Administration of Estates – Put up or Shut up orders
Andrew Carswell is a partner specialising in Dispute Resolution at Trethowans. He explains some of the issues encountered in the context of threatened claims against the validity of Wills.
The administration of a deceased’s person’s estate can be complicated with all the usual steps required to deal with his or her affairs, but in the main part should be free of any serious challenge to the validity of the Will itself. However, this is not always the case and sometimes disappointed beneficiaries may argue that the Will is in valid and should be set aside. Common arguments are that the testator lacked mental capacity or the Will was made subject to undue influence .
Usually these issues are resolved. A person raising a challenge may back down or there may be court proceedings. Alternatively, there may be a settlement. So far so good, but there can be circumstances where claims cannot be resolved because the prospective claimant is not willing to pursue his claim. Often this will be because it has been mentioned in vague terms and the executors may understandably have questioned the legitimacy or sincerity of the claim. Alternatively, a Claimant may be concerned about pursuing the claim for costs reasons.
What should an executor do in a situation like this, as most administrations will be completed within the first year or two and he will then normally want to distribute the estate to beneficiaries (subject to certain other time limits for differing purposes)?
Unfortunately, an executor who assumes that a challenge is not going to materialise, may leave himself open to criticism or even liability if he makes a distribution without any further safeguards. Section 27 of the Administration of Estates Act 1925, provides an executor with an indemnity who distributes an estate under a Grant of Probate, if he acts in good faith, but that may be difficult to satisfy if a distribution has taken place after a notification has taken place, however sceptical the executor is.
In certain cases it may be sufficient to obtain an indemnity from beneficiaries that they will, in effect, meet any claim or indemnify the Executor, but that of course may be impractical if they have spent the money or cannot be traced.
The cast iron protection for an executor in a situation of this kind is to make an application to the court for an Order permitting him to distribute the estate. If he does so and a claim is then made the executor should be protected from any personal liability.
The approach taken by the courts, balancing the interest of everyone concerned illustrated in Cobden–Ramsay v Sutton . The executor had been granted probate of the deceased’s Will. The residue was to be divided between the deceased’s adult children, with various legacies to third parties. One of the children argued that the Will was invalid on the basis of lack of mental capacity. However, he was reluctant to bring a claim himself and insisted that the executor did so.
The Judge considered all the circumstances and the practice adopted in previous decisions and the current approach of the legal profession in dealing with such claims. He decided that the Claimant should be given 28 days in which to bring a claim and if he did not do so then the executor was at liberty to distribute the estate according to the then unchallenged Will. This approach has become known as a “Put up or Shut up Order”.
A Put up or Shut up Order can actually be quite a reasonable approach for all concerned. The person who challenges the validity of the Will is not prevented from making a claim at any time (there being no limitation period for such claims), but is told that he must proceed quickly. The executor is protected from any liability if there a later successful challenge. So far as the beneficiaries are concerned, they will receive their bequest and although nothing can be certain, they can begin to rest easily knowing that it is unlikely that any subsequent claim would be successful.
In practice these Orders will be rare, because most claims are dealt with in one way or another and sometimes beneficiaries will provide indemnities, but in cases that do not fit this model they can be extremely advantageous and an executor will normally obtain his costs from the estate of having to make such an application.