National Westminster Bank plc v. Lucas & ors.
Mr Justice Scales judgment in the case brought by the ‘Savile’ charities against the National Westminster Bank has just been published.
Of particular note is the following sentence:
In the event, to meet these concerns, the PI Claimants, the Third Party Defendants and the Bank agreed that clause 4 of the Scheme should be modified to provide that any claimant wishing to make a claim under the Scheme will have to give consent for their name to be provided to such sources of information (including the individual beneficiaries) as the Bank and the Third Party Defendants might consider helpful to allow for evidence to be obtained to respond to the claim.
There will be scrutiny of these claims against the mass of information that has been compiled…
Apologies that I do not have time to go through this judgment today or tomorrow, but for those who have the inclination and prefer to make informed decisions, rather than leave it to the media to make their minds up for them here is the full judgment.
Feel free to use the comments section to highlight points of interest……
Neutral Citation Number: [2014] EWHC 653 (Ch)
Case No: HC13F00335
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 11/03/2014
Before :
THE HONOURABLE MR JUSTICE SALES
– – – – – – – – – – – – – – – – – – – – –
IN THE MATTER OF THE ADMINISTRATION OF THE ESTATE OF JIMMY SAVILE
Between :
Between :
| National Westminster Bank plc and
– – – – – – – – – – – – – – – – – – – – – |
Mark Cunningham QC (instructed by Osborne Clark) for the Claimant (National Westminster Bank plc)
Teresa Rosen Peacocke (instructed by PWT Advice LLP) for the Trustees
Piers Feltham, Justin Levinson & Elizabeth Gumbel QC (instructed by Slater & Gordon (UK) LLP) for the 3rd & 4th Defendants
Andrew Cosedge (instructed by PWT Advice LLP) for the 5th Defendant
Neil Block QC (instructed by Capsticks LLP) for the 6th Defendant
Andrew Warnock QC & Andrew Spencer (instructed by DAC Beachcroft LLP) for the 7th Defendant
Hearing dates: 24/2/14-26/2/14
– – – – – – – – – – – – – – – – – – – – –
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
………………………..
THE HONOURABLE MR JUSTICE SALES
Mr Justice Sales:
Introduction
These proceedings relate to the administration of the estate of Jimmy Savile, the television presenter. Jimmy Savile died on 29 October 2011. The current value of his estate, after allowing for a range of expenses that have been incurred, is about £3.3 million.
Jimmy Savile left a will. The executor of the will and Jimmy Savile’s personal representative is National Westminster Bank plc (“the Bank”).
Various individuals are named in the will as beneficiaries (“the individual beneficiaries”). These include Mrs McKenna, who is Jimmy Savile’s niece and next-of-kin. Mrs McKenna has now been appointed to represent the interests of the individual beneficiaries in these proceedings. Under the will, the residue of Jimmy Savile’s estate is left to the Jimmy Savile Charitable Trust (“the Trust”).
On 4 October 2012 a television programme was broadcast on ITV accusing Jimmy Savile of being a serial child abuser and sex offender. As a result of that programme and the publicity and further investigations into Jimmy Savile’s activities which followed, a large number of people have come forward to make claims that they were abused by Jimmy Savile.
By the date of the hearing, 139 people had intimated to the Bank that they had personal injury claims against Jimmy Savile and his estate in relation to such abuse (“the PI Claimants”). Some of the PI Claimants have also indicated that they have claims against other defendants with whom Jimmy Savile was associated: the BBC, certain NHS hospital trusts and the charities Barnardo’s and Mind (I refer to these as “the Third Party Defendants”). The great majority of the PI Claimants are now represented by Slater & Gordon solicitors (having previously been represented by the firms of Russell, Jones and Walker and Pannone).
The claims which the PI Claimants have brought forward have not been the subject of determination in court proceedings, and in that sense remain untested allegations. But there is no serious dispute that some, perhaps many, of the claims may be well-founded and meritorious. If such claims are substantiated, there is a serious possibility, to put it no higher, that they would exhaust the money remaining in the estate, leaving the individual beneficiaries and the Trust with nothing.
On the other hand, it cannot at this stage be assumed that this outcome will arise. The individual beneficiaries and the Trust have an interest to ensure that the claims are properly scrutinised. They maintain that if that happens a substantial part of the estate may remain available for distribution to them under the will.
There are two application notices before the court on this hearing. The first is an application notice dated 5 November 2013 issued by the trustees of the Trust seeking an order under section 50 of the Administration of Justice Act 1985 that an alternative professional executor (PennTrust Limited – “PennTrust”) be appointed as personal representative of Jimmy Savile in place of the Bank, “on the grounds (inter alia) that the Bank’s failure to act in the interests or for the benefit of the beneficiaries [i.e. including the Trust], the breakdown of the Bank’s relationship with [the Trust] … based on the mode in which the estate is being administered and caused by substantial overcharges claimed against the estate, prevents the trusts of the estate being properly and expeditiously executed.” The individual beneficiaries support this application. The Bank, the PI Claimants and Third Party Defendants oppose it.
The second is an application notice dated 17 December 2013 issued by the Bank seeking (i) a determination whether a proposed draft scheme designed to facilitate the speedy and inexpensive resolution of personal injury claims by the PI Claimants and others against Jimmy Savile’s estate (“the Scheme”) is a suitable mechanism by which the personal injury claims that have been and may in future be made against the estate can be dealt with and (ii) ratification by the court under section 284(1) of the Insolvency Act 1986 of various expenses incurred by the Bank in the course of executing the will and administering the estate, including substantial legal expenses which have been incurred. The request for approval of the Scheme is supported by the PI Claimants and the Third Party Defendants. The Bank’s applications are opposed by the Trust and the individual beneficiaries.
At the end of the hearing, I was invited to indicate what my decision would be. I was persuaded that it was appropriate to do so, with detailed reasons in writing to follow. I indicated that I would dismiss the Trust’s application to remove the Bank as executor and personal representative; I would approve the Scheme; and I would grant validation of expenses as sought by the Bank. This judgment sets out my reasons.
Factual Background
On 9 December 2011, at an early stage after the death of Jimmy Savile, the Bank issued an advertisement in the usual way under section 27 of the Trustee Act 1925 in a local newspaper and the London Gazette calling for claims in relation to Jimmy Savile and the estate to be notified to it by 13 March 2012.
The usual effect of such an advertisement is to provide protection for an executor who distributes an estate after paying out valid claims made by creditors (and notified pursuant to the advertisement) against the estate. However, it is common ground that advertisement pursuant to section 27 does not have this effect where, after the time for notifying claims as stated in the advertisement has passed but before the estate has been distributed and paid out, other claims are notified to the executor which require assessment.
That is what happened in this case. After the television programme in October 2012 and before distribution and winding up of the estate, it became clear that it was likely that various personal injury claims would be brought forward against Jimmy Savile’s estate, as has happened.
