Liability of Personal Representatives

Question 1

Devastavit - Breach of duty by a personal representative

Answer 1

• any breach of duty by PR called devastavit.
• 3 main areas, misappropriation of assets, maladministration and failure to safeguard assets

1. Misappropriation - where PR uses estate assets for own personal use - Re Morgan 1881 - or enters into collusive sales.
2. Maladministration
   a. Misapplication - applying estate assets, albeit in good faith, otherwise than in order provided by Will or statute - for ex paying ordinary creditor before preferred creditor.
   - PRs who had no notice of preferred creditor will not be liable - Re Fluyder 1898 - unless would have had notice if had advertised under s27 Trustee Act 1925 - Chelsea Waterworks v Cowper 1795
   b. Unjustified expenses - PRs should incur only reasonable expenses, for example PR will be liable in devastavit if spend more than is reasonable on funeral expenses. Question of fact on each case.
   c. Wasting assets - giving away asset of value or paying debts PR not bound to pay.
   >Thompson v Thompson 1821 - asset was leasehold prop which had greater value than rent payable. PR liable when surrendered lease without considering selling asset at premium.
   - Converse would apply if PR fails to surrender uneconomic lease where rent exceeds value - Rowley v Adams 1839
   d. failure to pay debts promptly so creditor sues, failure to recover assets so that claim becomes statute barred and delay in obtaining probate (Re Stevens 1897)
   e. Failure to collect in estate assets with due diligence.
   f. Failure to distribute estate to those correctly entitled.

• misapplication can arise if PR doesnt take enough care in determining who entitled under Will or intestacy rules and ends up giving prop to someone not entitled to it.
• if says “£10k to my housekeeper”, person entitled would be person answering description of “my housekeeper” at time Will made - Re Whorwood 1887. If PR pays housekeeper employed at date of death, would be liable to rightful ben

-PR might be exec distributing under Will where there is undisposed of residue passing on partial intestacy. Exec ascertains that closest class of relative is brothers and sisters of whole blood, no spouse or issue and parents died. PR locates brother who says 2 sisters alive, so exec distributes in 3 shares on basis dec’d siblings who are entitled. Exec not told that not asked right questions, as was another brother who predeceased and left son alive. Exec should have set aside 4 shares, but as not done exec personally liable for misapplication to son

• can be avoided by seeking protection from liability and can seek guidance from Court in form of specific relief. Is possibility of other relatives in class, so should still advertise anyway.

3. Failure to safeguard assets - negligence - PRs cant be held liable for loss in absence of evidence of failure to take reasonable care - Job v Job 1877.
   - would not be liable if assets were lost in robbery.
   - burden of proving loss as against PRs rests with party alleging loss.

Question 2

Breach of Trust

Answer 2

• important when to ascertain when acting as PRs and when as trustees.
• concept for breach of trust wider - for ex PR who makes unauthorised profit from estate even though estate doesn’t suffer loss, makes unauthorised investment or fails to observe terms of Will would be liable.
• acts of co-representative will not make other PRs liable unless wilful default results in not obtaining prop into their joint control. Means PRs will not be liable for default of fellow PR unless aware of that PR’s activities.
• ss11 and 12 Trustee Act 200 sets out powers of PRs to appoint agents.
  -ss21-23 lay down obligations to keep such appt under review and limits of their liability for agents who have been appointed in accordance with duty of care in s1 and applied in various situations in accordance with s2 and para 3 Sch 1

Question 3

Duty to account

Answer 3

• s25 AEA 1925 - PRs owe duty when called upon by Ct to exhibit inventory and account of estate. Make promise to do so when applying for grant by way of statement of truth or oath form lodged with probate registry. Duty can be enforced by ben or creditor and will require PRs to produce account of receipts and payments made. Will reveal state of admin and whether any breach committed.
• where appropriate, PRs may be called upon to account on footing of wilful default

