Vivien Hanson v Jeremy Coleman & Anor [2024] EWHC 3589 (Ch)

[2024] EWHC 3589 (Ch)Case No PT-2024-000569IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERT COURTS OF ENGLAND AND WALESPROPERTY, TRUSTS AND PROBATE LIST (ChD)Venue 7 Rolls Building, Fetter Lane, LondonEC4A 1NLDate 21 November 2024
Before
MASTER BRIGHTWELL
Between
VIVIEN HANSONClaimant(1) JEREMY COLEMANDefendants(2) MARCUS COLEMANDefendant
Mr Toby Bishop (instructed by Warners Solicitors) for ClaimantMr Maurice Rifat (instructed by Palmers Solicitors) for Defendants
APPROVED JUDGMENTThis Transcript is Crown Copyright.  It may not be reproduced in whole or in part other than in accordance with relevant licence or with the express consent of the Authority.  All rights are reserved.Digital Transcription by Marten Walsh Cherer Ltd.,2 nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP.Telephone No: 020 7067 2900. DX 410 LDEEmail: info@martenwalshcherer.comWeb: www.martenwalshcherer.com

MASTER BRIGHTWELL:

[1]This is a claim brought by the claimant, Vivien Hanson, against her two brothers, Jeremy Coleman and Marcus Coleman, seeking their removal as the executors of their father’s estate under section 50 of the Administration of Justice Act 1985. The deceased, Frank Leonard Coleman, died on 19 June 2021 leaving a will dated 26 August 2005. By that will, he appointed the two defendants as his executors. The will then left the residuary estate to the three parties in equal shares, subject to a specific pecuniary legacy of £40,000 to the first defendant. A grant of probate was obtained by the defendants on 16 June 2022.[2]After the death of their father, there were in the first instance discussions between the parties about the way in which the estate was going to be administered and how the property, particularly personal property left by the deceased, was going to be dealt with. The initial discussions between the parties were amicable. Unfortunately, in the course of 2022 a dispute arose. An issue arises in this case particularly because of the properties within the estate. There are two properties, the first 41 Salisbury Road, Bexley in which the first defendant lives and another property, which I am told is in a poor state of repair and unoccupied, at 41 Ronaldstone Road, Sidcup.[3]When applying for a grant of probate, the defendants when completing the schedule IHT404 to the inheritance tax return confirmed that the deceased had a two thirds share in the Ronaldstone Road property and a 50% share in the property at 41 Salisbury Road. The net estate was stated to be some £697,000-odd. I am told that the claimant in satisfaction, or part satisfaction, of her one-third share has received an interim distribution of £150,000 so far which has come from the sale by the defendants of the deceased’s minority shareholding in a company in which the deceased was a director, which shareholding has formed one of the issues of contention between the parties.[4]The claimant in her witness statement in support of the claim refers at paragraph 20 to discussions which took place in 2022, shortly after the grant of probate had been obtained by the defendants. She says this:
“By 8 July 2022 I was becoming frustrated. I had spoken to my brothers the previous weekend. At that meeting, Jeremy proposed the best way to settle the estate was for him to retain 100% of Salisbury Road, Marcus to retain 100% of Ronaldstone Road based on probate valuations and I should take the cash, a ballpark figure of £230,000 which I complained was unfair. My husband had pointed out to my brothers that the properties were accruing assets that needed to be revalued against the current property market. This provoked an angry response from Jeremy who stated that wasn’t necessary, it was the valuation at date of death that was final and if I challenged this he would use the cash from the estate to fight me.”
Also at paragraph 21 the claimant says:
“I explained to my brothers that I had started to become particularly concerned when they had announced that Jeremy owned two thirds of the property at 41 Salisbury and Marcus had taken a mortgage to pay off an outstanding loan on 41 Ronaldstone and that he too was seeking a greater share in the property than I had been led to believe he owned.”
