THE ADMINISTRATION OF ESTATES
What could possibly go wrong ?
Deborah Cain
LLP Partner – Litigation
Griffith Smith Farrington Webb LLP
1
The angry beneficiary
or
The person who is angry because they are not a beneficiary
2
Common Complaints
•
“That isn’t what mum, dad, husband, sister etc. wanted.
– The Will must be invalid, or
– The Will writers must have been negligent.”
•
“I don’t care what the Will / Intestacy says – I need / want some of the
estate (or more of it)”.
•
“The deceased promised x to me but they have left it to someone else”.
•
“My co-executor / the executor is a crook and I don’t trust them”.
•
“No wonder there is no money in the estate, my sister / brother spent all the
money on themselves when they had Power of Attorney for mum / dad”.
•
“I don’t agree with what you say the Will means”.
3
Invalid Wills
“The Will must be invalid……”
1.
Lack of testamentary capacity
2.
Lack of knowledge and approval
3.
Undue influence
4.
Fraud
5.
Lack of due execution – i.e. failure to comply with s.9 Wills Act
1837 (as amended).
4
Negligent Will Writers
“The Will writers must have been negligent…………”
1. Professional Negligence Claims
2. Rectification – uncontested or contested.
5
Claims under the Inheritance (Provision for
Family and Dependants) Act 1975
“I don’t care what the Will / intestacy says,
I want some of the estate (or more of it)”
Who can bring a claim ?
1.
Spouse or Civil Partner of the deceased
2.
A former Spouse or Civil Partner
3.
A person living with the deceased as a Spouse or Civil Partner for two
years immediately before death.
4.
A child of the deceased
5.
A person who was treated as a child of the deceased.
6.
Any person who immediately before the death of the deceased was
maintained by them.
6
Proprietary Estoppel
“The deceased promised x to me but they have left it to someone
else……”
Representation
+
Reliance
+
Detriment
=
Proprietary Estoppel
7
Executor v Executor
“My Co-Executor / Executor is a crook and I don’t trust them”
Renounce
Removal
Replacement
8
“No wonder there is no money in the estate, my brother / sister spent it all
on themselves whilst they were acting as Mum / Dad’s Attorney”
Taking Recovery Action
•
The PR’s duty is “to collect in the real and personal estate of the deceased and
administer it in accordance with the law”.
•
The PR must be diligent, exercise the appropriate standard of care, and act as a
prudent man of business would in relation to his own affairs.
•
The PR cannot turn a blind eye to claims.
•
The professional PR will owe a higher duty of care than a lay PR (s.1 Trustee Act 2000).
•
A PR will be personally liable for all breaches of ordinary trust arising from their office.
BUT
Being too proactive = exposure to costs liabilities
Are you properly spending estate money being proactive ?
9
“I don’t agree with what you say the Will means”
Or
“You don’t even get what the Will means yourself….”
10
11
Come and see me…….
Griffith Smith
Farrington Webb LLP
recruited Deborah
Cain from Adams &
Remers in 2014. Cain
is praised as
‘exceptionally good
in the area’, and ‘a
highly experienced
litigator’ who ‘fights
harder than anyone
for the client’.
12
Will Validity Claims
•
Did you draft the Will ? If so, is there a conflict of interest ?
•
If you did draft the Will, be co-operative. Do not be seen as obstructive. This could lead
to adverse cost orders.
•
Renounce ?
•
If the grant has been taken, revocation of it will be sought and you will be named as a
Defendant being a person entitled to the grant.
•
If a Defendant, you may give notice in your Defence that you raise no positive case.
As such, the Court is unlikely to make a costs order against you.
•
If the Will is ultimately judged to be invalid, any action you took as “Executor” will have
been invalid too, because you will never had had the authority to take the action.
Personal liability ?
•
Administration pending determination of a probate claim – apply under s.117 Senior
Courts Act 1981 for an Order of the grant of administration pending the
determination of the probate claim.
•
If on notice of a claim – inform and consult with the beneficiaries. It is their fight.
•
Don’t distribute !
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Rectification
“If the Court is satisfied that a Will is so expressed that it fails to carry out the testator’s
intentions, in consequence
(a) Of a clerical error; or
(b) Of a failure to understand his instructions,
It may be order that the Will shall be rectified so as to carry out his intentions” s.20(1)
Administration of Justice Act 1982”.
•
Every PR will be joined as a party although their role should be one of neutrality.
•
Uncontested : straight forward application to the Registrar.
•
Contested : Proceedings in the Chancery Division of the High Court.