Clearly, the interests of the PI Claimants, on the one hand, and of the Trust and the individual beneficiaries, on the other, are opposed. Both sides have potential claims to the money in the estate, depending on the contingency of how many of the personal injury claims may be found to be substantiated and for what quantum of damages.
At the same time, the interests of the PI Claimants (and of any other individuals who may in future bring personal injury claims against the estate – “future claimants”) amongst themselves are potentially in conflict, in that the more claims which are found to be substantiated and the greater the amounts found to be due, the greater the risk that the remaining funds in the estate will be exhausted and the recovery in respect of the claims which are substantiated will have to be reduced pro rata. Hence, it is in the interest of those of the PI Claimants and any future claimants who have meritorious claims that those without meritorious claims or who may be making false claims should be screened out in some way, so as not to deplete the remaining funds in the estate and thus reduce the prospect that meritorious claims be met in full or at any rate with the least possible reduction.
A further complication is that, as mentioned above, some of the PI Claimants (and, it may be, future claimants) also have claims against the Third Party Defendants, who are various institutions which are alleged to be vicariously liable for tortious acts of Jimmy Savile, including certain NHS hospital trusts (represented in negotiations and before me by the Secretary of State for Health), the BBC and the charities Barnardo’s and Mind. To the extent that such claims are substantiated, the Third Party Defendants will have claims over against Jimmy Savile’s estate for an indemnity.
Another significant part of the context which has to be taken into account is the impact of legal and other costs which may be incurred by the estate and by others in seeking to resolve disputes regarding the merits of the multitude of claims which have already been brought forward and others which may in future be brought forward. The costs of dispute resolution validly incurred by the Bank in the course of administering the estate will be deducted from the fund available to meet claims of the PI Claimants, future claimants, the Third Party Defendants, the Trust and the individual beneficiaries. Parties involved in arguments to determine those claims will incur costs of their own which may in part also be recoverable from the estate and may in part have to be borne by themselves.
Accordingly, those with claims or potential claims to the fund in the estate have an interest in there being effective scrutiny of personal injury claims while at the same time having an interest in such scrutiny being achieved at the lowest possible cost.
The Bank has gathered in the estate and realised the assets, such as real property, owned by Jimmy Savile when he died. The remaining matter to be sorted out before the estate is wound up and the remaining funds distributed is the resolution of the extent of liabilities in respect of the personal injury claims referred to above. In that regard, enough has been said about the complexities of the situation to indicate the difficult task which the Bank has had to carry out as executor of the will and personal representative, balancing the interests of all those with claims or potential claims to the fund in its hands.
There was a previous hearing before me on 20 February 2013 on an application by the Bank seeking directions. My judgment on that occasion is reported at [2013] EWHC 770 (Ch). In the course of that hearing, I emphasised to all parties the importance of trying to minimise the costs of resolution of disputes in respect of the various claims, so as to avoid what counsel had described as “a feeding frenzy for the lawyers” and to preserve as much of the money in the estate as possible to meet the claims of those with entitlements in respect of it. I said this:
“I would encourage everyone here to be as imaginative as possible in terms of trying to work out sensible ways in which the claims can both be scrutinised, but also dealt with at a minimum of expense in terms of advisors’ fees on all sides. I think it is important that, although the estate is significant, it is not hugely valuable when set against the possible claims which may be brought against it. I am very concerned … that it not be swallowed up, in effect, in advisors’ fees and legal fees going forward.”
The Bank, the PI Claimants and the Third Party Defendants have taken that observation very seriously. They engaged in negotiations to try to devise a scheme which would allow effective scrutiny of the merits of the personal injury claims at the least possible cost. The negotiations have been lengthy and difficult, but they have borne fruit in the form of the Scheme, which I discuss in detail below.
Also at the hearing on 20 February 2013, counsel then appearing for the Trust mentioned the possibility that the Trust might be involved in some way in scrutiny of and defending the personal injury claims being brought forward against the estate, perhaps even on the basis that the Trust took over the defence of those claims on behalf of the Bank. This was only an idea, not a detailed worked out proposal, and there was little discussion about it. I indicated that the court might be open to accepting such an arrangement, if it was acceptable to the Bank and if it appeared sensible and viable.
In the event, despite some discussion between the Bank and the Trust regarding the possibility of the Trust taking on responsibility for conducting the defence of the personal injury claims, no arrangements acceptable to the Bank could be agreed. The Bank pointed out that it could potentially be at risk in relation to costs orders in the personal injury proceedings and said that it would not be willing for steps to be taken in its name over which it had little control. It also thought it inappropriate that the Trust, as but one party with a potential claim in respect of the estate, should have its costs of litigating over such entitlement paid out of the estate while other claimants in respect of the estate, the PI Claimants, had to bear for themselves the cost risks of such litigation. These were, in my view, all proper grounds on which the Bank could fairly decide not to permit the Trust to take over the defence of the personal injury claims from itself.
The individual beneficiaries were also consulted, and were at that time against passing over the defence of the claims from the Bank to the Trust. Although Mrs Peacocke made some complaint about the information which was provided by the Bank to the individual beneficiaries regarding this issue, I do not consider that it was defective. She suggested that the Bank gave a misleading impression that the Bank was willing to defend the personal injury claims against the estate; but there was nothing misleading in the letters sent out. That was indeed what the Bank proposed to do, to the extent to which it was proper.
In her submissions at this hearing, although Mrs Peacocke complained about the fact that in the past the Bank did not agree to delegate responsibility for dealing with the personal injury claims to the Trust and its reasons for doing so, she did not seek to say that this is something which the court should now expect or require to be done. I think she was right not to try to advance such a contention. The Bank’s objections against allowing the Trust simply to take over the defence of the personal injury claims on behalf of the estate (and, in particular, to allowing the Trust to do so on the basis that it should receive full indemnity from the estate for the expenses of defending the personal injury claims as it saw fit), as explained to the Trust, were reasonable. Further, it could not be said that they were indicative of any hostility to the Trust as residuary beneficiary under the will.
The Bank sought, instead, to negotiate some form of scheme for consideration of the claims. A further application for directions issued by the Bank on 12 March 2013 was put to one side to enable exploration in negotiations whether a scheme could be agreed. At first, efforts were made to include the Trust in the negotiations, while the individual beneficiaries were kept informed, so far as possible, about their course.
There were three important meetings, on 27 March 2013, 14 May 2013 and 30 September 2013, as well as a good deal of other discussion and correspondence. The Trust was invited to the first meeting, but was unable to attend. It was, however, sent an attendance note of that meeting.
