LEVEL 6 - UNIT 14 LAW OF WILLS AND SUCCESSION SUGGESTED ANSWERS - JUNE 2011

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1 LEVEL 6 - UNIT 14 LAW OF WILLS AND SUCCESSION SUGGESTED ANSWERS - JUNE 2011 Note to Candidates and Tutors: The purpose of the suggested answers is to provide students and tutors with guidance as to the key points students should have included in their answers to the June 2011 examinations. The suggested answers set out a response that a good (merit/distinction) candidate would have provided. The suggested answers do not for all questions set out all the points which students may have included in their responses to the questions. Students will have received credit, where applicable, for other points not addressed by the suggested answers. Students and tutors should review the suggested answers in conjunction with the question papers and the Chief Examiners reports which provide feedback on student performance in the examination. Question 1 SECTION A The case of Scammell v Farmer (2008) was not governed by the provisions of the Mental Capacity Act 2005 (MCA) but put forward the suggestion that s3 MCA is a modern restatement of the test laid down in Banks v Goodfellow (1870). Section 3(1) MCA provides that a person is unable to make a decision for himself if he is unable to understand the information relevant to the decision, retain that information and use or weigh that information in the course of making a decision and communicate his decision by any means. Section 2(1) MCA refers to a person being unable to make a decision because of an impairment of or a disturbance in the functioning of the mind or brain. The Act is couched in fairly general terms whereas the case law provides much more detailed guidance. The test in Banks sets out the type of information a testator must be able to understand and use. It was said in Banks v Goodfellow that a testator must understand the nature of his act and its effects, ie that he understands he is making a will to take effect on his death; be aware of the extent of the property he has to dispose of in general terms; be able to appreciate the claims on his generosity; and no disorder of the mind should poison his affections or prevent the exercise of his natural faculties and no insane delusion should influence his disposal of property. There is much case law that has explained and expanded on the common law rules. For example, the need to be able to appreciate the moral claims upon him was considered in Harwood v Baker (1840), where it was held that the testator did not have sufficient recollection of other family members, so the will was invalid for lack of testamentary capacity. However, a testator is not obliged to meet the claims on his bounty - Boughton v Knight (1873), Fuller v Strum (2002).This can be compared with s1 MCA which states that a person is not to be treated as unable to make a decision merely because he makes an unwise one. Page 1 of 14

2 Insane delusions have affected capacity to make a will. In Banks v Goodfellow, the delusion had no bearing on the provisions in the will, but this can be contrasted with eg Dew v Clark (1826) or Kostic v Chaplin and others (2007), where they did affect the provisions, which were therefore invalid. Section 3(3) MCA provides that only being able to retain information for a short time does not prevent a person from being able to make a decision and this can be compared with Tchilingirian v Ouzounian (2003), where a testatrix was held to have lacked capacity as, by the time she reached the end of the will, she would not have been able to recall what it said. Section 2 MCA provides that a person lacks capacity if at the material time he is unable to make a decision. The Act does not explain the phrase italicised here but case law has taken account of the fact that a person's mental competence may fluctuate. For example, even if a testator is known to have been suffering from a mental illness, the will may be valid if it can be shown that it was made in a lucid interval, as in Cartwright v Cartwright (1793). This can be contrasted with Richards v Allan (2000), where the testatrix was visited by her doctor and friend on the day she signed her will and they both found her to be confused. The court thought it unlikely that the will had been executed in a lucid period. The courts have also taken account of diminishing testamentary capacity under the rule in Parker v Felgate (1883), (confirmed in Perrins v Holland (2010)): if the testator had capacity at the time he gave instructions to a solicitor to prepare his will, the will was prepared in accordance with those instructions and, when executing the will, the testator understood that he was executing a will for which he had previously given instructions, then the will is valid, even though he lacked full capacity at the time of execution. This was confirmed in Clancy v Clancy (2003) but, in Battan Singh v Armichand (1948), the Privy Council warned that caution was needed if the instructions were relayed to the solicitor by a third party. Under case law, capacity is presumed if the will seems rational on its face, and it would be for those challenging the will to bring forward evidence to the contrary, if there is any. This can be compared to s1 MCA, which states that a person must be assumed to have capacity unless it is established that he lacks it. The MCA Code of Practice has stated that the definition in the Act is in line with common law tests and does not replace them. The Act was intended to deal with mental capacity in general and is not specific to wills, where the case law is likely to remain important because it contains far more detail and specifically covers the issues surrounding capacity to make a will. Question 2 This question requiresa consideration of the extent to which the rules relating to (a) donationes mortis causa and (b) privileged wills undermine the need to provide reliable evidence of a person's testamentary intentions, which is the justification for the normal formality requirements. The normal formality requirements are contained in s9 Wills Act 1837, which requires the will to be in writing, signed and witnessed by two witnesses. The reasons behind this are prevention of fraud (the reliable evidence referred to in the quotation) and ensuring that the wishes express a person's actual testamentary intent. However, in exceptional circumstances, the normal formalities are waived. (a) Donationes mortis causa Page 2 of 14

