National Westminster Bank Plc v Lucas & Ors

The Court of Appeal upheld the High Court's approval of a negotiated scheme for processing personal injury claims against the estate of Sir James Savile, ratified the executor's validated expenditure under s.284(1) of the Insolvency Act 1986 and dismissed the Trust's application to remove the Bank as executor, but allowed the Trust's appeal in relation to certain adverse costs orders. Key legal principles applied were the executor's duty to preserve and administer estate assets for the benefit of beneficiaries and creditors, the court's supervisory role under CPR Part 64 when approving significant trustee decisions, the requirement that the trustee provide sufficient material for the court to assess the propriety of a proposed course of action, and the proper exercise of the Limitation Act 1980 regime (notably s.11 and the court's discretion under s.33) in considering historic sexual abuse claims.

The Court concluded that the Scheme provided an appropriate mechanism for scrutinising and, where appropriate, settling claims (including fixed tariff levels and costs provisions), that the judge had sufficient material to approve the Scheme and to ratify past and prospective expenditure subject to later scrutiny, and that there was insufficient objective evidence that the Bank's continuation as executor would impair administration. The Court of Appeal varied the costs orders made by Sales J., holding that the Trust's costs of the approval application should be paid from the estate on an indemnity basis and that the Trust should pay the Bank's costs of the removal application on an indemnity basis; it refused to order the Trust to pay the personal injury claimants' costs of the removal application.

Background and parties

The deceased, Sir James Savile, left a residuary estate to the Jimmy Savile Charitable Trust. National Westminster Bank plc was the named executor. Following broadcast allegations of serial sexual abuse, the Bank received numerous prospective personal injury (PI) claims. The Bank feared that successful PI claims and associated costs might exhaust the estate and so sought court directions and approval for a negotiated claims processing scheme (the "Scheme") and validation of expenditure.

Procedural history

• Initial Part 64/Part 8 applications were made to Sales J. in the Chancery Division in early 2013; interim orders were made and representative PI claimants and the Trust were joined.
• After extensive negotiation among solicitors for the Bank, representative PI claimants and third parties, Sales J. approved the Scheme and ratified past and projected legal expenditure in an order dated 1 April 2014; he dismissed the Trust's application to remove the Bank as executor and made consequential costs orders.
• The Trust appealed to the Court of Appeal challenging the Scheme's approval, the ratification under s.284(1), refusal to remove the Bank, disclosure and conduct issues, and the adverse costs orders.

Nature of the Scheme and principal issues

• The Scheme provided a mechanism for claimants to submit claims, set out eight categories of assault with tariff damages for each, fixed costs payments for claimants and procedures for scrutiny by counsel instructed by the Bank. Payments under the Scheme required court approval to become final and to afford protection to the executor.
• Key issues included whether the Bank had acted improperly in treating PI claimants as having equal status to beneficiaries, whether the judge had sufficient evidence to approve the Scheme and to ratify expenditure under s.284(1), whether alternative dispute resolution or other methods should have been considered, whether privileged/confidential material had been improperly disclosed, and whether the Bank should be removed as executor. Costs allocation and the correct approach to costs in Part 64/Part 8 trustee directions applications were also in issue.

Court of Appeal reasoning and conclusions

• The Court accepted that the executor must balance beneficiaries' and creditors' interests but that it was not wrong in principle to create a Scheme to permit practical scrutiny and potential settlement of numerous contingent PI claims. The Scheme was intended primarily as a scrutiny mechanism and would facilitate assessment of genuine claims and thereby enable the executor to seek sanctioned distributions.
• The Court held Sales J. had sufficient material before him to decide whether a reasonable executor could enter the Scheme and that the Scheme fell within the range of reasonable options. Concerns about drafting or further detail did not render the Scheme inherently unsuitable, and the judge had preserved the right to challenge solicitors' bills on reasonableness.
• The Court rejected the Trust's complaints that the Bank should have litigated limitation points as the unanimous position before the judge was that limitation was unlikely to dispose of the claims in practice and s.33 discretion would tend to favour vulnerable claimants.
• On removal, the Court held the Trust had not shown that continuation of the Bank as executor would be detrimental to administration; a change of administrator would risk disruption to the already operating Scheme.
• On costs, the Court of Appeal found Sales J. erred in principle in ordering the Trust to pay substantial inter partes costs of the approval application. The Court reallocated costs: the Trust's and the PI claimants' costs of the approval application to be paid from the estate on an indemnity basis; the Bank to recover its costs from the estate; the Trust to pay the Bank's costs of the removal application on an indemnity basis; and no order for payment by the Trust of the costs of the PI claimants and Secretary of State for the removal application.

Relief sought

• The Bank sought court directions to enable administration of the estate in the face of numerous PI claims, approval of the Scheme, permission to issue proceedings without naming defendants, and ratification under s.284(1) of past and prospective expenditure. The Trust sought removal of the Bank and other relief, and challenged approval and validation orders.

Appeal allowed in part. The Court of Appeal upheld Sales J.'s approval of the Scheme, his dismissal of the Trust's removal application and his s.284(1) ratification of expenditure, concluding the judge had sufficient material and the Scheme was within the range of reasonable options for an executor faced with numerous contingent PI claims. However the Court allowed the Trust's appeal against the specific adverse costs orders made by Sales J., finding those orders to be wrong in principle in parts, and reallocated costs (Trust and PI claimants' costs of the approval application to be paid from the estate on indemnity basis; Bank to recover its costs from the estate; Trust to pay Bank's costs of the removal application on indemnity basis; no order for costs in favour of PI claimants and Secretary of State for the removal application). The Court emphasised the trustee's duty to provide sufficient material when asking the court to sanction a course of action and the court's supervisory role when beneficiaries' and claimants' interests are engaged.

On appeal from Sales J., Chancery Division: approval of the Scheme and dismissal of removal application at first instance [2014] EWHC 653 (Ch) and costs judgment [2014] EWHC 1683 (Ch); appeal heard in the Court of Appeal and decided [2014] EWCA Civ 1632 (16 December 2014).