The Trust was not happy with the approach adopted by the Bank at the meeting on 27 March 2013. The Trust felt that the Bank was – in the words of Jo Summers of PWT Advice LLP (“PWT”, the solicitors acting for the Trust) in her second witness statement, dated 17 February 2014 – “capitulating to the demands of the adverse claimants, contrary to the proper administration of the estate and the welfare of the beneficiaries.” By letter dated 17 April 2013, PWT (for the Trust) wrote to Osborne Clarke (the solicitors for the Bank) to make various complaints about the conduct of the Bank. PWT maintained that the Bank’s main duty was owed to those interested under the will and that there was no duty or need to assist adverse claimants to pursue claims against the estate; objected to provision of information to the PI Claimants which was confidential or privileged; complained about expenses incurred by the Bank in communicating with the beneficiaries; objected to the reasons which the Bank had given for declining to delegate the conduct of the defence of the personal injury claims to the Trust; objected to the expenses being incurred by the Bank in administering the estate; complained about the time being taken to resolve matters; and complained that the Bank had not rejected the claims by the PI Claimants for payment of their costs in relation to the hearing on 20 February 2013. The Trust asked for a meeting to address these issues.
On 30 April 2013 a meeting took place between representatives of the Trust and representatives of the Bank. According to the second witness statement of Ms Summers, at that meeting, the Bank explained that it had waived its own fees for acting as executor and personal representative; the Trust proposed that the Bank be replaced by PennTrust, which was independent of the Trust but enjoyed the Trust’s confidence; Mr Tim Parsons, for the Bank, indicated that the Bank was finding the performance of its duties onerous and expensive and that the Bank wished to retire as executor; PennTrust was accepted as a prospective personal representative; Osborne Clarke said they would contact PennTrust to discuss arrangements; and PWT said that it would write to Osborne Clarke setting out the proposed procedure.
At the hearing, the alleged agreement by the Bank to withdraw as executor and personal representative in favour of PennTrust and its later change of heart without (it was said) proper justification was relied upon by Mrs Peacocke as part of the material in support of the Trust’s application to have the Bank removed. In that context, it is unfortunate that this evidential material was only put forward by the Trust in evidence in reply, and was not set out in the first witness statement of Ms Summers, dated 5 November 2013, in support of the Trust’s application. The Bank did not seek to put in further evidence in response to the Trust’s evidence in reply. On instructions, Mr Cunningham QC for the Bank accepted that there had been discussion about the possibility of the Bank stepping down in favour of PennTrust and that at the meeting the Bank had been interested in this; but he said it had only been a proposal for further consideration, and the Bank made no commitment to retire. That is consistent with the account given by Ms Summers in her second witness statement and is supported by the correspondence which followed the meeting (PWT’s letter of 1 May 2013, which said “we canvassed the possibility of agreeing for [the Bank] to be substituted as Executor … and Tim Parsons appeared to be in agreement with this” and sought “to record the proposal as we understand it, and describe the general procedure involved, which if undertaken consensually would be a relatively simple and inexpensive matter”; and Osborne Clarke’s reply of 8 May 2013, which referred to the “proposal” made by the Trust).
Upon mature reflection, and in particular having regard to the progress the Bank had made in negotiations towards drafting a viable Scheme and the desirability of ensuring the Scheme (once agreed with the PI Claimants and the Third Party Defendants) could be operated effectively and at minimal cost, the Bank decided that it ought not to step down as executor and personal representative. In my view, this was clearly a legitimate and lawful decision by the Bank, which cannot be impugned.
The Trust did attend the meeting between the Bank, the PI Claimants and the Third Party Defendants on 14 May 2013, acting by Mrs Peacocke (who also appeared for the Trust as junior counsel at the hearing on 20 February 2013 and represented it again in this hearing). However, it is clear that the conflicting interests involved, as asserted at that meeting on various sides, made the meeting fractious and difficult. The Bank, the PI Claimants and the Third Party Defendants say that they found the Trust to be difficult and unhelpful in the negotiations, with the result that the Trust was not involved thereafter in the detail of the negotiation of the Scheme and was not invited to the third meeting, on 30 September 2013.
At the hearing, Mr Cunningham for the Bank made the incautious comment that it was Mrs Peacocke herself who had been “the problem” at the meeting on 14 May 2013. Whatever may have been his instructions about that meeting, there was not a sound basis in the evidence before the court to support the view that Mrs Peacocke had behaved improperly or had been at fault at that meeting, so as to be “the problem”. (I should note that Mr Cunningham has made it clear, in his comments when this judgment was circulated in draft, that he did not intend by this to suggest that Mrs Peacocke had acted with professional impropriety). Since Mrs Peacocke had been attacked personally in that way, as a matter of fairness to her I allowed her some time in the course of her submissions to give her account of that meeting. In my view, it is clear from what I have heard that at the meeting Mrs Peacocke in good faith stoutly maintained and sought to promote the interests of her client, as she perceived them to be. She did nothing improper or wrong.
Unfortunately, however, whilst Mrs Peacocke undoubtedly acted in a professionally proper way at the meeting, the robust line which she sought to take on behalf of the Trust was perceived by the other parties as unhelpful and unconstructive. The negotiations to construct a scheme which could be agreed by the range of parties directly concerned with the personal injury claims – which included the Bank on behalf of the estate, but did not include the Trust – were complex, difficult and sensitive on all sides. The PI Claimants, for example, have emphasised that they have in the event finally been persuaded to make major concessions and compromises agreeing the Scheme, particularly in relation to the tariff of compensation and the provisions for recovery of costs which it sets out, in the interests of trying to achieve speedy resolutions and payments at least cost. The Third Party Defendants also made significant concessions in order to achieve an agreed Scheme, as did the Bank.
In my view, just as Mrs Peacocke did nothing improper at the meeting on 14 May 2013 and the Trust was fully entitled to take a robust line at that meeting, the other parties involved in these difficult and sensitive negotiations were also entitled to take the view that they would be more likely to make real progress towards agreeing a scheme, and would be able to minimise the costs of achieving that end, if they did not thereafter try to involve the Trust until the final Scheme had been agreed between them and could be presented to the court for approval. Their decision to proceed in this way cannot be impugned as unnecessarily or improperly hostile to the Trust. Rather, it was a legitimate, pragmatic and reasonable approach to the handling of a difficult negotiation.
In fact, when the Bank made the arrangements for the meeting on 30 September 2013, it did not unilaterally decide to exclude the Trust. It sought the views of those then representing the PI Claimants. Mr Collins of Pannone and Ms Dux of Slater & Gordon, for the PI Claimants, both asked that the Trust should not be invited to the meeting. In the circumstances, the Bank acted reasonably and without hostility to the Trust, and was entitled to arrange for the meeting to be held without the Trust being invited to attend.
On 11 October 2013, Osborne Clarke wrote to the beneficiaries under the will to outline the Scheme which it was proposed to put in place.
