When can an executor be removed?

Original news

National Westminster Bank plc v Lucas and others [2014] EWHC 653 (Ch), [2014] All ER (D) 92 (Mar)

The proceedings concerned applications made in respect of the administration of the estate of the deceased television presenter Jimmy Savile. Under the deceased’s will, the residue of the estate was left to a charitable trust (the trust). However, there was a risk that claims for personal injury in respect of alleged child sex abuse, made against the estate, could leave the estate insolvent. The Chancery Division dismissed the trust’s application to remove the claimant bank as executor and personal representative of the estate. Further, the court approved a scheme designed to facilitate the speedy and inexpensive resolution of personal injury claims made against the deceased’s estate and it granted validation of expenses incurred by the bank in the course of administering the estate.

What key issues did this case raise?

The main issue was how an executor was to conduct the administration of an estate when there was a contest between the will beneficiaries on the one hand, and potential claimants on the other, where the claims might render the estate insolvent. The corollary of this issue was the question of what circumstances are required in order for an executor to be removed by the court.

To what extent did the judgment clarify the law in this area? Are there any grey areas or unresolved issues remaining?

The judgment followed, and was consistent with, a line of well-known cases dealing with the removal of executors/trustees. These cases are:

1. Letterstedt v Broers (1884) 9 App Cas 371
2. Thomas and Agnes Carvel Foundation v Carvel [2007] EWHC 1314 (Ch),[2007] 4 All ER 81, and
3. Kershaw v Mickelthwaite [2010] EWHC 506 (Ch)

As for clarifying the law, Sales J rejected the submission that an executor ‘…was obliged to treat the interests of the beneficiaries under the will as superior to the claimants against the estate’, and accepted the contrary submission that ‘if…claimants…have meritorious claims against the estate, the proper fulfilment of the executor’s role is to see that such claims are paid out of the estate before making any distribution under the terms of the will’.

I do not regard the applicable legal principles as being ‘unresolved’. What will always be capable of argument is how these principles apply to the particular and specific facts of a given case. For obvious reasons, it is unlikely that the circumstances surrounding Jimmy Savile and his estate will stand as a factual template for other cases.

Under what circumstances can professional trustees be removed?

The subsistence of friction or hostility between the executors/trustees and the beneficiaries is not of itself sufficient ground for the removal of a trustee (see Kershaw v Micklethwaite at paras [27–32]). The principle is that the court should only interfere ‘… if it can be shown that he [ie trustee/executor] has acted in bad faith or so perversely that no trustee properly advised or properly conducting himself could so have acted, alternatively if he has acted fraudulently or in a manner so unreasonable or absurd that no reasonable person would have acted in that way’ (Bramston v Haut [2012] EWCA Civ 1637, [2012] All ER (D) 127 (Dec)).

What do trustees have to keep in mind when there are pending, but not yet substantiated, claims against an estate?

The trustees should have in mind the draconian effect of the Insolvency Act 1986, s 284 (IA 1984). As explained by Chief Registrar Baister in Re Vos [2006] BPIR 348, IA 1986, s 284, when read in conjunction with the Administration of Insolvent Estates Order 1986, SI 1986/1999, art 3, has the effect that where the estate of a testator is found to be insolvent, any disposition of property in the period after his death is void except to the extent that it was made with the consent, or subsequent ratification, of the court.

What should lawyers advising in this area of law take note of, and be advising their clients?

Firstly, where there are hostile claims against an estate and their effect, if substantiated, might be to render the estate insolvent then, having regard to Re Vos and IA 1986, s 284, the prudent executor would be wise to proceed with the utmost caution. Unless the adverse claims are obviously unmeritorious, then the executor should always consider seeking the guidance and approval of the court—failing to do so might well lead him to fall foul of the voiding effect of IA 1986, s 284 and leave him at risk of failing to recover his costs. Re Vos is an object lesson in the hazards of proceeding without judicial sanction where there is a danger of the estate being insolvent.

By contrast, those with an actual, or contingent, interest in the proceeds of an estate should be wary of taking hostile action against the executor. Only if the executor’s conduct is as exceptional as that contemplated by the test set out in Bramston v Haut should adverse applications be made.

Are there any detectable trends in this area of the law?

I do not think that the four cases that have been reported in the 130 years since the decision in Letterstedt could properly be said to give rise to a ‘trend’. The law can, I think, now be regarded as settled—though, no doubt, litigators will find further cases where the specific facts warrant recourse to the courts.

Mark Cunningham QC is a litigator equally at home dealing with interlocutory matters, conducting trials and arguing in appellate courts, whether in the UK or abroad. His practice generally falls within the following areas of law: commercial chancery, company/corporate insolvency, tax and professional conduct. He handles substantial cases, particularly where the facts and documents are complex and heavy, and is an experienced and well-regarded cross-examiner. In Nat West v Lucas, Mark was counsel for the claimant.

Interviewed by Kate Beaumont.

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