Case commentary: Fellner v Cleall

Case commentary: Fellner v Cleall

Removing an executor and obtaining costs – Fellner v Cleall [2021] EWHC 3599 (Ch)

The dispute

A recent case heard in the High Court demonstrates the risks which personal representatives face in proceeding to obtain a grant when there is an ongoing will dispute and in the face of opposition from the beneficiaries.

I recently acted in a matter where my client was challenging the homemade will of her late brother on the grounds of lack of testamentary capacity and/or want of knowledge and approval.  The executor, Ms Cleall was a friend of the deceased and had been instrumental in the preparation of the will. The challenge was outlined in a letter of claim and the defendant – also the executor under the will – vigorously defended the claim. I might also say that she inherited the bulk of the estate under the will so was also the major beneficiary. Our client had lodged a caveat to prevent the defendant from obtaining a full grant of probate. The defendant had threatened to apply for a grant ad colligenda bona, otherwise known as a limited grant, to enable her to sell estate property and manage an antiques business, which belonged to the estate.

Our client indicated in correspondence that she was not necessarily opposed to a limited grant being obtained but rather she was opposed to the defendant obtaining it. She proposed that an independent administrator be appointed instead – the defendant did not agree. There then followed further correspondence and an unsuccessful mediation relating to the will dispute in January 2021. In February 2021, without notice to us, the defendant applied to the Probate Registry for a limited grant to deal with the operation of the business and selling of estate assets. The defendant provided no notice of the application to our client until the sealed grant was returned by the Probate Registry in March 2021 at which point, she disclosed it to us. Our client, understandably concerned, requested that she refrain from using the grant and again suggested she agree to be removed and an independent administrator be appointed in her place. The defendant refused to agree to this request and promptly started to sell estate property at auction.

Our client, considering she had no other option, was forced to make an application to the court for removal of the defendant as administrator grant ad colligenda bona and replacement with a professional administrator. Prior to issuing court proceedings, our client provided the defendant with a further opportunity to agree to the appointment of a professional by way of an open offer dated 6 May 2021 and provided the deadline of 2 June 2021. Through her solicitors, the defendant replied by letter dated 2nd June but sent by email on 3rd June. The defendant’s response sought to agree to the instruction of a professional administrator but only on the basis that various qualifications were made to her appointment and did not agree to pay our client’s costs. Accordingly, our client, considering the offer had not been accepted, issued court proceedings the same day.

Negotiations continued and the parties were able to reach agreement regarding the appointment of a professional administrator and signed a consent order on 14th July 2021. Our client, considering she had won her application, sought her costs. The defendant refused, insisting that proceedings had been issued prematurely. The parties could not reach agreement and asked the court to list the matter for a disposal hearing, which it did.

The disposal hearing

The hearing took place on 28th September by online video platform. Our client was represented by James McKean of New Square Chambers. Deputy Master Linwood heard the case.

Deputy Master Linwood stated the two issues he needed to consider:

The first issue as to costs is what order for costs should be made? The second issue is, if I find the defendant should pay, should she do so personally or can she avail herself of the usual indemnity from the estate?”

Our client had sought, as part of her application, to preclude the defendant of availing herself of the usual costs indemnity whereby personal representatives can obtain their costs from the estate.

Deputy Master Linwood considered the Civil Procedure Rules part 44.2 which provides the court with guidance in relation to its general discretion on costs and in particular the general rule being that the loser pays the winner’s costs.

Mr McKean relied on the cases of BCT Software Solutions Limited v C Brewer & Sons [2003] and Ghafoor v Cliff [2006]. Mr McKean argued that the court should look at whether one of the parties was a “winner” and in doing so should consider the substance of the case.

Deputy Master Linwood considered this a helpful approach and further added that conduct was also relevant. The first issue therefore was to consider who was the winner?

The Deputy Master considered the open offer sent to the defendant’s solicitors dated 6 May 2021. This set out that, if the defendant agreed to set aside the limited grant, our client would agree to the appointment of an independent administrator. Deputy Master Linwood referenced the Harris v Earwicker case and there was no need to make an actual finding but that the claimant had rightly raised the potential conflict of interests the defendant faced. The offer provided seven days for the defendant to accept the offer and pay costs. An extension of time was agreed by the claimant so the defendant could take advice from counsel. The defendant had replied saying that, although she had posed questions to counsel, it did not “alter the fact that your communications are unsubstantiated, as with any application to remove our client as administrator”.