[5]Shortly thereafter the dispute was taken over by solicitors instructed by the parties. The first letter sent by a firm of accountants, Kreston Reeves, who appear to have had solicitors working for them, was dated 4 October 2022 and sent on behalf of the defendants. This set out why it was alleged that the two properties were not owned as has been stated in the IHT return and stating that the joint owners were keen to rectify the position and to document the ownership of the properties accurately given their significant financial contributions to secure their respective shares.[6]There was also reference to the estate of the late Ivy Coleman, who was the deceased’s wife and the mother of the parties, referring to a loan which was owing from the deceased to his late wife’s will trust and saying if figures could be agreed it was possible that distributions from the settlement would partially assist the owners in purchasing shares in the properties. This shows that it was the anticipated intention of the defendants to purchase the two properties between them from the estate.[7]The claimant had by then instructed Warners Solicitors who continue to act for her now. She indicated in a letter sent by them to the two defendants on 3 November 2022 that she was prepared to buy out the defendants but such a buyout would have to be done in accordance with the will and in accordance with the beneficial ownership of the properties as she understood it to be and was reflected in the inheritance tax return.[8]Commenting on the correspondence thus far, it seems to me that it should have been apparent to the defendants by this point that if they wished to pursue an allegation that they had a claim against the estate, that the properties were not owned beneficially as they had declared them to be consistent with the equal beneficial ownership of properties among their joint owners, then they would be in a position of conflict as against the estate. Accordingly, if they wished to pursue such a claim against the estate, then it may not be appropriate for them to be acting as executors because of that conflict of interest.[9]There was then further correspondence from Jarmans Solicitors, who had by then been instructed by the defendants to take over the correspondence. In a letter dated 21 November 2022, they restated the position and said that it was a matter for negotiation. In a further letter on 12 January 2023 they sent a number of documents to the claimant’s solicitors for them to consider saying they had no other documents other than those that they had provided. They went on to say:
“If the attached documentation is unacceptable and if your client is of the opinion that this evidence of these negotiations are unsatisfactory, then it is open to her to sue the estate. It is hoped that she will accept the truth of the attached documentation but it is a judgment that only she can make.”
[10]Again, I consider for the reasons I have already given that this was not an appropriate or correct position for the defendants through their solicitors to take. They were the ones who asserted claims against the estate. It was not appropriate to tell the claimant that it was for her to sue the estate if she disagreed with those claims.[11]The position was repeated in the next letter dated 26 January 2023 where it was said, in my view again incorrectly:
“As the executors our clients have a duty to correct the fundamental issues and problems within the estate and to finalise a settlement. They say that they wish to avoid the incurrence of any unnecessary litigation and have acted within the remit of their powers as executors but can only do this with your client’s consent.”
[12]In a letter on 11 April 2023 from Warners to Jarmans, Warners said:
“If either or both of your clients consider that they are entitled to a greater share of either property, that is a trust claim which they can only pursue in their personal capacity and not a claim to be pursued by them as executors or trustees. If they are pursuing such claims, they are clearly in a position of conflict and must be removed as executors.”
It seems to me that that statement is entirely correct. The defendants ought to have been advised at that point either that they should accept the position as recorded in the inheritance tax return or they should voluntarily resign in favour of a new administrator who could conduct the appropriate negotiations and discussions with them.[13]No further progress having been made, Warners sent a letter before action on 23 June 2023 essentially indicating that the claim which has now been brought was to be brought and indicating why. There was for the remainder of 2023 dialogue between the two firms which for a short period looked as though it might lead to the parties moving closer together. An issue arose about the shares in the company known as Ranburn Limited which had been valued in the inheritance tax return at £20,000. Warners asked more than once for a valuation of it and this point has never properly been addressed.[14]The last letter that was received from Jarmans, I believe, was on 13 December 2023, before it became subject to the intervention of the Solicitors Regulatory Authority. A letter was then sent by the defendants’ current solicitors, Palmers, on 11 April 2024 saying that they had been instructed by the defendants. There does not appear to have been any more significant correspondence before these proceedings were issued.[15]I am told that some more recent estate accounts than those that had previously been made available have been provided under the cover of without prejudice correspondence. I am thus not entirely clear on the current state of administration of the estate. Mr Rifat appearing for the defendants accepted that there had been a wait and see approach from the defendants and that not a great deal may have happened recently. What is clear is that the two properties have not been sold. Mr Rifat indicates now that the defendants are prepared to allow the unoccupied property to be sold but the first defendant continues to wish to purchase 41 Salisbury Road from the estate, it being his home.[16]Mr Bishop appearing for the claimant has set out a number of concerns about the way in which the estate has been dealt with by the defendants thus far. The first I have already adequately described by reference to the claim which has been intimated in relation to the two properties. The defendants accept now that they must, if they remain in post, administer the estate in accordance with the position as set out in the IHT return.[17]Mr Bishop raised a number of other points: first of all, the fact of the delay in the administration of the estate with little progress appearing to have been made since the correspondence between the parties effectively ended at the end of 2023. He also points out that as the first defendant has been living in Salisbury Road, he should have been paying an occupation rent and that no income has been derived from the estate.[18]He also suggested that the delay may have caused a diminution in the value of the property given the fall in the property market in the last couple of years. There is also a reference to the fact that Jarmans’ fees have been charged to the estate. A suggestion is made that those costs were, in fact, in relation to a dispute between the beneficiaries as to the beneficial ownership of property and therefore not a proper expense of the estate and therefore that they ought not to have been paid out of the estate.