LexisNexis | Leading Estates Cases: Disputes Between Beneficiaries and Executors or Administrators

LexisNexis | Leading Estates Cases: Disputes Between Beneficiaries and Executors or Administrators

LexisNexis | Leading Estates Cases: Disputes Between Beneficiaries and Executors or Administrators 900 642 Hugill & Ip
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In our last article, we covered some of Hong Kong’s landmark contentious estate cases, that concerned disputes between beneficiaries of estates. Today, we delve deeper into leading cases – in both the U.K. and Hong Kong – that concern disputes between beneficiaries and executors / administrators.

There are many complex issues related to estates and it’s common for disputes to arise between executors / administrators and beneficiaries. There are different duties attached to each role and it’s imperative to fully understand rights and obligations when managing estates, especially when disputes arise.

Removal or replacement of executors

One of the greatest disputes between beneficiaries and executors of estates is the removal or substitution of executors or administrators.  We have discussed how to remove an executor in a previous article, Execute the Executor!. In Hong Kong, section 33(3) of the Probate and Administration Ordinance (Cap. 10) gives the Court the power to remove an executor; section 36 of the Ordinance grants power to appoint an individual as the administrator of the deceased’s estate. Several cases also highlight the governing principles and the jurisdiction of the Court.

Case Study 1: Court’s power to remove an executor not limited to misconduct

Re, Steel. Also known as Angus v Emmott [2010] EWHC 154 (Ch)

The background facts to Angus v Emmott are unusual.  It concerned the estate of Anthony Steel (“the Deceased”), who died in September 2007.  In 1979 the Deceased was convicted of brutally attacking and murdering a woman and sentenced to 19 years in jail, released in 1998.  All along, he maintained his innocence.  The Court of Appeal quashed his conviction in February 2003, and the Deceased successfully applied for compensation from the Home Office. Due to the length of his imprisonment, the award was likely to be substantial, which thereby required a determination by a special Assessor.  He died before written submission prepared by counsel for the determination could be forwarded to the Assessor (“the Written Submission”), which would become the crux of the dispute between the executors. The total amount claimed exceeded £2.1 million.

The Deceased’s Will named three executors: his sister and brother in law (“the Emmotts”), and his partner, Margaret Angus (“Mrs. Angus”).  The Emmotts and other members of the Deceased’s family were entitled to pecuniary legacy totalling £120,000; and Mrs. Angus was entitled to the residuary beneficiary of his estate.  It was known that friction existed between the Emmotts and Mrs. Angus.  Due to the Emmots’ refusal to approve of the content of the Written Submission, Mrs. Angus applied to the Court for removal and replacement of them as the executors of the Deceased’s estate, and also requested the Court’s direction regarding the dispute of the Written Submissions.

In their decision, the Court quoted Lord Blackburn’s judgement in Letterstedt v Broers (1884), emphasizing that “It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.”  In other words, the primary concern of the Court in adjudging a situation where conflict arises between beneficiaries and executors, would be to consider the proper execution of the trust in the interest of the beneficiaries.  However, even with the Letterstedt principles, it was held that the Court’s power to remove executors is not limited to misconduct – where a “situation arising between the trustees has become impossible or improbable” the Court is justified and “required” to interfere, particularly where the interests of the beneficiaries would be compromised.

While the Court did not find misconduct on the part of the Emmotts, the Court accepted that “a situation has been reached in which there is such a degree of animosity and distrust between the executors that the due administration of [the Deceased’s] estate is unlikely to be achieved expeditiously in the interests of the beneficiaries unless some change is made.”  The tension between the Emmotts and Mrs. Angus had become plainly obvious as the two sides had “engaged in hostile litigation with each other twice in as many years” since the death of Mr. Steel in 2007.  The Court ultimately removed all three executors (both the Emmottts and Mrs. Angus), holding that it would be “the safest and most appropriate course to ensure the proper administration of the estate in the interests of all beneficiaries” and replace them with an individual.

Case Study 2: Removing an executor in absence of wrongdoing

Heath v Heath [2018] EWCH 779 (Ch)

The Deceased died in 2015 at aged 93, and was survived by her three adult children, Dr. James Dominic Heath (“Dominic”), Dr. Jeremy Heath (“Jeremy”), and Mr. Timothy Heath (“Timothy”).  In her will dated 17th April 1971, and three codicils, she appointed all three brothers as executors and equal beneficiaries to her whole estate, valued at approximately £1.8 million.  The claim was brought by Dominic and Jeremy against Timothy, seeking the removal of the latter as an executor to their mother’s estate.

