What can be done when a personal representative causes a financial loss to an estate?

A personal representative (“PR”) of an estate is the person(s) appointed by a valid will or who takes out a Grant under the rules of intestacy (where there is no will). The PR is charged with administering the estate either under the provisions of the will or in accordance with the statutory method of distributing assets where there is no will – the rules of intestacy. This blog will explore the different claims that can be made where a PR has caused a financial loss to an estate.

Duties of PRs

Section 1 of the Trustee Act 2000 imposes the standard of care for PRs. The PR must exercise reasonable care and skill when acting in this role, and any specialist experience the PR has or holds themselves out to have is taken into account – this means that a solicitor experienced in probate matters will be held to a higher standard than a lay individual. Section 25 of the Administration of Estates Act 1925 also requires PRs to collect in and safeguard the assets of the deceased, provide an inventory of the assets to the court if required and deliver up a grant of probate if necessary. PR’s also have fiduciary duties to, amongst other things, act in the best interest of the estate / beneficiaries, avoid conflicts of interests and to not profit from their role. The duties of a PR are explored more in our previous blog here.

This duty of care is owed to the beneficiaries and any creditors of the estate and the PR may be liable for any losses arising from a breach of their duties. For beneficiaries, they have a right to have the estate properly administered by the PR; generally speaking when the administration is complete, only then do the residuary beneficiaries have a legal and equitable interest in the assets.

A beneficiary has a number of options to seek compensation for losses caused by a PR; this can be by taking personal action against the PR or to trace and recover estate assets that have been misappropriated. Another option is to seek the removal / replacement of the PR by an Independent Administrator. That individual can then seek to recover losses on behalf of the estate. The removal / replacement of a PR and role of an Independent Administrator is explored more in the following blogs

• Independent administrators
• Removal and replacement of a PR

Personal Claims

There are various personal claims which a beneficiary can take against a PR.  For example, a claim for negligence by which, in general terms, the beneficiary must establish that the PR breached their duties which caused, both factually and legally, the claimed financial losses. If such a claim succeeds, the PR might then be ordered to compensate the estate for the financial loss they caused from their own personal assets.

If more than one PR has breached their duties and caused a loss to the estate, the liability of the PRs in breach is joint and several which means the beneficiaries can sue any of the PRs for their entire losses. Furthermore, whilst a PR is not automatically vicariously liable for the losses caused by another PR, the other PR may still be liable for breaching their duties to safeguard the estate assets by not stopping the other PR.

There are some important defences to note in regards to taking personal action against a PR. If the beneficiaries are adults with capacity who, with full knowledge of the relevant facts, agreed to the action taken by the PR at the time, they might be later barred from bringing a claim relating to this. The court also has discretion to absolve a PR of their breach of duty if they consider that the PR “has acted honestly and reasonably and ought fairly to be excused for the breach.” Finally, if the PR has been appointed under a will, the will itself may exclude the PR from liability for certain kinds of breaches but such clauses are ordinarily interpreted strictly by the courts so the PR will be unlikely to rely upon the clause unless the breach was neither intentional or reckless and the PR acted in good faith.

Proprietary Claims

If a beneficiary is able to identify misappropriated estate property or its proceeds in the hands of a PR or third party, they might be able to bring a proprietary claim to recover the asset or its proceeds.  Beneficiaries are entitled to bring such claims relating to particular estate assets in certain circumstances.

However, in such circumstances, the best approach is usually for the beneficiary to seek the PR’s removal / replacement with either themselves or an Independent Administrator.  The new PR can then take the necessary steps to recover any estate assets on behalf of the estate.

At Anthony Gold, we specialise in both pursuing claims against PR’s on behalf of beneficiaries and acting in the role of Independent Administrator.

If you need assistance with any of these issues, please do not hesitate to contact one of our specialists, who will be happy to help.

Upcoming seminar: Dealing with problematic Personal Representatives – pre and post removal

Don’t miss our upcoming seminar dealing with problematic personal representatives on 14 May from 18:30. Tom Dickinson and Elliot Booth will explore the Court’s current approach, recent case law, and the practical options available to beneficiaries and Personal Representatives when concerns arise in the administration of an estate. Register now to secure your place.