•
Rectification in hostile litigation is NOT for the PR to pursue unless they want to
risk personal liability for costs.
•
6 month time limit from grant (discretion to extend). S.20(3) AJA protects PR’s if
distribution is made after the permission to rectify is out of time is granted.
14
Overlap Professional
Negligence / Rectification
•
Walker v Medlicott [1998] – where rectification is available it should be
pursued in preference to a negligence claim.
•
Where fault can be established, the costs of rectification can be recovered
from the Will draftsman.
•
Therefore – invite the draftsman to indemnify the costs of the rectification
application from day one.
•
If you drafted the Will – offer to pay the costs of the rectification application.
15
1975 Act Claims
•
Not a claim against the estate.
•
Do not be tempted to compromise. You do not have authority to do so under
s.15 Trustee Act 1925.
•
Remain neutral ?
•
If you do not remain neutral – you risk an adverse costs order.
•
State in Section A of the Acknowledgment of Service that you intend to
remain neutral and file and serve the written evidence required by Practice
Direction 57 to the Civil Procedure Rules (CPR) about the size and nature of
the estate.
•
Consult with beneficiaries ?
16
Proprietary Estoppel Claims
•
The Testator broke their promise to the Claimant – falls not far short of a contract.
•
The Court will “vindicate” the Claimant’s expectations as far as possible. Wide
discretion. It will not necessarily give the Claimant that which they say they were
promised.
•
These claims are usually claims between rival claimants for a beneficial interest.
•
In the absence of any order from the Court, the PR’s duty is to remain neutral and
submit to the Court’s direction.
•
Similarities with Constructive Trusts – tax consequences.
•
A Constructive Trust arises where there has been an express agreement or
understanding between the Claimant and the Deceased, or a common intention
(i.e. implied agreement) which can be inferred by conduct – no discretion. Either
there was a constructive trust, or there wasn’t.
17
Estate Depletion / Estate Claims
•
Personal liability for failing to collect in the estate assets.
•
PRs cannot and should not turn a “Nelsonian Blind Eye”.
•
PRs on notice of the claim may make initial enquiries e.g. obtain medical records,
contact witnesses.
•
Dangers of being too proactive.
•
Re Clough – Taylor [2003] – it is no part of a PR’s duty to take anything other than
normal or routine steps to collect in an asset which is bequeathed under a Will (or
an intestacy). No requirement to issue.
•
Consult with beneficiaries.
•
Assign the cause of action to the beneficiary ?
•
Obtain indemnities from beneficiaries / insurance or make an application to the
Chancery Division of the High Court for a “Beddoe Order” ?
•
Seek any other directions from the Court ?
18
What does the Will mean ?
Non Contentious Construction Issues
•
S.48 Administration of Justice Act 1985 Application.
•
Opinion of Counsel of at least 10 years call.
Contentious Construction Issues
•
Part 64 Civil Procedure Rules Application
19
Complaints from beneficiaries
Estate assets are given to a PR on trust. Examples of breaches include :
•
Squandering or misapplying assets.
•
Selling property at an undervalue.
•
Failing to dispose of wasting assets before they lose value.
•
Taking estate assets and using them for their own purposes.
•
Leaving assets in an inappropriate form of investment not authorised by the Will or general Law.
•
Discharging a “moral” obligation (as opposed to a legal one). Note s.15 Trustee Act 1925 = power to
compromise in good faith.
•
Excessive costs ? – Claimant can apply for an account and ask the Court to refer the file to the
Supreme Court Costs Office.
•
Paying the wrong beneficiaries the wrong amounts.
Benjamin Orders / insurance / indemnities.
•
Paying estate liabilities in the wrong order.
•
Failure to exercise the rights of a shareholder and appoint nominee directors (where appropriate).
•
Failure to act impartially as between beneficiaries.
Failing to identify missing beneficiaries –
20
Removal Applications
a) S.50 Administration of Justice Act 1985 – discretion to appoint a substitute PR and
terminate the office to an existing PR.
b) S.41 Trustee Act 1925 – courts inherent jurisdiction.
c) Judicial Trustee Act 1986 – appointment of a judicial trustee.
d) CPR64 – application for directions.
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Top Tips
•
Don’t bury head in the sand and hope it “goes away”
•
Advise beneficiary to get independent legal advice.
•
Consider whether to seek your own independent legal advice.
•
Consider carefully before distributing.
•
Consult with beneficiaries.
•
Consider indemnities from beneficiaries, applications to the Court or Insurance.
•
Consider neutrality.
•
Consider conflict of interest.
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Modern Practice. Traditional Values.