On 22 October 2013, the Trust wrote to the Bank enclosing a draft of an application notice to remove the Bank as executor and personal representative and a draft of Ms Summers’ first witness statement in support. This was done with a view to trying to persuade the Bank to agree to the substitution of PennTrust in its place. In the draft witness statement, the principal reasons for making the application were said to be: (a) there had been a complete breakdown in relations between the Bank and the Trust which seriously jeopardised the proper administration of the estate; (b) the Bank had failed to advertise properly or at all for personal injury claims to be brought forward to enable the liabilities of the estate to be assessed so that distributions could be made from it; (c) the Bank had taken instructions from solicitors acting for the PI Claimants whilst withholding information from the Trust about the administration of the estate; (d) the Bank’s conduct of the defence of the personal injury claims had prejudiced the estate by disclosing confidential and privileged information to solicitors acting for the PI Claimants; and (e) notwithstanding the Bank’s failure to advertise for claims or assess the estate’s liabilities, or indeed to make any real progress in completing the administration of the estate, the expenses (including legal expenses) incurred by the Bank had been unacceptably high. There was also a draft witness statement of Michael Cash of PennTrust, indicating a willingness to act and setting out the relevant hourly rates.
By letter dated 25 October 2013 from Osborne Clark to PWT, the Bank rejected the Trust’s complaints. The Bank said that it could not agree to retire as executor and personal representative without the court’s approval, and that it considered that the court, in considering the Trust’s application for removal, would take into account the views of all relevant parties, including those acting for the PI Claimants. The Bank called on the Trust to serve its application on all interested parties.
On 5 November 2013, the Trust issued its application, supported by the witness statements from Ms Summers and Mr Cash in finalised form. Contrary to the request of the Bank, the Trust did not serve the application on the PI Claimants. On 18 November 2013, PWT wrote to Osborne Clarke to say that the Trust did not consider it appropriate to have a client of Slater & Gordon or Pannone represent adverse claimants on the Trust’s application, although it might consider a proposal whereby one party was joined to represent all those asserting claims against the estate.
By letter dated 20 November 2013, Osborne Clarke replied to say:
“Your suggestion of joining one party only to represent all those who have asserted claims or potential claims is preposterous. All parties with a legitimate interest should be able to participate in the hearing, at which all issues will be considered.”
At the hearing, Mrs Peacocke relied on this letter (and in particular the use of the word “preposterous”) as evidence of improper hostility on the part of the Bank to the Trust. In my view, however, it does not constitute such evidence. The basic position adopted by Osborne Clarke regarding the right to participate in the hearing was clearly correct. The proposal by PWT and the Trust to try to exclude those with a legitimate interest from being able to participate was, with respect to them, misconceived. Although “preposterous” is a strong word, I do not find its use in this context entirely surprising or inappropriate. It is not unusual for inter-solicitor correspondence to become, on occasion, somewhat testy – particularly if the writer considers (with some justification, as in this case) that the opposing party is behaving unreasonably. It cannot be inferred from this letter that Osborne Clarke’s client, the Bank, had a settled and inappropriate attitude of hostility to the Trust in relation to the administration of the estate.
Meanwhile, the negotiations between the Bank, the PI Claimants and the Third Party Defendants proceeded. They were eventually successful in producing an agreed Scheme for which approval is sought from the court. When it was in agreed form, the Bank issued its application notice of 17 December 2013 and served its evidence, including the draft Scheme, on the Trust and the individual beneficiaries.
The Trust indicated its opposition to the Scheme. Mrs McKenna and the other individual beneficiaries also indicated their opposition to the Scheme and their support for the Trust’s application to remove the Bank. Mrs McKenna explains in her evidence that she has become disillusioned with the Bank, since it does not propose defending the personal injury claims as robustly as she would wish, spending the resources of the estate to do so.
The Scheme
The Scheme is designed to facilitate the settlement of personal injury claims which may be brought against the estate and the Third Party Defendants, and indemnity claims by the Third Party Defendants against the estate. It does not oblige anyone to settle a claim. If a person with a personal injury claim against the estate (and, as may be, against a Third Party Defendant) chooses to make an application under the Scheme, the Bank (and any relevant Third Party Defendant) will be required to consider the claim according to a set time-scale and procedure and to decide whether to accept or reject it. The consideration of the claim will involve all relevant evidence in relation to it being referred to a barrister to review. The barrister will then produce a recommendation whether the claim should be accepted, rejected or accepted in part. If it is accepted, the claimant will have the option to enter into a settlement agreement with the Bank. If it is rejected or if the claimant chooses not to settle, the claimant will have to decide whether to commence legal proceedings against the Bank, acting for the estate.
The terms of the Scheme have been negotiated between the Bank, the PI Claimants and the Third Party Defendants. If the Scheme is approved by the court, it is intended that the Bank and the Third Party Defendants should enter into the Scheme by way of agreement. There is some uncertainty at the moment whether the charity Mind will in fact be able to do so, having regard to its insurance arrangements, but if it transpires it cannot do so it will be a simple matter for the Scheme to be slightly recast as an agreement between the Bank and all the other Third Party Defendants, who have indicated that they are able and willing to sign it. If the Scheme is put in place, persons claiming to have suffered abuse at the hands of Jimmy Savile will have a choice whether to make an application under the Scheme and will also have a choice whether or not to agree to settle their claims on the terms recommended as a result of operation of the Scheme. They will not be obliged to settle at that level.
The main features of the Scheme are that it should operate, for those claimants who choose to make an application under it, as a means of seeking to agree a settlement without recourse to a trial or the making of CPR Part 36 offers; the overall aim of the parties is to seek to agree the liability of each of the estate and the Third Party Defendants, including any claim by Third Party Defendants for contribution from the estate; the Scheme is to be administered by the Bank as executor and personal representative under the general supervision of the court (clause 2.1); an advertisement or advertisements are to be placed in national newspapers setting out a time limit within which claims should be made under the Scheme (clause 2.3); if an individual claim cannot be settled under the Scheme, the claimant may pursue her claim through the courts (clause 2.5); in making a claim, a claimant is required to fill out a claim form providing information in support of the claim (clause 3); provision is made for the submission and obtaining of medical reports and disclosure of medical records (clause 3.2); the Bank or Third Party Defendant against whom a claim is made may seek additional information about it, and must within 56 days either accept or reject the claim (clause 4); if a claim is not accepted, there is to be an effort to meet to try to settle the claim (clause 4.2); the estate is to be deemed to admit a claim for an indemnity by a Third Party Defendant which settles a claim against it under the Scheme (clause 5.1), and a procedure is stipulated to try to promote settlement between the estate and any such Defendant where there is a dispute regarding whether the personal injury claim is valid or not (clause 5.2); the name of any claimant involved in the Scheme shall not be published without the consent of the claimant (clause 6); a set rate for sums in respect of costs in relation to claims settled under the Scheme is set out (clause 7); there is a tariff of damages claimable under the Scheme, depending on the seriousness of the abuse in question (schedule 6); payment of a claim out of the estate will only take place if the court approves such payment (clause 8.1); where a Third Party Defendant has a claim for an indemnity against the estate in respect of any claim settled pursuant to the Scheme, it agrees that its entitlement will rank behind any liability the estate has to any personal injury claimant who settles their claim pursuant to the Scheme (clause 8.3). The costs recoverable in respect of a claim settled pursuant to the Scheme are limited in amount and no uplift in respect of the conditional fee arrangements under which the solicitors for the PI Claimants are acting will be payable (clauses 7 and 8).
