Lyons & Anor v Kerr-Robinson [2016] EWHC 2137 (Ch)

Case No HC-2015-004967[2016] EWHC 2137 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 24/08/2016
Before
MASTER MATTHEWS
Between
George LyonsClaimantsJonathan Augustus Kerr (by his appointed attorney Sandra Grant)ClaimantAndrene Kerr-RobinsonDefendant
Charles Scott (instructed by John Bays & Co) for ClaimantsElizabeth White (instructed by Sharman Law LLP) for DefendantHearing Hearing dates: 14 and 20 July 2016
JudgmentMaster Matthews :Introduction
[1]This is my judgment on part of an application made by the Claimants by notice dated 12 February 2016. That application sought an order that Janet Atkinson, as the interim administrator of the estate of Cynthia Maria Lyons deceased, be appointed to administer that estate fully. The draft order attached to the notice also contained a number of further paragraphs each seeking relief in connection with that administration.[2]On 19 February 2016 the application came before me. I granted the main relief then sought, as well as some of the rest, but, so far as related to paragraphs 2-4 and 7 of the draft order, I adjourned the hearing of the application to 1 June 2016. In late April that hearing was vacated and relisted for 14 July 2016. On that date Charles Scott of counsel appeared for the Claimants, Owen Curry of counsel for the administrator, and Elizabeth White of counsel for the Defendant. Unfortunately, the time available proved insufficient, and the hearing went over to 20 July 2016, when, the administrator needing no longer to be involved, only Mr Scott and Ms White were present.

Background

[3]The deceased was born in Jamaica in 1927, and died in 2011, domiciled in England. She left neither a widower nor a civil partner (she had been married, but later divorced), nor issue or parents living. She died intestate, leaving property both in Jamaica and in England. There were competing parties for the grant of Letters of Administration to the estate of the deceased, and caveats were entered. Caveats notwithstanding, the Defendant obtained a grant on 15 February 2012. Apparently realising its error, the Principal Registry wrote to the Defendant on 20 March 2012 requiring the return of the grant. But it was not returned.[4]According to her first witness statement, the Defendant was also born in Jamaica, but moved to the UK in 1998. She is a qualified accountant. Her evidence is that in 2012 she was working for “a leading UK defence equipment manufacturer”. In his first affidavit in these proceedings, at [20], Mr John Bays, the Claimants’ solicitor, says that the Defendant is a director of a company dealing in financial services. In her first witness statement (at [66]) the Defendant objects to his “researching and exposing [her] private life…” But the factual correctness of the statement of Mr Bays is unchallenged. She claims to be a niece of the half-blood of the deceased.

Procedure

[5]The claim was begun by claim form issued on 27 March 2012. The First Claimant claimed an interest in the estate as a person entitled to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975. The Second Claimant claimed an interest in the estate under the intestacy rules as a nephew of the half-blood. The Claimants alleged that the Defendant was not related to the deceased by blood at all, and had wrongfully appropriated assets of the deceased’s estate to herself. They sought the revocation of the grant to the Defendant and their own appointment as administrators.[6]The Claimants sought interim relief to prevent possible dissipation of the estate in the meantime, including the appointment of an interim administrator under the Senior Courts Act 1981, s 117. Their application came before Arnold J on 4 April 2016, by which time the Defendant had instructed Blueprint Property Lawyers Limited (“Blueprint”) to represent her. I will come back to Blueprint. At that hearing the Defendant gave certain undertakings to the court in lieu of an injunction, to which I shall also have to return. The judge ordered that the application proceed as an application by order and gave directions in respect of that.[7]The application by order eventually came before Michael Brindle QC sitting as a deputy judge, in October and November 2012. On 7 December 2012, he gave judgment, revoking the grant under the Senior Courts Act 1981, s 121, on the grounds of error, and ordering the appointment of a local solicitor (to be nominated by the President of the Law Society) as interim administrator of the estate. He also ordered that the Defendant deliver the property or assets of the estate to the interim administrator and not dispose of or deal with the estate assets in the meantime. Finally, he ordered the Defendant to pay 70% of the Claimants’ costs of the application, not to be charged to the Estate, and ordered the Defendant to pay £20,000 on account of those costs within 28 days.[8]The deputy judge refused the Defendant permission to appeal. Nonetheless, Blueprint applied on her behalf to the Court of Appeal for permission to appeal, filing an appellant’s notice on 28 December 2012. (In her evidence the Defendant says that it was never explained to her why this was done: see her second witness statement, [40].) At the Defendant’s request, on 23 January 2013 the Court granted an extension of time for filing the appeal bundle and skeletons. That application was ultimately dismissed by consent on 22 April 2013.[9]The parties attended by counsel before Master Price on 6 February 2013 and obtained directions for the appointment of the interim administrator. There was a further hearing on 25 February 2013 before Sales J, to deal with the question of the purchase monies to arise from the sale of the deceased’s house at 111 Nightingale Road, Wood Green, London N22 (“Nightingale Road”). Janet Atkinson was appointed interim administrator on the same day. She obtained a grant of Letters of Administration on 12 December 2013.[10]The Defendant did not pay the £20,000 on account of costs to the Claimants, and on 5 March 2013 Master Bragge, on the application of the Claimants, made an interim charging order against the Defendant’s property to secure the debt. Ultimately this debt was paid, but the Defendant says in her evidence that she did not pay it (see her second witness statement, [44]), and that she assumes that either Blueprint or Mr Okoronkwo did. This is confirmed by an email from Mrs Buket Yilmaz, a director of Fortis Rose, to the SRA dated 6 January 2015, which says that in April 2013 Mr Gondo arranged with Fortis Rose to be put in funds by Blueprint so that Fortis Rose could pay the Claimants’ solicitors.[11]It was thus in April 2013 that the Defendant instructed Fortis Rose (solicitors) to act in place of Blueprint. Fortis Rose ceased to act for the Defendant in February 2016, and she is now represented by another firm of solicitors, Sharman Law. I also record that in October 2013 the Council of Licensed Conveyancers intervened in the practice of Blueprint. The Council of Licensed Conveyancers has apparently disclaimed any liability to indemnify the Estate, as the losses it suffered took place in the course of probate and litigation work, which Blueprint was not authorised to carry on. Although one of the employees of Blueprint was a solicitor (Perdip Bhachu), the Solicitors Regulation Authority has similarly disclaimed any liability.