3 These are gifts intended to take effect on death which do not comply with the normal formalities, the idea being that a person who is near death may not have the opportunity to have a formal will drawn up. There are three requirements for such gifts to be valid. First, the gift must be made in contemplation of death which the donor believes to be imminent. It is not sufficient that he knows he will die one day - Gardner v Parker (1818). If the normal rules are to be relaxed, there must be sufficient justification for this so that it is only applicable where a person expects to die soon. However, this might be criticised as the rules are not restricted to someone at the point of death. The second requirement is that the gift is conditional on death in the sense that it is only intended to become fully effective if and when the person dies and, until then, it remains revocable and will be automatically revoked if the anticipated cause of death ceases eg the person recovers from an illness which he contemplated might cause his death - Re Craven's Estate (No 1) (1937). However, if the anticipated cause of death continues, it does not matter if the person in fact dies from a different cause Wilkes v Allington (1931). This requirement fulfils the need for 'testamentary' intention, in the sense that it will not be a valid DMC if it is intended to be fully effective before death. The third requirement is that there must be delivery of the item being given, in the sense of handing over dominion of the gifted property. This could be by handing over a chattel or the keys giving access to a box containing the gifted item as in eg Re Lillingston (1952). For property other than chattels, handing over the indicia of title will suffice, such as a bank book in relation to a deposit account, as in Birch v Treasury Solicitor (1951), or the keys to the box containing the deeds of a house, as in Sen v Headley (1991). This requirement offers some evidence that the gift was intended by the deceased but it is questionable whether it is reliable enough, particularly as the rules can apply to very valuable assets, such as a house. No witnesses are required, so there could be potential for someone to obtain an item of property, or the indicia of title to it, by some other means and then falsely claim that the deceased had given it to him. This does seem to undermine the idea behind s9 that reliable evidence of the deceased's intentions is needed and could be considered unsatisfactory. (b) Privileged wills The rules relating to privileged wills allow servicemen and women to make informal wills in situations where they cannot readily have access to legal advice and the means of making more formal testamentary provision. The rules are contained in s11 Wills Act 1837, as amended by the Wills (Soldiers and Sailors) Act 1918, which provide that a soldier or airman in actual military service or a mariner at sea may make an informal will. In contrast to the rules in s9, the will does not need to be in writing and can be made by a person under the age of eighteen and there is no requirement for witnesses. This seems to leave room for the evidence not to be reliable. However, the court must be satisfied that the testator possessed the necessary testamentary intention. This is illustrated by In the Estate of Knibbs (1962), where a barman on a passenger liner said a number of times that, if anything happened to him, his sister Iris would get everything but this was held not to be a statement of testamentary intent. This can be contrasted with Re Stable (1919), where the words 'If I stop a bullet, everything of mine will be yours' were held to fulfil the requirement for testamentary intent, and with Re Spicer (1949). Page 3 of 14

4 The privilege only applies in limited situations, the idea being that it is difficult for those in a war zone or at sea to make formal wills and, as they may be in danger, it is arguably important for them to be able to express their testamentary wishes without formaility. Privileged status extends to any warlike operations, even if there is no formal state of war and so applied to a soldier serving in Nothern Ireland during the troubles - Re Jones (1981). The case law has allowed privileged status to wills made by people not actually in a war zone or at sea. Examples include Re Wingham (1949), where it was held that an airman at a training camp in Canada in World War II was able to make a privileged will as he could have been posted to an operational area at any time; other examples are Re Spark (1941) and Re Colman (1958)). Seamen are regarded as 'at sea' even when on shore, if they are under orders to join their ship eg In the Goods of Newland (1952). It could be argued that this extends the exception to the need for formalities too far, as people in such situations would more easily be able to make formal wills. There is also an argument for saying that privileged wills are not really justifiable in the modern day when servicemen and women have greater access to legal advice. The privilege extends to support personnel such as army nurses - In the Estate of Stanley (1916) and typists or barmen on liners - In the Goods of Hale (1915), In the Estate of Knibbs, as they may be in as much danger as the service personnel themselves. Question 3 Spouses and civil partners, on the one hand, and cohabitants, on the other hand, are treated differently in a number of ways under the provisions of