Landmark decision on Trustee remuneration

Further Comment

The clause in question read as follows:

“MY TRUSTEES shall have the following powers in addition to their powers under the general law or under any other provisions of this Will or any Codicil hereto:-…for any of my Trustees who shall be engaged in any profession or business to charge and be paid (in priority to all other dispositions herein) all usual professional and other fees and to retain any brokerage or commission for work or business introduced transacted or done or time spent by him or his firm in connection with the administration of my estate or the trusts powers or provisions of this Will or any Codicil hereto including work done or business outside the ordinary course of his profession and work or business which he could or should have done personally had he not been in any profession or business.”

Mrs Heselton gave evidence that she was involved in a number of businesses, including property management, and claimed a flat fee of £300 per month for her work in administering the estate, which principally comprised renting out a residential property belonging to the estate, over 13 years.

Following a change of personal representatives the replacement administrator invited the court to declare that Mrs Heselton had no right to charge remuneration to the estate.

The Question

The key issue before the Court was whether a trustee engaged in a profession or business may charge for all work done or time spent on the administration of the estate, irrespective of whether that had any connection with their profession or business (the wider view); or whether they can only charge for services rendered to the estate in the course of their profession or business (the narrower view). Both Deputy Master Lloyd and Mr David Rees QC sitting as a deputy High Court judge opted for the narrower view.

The Court of Appeal gave permission for a second appeal on a point of general public importance.

The Judgment

In a unanimous decision, Nugee, Arnold and Lewis LJJ dismissed the appeal and confirmed the narrower view:

“a trustee or executor can rely upon the charging clause in the Will to charge for work done or time spent in the administration of the estate only if that work falls within the scope of their profession or business in question; that is to say if it is work of a type which would attract or incur their usual professional fees.”

In summary, the Court of Appeal concluded as follows:

• A trustee who is a member of any profession, or engaged in any business, may in principle benefit from the clause, even if that business does not directly concern the administration of estates or trusts [31]. This takes such clauses beyond the scope of s.28 Trustee Act 2000, which applies only to those engaged in trust administration.
• However, the trustee may only charge for work done in the course of their business, not for any work done in the administration of the estate [40]. So, for example, a surveyor-trustee may charge for carrying out a valuation of estate property, but may not charge for attending meetings in relation to other matters. A self-employed builder may charge if building work is required to an estate property, but not for any other work outside of his business.  A dentist will most likely be unable to charge any fee, even though he his a member of a profession.
• The purposes of such clauses is not to compensate executors for the loss of their valuable time, but to reward valuable work done for the benefit of the estate, for which a trustee would not otherwise be permitted to be paid [40].
• An employee will probably not qualify as a person engaged in business (the court did not give a firm decision) because they would not have a ‘usual fee’ for work done, but rather receive a salary from their employer [34].
• The words “including work done or business outside the ordinary course of his profession” is designed to permit professionals from being denied remuneration for work falling outside their usual practice. For example, a surveyor who usually values only commercial property valuing residential property [42].
• The words “which he could or should have done personally …” is intended to avoid the argument that it was not strictly necessary for a professional (i.e. the executor) to have been engaged, as raised in Harbin v Darby (1860), and which position is mirrored for professional executors in s.28 Trustee Act 2000.

 Comment

This decision will have a major impact on those executors and trustees for whom trust/estate administration is not their principal occupation, such as IFAs, Accountants, Barristers, Land Agents, Surveyors and businesspersons generally. It may well come as a surprise that notwithstanding the words “including work done or business outside the ordinary course of his profession”, the trustee is not entitled to charge for work unless it falls within the course of his profession or business. The distinction between ‘the course of his profession’ (necessary) and ‘the ordinary course of his profession’ (not necessary) is one which will doubtless give rise to disputes in future.

Given that many of the initial tasks of estate administration (such as sifting through the Deceased’s papers) would not attract a usual professional fee for anyone other than a solicitor practising in estate administration, the question of remuneration may become germane very early on, and it may well be that many executors named in wills decide not to embark upon the process themselves if they are not to be remunerated. Instead, they would be well advised to instruct solicitors to do the work for them, doubtless at greater cost, for which they have an absolute entitlement to be reimbursed under s.31 Trustee Act 2000.

Aidan Briggs acted for the Appellant in the Court of Appeal.