Analysis
The claimant (Mr Pullan) was a beneficiary of ten high-value family trusts. The first defendant (Mr Wilson) was an accountant who had been appointed as a professional trustee of those trusts. Mr Wilson was also a non-executive director of three of the companies in which the trusts held shares. The second and third defendants were the co-trustees of the ten trusts and were not subject to the relief sought by Mr Pullan.
Mr Pullan brought a claim against Mr Wilson as he considered that the professional charges of £849,890 for the period from 12 March 2007 to 4 November 2010 exceeded the proper and reasonable remuneration which Mr Wilson (together with his assistant) was entitled to. Mr Pullan also raised concerns as to Mr Wilson being over remunerated for his role as a non-executive director. Mr Wilson was receiving a fee for this role while also charging the trusts for his time spent as trustee on company matters.
Mr Wilson had been formally appointed as trustee on 12 March 2007. Written evidence from July 2008 demonstrated that Mr Wilson’s rate of £400 was communicated to Mr Pullan. Little evidence was provided as to whether there had been any agreement on fees prior to that date. Mr Pullan provided no direct evidence on the point, however his solicitors confirmed that Mr Pullan had agreed Mr Wilson’s £400 rate for the initial ‘landscaping’ work.
Judge Hodge QC reviewed the relevant law (as set out in Lewin on Trusts, paras 20-141) and sought to apply this in a two-step approach:
- 1) If Mr Pullan had not been advised of Mr Wilson’s hourly rates then were the rates of £400 and £250 per hour reasonable?
- 2) Had the rates been communicated to Mr Pullan? If so, did that make any difference to the rates charged?
A joint expert was appointed to consider the appropriateness of rates and submitted that £275 per hour would be a reasonable rate for Mr Wilson and £160 per hour would be reasonable for his assistant. The expert also concluded that excessive time had been spent on administrative and other ‘non-productive’ tasks which had then been invoiced. In view of this a 7.5% discount on the fees should be applied.
Held:
- 1) A professional trustee is not necessarily entitled to charge by reference to his standard charging rate unless this rate is approved by the principal beneficiaries and co-trustees. When determining what is an appropriate hourly rate regard should be had to the nature and value of the services being provided. In this case it was clear from the joint expert’s evidence that Mr Wilson’s and his assistant’s rates were higher than what was considered reasonable.
- 2) In the absence of any agreement on the charging rates, the court accepted £330 and £165 as reasonable charging rates for Mr Wilson and his assistant respectively.
- 3) A beneficiary may bar himself from challenging a trustee’s remuneration where he has previously agreed to the level of remuneration. In such situations the court will be unable to intervene, even if the fees are unreasonable.
- 4) Mr Wilson had, on the balance of probabilities, demonstrated that he had received Mr Pullan’s agreement to his £400 per hour. Mr Pullan’s failure to raise any objection to the level of fees until June 2009 amounted to acquiescence on the level of charges and Mr Pullan was barred from now challenging these.
- 5) Although there was no evidence of Mr Wilson’s assistant’s rate having been agreed, the acceptance of Mr Wilson’s rate fed into the appropriateness of his assistant’s rate being £200. This was accepted by the court
- 6) In view of the excessive time spent on administration a discount of 7.5% should be applied to the hourly rates.
- 7) There was no element of double recovery by Mr Wilson. The line between Mr Wilson’s role as trustee and as non-executive director of the trust companies was a blurred one. It was not expressly agreed that Mr Wilson would not charge the trusts for his time and Mr Wilson’s remuneration as a director was set off against time he would otherwise have charged to the trusts.
- 8) As each party had been successful in part Mr Pullan received 25% of his costs.
Judge Hodge QC noted that much time and energy had been wasted which could have been avoided had the charging rates been clearly set out in an engagement letter issued prior to the commencement of work and provided to the other trustees and principal beneficiaries.
JUDGMENT HHJ HODGE QC: [1] This cases raises interesting, and difficult, questions concerning the reasonableness of the remuneration charged to a number of family trusts by a professional trustee. There is no dispute about the relevant underlying principles; but I have been taken to no authority which assists in applying them to the circumstances of …Continue reading "Pullan v Wilson & ors [2014] EWHC 126 (Ch)"