Vivien Ann Hanson v Jeremy Allard Coleman & Anor

An opposed application to remove personal representatives under section 50 of the Administration of Justice Act 1985 will frequently be a beneficiaries’ dispute. The court must examine the substance of the proceedings and the parties’ conduct, rather than their form.

A personal representative may lose the indemnity for litigation costs without a positive finding of breach of trust. The question is whether the costs were properly incurred and whether the representative acted on behalf of the estate. Where removal proceedings were defended in the representative’s own interests and unreasonably, the indemnity may be lost. That does not automatically justify indemnity costs for the successful claimant: ordinary costs principles apply, and indemnity costs require conduct outside the norm or unreasonable to a high degree.

The claimant sought the removal of her two brothers as executors of their late father’s estate. The defendants were beneficiaries and had asserted greater beneficial interests in estate properties, while also delaying administration and failing adequately to explain the estate’s minority shareholding.

The court had already ordered their removal and appointed an independent administrator. It then determined the parties’ costs disputes: whether the defendants retained an indemnity from the estate for their own costs and the claimant’s costs, whether the claimant should receive indemnity costs, and whether an exemption clause in the will affected those issues.

1. Characterisation of the proceedings. An opposed removal claim under section 50 of the Administration of Justice Act 1985 was properly characterised as a beneficiaries’ dispute. The court considered the nature of the dispute, the positions adopted and the parties’ conduct. The claimant was alleging a conflict of interest and breach of fiduciary duty, rather than merely seeking directions for the benefit of the estate [9], [22]–[24].
2. Loss of indemnity. The defendants’ indemnity for their own costs, and for the claimant’s costs which they were ordered to pay, was lost. A positive finding of breach of trust was unnecessary. The relevant question was whether it was unreasonable to defend the removal application without the court’s approval. Misconduct is construed broadly and includes unreasonable conduct in the circumstances [21]. The defendants had defended in their own interests while maintaining claims against the estate and had acted unreasonably in the face of the conflict and the delay in administration [22]–[26].
3. Exemption clause. Clause 15.1 of the will concerned loss caused to the estate by the executors. It did not extend to the executors’ own costs of defending the removal claim or to their liability for the claimant’s costs. Exemption clauses are strictly construed and require clear and unambiguous words. The costs questions were governed by established indemnity and costs principles, not by the clause [14]–[17].
4. Claimant’s costs. The claimant was entitled to costs on the standard basis. A beneficiaries’ dispute is ordinary hostile litigation. The defendants’ conduct, though unreasonable, was not outside the norm or unreasonable to a high degree, so indemnity costs were refused [27]–[30]. Pre-action costs relating to the issues giving rise to the proceedings were recoverable, subject to reasonableness and proportionality. The claimant’s total costs were summarily assessed at £34,000 inclusive of VAT, with no additional sum for further written submissions [33]–[36].