The main object of the Scheme is to try to achieve as much clarity as possible, as quickly as possible and at the least cost possible, regarding the extent of liabilities of the estate. It is only when the extent of those liabilities is known, or can reasonably be estimated, that it will be possible for the correct distribution of money in the estate to be worked out. At that stage, it is contemplated that the Bank would make an application to court for sanction and approval of payments to be made by the Bank out of the estate. Settlements of claims made pursuant to the Scheme will not, in themselves, involve payment out of money from the estate, but only agreement to the quantification of those claims as a necessary and important step towards allowing payments out of the estate (in whatever appropriate sum) in respect of those claims.
The Scheme is similar to those which operate in relation to certain road traffic accidents and employment and public liability claims under Protocols under the Civil Procedure Rules, which likewise seek to promote fair scrutiny of claims and settlements at the least cost which can be achieved.
If the Scheme is approved and given sanction by the court on the Bank’s application, it will have two main effects so far as the Bank’s position is concerned. First, it will mean that the Bank can incur legal expenses in operating the Scheme with reasonable assurance that the court will find that it is entitled to recoup those expenses out of the estate (subject to possible scrutiny later of the reasonableness of the amounts of those expenses). Secondly, it will mean that, if the quantum of those personal injury claims found to be valid can be assessed by means of the Scheme procedures (or by means of those procedures and prompt resolution of any other claims pursued outside the Scheme), it is likely that the court will give sanction and approval at the final stage for payments to be made out of the estate to claimants, the Trust and the individual beneficiaries, as the case may be. The giving of such approval will provide the Bank, as executor and personal representative, with protection in respect of any later claims brought forward against the estate after it has been distributed: cf Re Yorke (deceased); Stone v Chataway [1997] 4 All ER 907.
It is because of this second effect that there was some debate at the hearing about the form of the advertisement which would be required to be given under clause 2.3 of the Scheme, if the Scheme is approved. I was concerned to ensure that any advertisement would give potential personal injury claimants who have not yet intimated claims against Jimmy Savile’s estate fair notice that they might in practice lose the opportunity to make claims against the estate after a certain period of time, after which it is proposed that the Bank will apply for the sanction of the court to make payments out of the estate and to wind up the estate, leaving no further money to meet later claims. I am satisfied that the form of the proposed advertisement as finally agreed is appropriate. It is in terms which will give fair warning that it is intended that the estate will be fully paid out within a year after the date of the advertisement or as soon as possible thereafter and it will contain an explicit warning that if notice is not given of a claim before such distribution, all right to recover from the estate will be lost.
At the hearing, there was also debate about other features of the drafting of the Scheme, with contributions being made by Mrs Peacocke for the Trust and by Mr Cosedge, counsel for the individual beneficiaries. Some adjustments were made to the final form of the Scheme for which the court’s approval is sought. In my view, the adjustments which were made would all have been capable of agreement by the Bank and the Third Party Defendants had they been raised promptly by the Trust and the beneficiaries in the course of correspondence after they had notice of the Scheme terms in December 2013.
Mr Cosedge also raised a series of other points on the Scheme, not as objections to it, but for consideration by those who had negotiated the Scheme. None of them indicated that they were attracted by any of these further points. In the context of Mr Cosedge’s list of points, Mrs Peacocke raised one matter which she said was an objection to the Scheme. She said that it was a defect of the Scheme that a Third Party Defendant might agree a higher settlement in relation to a personal injury claim than the Bank was prepared to agree, and then claim over against the estate an indemnity for the greater sum. However, I do not think that it can be said that this is a defect in the Scheme. Since Third Party Defendant indemnity claims under the Scheme are to rank behind personal injury claims under the Scheme (clause 8.3), it is very unlikely that a Third Party Defendant would seek to employ such a tactic in order to increase the size of the (potentially worthless) indemnity claim it might have against the estate. And in any case, if such a situation occurred, the Scheme makes it clear that the Bank is not obliged to accept the validity of the higher indemnity claim which may be made (clause 5.2 and 5.3).
The most significant point of amendment to the terms of the Scheme which was agreed at the hearing related to the stage for consideration of claims under clause 4 of the Scheme. Clause 4 did not originally say in terms that the Bank and Third Party Defendants would be entitled to seek to obtain information about claims made under the Scheme from any other person who might have relevant information bearing upon such claims, but Mr Feltham for the PI Claimants assured me that this was properly covered by clause 4 as it stood, since that would be something to be done in making the assessment whether to accept or reject the claims. Since the individual beneficiaries maintained that they had information which might be relevant to assessing whether some claims were bogus or not, and were concerned that the Bank would not have regard to this in assessing such claims under the Scheme, I indicated that it seemed desirable to allay those concerns by making express provision in the Scheme allowing for this to be done.
After considering the matter overnight, however, those acting for the PI Claimants (in particular) indicated that in fact this might not be possible, out of a concern that it would be unlawful by reason of the Sexual Offences (Amendment) Act 1992 for the Bank or Third Party Defendants to identify to others a person who was making a claim in relation to sexual abuse. I was concerned by this, both because no-one had presented any detailed reasoned argument to me to explain why this would be the effect of the 1992 Act (and I was doubtful, absent such argument, that it would be) and because it appeared to make the operation of the Scheme potentially unfair to the Trust and the individual beneficiaries, in that it might well in practice disable the Bank or Third Party Defendants from seeking from them information which could have a material bearing on the question whether a particular claim has merit or not.
In the event, to meet these concerns, the PI Claimants, the Third Party Defendants and the Bank agreed that clause 4 of the Scheme should be modified to provide that any claimant wishing to make a claim under the Scheme will have to give consent for their name to be provided to such sources of information (including the individual beneficiaries) as the Bank and the Third Party Defendants might consider helpful to allow for evidence to be obtained to respond to the claim. I am satisfied that this adjustment to the Scheme avoids any problem arising from the 1992 Act in the operation of the Scheme and will allow for the possibility of appropriate access in the course of such operation to relevant information held by the individual beneficiaries and others.
The Trust submitted that the Scheme was defective for a number of other reasons. Ms Summers, in her first witness statement, complained that the Scheme is “unworkable and futile”, and that costs to negotiate it and operate it should not be recoverable out of the estate.
I do not accept this criticism. It is true that claimants are not required to claim under the Scheme and that those who do are not obliged to settle at the level which might be indicated under the Scheme. Until they settle, claimants retain the right to launch proceedings in court. However, there are considerable potential benefits for claimants in using the Scheme and it is likely that claiming under the Scheme will be attractive to many or all of them. Use of the Scheme will provide a good opportunity for their claims to be quickly and inexpensively scrutinised by a barrister, so that they have a reasonable chance of reaching a settlement at an agreed level which can be regarded as fair. Agreement about that will in turn help the Bank to get to a position in which the full amount of valid claims is known, so that it can decide whether and in what amounts they can be paid out of the estate and whether and in what amounts the claims of the Trust and the individual beneficiaries upon the estate can be met. This will allow the Bank to come to court for sanction of payments out of the estate, so that those who are entitled to the money remaining in the estate can actually receive what is due to them.
