National Westminster Bank Plc v Lucas & Ors

An executor must administer an estate for all persons interested in it, but an unsubstantiated personal-injury claim remains contingent. It does not place the claimant on the same footing as an established creditor or beneficiary.

In a category 2 application for approval of a fiduciary decision, the court must be satisfied that the fiduciary has formed the relevant view, could reasonably hold it, is free from conflict, and has disclosed material sufficient for review. A proportionate scheme to scrutinise and settle claims may satisfy that standard despite its voluntary character and negotiated costs.

Removal requires an objectively demonstrated risk that continued office will prejudice proper administration. Mere mistrust is insufficient. Necessary parties’ costs of a directions application normally come from the estate; genuine opposition does not alone justify adverse inter partes costs.

The Bank, as executor of Jimmy Savile’s estate, faced numerous allegations of sexual assault. The claims could exhaust the estate if established, but many were unsubstantiated and potentially time-barred. The Bank negotiated a scheme for the scrutiny, assessment and possible settlement of claims.

Sales J approved the Bank’s entry into the scheme, refused the charitable residuary beneficiary’s application to remove the Bank, ratified expenditure under Insolvency Act 1986 section 284(1), and made adverse indemnity costs orders against the Trust: [2014] EWHC 653 (Ch) and [2014] EWHC 1683 (Ch).

The Trust appealed. The central issues were whether the Scheme was a proper exercise of the executor’s powers, whether the Bank should be removed, whether expenditure should be ratified, and how the costs of the proceedings should be borne.

1. The appeal was allowed only as to costs. Patten LJ gave the judgment, with which Gloster and Bean LJJ agreed. The approval of the Scheme, refusal to remove the Bank, and validation of expenditure were upheld.
2. An executor must preserve and administer assets for creditors and beneficiaries, but alleged personal-injury claimants whose claims have not been substantiated are contingent creditors. They need not be treated as having an equal current entitlement to beneficiaries or established creditors. The executor was nevertheless obliged to investigate claims that might prove valid, rather than simply ignore them.
3. The application was properly a category 2 approval application under Public Trustee v Cooper, [2001] WTLR 901. Such approval requires a proposed exercise of the fiduciary’s own discretion, not a surrender of it. Although the Bank’s evidence and apparent neutrality were open to criticism, the judge had sufficient material and correctly asked whether a reasonable executor could lawfully adopt the Scheme.
4. The Scheme was a proportionate means of scrutinising and quantifying claims, filtering out unmeritorious claims and encouraging settlement below likely litigation awards. Its voluntary nature, absence of a costs penalty for rejected claimants, and negotiated allowances for historic costs did not place it outside the range of permissible administration. Notice and subsequent court approval of distribution could in practice give the estate finality. The limitation defence under Limitation Act 1980 section 11 was not a complete answer where the court might disapply the period under section 33.
5. The Trust had not shown that continued appointment of the Bank would prejudice proper administration. Applying Letterstedt v Broers, (1884) 9 App Cas 371, lack of confidence alone was insufficient. Replacing the Bank while the approved Scheme operated would risk further delay and expense.
6. The section 284(1) validation order was proper. The estate was not shown to be insolvent, and the earlier directions application had sought approval for significant expenditure. Challenges to the reasonableness of solicitors’ bills remained reserved.
7. The approval application fell within the first or second Re Buckton category. The Trust’s genuine objections did not justify adverse costs orders. The Trust’s and PI claimants’ costs of that application were payable from the estate, as were the Bank’s costs subject to later scrutiny. The hostile removal application was a third-category dispute, so the Trust remained liable for the Bank’s indemnity costs; no order was made for the PI claimants’ or Secretary of State’s costs of that application.

• Court of Appeal (Civil Division): Allowed the appeal only on costs. The approval, removal and validation orders were upheld: [2014] EWCA Civ 1632.
• High Court, Chancery Division (Sales J): Approved the executor’s entry into the Scheme, dismissed the Trust’s application to remove the executor, and ratified expenditure: [2014] EWHC 653 (Ch).
• High Court, Chancery Division (Sales J): Made the associated costs orders, which the Court of Appeal varied: [2014] EWHC 1683 (Ch).