Costs and the administration of estates

Some years ago, The Guardian estimated that as at 2009 the high street banks and solicitors profession charged collectively £1.25 billion a year in fees for dealing with the administration of estates through the grant of probate or letters of administration.

Probate is the term applied to the process of dealing with someone’s property after their death. It involves proving a will, gathering in property, and perhaps having it valued, paying the estate’s debts including taxes and then distributing the value of the estate either according to the terms of the will or in accordance with the laws of intestacy, if someone died without a will.

The naming of solicitors or banks in wills as executors will often mean that as a matter of course they undertake the administration and distribution of the estate of the deceased.

Although one can see at a difficult time for the family that for a professional to move seamlessly into position and deal with the necessary work might be a welcome option, the charges of the solicitor may not have been discussed, agreed or negotiated on a competitive basis.

Accordingly the purpose of this post is to consider the basis on which solicitors charge and the way in which such charges can be limited at the start of the engagement or challenged after its conclusion.

The starting point is to consider what agreement has been reached in relation to the solicitors fees by the executors or administrators of the deceased’s estate. There will always be a contract of retainer, between a solicitor and client as even if there is no express agreement the law will imply a contract: but the terms of the contract may be very different and in particular may provide for an opaque charging structure based on time spent and the value of the estate or in fact make no provision for an express agreement on fees. In such circumstances the term implied by law is that the solicitor will be paid a reasonable fee: but how does one ascertain what is reasonable?

Such situations should be increasingly uncommon: as the weight of regulation grows on the legal profession, year by year, in most cases one would expect to see a written retainer either made in writing or at least evidenced in writing and the absence of such a document can itself be a cause for complaint.

The starting point in this respect will be the Solicitors Code of Conduct and the requirement as an outcome in any matter to give the client “best possible information” about the costs they will incur as well as the mechanism for complaint about the solicitor’s bill.

The Code of Conduct dictates the outcomes that a solicitor must achieve:

O(1.13)

clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter;

O(1.14)

clients are informed of their right to challenge or complain about your bill and the circumstances in which they may be liable to pay interest on an unpaid bill;

The outcomes are achievable by what are termed the range of indicative behaviours, so those steps a solicitor might take in order to achieve the outcomes.

IB(1.13)

discussing whether the potential outcomes of the client’s matter are likely to justify the expense or risk involved, including any risk of having to pay someone else’s legal fees;

IB(1.14)

clearly explaining your fees and if and when they are likely to change;

IB(1.15)

warning about any other payments for which the client may be responsible;

IB(1.16)

discussing how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union;

IB(1.17)

where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, giving the client all relevant information relating to that arrangement;

IB(1.18)

where you are acting for a publicly funded client, explaining how their publicly funded status affects the costs;

IB(1.19)

providing the information in a clear and accessible form which is appropriate to the needs and circumstances of the client;

IB(1.20)

where you receive a financial benefit as a result of acting for a client, either:

(a) paying it to the client;

(b) offsetting it against your fees; or

(c)keeping it only where you can justify keeping it, you have told the client the amount of the benefit (or an approximation if you do not know the exact amount) and the client has agreed that you can keep it;

IB(1.21)

ensuring that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client;

So much for the form: but what will be the terms of trade? How can (or should) a solicitor structure their charges in a probate matter?

Solicitors undertake both contentious and non-contentious work: a theme of the last 20 years with the move to ever increasing specialisation within the solicitors’ profession, is that many solicitors will never have undertaken contentious work and vice versa.

The difference matters, because there are separate legal rules governing how solicitors can charge depending on whether work is classed on contentious and non-contentious work. Section 87 of the Solicitors Act 1974 defines the two areas of work in these terms:

“contentious business” means business done, whether as a solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator, not being business which falls within the definition of non-contentious or common form probate business contained in section 128 of the Senior Courts Act 1981…”non contentious business” means any business done as a solicitor which is not contentious business as defined by this subsection.