the Inheritance (Provision for Family and Dependants) Act 1975, resulting in certain disadvantages for cohabitants. The Act allows certain categories of people to apply to the court on the basis that a deceased's will or the operation of the intestacy rules did not make reasonable financial provision for them. A category for cohabitants was added by the Law Reform (Succession) Act 1995 and further amendments were made by the Civil Partnership Act Spouses and civil partners are covered by s1(1)(a). The marriage/civil partnership must be valid and subsisting at the death but, if it is, a claim may be made however short the marriage and even if the parties are no longer living together. (A former spouse/civil partner who has not remarried/entered another civil partnership can apply under s1(1)(b) but will only rarely succeed.) This can be compared with the requirements for cohabitants contained in s1(1)(ba), which covers a person (not within (a) or (b)) living in the same household as the deceased as the husband, wife or civil partner of the deceased. Difficulties can sometimes arise as to whether the couple were living as spouses or civil partners. The case of Re John Watson (deceased) (1999) shows that the court will take into account that there is variation in how spouses live, so that the fact that the couple no longer had sexual relations did not prevent a claim by the surviving cohabitant. The cohabitation must have subsisted throughout the two year period immediately prior to the death. Therefore, a former cohabitant cannot claim but the court would look at the settled state of affairs - Re John Watson, Gully v Dix (2004). It can be seen that it is much harder for a cohabitant to establish locus standi than it is for a spouse or civil partner. Prior to 1996, cohabitants could only apply under s1(1)(e) and a cohabitant who cannot show the necessary two year period can still only apply under s1(1)(e) as Page 4 of 14

5 a person maintained, wholly or partly, by the deceased, other than for full valuable consideration. The applicant must show that they were being maintained immediately before the death, the meaning of this having been considered in cases such as Re Beaumont (1980), where it was stated that the court should look at the normal, habitual state. Difficulties can arise over the idea of maintenance other than for full consideration as, if the parties contributions are equal, there can be no claim but, if there is doubt, the matter should go to trial - Jelley v Iliffe (1981). In Bishop v Plumley (1991), it was stated in the Court of Appeal that there should be a commonsense approach, looking at the situation in the round. However, this does pose problems for cohabitants who do not meet the requirements of s1(1)(ba). The standard of provision for spouses and cohabitants also differs. For spouses and civil partners, the 'spouse standard' applies, under which they do not need to show that the provision is required for maintenance - s1(2)(a). The standard applicable to cohabitants, in s1(2)(b), is such provision as would be reasonable for the applicant to receive for his/her maintenance. This means that provision for a cohabitant may be less generous than for a spouse/civil partner, as it is limited to maintenance. According to Re Coventry (1980), the level of maintenance would take account of the applicant's circumstances and the courts have taken account of the standard of living which the deceased encouraged the applicant to adopt, as in Malone v Harrison (1979). However, the standard of provision for a cohabitant is still likely to be less generous than for a spouse. The Act lays down matters the court will take into account in s3. For all applicants, the general guidelines in s3(1) apply and include the applicant's financial resources and needs and any obligation or responsibilities which the decased had towards the applicant. Account is also taken of the particular guidelines in s3(2), which vary according to the category of applicant. For spouses and civil partners, these include the applicant's age, the duration of the marriage/civil partnership and the applicant's contribution to the welfare of the family, including looking after the home and family. Similar guidelines apply for cohabitants. However, for spouses and civil partners, the court is, in addition, directed to take account of the provision which they might have expected to receive on a divorce/dissolution. This means that generous provision will normally be awarded, as illustrated by case law, such as Re Krubert (1996), Re Besterman (1984). White v White (2001) (an ancillary relief case) suggests equality of division on divorce unless there is good reason for doing otherwise (although some account is taken of length of the marriage). This was applied in Adams v Lewis (2001), where the marriage was long. The particular s3 guidelines for applications under s(1)(e) are the extent to which, basis upon which and length of time for which the deceased had assumed responsibility for the applicant's maintenance. Provision here may well be much less generous. The disadvantages faced by cohabitants under the Actcan cause hardship, particulary if the relationship has been long and/or there are children. It is questionable whether the differences are justifiable, given the increase in cohabitation and the common misapprehension that it gives rights to property, which may lead to cohabitants failing to make wills to provide for each other. It should also be noted that the intestacy rules make no provision for cohabitants, whose only recourse would be an application under the 1975 Act, under which Page 5 of 14

