Lack of neutrality – Executors ordered to pay six figure costs

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Background

The Inheritance (Provision for Family and Dependants) Act 1975, often referred to as the Inheritance Act, permits certain categories of beneficiaries to make a claim for reasonable financial provision against the estate of a deceased person. A claim can be made if they have not been provided for sufficiently or at all under a person’s Will or, if the person died without a Will, their intestacy.

Brief facts

Buckles recently represented the cohabitee of a deceased person, bringing a claim under the Inheritance Act against his substantial (over £6million) estate for reasonable financial provision. Under the Will, our client had been left a legacy of £50,000. When the matter eventually came to trial, our client’s claim was successful and she was awarded a house in her sole name and a substantial cash sum by way of reasonable financial provision for her maintenance.

Costs

Following the conclusion of the main trial, a further hearing determined who should pay the costs of the action. The general rule in England and Wales is that the loser pays all, or a proportion of, the winner’s costs.

In Inheritance Act litigation, the executors usually steer a neutral course. If they abide by any orders the Court makes, carrying out their duties in administering the estate and providing information about the size and nature of the estate, then any costs that they incur should be properly refunded to them by the estate. This is broadly because the Court recognises that executors do not necessarily choose to be involved in litigation and are there simply to administer the estate rather than take sides.

However, in this case, despite claiming to the contrary in their correspondence and in Court documents, the Court found the executors had not remained neutral. Consequently, the Court found that the executors were not entitled to recover their costs from the estate, aside from some minor exceptions. Given that our client was successful, she obtained costs orders against the executors and two other Defendants who were daughters of the deceased.

The Judge said: “The Defendants’ position at trial was that (the Claimant’s)claim should be dismissed. They lost with this contention”. “I see no reason not to give (the Claimant) her costs against (the Defendants) but the more important issues in this case are whether there should be an order against (the Executors) and whether (the Defendants) should get an indemnity from the estate … and how those two relate to each other.”

In other words, ordinarily, the Defendants would have had to pay the Claimant’s costs and that would have been an end to the matter but here, as a result of the Executors’ lack of neutrality, the Judge considered whether they should pay instead.

The Judge found that the Executors took a position on the value of the assets that was not consistent with their protestations of neutrality and “presented an argument at trial, contrary to their expressed neutrality, consistent only with a position that no order (in favour of the Claimant) should be made” and that “It was not possible … for (the Executors) to maintain a position of neutrality and, at the same time, assert that the shareholding should be given no value. Those positions were directly opposed to each other.”

He also found that the Executors had a conflict of interest, one being a shareholder and director in the company, and so should have taken independent advice.

In conclusion, the Judge said “I consider that (the Executors’) conduct of the litigation has been such that the Court should make them personally responsible for (the Claimant’s) costs.”

This order required the executors to pay the Claimant’s costs out of their own pocket. This matter involved six-figure costs and, therefore, this is a serious issue for the Executors to deal with, especially given that one of their number was a solicitor.

Whilst part of the costs order is subject to an appeal, there nonetheless remains a salutary lesson for Executors who do not remain neutral in this sort of litigation.

Executor’s Position

If you are an executor or an administrator of an estate and find yourself embroiled in Inheritance Act proceedings, you should take expert independent legal advice at the earliest opportunity to help avoid committing extremely expensive mistakes.

Our expert team of contentious probate specialists have years of experience dealing with these sorts of claims, both in acting for and against Executors. Their track record, including this case, demonstrates they are in an ideal position to advise you as to the best course to take.

If you would like to speak to one of our team, please do not hesitate to contact us on 01733 888 888 or contentious.probate@buckles-law.co.uk