A deadline of 2nd June had been agreed for a response, but no response was received from the defendant’s solicitors by 2nd June. Deputy Master Linwood noted, that the although the defendant’s response was dated 2nd June, it was not received until 3rd June and, whilst it accepted the appointment of an independent administrator, it sought to impose various qualifications to that appointment. Once the claim was issued, the defendant had filed evidence in response which Deputy Master considered to be of “considerable volume” and some 70 pages. The point being that the defendant was disputing the allegations made against her and taking active steps in the litigation.

Considering that a consent order was then signed on 14th July 2021. On the face of it, Deputy Master Linwood considered that the claimant was clearly the winner.

Deputy Master Linwood found that whilst it could be said that proceedings were issued with some speed, this was understandable in view of the urgency and that estate assets were being sold. He found that the defendant’s response to the open offer letter of 6th May, which he referred to as “direct, simple, and incapable of being misunderstood” was insufficient and did not amount to a response capable of acceptance.

Accordingly applying CPR 44.2, he stated:

“It seems to me that there can be no doubt but that the claimant is the winner here. I would also add that, on the face of the correspondence, I have seen the defendant was in circumstances where fault does not have to be proved conceded inevitably. Where there is such conflict between beneficiaries, and between the executor and the beneficiary, it seems to me the result is well-known. The essence of this is that the defendant’s removal from office was in the bests interests of the beneficiaries which is the basis for the test in Harris v Earwicker [2015].”

“hilst it can be said that the claimant acted with some speed, I think in the circumstances that was reasonable. Time limits, as long as they are not too onerous or impossible to comply with, must be complied with otherwise the parties making reasonable offers will have great difficulty enforcing them.”

He found that the issues between the parties were obvious and the offer letter of 6th May was “clear and succinct” and incapable of being misunderstood, and in the circumstances did not accept there needed to have been a pre action letter of claim. The defendant did not accept the claimant’s position but instead filed 70 pages of evidence in response.

Accordingly, he ordered that the claimant was the winner, and the defendant should pay her costs.

Turning to the second issue of whether the defendant could avail herself of the indemnity afforded to her as executor and take her costs of defending the claim from the estate (CPR 46).

The defendant argued that, when dealing with personal representatives or trustees, the test was whether the trustee had properly incurred the costs and were they incurred when acting on behalf of the trust? The defendant’s counsel submitted she had done everything in her power to avoid costly proceedings and signed the consent order, which could not be improper.

The claimant submitted that the conduct had been unreasonable, and the matter should have been conceded on the basis of the offer of 6th May. Deputy Master Linwood accepted Mr McKean’s submission and that the defence was “self-serving and unnecessary”. He did not think in the circumstances that the defendant’s behaviour was reasonable, and she could not therefore avail herself of the usual indemnity in such claims. Therefore, she should pay her own costs personally.

Conclusion

So what can be taken from this judgment? Clearly, where there is an ongoing will challenge, great care should be taken before obtaining a limited grant without notice to, or agreement with, other beneficiaries. Where there is a potential conflict of interests with an executor and their position as beneficiary, especially where there is an ongoing dispute, then they should agree to the appointment of an independent administrator if a limited grant is required. In circumstances where the behaviour of personal representatives or trustees oversteps or exceeds their position of neutrality and is “self-serving”, they should proceed to fight proceedings at their peril and to do so is likely to leave them liable to not only the other side’s legal costs but also unable to rely on their indemnity to take their own legal costs from the estate.

As an aside, the Master placed a great deal of importance on the “open offer” letter and the deadline contained within it. Defendants, and especially personal representatives or trustees, should pay considerable attention to offers, and deadlines should be adhered to wherever possible.

Tara McInnes is a Partner (Contentious Wills and Estates) at The Burnside Partnership.

Tara McInnes, Partner, The Burnside Partnership

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