[19]Mr Rifat in response suggests that there has not been an undue delay, i.e. not a delay which is greater than that which is often experienced for one reason or another in the administration of an estate. He accepts that, if the first defendant continues to wish to buy the property and the claimant does not consent to the price at which he is prepared to do so, then an application would have to be made to court under Part 64 of the Civil Procedure Rules for directions.[20]He accepts that the IHT400 may not have been prepared as his clients would have wished it to be prepared. His words were that the matter may have been clumsily handled by the defendants when acting without the benefit of professional assistance but they now have the benefit of that professional assistance and have instructed reputable solicitors who are experienced in estate administration matters. He stressed the fact that the defendants have now accepted the correct position on conflict of interest.[21]He also submitted that as an interim distribution has been made, there is relatively little else to come to the claimant and he suggested the balance may be £80,000 to £90,000, which he said should be weighed up against the additional costs that would be incurred by the appointment of an independent administrator. One option he ventilated was the possibility of the court adjourning this application to enable the estate administration to be completed, thus anticipating that there will be the possibility of restoring it in the event that there was further deadlock between the parties.[22]One point I should just mention is clause 15 of the will. Clauses 15.2 and 15.4 relate to the ability of the executors and trustees to act in a way in which they may be personally interested. I will not read the clauses out now but essentially clause 15.2 allows the will trustees to exercise powers and discretions even though they have an interest in the outcome and clause 15.4 permits the trustees to contract or deal with themselves as vendor or purchaser provided the other trustee with whom they deal has no interest in such contract or dealing save as being one of the trustees.[23]A question of construction arises, or might arise, as to whether those provisions permit the first defendant to purchase the property at Salisbury Road from the estate without there being a breach of the self-dealing rule which would generally prevent an executor from purchasing an estate property (i.e. without the informed consent of all the beneficiaries). Neither counsel invited me to make a determination on that point. As I have indicated, Mr Rifat accepted that there would have to be an application in the event that there was not agreement between the beneficiaries to enable the first defendant to proceed to purchase the property.[24]The legal test to apply on a claim under section 50 of the 1985 Act is now very well established. The main cases are set out by the parties. In Schumacher v Clarke [2019] EWHC 1031 (Ch), Chief Master Marsh summarised the issue for the court in this way. He said at [18]:
“It is critical for present purposes that the core concern of the court is what is in the best interests of the beneficiaries looking at their interests as a whole. The power of the court is not dependent on making adverse findings of fact, and it is not necessary for the claimant to prove wrongdoing.”
[25]He was concerned primarily with the correct procedure to be adopted at an interim stage in a heavily contested case but at paragraph 21(i) he also said:
“The claim is between the executors and trustees and the beneficiaries, but it is only in part about them. It is primarily about the estate, or the trusts, seen separately from the persons who are its custodians and the beneficiaries. As I have said, the claim is not an ordinary in personam claim.”
He also made the point in paragraph 21(ii) that delay can be damaging. He was talking there about the delay in the course of legal proceedings but this recognises the fact that estates need to be administered and should be administered in a timely fashion.[26]The other relevant case is another decision of Chief Master Marsh in Harris v Earwicker [2015] EWHC 1915 (Ch) where he summarised the previous case law at [9]. I am going to state my conclusion first and then I am going to refer to the Harris v Earwicker criteria in explaining why I have reached the decision that I have.[27]The decision I have come to is that the interests of the beneficiaries as a whole in light of the conduct of the parties to date is best served by my removing the defendants as the executors of their father’s estate and by appointing an independent administrator in their stead. I do so for the following cumulative reasons.[28]First, an incorrect position was clearly adopted in 2022. There was undoubtedly a conflict between the defendants and the estate when they intimated claims against the estate to be entitled to a greater share in the properties than appeared from the way in which the properties are registered. That early mistake could have been remedied either by them resigning or offering to resign, or by them adopting the position they have now adopted in a much more timely fashion but they persisted with their initial position until well after these present proceedings were brought.[29]Secondly, there has been a significant delay in the administration of the estate. It is a delay of over two years. Mr Bishop is right to say, and I can say this from the experience of a number of cases before the court where the sale of property is concerned, that the property market generally has deteriorated in period. I consider that there has at least potentially been prejudice to all of the beneficiaries by the failure to administer the estate.[30]Thirdly, it remains the first defendant’s position that he wishes to purchase the property from the estate, the property at 41 Salisbury Road. It is at least possible, although I have not heard argument on this, that he is precluded from doing so by the terms of the will. As I have indicated, Mr Rifat accepted that possibility by indicating that an application would have to be made if there was not consent between the parties. I agree with Mr Bishop that the costs of such an application would likely exceed the costs that would be incurred by an independent administrator. In the light of what has happened in the past and the breakdown in the relationship between the parties, it would not, in my judgment, be appropriate for the first defendant to purchase the property from the estate without there being a different personal representative in place.[31]Fourthly, as I have indicated, there is a clear breakdown in the relationship between the parties. That is not itself enough to justify an order for removal but, in my judgment, it is relevant when it is coupled with the other factors. The maintenance by the defendants for such a long period of an inappropriate position has, in my view, given the claimant good reason to have mistrust in the way in which the estate might be administered from here on.[32]For all those reasons, I do not consider that it would be appropriate to adjourn the claim to enable the estate to be administered by the defendants.[33]As a cross check, I will refer to the Harris v Earwicker factors. The first is:
“It is unnecessary for the court to find wrongdoing or fault on the part of the personal representatives. The guiding principle is whether the administration of the estate is being carried out properly. Put another way, when looking at the welfare of the beneficiaries, is it in their best interests to replace one or more of the personal representatives?”
