14 September 2022 - Events
An August 2019 decision saw an executor, who sought to charge £27,000 for administering an estate valued for probate at £1.9m, denied any recompense. It is an extreme, yet salutary, lesson that agreements about charging should be clearly documented from the outset.
Charalambos Gavriel died in May 2016. He appointed Hope Davis as his executrix and left his estate to his two sons, Nicholas and Tryfon.
Most wills contain provision for a professional executor to charge fees. Some wills allow a lay executor to charge a reasonable fee to compensate for time. What is ‘reasonable’ can often be a cause of dispute.
However, Charalambos’ will did not contain a charging clause.
Hope obtained a grant of probate in December 2016. In February 2017 she emailed the sons to say:
‘So sorry to have to do this, but as it’s taken a lot more work than I had envisaged I will need to make a charge for some of the work undertaken. I hope this is acceptable to you.’
In September 2017 the sons emailed to ask whether she had arrived at a proposed fee figure and sought an update. In October 2017 they complained that she had still not proposed a figure and said that they had only agreed to the principle of her charging ‘on the basis that you were a friend’.
Hope’s evidence was that she told the sons what hourly rate she would propose to charge, £250, but that this was reduced to £230 in November 2017 on account of Hope’s ‘relationship with the family’.
Hope had saved £60,000 for the estate as a result of negotiation with HMRC.
However, the friendship deteriorated to the extent that, it appears, Hope refused to distribute the estate until the fee had been agreed and in consequence the sons issued proceedings against her.
When can an executor charge?
In the absence of a charging clause in the will, an executor will normally only be able to recover ‘out of pocket expenses’ (although of course this does not mean that the executor may not instruct a solicitor or other professional to act on his or her behalf).
There are exceptions. The beneficiaries can agree the executor may charge on a particular basis (the beneficiaries must be of age and have the capacity to agree). The Court may authorise fees in certain circumstances and it is possible for the Court to retrospectively authorise ‘in exceptional circumstances’, in particular, where it would be inequitable for the beneficiaries to take advantage of the work the executor has done (ie the beneficiaries should not be unjustly enriched at the executor’s expense).
Chief Master Marsh criticised Hope’s evidence as combative and ‘entitled’.
He was also struck that, although the sons referred to her as an accountant, she herself provided no evidence of any professional qualification. She also failed to provide clear details of the alleged agreement on the part of the sons that she could charge (evidence that would in any event have been contradicted by the emails referred to above that were in evidence). Indeed, the Chief Master damned her evidence as ‘fanciful’.
Having concluded that there was no agreement he also concluded there was no evidence to support a claim of unjust enrichment.
The ‘entirely unsatisfactory nature’ of Hope’s evidence meant that this was not one of the exceptional circumstances in which retrospective authority to charge was granted.
It is clear that Hope’s own evidence damaged any prospect of leniency from the Court. However, it does feel as if the decision might have gone the other way if she had adopted a more reasoned approach.
The moral must be that, if you are the executor, you wish to be remunerated and the beneficiaries recognise that is fair, and yet the will does not have a charging clause, agree how you will charge in advance and keep a clear record of that agreement. After all, nobody can force you to act as executor if you do not wish to do so.
Chief Master Marsh gave judgment against Hope summarily. In other words he read the witness statements but he did not hear anyone give evidence orally.
Hope applied for permission to appeal, which was granted. The appeal was heard in mid-February.
The Chief Master had taken into account that the sum at issue is relatively modest. The overriding objective governing civil litigation in England and Wales includes disposing of disputes proportionately. But more importantly, he was entitled to dispose of a claim summarily if he thought Hope’s evidence in her written witness statements meant her prospects were merely fanciful. To this extent Michael Green QC, hearing the case on appeal, agreed with the Chief Master.
The Judge criticised the Chief Master for not referring in his judgment to evidence that supported Hope’s case: most importantly, an email suggesting Hope could pay herself her fees from the estate, and a letter from the sons’ solicitors advising on what would be a reasonable charge. Moreover it is clear the Judge felt that Chief Master Marsh’s criticisms of Hope’s evidence went too far.
Although saying that he shared the Chief Master’s desire to deal proportionately, the Judge nevertheless allowed Hope’s appeal and ordered that a trial take place.
Presumably that will take at least one day, and possibly longer given there are at least three witnesses. Legal costs are very likely to exceed the sum in dispute.
By way of comment it is difficult to see how the overriding objective has been advanced. The Chief Master tried to deal proportionately. Not unreasonably he took the view there should be consequences for badly presented evidence. And the Chief Master is probably in a better position to assess whether conduct of an estate administration merits professional charges than most judges who, however eminent, will see far fewer probate issues.
The moral of the story is unchanged, however; transparency about charging and keeping a record of beneficiary agreement will save considerable pain in the future.