Can an executor be personally liable for legal fees when defending a claim from the estate?

An executor who has been appointed to administer an estate is given a lot of responsibility and has many duties to carry out in their role as an executor.

Matters can be complicated if the executor faces a claim from the estate, whether that is by a third party or a beneficiary, particularly if the executor is also a beneficiary of the estate (which commonly occurs). The executor may worry about the cost implication for them if they were to defend a claim from the estate, and whether they would be personally liable for the costs.

Executors (and administrators/personal representatives) may apply to the court for a ‘Beddoe Order’. Such an order entitles the executor to recover the costs incurred in connection with defending a claim from the estate itself, provided those costs have been reasonably and properly incurred.

If the executor is deemed to have acted unreasonably in defending the claim, they may be held personally liable for the costs. Each case will depend on the specific circumstances as to whether the executor acted reasonably. The court will also give consideration as to whether the executor sought directions from the court before the proceedings of the claim were defended.

In the recent case of Clyne v Clyne [2021] the executor, who was also a beneficiary, was successful in her application for a Beddoe Order and the court indemnified her for the legal costs she incurred when defending a claim brought by another beneficiary.

In this instance, the beneficiary bringing the claim had not made the other beneficiaries parties to the claim and the court held it was reasonable for the executor to defend the claim, as the other beneficiaries could not (unless they were later added to the proceedings). The court also considered the risk of injustice to the executor if she were to be burdened with the costs of defending the claim. The court held that this outweighed the injustice to the beneficiary who brought the claim, whose entitlement to the estate would ultimately be reduced (along with the other beneficiaries) as the costs would be paid by the estate.

Whether an executor would be successful in applying for a Beddoe Order from the court depends on the specific circumstances of each case. This area of law is not straightforward; an executor would need to take several factors into account if faced with defending a claim, such as who the parties to the claim are, whether the executor has good reason to defend the claim and when the application for the Beddoe Order should be made to the court.

It is important that an executor who finds themself in this potential situation seeks legal advice sooner rather than later, as such matters are time sensitive.