6 they may receive much less than their partner would have wished. The Law Commission is looking into the rules on intestacy and family provision and has suggested that the rights of cohabitants should be increased. Question 4 This question requires consideration of the rules on revocation of wills and evaluation of the importance of the role played by intention to revoke. A will may be revoked expressly or impliedly by a subsequent testamentary instrument, or by destruction, provided there is in all cases an intention to revoke animus revocandi. A will may also be revoked by subsequent marriage, which is not dependent on an intention to revoke. Revocation by a later testamentary instrument is governed by s20 Wills Act 1837, which provides that a will or codicil or part of it may be revoked by another will or codicil or by writing declaring an intention to revoke and executed in the way in which a will is required to be executed. Revocation can be contained in any document provided it is executed in accordance with s9 Wills Act and shows the necessary intention. For example, in Re Durance (1872), the testator wrote to his brother requesting him to collect and destroy his will and the letter was sufficient as it was signed in accordance with s9. Although the intention to revoke must be clear, intention alone will not suffice if the document is not duly executed. It is common for an express revocation clause to be included in a will but the intention to revoke is required; eg in Re Wayland (1951), the testator did not intend a revocation clause in a will dealing with his English property to revoke an earlier will dealing with his Belgian property. An express revocation clause may be invalid for want of knowledge and approval but the burden of proving that an express clause is not intended to revoke previous dispositions is high - Lowthorpe-Lutwidge v Lowthorpe-Lutwidge (1935). Merely stating that a will is a person's last will does not of itself revoke an earlier will - Kitcat v King (1930), even if the testator may have intended this, but a later will revokes an earlier one, by implication, to the extent that they are inconsistent eg Pepper v Pepper (1870), which would seem to accord with the testator's likely intention. Revocation may be by destruction under s20, which provides that a will may be revoked by burning, tearing or otherwise destroying the same by the testator or someone in his presence and by his direction with the intention of revoking the same. Both destruction and intention are crucial and must be present at the same time. It was held in Cheese v Lovejoy (1877) that the words 'otherwise destroying' must be construed eiusdem generis with 'burning and tearing' and so required physical destruction. In that case, the testator put a line across the will and wrote 'all these are revoked' and crumpled it and threw it into the corner of the room. The will had not been sufficiently destroyed to be revoked, even though it might seem that the intention to revoke was present and this outcome could be criticised. However, destruction of the signatures will generally be sufficient destruction to revoke the will as illustrated by cases such as Re Adams (1990), In the Estate of Morton (1887). This is likely to accord with the person's intentions. Destruction can only be done by another if in the testator's presence and by his direction. There was no revocation in In the Goods of Dadds (1857), where Page 6 of 14

7 someone burnt a codicil in an adjoining room out of sight of the testator, or in Re De Kremer (1965), where the testator's solicitor destroyed the will after telephoned instructions from the testator. These cases illustrate that, while the intention to revoke is essential, it is not enough as the testator must also follow the specific rules as to destruction. In Perkes v Perkes (1820), the will was held not to be revoked as the testator had intended to do more by way of destruction. He had torn the will into four pieces during a quarrel but was then restrained and later said it was a good job it was no worse. Destruction without the necessary intention to revoke is also ineffective. In Gill v Gill (1909), where a will was torn up by the testator's wife during an argument, it was not revoked as there was no intention on his part. In Brunt v Brunt (1873), a testator tore his will up at a time when he lacked mental capacity and so it was not revoked as there was no valid intention. In Re Booth (1926), a will accidentally destroyed by fire was not revoked. These cases show that intention to revoke is crucial and it is important to note that intention to destroy is not the same as intention to revoke. In some cases, the doctrine of dependent relative revocation - conditional revocation - applies, the issue being whether the intention to revoke an earlier will or provision was conditional on a later will or provision being valid. For example, in Re Southerden (1925), the will was not revoked when it was destroyed because of a mistaken belief that his wife would inherit everything on intestacy and, in Re Finnemore (deceased) (1992), an express revocation clause was held to be conditional on a later provision being valid. This illustrates the importance attached by the court to the testator's intention. There are presumptions as to destruction with the necessary intention if the original will was in the possession of the testator and is found in a mutilated condition at his death Lambell v Lambell (1831) or cannot be found on his death, but these are rebuttable eg Re Webb (1964). Under s18 Wills Act 1837, as amended, a will is revoked by the testator's subsequent marriage (extended to formation of a civil partnership by the Civil Partnership Act 2004). This is not dependent on intention but there will be no revocation if it appears from the will that the testator was expecting to be married to a particular person and intended that the will should not be revoked by the marriage. This means that, even here, intention may have some role to play. A will may be revoked informally during privileged status. The intention to revoke is essential and, in this situation, is all that is really needed. Question 1 SECTION B Vince's will leaves a legacy to Karen and it is unclear whether or not she survived Vince. Where two or more people die in circumstances where it is unclear who died first (commorientes), s184 Law of Property Act 1925 provides that the younger shall be deemed to survive the elder for all purposes affecting the title to property. In Hickman v Peacey (1945), the House of Lords held that the presumption applied in any situation where it could not be said for certain who died first and it did not matter whether the doubt arose because the deaths were thought to be consecutive or simultaneous. Therefore, for the purposes of the Page 7 of 14

