Analysis
A testator appointed as executors her brother, Mr Hayward, and the partners of the defendant, a firm of solicitors. At the time of the testator’s death Mr Shepherd and another solicitor, Mr Smyth, were the only partners in the defendant. Mr Hayward and Mr Shepherd took probate. The will did not contain a charging clause.
The claimant was a residuary beneficiary and the occupant of the testator’s home. The claimant refused to move out and an issue also arose over a loan made by the testator to the claimant. To progress these matters and the administration of the estate, the executors entered retainers with the defendant. The retainers named Mr Shepherd as the partner responsible. Ninety-one invoices were raised, much of which related to work by Mr Shepherd. The invoices were approved by Mr Shepherd and also by his coexecutor.
The claimant brought proceedings for a thirdparty assessment under s71(3) Solicitors Act 1974. Judge Rowley held that the ‘blue pencil’ test from Tim Martin Interiors Ltd v Akin Gump LLP [2012] applied and that the claimant was therefore only permitted to challenge items because they fell outside the scope of the retainer or were only allowable on the basis of a special arrangement within CPR r46.9. Following this, the claimant filed amended points of dispute challenging Mr Shepherd’s right to charge fees for time spent in the administration of the estate absent a charging clause.
The defendant argued that Mr Shepherd was entitled to charge pursuant to s29(2) Trustee Act 2000 because Mr Hayward had countersigned the defendant’s invoices and retainer letters and a later breakdown of costs. Alternatively, the defendant asked the court to authorise remuneration under its inherent jurisdiction.
Judge Rowley rejected these arguments and an appeal to Cavanagh J was dismissed. The defendant was permitted to bring a second appeal to the Court of Appeal.
Held (dismissing the appeal):
Section 29(2) Trustee Act 2000
Mr Hayward signing the invoices and retainer letters could not satisfy s29(2) Trustee Act 2000 because Mr Smyth had not also signed them. The fact that Mr Smyth had not proved the will or taken an active role in the administration did not affect the position. Mr Shepherd (who had signed the retainers and invoices) could not be treated as signing on Mr Smyth’s behalf due to s5 Partnership Act 1890. It was therefore unnecessary to determine whether the retainers, invoices or (retrospectively) the breakdown of costs could have satisfied s29(2) Trustee Act 2000.
The inherent jurisdiction
A significant consideration when considering whether to authorise remuneration is the principle that the trusteeship is gratuitous and that the interests of the beneficiaries must be protected. Although the question can be expressed as whether the allowance is justified in the interests of the good administration of the trust, a decision on that question necessarily involves a consideration of all of the circumstances, which in this case included the reasons why no charging clause was inserted into the will, the basis upon which Mr Shepherd had accepted the office of executor, and whether in light of the fact that there was no objection to other legal expenses an allowance for Mr Shepherd’s time should also be made.
In determining a particular case, the court was not constrained to choosing between an ‘exceptional circumstances test’ and a test based only on considerations of good administration. The principle that the office of trustee or executor is gratuitous absent express authorisation of remuneration in the trust deed or will, coupled with the duty of a fiduciary to prefer the interests of the beneficiaries over their own, means that any exercise of the jurisdiction will necessarily be an exception to the underlying rule. The jurisdiction was exceptional in that sense and must be justified having regard to all of the relevant circumstances, including the need to protect the interests of beneficiaries and to ensure the good administration of the trust or estate. For the same reason, the jurisdiction was one to be exercised sparingly in the sense that it was not unfettered but was to be exercised compatibly with these considerations.
The different outcomes in cases like Guinness plc v Saunders [1990] and Re Duke of Norfolk’s Settlement Trusts [1982] were not based on a difference in principle but rather on the different circumstances in those cases. In many if not most cases the interests of the beneficiaries and the good administration of the trust should go hand in hand, but the scale of and circumstances in which remuneration was sought would still need to be justified if the court was to exercise its jurisdiction.
Judge Rowley had ruled that he could not exercise the inherent jurisdiction in Mr Shepherd’s favour absent real information to explain the lack of a charging clause and why Mr Shepherd should be remunerated as contended for. His reference to the jurisdiction being exercised sparingly was made to emphasise the need for it to be justified by a properevidenced application. His decision was not based on a misdirection and was a permissible exercise of the discretion.
JUDGMENT SIR NICHOLAS PATTEN: [1] This is a second appeal by the defendant firm of solicitors against an order of Costs Judge Rowley dated 29 November 2021 which was made in third-party assessment proceedings brought by the claimant, Mr Peter Brealey (‘Mr Brealey’), pursuant to s71(3) of the Solicitors Act 1974 in relation to the …Continue reading "Brealey v Shepherd & Co Solicitors [2024] WTLR 427"