Re K (Deceased)
| Jurisdiction | England & Wales |
| Judge | RICHARD ARNOLD Q.C. |
| Judgment Date | 28 March 2007 |
| Neutral Citation | [2007] EWHC 622 (Ch) |
| Court | Chancery Division |
| Date | 28 March 2007 |
[2007] EWHC 622 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Arnold Q.c.
(Sitting as a Deputy High Court Judge)
John Dagnall (instructed by Royds) for the Administrators
Stephanie Tozer (instructed by Royds) for the Representative Beneficiary
William Edwards (instructed by Denton Wilde Sapte) for the Representative Creditor
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is my judgment on an application by the Administrators in effect for the Court's sanction to pay certain admitted creditors (“the Admitted Creditors”) and then to distribute the Deceased's Estate without reference to the claims of a number of disputed and potential creditors (“the Potential Creditors”). The application was heard in private. I have anonymised this judgment in order to enable it to be handed down in open court.
Background
The Deceased died in 1992. By clause 3 of his will (“the Will”) he appointed his sister and another person (“the Executors”) as executors and trustees of the Will. By clause 4 he bequeathed the sum of £22,500 to each of his children who survived him and attained the age of 18. Clause 5 provided:
“I GIVE DEVISE AND BEQUEATH the remainder of my estate of whatsoever nature and wheresoever situate including all property over which I have power of disposition by Will to my Trustee [sic] UPON TRUST to pay therefrom my debts funeral and testamentary expenses and to hold the residue UPON TRUST for my wife [name] for her own use and benefit absolutely PROVIDED HOWEVER that if my wife shall predecease me then and only then I GIVE DEVISE AND BEQUEATH the residue of my estate to my Trustees to hold the same upon trust to divide equally between such of my children as shall survive me and attain the age of eighteen years.”
In 1993 the Deceased's sister signed a power of attorney appointing the Deceased's and her brother (“the Brother”) to act as her attorney for the purpose of obtaining letters of administration of the Estate. In 1994 the Brother commenced proceedings against the Estate for a substantial sum, as I shall relate in more detail below. Subsequently in 1994 the Deceased's widow commenced proceedings seeking an order passing over the Executors under section 116 of the Supreme Court Act 1981. That application was initially opposed by the Brother, but ultimately he consented to it. Accordingly, in 1996 an order was made by the Family Division (Probate) appointing the Administrators as administrators of the Deceased's Estate. The First Administrator is the Deceased's widow. The Second Administrator is a solicitor.
In January 1998 the Administrators commenced the present proceedings. The Deceased's children were joined as defendants, as were a considerable number of persons who had intimated claims against the Estate. In February 1998 Sir Richard Scott V-C made an order that the Deceased's eldest child should represent all the beneficiaries of the Estate (“the Beneficiaries”) other than the First Administrator and that one of the other defendants should represent all the creditors of the Estate save for two. Later the same month Carnwath J made an order affirming the appointment of the Administrators and giving them Beddoe relief in respect of actions commenced against the Estate by two creditors, including one brought by the Representative Creditor. In September 1998 the Administrators obtained a formal grant of probate. The Administrators placed advertisements in The Times and the London Gazette in October 1998.
In November 2000 His Honour Judge Weeks QC made an order giving the Administrators further Beddoe relief in respect of actions commenced against the Estate by seven creditors, including the action brought by the Brother, and in respect of a claim by the Inland Revenue for inheritance tax. The Beddoe relief granted in respect of the action brought by the Brother was subject to the following proviso:
“Provided that no action shall be taken unless an application is made to lift the stay imposed by Paragraph 19 of the Practice Direction under CPR Part 51”
In July 2002 His Honour Judge Weeks QC made an order appointing the Representative Creditor as representative creditor in place of the previous representative creditor. In September 2002 and February 2003 His Honour Judge Weeks QC made orders sanctioning the payment of various sums to seven creditors of the Estate, including the Inland Revenue, by way of compromises of those creditors' claims and ratifying the compromises of six further claims. These orders were expressed to be “notwithstanding the Administration of Insolvent Estates of Deceased Persons Order 1986 and notwithstanding whether or not the Estate is solvent” and included permissions and directions pursuant to section 57 of the Trustee Act 1925 and sections 303, 314 and 363 of the Insolvency Act 1986.