8 legacy, Karen, who is described as Vince's elder sister, will be deemed to have died before him and so the gift to her will lapse and form part of the residuary estate. William has been convicted of Vince's manslaughter and, under the forfeiture rules, he would not be able to benefit under Vince's estate Re Crippen (1911). The principle was extended to manslaughter in In the Estate of Hall (1914). However, there is some doubt about whether the rule applies to manslaughter by reason of diminished responsibility as the cases on this have not been consistent. In any case, the Forfeiture Act 1982 gives the court a discretion to waive forfeiture, where the conviction is not for murder. Relief may depend on how culpable William is found to be - Re K (deceased) (1985) - where full relief was granted by the court. If no relief were granted, the money would form part of the residuary estate. In relation to the gift to Jane, there is a latent ambiguity as the evidence shows that Vince had two cousins both called Jane. Section 21 Administration of Justice Act 1982 provides that the court can admit extrinsic evidence insofar as evidence, other than evidence of the testator s intention, shows that the language used is ambiguous in the light of surrounding circumstances. This covers situations such as that in Re Jackson (1933), where the testatrix left property to my nephew Arthur Murphy. She had three nephews by that name and extrinsic evidence showed that she intended her illegitimate nephew. Evidence of the testator's intentions cannot be admitted to create an ambiguity. Evidence could be admitted here to resolve the ambiguity and might show that Vince intended the cousin he saw regularly. Vince made a gift of Kempston plc shares to Ivan but had sold the ones he owned at the time of making his will. Whether or not Ivan will be entitled to the gift turns on whether it is interpreted as a specific or general legacy. If specific, it would adeem. However, the word 'my' is not used and the wording suggests this may be a general legacy, unless there is something to indicate that he meant the specific Kempston shares he owned when he made the will. The court leans against specific legacies to avoid them adeeming and so the mere fact that, at the date of the will, Vince owned shares that exactly fitted the description is not enough to show that he meant those specific shares. In Re Willcocks (1921), a testatrix made a gift of exactly the amount of particular stock which she owned at the time of making her will. She had sold it before she died, but the court held it to be a general legacy, so it did not adeem. Under s21 Administration of Justice Act 1982, the court could admit any extrinsic evidence as to Vince's intention. If, as seems likely, the gift is found to be a general legacy, it would not adeem and the personal representatives would be required to purchase 100 ordinary shares in Kempston plc from the residuary estate. As Yana died before Vince, the gift of residue lapses and results in a partial intestacy. The residue of the estate will be dealt with under the provisions of the Administration of Estates Act 1925, as amended s49(1) applying the rules for intestate estates to the part of the property not effectively disposed of. The order of those entitled to benefit on intestacy is set out in s46 Administration of Estates Act Where, as in this case, there is no surviving spouse but there are issue of the deceased, the residue will be held for Vince s issue on the statutory trusts explained in s47 AEA The property will be held in equal shares for any children living at Vince s death who attain the age of 18 (or marry or form a civil partnership under that age) and for the living issue of any child who predeceased per stirpes. This means that the issue of a deceased child of the intestate take equally between them, contingent on attaining 18 or earlier marriage or Page 8 of 14

9 formation of a civil partnership, the share their parent would have taken had s/he been alive at the intestate s death. Zack will not be entitled to a share as, under the Adoption and Children Act 2002, he is treated for intestacy purposes as the child of his adoptive parents and not of his natural father Vince. Applying this, Anita has a vested interest in one half of the residue as she is over 18. No issue can take if their parent is alive and capable of taking, so Anita s son Ben is not entitled to a share. One half share of residue would have gone to Colin but, as he predeceased Vince, his half share would pass to his issue, Dave and Ellen, per stirpes. Colin's wife Fay will receive nothing, as she is not a blood relative of Vince's. Dave will take half Colin's share (ie one quarter of residue) as a vested interest. Ellen's quarter is contingent on attaining 18 or marrying or forming a civil partnership. If she failed to meet the contingency, her share would pass to Dave. Question 2 This question requires consideration of any breaches of duty committed by personal representatives Fi and Goran, the extent of their respective liability for these and any defences they or either of them might raise. Fi and Goran were under a duty to collect all assets, including debts due to the estate. Failure to fulfil their duties is known as devastavit. Assets must be collected even if this means taking legal action, so they should have recovered the debt from Lorna and sued her if necessary. In Caney v Bond (1843), the