The issues on this application

[12]The issues arising from paragraphs 2-4 and 7 of the draft order concern monies which were assets of the estate but which have now been lost, mostly because they were paid by the Defendant to Blueprint, and that company has since gone into insolvent liquidation. There is also a smaller sum relating to disputed expenses. In summary form, the two matters arise in this way.[13]First, the Defendant had opened a bank account with Halifax in her own name and had paid into it monies obtained from the deceased’s estate. From that account she paid the sum of £59,657.71 by CHAPS transfer on 28 March 2012 to Blueprint’s client account. She made a second payment from that account to Blueprint’s client account, also by CHAPS transfer dated 26 May 2012, in the sum of £27,107.41. These two payments total £86,765.12.[14]Second, in addition the Defendant transferred two sums of £2000 and £6000 on 2 and 7 March 2012 respectively from the Halifax account to her own current account, repaying £5000 and £100 to that account on the 22 and 28 March respectively. The difference between the in- and outpayments is £2900. The Claimants seek an order that the Defendant pay this sum also. The question is whether there are any proper Estate expenses which go to reduce this.[15]For completeness, I add that Blueprint also received a third payment of £30,000 as the deposit on the sale of Nightingale Road. The order of Sales J permitted Blueprint to deduct the costs and expenses of the sale and ordered it to remit the balance to the interim administrator. Blueprint in fact transferred £19,537.20 to the interim administrator, claiming costs of the sale of £10,462.80. As I understand the matter, no point is now taken in respect of this third payment to Blueprint.[16]Resolving these issues is the more difficult because Blueprint went into insolvent liquidation in early 2014, and there was an intervention in its practice and an investigation into its affairs by the Council of Licensed Conveyancers. The Defendant was not able to retrieve her file, and some relevant documents have not been located. She also says that she has been unable to obtain documents from Fortis Rose, her former solicitors, because they have refused to release files until their bill is paid. Accordingly, I have to do the best I can with the material that is available.

Use of estate monies to pay litigation costs

[17]First I consider the two payments amounting to £86,765.12, paid to Blueprint on 28 March and 26 May 2012. Blueprint was a firm of licensed conveyancers, regulated and authorised to provide conveyancing services by the Council of Licensed Conveyancers. According to its headed notepaper in March 2012, it then had three directors, including Mr Shamiso Gondo, who was shown as possessing a law degree. Blueprint was not however authorised to carry out contentious probate work, nor to provide litigation services. Nevertheless, in relation to this case at least, it appears to have done both of these things. In his second witness statement (at [11]), Mr Gondo accepted that Blueprint could not conduct litigation, but relied on counsel authorised by the General Council of the Bar to do so.[18]The Defendant in her second witness statement, dated 17 February 2016, explained how she came to use Blueprint. When the Defendant was faced with these proceedings, she confided in a work colleague, who told her that her husband was a barrister. This was Samuel Okoronkwo. According to the Claimants he was not then in fact a barrister in private practice, but employed by a company called Capstone Sports Management Limited (see John Bay’s first witness statement, [17]). If that is right, then he would not have been able to appear in court on behalf of anyone other than Capstone. Be that as it may, Mr Okoronkwo referred the Defendant to Blueprint, with which he appeared to be connected. In her evidence the Defendant said (at [38]) that he was “listed as personnel in the client care letter I was sent”. I refer further to this below. And, as will be seen shortly, his time was charged for by Blueprint as one of its fee-earners.[19]On 27 March 2012 Blueprint sent the Defendant a retainer letter. The letter is not signed personally, but the internal reference contains the letters SG, so it probably came from Mr Gondo. It referred to a meeting on 26 March 2012 at which “detailed instructions” were taken. It refers to an agreement between them that the Defendant would “immediately transfer into Blueprint’s client account for safe holding the current balance of the funds you presently hold on this matter and provide us with the account statement so that we can be in position to confidently state to the other side no dissipation of assets.” Client care terms were enclosed. This gave details of “Personnel and charging rates”. Charging rates were stated to be “hourly rates”. These details included “Mr Samuel N Okoronkwo (Counsel) £550”, and two other members of staff, including “Mr Shamiso H Gondo £250”.[20]As already mentioned, on 28 March 2012 the Defendant paid to Blueprint out of estate assets the sum of £59,657.71 by CHAPS transfer to Blueprint’s client account. On 26 May 2012 she paid the further sum of £27,107.41 also out of estate assets to that account. These monies were estate assets. Between the two payments came the hearing before Arnold J on 4 April 2012. Mr Okoronkwo represented the Defendant at that hearing. The day before, on 3 April 2012, the Defendant’s defence, settled by Mr Okoronkwo, was filed on her behalf by Blueprint, as if it were acting as her litigation solicitor.[21]At the hearing on 4 April, the Defendant gave undertakings to the Court, including an undertaking “not to dispose of or distribute any part of the Estate of Cynthia Maria Lyons which she has received or which she is entitled to collect get in and receive in her capacity as Administratrix of the Estate of Cynthia Maria Lyons until further order”. The payment of £59,657.71 was made before this undertaking was given. But the payment of £27,107.41 was made afterwards.