Probate work (for the most part) will be non-contentious work.

A contract of retainer for non-contentious business to be carried out may be a simple retainer or it may be a non-contentious business agreement. Satisfaction of the requirements of section 57 of the Solicitors Act 1974 will serve to create a non-contentious business agreement:

(1) Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non-contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2) The agreement may provide for the remuneration of the solicitor by a gross sum or by reference to an hourly rate , or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, fees or other matters.

(3) The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf.

(4) Subject to subsections (5) and (7) , the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5) If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6) Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7) If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.

It should be noted that sometimes a non-contentious business agreement is created accidentally: a client care letter signed by the client may suffice. Where a simple retainer has been made, or indeed is implied which does not specify the amount or basis of the solicitors remuneration, the Solicitors (Non Contentious Business) Remuneration Order 2009 implies a set of criteria for establishing the reasonable charges of a solicitor.

Article 3 expressly allows a solicitor’s charges to be related to the amount of any money or value of any property involved.

A solicitor’s costs must be fair and reasonable having regard to all the circumstances of the case and in particular to—

(a) the complexity of the matter or the difficulty or novelty of the questions raised;

(b) the skill, labour, specialised knowledge and responsibility involved;

(c) the time spent on the business;

(d) the number and importance of the documents prepared or considered, without regard to length;

(e) the place where and the circumstances in which the business or any part of the business is transacted;

(f) the amount or value of any money or property involved;

(g) whether any land involved is registered land within the meaning of the Land Registration Act 2002;

(h) the importance of the matter to the client; and

(i) the approval (express or implied) of the entitled person or the express approval of the

testator to—

(i) the solicitor undertaking all or any part of the work giving rise to the costs; or

(ii) the amount of the costs.

More than ten years ago the Court of Appeal in the case of Jemma Trust Co Ltd.v.Liptrott and others [200]4 1 WLR 646 established a set of principles for the basis of solicitors charges in probate matters going forward and indeed which may be of more general application for devising fair and reasonable charging structures for non-contentious work undertaken by solicitors. In this case the solicitors had sent to their client bills claiming time spent and also a separate bill seeking costs calculated by reference to the value of the estate on a percentage basis.

The principles set out at paragraph 33 of the judgment of Longmore LJ were as follows:

(1) Much the best practice is for a solicitor to obtain prior agreement as to the basis of his charges not only from the executors but also, where appropriate, from any residuary beneficiary who is an entitled third party under the 1994 Order. This is encouraged in the 1995 booklet and letter 8 of appendix 2 to the 1999 booklet provides a good working draft of such agreement. We support that encouragement.

(2)In any complicated administration, it will be prudent for solicitors to provide in their terms of retainer for interim bills to be rendered for payment on account; this is of course, subject to the solicitor’s obligation to review the matter as a whole at the end of the business so as to ensure that he has claimed no more than is fair and reasonable, taking into account the factors set out in the 1994 Order.

(3)There should be no hard and fast rule that charges cannot be made separately by reference to the value of the estate; value can, by contrast, be taken into account as part of the hourly rate; value can also be taken into account partly in one way and partly in the other. What is important is that (a) it should be transparent on the face of the bill how value is being taken into account; and (b) in no case should it be taken into account more than once.

(4)In many cases, if a charge is separately made by reference to the value of the estate, it should usually be on a regressive scale. The bands and percentages will be for the costs judge in each case; the suggestion to the costs judge set out in para 31 may be thought by him to be appropriate for this case but different bands and percentages will be appropriate for other cases and the figures set out in para 31 cannot be more than a guideline.

(5)It may be helpful at the end of the business for the solicitor or, if there is an assessment, for the costs judge, when a separate element of the bill is based on the value of the estate, to calculate the number of hours that would notionally be taken to achieve the amount of the separate charge. That may help to determine whether overall the remuneration claimed or assessed is fair and reasonable within the terms of the 1994 Order.

