Nedbank Limited v Gordon NO and Others (GP) (unreported case no 8938/17, 16-8-2019) (Mabuse J)

By Solomon Gordon

The Nedbank case is an important judgment dealing with principles relating to the question of whether legal practitioners, appointed as executors, are entitled to a fee outside their capacity as an executor.

Nature of the matter

This matter is a review of the taxation by the Taxing Master of the Gauteng Division of the High Court of a bill of costs pursuant to an order granted by Haupt AJ in an application to compel the respondents, the executors in an estate, to file the liquidation and distribution account and to be removed if they did not. The matter was fully argued, which included the costs order and both parties had the benefit of counsel.

The application was dismissed with costs on an attorney and client scale and the legal representatives of the applicant were not allowed to charge any fees for the preparation of the application.

The Taxing Master, notwithstanding the order made by the judge, disallowed the attorney and client costs due to the respondents, but not the disbursements incurred by them on the basis that the ‘executors [remuneration] covers all the work as an attorney and executor of the Estate’.

The respondents applied for a review of the Taxing Master’s order to disallow the attorney and client fees.

Background

The respondents opposed the application as the validity of the will was being challenged, and litigation to set aside the will and other relief was also pending in the Gauteng Local Division of the High Court in Johannesburg. They were unable to draw a liquidation and distribution account, until the validity of the will had been determined.

The Taxing Master’s case

The Taxing Master argued that the first respondent was the co-executor, as well as the attorney of record and that an executor can only be paid their ‘commission’.

The Taxing Master cited – as authority for her ruling – Marcus Jacobs and NEJ Ehlers Law of Attorneys’ Costs and Taxation Thereof (Cape Town: Juta 1979) at p 91 where they discuss how ‘an attorney who performs duties as an attorney and who is also at the same time an executor of an estate, is not entitled to recover costs for work done in his professional capacity’. She went on to state that: ‘The principle is strictly applied and even where an estate is successful in legal action and costs are awarded against the other party, they cannot be recovered except for disbursements’.

As further support for her ruling she cited Estate Fawcus v Van Boeschoten and Lorentz 1934 TPD 94 and Nieuwoudt v Estate van der Merwe 1928 CPD 486. In Estate Fawcus it was held that: ‘An executor who is an attorney and acts in his professional capacity on behalf of the estate in a lawsuit is not entitled to remuneration as an attorney, notwithstanding that his co-executor approves of his so acting’.

The Taxing Master referred to circumstances where the work undertaken by an executor in their administration of the estate far exceeds what has been allowed as an executor’s remuneration in terms of the Administration of Estates Act 66 of 1965 and not for work undertaken by them that is not part of their functions in attending to the administration of the estate. It appears from the Taxing Master’s remarks that she had not grasped the difference between the executor’s functions in administering the estate and work undertaken by them outside the estate and which was not part of their functions as executor.

The Taxing Master believed that she exercised her ‘discretion reasonably and justly … in finding that the executor’s [remuneration] covers all of his work as an attorney and executor of the estate.’

The cases cited by the Taxing Master, were where the costs were argued at the hearing of the matter.

The discretion, which the Taxing Master can exercise, is in relation to an item in a bill or the quantum thereof and not whether to accept an order of court or not.

Estate Fawcus must be clarified. The question of liability for costs was argued at the trial and related to fees claimed by an attorney for the work they had carried out in connection with the estate. A distinction must be made between costs incurred in an action against the executors for an order compelling them to draw a liquidation and distribution account and costs which were incurred by them in administering the estate. The costs claimed by the respondents were in respect of an application against the executors personally where there was a prayer for costs against them de bonis propriis.

The respondents’ case

The task of the Taxing Master is to quantify the costs in accordance with the order that already exists and they are not entitled to ignore the order made by the judge or vary it in any way.

The respondents argued that it was not the function of the Taxing Master to interpret statutes or to conduct an inquiry as to what fees may be charged by executors by law.

Furthermore, s 51(a) of the Administration of Estates Act read with para 12 of the will, specifically allowed for payment of professional fees incurred by the executors outside of the executor’s remuneration, and reads in the will: ‘An executor … or any firm of which he is a member or partner, may be employed to act in any matter relating to my estate … and shall be entitled to charge and be paid for any services rendered by him or his firm in a professional capacity. Including for acts or services which any Executor … could have done personally’.

The fees incurred were not in respect of the executor’s functions in administering the estate but rather to defend a claim against them personally.

‘A Taxing Master’s duty is to carry out an order for costs not to vary it.  Whether the order is right or wrong the Taxing Master must give effect to it. The argument that the trial court was wrong in law in making the order it did is not an argument which can be advanced on taxation, for this would in effect amount to a Taxing Master sitting in appeal on the judgment of the Court which made the order. This is not the function of the Taxing Master’ (Jacobs and Ehlers (op cit) at p 32 in the Nedbank Limited case at para 9).