The second payment

[22]As to the second payment, this was made out of estate monies, came from the Defendant and went to a third party, Blueprint. On the face of it this seemed to me be a “disposal” by the Defendant of estate assets and therefore a breach of the undertaking. At the hearing the Defendant argued that there was no breach merely by paying into Blueprint’s client account. After the hearing and in preparing this judgment I came across some decided cases which appeared to me to be relevant to this question, but which had not been cited to me. So by email to counsel on 8 August 2016 I invited further submissions on the point. On 15 August 2016 both Ms White and Mr Scott sent me written submissions on the cases to which I had referred in the invitation.[23]The earliest such case was Re Barn Crown Ltd [1995] 1 WLR 147, a decision of Judge Rich QC sitting as a High Court judge. After the date on which a winding-up petition was presented against a company, the company’s bank accepted cheques made payable to it and collected the proceeds, crediting them to the company’s account with itself, which was in credit. The company thereafter went into liquidation, and the liquidator subsequently sought a declaration that the receipt by the bank of such proceeds constituted dispositions of the company’s property, which would be void under the Insolvency Act 1986, s 127, and an order that the bank pay the total sum of such proceeds to the liquidator.[24]That section provides, so far as material, that:
“In a winding-up by the court, any disposition of the company’s property … made after the commencement of the winding-up is, unless the court otherwise orders, void.”
For the purposes of the section the commencement of the winding-up, in a case where a winding-up order is made, is the date of the presentation of the petition. The only two parties to the proceedings were the liquidator and the bank.[25]The bank accepted that any payments out of the company’s account would amount to “dispositions” within the meaning of s 127 of the 1986 Act. On the other hand, the liquidator accepted that any such payments would not be such dispositions by the bank. Judge Rich QC held that the accepting of cheques payable to the company, and the collection of their proceeds, to be held in an account with the bank which was in credit did not amount to such dispositions at all. On the other hand, on the liquidator’s undertaking not to seek repayment from any payees, he granted a declaration that the payments out of the company’s accounts were such dispositions.[26]In reaching his decision, Judge Rich QC considered various authorities, both on s 127 and its analogues elsewhere in the common law world, and on banking transactions, and concluded (at p 156H): “In collecting payment upon a cheque the bank credits the customer’s account with the amount of the cheque. If the account is already in credit, no disposition of the property of the customer takes place in favour of the bank. The amount standing to the credit of a customer’s account is increased in return for the surrender of the cheque, which becomes a voucher for payment. It is the drawer of the cheque whose property is disposed of. All that happens between the customer and the banker is an adjustment of entries in the statement recording the accounts between them”.[27]At this stage I draw attention to one point. This is the phrase used by the judge in that citation, “It is the drawer of the cheque whose property is disposed of.” The cheque ceases to be a valuable negotiable instrument, representing a close in action and becomes a “voucher for payment”, because no longer of value in itself, and now simply justification for a payment. So there is a disposition. But according to the judge it is not a disposition of the property of the company. It is a disposition of the property of the drawer.[28]The second authority is the decision of McCombe J in R (Revenue & Customs Prosecution Office) v R [2007] EWHC 2393 (Admin). In this case a man identified only as R was prosecuted for and convicted of money laundering in relation to the proceeds of drug dealing. In the course of those proceedings a restraining order was made in relation to certain assets in the possession of R. This provided (so far as material) that R “must not until further order of the court(a) remove from England and Wales any of his assets which are in England or Wales; or(b) in any way dispose of or deal with or diminish the value of any of his assets whether they are in outside England and Wales; [ … ]”[29]R’s original conviction was quashed. Pending retrial, and with the benefit of provisions for the payment of R’s living expenses, it was also ordered that the monies argued to be the proceeds of drug dealing be transferred to a bank account in R’s name. His bank was aware of this order, and was concerned to be able to “police” it. With R’s knowledge, and non-dissent, the bank moved the substantial funds from his account to two other accounts in his name, one a term deposit and the other a tracker account. The prosecuting authority was however never made aware of this at the time. Once it became aware, much later, it applied for the committal of both R and his bank for breach of the order, in transferring funds from the bank account where they were to the two other accounts (with the same bank) to which they went.[30]It was submitted by counsel for the bank that there was no breach of the order, because “18. …[t]here was no disposal of or dealing with any relevant asset of Mr R’s. [Counsel’s] submission … was that the nature of Mr R’s assets with the bank was simply a debt owed by the bank to him. That remained the same notwithstanding the different characterisation and identification of the account names and nothing was done either to dispose of or to deal with the asset”.[31]The judge however rejected that submission, holding that there had manifestly been a dealing with the asset concerned. The judge said:
“19. The relevant order was a freezing order, having the well-known objective of rendering the defendant’s assets more readily available for enforcement as and when necessary. The restraint on dealing with an asset is a restraint on any action by a defendant which may have the effect of rendering that process more difficult … 20. It seems to me that there had in this case been manifestly a dealing with this asset in so far as it had removed the identifying characteristic of this debt owed by the bank to Mr R, by being a debt with a clearly identified location and identification with books of the bank to one that was not so readily ascertained. A claimant in a freezing order case is always comforted by the ability to identify particular bank accounts held by the defendant. They are specified in the order for a purpose. They are meant to be assets which will be there and identifiable, and readily identifiable, by that identifying mark throughout the currency of the order. 21. The decision on the part of the bank to change that identification without the consent of the person seeking the order, or of the court, was to my mind in clearest breach, by both Mr R and the bank, of the terms of the order. As a matter of its true construction, I have no doubt about that. I am somewhat surprised that the bank should decide that it was safe to embark on these transactions or arrangements, without any reference either to the prosecutor or to the court.”