Personal injury claimants who do not claim or settle under the Scheme will have a difficult choice. They can go to court, but that may involve them in expense which may prove to be irrecoverable; they may fail in their claim and receive nothing; they will be on risk for an award of costs being made against them in favour of the estate if they lose, or if they have failed to apply under the Scheme without good reason; and taking that step will be likely to lead to the Bank being forced to incur legal expenses which will deplete further the balance remaining in the estate, so diminishing whatever recovery they might hope to obtain (in contest with all the other personal injury claimants) at the end of the day. Even if some claimants do pursue this course, despite the risks they will face, it is reasonable to think that the numbers are likely to be comparatively small and easier to deal with than if the Scheme was not put in place.
Mrs Peacocke also developed certain other criticisms of the Scheme in her submissions. In my view, there was no substance in any of these criticisms that should lead the court to refuse to approve the Scheme. She suggested that the court should withhold approval and require the parties to the Scheme to negotiate some more to see if it could be improved, from the point of view of the estate. However, to do so would increase the cost of negotiating with the PI Claimants and the Third Party Defendants in circumstances where there is no evidence to suggest that there is any prospect that the Bank could achieve better terms than those in the Scheme.
Since Mrs Peacocke made criticism of the proposed Scheme part of her complaint about the behaviour of the Bank as executor, it is relevant at this juncture to express a view about it. In my judgment, the proposed Scheme is a sensible and pragmatic attempt at a solution to the complex situation which confronts the estate. It seeks to strike a fair balance between the objectives of providing for reasonable objective scrutiny of claims made against the estate whilst minimising the costs of dispute resolution and seeking to maximise the scope for distributions out of the estate to those who are really entitled to it (whether personal injury claimants, the individual beneficiaries or the Trust). It is a feature of the Scheme that it provides for comparatively summary and truncated scrutiny of the merits of the personal injury claims under it, as compared with a Rolls-Royce type examination of those claims at trial in court proceedings. But the problem with Rolls-Royce trial procedures to resolve such disputes is that they are expensive, and are such as would be likely to exhaust the estate in payment of legal expenses if every claim were pursued in that way. In my view, the provisions of the Scheme allow for proportionate and sufficient objective scrutiny of the merits of the claims consistent with the proper administration of the estate. I do not accept the Trust’s further criticism of the Scheme, that it is unfairly generous to the personal injury claimants.
Having made these points, however, I wish to emphasise that in my view the relevant question is not so much whether the court thinks that the making of the Scheme is a good idea in the circumstances (which I do), as whether an executor and personal representative faced with the practical problems confronting the Bank in administering the estate could reasonably and lawfully assess that it should enter into the Scheme. The further question, then, is whether in light of that assessment the court should give its sanction for the executor to do so. I discuss the relevant legal test below.
I reject any suggestion by the Trust that the Scheme shows that the Bank is incompetent or unable to continue in post as executor and personal representative. On the contrary, I consider that the Bank has behaved entirely properly and in line with the indication given by the court at the hearing on 20 February 2013, referred to above. Further, as discussed below, I consider that the role of the Bank in negotiating the Scheme and its ability and willingness to carry it into effect are strong reasons counting against the Trust’s application to remove the Bank as executor and personal representative.
The relevant law
On the test to be applied on the question whether an executor and personal representative should be removed and replaced by order of the court, the principal authority to which I was referred is the decision of the Privy Council in Letterstedt v Broers (1884) 9 App Cas 371, in which the court’s power to remove and replace a trustee was confirmed and discussed. It is common ground that similar principles govern the question whether an executor and personal representative should be removed by the court: see Thomas and Agnes Carvel Foundation v Carvel [2007] EWHC 1314 (Ch); [2008] Ch 395, [44]-[47] per Lewison J; Kershaw v Micklethwaite [2010] EWHC 506 (Ch), [6]-[14] per Newey J.
In Letterstedt, at 385-386, Lord Blackburn referred with approval to the discussion in Story’s Equity Jurisprudence at section 1289:
“But in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who have abused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce Courts of Equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property or to shew a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.”
He went on at 386-387:
“It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non-contentious cases. And therefore, though it should appear that the charges of misconduct were either not made out, or were greatly exaggerated, so that the trustee was justified in resisting them, and the Court might consider that in awarding costs, yet if satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.
The reason why there is so little to be found in the books on this subject is probably that suggested by Mr. Davey in his argument. As soon as all questions of character are as far settled as the nature of the case admits, if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign, and does so. If, without any reasonable ground, he refused to do so, it seems to their Lordships that the Court might think it proper to remove him; but cases involving the necessity of deciding this, if they ever arise, do so without getting reported. It is to be lamented that the case was not considered in this light by the parties in the Court below, for, as far as their Lordships can see, the Board would have little or no profit from continuing to be trustees, and as such coming into continual conflict with the appellant and her legal advisers, and would probably have been glad to resign, and get out of an onerous and disagreeable position. But the case was not so treated.
In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety. But they proceed to look carefully into the circumstances of the case.”
As noted by Lewison J in Carvel at [46], “The overriding consideration, therefore, is whether the trusts are being properly executed; or, as [Lord Blackburn] put it in a later passage, the main guide must be ‘the welfare of the beneficiaries’.” The court is called on to apply that broad principle, having careful regard to the particular circumstances of the case.
Mrs Peacocke said at the hearing that she did not seek to say that the behaviour of the Bank fell within the category of cases of positive misconduct identified by Story (although I think that the Bank might have been forgiven for thinking otherwise, from the way in which the evidence in support of the Trust’s application was framed). Rather, she submitted that relations had broken down between the Bank and the Trust and the individual beneficiaries, so that they no longer had confidence in the Bank’s administration of the estate; and since there was available a suitable alternative executor and since (she said) there was no reasonable ground for the Bank to refuse to step down as executor, the court should, following the guidance of Lord Blackburn in the second full paragraph quoted above, remove it.
In order to assess this submission, it is necessary to examine carefully the nature of the obligations upon the Bank as executor and personal representative in the unusual circumstances which have arisen in relation to Jimmy Savile’s estate. I accept the submission of Mr Cunningham, for the Bank, and of Mr Feltham, for the PI Claimants, that proper execution of the Bank’s obligations – what, in the context of Letterstedt, Lord Blackburn called the proper execution of the trusts – in the circumstances of this case requires the Bank to have regard not only to the interests of those claiming under Jimmy Savile’s will (the individual beneficiaries and the Trust) but also to the interests of those among the PI Claimants, possible future claimants and the Third Party Defendants who may have meritorious claims against his estate. If personal injury claimants or Third Party Defendants have meritorious claims against the estate, the proper fulfilment of the executor’s role is to see that such claims are paid out of the estate before making any distribution under the terms of the will. On the material available to the Bank and before the court, the assessment can properly be made that there are likely to be at least some meritorious claims. That is not a possibility that can be discounted on the basis that the claims all appear to be weak or without substance.
