A recent case concerned the duties of an executor towards potential creditors of a deceased's estate where the creditors were the potential victims of the deceased.
In the estate of Studdert, which was valued in excess of £4.5 million, the difficulty arose because at the date of death there were no actual personal injury claims in process identifying any claimants. It was known to the executors, however, that there was potential for such claims to be brought against the deceased's estate by victims, whose names and locations were as yet unknown.
A number of cases in England and Wales have highlighted that the court will take a practical approach and that the executors would be required to take reasonable steps to identify creditors. If there is a reasonable prospect of there being claims against the estate, present or future, the executors should apply to the court for direction on the steps to be taken to shed light on such claims and the claimants.
When should an executor seek court guidance regarding potential creditors?
In the Studdert case, the deceased had a number of convictions for possession of indecent images. The positions he held throughout his career gave him access to a countless number of victims over several decades. It is the nature of the offences and the opportunity to have committed such offences against many victims that gave rise to the reasonable probability of personal injury claims being brought against the estate.
It is important to note that the court did not direct the executors to take steps themselves to identify victims. Instead, the police and the various institutions in which the deceased operated were required to provide all information legally possible to locate the potential victims. In this case, social media has been utilised to attempt to reach as many victims as possible by directing them to a specially created website detailing the death and the deceased's convictions and advising how to make a claim. It is not known how long the executors will have to wait although it is expected that the same test of reasonableness will be applied.
Prohibition on distributing the estate
Until the executors have reported to the court as regards claimants that have come forward, they are prohibited from distributing the estate. They can, however, apply for this prohibition to be lifted. The other interested party in this case is the residuary beneficiary as it is their entitlement that will be affected by the settling of claims by creditors. It is likely important that in this case, the residuary beneficiary is an educational trust which is also a registered charity. They have thus far had no part in the proceedings.
Although the cases have taken place in England and Wales, it is likely that the same approach would be taken in Scotland.
Get in touch
If you wish to discuss your responsibilities as an executor, please do not hesitate to get in touch with a member of our Private Client team and we will be more than happy to assist:
Elgin: 01343 542623
We have solicitors and offices across the country and are ready to help.