A tale of estate administration fees and spiralling litigation costs
A recent Court of Appeal decision, Da Silva v Heselton (1), decisively restricts the scope for individuals to charge fees for administering an estate.
At the heart of the dispute is the question: should any professional or businessperson (2) be allowed to charge for administering an estate where the Will contains a clause authorising such a person to charge (3) even if their profession or business has nothing (or little) to do with estate administration?
But Mrs Heselton’s pursuit of remuneration for administering the estate is also a cautionary tale about litigation costs. In English litigation the loser usually pays most of the winner’s costs (4) as well as their own (5). That is one of the reasons good lawyers encourage clients to at least consider compromise. It can be an inducement to appeal if you lose (6). Succeed on appeal and the original costs order is overturned as well. Lose and you have even more costs to pay…
And so, in pursuit of £43,350, Mrs Heselton has come a cropper, most recently in the Court of Appeal.
Background
The late Ms Townsend’s Will directed that her executors ‘who shall be engaged in any profession or business’ be entitled to ‘charge … all usual professional and other fees’ including for ‘work done or business outside the ordinary course of his profession and work or business which he could or should have done personally had he not been in any profession or business’.
Ms Townsend left her residuary estate to Ms Da Silva. She died in 2003. Probate issued over a year later to Mrs Heselton and Mr Armour (a lawyer in Dominica). For reasons unexplained in the judgment (7), it took until 2015 before Ms Da Silva sought to remove the executors. In June 2016 the court appointed a solicitor, Mr Brunton, in their place. It took another three years for Mrs Heselton’s solicitors to provide Mr Brunton with an estate account. This showed Mrs Heselton had received £43,350 in administration charges (£300 per month), deducted from £48,900 of rental income from Ms Townsend’s former residence.
Mr Brunton challenged Mrs Heselton’s deduction on the basis that, as a non-professional executor, she was not entitled to charge.
Mrs Heselton argued that she was engaged in business and so should be allowed to charge. She put in evidence of involvement in a debt collection company, acting as practice manager for her husband’s law firm, and running an art gallery.
Mrs Heselton lost and appealed to the High Court.
As the Judge hearing the first appeal put it, the case ‘raise[d] the question of whether an executor who is engaged in a profession or business unrelated to the administration of trusts or estates [could] rely upon a common form of professional charging clause contained in a Will to charge for time spent on the administration of the estate’.
Mrs Heselton lost again, and appealed to the Court of Appeal where Lord Justice Nugee used the example of a dentist to illustrate the principle at stake. He noted that it is difficult to envisage circumstances in which a dentist might provide dentistry services to the estate. Should that notional dentist, who unquestionably is involved in a ‘profession or business’, nonetheless be entitled to charge for acting as executor?
The wider view would say ‘yes, you are a professional’; the narrower view, ‘no, you are a professional but your profession has nothing to do with the business of administering an estate’.
In support of Mrs Heselton and the wider view, is a paragraph in the leading textbook Lewin on Trusts which states ‘A professional trustee’s charging clause in the usual form is not confined to solicitors. Under such a clause, trustees engaged in any professional business are entitled to remuneration for their services, even though the professional business does not pertain to trust administration at all.’
The subject of a non-solicitor charging was debated in the estate of George Orwell’s widow (8) who had appointed his longstanding literary agent as literary executor (9). He had always charged for acting as literary agent. The question was whether he could continue to charge for the same work now he was an executor (albeit limited to the literary estate). It was held that he brought a relevant specialism and it was appropriate for him to be able to continue charging.
Mrs Heselton’s barrister suggested that if the executor is a builder who carries out building work for the estate (ie work that is within their usual business), it should follow that they could charge not only for that work but for all other time spent on the estate administration (even though estate administration is, generally speaking, nothing to do with building). Lord Nugee suggested it would be an odd result, distinguishing the ‘lucky builder’ who happened to carry out some minor repair work from the ‘unlucky builder’ who did not.
At every stage of the judicial process the narrower view prevailed: each court holding that there needs to be some link between the administrator’s profession and the entitlement to charge.
With the narrower view prevailing, had Mrs Heselton done enough to demonstrate that she was indeed involved in a profession relevant to administration of the estate? Or at least management of the property for which she had charged her management fee? The sketchy evidence at first instance did not convince at any stage that she was involved in a profession that would entitle her to charge.
Conclusions
Mrs Heselton might have done better with convincing evidence that she was involved in, say, property management. Even then seems unlikely she could justify the level of fee she charged.
It seems Mrs Heselton was not transparent with Ms Da Silva about her proposed fees. If Mrs Heselton had communicated her proposed charges, Mrs Da Silva and Mr Brunton may have been less inclined to object when she finally delivered her account, and they may have had more difficulty in successfully doing so (on the basis it would not be fair to deprive her) (10).
The outcome may seem harsh to those who give up their time to administer an estate given the demands that can involve. Equally there will be residuary beneficiaries reassured that administering an estate may not be exploited by people with little or no appropriate expertise to make money at their expense.
It is a cautionary tale against spending large sums of money pursuing relatively small sums through the courts.
And no, as a general rule dentists don’t get to charge for estate administration.
For further information, please contact:
Paul Hewitt, Partner, Withersworldwide
paul.hewitt@withersworldwide.com
(1) – [2022] EWCA Civ 880
(2) – For reasons that become clear there is no analysis of what those terms mean
(3) – In the absence of a charging clause the general expectation is that the executor acts for free (although can employ others)
(4) – Costs are always at the court’s discretion. Factors including conduct and any offers made may lead to an alternative outcome.
(5) – Assuming they do not have a conditional or damages based funding agreement
(6) – It is worth pointing out that one has to apply for permission to appeal – it is not an automatic entitlement
(7) – Although it is clear there are other issues being disputed
(8) – Re Orwell’s Will Trusts [1992] 1WLR 1337
(9) – ie the person charged with dealing with all copyrights, film and television rights derived from her late husband’s writings
(10) – See for instance the recent decision of Gavriel v Davis [2019] EWHC 2446(Ch) https://www.withersworldwide.com/en-gb/insight/charging-off-when-executors-fees-are-disallowed