The interests of the beneficiaries under the will (including the Trust) cannot automatically be promoted above those of the various personal injury claimants and Third Party Defendants who may have good claims against the estate. I reject the submission by Mrs Peacocke that the Bank was obliged to treat the interests of the beneficiaries under the will as superior to those of the claimants against the estate. The entitlements of both beneficiaries and claimants depend, in substance, upon the same contingency, namely whether and to what extent there may be valid and meritorious claims against the estate. It is that contingency which the Scheme is designed to address and, so far as may be possible, determine.
In light of the claims against the estate, and the real risk that it may prove to be insolvent because of them, the Bank is obliged to have regard to the interests of the class of claimants against the estate as well as to the interests of the beneficiaries under the will. The position is in significant respects analogous to that of a company which faces a real risk of being unable to pay its creditors, where the directors are bound to consider the interests of the creditors and not simply those of the shareholders: see e.g. West Mercia Safetywear Ltd v Dodd [1988] BCLC 250, CA, 252-253, and Hellard v Carvalho [2013] EWHC 2876 (Ch), [88]-[89].
The decision of Chief Registrar Baister in Re Vos [2006] BPIR 348 provides further support for this view. In that case, the executor of the will of a testator who had been a Lloyd’s name, whose estate faced substantial claims by Lloyd’s, engaged lawyers to defend the estate against those claims. Lloyd’s eventually obtained summary judgment against the estate and then presented a petition for an insolvency administration order in respect of the estate, which was in due course made. One question which arose was whether the payment of the legal expenses incurred in the defence of the estate should be ratified under section 284 of the Insolvency Act 1986. This provision, when read with Article 3 of the Administration of Insolvent Estates of Deceased Persons Order 1986, has the effect that where the estate of a testator is found to be insolvent, any disposition of property in the period after his death is void except to the extent it was made with the consent of the court or was subsequently ratified by the court.
Counsel for the trustee in bankruptcy submitted that the court should in its discretion refuse ratification of certain expenses incurred in defending the claim by Lloyd’s, on the basis that there was doubt about the solvency of the estate from the outset, that “There was therefore a duty (arising out of the doubt) to administer the estate as if it was insolvent”, and that the possibility of insolvency became a probability thereafter: para. [34]. The Chief Registrar accepted these submissions: para. [34]. He explained his reasoning in the following paragraphs. At para. [37] he said that, “even allowing a reasonable time in which to investigate the estate and see what could be done, there came a time when [the person administering the estate] realised, or ought to have realised, that the estate was insolvent or at least that there was a strong possibility of its being so.” From that point, the estate should have been administered as insolvent, if only out of an abundance of caution: para. [38]. The Chief Registrar was critical of the efforts made on behalf of the estate, without the benefit of approval by the court under the Re Beddoe jurisdiction, [1892] 1 Ch 547, to seek to settle the Lloyd’s claim, including by making threats to dissipate the estate’s assets in the course of any litigation: para. [40]. As he said at para. [41]:
“It is one thing to adopt tactics of that kind in ordinary commercial litigation, but different considerations apply where one is dealing with money that should be held on trust for the general body of creditors and beneficiaries of an insolvent estate. In taking the approach he did, in my view, [the person administering the estate] misunderstood completely what his obligations were. From the point when he realised, or ought to have realised, that the estate was insolvent it was no longer acceptable to engage in horse trading with one of the creditors of that estate. His obligation was to ensure that each creditor of the estate received that to which it was entitled under the statutory regime. He was under no obligation to see that Lloyd’s got anything more than it was entitled to, but he had no business trying to ensure that Lloyd’s claims were dealt with other than fairly, that is to say rateably …”.
Thus, the Chief Registrar makes the important point that a person administering an estate has an obligation to be fair to those who may have good claims against the estate. It should, however, be noted that one cannot transpose everything he said to the circumstances of the present case. Since, as explained above, the rights of claimants against the estate and the rights of beneficiaries under the will cannot be known with any certainty at the moment, depending as they do upon the contingency referred to, it cannot simply be said that the estate should be administered as if it is insolvent and the beneficiaries under the will have no relevant interest. Mr Feltham correctly acknowledged that the Bank should have regard not only to the interests of claimants against the estate but also to the interests of the beneficiaries under the will.
In my judgment, the person with the primary responsibility for balancing these different and competing interests which ought to be taken into account is the executor, the Bank. In the context of this case, this requires emphasis. It is not for the court to intervene to “second guess” the Bank’s decision to negotiate and implement the Scheme, unless the Bank has acted in breach of its duties. The weight to be given to the respective interests in deciding how to proceed is a matter for evaluative assessment by the executor, taking a range of factors into account such as the apparent strength of the claims against the estate (so far as that can be assessed at this stage), the potential extent of the liability of the estate to the claimants, the interest on all sides in minimising the costs of dispute resolution and the appropriate means to be adopted to ensure fair scrutiny of the merits of the claims made while avoiding the exhaustion of the estate in legal costs.
In my view, no good case has been made out by the Trust or the individual beneficiaries to indicate that, in negotiating the Scheme and in now asking the court for approval to implement it, the Bank has acted or will act in any way unreasonably or without fair and proper regard to the interests which ought to be taken into account in deciding how the estate should be administered. The Bank has been at pains to negotiate a scheme which allows for fair scrutiny of the claims made against the estate and which seeks to contain the extent of any sums due and the costs of such scrutiny within reasonable and proportionate bounds.
Mr Feltham for the PI Claimants submitted that in the context of administration of an estate in relation to which there is a real risk that it is insolvent, the court should adopt the same underlying policy as in administration of bankrupts’ estates, of discouraging applications to control the conduct of the administration so as to minimise expensive applications to court where the estate is or may be insolvent and to avoid overburdening the administrator: see Bramston v Haut [2012] EWCA Civ 1637; [2013] 1 WLR 1720 at [66]-[69]. In the latter context, the principle is that the court should only interfere with a decision of the official receiver or a trustee in bankruptcy “if it can be shown he has acted in bad faith or so perversely that no trustee properly advised or properly instructing himself could so have acted, alternatively if he has acted fraudulently or in a manner so unreasonable and absurd that no reasonable person would have acted in that way”: ibid., at [69].
Whether or not the position will always be exactly the same in a case of possible insolvency as distinct from a case of established insolvency, I agree with Mr Feltham that particular caution should be exercised by the court when considering whether to interfere with the administration of a testator’s estate where there is a real risk that it is insolvent. It is in such a context that particularly difficult choices may have to be made in balancing different competing interests in respect of a fund which may prove to be inadequate to satisfy all the reasonable claims being made upon it. There will often be no clear and obvious standard to guide how to proceed. Also, it is in that type of situation that the court should be astute to discourage wasteful depletion of the estate in management and legal expenses to the prejudice of those making valid claims against it, by ensuring that the executor and personal representative is accorded a substantial margin of discretion to decide how best to proceed.
