Lyons & Anor v Kerr-Robinson

An undertaking not to dispose of or distribute estate assets prohibits transferring those assets to a third party to hold on trust, even where the beneficial value remains with the transferor. A personal representative who uses estate money to fund litigation conducted for personal benefit cannot ordinarily deduct those costs when accounting to the estate. The burden lies on the personal representative to prove that claimed expenses were proper estate expenses. Relief under section 61 of the Trustee Act 1925 requires honesty, reasonableness and fairness in excusing the breach; those requirements are cumulative. Failure to obtain the court’s directions, particularly in contentious proceedings involving alleged personal wrongdoing, may justify refusal of relief.

The claimants sought orders concerning the administration of the estate of Cynthia Maria Lyons, including payment by the defendant of estate monies transferred to her solicitors, Blueprint, and a shortfall arising from transfers to her personal account. The defendant had obtained an erroneous grant of administration, which was later revoked, and had given undertakings to the court not to dispose of or distribute estate assets.

The application required determination of whether payments into Blueprint’s client account and subsequent payment of Blueprint’s litigation invoices breached the undertaking or later order, whether the defendant could deduct the litigation costs as estate expenses, whether relief was available under section 61 of the Trustee Act 1925, and what other expenses could properly be set off.

1. Disposal of estate assets. The defendant breached her undertaking in respect of the £27,107.41 transferred after it was given. Transferring estate money from her Halifax account to Blueprint’s client account was a disposal because the money came under the legal ownership and control of another person, notwithstanding that Blueprint held it on trust for the defendant’s client. The earlier £59,657.71 was also implicated because the defendant allowed estate money to be taken over to pay Blueprint’s invoices. The court’s conclusion was supported by the distinction between disposing and distributing in the undertaking and by the reasoning in Re Barn Crown Ltd [1995] 1 WLR 147 and R (Revenue & Customs Prosecution Office) v R [2007] EWHC 2393 (Admin), though neither authority was treated as determinative.
2. Knowledge and breach. Contempt did not require proof that the defendant understood the legal consequence of her conduct. It was enough that she knew the undertaking, knew the relevant facts, and intentionally performed the acts or omissions constituting the breach. In any event, she failed to safeguard and transfer the money as required by the later order.
3. Accounting and litigation costs. A personal representative bears the burden of proving that deductions are proper. Under CPR Practice Direction 46 paragraph 1, relevant considerations included obtaining directions, acting for the benefit of the estate, and acting reasonably. The litigation defended allegations of the defendant’s personal wrongdoing and was conducted through persons not authorised to conduct litigation at excessive rates. The defendant therefore could not deduct the Blueprint payments.
4. Section 61 relief. Section 61 of the Trustee Act 1925 did not assist. Although the defendant may have acted honestly, she had not acted reasonably and it was not fair to excuse her after she failed to obtain directions in contentious proceedings. The cumulative requirements were not met.
5. Other expenses and order. The defendant established only £450.61 of proper expenses against the £2,900 shortfall, leaving £2,450.02 payable. The application succeeded. The defendant was ordered to pay the administrator £86,765.12 and £2,450.02, in each case with interest.

First-instance decision. The judgment does not state any subsequent appellate history.