PR liabilities

Question 1

Who does the PR owe duties to and what are their liabilties?

Answer 1

Beneficiaries and the creditors.
* a claim against a PR for breach of PR duties is a devastavit and may be brought where there is a loss to the estate because of PR wrongoding
* C will seek a court oder that the PR makes good the loss using personal assets
* even if no loss, a breach of duty can arise in which C may seek account of unauthoirsed profit and/or transaction to be set aside.

Question 2

What can a claim against a PR be based on?

Answer 2

• Maladminstration:
  
  • incorrectly adminstering estate by making wrong distributions to beneficiaries
  • using residurary estate to meet liabilities which should have been part from other parts of estate
  • paying legacies before bebt without retaining sufficient funds for creditors
• Misue of assets:
  
  • making personal use of estate assets
• Negligence:
  
  • unreasonable delay in carrying out administration
  • failing to invest or making poor investment decisions in breach of duty of care
• Breach of fiduciary duty:
  
  • breach of no conflict rule
  • breach of no profit rule
  • self-dealing

Question 3

How can a PR who fails their duties be removed?

Answer 3

• S.50 Court Order AJA appointing a replacement PR
• Administration action, where court would take over adminitsration itself

Question 4

What actions can PRs take for breach of their duties?

Answer 4

• Seeking court direction
• S.48 AJA application
• S.27 Trustee Act notice
• Benjamin Order
• Presumption of Death Act
• Insurance
• Payments into court
• Indemnity from beneficiary
• S.61 Trustee Act

Question 5

How can a PR protects itself by seeking court direction?

Answer 5

If PRs can forsee difficulties in administration and are concerned this may lead them incurring personal liability, they may seek court directions:
* administration action application to have estate administered by court
* specific relief, an application for guidance on a particular matter.

most prudent course of action but expensive and time consuming

Question 6

How can a PR protects itself by s.48 Administration of Justice Act?

Answer 6

• Application under s 48 can be made instead of court directions, if question is over construction of the will - this application is to distribute the will in accordance with written legal opinion
• opinion given by person must meet criteria of s 48 and no dispute making it inappropriate for court to grant permission

Question 7

How can a PR protects itself by S27 Trustee Act?

Answer 7

General rule is that PRs who distribute estate remain personally liable to unpaid beneficiaries and creditors, even if they were unaware of their claim at the time of administration.

To prevent liability, trustees may publish notice of their intention to distribute to known beneficiaries 2 months after date of advertisement. Notice must be placed in:
- London Gazette
- newspaper circulating area in which land is stipulated and
- any other newspaper which is appropriate

Question 8

Who does s.27 protect/does not protect PR from?

Answer 8

• Only protects claims by unknown beneficiaries and creditors
• Protects PRs from claims against them in their capacity as PR not beneficiary
• DOES protect PR if they distribute assets ignoring the claim of known but missing beneficiary or creditor.

Question 9

How can a PR protects itself by a Benjamin Order?

Answer 9

In cases of known but missing beneficiaries, s.27 TA will not protect PRs but PRs may instead seek a Benjamin Order:
* permitting them to distribute estate on basis that missing beneficiaries have died
* may permit trustees to distribute estate under different assmumption (e.g., missing beneficiary had no children)
* before order is awarded, PRs must make full enquiries to attempt to establish true position and demonstrate there is no reasonable prospect of knowing true position without diproportionate expense

Question 10

How can a PR protects itself by Presumption of Death Act?

Answer 10

PRs may make application under this act for court order declaring that person thought to have died, or not known to have been alive for 7 years or more has died
* order will confirm presumed date of death and relates generally to deceased’s property and affairs
* if criteria can be met, may be quicker and esaier to use this rather tahn requesting Benjamin Order

Question 11

How can a PR protects itself by Insurance?

Answer 11

• PRs can purchase insurance to cover risk that beneficiary or creditor return after administration is complete and make a claim against PR for shares they should have received (missing beneficiaries/creditors)
• may not be able to obtain insurance if risk is too high - less expensive than seeking Benjamin Order

Question 12

How can a PR protects itself by idemnity?

Answer 12

• PRs could seek an indemnity from beneficiaries they can trace - beneficiaries promise to reimburse PRs for any loss PRs suffer as a result of being sued by disappointed creditor or beneficiary

may not be a preferred option as its diffisult to trace beneficiaries providing idemnity

Question 13

How can a PR protects itself by payment to court?

Answer 13

• PRs could pay legacy amount into court and distribute balance of estate - person who benefits from share paid to court may not favour this option
• while purchase of insurance would be a preferable option, payment into court may be suitable where beneficiary can be located but refusing to accept their inheritance

Question 14

How can a PR protects itself by exoneration by the court?

S.61 AJA

Answer 14

• PR may apply to court for an order exonerating them, wholly or partly, from personal liability for breach
• Order will not be made unless court considers that PR:
  
  • acted honestly and reasonably
  • ought fairly to be excused for breach of trust and omitting to obtain directions of court in the matter

Question 15

Exemption clauses in will?

Answer 15

Testator’s will may contain clauses which exclude or restrict liability for PR’s wrongdoing - clauses may range from innocent mistake to gross negligence

can also exclude liability of statutory duty of care owed