Kanta Kaur v Kouri Kaur & Ors

A beneficiary may bring a derivative claim on behalf of an estate where special circumstances make that course just, including where the personal representative properly remains neutral in a dispute between adult beneficiaries and the estate’s administration is otherwise suspended.

In deciding whether a transfer from parent to adult child is repayable, the court must determine the donor’s intention. The presumption of advancement remains applicable between parent and child, although it may be displaced by evidence. Subsequent statements by the recipient do not establish the donor’s intention unless they amount to clear admissions.

Where no common-law contract of repayment exists, equity may impose an equitable debt. A family document described as “Heads of Agreement” is not binding without evidence of an intention to create legal relations.

The claimant, a beneficiary of the estate of Raj Kaur, brought a derivative claim against her sister, Kouri Kaur, concerning mortgage proceeds advanced to Kouri, jewellery retained after Raj Kaur’s death, rental receipts from the former family home, and a document entitled “Heads of Agreement”. The professional administratrix had declined to pursue the claims on behalf of the estate.

Preliminary issues concerned discontinuance by a co-claimant, the permission required for a derivative claim, the use of witness statements from earlier proceedings, and the status of a Scott Schedule. The substantive questions were whether the mortgage advances were loans or gifts, whether jewellery or rent had been misappropriated, and whether the family document was contractually binding.

1. Derivative claim. The court permitted the claim to proceed derivatively. The claims belonged to the estate, but the administratrix had reasonably adopted a neutral position in a dispute between adult beneficiaries. Applying the principles in Hayim v Citibank NA and Roberts v Gill, special circumstances existed because the dispute had remained unresolved for years, the estate’s distribution was suspended, all relevant parties were before the court, and the claim was pursued at the claimant’s own expense.
2. Discontinuance. A notice of discontinuance by one of two claimants was ineffective without the other claimant’s written consent or the court’s permission under CPR r. 38.2(2). The co-claimant was treated as having ceased to be a claimant and was joined as a defendant, so that he remained bound by the proceedings.
3. Mortgage advances. The relevant issue was the intention of the donor, not the recipient. The presumption that gratuitous payments are repayable was countered by the presumption of advancement between parent and child. That presumption remains applicable to an adult financially independent child, though it may be rebutted by evidence. On the facts, the arrangements were intended to provide assistance to Kouri while enabling Raj Kaur to realise value from the home and receive continuing payments. The advances were therefore repayable, subject to credit for payments made by Kouri to Raj Kaur over and above mortgage interest, post-death interest payments, and any established payment for Thakur’s wedding. The estimated net liability was approximately £80,000, subject to those adjustments.
4. Nature of liability. The transfers were legally effective and did not create a common-law contract of repayment. The repayment obligation arose in equity as an equitable debt, rather than as damages or a compensatory breach-of-trust liability.
5. Jewellery and rent. The claimant failed to prove on the balance of probabilities that jewellery had been misappropriated. The executor’s discretion to distribute jewellery among the children included power to reserve items for grandchildren. There was also no evidence that Kouri received rental income for her own benefit which was unaccounted for. No delivery-up order or account was made.
6. Heads of Agreement. The document recorded a family arrangement intended to repair relations, not a binding contract. The description “Heads of Agreement” was relevant but not conclusive. The court required evidence of an intention to create legal relations and found none.
7. Interest. Interest was to be addressed at a later hearing. The court indicated that equitable compensation, calculated at an investment rate from the date of Raj Kaur’s death on the net amount due, was appropriate.