JOHN RICHARD FULLARD v DAVID GRAHAM KERSHAW & Ors

In costs disputes concerning executors or personal representatives, the general rule remains that the successful party receives its costs, but the court may make a different order having regard to all the circumstances, including party conduct and admissible settlement offers.

An executor’s entitlement to an indemnity from the estate may be curtailed where the executor’s conduct amounts to misconduct, construed broadly to include unreasonable conduct, obstinacy, negligence or carelessness. Where executors indicate that they will resign but continue actively contesting removal proceedings, the court may require them to bear their own costs and pay the successful claimant’s costs on the indemnity basis. A scattergun claim may justify a modest reduction.

The claimant, an executor and beneficiary of the estate of Richard Stephen Fullard, sought the removal of two co-executors under section 50 of the Administration of Justice Act and the appointment of a professional administrator. The claim raised disputes concerning estate administration, property boundaries, a loan and alleged conflicts of interest.

The substantive issue was ultimately resolved on the basis that the executors would step down and a professional would be appointed. The remaining dispute concerned responsibility for the parties’ costs, including whether the defendants should recover their costs from the estate.

1. The claimant was the successful party. Under CPR rule 44.2, the general rule is that the unsuccessful party pays the successful party’s costs, although the court may make a different order after considering all the circumstances, including conduct and admissible settlement offers.
2. The defendants’ arguments that the claim was issued prematurely, that they had offered to step down, that the claim was substantially unmeritorious, and that the claimant had failed adequately to engage in ADR did not justify departing from the general rule. The defendants could have indicated that they would resign while maintaining their objections to the allegations, thereby confining the dispute to costs. Their decision to contest the claim and file substantial evidence caused avoidable litigation.
3. Two grounds for removal were sufficiently established for present purposes: the breakdown in relations and a potential conflict arising from the first defendant’s involvement in witnessing the loan. Other grounds could not be determined on the material before the court. The claimant’s particulars of claim adopted a somewhat scattergun approach, warranting a 10 per cent reduction.
4. Under CPR rule 46.3, a personal representative is generally entitled to recover unrecovered costs from the estate. That indemnity may be lost or curtailed for misconduct. The court adopted the wider meaning of misconduct, including unreasonable conduct. The defendants’ conduct justified denying them any indemnity from the estate.
5. The defendants were ordered to pay 90 per cent of the claimant’s costs on the indemnity basis and to bear their own costs, without recourse to an indemnity from the estate. The remaining 10 per cent of the claimant’s costs was payable from the estate.