A recent appeals decision has been handed down by Justice Cavanagh in the case of Shepherd & Co Solicitors v Brealey [2022] EWHC 3229.

The appeal was dismissed and reinforced the need for comprehensive and regularly reviewed terms of business, fee schedules and charging clauses where relevant. This decision should be considered by professional executors nationwide and consider taking steps to rectify any of the issues raised in this case.

This was an appeal against a judgment of Master Rowley, sitting as a Costs Judge, in November 2021. The legal costs incurred in the administration of Ms Brealey’s estate were being challenged by the beneficiary and son, Peter Brealey, and the proceedings involved a careful appraisal of the executors fees.

The estate was valued at approximately £900,000 and the beneficiary held that Mr Shepherd’s fees, which amounted to almost 15% of the total estate value, were not correctly incurred.

The fees were collected by one of the two executors, Mr. Shepherd, a former Senior Partner of Shepherd & Co, whose personal fees account for 70% of the bill. The Claimant held that, because the will in question lacked a charging provision, a fact Mr Shepherd accepts, his fees were not payable from the estate. However, the question remained as to whether the beneficiaries had consented to his fees.

Counsel for Mr. Shepherd put forward a variety of justifications to support the fees incurred. Despite being a lawyer, he maintained that his appointment was personal and that both executors were entitled to reimbursement for expenditures expended in the fair execution of the trust. Additionally, it was claimed that the executors had the right to hire Mr. Shepherd’s business to perform services on their behalf.

It was also claimed that the beneficiaries were aware of Mr. Shepherd’s fees and that both executors had given their consent to them. For seven years, the beneficiaries and the late Ms Brealey’s brother were “aware that Mr Shepherd was charging for his fees”.

Last but not least, he relied on the Boardman v. Phipps [1966] decision to establish that when a person openly undertakes a fiduciary obligation, they are entitled to be paid a reasonable compensation for their services.

The fundamental difficulty that the Defendant faced in attempting to persuade the judge to exercise the Boardman decision was that the Defendant did not present any, or adequate, evidence to the Court to persuade him to do so.

As a result, there was no evidence about Ms Brealey’s expectation that Mr Shepherd would be compensated in his capacity as executor. There was no evidence as to whether the solicitors’ work on the will was unexpected (or whether it was expected at the time the will was signed that the Claimant would be “difficult”).

Master Rowley ultimately held that there was “simply nothing before the court” to suggest that Ms Brealey’s brother (the co-executor) had “ever signed anything” to reflect his agreement to Mr Shepherd’s charges as executor, as required by the Trustee Act. “The extent of the material before the court here appears to amount to little more than a suggestion of some form of estoppel acting upon the claimant having paid Mr Shepherd’s fees in other proceedings and the fact that the claimant was aware of Mr Shepherd’s involvement during the administration of the estate.”

Master Rowley further said that the fact that the claimant knew about Mr Shepherd’s involvement could not of itself justify a charge to the estate.

“If the testator has no charging clause in her will, then it is up to the professional executor to demonstrate why fees should be paid rather than for the beneficiaries to prove that they should not.”

The judge disallowed the fees of Mr Shepherd in his role as executor rather than solicitor. He added that any fees claimed as work done by Mr Shepherd as a solicitor would “require an explanation at the detailed assessment hearing”.

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The appeal was lodged on four main grounds and Mr Cavanagh’s judgment follows:

Applying the ruling in Tim Martin to the present case, this means that it is not open to the Claimant to challenge fees that were properly incurred by the Defendant for work done for the benefit of the estate, on the basis that the Claimant believes that the charges were excessive, or that too much time was spent on a particular piece of work, unless the charges could have been challenged on that basis by the client, under section 70. However, the Claimant is entitled to challenge some of the Defendant’s fees on the basis that the fees were not incurred for work that the estate was liable to pay for. Therefore, the issue becomes whether the Defendant was entitled to charge the estate for work done by Mr Shepherd in his capacity as executor, as opposed to work done by Mr Shepherd or others in the Defendant firm in the administration of the estate.

Furthermore, the question whether Mr Shepherd’s firm is entitled to charge for the time that he spent as executor or Mrs Brealey’s will depends upon whether such an entitlement arises under section 29 of the 2000 Act or under the Boardman jurisdiction. It is to these questions that I will now turn.

Ground 1 of the appeal was rejected.

Ground 2 Was the judge wrong to fail to conclude that the Defendant was entitled to payment for the time spent by Mr Shepherd in his capacity as executor, pursuant to section 29 of the Trustee Act 2000, because the only other executor, Mr Hayward, had agreed in writing to his remuneration?

In the present case, the Defendant submits that the only other trustee/executor is Mr Hayward, and that he agreed in writing that Mr Shepherd may be remunerated for his services. The Claimant disputes both propositions. The judge accepted the Claimant’s submissions, holding that Mr Smyth was an executor alongside Mr Hayward and Mr Shepherd and that, in any event, there was no evidence that Mr Hayward had agreed in writing to Mr Shepherd being remunerated as an executor.

Ground 3: Should the judge have exercised the court’s inherent jurisdiction to permit the recovery of the fees for the time spent by Mr Shepherd, given the unjustified windfall that would otherwise accrue to beneficiaries as a result of the unremunerated services of Mr Shepherd?

This submission is based upon the Boardman jurisdiction. For multiple reasons, discussed at 108 – 139, Mr Cavanagh was satisfied that Master Rowley did not err in law when he directed himself that the inherent jurisdiction, or Boardman jurisdiction should be exercised only sparingly and in exceptional circumstances.

Ground 4: If, contrary to the Defendant’s primary submissions, the judge was right to disallow Mr Shepherd’s fees when acting in the capacity as executor, should the disallowance be restricted to the profit the Defendant made on Mr Shepherd’s time, and not the cost of providing the service for which charge is sought?

This argument was not advanced before the judge. I do not accept Mr Cohen’s submission that this ground is subsumed in Ground 3, on the basis that all Ground 4 amounts to is Ground 3 but restricted to permitting the Defendant’s costs of providing Mr Shepherd’s services rather than seeking profit in addition. In my judgment, this is a new point, based on the proposition that a differentiation can be drawn between profits and the cost of providing the service.