Question 4

Administration by Court

Answer 4

• any person interested in estate that isnt satisfied with progress or who concerned about matters not being dealt with correctly, may issue proceedings for administration by the Court. App may be PR, ben or creditor. Would be to Chancery Division of High Court under s61 Senior Courts Act 1981 and CPR 1998.
• must be duly constituted PR before court will consider taking admin as must be defendant to proceedings. person cant be executor de son tort as their duty is not to administer the estate, merely to account for what they have received.
• If no grant of admin has been made, creditors and bens interested can apply to Ct for appt of receiver to protect estate pending appt of PR. If there are proceedings pending in estate, better course of action is to apply for appt of admin pending suit under s117 SCA 1981.
• admin order may take form of order for full admin, in which case PRs may act only as directed by Ct or Ct may grant specific relief. Full admin order rarely made, partly due to expense. If order is made, Ct will direct following accs be prepared:

. acc of prop not specifically devised or bequeathed that has come into hands of PRs
. acc of debts, funeral and testamentary expenses.
. account of legacies
. acc of any prop of dec’d that remains outstanding.
- apart form order calling in acc, Ct can appt person to act as judicial trustee. Officer of Court who can act with PR or alone.

• PRs themselves may apply for specific relief, for ex on meaning of particular clause or for summons for Ct to pronounce on validity of Will.
  >Spurling v Broadhurst 2012 - execs sought declaration from Court on meaning of residuary gift where words were open to at least 4 different interpretations.
  >Re Jones (Deceased) 1981 - Ct asked to consider validity of words uttered to warrant officer.
  >Perotti v Watson 2001 - Ct concluded that, although Cl had legitimate complaints about way Def sol has administered estate, most pragmatic approach was to allow administrator to continue. Judge awarded admin 3/4 of costs, by way of indemnity, out of estate and Ct of A reduced figure by £2,500 and awarded Def legal fees as had not charging clause.

Question 5

Defences of personal representatives

Answer 5

1. Clause in Will restricting liability of PRs to wilful wrongdoing limits liability as far as bens concerned, but doesnt affect rights of creditors of estate
   >Armitage v Nurse 1998 - clause in Will excluding execs from liability for everything short of actual fraud was held valid.
   - professional bodies, including Law Society and Society of Trust and Estate Practitioners require members to bring limitations of their liability to attention of clients, for ex prior to client executing Will where prof appt exec of Will.
   - questionable whether inclusion of clause limiting liability for acts of negligence by prof exec or trustee justified. May be appropriate for lay people, but prof who is being paid a fee for expertise shouldnt be able to avoid liability. usually have benefit of prof negligence insurance to cover losses anyway.
2. By s61 TA 1925, Ct can grant relief against claim by ben or creditor where PR has acted honestly, reasonably and ought fairly to be excused against claim.
   >Evans v Westcombe 1999 - admin of small estate took advice re proper admin of estate where brother not heard of for 30 years. Took out missing ben cover as being cheaper than Benjamin order. Reappeared and asked for half of estate plus interest. Sister held to act reasonably as acted on advice, but Cl was entitled to interest, held fairness required sister to satisfy interest claim out of prop derived from estate that remained at her disposal. Enforcement stayed until sale and sister relieved of other liability for interest and to render accs and enquiries.

• points to note:
  . reliance on legal advice not passport to relief - s61
  . PRs of small estates not to be discouraged from seeking practical solutions to difficult admin problems which avoid incurred expense of app to Ct.
• Ct less likely to allow paid prof PRs to rely on clause limiting liability or grant relief under s61 but in Bogg v Raper 1998, held that exemption clause was valid where limited liability of trustees and execs of estate that no special procedures were required.