[32]However the judge accepted that, on the facts of the case, what was done was done with the best possible motives, and there was no actual interference with justice, because the bank sought in this way to prevent any loss to the Crown or the prosecutor, and R too considered he was doing something proper. In the circumstances, although the judge considered that both R and the bank were guilty of contempt of court, he did not think it right to visit any punishment upon them or even to make them pay the costs.[33]It will be observed that the judge’s decision was that there was a breach of the prohibition on ‘dealing’. There was no discussion of the prohibition on ‘disposing’. No doubt this was because, although the terms of the debt owed by the bank to R changed, the amount and the parties to the relationship did not, as counsel for the bank had submitted (see para 31 above). The creditor remained the creditor and the debtor the debtor, and for the same amount. It could not easily be said that R had disposed of the debt.[34]This decision was referred to in approbatory terms, without necessarily applying it, by Henderson J in Hewlett Packard Ltd v Bhandari [2013] EWHC 4647 (Ch). But it does not take the matter any further. In their written submissions, both counsel agree that these cases are not authoritative on what constitutes ‘disposing’ of an asset for the purposes of an undertaking of the kind given to Arnold J in the present case. It is therefore necessary for me to consider the matter on principle.[35]The undertaking “not to dispose of or distribute” distinguishes two kinds of conduct, both of which are prohibited. One is disposing of assets forming part of the deceased’s estate. The other is distributing them. There is no prohibition on merely ‘dealing’ with them so long as that does not involve disposing or distributing. On the face of it, ‘distributing’ in the context of assets of a deceased’s estate refers to the transfer of assets or their proceeds to persons entitled (or at any rate believed to be entitled) to them under the applicable succession rules.[36]‘Disposing’ must mean something different from that. The context is an undertaking designed to hold the ring and keep the assets safe in a succession dispute until it can be determined who is entitled to carry on the administration of the estate. Again on the face of it, it therefore seems to me that it means a transfer of assets otherwise than to a person entitled (or at any rate believed to be entitled) to them. If the Defendant had split the Halifax account containing estate monies into two Halifax accounts with different terms, or had combined it with another Halifax account, the creditor and debtor would still have been the same, and, consistently with the decision in R (Revenue & Customs Prosecution Office) v R, there might well have been no ‘disposing’. On the other hand, if she had used the funds in the Halifax account directly to pay Blueprint’s bills, the monies passing straight to Blueprint’s office account, there can be no doubt that this would have been a disposing, even though legal services were being acquired in exchange.[37]The present case lies between those two extremes. It might at first glance be thought analogous to the case of a bank account holder who transfers the account from one bank to another. Before the transfer, the holder had a chose in action as against one bank. Afterwards, he or she has a similar chose against another bank. But it is not. Our case goes further. The funds from the first account go to the bank account of a completely different person, at another bank, who (by virtue of statutory requirements) holds the benefit of the account on trust pro tanto for the client.[38]As a matter of ordinary language, where A transfers an asset to B to hold on trust for A, there is a ‘disposing’ by A of that asset to B, even though the economic benefit of the asset remains with A. Compare for example the bare trust created by Lady Ingram by transferring freehold land to her solicitor on trust for herself: Ingram v IRC [2000] 1 AC 293, HL. Indeed, if for any reason (eg failure to comply with formalities rules) there were no disposing of the asset, there generally could be no trust: Milroy v Lord (1862) 4 De G F & J 264. But, as a result, the asset is now in the legal ownership of B, and not that of A. A cannot deal directly with any relevant third parties. It is for B to take any necessary action to protect it or vindicate it.[39]From the point of view of the undertaking given to the court, keeping assets in the ownership of the Defendant served a useful purpose. Allowing the Defendant to create trusts of them for the Defendant’s benefit, with third parties as trustees, involves bringing in another person as owner and taking an extra risk. Where, before the exercise, the funds were subject only to the solvency of the bank and the honesty of the Defendant, afterwards they are subject to the solvency of another bank (which the Defendant did not choose), the honesty of the Defendant, and also the solvency and honesty of the interposed trustee (risks which in the present case – on the Defendant’s case, at least – appear to have matured). Plainly this is a change for the worse. I see a similar concern expressed by McCombe J in paragraphs 19-20 of his decision in R (Revenue & Customs Prosecution Office) v R. Subject to that, that decision has little or nothing to say about this question.[40]As for the decision in Re Barn Crown Ltd, that arose in a statutory context (Insolvency Act 1986, s 127) which is not the present. Even so, the judge was of the view that, when the proceeds of the cheques paid into the bank were collected and credited to the bank’s account with the company, there was a disposition, but it was one by the drawers of the cheques, just not by the company (and therefore not caught by s 127). In the present case there were no cheques, simply a bank transfer from one bank to another. This would involve a reduction in the debt due by the Halifax to the Defendant, a netting off of accounts between the Halifax and Blueprint’s bank, and an increase in the debt owed by the latter bank to its own customer. This must have involved a ‘disposing’ by the Defendant of her credit balance with the Halifax.

