Mixed news. Your maiden aunt, Aunt Agatha, has died aged 92, but she has left the bulk of her wealth to you and the solicitors instructed by her executor to administer the estate have now completed their work.
You were aunt Agatha’s favourite relative and apart from a few personal gifts such as jewellery, you have inherited everything, including her old home which has been sold for £250,000, a collection of fine wine held in the Wine Society’s vaults and the sum of £250,000 standing to her credit in her single building society account. All welcome news, as you plan to buy a nice house in leafy Abbey Wood in readiness for the opening of Crossrail and the Elizabeth Line later this year. You are, indeed, a fortunate relative.
All good so far?
Not necessarily. Prior to distributing the estate, the solicitors have delivered a bill for £30,000 plus VAT for their work in obtaining a grant of probate and in realising Aunt Agatha’s assets. That has included the charges of the executor, a solicitor, Mr Uriah Fleece, together with a further £2,500 plus VAT for the conveyancing involved in the sale of her home. Those sums have been deducted from your share of the residue of the estate.
“Crumbs, this seems a bit steep,” you think: “Don’t want to appear stingy after Aunt Agatha has been so generous, but has the firm dropped an extra nought onto the bill by accident?”
Absolutely! The deduction is about 5% of the estate in circumstances where shrewd Aunt Agatha had sold her portfolio of shares before her death and put the proceeds into the single building society account in order to simplify the administration. Likewise her home: that was in her sole name, free from encumbrances and registered with title absolute at Her Majesty’s Land Registry. As to the fine wine, that needs keeping and will remain safely stored in the Wine Society’s cellars until it matures. In these circumstances, how can the solicitors justify such high charges and what can be done by way of asking them to substantiate their fees, you ask?
Not much, appears to be the answer!
In reply to your measured enquiry, you are told by Mr Fleece that the fees are in line with what a high street bank would charge for administering an estate worth above £500,000. It was Mr Fleece, too, who drafted Aunt Agatha’s will, and she had appointed him to be her executor, having agreed beforehand to the inclusion of a charging clause to cover his fees.
On Aunt Agatha’s death, as commonly happens, Mr Fleece had instructed a colleague in the probate department of his own solicitor’s firm, and the estate had been administered effectively and promptly in accordance with Aunt Agatha’s instructions. Not only that, Mr Fleece in his capacity as client/executor approved the charges and authorised their deduction out of the estate prior to distribution of the residue to you. Receipts for any items relating to the house sale or any other expenses, such as her funeral charges or the Wine Society’s latest bill for cellarage, are available on demand. Happy to oblige, he tells you!
Not really the reply you were expecting, still less did you want. A nought off the bill would have secured that house in Abbey Wood. Now you are not so sure. Is it really permissible for an executor such as Mr Fleece to instruct his own firm to do the work, for him to bill his time as executor within the invoice, for the fees of the conveyancing and probate departments to amount to 5% of the estate and for all these to be deducted without the principal beneficiary having any say in the amount of the charges?
The answer appears to be “yes” and there is not much that a concerned beneficiary can do about it.
Insofar as executors are under a duty to provide receipts, all they need do according to recent guidance given on the taking of an account by HHJ Paul Matthews in Mussell v Patience, at paragraph 15, is to provide a document such as a voucher or receipt:
“… referring to the executor as such, to administration of the estate or to some good or service having a connection with the estate (e.g., repairs to estate property). It will of course be open to the beneficiaries to rebut the inference in either case, but unless and until some other evidence is adduced by the beneficiaries to that end, the executor in my judgment, need do nothing more.”
In Mussell, two disgruntled beneficiaries had declined to approve the estate accounts of their late mother’s will, as a result of which their unconcerned sister, together with the executor solicitor, who was a partner in the firm which drafted the will at the time it had been executed, issued proceedings for their approval, since they did not wish to distribute the estate while there was an impasse between the beneficiary siblings. In the view of HHJ Matthews at paragraph 4:
“… This was really a claim by the executors for the taking of an account in the sense of seeking the court’s approval (in default of that of the defendants) of the estate accounts.”
The correct test which the court was to apply was for the executors to provide by way of “voucher”, no more than basic information contained in the solicitor’s invoice that the charges claimed related to the administration of the estate. It was not necessary for the voucher to disclose the number of hours worked or the hourly rate used to arrive at the total charged, nor to give a detailed breakdown of exactly what work had been done. In these circumstances, the judge invited the warring parties to apply that test to the objections made to the estate accounts, with the matter to be restored before him for a decision on paper.
Not much point going to the expense of applying to the court for the taking of an account in that case, so as to require Mr Fleece to justify the estate accounts! According to Mussell, all he would need to do would be to produce an invoice from, say, the Wine Society, or a bill from the estate agents referring to late Aunt Agatha’s estate, in order to justify the account. So an action on the estate accounts is a non-starter, it would seem.
