What is classed as a net-asset?

Following the case of Penntrust Ltd v West Berkshire District Council & Anor 2020, the ambiguity of whether property is classed as a net-asset when considering a Protected Party’s estate was clarified.

For the purpose of context, the Applicant was appointed as the Protected Party’s Deputy in October 2014 in relation to property and financial affairs.

In January 2019, an Application was made to discharge the of professional Deputy. The Deputy sought the authority for detailed costs assessment by the Senior Courts Costs Office for the work conducted to the date of discharge, even though the asset value (according to PD19B) was below £16,000, because the Protected Party’s property – valued in excess of £300,000 – was disregarded

The Deputyship Order in which the Applicant wished to rely upon contained authority that stated ‘The Deputy is entitled to fixed costs in relation to their application and to receive fixed costs or the general management of affairs of the Protected Party. If the Deputy would prefer the costs to be assessed, the order is to be treated as authority to the Senior Courts Cost Office to carry out a detailed assessment on the standard basis’.

The Protected Party’s liquid assets were substantially less than the £16,000 requirement for costs to be assessed and therefore only provided the Applicant with the fixed costs provision under Practice Direction 19B. It was imperative for costing purposes that the Protected Party’s property that they lived in be established as an asset to increase the asset worth, in order for the Applicant to seek detailed assessment and recover costs incurred throughout the management periods. Ordinarily, the property would be disregarded if the Protected Party or a dependent lived there.

Following the hearing, it was concluded that the term ‘net-assets’ in PD19B effective from April 2017, falls to be interpreted according to the ordinary meaning of the phrase, ‘total assets minus total liabilities’. This meant that the Protected Party’s property would be included within net-assets which resulted in the £16,000 threshold being exceeded, allowing for detailed assessment. It was also noted the Protected Party’s occupation of the property did not exclude it from quantification of assets in this case.

Following this inclusion of the property, the Applicant had sufficient authority to seek detailed assessment from the Senior Courts Costs Office.

In cases where fixed costs are not appropriate, professionals may apply to the Court for clarification if their order gives them authority for a detailed assessment of costs. However, it is noted that the use of fixed costs is still encouraged by the Courts. The provision of the £16,000 threshold does continue to apply if the net-assets of a Protected Party are below the specified amount.

It is positive that the Court recognised that it is not always appropriate to disregard the property as an asset and this case enables Deputies to apply to amend their Order allowing the property to be included as an asset, regardless of whether the Protected Party or a dependent lives there.

Please contact Ellis Tolan at 0113 288 5679 or email Ellis.Tolan@clarionsolicitors.com for more information.