(6)It may also be helpful to consider that the Law Society’s guidance in cases where there is no relevant and ascertainable value factor which is given in the 1995 booklet at para 13.4 If the time spent on the matter is costed out at the solicitors expense rate (which should be readily ascertainable from the solicitors expense of time calculations) the difference between that sum (the cost to the solicitor of the time spent on the matter) and the final figure claimed will represent the markup. The markup (which should take into account the factors specified in the 1994 Order including value) when added to the cost of the time spent must then be judged by reference to the requirement that this total figure must represent “such sum as may be fair and reasonable to both solicitor and entitled person”.

It should be noted that some commentators might take the view that the Court of Appeal decision shows a degree of benevolence to solicitors when rendering bills where their fees have not been expressly agreed, which sits uneasily with the obligations in the Solicitors Code of Conduct.

In this respect the case of Bilkus.v.Stockler Brunton (a firm) [2010] 1 WLR 2526 is an interesting illustration of a stricter approach being taken to charging clients value elements. A solicitor having done an excellent job for his client, in recovering £6.6 million, decided to add a value element of £50,000 to his charges.

The decision hinged upon the question of whether work done in giving effect to a final court order in concluded litigation was contentious or non contentious work: if contentious then no “value” element of the type contemplated by article 3 of the 2009 Order could be added to the bill. Of perhaps wider importance, was the fact that the client had never agreed to pay a value element, and this was sought to be raised at the end of the case. The Court of Appeal in the leading judgment of Stanley Burnton LJ noted the following:

50 It is common ground that sections 57 and 59 of the 1974 Act do not require separate agreements relating to contentious and non-contentious business. A single written agreement, signed by both parties, may cover both kinds of business. Whether the agreement does so will depend on its true construction in the circumstances prevailing when the business in question is carried out.

51 I accept that the terms of the letter, when it was written and agreed, applied to the contentious business then anticipated. But when the solicitors continued to act after judgment had been given by Lawrence Collins J without seeking Mr Bilkus’s agreement to any other basis of charging, or even informing him that any other basis of charging would be applicable, he was entitled to assume that nothing had changed: that the same basis of charge continued. Mr Bilkus was not a solicitor; it can safely be assumed that he had no knowledge of the statutory de[1]nitions in the 1974 Act or of their relevance. The reasonable client, in the circumstances of this case, would consider that the solicitors were continuing to work under the terms of the letter agreement.

52 Indeed, it may be significant that although the solicitors own invoice dated 3 September 2004 stated that the proceedings had been concluded by the order of Lawrence Collins J dated 29 October 2003, it does not distinguish between the basis of charge for work done by them before and after that date.

53 In my judgment, it is incumbent on a solicitor who seeks to charge a client on a di›erent basis from that previously agreed to make his intention clear to his client, who must be given an informed opportunity to agree or to reject the new basis of charge, and if he so chooses to cease to instruct the solicitor. Mr Bilkus was not given that opportunity.

54 It follows that I would uphold the finding of the judge that the solicitors are not entitled to any remuneration beyond that agreed in the letter of 25 January 2001. Thus for this reason too they are not entitled to any value element or uplift.

Ward LJ expressed in a concurring judgment:

71 The answer to the appeal may, however, lie in the answer to the second point identified by and given by Stanley Burnton LJ. There was only one retainer by the client of his solicitor in this case. The terms of business for that retainer were set out in the letter dated 25 January 2001. The terms prevailed until the retainer was discharged or varied. It was not. Mr Stockler was not entitled to charge more than he had agreed to charge in that letter. He was not entitled to charge an uplift.

In cases where there is a dispute about the amount of a solicitors costs, whether in terms of the time spent on the case or the value element, an application to court can be made for a solicitor/own client assessment under the Solicitors Act 1974.

Alternatively a complaint can be made to the Legal Ombudsman. The question of which route a client should pursue will of course depend on the nature of the complaint about the solicitors work and the amount of the costs in dispute.

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