Executors' Litigation Costs- Who Pays?

The general position is that costs incurred by the executors will come from the estate.  However, the Court has discretion as to how the costs are to be awarded. That remains the position regardless of the general position concerning executors.

As a result, executors must be able to justify their actions to the Court which is the case with any party.

The Court has substantial powers when awarding costs which should always be remembered by executors.

There is absolutely no guarantee that they will have their costs paid for by the estate.

It depends on the actions and behaviour of the executors as to whether the accepted “usual rule” will be applied to them and their circumstances.

A recent illustration of the difficulties executors can find themselves in concerning the issue of costs is the case of Hanson v Coleman & Anor.

Hanson v Coleman & Anor

The deceased, Frank Leonard Coleman, passed away on 19 June 2021, leaving a Will dated 26 August 2005. The Will appointed his sons, Jeremy and Marcus Coleman as executors. The Will divided the residuary estate among his two sons and his daughter, Vivien Hanson, equally. Subject to a specific pecuniary legacy of £40,000 to Jeremy Coleman. The executors obtained a Grant of Probate on 16 June 2022.

Vivien brought a case under Section 50 of the Administration of Justice Act 1985 to remove her brothers as executors.

The Court found that the executors had caused delays and conflicts of interest in the administration of the estate. This was based on the following:

1. The executors had obtained a grant of probate based on an inheritance tax return which showed the estate having a beneficial interest in two properties. The executors then subsequently advanced a claim to own a greater beneficial share of the two properties at the expense of the estate. As a result the claim placed them in an obvious position of conflict of interest;
2. There had been a significant delay in the administration of the estate. No progress had been made in realise the estate's interest in those two properties. That delay had, arguably, caused financial loss to the estate; and
3. The executors had taken an incorrect approach to their duties as for a sustained period of time. This, combined with the delay, meant Vivien’s apprehension that the estate would not be administered in the interests of all the beneficiaries was reasonably held.

Consequently, the Court ordered their removal and an appointment of an independent administrator in their place.

The brothers argued that they should be able to recover their costs from the estate. They did not object to their sister recovering her costs on an indemnity basis but again, it should be from the estate.

The Court found that the brothers had in fact defended the claim brought by their sister in their own interests and were unreasonable in having done so. As a result, the Court held that the brothers should be deprived of their usual indemnity and instead they should personally have to pay not only their own costs but also their sister’s, with her costs to be assessed on a “standard basis”.

The implication of “costs on a standard basis”, means that if there is any doubt as to whether a particular cost was reasonable it will be decided against Vivien, rather than the benefit of doubt being with her, which would have been the case if the costs were to be assessed on an indemnity basis.

Considerations

A salutary lesson for executors is that they must bear in mind the opinion of the Court in respect of their actions. The Courts consistently emphasise the need for executors to act in good faith. They expect communication to be transparent with the beneficiaries and to adhere strictly to the terms of the Will – the relevant statutory framework.

The situation is not always clearcut for executors who may have more than one role in relation to the estate. It is certainly quite common for executors to also be beneficiaries. This means that they must consider carefully their actions and of course the impact on others affected by their decisions.

It is always sensible to obtain legal advice in these situations. Particularly if there is the prospect of legal action being taken, either by the executors because of the situation they find themselves facing, or by other parties. Commonly, beneficiaries who have become frustrated with the actions of the executors.

At Brethertons we have a highly experienced Probate Dispute team who are ready to assist you. If you are facing a probate dispute and you would like to speak to a member of the team please email info@brethertons.co.uk or call 01295 270999 (Banbury Office), 01869 252161 (Bicester Office), 01788 579579 (Rugby Office) or 01242 472747 (Cheltenham).