Litigation costs order in favour of executors does not automatically carry over to estate

A costs order from a piece of litigation involving trustees or executors does not automatically carry over to an order that the estate indemnify them, the High Court has ruled.

Trustees and executors can only be deprived of their indemnity out of the estate if they have acted improperly, said His Honour Judge Paul Matthews in Bristol, sitting as a High Court judge.

The decision followed his ruling in Mussell and Anor v Patience and Anor [2019] EWHC 1231 (Ch), the substance of which dealt with an account by the claimants as executors of what they had done with the estate of the deceased. The judge rejected the defendants’ objections and ruled that the accounts were to be confirmed.

He ordered that the defendants pay 80% of the claimants’ costs on the standard basis, reflecting the claimants’ failure in relation to the part of the proceedings concerning approval of the distribution account.

There was no issue that the claimants should be entitled to recover those same costs from the estate on an indemnity basis, together with the costs of updating the estate accounts. However, there was disagreement over who, if anyone, should pay the balance of the claimants’ costs, i.e. the other 20%. The claimants contended that they were entitled to an order that those costs should be paid from the estate on the indemnity basis, a position opposed by the defendants.

HHJ Matthews said: “In my judgment, it is wrong to assume that there will be any automatic ‘carry-over’ from a litigation costs order which happens to involve trustees or executors to an order concerning the right to indemnity of such trustees or executors.

“Litigation costs principles are different from trust and estate costs principles. Litigation costs orders are concerned largely with who has won, and then if there are reasons to depart from the general principle that costs follow the event. On the other hand, the entitlement of trustees and executors to an indemnity for their costs (or any other trust or estate expenses) is concerned largely with whether they have acted properly (or reasonably) or not.”

He continued that he could not deprive executors of their indemnity out of the estate for costs or other expenses or liabilities which they have incurred for the estate unless they have incurred them “improperly”. This was the effect of section 31 of the Trustee Act 2000 (applied to executors by section 35) and paragraph 1 of Practice Direction 46, acting as an exception to the general rule in CPR 46.3.

HHJ Matthews held that the claimants have not behaved improperly or unreasonably. “At worst, they have tried to ask for a question arising in the administration to be dealt with in what has turned out to be an account rather than in an application for directions or something similar. But it is, as I reiterate, a question that needs to be answered if it cannot be agreed.

“In my judgment, the claimants as executors have sought to advance the interests of all the beneficiaries by winding up the administration, in part by setting out what they consider to be the effect of the mediation agreement and the consequent effect on the interests of the beneficiaries. Accordingly, the relevant costs were properly incurred, even if they have not so far borne fruit.”

He ruled that the claimants be paid 80% of their costs of the proceedings by the defendants on the standard basis, but under the general law were entitled to recover the difference between that and 100% of their costs on the indemnity basis from the estate itself.

John Dickinson (instructed by Brewer Harding and Rowe) for the claimants, Steven Ball (instructed by Clarke Willmott) for the defendants.


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Costs News
Published date
16 May 2019

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