KATHRYN MARY CLEVELY & Anor v JANET MARY ATKINSON & Ors

This Part 8 claim concerned whether the second defendant, Timothy William Maclear Campbell, was entitled to payment (remuneration or reimbursement of expenses) for work performed as (1) a director of Jarman Properties Limited and (2) an executor of his mother’s estate. The court applied established principles on fiduciary duties and directors’ remuneration, including the Duomatic principle for shareholder approval, and the general rule that executors are not entitled to remuneration except by a court "just allowance" in exceptional circumstances.

The judge found that the family shareholders (including the deceased parents) had agreed that the Company should be converted into a trading company and that Tim would carry out the Scarletts development project, which satisfied the Duomatic principle so as to authorise the Company-wide payment of a fair and reasonable sum. The judge quantified a fair and reasonable director’s allowance for the Scarletts work at an annual rate of £45,000 for four years, producing a gross figure of £180,000; after treating Tim as bearing 1/90 of that sum by reason of his single shareholding, the net amount to which he was entitled was found to be £178,000. Agreed proper out-of-pocket expenses of £30,000 were allowed in addition. The court held that Tim was not entitled to remuneration in his capacity as executor and rejected claims for executor remuneration on the "just allowance" basis.

This is a first instance Part 8 claim in the Chancery Division concerning disputes between four siblings about sums received and retained by one sibling (Tim) in the course of managing family property and executing the mother’s estate.

Background and parties:

• The claimants (Kate Clevely and Jennifer Arnold) and the second and third defendants (Tim and John Campbell) are four children of the deceased parents. Tim and John had been appointed executors of the mother’s will; Tim later obtained probate and the executorships were subsequently removed and an independent administrator appointed.
• Jarman Properties Limited was a family company. From 2009 Tim carried out a substantial property development project (the Scarletts project) and undertook estate-related work. Disputes arose about payments Tim paid himself from the Company and from the executor account.

Relief sought: The claim sought directions and declarations as to final distribution of the mother’s estate, including declarations that Tim must account for all payments, that he was not entitled to remuneration as a director or as executor, or alternatively quantification of any allowance due, and directions as to final distributions.

Issues framed:

• What sums had been received by Tim after the mother’s death? (the court accepted the MHA report figure of £381,543 as the sum received by him)
• What out-of-pocket expenses were properly claimable by Tim? (agreed at £30,000)
• What is the legal basis for any entitlement to payment from the Company (including whether shareholder approval under the Duomatic principle applied) and from the estate (including whether a "just allowance" was payable)?
• If an allowance was payable, how should it be quantified?

Court’s reasoning and conclusions:

• The court reviewed fiduciary duties of directors and the settled rule that a director is not entitled to remuneration except under the constitution or with member approval. The Duomatic principle (Re Duomatic Ltd) applies where all shareholders, being aware of material facts, assent to a course of action; the court concluded that the family shareholders had approved conversion to a trading company and Tim carrying out the Scarletts project, and that approval covered payment for that work.
• The court distinguished the position of company payments from any entitlement to be paid as executor: the Duomatic principle cannot be used to authorise executor remuneration; executor remuneration is only available by way of a court "just allowance" in exceptional circumstances.
• On quantification the court made broad-brush findings (given lack of contemporaneous time records). It held that four years of full-time work fairly described the Scarletts development work, that a reasonable annual rate was £45,000, yielding £180,000 in total. Treating Tim as bearing 1/90 of that sum by reason of his single share, the net amount to which he was entitled was found to be £178,000. Agreed out-of-pocket expenses of £30,000 were allowed in addition. No remuneration was allowed for executor duties or estate work.

The judgment records the court’s concern about the disproportionate litigation over sums of modest size and notes that the parties could and should have resolved matters consensually.

First instance: Claim allowed in part. The court held that the Company’s members (the family) had approved Tim undertaking the Scarletts project and that he was entitled to a fair and reasonable payment for that company work under the Duomatic principle; the appropriate allowance was quantified at a net sum of £178,000 with agreed expenses of £30,000. The court held that Tim was not entitled to remuneration for work done in his capacity as executor and refused to award executor remuneration on a "just allowance" basis.