3. protection afforded by s27 TA 1925 notice.
4. Where ben or creditor is sui juris and with full knowledge of facts acquiesced breach, onus of providing acquiescence rests on PRs. PRs can protect themselves in obtaining written release from ben for acts done in course of admin of estate, but release ineffectual if has been obtained fraudulently or by undue influence. Release usually obtained on completion of admin.
5. Under s62 Ct can order PRs to be indemnified for loss where ben or creditor has consented to breach of duty
   - Ct may order beneficial interest of ben be impounded to indemnify PRs where ben consented in writing, instigated or requested breach. Relevant where bens didnt consent to sue PRs.
6. Right to take action may be barred by Limitation Act 1980. Creditors limitation period is 6 years for debt due under single contract, period runs from date on which right accrued - s5. For judgment debt, period is 12 years from date on which judgment became enforceable - s24. Periods may be extended by acknowledgment of debt by PRs, either by part payment or in writing.
7. PRs may please have duly administered all assets which have come into their hands by entering please plene administravit.
8. Plead plene administravit praeter - have duly administered assets that have come into their hands with exception of assets of stated value that still hold. Available against creditor and mean claim can be satisfied only from future assets or those that PRs admit to holding.
9. Under I(PFD)A 1975 PRs protected from liability for distributing estate provided they waited 6 months from date of grant and no prior claim made - s20(1)
10. For rectification of Will, PRs protected from liability if wait 6 months before distribute and no prior claim - s20(3) AJA 1982
11. Under s48 AJA 1985, PRs can plead that have relied on opinion of barrister on any q as to meaning or interpretation of Will. Opinion must be written and given by barrister of at least 10 years standing. Opinion cannot be acted upon until Ct so orders and Ct will refuse where are contentious issues that need to be aired before Court.
12. Where estate includes leasehold prop, PRs may be liable not only for liabilities o/s at date of death but for dec’d ongoing liability under privity of contract. Also liable for liabilities arising during admin period, only to extent of dec’d assets so long as didnt enter into possession.
    - s26 TA 1925 protects PRs in re to liabilities. May satisfy all liabilities to date, set aside a fund to meet future known liabilities for fixed amount then assign lease.
    - if PRs entered into poss, s26 doesnt apply and PRs must rely on indemnity from bens or set aside indemnity fund from estate which must be retained until all claims are extinguished.
13. Where estate is subject to contingent liabilities, PRs must set aside indemnity fund or obtain indemnity from bens or insure against risk of liability being enforced.

Question 6

Limitation of Actions

Answer 6

• for creditors, action must be brought within 6 years of cause of action, or 12 years in case of proceedings on covenant.
• in case of bens, action must be commenced within 12 years from date they entitled and 6 years to recover interest (ss15 and 22 LA 1980). Can be extended where future interest or facts have been concealed by fraud - unless ben should have discovered fraud. Doesnt apply where has been fraud by PR or where PR is in possession of estate assets or their proceeds, unless ben barred by laches (delay) once discovered facts.
  >Green and Others v Gaul and Others 2006 - held by Ct of A that limitation of 12 years for claims by bens ran from end of exec’s year.

Question 7

Action against recipient of assets

Answer 7

• action against PR will be first course of action by creditor or ben, though PR may not have sufficient assets to cover value of claim. Then choices are.

1. tracing action to follow assets to those who received them, other than bona fide purchaser for value without notice of any defect. Doesnt depend on solvency of recipient, bit rather action against asset in question. Asset must be identifiable and must not be inequitable to trace.
2. Pursuit of those who have received asset wrongly by way of personal claim, as in Ministry of Health v Simpson 1951 . Enquiries must be made to see that recipient is solvent and claim worth pursuing.
   - personal claim against overpaid ben or creditor for refund of amount overpaid. Remedy is available only if remedy against PR exhausted. LA 1980 applies so right of claim lost after 12 years.

• Re Diplock 1948 - prop left to named charities for charitable or benevolent purposes. After distribution of assets, Will successfully challenged on basis that gift was void and should read charitable and benevolent purposes. Succession of tracing actions commenced. Ct said where prop had come into hands of innocent volunteer who mixed prop with own, by extending house, would be inequitable to allow tracing action to succeed. Tracing not barred by limitation but party seeking relief must act promptly and if guilty of laches, right to take action will be lost. To extent that tracing not available, and PRs not able to make refunds, overpaid bens were ordered to refund overpayment.