Removal of executors: National Westminster Bank plc v Lucas [2014] EWHC 653 (Ch)

 In Probate

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Removal of ExecutorsOn 11th March 2014 Sales J decided two applications relating to the administration of the estate of the late Jimmy Savile. One of them was an attempt by beneficiaries of the estate to remove NatWest as sole executor. In dismissing it, Sales J provided a helpful reminder of some of the principles governing the court’s jurisdiction to remove personal representatives of estates.

The background facts

By his will the late television presenter Jimmy Savile appointed NatWest as his sole executor, left various legacies to various named individuals and left the residue of his estate to the Jimmy Savile Charitable Trust. He died on 29th October 2011 and his estate was said to be worth c.£3.3m. NatWest took out a grant of probate and in the usual way advertised for claims pursuant to section 27 of the Trustee Act 1925.

A year later, in October 2012 ITV broadcast a programme which suggested that Jimmy Savile had been a serial child abuser and sex offender. Thereafter a large number of people claimed to have been victims of his abuse and indicated they intended to bring claims for compensation for personal injury against his estate. At the date of the hearing NatWest had received notice from 139 such intended claimants, referred to in Sales J’s judgment as the ‘PI Claimants’. Although their claims had not been tested in court proceedings, Sales J indicated that there was no serious dispute that some, and perhaps even many, of the claims may turn out to be well-founded and meritorious and if so there was a serious possibility that the estate would be used entirely to pay compensation, leaving nothing for the individual legatees and the trust.

In November 2013 the trust issued an application by which it asked the court to remove NatWest as executor and to appoint another professional executor in its place pursuant to section 50 of the Administration of Justice Act 1985. The application was supported by the individual legatees but was opposed by NatWest and the PI Claimants.

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Then in December 2013 NatWest issued an application asking the court to approve a proposed scheme designed to manage and resolve the claims which the PI Claimants were threatening to bring without the need for court proceedings, and to validate various administration expenses.

Sales J dismissed the trust’s application for substitution of NatWest as executor and approved NatWest’s proposed scheme and validated its expenses.

The removal application

In May 2013 a meeting had taken place between NatWest, the trust, the PI Claimants and other third party defendants against whom the PI Claimants might also have claims for compensation (such as Jimmy Savile’s former employers). The purpose of the meeting was to explore the possibility of agreeing a scheme by which the PI Claimants’ claims could be subjected to a degree of scrutiny in a cheaper way than by fully contested court proceedings. The meeting proved “fractious and difficult”, at least in part because of the robust stance taken by the trust in the negotiations. As a result, the trust was not invited to a subsequent meeting between NatWest, the PI Claimants and the third party defendants, at which the proposed scheme was agreed.

Asking the court to remove NatWest as executor the trust relied on the following grounds (at [38]):

(a) there had been a complete breakdown in relations between [NatWest] and the Trust which seriously jeopardised the proper administration of the estate;

(b) [NatWest] had failed to advertise properly or at all for personal injury claims to be brought forward to enable the liabilities of the estate to be assessed so that distributions could be made from it;

(c) [NatWest] had taken instructions from solicitors acting for the PI Claimants whilst withholding information from the Trust about the administration of the estate;

(d) [NatWest’s] conduct of the defence of the personal injury claims had prejudiced the estate by disclosing confidential and privileged information to solicitors acting for the PI Claimants; and

(e) notwithstanding [NatWest’s] failure to advertise for claims or assess the estate’s liabilities, or indeed to make any real progress in completing the administration of the estate, the expenses (including legal expenses) incurred by [NatWest] had been unacceptably high.

In discussing the relevant legal principles, Sales J referred to and cited from the well-known Privy Council decision in Letterstedt v Broers (1884) 9 App Cas 371 and the decision of Lewison J (as he then was) in Thomas and Agnes Carvel Foundation v Carvel [2007] EWHC 1314 (Ch), citing in particular the following:

[46] The overriding consideration, therefore, is whether the trusts are being properly executed; or, as [Lord Blackburn [in Letterstedt v Broers]] put it in a later passage, the main guide must be ‘the welfare of the beneficiaries’.

Sales J indicated (at [80]) that “[i]n light of the guidance in Letterstedt, I consider that it would not be appropriate for the court to take the further step of removing [NatWest] as executor unless there is a real risk that [NatWest] will not act fairly and conscientiously in that office or if [NatWest] cannot be expected to continue to carry out the administration of the estate in an effective and proper manner.

He went on to conclude that all that had been shown was that there was friction and hostility between the beneficiaries and NatWest, but that was not of itself a good ground to remove NatWest as executor (applying Letterstedt v Broers and the more recent decision in Kershaw v Micklethwaite [2010] EWHC 506 (Ch)).

Interesting points

A number of interesting points emerge from the decision.

  1. The case reiterates that hostility and friction between beneficiaries and personal representatives or trustees will not necessarily persuade the court that it is appropriate to remove the personal representatives or trustees. As Sales J explained (at [83]):

There are many contexts in which trustees or those in equivalent positions, such as personal representatives of a deceased person, have to make judgments which involve striking a balance between different competing interests and which may thus adversely affect some persons claiming under the trust or in respect of the estate of the deceased. It is to be expected that in such cases there will often be an element of friction between the trustee or personal representative and those disappointed by their decisions. This is not in itself a good ground to remove the trustee or personal representative from their office.

  1. Sales J also rejected the submission that NatWest as executor had been under a duty to give greater weight to the interests of the beneficiaries named in the will than to those of the potential creditors of the estate (i.e. the PI Claimants). He explained at [70]-[71]:

The interests of the beneficiaries under the will … cannot automatically be promoted above those of the various personal injury claimants and Third Party Defendants who may have good claims against the estate. I reject the submission … that [NatWest] was obliged to treat the interests of the beneficiaries under the will as superior to those of the claimants against the estate. The entitlements of both beneficiaries and claimants depend, in substance, upon the same contingency, namely whether and to what extent there may be valid and meritorious claims against the estate. It is that contingency which the Scheme is designed to address and, so far as may be possible, determine.

In light of the claims against the estate, and the real risk that it may prove to be insolvent because of them, [NatWest] is obliged to have regard to the interests of the class of claimants against the estate as well as to the interests of the beneficiaries under the will. The position is in significant respects analogous to that of a company which faces a real risk of being unable to pay its creditors, where the directors are bound to consider the interests of the creditors and not simply those of the shareholders

  1. Sales J also indicated that in cases in which there is a risk that the estate will be insolvent the executor may have to make some difficult decisions in circumstances in which there “will often be no clear and obvious standard to guide how to proceed”. In such cases, the court should “be astute to discourage wasteful depletion of the estate in management and legal expenses to the prejudice of those making valid claims against it, by ensuring that the executor and personal representative is accorded a substantial margin of discretion to decide how best to proceed” (at [78]).

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