Analysis
The issue before the court was costs in proceedings relating to the estate of Richard Stephen Fullard (the testator), who died on 4 April 2020. By a will dated 20 June 2019 (the will), the testator appointed the following as executors and trustees of his will: the claimant, his son; the first defendant, his friend; the second defendant, his partner; and the third claimant, his daughter. By the will the testator also bequeathed one property to the second defendant, and another property to the claimant and third defendant. He made various pecuniary legacies, including to the first defendant. The parties disagreed as to the dealings with the estate.
By a Part 8 claim dated 9 June 2021 the claimant brought proceedings for the removal for the first and second defendants as executors and for the appointment of a professional executor. He also sought for the defendants to account to their actions as executors, exhibiting an oath and delivering up books and records pertaining to the estate. The claimant also sought for the first and second defendants to be liable personally for the costs of proceedings.
The only issue before the court was costs. The Master did not consider the particulars of claim in his ex tempore judgment other than to note they were contentious and raised a raft of matters in dispute between the parties and they could not be determined by the court. The Master considered the chronology of proceedings and the open correspondence and deemed it of importance to turn to the without prejudice correspondence in determining the issue of costs.
Following the issue of proceedings on 9 June 2021, which it was argued on behalf of the defendants was precipitate, a without prejudice e-mail was sent by the first and second defendants on 14 July 2021 which indicated that they were agreed in principle that they were to resign and a professional executor be appointed in their place. They sought the costs to be borne by the estate, which at that stage would have been the costs of the claimant in issuing the proceedings and the particulars of claim and any costs of the defendants. By a reply dated 19 July 2021 the claimant withdrew his settlement offer of 1 April 2021, which suggested the claimant and first and second defendants resigned as executors, but indicated he was happy to repeat it with an additional requirement that the first and second defendants should pay the claimant’s costs and not claim an indemnity from the estate. The Master observed that sadly on 19 July 2021 the parties had been agreed about the substantive issues and the sticking point was costs. The acknowledgement of services was served on 27 July 2021 clearly indicating that the claim was contested, which seemed to the Master where matters went wrong.
The Master considered CPR r44.2, and CPR r46.3 and para 48-006 of Lewin on Trusts, which sets out that a trustee may be deprived of costs or ordered to pay costs by court order on the ground of breach of trust or misconduct. The Master used ‘misconduct’ in the wider sense for the purposes of the judgment. The starting point in the Master’s analysis was who was the successful party. Counsel for the defendants had very fairly accepted that the successful party was the claimant. The presumption, therefore, was that the claimant should have his costs. The court then needed to consider that presumption, clarifying it was not a presumption, but a starting point or a general rule, whether the court could make another order and the Master was very alive to the fact he could make a different order.
The defendants sought to rely on several grounds for the court to depart from the general rule on costs. While issuing the claim was perhaps a little precipitate, the Master did not consider that any of the matters identified on behalf of the defendants would justify departing from the general rule. The 1 April proposal was ultimately what had been agreed to by the time of the hearing before the Master. Then there was ample time for the defendants to take advice and consider their position. The Master could not say that the timing of when the proceedings were issued was a ground for departing from the general rule.
As to the proposal on 14 July, whereby in the without prejudice correspondence the defendants indicated that they were prepared to step down, albeit with costs to be borne by the estate, the Master found it astonishing and even more importantly quite wrong for the first defendant to indicate in the acknowledgement of service that he was contesting the claim. Had the defendants adopted a different course much of this litigation could have been avoided. This was where things really went wrong. It did not seem to the Master that that was a ground for departing from the general rule. He also took into account that there were subsequent discussions between the parties, both on a without prejudice and on an open basis, where again the defendants offered to step down, but again they were seeking their costs. It seemed to the Master that they had missed their opportunity to seek costs and this should have been done at a much earlier stage in the proceedings.
The third ground identified by the defendants as a reason for departing from the general rule was that the claimant’s application was substantially unmeritorious. The Master acknowledged he had not heard detailed submissions and had not heard the parties, but it seemed there were a number of issues put forward as grounds of removal in the particulars of claim which he simply could not decide. However, it seemed the claimant had adopted a somewhat scattergun approach in the particulars of claim, which took various points that did not need to be taken. The Master would consider whether that justified some reduction in the costs order he should ultimately make.
The fourth ground which the defendants identified as a reason for departing from the general rule was the claimant’s failure to engage in the alternative dispute resolution (ADR). Refusing to engage in ADR may be a ground for making costs consequences. It seemed to the Master there had been a mismatch. The claimant had been focused on the actual issue raised in the proceedings, which was the removal of the defendants as executors. The defendants had taken the view that the mediation could address other issues between the parties and it had been pointed out that there had been an acceptance in principle of mediation, but then their counsel had referred to an e-mail of 15 November 2021 in which a list of points was requested before a decision on mediation would be made. Again, the Master found it difficult to see that this went sufficiently far to be a reason for departing from the general rule.
Finally, very recently various proposals had been made by the defendants. The parties were moving towards each other but again, agreement was not reached, so this hearing had been necessary and they had not been able to resolve matters. The Master took into account a without prejudice letter from the claimant’s solicitors on 1 March 2022 expressed to be open for 14 days, which had all the parties stepping down as executors, a professional being appointed, the defendants to bear their own costs of the proceedings, which should not be paid from the estate, and the defendants to pay 50% of the claimant’s costs with the remainder to be recovered as an indemnity from the estate. The letter also pointed out that the defendants could recover any legitimate expenses properly incurred as executors, not including the costs of the proceedings, and that as the claimant and the third defendant were residuary beneficiaries they would bear any costs which were paid from the estate. The letter had prompted two offers by the first and second defendants on 3 and 8 March 2022, which were for a contribution towards the claimant’s costs.
Held (awarding costs on the indemnity basis):
On any view the claimant was the successful party, therefore he should have his costs. The Master took into account that the particulars of claim were somewhat scattergun to have raised a number of issues which he had not been able to decide, so to a small extent there should be a reduction in the amount the defendants should pay for the claimant’s costs. Coming up with a figure was very difficult. It should be 10%. The starting point was that the defendants should pay 90% of the claimant’s costs. Those costs should be paid on the indemnity basis. The defendants were going to have to pay their own costs, without recourse to an indemnity. The Master had regard to the principles of what Lewin said in relation to indemnities. It seemed to him that given that he had already made a reduction of 10% to the amount the defendants should pay towards the claimant’s costs, for the entirety the defendants should not be able to recover any indemnity from the estate. The final 10% that the defendants would pay to the claimant would come out of the estate, which effectively meant that it was going to be borne by the claimant and the third defendant as residuary beneficiaries.
JUDGMENT MASTER PESTER: Introduction [1] The only issue before me today is a dispute about costs. These proceedings relate to the estate of Richard Stephen Fullard, ‘The Testator’. He died on 4th April 2020. He died testate, leaving a will dated 20th June 2019. The key provisions of the will are he appoints as executors, …Continue reading "Fullard v Kershaw & ors [2022] WTLR 1323"