Absence of charging clause meant solicitor could not be paid for work as executor

Court of Appeal upholds costs judge’s rejection of other bases for claim

The Court of Appeal has upheld a decision to prevent the former senior partner of a law firm from claiming tens of thousands of pounds in costs as executor of an estate in the absence of a charging clause in the will.

Sir Nicholas Patten, giving the court’s unanimous ruling, also agreed with Costs Judge Rowley at first instance that the failure of the solicitor or fellow trustee to give evidence about why there was not a charging clause meant he could not exercise the court’s inherent jurisdiction to order that Robin Shepherd should be remunerated for his time.

Judge Rowley said that, in the absence of a charging clause, it was “up to the professional executor to demonstrate why fees should be paid rather than for the beneficiaries to prove that they should not”.

He did not and the judge disallowed the fees of Mr Shepherd in his role as executor rather than solicitor, adding that any fees claimed as work done as a solicitor would “require an explanation at the detailed assessment hearing”. His decision was upheld on first appeal by Mr Justice Cavanagh.

In Brealey v Shepherd & Co Solicitors [2024] EWCA Civ 303, the Court of Appeal heard that the estate of the claimant’s mother was worth around £880,000. She appointed as executors her brother Peter Hayward, Mr Shepherd and the other partners of Shepherd & Co at the time of her death – which was just one solicitor, Edward Smyth.

Between 2014 and 2019, Shepherd & Co’s fees totalled £153,500, of which a significant proportion related to time spent by Mr Shepherd up to his retirement in 2018. Mr Smyth took no part in the administration of the estate and retired from the firm soon after appointment. In 2019, the testatrix’s son issued a claim as a third-party for an assessment of the 91 bills delivered the previous month.

Judge Rowley said most of the fees claimed by Mr Shepherd − he was told 70% − related to fees charged by the senior partner as executor.

He said: “It might be thought, given the significance of the fees charged by Mr Shepherd, that he might have given a witness statement to explain the arrangements in this case.

“But he has not and therefore there is no explanation of, for example, why there was no charging clause in the will of Ms Brealey.

“It seems to me that I have to conclude that this was the intention of Ms Brealey on the basis that she should be taken to have put her name to a deed which accurately reflected her intentions. As a starting point, therefore, it would seem that Ms Brealey did not expect her executors to charge for their services.”

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

To take advantage of section 29(2), Mr Shepherd had to establish that “each other trustee has agreed in writing” to his being remunerated. There was no formal agreement but counsel pointed to the fact that Mr Hayward countersigned the retainer letters and the invoices as written confirmation of an agreement.

Sir Nicholas said: “Putting aside for the moment the question whether either the retainer letters or the invoices (or a combination of both) can properly be treated as constituting the necessary agreement in writing for the purposes of section 29(2), the defendant firm must first overcome the difficulty that Mr Smyth, who was also an executor under the will, was not a signatory to any of these documents or party to any other kind of agreement relating to the remuneration of Mr Shepherd.”

Counsel for the firm argued that ‘each other trustee’ only applied for active trustees, pointing to the absurdity that would arise in a similar case where the firm had a large number of partners.

Sir Nicholas said: “I agree with Cavanagh J. who on the first appeal held that the Costs Judge was right to construe section 29(2) as requiring the consent of all of the current executors: see [2023] EWHC 3229 (KB). The difficulties which Mr Cohen envisages might flow from the appointment of all the partners in a large firm of solicitors as executors are, I think, a remote scenario.

“Most firms of solicitors will in practice require a charging clause to be contained in a will as a condition of accepting an executorship and the likelihood that a will would appoint numerous partners in a large firm as executors seems to me to be unrealistic.

“But whether or not the requirements of section 29(2) are likely to create difficulties in some cases the principle behind the legislation is not in doubt. Its purpose is to provide a safeguard for the trust or estate in relation to the use of trust property to recompense a trustee or executor for his or her professional services.”

Judge Rowley held that he could not exercise the inherent jurisdiction in favour of allowing Mr Shepherd to be remunerated as executor in the absence of any real information to explain the lack of a charging clause and why Mr Shepherd should be remunerated in the way and to the extent contended for.

Sir Nicholas said: “His reference to the jurisdiction being exercised sparingly was made to emphasise the need for it to be justified by a properly evidenced application. We are asked to set his decision aside on the basis of a misdirection. But in my view the judge’s decision is not open to challenge on that ground.

“It was a permissible exercise of his judicial discretion to rule that in the absence of any evidence filed by Shepherd & Co. to support the application he was not able to accede to it. That was a decision properly open to him and is not one with which this court can interfere. I would therefore dismiss the appeal.”

Rupert Cohen (instructed by Kain Knight Costs Lawyers) for the appellants. Andrew Williams and John Meehan (instructed by Jones & Co Solicitors) for the respondent.

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28 Mar 2024

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