The invoices from Blueprint

[41]On 11 May 2012, Blueprint rendered an invoice (numbered BP/AKR/002) to the Defendant for legal services between 4 April and 10 May 2012. This was for profit costs of £97,167.50 plus disbursements of £799.70, making a total of £97,967.20. VAT of £19,433.50 was then added to this, making a grand total of £117,400.70. The invoice is unusual, because fees for Mr Okoronkwo as counsel are not shown as a disbursement (as would be normal) but instead as part of profit costs, as if he were a fee-earner employed by (or a partner in) Blueprint. The lion’s share of the “profit costs” (£58,905.00) were incurred by Mr Okoronkwo himself, who was charged out at the rate of £550 per hour for just over 107 hours’ work, in a period of some 24 working days (ie excluding weekends and bank holidays). On any view this is a large number of hours, at a high rate of charge, even for a partner in a City law firm. For a barrister retained by a small firm of licensed conveyancers, even in the West End of London, it is remarkable. And, in the context of a dispute over an estate worth a few hundred thousand pounds at best, it is extraordinary.[42]The invoice just referred to ran only from 4 April 2012, whereas Blueprint had become involved from at least 26 March 2012, when there had been a meeting to take instructions. It appears that there was an earlier invoice from Blueprint (apparently numbered BP/AKR/001), but no copy was available to me. There is a redacted bank statement for Blueprint showing that the sum of £55,523.40 was taken over from Blueprint’s client to office accounts on 4 April 2012. This statement gives the client reference and invoice number for the Defendant (ie BP/AKR/001). This invoice would have covered a maximum of 8 working days, ie from 26 March to 4 April inclusive. During this time Mr Okoronkwo would have drafted the Defendant’s defence, and prepared for the hearing on 4 April. Further statement entries show “bill payments” of £3400 on 25 May and £27162 on 28 May, both giving the same client and bill reference. There may be other take-overs too. Some of the (limited) records available at the hearing were equivocal. But the three take-overs mentioned add up in total to £86,075.40.[43]In relation to the scale of charges levied by Blueprint, I should mention the statement of costs apparently prepared by it for the hearing before Michael Brindle QC on 7 December 2012. It is stated to cover the period from 26 March to 7 December 2012 (ie since the beginning of the matter). This sought a grand total of £360,814.30 (apparently excluding VAT) for the work done for the Defendant in the proceedings to that point. It states for example that Mr Okoronkwo (shown in the list of fee-earners) claimed to have spent 394 hours at £550 per hour, making £216,700, out of £347,770 for all fee-earners. However, there is no evidence that this was ever served on the Claimants, or filed with the court.

The first payment

[44]All in all, however, it seems plain that the vast bulk, if not the whole, of the monies paid over to Blueprint by the Defendant in March and May 2012 had been taken over from client to office account long before the order of Michael Brindle QC, in December 2012, that the Defendant should transfer all estate assets to the Interim Administrator. Certainly, the whole of the first payment would have been used up. On this basis the Defendant argued that, by the time that that order was made, she could no longer pay over these monies in compliance with it. Moreover, she argued that she had not authorised the taking over of the money. She said that she did not even know it had been taken over – on her case, without consent – until much later: see her second witness statement, [13]. By then Blueprint was insolvent.[45]In support of that position, the Defendant referred in her second witness statement (at [14]) to emailing Blueprint on 20 March 2013 to ask “what part of the order [of Michael Brindle QC] I have not complied with”. The response by email dated 21 March 2013 from a solicitor called Perdip Bhachu at Blueprint was that “The parts of the order which have not yet been complied with are as follows: 1. Payment in respect of the costs order in the sum of £20,000, which we are counter acting [sic] with our Court of Appeal application; and 2. Requirement to return the original letter of administration from Jamaica, which you are only obliged to do so on receipt.”[46]On the other hand the Claimants referred me to the email from the Defendant to Mr Okoronkwo dated 29 October 2014 in which she complained that her then firm of solicitors (Fortis Rose) did not seem to be representing her position well to the Interim Administrator:
“I am concerned that the current Administrator has heard nothing from my side and the matter will proceed at my disadvantage, particularly with the legal bill of Bays [solicitor for the Claimants] in addition to accounting for the £80k Adem [trainee solicitor at Fortis Rose] mentioned is due to the estate.”
That suggests that, certainly by October 2014, the Defendant was well aware that there was a hole of some £80,000 in the estate accounts.[47]That email correspondence was a year and a half later than the one between the Defendant and Blueprint in March 2013. But exactly contemporary with the earlier correspondence was a letter dated 18 March 2013 from Blueprint to the Interim Administrator’s firm, Osbornes Solicitors. It enclosed a statement of what it called “the current Estate Balance” for information. That statement shows the various estate monies coming into the hands of Blueprint, and the way in which those funds have been dealt with. It includes an entry for “Partpayment of Litigation Expenses” in the sum of £84,669.02”. The Defendant denies knowing of this at the time: see her second witness statement, [12]-[13].[48]The email correspondence between the Defendant and Blueprint in March 2013 does not, as the Defendant would have me accept, unambiguously show that the Defendant did not know that the estate monies had been used to pay Blueprint’s litigation bills. It is equally consistent with neither the Defendant nor Blueprint considering that there would have been any breach of the undertaking given to Arnold J in doing so. After all, the Defendant places great emphasis on having been advised by Blueprint that all her legal costs would be paid out of the Estate: see her second witness statement, [43].[49]The Defendant’s assertion that she did not know that the monies had been taken over (because, on her case, she had not agreed to this) can be tested in this way. If she is telling the truth, then she must have believed that the funds were still in the Blueprint client account. She must have known that the order of December 2012 required them to be transferred to the interim administrator once appointed. Yet on her case she did nothing at the time to ask about those funds. Nor did she ask about the matter when the interim administrator was appointed in February 2013. And, even when she wrote to Blueprint in March, she still did not ask about the funds, and in particular whether they had by now been transferred. At the very least, this is a considerable failure, by a person on whom a personal injunction lay, to seek to discharge that obligation. Moreover, the Defendant is not an ordinary layperson. She is an accountant, with a high-powered employment. In my judgment this alternative scenario is highly improbable, and that lends further weight to the view that she knew of the take-overs.[50]If Blueprint was willing in March 2013 to tell the Interim Administrator that the litigation costs had been paid out of the estate funds, then, whatever the position 18 months later, in my judgment it is not credible for the Defendant to assert that in March 2013 she did not know that those costs had been paid. She was their client, after all. On the material before me I am satisfied on the balance of probabilities that in March 2013 the Defendant knew that the litigation bills of Blueprint had been settled in part by the use of the estate monies.[51]Whether the Defendant appreciated as a matter of law that by allowing Blueprint to take over estate monies to pay their invoices was a breach of the undertaking by her (and Blueprint) is another matter. But it is not now the point. She obviously knew of the undertaking, and the acts and omissions involved in breaching it were intended, even if her understanding of their legal consequences was faulty, and even if that faulty understanding was caused by wrong legal advice. The law is clear, that it is not necessary to show that the defendant to a contempt application appreciated that what she was doing was a breach of the court order and intended to breach the court order. It is enough to show that the Defendant knew of the terms of the order or undertaking, that her acts or omissions did breach the order or undertaking, and that she knew of the facts which made it such a breach. In my judgment, that is this case.[52]A petition for the winding-up of Blueprint was presented on 13 December 2013. A winding-up order was made on 10 February 2014. So there was a window of opportunity – in fact lasting for several months – for the Defendant to do something about the money which she says was taken over without consent. The Defendant’s rights against Blueprint during this window were still valuable, and could have been turned to the account of the Estate.[53]Even if, contrary to my finding, she did not know the money had been taken over, she had the same opportunity to satisfy herself that the money was still in the client account. She did not take it. If (on that hypothesis) she had asked about the money, she would have found out that (on her case, contrary to her instructions) the money had been taken over. She could then have taken steps to have the transfers reversed, or to have clothed the administrator once appointed with all the necessary authority to do so. Ex hypothesi, she did not do that either.

