Personal representative awarded costs against beneficiary who acted unreasonably (High Court)

Personal representative awarded costs against beneficiary who acted unreasonably (High Court)

The High Court has ordered a beneficiary (B) who acted unreasonably during litigation to pay the costs incurred by a personal representative (PR) in applying to the court to authorise a step that she proposed to take.

Roth J held that, having regard to the overall justice of the case, the costs should not fall on the estate and so be at the expense of all the beneficiaries. If it had not been for B's determined opposition to the proposed step, the PR would probably not have made an application to the court at all.

However:

  • The PR had to pay the costs of both parties relating to an application for approval of a step she had already taken (representing about 15% of the total costs), because this was for her own protection rather than for the benefit of the estate. The PR had reason to believe that B would make a claim against her personally in relation to that step. However, if he did so, that would be hostile litigation and subject to the normal rule that costs would follow the event. Therefore, it was inappropriate for the PR to try to close off the point in an application under Part 64.2(a) of the Civil Procedure Rules for the court to determine a matter arising in the administration of the estate.
  • As Roth J had made adverse costs orders, he held that costs should be on the standard basis, rather than the indemnity basis (which the PR had requested). This would require the costs to be proportionate as well as reasonable, which he regarded as a salutary qualification in view of the "alarming" and "extraordinary" figures that he had been given for the costs incurred by B (the only beneficiary to defend the claim) and the PR (together over £900,000, in an estate worth less than £8 million).
The award against B in this case may serve as a warning to a beneficiary who is running up costs by frequent communications and demands for information, as in this case. The PR had been requested by the other beneficiaries to restrict the time that she spent dealing with B's communications. The PR had also warned B that she would seek a costs order against him if she had to apply to the court to approve her actions. She had obtained advice on the step she proposed to take and the remaining seven beneficiaries had all consented to it on the basis of that advice.

There is also a lesson in the case for trustees and PRs, who should not use a Part 64 application to obtain an order that is purely for their own protection in hostile proceedings. If a beneficiary is likely to contest an action, it may be preferable to obtain the court's approval of that action in advance. If this is not done, it may not be possible to obtain protection in advance of the beneficiary making a claim. At an interim hearing in this case, Peter Smith J had brokered an agreement that any order approving the steps that the PR had taken, or proposed to take, would be without prejudice to any claim for negligence or other breach of duty against the PR by B before a specified date.

It is also noteworthy that the parties had attempted mediation, but this had failed. Roth J does not comment on this, but the fact that mediation had been attempted may have helped to persuade him that the PR had done what she could to avoid the costs of a court application.


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