute costs concerning the administration of an estate or trust, as well as the executor/administrator, and if the will does not include a charging clause for executors, then all the executors of the estate (including the non-intermeddling) executors will need to provide approval, or you will need approval from all the beneficiaries. This marks a change in approach and in all likelihood much greater scrutiny on the costs incurred in estate administration. We foresee a wealth of disputes in this highly contentious area going forwards.