Conclusion and consequences

[54]In my judgment the Defendant was in breach of the undertaking to Arnold J in respect of the £27,107.41 paid after the undertaking was given, because she paid the money out of her Halifax account to Blueprint’s account. She was also in breach of the undertaking even in respect of the £59,657.71 paid to Blueprint before the undertaking was given, by allowing the monies to be used to pay Blueprint’s legal bills. If I were wrong, and the transfer of the £27,107.41 were not a breach at the time of transfer, it would certainly have been a breach when the monies were taken over to pay the Defendant’s legal bills.[55]But if I were wrong about that, and the Defendant did not know that the money had been taken over, then her failure to take any sufficient steps to ensure that the monies she believed still to be in the client account were safeguarded and transferred to the administrator would mean that she was in breach of the order of Mr Brindle QC to deliver the property or assets of the estate to the interim administrator and not dispose of or deal with the estate assets in the meantime. The Defendant was required to keep the monies covered by the undertaking and order safe until transferred to the administrator, and to transfer them once she or he was appointed. She must therefore now account to the administrator for them.[56]Public policy requires that a person who commits an act or omission in breach of an injunction (or in breach of an undertaking in lieu of an injunction) should not be able to profit from it. As Sir Robert Megarry V-C said in Clarke v Chadburn [1985] 1 WLR 78, 81, a case where a meeting passed a resolution in breach of an interim injunction, “those who defy a prohibition ought not to be able to claim that the fruits of their defiance are good, and not tainted by the illegality that produced them.”[57]In my judgment, one consequence of the breaches by the Defendant of the undertaking (alternatively, of the order) is that the Defendant cannot rely on those monies having been paid away to Blueprint in part-satisfaction of their invoices, and having now become irrecoverable. She is therefore unable to reduce the amount for which she accounts to the administrator by anything paid to Blueprint. Accordingly, at first blush the court should order that she pay to the administrator the sum of £86,765.12, plus interest.[58]I say “at first blush”, because the Defendant argues that the court should excuse the Defendant on the basis that she acted honestly and reasonably, by analogy with the jurisdiction under the Trustee Act 1925, s 61. She referred me to De Clifford v Quilter [1900] 2 Ch 707, a decision of Farwell J. I will postpone consideration of this point until I have dealt with an alternative analysis of the situation, which immediately follows.

