To charge or not to charge – that is the question. A case summary of Da Silva v Heselton (also known as re Townsend (Deceased)) [2022] EWCA Civ 880
On 30 June 2022, the Court of Appeal handed down its judgment in Da Silva v Heselton [2022] EWCA Civ 880, in which a former executor of an estate appealed against a decision that she was not entitled to receive payment under a professional charging clause in a will. Lord Justice Nugee, delivering the leading judgment upheld the decision of the High Court that – despite the existence of a professional charging clause – the executor could not charge for her time spent in connection with the estate administration. What if anything can an executor charge for estate administration?
The case is important and significantly restricts the ability of executors and trustees to charge fees for administrating an estate. In particular, those whose usual occupation does not involve estate administration (for example, accountants, financial advisors, fund managers, estate agents and surveyors).
The facts of the case
The facts surrounding the case are as follows. Ms Townsend (“the Deceased”) died on 1 July 2003 leaving a will dated 28 June 2001 (“the Will”), appointing Mrs Heselton (“the Appellant”) and one other as her executors and trustees. Please note, that although the roles are separate, it is common for the same individuals to be appointed as both the executors and trustees of a will. Executors are responsible for administering the estate and carrying out the terms of the will. Whereas trustees are only necessary where a trust arises under the will and are responsible for holding the property and assets for the benefit of the named beneficiaries. Here, the Will contained a professional charging clause which is a clause that is intended to allow an executor/trustee to charge his or her professional or other fees for estate-related work. Specifically, Clause 11 of the Will allowed the executors/trustees:
“engaged in any profession or business [to] charge and be paid (in priority to all other dispositions herein) all usual professional and other fees and to retain any brokerage or commission for work or business introduced transacted or done or time spent by him [or] his firm in connection with the administration of my estate or the trusts powers or provisions of this Will or any Codicil hereto including 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.”
The Court of Appeal decision concerned the issue of whether:
- any executors/trustees that happened to be engaged in a profession or business could charge for all work done and time spent on the administration, irrespective of whether the work had any connection with their profession or business (the wider view); or
- the executors/trustees could only charge for work done in the course of their profession or business (the narrow view).
The Appeal arose after the Appellant was removed as an executor following a successful application by a beneficiary under Section 50 of the Administration of Justice Act 1985. Her replacement executor, Mr Brunton (“the Respondent”) then challenged whether the Appellant could charge for her time arranging for a property falling within the estate to be rented out. The rents received were £48,900, but that amount had been reduced by an administration charge raised by the Appellant of £300 per month, leaving £43,350 remaining.
In terms of work or occupation, during her lifetime, the Appellant had been employed in a law firm from 1988 to 1991; self-employed and engaged in business; involved in various debt recovery companies; employed as Practice Manager of a law firm at which her husband was a Partner; and had established a French Art Café and Gallery in Greater London.
The High Court decision
The first instance decision of Mr Stephen Lloyd (sitting as a Deputy Master in the High Court) took the narrow view (above) and held that the Appellant could only charge for work done in the course of her profession or business. On the facts, the Deputy Master held that based on the limited witness evidence put forward by the Appellant, there was insufficient detail as to what her professional or business was and how that was relevant to the letting and management of property. The Deputy Master, therefore, concluded that the Appellant was not entitled to charge the estate for her time spent arranging for the property to be rented out and made various costs orders against her (leaving her liable for both her costs as well those of her opponent).
The First Appeal
With permission, the Appellant then challenged the first instance decision of the High Court. That appeal was heard by David Rees QC, sitting as a Deputy High Court Judge (“the Deputy Judge”) who dismissed the appeal and held that the Appellant was still liable for the costs arising.
The Second Appeal
Somehow undeterred, the Appellant then appealed to the Court of Appeal. Ignoring cost arguments, the appeal was based on two grounds:
- that the Deputy Judge made an error on the construction (interpretation) of the Will; and
- that the Deputy Judge wrongly concluded that the question of whether the work done had fallen within the scope of the profession or business had already been determined by the Deputy Master and he should instead have re-evaluated the evidence.
In his unanimous judgement, Lord Justice Nugee concluded that – in light of the Trustee Act 2000 — the purpose of the charging clause was to enable those “engaged in a profession or business to charge their usual fees for work done in the course of that profession or business”. He, therefore, endorsed the conclusion reached by the Deputy Judge (at Para [44] in his Judgment) in relation to (1) that:
“a trustee or executor can rely upon the charging clause in the Will to charge for work done or time spent in the administration of the estate only if that work falls within the scope of their profession or business in question; that is to say if it is work of a type which would attract or incur their usual professional fees…”
In relation to (2), Lord Justice Nugee held that the Deputy Judge had dealt with the matter property and therefore dismissed the appeal.
Practical Implications
The decision of the Court of Appeal is important for all executors/trustees whose usual occupation does not involve estate administration. Such individuals should take note that – in spite of wording that would seem to permit executors/trustees to charge for “work done or business outside the ordinary course of his profession” – executors/trustees can only charge for their services where the work undertaken falls within the scope of their profession or business. In other words, there must be a link between the work done in the administration and their profession or business.
The Court also noted the lack of evidence advanced by the Appellant as to what her profession or business was and how that was relevant to the work carried out. Therefore, when charging for their services, executors/trustees should keep detailed records, and be able to evidence:
- what their business or profession is;
- what work has been undertaken and charged for; and
- how the work is relevant to:
- their business or profession; and
- the administration.
Executors/trustees should also learn from the Appellant and be upfront and transparent about proposed fees and communicate these with fellow executors, trustees and beneficiaries at the earliest opportunity.
In conclusion
Further, it is important to note that where an executor/trustee does charge the estate for work done outside the scope of their profession or business, there is a significant risk of the executor/trustee being removed and an adverse cost order being made against them. Therefore, given that executors/trustees will undoubtedly need to undertake time-consuming work for which they cannot charge (i.e. outside the scope of their profession or business), it would be sensible for executors/trustees to instruct legal advisors to assist with the administration as their fees can in most circumstances be recovered from the estate.
How can Moore Barlow help?
At Moore Barlow LLP, our Private Wealth & Tax team are specialists in probate and estate administration and have particular expertise in dealing with high-value estates. Our Contentious Trusts & Estates team is also widely recognised as a market leader in the South East and we have extensive experience advising on a range of disputes that can arise during the administration. Both teams often work holistically to support executors and trustees dealing with complex estates and trusts.
If you are not sure what an executor charge for estate administration, then please get in touch.