personal representative was liable for the loss in relation to a debt that he had not collected promptly and which could not be recovered as a result of the subsequent insolvency of the debtor. Fi and Goran will therefore be liable for maladministration for the 4,000 they should have collected from Lorna, as the debt can no longer be enforced. It was at Ian's request that they failed to collect this debt. The consent of a beneficiary who is of full age and had full knowledge of the facts is a defence to an action by that beneficiary, so Fi and Goran would have a defence if Ian sued in respect of this breach. However, Kylie is under 18 and does not appear to have consented, so she could sue on reaching 18. As Ian seems to have instigated or requested this breach of duty, under s62 Trustee Act 1925, the court could order part of Ian's interest to be impounded to indemnify the personal representatives against liability to Kylie in respect of this breach. The Trustee Act 2000 (TA 2000) made changes to the rules on charging and on investment powers and duties. Section 35(1) states that the Act applies to personal representatives administering an estate. The general rule on remuneration is that personal representatives cannot charge for their work and time, although they are entitled to recover their out of pocket expenses. There is presumably no charging clause in Henry's will but, under s29 TA 2000, a professional is entitled to charge reasonable fees, provided he is not the sole personal representative and all others consent in writing. There is no indication that Fi and Goran are professionals. They have therefore committed a devastavit by taking money from the estate to which they were not entitled and they will be liable to repay the sum of 500 each. No consent was obtained to this and no defence would seem to be available in this situation. Under TA 2000, investment in shares in Crudoil plc would come under the general power of investment in s3, which permits personal representatives to invest the estate money in any investment they could have made as absolute Page 9 of 14

10 owners. However, when making investments, the personal representatives must have regard to the duty of care contained in s1 TA 2000, which requires them to exercise such care and skill as is reasonable in the circumstances. Under s4, they are required to take account of the standard investment criteria, which state that they must consider diversification and the suitability of the investment. Investing 300,000 in Crudoil plc would seem to be a breach of the duty to diversify as it is a large sum to invest in one company and represents over half the value of the net estate. Under s5, they are required to take advice from someone they reasonably consider to be qualified to give it. This would not seem to include a bank security guard, even though Jay had made many successful investments. They should have sought advice from an independent financial adviser and again the personal representatives seem to have breached their duty. The estate has lost 150,000 and Fi and Goran would be personally liable for this. The general power of investment in s3 TA 2000 excludes investment in land. However, s8 allows investment in a legal estate in land but only in the United Kingdom. This means that they could not invest in the plot of land in Italy, and this is a breach of their investment powers and duties which has caused a loss to the estate in the sum of 50,000. Fi will be liable for this loss but, as she acted without consulting Goran, he may not be liable for her default unless he was in some way in default himself, for example, by not ensuring that the money was under their joint control. It seems that there is no clause in Henry's will restricting the liability of the personal representatives. The court has power under s61 Trustee Act 1925 to grant relief where the personal representatives acted honestly and reasonably and ought fairly to be excused. However, Fi and Goran do not seem to have acted reasonably as they do not seem to have been aware of their duties or to have sought any professional advice as to whether the actions they were taking were appropriate. As Fi and Goran know little about investment, it seems appropriate that they should take advantage of s11 TA 2000, under which they may delegate their investment powers to an agent. The appointment of Molly to make investments was permissible under s11 (and they could agree remuneration for her under s14). Molly seems to have been given full written details of the trust which may meet the requirement, under s15, for a policy statement giving guidance as to how the powers should be exercised. As a result of Molly's actions, the estate has lost 75,000. Under s22 TA 2000, the personal representatives are under a duty to keep the arrangements with their agent under review. The duty of care applies to appointing the agent and to reviewing the arrangements with her (Schedule 1 para 3). Assuming they have fulfilled their duty of care in these respects, they are not liable for Molly's acts or defaults according to s23 TA As Molly is described as a well respected financial adviser with a good track record, Fi and Goran may have complied with their duty of care, in which case they are not liable for this loss. As the liability of the agent must not be restricted, it may be possible to recover the loss from Molly. Question 3 (a) This part of question 3 requires advice on the payment of liabilities and distribution of an estate which appears to be an insolvent estate. As the known debts exceed the known assets, the estate is insolvent and the executors need to be careful because special rules govern the Page 10 of 14