An alternative analysis

[59]The alternative analysis is this. The Defendant obtained Letters of Administration to the Estate, and therefore stood in a fiduciary relation to those who were entitled to benefit from it. Such a person must account to those entitled. In the present case, by reason of the handover of the administration of the estate from the Defendant to the court-appointed administrator, she must account to the latter.[60]In so accounting, she is entitled to deduct from the amount entrusted to her any proper estate expenses and also losses that occurred without her fault. That would include, for example, in an appropriate case instructing lawyers to deal with Estate business, such as getting in assets belonging to the Estate or resisting claims against it. The burden must however lie on the Defendant to justify such deductions, by showing that the expenses incurred were proper for the Estate to bear.[61]In the context of litigation costs, the relevant rules are found in CPR Practice Direction 46 para 1. This provides: “1.1 A trustee or personal representative is entitled to an indemnity out of the relevant trust fund or estate for costs properly incurred. Whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative (‘the trustee’) –(a) obtained directions from the court before bringing or defending the proceedings;(b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee's own; and(c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings. 1.2 The trustee is not to be taken to have acted for a benefit other than that of the fund by reason only that the trustee has defended a claim in which relief is sought against the trustee personally.” (a) obtained directions from the court before bringing or defending the proceedings; (b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee's own; and (c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.[62]In my judgment the Defendant has not discharged the burden on her in respect of these litigation costs. I bear in mind the important provision in paragraph 1.2. Nevertheless, the Defendant did not obtain directions from the court before defending the proceedings, though I accept that time was short before the hearing on 4 April 2012. But she did not seek such directions at any time afterwards, either.[63]As to whether the Defendant acted in the interests of the Estate or in substance in another interest, the work done by Blueprint was not to gather in or protect the estate. On the contrary it was to resist a claim by the Claimants that accused the Defendant of plundering the estate. It does not matter where the truth of that allegation lay. These were allegations levelled against the Defendant personally.[64]To the extent that the claim was about estate administration at all, it was all about whether the Defendant or someone else (and if so who) should act as administrator of the Estate. As shown by the witness statements of eight relatives of the deceased, enclosed with Fortis Rose’s letter of 16 April 2013 to the Claimants’ solicitors, it was in substance a dispute between different branches of the deceased’s extended family. Those relatives all supported the Defendant, and indeed in their witness statements undertook to indemnify the Defendant against any costs or damages that she might be ordered to pay. I add that of course there are other relatives who support the Claimants rather than the Defendant.[65]As to whether the Defendant acted reasonably in defending these proceedings, I record that, first of all, the Defendant engaged lawyers who were in fact not authorised to conduct litigation at all. Second, the Defendant agreed to the retainer of Blueprint, including their high charging rates, instructing Blueprint to go ahead, and did not place any kind of cap or limit on the value of the work which Blueprint did or the charges it could make. On the materials before me, she made no enquiry, let alone complaint, about the very high charges that were made by Blueprint in its two invoices.[66]These are not the hallmarks of an administrator anxious to look after the interests of the Estate. I accept her evidence that she was told by Blueprint that her costs would come out of the Estate. But that just made it all the more necessary for her to take care. On her own case, it was not her money she was spending. In my judgment the Defendant was not acting reasonably in the way that she defended these proceedings.[67]Overall, I am not satisfied that it was proper for the Defendant on behalf of the Estate and at the Estate’s expense to engage Blueprint to defend the Defendant in the litigation in which she was involved. That means that, in accounting to the court-appointed administrator, she cannot claim to deduct the monies paid to Blueprint for its services. Prima facie, she must therefore pay over to the administrator the sum of £86,075.40, being the minimum amount which can be demonstrated to have been paid out of estate monies towards the satisfaction of Blueprint’s invoices for legal services.

Excusal for acting honestly and reasonably

[68]However, as I have said, the Defendant argues that the court should excuse the Defendant, here for any breach of fiduciary duty, on the basis that she acted honestly and reasonably. This argument is based on the jurisdiction of the court under the Trustee Act 1925, s 61, formerly s 3(1) of the Judicial Trustees Act 1896, which provides:
“If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same.”
[69]There can be no doubt that this jurisdiction applies to personal representatives as it applies to trustees. This is because the definition of trustee extends to the duties incident to the office of personal representative: see the Trustee Act 1925, s 68(1)(17); Marsden v Regan [1954] 1 WLR, CA; Re Evans [1999] 2 All ER 777. It is also clear that the section applies to a claim for an account as to a claim for breach of trust: Re Kay [1897] 2 Ch 518.[70]As I also said, the Defendant relied on the decision of Farwell J in De Clifford v Quilter [1900] 2 Ch 707, under the predecessor provision, s 3(1) of the Judicial Trustees Act 1896. There, executors of an estate knew that large sums of money were needed for various administration purposes, and so for five years they paid sums to their solicitors in reliance on their statements that they were in fact needed for those purposes. In large part they were so applied by the solicitors. But shortly before the administration came to an end, the solicitors became bankrupt, and the remaining balance of estate monies held with them was lost.[71]The judge held that in all the circumstances “the executors had acted honestly and reasonably, and ought fairly to be excused and relieved from personal liability in respect of the balance lost” (at 715). However, the circumstances differed from those in the present case. The main point is that it was reasonable for the executors to hand over the sums they did for administration, relying on the solicitors’ statement that it was necessary, when much of those sums was indeed so applied, only the balance being lost.[72]In the present case there was no need whatever for the Defendant to hand over the estate monies to Blueprint for estate administration, or indeed any other estate purpose. In the retainer letter, there was a reference to transferring those monies to Blueprint “for safe holding”. But the monies were safe where they were. Indeed, as it turned out, rather safer. In hindsight it may be that Blueprint wanted the monies in its client account so that its bills could be easily paid. If so, I do not criticise the Defendant for not realising this at the time. However, I can and do say that she did not act reasonably in handing over the monies to Blueprint when it had no estate function to perform and the litigation which it was to carry on was (as I have held) for the Defendant’s benefit rather than for that of the Estate.[73]Moreover, section 61 does not merely refer to acting “honestly and reasonably”. There is another limb, which is cumulative rather than alternative. This is that the applicant “ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach”. The Defendant was involved in legal proceedings in which she was accused of serious wrongdoing. She had paid over large sums to Blueprint, then had given an undertaking to the court, and after that paid further sums. She took the risk that it would all turn out right. She did not seek or obtain the directions of the court in relation to the payments that she had made.[74]Moreover, to the extent (if any) that the Defendant has been misled by statements made to her or otherwise badly advised by the lawyers who acted for her, she may well have rights against those individual lawyers. The Defendant appears to be well aware of this: see her second witness statement, [48]. I remind myself also that she has the benefit of indemnities offered to her by those of her relatives who supported her actions. The Defendant was a professional person, a qualified accountant, well used to business matters. In my judgment it is not fair to those who ultimately benefit from this Estate to excuse the Defendant for failing to obtain directions.[75]Accordingly I cannot exercise the jurisdiction under section 61 in favour of the Defendant, either in relation to her accounting as personal representative to the interim administrator, nor indeed by analogy in relation to the claim under the undertaking and the order.