Any other port of call which might come to your assistance? Yes, according to Mussell. At paragraph 16, the court gave further guidance:
“… the executor is not required at the outset to prove by his or her voucher(s) that the charge made is reasonably incurred or reasonable in amount. These are matters which may arise in the assessment of solicitor’s costs… That is what the system of assessment of solicitor’s costs is for. As is well known, it is not only the direct client (here the executor), who may seek assessment of costs. In addition, third parties who may in substance pay such costs may do so too…”
“Where a person other than the party chargeable with the bill for the purposes of section 70 has paid or is or was liable to pay a bill either to the solicitor or to the party chargeable with the bill, that person… may apply to the High Court for an order for assessment of the bill as if he were the party chargeable with it…”
Here, you are the “party chargeable”, it being your inheritance which effectively is being used to pay the charges of the solicitors and the executor, Mr Fleece. It follows that you have the right, in common with Mr Fleece under section 70 (as being the person primarily liable to pay the bill) if he wanted to do so, to a apply to the court to have the charges checked by a costs judge in order to decide whether they are fair and reasonable. If they are not, they will be reduced to a figure that is, an eventuality that might be thought likely, given the simplicity of Aunt Agatha’s estate in comparison with the size of the bill.
At least, that is the theory and insofar as that theory is concerned, HHJ Matthews is correct in what he has said. The practice, however, as the Court of Appeal has pointed out, is far different.
In Tim Martin Interiors Ltd v Akin Gump LLP, a borrower had objected to the costs the lender bank had passed on to him following a default under the mortgage. The bank had instructed City of London Solicitors at high hourly rates and the borrower had applied under section 71 for an assessment of the costs on the basis that the work had not justified City Solicitors for a case proceeding in Wandsworth County Court, and that items such as the solicitor travelling to meetings at the bank, rather than vice versa, should not have been laid at his door.
Not so, said the Court of Appeal. Where the client has approved fees (as the bank had done in that case), the bill is no longer susceptible to challenge under section 70 and it follows that under section 71, it cannot be either. Putting it another way in Aunt Agatha’s case, since Mr Fleece in his capacity as executor/client has approved the charges, the court cannot allow any lower amount than the sum he has agreed to pay, on any subsequent assessment brought by a third party under section 71. As Lewison J had expressed it in Akin Gump in the court below:
“On an assessment under section 71, the court is entitled to interfere with the hourly rate agreed between the solicitor and the client, but only to the extent that it could have interfered with it at the behest of the client.”
In agreeing with Lewison J, Lloyd LJ, who gave the lead judgment in the Court of Appeal, continued at paragraph 84:
“This is a serious limitation on the scope of an assessment under section 71 for determining the question what is properly due from the third party to the client…”
Accordingly, at paragraph 101:
“The effect of my conclusions as regards both quantification and payment is that a third party assessment under section 71 is of limited use to a third party.  … A claim for an account may be the right approach for several situations which can throw up this sort of problem, for example in the case of a trust or the administration of an estate … In the light of this judgment it may be anticipated that third party assessments will become rare, whereas claims for an account, and like proceedings in other types of case, where the real issue is as to the reasonableness of legal costs , best resolved by those experienced in the assessment of costs, may become much more frequent.”
So the remedy is the taking of an account, but is that not where we came in? That is exactly what happened in Mussell, where the beneficiaries were disgruntled and all the executors had had to do was to produce some vouchers relating to the administration of the estate in order to justify the estate accounts. In adopting that process, as HHJ Matthews pointed out, charges are not to be scrutinised for their reasonableness as they would be on a detailed assessment, but due to Akin Gump, that avenue is a dead end, where, as will invariably be the case, the executor has already approved the charges.
What can the disgruntled beneficiary do in the circumstances?
Answers on a postcard to the author of this blog please, since, as things stand at the moment, we appear to have gone full circle. As a beneficiary concerned that the estate has been overcharged, if you bring proceedings for an account, you will be sent away for a section 71 assessment, but if you do that, the costs judge will tell you that under Akin Gump, such an assessment is pointless if the bill has already been approved and that, instead, you should make a claim for an account in the court from whence you have just come!
Back to Aunt Agatha’s estate. Unless there has been some skulduggery (and there is nothing to suggest that Mr Fleece, or indeed his firm has acted improperly, as opposed to having charged rather a lot for administering a simple estate), there appears nothing that a beneficiary such as you can do, except to be cheerful at having benefited from Aunt Agatha’s generosity in the first place, but not by quite as much, perhaps, as you had originally hoped.