As I have indicated, there has been delay, the estate administration has certainly not been carried out properly, even recently.[34]Secondly:
“If there is wrongdoing or fault and it is material such as to endanger the estate the court is very likely to exercise its powers under section 50. If, however, there may be some proper criticism of the personal representatives, but it is minor and will not affect the administration of the estate or its assets, it may well not be necessary to exercise the power.”
Save for the delay, I do not make any finding that the trustees have committed any breaches of duty beyond delay. There were certainly threats that they might do so in 2022 and into 2023. It is possible, as Mr Bishop explained, that there have been breaches in the use of estate funds, and in the failure to account for an occupation rent. I consider those are all matters which ought properly to be considered by an independent administrator. It may well be that administrator considers that no further action should be taken but that is a separate point.[35]Thirdly:
“The wishes of the testator, as reflected in the will, concerning the identity of the personal representatives is a factor to take into account.”
Mr Rifat began his submissions by suggesting that that was the strongest factor here. With respect, I disagree. In a case where the only or main ground for removal is a breakdown in relationships or a mistrust which has no clear basis, the fact that the testator named certain individuals to be his executors is likely to be of significant importance. In a case where there are a number of other factors relating to conduct which justify or might justify removal, it seems to me that the wishes of the testator are of much less significance and do not override the other factors I have mentioned.[36]Fourthly:
“The wishes of the beneficiaries may also be relevant. I would add, however, that the beneficiaries, or some of them, have no right to demand replacement and the court has to make a balanced judgment taking a broad view about what is in the interests of the beneficiaries as a whole. This is particularly important where, as here, there are competing points of view.”
I consider that, in my summary of my reasons for my decision, I have explained why I have made the decision and I have taken into account what the Chief Master said in this regard.[37]Fifthly:
“The court needs to consider whether, in the absence of significant wrongdoing or fault, it has become impossible or difficult for the personal representatives to complete the administration of the estate or administer the will trusts. The court must review what has been done to administer the estate and what remains to be done. A breakdown of the relationship between some or all of the beneficiaries and the personal representatives will not without more justify their replacement. If, however, the breakdown in relations makes the task of the personal representatives difficult or impossible, replacement may be the only option.”
I consider there is still a significant amount to be done by virtue of the fact neither property has yet been dealt with at all. Furthermore, I consider that it would not be expedient for the defendants to remain in post, in circumstances where a further application will then likely be necessary in relation to 41 Salisbury Road.[38]Sixthly and finally:
“The additional cost of replacing some or all of the personal representatives, particularly where it is proposed to appoint professional persons, is a material consideration. The size of the estate and the scope and cost of the work which will be needed will have to be considered.”
Again, I consider that I have dealt with this in saying that the cost of the Part 64 application, which is very likely to be necessary if the order is not made, would likely exceed the costs of an independent administrator as it is likely to be contested. The estate also contains significant shares in two properties and a significant amount of cash, some of which may have already been distributed, and is thus large enough to bear the costs of an independent administrator.[39]For those reasons, I will make an order removing the defendants and appointing an independent administrator. Digital Transcription by Marten Walsh Cherer Ltd 2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Telephone No: 020 7067 2900 DX: 410 LDE Email: info@martenwalshcherer.com Web: www.martenwalshcherer.com

Cited in 1 later judgment