Timothy had lived with and provided care for the Deceased for several years, and thereby claimed that he was entitled to a greater share of the estate than the third provided for in the Deceased’s Will, and should be “recompensed” for his services to his mother – “a debt which the estate ought to pay”.  He also claimed there was a later will made in 2002, and that “[the Deceased] recognized his greater contribution” and left him the entire estate.  There was no proof of the alleged will made in 2002.  His brothers, Dominic and Jeremy claimed that Timothy “has frustrated and continues to frustrate” the process for obtaining the grant of probate, among other refusals and failures that obstruct the administration of the Deceased’s estate.

The Judge was “not impressed by [the brothers’] claim of impropriety against Timothy”.  It was held that the brothers’ claim to remove Timothy as an executor was “well-founded”, but there was an “absence of wrongdoing”, as his position “[gave] rise to a conflict of interest between his duties as executor and his potential claim as a claimant against the estate.”  The Court ordered for Timothy to be removed as an executor of the Deceased’s estate, but in order to adequately protect his interests in his absence he was to be replaced by an independent solicitor to act as the third co-executor.

Case Study 3: “Necessity or convenience” of removing an executor

Re Estate of Loo Che Chin [2013] HKEC 377

Under his Will, the Deceased bequeathed his HK$1.2 billion estate in six equal shares to his five children and son-in-law.  Among his children, C was named as an executor.  Following his death, the beneficiaries divided into “two warring camps”, and another of the Deceased’s children, J, applied for C to be “passed over as executor on the ground of necessity or convenience based on hostility and loss of mutual trust among the siblings” pursuant to s.36 of the Probate and Administration Ordinance (Cap. 10) (“the Ordinance”).

Section 36 can be applied to four different, but overlapping scenarios, as explained in Re Ho Wai Man []:

  1. where a person dies wholly intestate as to his estate;
  2. where a person dies … leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate;
  3. where the executor is, at the time of the death of such person, resident out of Hong Kong; or
  4. where it appears to the Court to be necessary or convenient to appoint some person to be the administrator of the deceased’s estate or of any part of such estate, other than the person who, if the Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate.

The general approach to “necessity or convenience” as a ground for removal was stated by Jeremy Poon J (the same judge writing the current judgement) in Re Estate of Haque Shaquil:

Whether or not the Court will exercise the discretion depends on the actual circumstances of the case. The circumstances are not limited to those in connection with the estate itself or its administration, but can extend to any other circumstances which the Court thinks are relevant, which lead the Court to think that it is necessary or convenient to pass over the executor … The burden rests with the applicant to satisfy the Court that such circumstances exist

And ultimately, the Court must exercise discretion for the best interests of the estate.  Poon J stressed in obiter of the present case, that future cases utilising section 36 of the Ordinance should exercise discretion in citing other contested applications, as they are fact sensitive.

It was held that while hostility between an executor and beneficiary were not per se good reasons for removing the executor, “hostility which affected the administration was a relevant factor” and removal could happen “if, due to the hostility he was proved unfit to perform his duties or a breakdown in the relationship had or could cause difficulty in the administration.”  The evidence given by the siblings evidenced the breakdown of the relationship and mutual distrust between C, and J and her supporters, beginning with the death of their mother with matters relating to the administration of her estate.  The Judge also commented that the size of the Deceased’s estate may suggest that administration would not be as straightforward as he contended, and continued hostility could result in lengthy litigation.  It was ordered that C be passed over as an executor, and independent accountants were appointed to administer the estate.

Final thoughts

The executor or administrator is obliged to take necessary steps to protect the interests of those who have an interest in the estate, however – since they might also be a beneficiary – often their decisions might be perceived as prejudicial to the interest of other beneficiaries. Challenging the conduct of the executor or administrator can at times be perceived as serving ulterior motives or as making a personal attack.

Thorough advice from an Estate lawyer is crucial to identify how to access your specific situation and decide the best course of action to be put forward.

 

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.


Originally published by LexisNexisThis document is available on Lexis Advance® Hong Kong Practical Guidance

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