By disallowing the fees, the Taxing Master overrode the order and acted contrary to the order.

The cases cited by the Taxing Master were based on s 81(2) of the Insolvency Act 32 of 1916, which was followed by a similar provision in s 63(1) of the Insolvency Act 24 of 1936.

The respondents contended that neither of the Insolvency Acts are applicable to the remuneration of executors in deceased estates which are regulated by the Administration of Estates Act nor did they contain similar provisions to s 51(1) of the Administration of Estates Act.

Judgment

Mabuse J in the review judgment, found the respondents did not advance any argument that the fees did not constitute a salary. It was clearly not a salary and I submit that the judge was misdirected in this regard. However, the judge found that the fees were classified as remuneration and raised the question whether the respondents’ were entitled to receive any remuneration outside ‘the precinct of the word “remuneration” as envisaged in s 51(1) of [the Administration of Estates] Act 66 of 1965’.

The judge also found the application was opposed by the respondents in their capacities as executors ‘and not in their personal professional capacities’.

Section 51(1) of the Administration of Estates Act is of paramount importance and points out that ‘whatever service the executor renders in the administration of the deceased estate, he will receive his remuneration from the assets of the estate’ (my italics).

The respondents were charging for fees in respect of the administration of the estate and were defending an application brought by a creditor (the applicant) to compel them to prepare and lodge a liquidation and distribution account, which application included a prayer for the respondents to pay costs. The work the respondents carried out in defending the application was clearly not carried out in the administration of the estate as envisaged by s 51(1).

The fees ordered against the respondents belonged to the estate and not to the respondents and that neither the ‘executor nor their attorneys were entitled to claim the fees that were awarded by the court. They were an asset in the estate of the deceased. They should therefore be reflected in the liquidation and distribution account of the deceased. They were not assets of the executors or the attorneys.’

Perhaps the judge did not fully appreciate how bills are drawn for submission for taxation. Only a legal practitioner can present a bill of costs for taxation. The costs were awarded to and belong to the litigants and not to the estate.

The crucial point is whether the legal practitioner is entitled to fees outside their capacity as the executor.

‘The ruling of the taxing master was that only disbursements were allowed and that all legal fees for work done by the first respondent in his capacity as the attorney should be disallowed. Accordingly, I agree with the applicant’s attorneys’ argument that an executor’s commission covers the whole of his work for the estate and that if the executor is an attorney, he or his firm is not entitled to recover any fees for work done as an attorney’.

Conclusion

This judgment sets a very dangerous precedent for litigants. It is clear that the judge misdirected himself in dealing with whether there was any liability by the applicant for costs – he found that there was no such liability – because it is the Taxing Master’s function to determine whether the services have been performed, whether the charges are reasonable and not to determine liability for costs or to question the court’s order, but to follow it. The question of liability is one for the court to determine not for the Taxing Master.

The judge found support in and quoted Boshoff J in Mouton and Another v Martine 1968 (4) SA 738 (T) in regard to taxation of costs:

‘The purpose of the taxation was really twofold; firstly, to fix the costs at a certain amount so that execution could be levied on the judgment and, secondly, to ensure that the party who is condemned to pay the costs does not pay excessive, and the successful party does not receive insufficient, costs in respect of the litigation which resulted in the order for costs.’

The question of costs was argued at the hearing of the matter and if the applicant was not satisfied with the order by the court as to the costs, it should have appealed the judgment. What the judge has now allowed, in effect, is an appeal on the order for costs.

The judge also found that ‘accordingly, the function of the Taxing Master is to decide: “… whether the services have been performed, whether the charges are reasonable or adding (sic) to tariff, and whether disbursements properly allowable as between party and party have been made, his function is to determine the amount of the liability, assuming that liability exists, and the fact that he requires to be satisfied that liability exists before he will tax does not show that there is any liability. The question of liability is one for the court, not for the Taxing Master”’.

I respectfully suggest that the judge should have taken careful note of, and indeed followed, the authority quoted which was, of course, the real reason for the review application. The judge should, therefore, have found that it was the Taxing Master’s function to assess the quantum of the fees, not to determine liability therefor.

If this judgment is followed it may result in a situation where opposing litigants would be free to abuse the court system and litigate recklessly, as in this matter, safe in the knowledge that there would be no costs consequences for their actions. This would not be in the interests of the courts or in the interest of justice.

Solomon Gordon BCom LLB LLM H Dip Tax (Wits) is a legal practitioner and consultant at Fairbridges Wertheim Becker in Johannesburg. Mr Gordon was personally involved in the Nedbank matter.

This article was first published in De Rebus in 2021 (Jan/Feb) DR 39.