The shortfall in Estate funds of £2900, and other expenses

[76]I turn now to the second matter, the sum of £2900, and other expenses. As I have already said, the Defendant transferred two sums of £2000 and £6000 on 2 and 7 March 2012 respectively from the Halifax account that she had opened for Estate monies to her own current account, repaying £5000 and £100 to that account on the 22 and 28 March respectively. The difference is the sum of £2900. The burden is on the Defendant to prove that that sum was (wholly or partly) spent on proper Estate expenses.[77]In a statement of account apparently prepared by Mr Shamiso Gondo, a director of Blueprint, in respect of administration by the Defendant prior to the involvement of Blueprint, the sum of £2000 is marked “Transfer to the Current Account for Admin Expenses” and the sum of £6000 is marked “Float for Admin Expenses in Jamaica”. The repayment sum of £5000 is marked “Balance of the £6000 float for Admin Expenses upon return from Jamaica”, and the repayment sum of £100 is marked “Balance of the £2000 for Admin Expenses transferred to the Current Account on 02/03/2012”.[78]The Defendant has referred me to a statement of expenses amounting to £2910.63, said to have been incurred by her on behalf of the Estate between February 2011 and March 2012, together with invoices said to be in respect of some at least of these. The first question here is whether and to what extent this statement of expenses justifies the shortfall of £2900 in withdrawn estate monies. The second question is whether, irrespective of that, there are any other expenses incurred by the Defendant which are proper Estate expenses for which the Defendant should be given credit.

The shortfall

[79]First of all, in considering whether any expenses among the £2910.63 can be set off against the £2900 shortfall, I can exclude any expenses incurred down to and including the entry for the Next of Kin Verification (this will include entries such as the renewal of the caveat in August 2011, which is further up the statement, though later in time). This is because the Defendant only obtained Letters of Administration in February 2012, and could not before that time have been acting in the administration of the estate. There was no certainty in 2011 that the Defendant would ever become the administratrix of the Estate. Indeed, it was only because of an error of the Principal Registry in February 2012 that she obtained Letters of Administration at all.[80]As to the remainder of the entries on that statement, I consider that the Defendant is entitled to credit for the grant of administration fees and travel to interviews, because these were undertaken directly in order to obtain the grant, and would have to be paid by the Estate whoever obtained the grant. I do not accept that the Land Registry fee was necessary, and certainly not at that stage. No purchaser could have safely bought the deceased’s land without seeing a grant, and only the Defendant had that, so the land was safe.[81]As to the legal fees for Hamilton Davies, solicitors, in the sum of £900, there were several invoices from that firm in the papers before me. Of these, the only one which in my judgment was a proper Estate expense was that numbered 28739, and dated 15 February 2012, in the sum of £252. That refers to a meeting on 27 February 2012 and advice in relation to missing beneficiaries and the sale of property, which it was proper for the Defendant to obtain. I have not included the invoice numbered 28798, in the sum of £75.60, because it is not clear what the advice concerned. It may have been personal rather than for the benefit of the Estate, and as I have said the burden lies on the Defendant. (In addition, the date given for the invoice is 22 March 2011, which is well before the grant was obtained, though this may be a mistake for 2012, because the invoice number is higher than the other invoice, and so presumably should follow it in time.)[82]The only other entries are land taxes in Jamaica and the amount of funds left in Jamaica for legal and professional fees. As to the former, they are small in amount (£15.98), and presumably relate to the land which the deceased owned there. In circumstances where the Defendant would have been trying to obtain information about the deceased’s Jamaican estate, I think it was reasonable to pay these. However, I cannot accept the entry for the “amount left in Jamaica” in the absence of justification for how in fact it was spent (if indeed it was). Again, it is for the Defendant to prove this, and she has not done so.[83]Accordingly, I am prepared to reduce the shortfall of £2900 by (£112+£44+£26=) £182 for the grant, £252 for Hamilton Davies and £15.98 for Jamaican land taxes. I calculate that that leaves a shortfall of £2450.02, which the Defendant must pay to the interim administrator. If I am wrong in my arithmetic, no doubt I shall be corrected.

Other expenses

[84]The second question is whether there are any other proper Estate expenses for which the Defendant should be given credit. For this purpose I am looking at the statement prepared by Mr Gondo. Once more I can exclude all the items down to the fee for the renewal of the caveat on 8 August 2011, for the same reasons as before. The next few items are already dealt with.[85]Then there is the claim for £694 for return flights to Jamaica, and £163 for car hire while there. It is clear from the British Airways e-ticket in the papers before me that, in addition to the Defendant, Mr Ervine Robinson (the Defendant’s husband: see her second witness statement, [32]) also travelled. Plainly the claim can only be in respect of one return journey, for the Defendant. Mr Robinson was not an administrator of the Estate. But in any event I am not satisfied that it was necessary for the Defendant to travel to Jamaica at all. In addition to postal serves, technology today allows for practically instantaneous voice video and fax communication. There is no serious attempt in the evidence to explain why information could not be obtained from those already there, whether relatives, government officials or professionals.[86]The only other entry that I have not already dealt with is one for postage in the sum of £10.37. The problem here is that there is nothing to show that this was Estate business rather than (for example) defending the Defendant’s personal interests in the litigation. Accordingly I am not satisfied that it is a proper Estate expense. This means that there are no other expenses than those which I have allowed against the shortfall of £2900.

Conclusion

[87]For the reasons given, this application succeeds. The Claimant is entitled to an order that the Defendant pay the Administrator the sums of £86,765.12 (paragraph 57) and £2,450.02 (paragraph 83), in each case with interest. I ask counsel to agree a form of order to give effect to this judgment, and lodge it for approval.