The Administrators have now admitted or partially admitted the claims of the three Admitted Creditors. (One of these claims is partially admitted in that the sum agreed is the result of a compromise of proceedings brought by that Admitted Creditor seeking a larger sum.) Accordingly, the Administrators seek the Court's sanction to pay these claims.
One of the Admitted Creditors, which is the beneficiary of a partially satisfied judgment in its favour which it obtained in 1998, is the Representative Creditor. As counsel for the Representative Creditor candidly pointed out, the Administrators' acceptance of its claim has had the unfortunate consequence of putting the Representative Creditor in a position of conflict of interest, since its interest lies in securing immediate payment of the sum admittedly due to it whereas for the reasons explained below that might not be in the interests of the Potential Creditors whom it represents. Accordingly, the Representative Creditor asks for an order relieving it of the requirement of representing the other creditors. I will make that order, which is clearly appropriate in the circumstances. In the circumstances, the burden of articulating the arguments that might be advanced by the Potential Creditors fell upon counsel for the Administrators. I am satisfied that he discharged that task to the best of his ability, and I am grateful to him for doing so.
In addition to seeking the Court's sanction to pay the claims of the Admitted Creditors, the Administrators seek the Court's sanction to proceed to distribute the Estate to the beneficiaries. Needless to say, this application is supported by the Representative Beneficiary and by the First Administrator in her capacity as a beneficiary.
There are two inter-related potential obstacles to this course. The first is the existence of the claims and potential claims of the Potential Creditors. The second is that the Estate is amply solvent if the claims of the Potential Creditors are discounted, but is substantially insolvent if all the Potential Creditors have good claims for the amounts claimed, intimated or apprehended which are not statute-barred or otherwise unpursuable.
The application was originally made on paper, but in December 2006 Warren J ordered that it be listed for an oral hearing without notice to the Potential Creditors for the Court to consider whether any of the Potential Creditors should be notified and, if not, determine the application.
The Potential Creditors' claims
The Potential Creditors' claims divide into two main categories: claims which have actually been made and those which have merely been intimated or (in two cases) are apprehended.
Claims which have been made
These can be summarised as follows:
i) After the Deceased's death, the Brother intimated various claims against the Estate and against a company owned by the Deceased. There are inconsistencies in the amounts claimed, and the justifications for those amounts given, by the Brother during the period between the death of the Deceased and the issue of proceedings by the Brother. The Brother issued a Writ against the personal representatives of the Deceased in 1994. The Statement of Claim indorsed on the Writ recited a series of debts allegedly due from the Deceased with skeletal particulars. The Brother obtained an order appointing the Official Solicitor to accept service of the Writ. It is assumed that the Writ was served in accordance with that order. No order appointing the Administrators to defend the action has even been obtained. In 1996 the Brother's solicitors sent the Administrators a copy of the Writ for information. In 1997 the Brother's solicitors came off the record. In 1999 a different firm of solicitors wrote on behalf of the Brother regarding one of the alleged debts. Since then nothing has been heard from the Brother. It appears that he had sold his London residence, and the Deceased's family believe that he has returned to the country from which the family originates. The Brother's action is subject to the automatic stay imposed by paragraph 19 of the Practice Direction – Transitional Arrangements which supplements CPR Part 51. The Administrators' evidence in support of the present application sets out the information that is presently available about each of the claims listed in the Brother's Statement of Claim. This information yields more questions than answers about the validity of these claims. The Administrators' solicitor states his belief that the passage of time since 1994 will have made it much more difficult to investigate the validity and quantum of the various claims.
ii) A second creditor, who I will refer to as Creditor A, obtained a judgment, presumably in default,...
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