KATHRYN MARY CLEVELY & Anor v JANET MARY ATKINSON & Ors

A director has no entitlement to remuneration unless authorised by the company’s constitution or approved by its members. Informal unanimous shareholder approval may satisfy the Duomatic principle where all persons entitled to vote apply their minds to the relevant work and agree to payment. The resulting remuneration must be fair and reasonable.

An executor is generally not entitled to payment for personal time and trouble. The court nevertheless has an inherent jurisdiction to award a just allowance in exceptional circumstances, particularly where substantial skill and labour have benefited the estate. The allowance is discretionary and depends on all the circumstances, including conflicts of interest, the nature of the work, time spent and the cost of professional assistance.

The claim concerned remuneration and reimbursement sought by Timothy Campbell for work performed as director of Jarman Properties Limited and as executor of his mother’s estate. The claimants, his sisters, disputed the amount and legal basis of his entitlement.

The company’s members had agreed that the company should be converted from an investment company into a trading company and that Mr Campbell should undertake the principal development work. The estate-related work included inheritance-tax planning, administration and work concerning a commercial property.

The central issues were the amount received, allowable expenses, whether remuneration was authorised under the Duomatic principle, whether an allowance could be made for executor’s work, and the appropriate quantification.

1. Company remuneration. A director has no right to remuneration except as authorised by the company’s constitution or approved by its members. The Duomatic principle requires objective proof that everyone entitled to vote applied their minds to the relevant matter and gave unqualified agreement.
2. The members had agreed that Mr Campbell should undertake the Scarletts development project and should be paid for that work. That informal approval satisfied the Duomatic principle. The proper basis was a fair and reasonable sum. The court therefore rejected the submission that payment could be made only by way of a discretionary just allowance.
3. The relevant factors included the time reasonably required, the commercial cost of the services, the family-company context, the anticipated and actual inheritance-tax benefit, the anticipated and actual project profit, and the fact that Mr Campbell would share in the benefit as a beneficiary. The work reasonably required did not exceed four years of full-time work. Applying an annual rate of £45,000, the remuneration was assessed at £180,000, subject to Mr Campbell’s one-share interest, producing £178,000, with £30,000 expenses in addition.
4. Estate remuneration. The Duomatic principle is confined to companies. An executor is not ordinarily entitled to remuneration for personal time and trouble. A just allowance may be awarded under the court’s inherent jurisdiction, but only where the circumstances justify it, having regard to the substantial work, skill and benefit involved.
5. The claimed executor duties involved ordinary administration, ordinary inheritance-tax work and property-management work of the type previously undertaken without payment. None justified a just allowance. Mr Campbell was therefore not entitled to further remuneration for work done for the estate.
6. The court found that Mr Campbell had received £381,543 and was entitled to £30,000 for agreed out-of-pocket expenses. The claim was determined accordingly.