11 administration of insolvent estates. If they do not follow the rules, they could be personally liable. Insolvent estates are governed by the Insolvency Act 1986 s421 and the Administration of Insolvent Estates of Deceased Persons Order 1986, as amended by the Administration of Insolvent Estates of Deceased Persons (Amendment) Order The statutory order for payment of debts in an insolvent estate cannot be varied. The personal representatives need to be aware of the special position relating to secured debts. Any creditors who have lent money on the security of property by way of a mortgage, charge or lien have prior claims over that property and may realise the security to meet the debt. Here, it appears that the value of the mortgage exceeds the value of the business premises by 50,000. This means that, if White Horse Bank plc realises the security, it will not meet the whole debt - there will be a shortfall of 50,000. The bank may therefore consider which of several options might be most advantageous. It could realise the security and prove for the balance of the debt as an ordinary creditor, which seems the most likely choice for it to make. Alternatively, if it wished to keep the property, which seems unlikely, it could at its own risk set a value on the security and prove for the balance as an ordinary creditor. Alternatively, the bank could opt to surrender the security and prove for the whole of the debt but this would not be likely, as this option would mean that the bank would have no priority for any part of the debt. In so far as the bank relies on the security (ie in the sum of 200,000) it has priority over all debts including funeral expenses. That would leave a further 50,000 owing to the bank and, assuming no further debts come to light, there are other known debts totalling 16,000, giving total unsecured debts of 66,000 and the remaining known assets are valued at only 34,000 in total, meaning that the debts cannot all be paid in full. For unsecured debts, the set order for payment must be followed. Funeral, testamentary and administration expenses take priority over all unsecured debts, with funeral expenses having the highest priority. Therefore, the first unsecured debt to be settled would be the funeral expenses of 3,200 (leaving known assets of 30,800). Next in order of priority are specially preferred debts but there are no such known debts here. Next in order of priority are preferential debts, listed in Schedule 6 Insolvency Act 1986, as amended by the Enterprise Act These include remuneration owed to an employee in respect of the four months before Andy's death, not exceeding 800. Therefore, the 800 owed to Andy s secretary would be paid next. Unless other preferential debts come to light, there are sufficient funds to meet this. If further preferential debts came to light and there was insufficient to pay them in full, they would abate proportionately. (This leaves a sum of 30,000 available.) Next in order of priority are ordinary debts, that is all debts not in the other categories. Again, if the assets are insufficient to meet them in full, they abate proportionately. The business telephone bill for 500, the overdraft with Mudland Bank plc in the sum of 8,500 and the unsecured debt to Chris for 1,000 rank together, along with the 50,000 of the mortgage debt not covered by the security, giving a total of 60,000 in this category, Page 11 of 14

12 assuming no further debts come to light. There will be insufficient funds to pay these debts in full, so each will receive the same proportion. (Assuming there are no further debts or assets that come to light, they would each get one half of the sums owing to them.) This would exhaust the known assets, leaving Beth's debt of 2,000 unpaid. This is in the final category of deferred debts, namely debts owed to a person who was the spouse of the deceased at the latter s death, irrespective of whether they were married at the time the loan was made. Therefore, Beth will receive nothing, even though she lent Andy the money before they were married. Nor will there be any money to distribute to her as beneficiary under Andy s will, unless further assets come to light. Debts are proved at the sum outstanding at the date of death, including interest then accrued. Interest on ordinary and preferential debts for the period from death to payment ranks after the ordinary debts and there would be no money left to cover any such interest. (b) This part of question 3 requires advice on the extent of the personal representatives' liability if they do deal correctly with the debts and on any steps they should take in relation to unknown debts. Section 25 Administration of Estates Act 1925 obliges personal representatives to administer the estate according to law. If the personal representatives pay the debts in the wrong order, they would commit a devastavit. For example, if they paid an ordinary before a preferential debt of which they had notice, they would be personally liable to pay the preferential debt. However, if a personal representative in good faith pays an inferior debt without notice of a superior debt, he is not liable - Re Fluyder (1898). The personal representatives have a duty to pay all debts in the same class proportionately (pari passu) but, under s10(2) Adminstation of Estates Act 1971, if they pay a debt in good faith, having no reason to believe the estate is insolvent, they would not be liable to other creditors in the same class if they could not be paid once the estate was found to be insolvent. This would not offer protection to Andy's personal representatives if it was clear that the estate is insolvent. As the executors think it possible that further debts may come to light, they need to take all reasonable steps to ascertain the debts payable to avoid being personally liable. To gain protection from the claims of creditors of whom they may not be aware, they must advertise and make searches in the manner laid down by s27 Trustee Act 1925 in the London Gazette and in local newspapers, including where Andy carried on business. The notice must allow two months for claims to be made. They can then pay the known debts without incurring personal liability to any creditors who have not come forward. Question 4 (a) This part of question 4 requires advice on whether certain gifts are valid under incorporation by reference. Sunita's list is unsigned and clearly does not comply with s9 Wills Act but a document may be incorporated into a will, so as to become part of it, provided three conditions are met. First, the document must be in existence Page 12 of 14

