Analysis
The claimants were the widow and the daughter of the deceased who died on 8 March 2015. The deceased executed an English will (“the Will”) dealing with his UK assets and appointing a Swiss lawyer (the 1st defendant) as his executor and trustee. The widow (the 1st claimant) was the sole beneficiary of the English estate. There was a breakdown of relations between the 1st claimant and the 1st defendant. The daughter (the 2nd claimant) supported the widow. The claimants applied for an order under section 50 of the Administration of Justice Act 1985 removing the 1st defendant as executor and for their own appointment as personal representatives, or as a fall-back position, their appointment together with an independent, professional, trustee. The claimants were discretionary beneficiaries under various Liechtenstein trusts established by the deceased. They claimed that the 1st defendant and his associates were acting in breach of trust and aggressively against the interests of the beneficiaries of those trusts.
The 1st defendant initially defended the proceedings objecting to his removal as executor. Subsequently he indicated that he was prepared to be replaced by the proposed professional trustee, but that he opposed the appointment of either claimant as executor on the grounds of their alleged unsuitability. Before the hearing he ceased to be involved in the proceedings. The trustees of the Liechtenstein trusts were joined as defendants.
The trustees denied any allegation of impropriety and contended that the claimants were plainly unsuitable to be appointed as personal representatives of the deceased’s estate due to three matters which they claimed gave rise to a conflict of interest: there was a dispute as whether some artwork was owned by the estate (of which the 1st claimant was the sole beneficiary) or by one of the Liechtenstein trusts (of which she was only a discretionary beneficiary); the claimants had not disputed that certain substantial debts were liabilities of the estate, but pre-determined those disputes; and the claimants had conflated the apparent interests of those entitled under the Liechtenstein trusts with those entitled under the English Will. It was also alleged that the claimants were guilty of dishonest conduct in seeking to take direct control of the assets of the trusts.
Held:
- 1) The guiding principle is whether the administration of the estate is being carried out properly having regard to the welfare of the beneficiaries, and whether it is in the interests of the beneficiaries to replace one or more of the personal representatives. The relevant principles were helpfully summarised in Harris v Earwicker [2015] EWHC 2587 (Ch) at [12]. The court’s discretion under s50 of the Administration of Justice Act 1985 (“the 1985 Act”) is a broad and unfettered one, albeit to be exercised in a manner informed by decisions under s50 of the 1985 Act and s116 of Senior Courts Act 1981. The court is entitled to take into account “any relevant circumstance”.
- 2) The court was not limited by the terms of the application before it: in the instant case for the appointment of the claimants, or for their appointment together with an independent executor. Section 50 of the 1985 Act refers to the court’s power to appoint “a person” to act as personal representative. There is no express linkage between that provision and the content of the application. It would represent a significant fetter on the court’s powers if applicants under s50 of the 1985 Act could limit the choice of replacement personal representatives. The court can appoint someone as a substituted representative other than the person who is proposed in the application, such as an independent third party solicitor.
- 3) It was not in dispute that the administration of the deceased’s estate was not being carried out properly by reason of the 1st defendant renouncing his appointment, and it was plainly necessary in the interests of the beneficiaries for someone else to be appointed.
- 4) The 1st claimant deferred to the 2nd defendant on matters relating to the deceased’s estate. For that reason, the court was not satisfied that she was willing or able to bring any independence of mind to her proposed role as personal representative. The 1st claimant would also be in position of conflict going beyond the inherent conflict from her position as both executor and beneficiary of the Will, being the sole beneficiary under the Will, but a discretionary beneficiary under the Liechtenstein trusts. She offered, through her Counsel, various undertakings to refer certain disputed matters, relating to the assets and liabilities of the estate, to the court for directions. However, the offer of undertakings did not adequately meet the problem as to conflict. It was not satisfactory to expect the court to micro-manage the administration of the estate rather than to be a port of last resort for the resolution of disputes when they arise.
- 5) The 2nd claimant’s conduct was not dishonest, albeit that she had been involved in conduct which called into question whether she would properly administer the estate. She had previously been the deceased’s choice as protector under some of the Liechtenstein trusts and had a vast amount of knowledge about the deceased’s affairs and his wider estate. The proper course, in the exercise of the court’s discretion, was to appoint the 2nd claimant together with an independent third party professional to act as joint executors. The costs of appointing a professional executor would be significant, but the estate was substantial and the issues with which the personal representatives would be expected to grapple were complex. It would be undesirable to create a situation where, by appointing both claimants, they would be in a position to outvote the independent third party. The appointment of an independent third party as co-executor with the 2nd claimant would provide an important check and balance in relation to the court’s findings as to her conduct.
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