13 at the date that the will is executed - In the Goods of Lady Truro (1866). Sunita's list was dated the same month as the will was executed so may have been in existence when she signed her will, but this is not clear. Secondly, the document must be referred to in the will as already in existence at the date of the will. In University College of North Wales v Taylor (1908), the will referred to 'any memorandum' found in my papers and the court held that this could refer to a document not in existence at the date of the will and so there was no valid incorporation. Sunita's will refers to any note found with her will and this may also be viewed as referring to a future document. If so, then, even if the list existed when the will was executed, it will not be validly incorporated. The third requirement is that the document to be incorporated must be clearly identified in the will. In Croker v Marquis of Hertford (1844) it was stressed by the court that if the identification is vague, it will be invalid. The importance of the third requirement is illustrated by In the Goods of Garnett (1894), where the will referred to documents numbered one to six, but there were so many papers in the testator's desk that it was impossible to identify with certainty which documents were intended. Sunita refers to a note found with the will but there are many papers in the safe with the will, so it may possibly not be clear enough that the list containing five names is the list referred to in the will. The list has not been validly incorporated and so the legacies in clause (iii) will not be valid. (b) This part of question 4 requires advice on intermeddling in an estate. Latika had no authority to act in relation to Sunita's estate. Anyone who deals with an estate without authority is classed as an executor de son tort and will be liable to the extent of the assets that he or she received. This is known as intermeddling. Acts of necessity or kindness would not make someone an executor de son tort, as in Pollard v Jackson (1994), so feeding Sunita's cat would not suffice. However, obtaining assets of the estate, for example, collecting the debt owed to Sunita by Victor, as in Sharland v Milldon (1846), would suffice to make Latika an executrix de son tort and, as such, liable to the extent of the assets she received (that is the 100), however innocently she may have acted. There is a defence if she can show that she dealt with the money in the way a lawful personal representative would have done. A personal representative cannot be held liable for failing to safeguard assets, unless he failed to take reasonable care - Job v Job (1877) and as the money was stolen and Latika was seemingly not at fault, she may not be held liable for the loss of the money. (c) This part of question 4 requires advice on the appropriate type of grant that would be issued and the order of entitlement, first where there is a will and secondly on an intestacy. In relation to Sunita's estate, Omar may have been impliedly appointed as executor according to the tenor' of the will. This occurs where a person is not expressly appointed but is requested to carry out acts which only an executor would do, for example, to pay the debts - In the Goods of Cook (1902), In the Goods of Baylis (1865). As Sunita's will states that Omar will 'make sure her debts are paid' and wishes carried out, it appears that he has been appointed executor according to the tenor and so would be entitled to a grant of probate. Page 13 of 14

14 However, it appears that he does not wish to act and the general rule is that an executor may renounce the position provided he has not already accepted office. An executor accepts office by taking any action which indicates an intention to act as executor and this would include any act that would have made him an executor de son tort had he not been appointed. Acts of humanity such as feeding the cat would not indicate an intention to act as executor and, as it was Latika rather than Omar who received the debt from Victor, it would seem that Omar can renounce. If he renounces, a grant of letters of administration with the will annexed (cum testamento annexo) will be issued. This type of grant is appropriate where there is a will but no executor able or willing to act. Although Omar could have acted alone as executor, two administrators are generally required where there is a minority, as is the case with Tanvir. The order of entitlement is set out in r20 Non Contentious Probate Rules (NCPR) First in order of entitlement are the trustees of the residuary estate, in this case Tanvir's father, Javed. As a second administrator is needed, the next in the order are the residuary beneficiaries but Tanvir is under age. The next in order of entitlement is any other beneficiary, in this case Wahid, so he could act with Javed. As Rashed has not made a will, the order of entitlement to a grant of letters of adminstration is set out in r22 NCPR and follows the order of entitlement on intestacy. As Rashed is unmarried and has no children and his parents died before him, the next in order of entitlement are brothers and sisters of the whole blood and their issue and then brothers and sisters of the half blood and their issue. Mahmud is a brother of the whole blood and Tanvir is the surviving issue of a deceased sister of the whole blood, and they would have priority over Kabir, who is only a brother of the half blood. However, Tanvir is only 14 and too young to take out a grant of letters of administration but Javed could take a grant on Tanvir's behalf. Page 14 of 14