In the present case, my own view is that the Scheme is a fair and sensible scheme to facilitate resolution of the issues faced by the Bank and that it ought to be implemented. But even if I myself would not have negotiated or sought to implement the Scheme, had I been executor, I would still have concluded that the Bank was fully entitled to make the decisions it did to seek to negotiate the Scheme and is now fully entitled to seek to implement it. In my opinion, these are matters well within the proper scope of the Bank’s duties and discretion as executor and personal representative.
In light of the guidance in Letterstedt, I consider that it would not be appropriate for the court to take the further step of removing the Bank as executor unless there is a real risk that the Bank will not act fairly and conscientiously in that office or if the Bank cannot be expected to continue to carry out the administration of the estate in an effective and proper manner.
As I discuss more fully below, the Trust and the individual beneficiaries have failed to show that there is any risk that the Bank will fail to act fairly and conscientiously in its office as executor. The facts that the Bank has waived its usual fees for acting as executor, has negotiated the Scheme in the responsible way it has and has even subsidised the administration of the estate by agreeing to pay out of its own resources for certain expenses amounting to about £20,000 in relation to a variation of the will for tax reasons are all strong indicators that the Bank has acted and will continue to act fairly and conscientiously in its office as executor.
Mrs Peacocke submitted that the Bank has shown unacceptable and improper hostility to the Trust in the manner in which it has dealt with the estate’s affairs. I reject this submission. It is true that there have at various points been conflicting views between the Trust and the Bank about how to proceed, but it cannot be inferred from this that the Bank has adopted an improperly hostile attitude towards the Trust or that there is any real risk that the Bank will not carry out its duties as executor and personal representative in a proper and lawful manner. The points on which there have been conflicts of view or in relation to which the Trust has felt badly treated (such as its exclusion from the latter phases of the negotiation of the Scheme) have not been the product of hostility by the Bank to the Trust, but the result of proper and reasonable judgments by the Bank about the best way to proceed to administer the estate, having proper regard to the interests of all those who may prove to have an entitlement in respect of it.
There are many contexts in which trustees or those in equivalent positions, such as personal representatives of a deceased person, have to make judgments which involve striking a balance between different competing interests and which may thus adversely affect some persons claiming under the trust or in respect of the estate of the deceased. It is to be expected that in such cases there will often be an element of friction between the trustee or personal representative and those disappointed by their decisions. This is not in itself a good ground to remove the trustee or personal representative from their office.
Mrs Peacocke sought to rely on a further passage from Lord Blackburn’s opinion in Letterstedt, at p. 389, in which he concluded that the trustees in that case should be removed. The full passage at pp. 389-390 is as follows:
“But though their Lordships acquit the Board [the trustees] of concealment in these accounts, the spirit which permits such charges is naturally offensive to the appellant and unfair towards the trust estate. They can only be made by persons who are themselves exasperated by the course pursued towards them, and determined to try somehow or other to get remuneration of which they conceive themselves to have been unjustly deprived. The making of such charges, and the vexatious course pursued by the Board in opposing the perfectly reasonable inquiry which the plaintiff asked before the referee, are calculated to introduce additional irritation into a relation which was disturbed enough before. And they have an important bearing on the question whether, in view of the future welfare of the trust estate, it is expedient that the Board should remain trustees.
It is quite true that friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is certainly not to be disregarded.
Looking therefore at the whole circumstances of this very peculiar case, the complete change of position, the unfortunate hostility that has arisen, and the difficult and delicate duties that may yet have to be performed, their Lordships can come to no other conclusion than that it is necessary, for the welfare of the beneficiaries, that the Board should no longer be trustees. Probably if it had been put in this way below they would have consented. But for the benefit of the trust they should cease to be trustees, whether they consent or not.”
In my view, the most pertinent section of this passage for present purposes is Lord Blackburn’s statement that friction or hostility between trustees and the possessor of the trust estate, or beneficiary, is not of itself a ground for removal of the trustee: see also Kershaw v Micklethwaite, supra, [27]-[32]. As I have mentioned, it will often be the case that a trustee or other fiduciary, acting perfectly properly, has to take decisions which may leave some persons interested in the trust estate disappointed or upset. That is not a good ground for the court to remove them. On a fair and proper analysis, that is all that has happened in this case.
Lord Blackburn indicated that something more would be required to justify removal of the trustees in Letterstedt. In that case, the trustees had overcharged the trust and had behaved vexatiously in seeking to brush off the inquiries of the plaintiff without good reason, thereby materially contributing without justification to the conflict and hostility that had arisen. That is not a feature of the present case. There is no evidence of improper over-charging by the Bank, and the form of ruling already made at the hearing in February 2013 and again later in this judgment (in accordance with the proposals by the Bank) in relation to ratification of legal expenses incurred in the course of the administration is specifically designed to allow for proper scrutiny of the propriety of any such expenses before they can be recouped out of the estate.
Lord Blackburn also referred to a material change of position by the trustees in Letterstedt and to the difficulties which they would have in carrying out further difficult and delicate duties in implementing the trust in that case. Mrs Peacocke sought to suggest that in the present case there had been a material change of position by the Bank, in that it had at one point agreed to step down as executor in favour of PennTrust but then reneged on that agreement. She also sought to suggest that the breakdown in relations between the Bank and the Trust which had occurred meant that the Bank could not now administer the estate effectively and should be replaced.
I do not accept either of these contentions. As to the first, as explained above, although the Bank did at one stage express interest in the possibility that it might step down as executor, it did not commit itself to do so and events moved on. In my view, nothing the Bank did in this regard contributed improperly to any breakdown in relations or conflict. It is not a matter which indicates that the Bank has shown improper hostility in relation to the Trust, nor that the Bank has inappropriately provoked hostility on the part of the Trust. The circumstances of this case are far removed from those in Letterstedt.
Further, this is not a case in which an executor has refused to resign “without any reasonable ground” for that refusal (Letterstedt at p. 386). On the contrary, I consider that there are good grounds, based on the need for fair and effective administration of the estate in the interests of all who may have claims upon it, to justify the Bank in its decision to remain in post:
The Bank is a professional executor of good repute which is capable of being neutral and impartial in administering the estate as between the different competing interests and, on any fair view, of being seen to be impartial. It was not appointed by either of the main contending groups, the personal injury claimants or the beneficiaries under the will. By contrast, if PennTrust were appointed in the Bank’s place, there is a significant risk that it would be perceived by the personal injury claimants as the candidate put forward by the opposing group and as potentially less than completely neutral, which would in itself pose a risk of greater disruption and argument – with all the additional cost of dealing with that – in carrying through the administration of the estate. Generally, the court will be slow to remove an executor and personal representative just because one group claiming against the estate is disappointed and disaffected as a result of reasonable decisions the executor has made in an effort in good faith to strike a fair balance between competing interests;
The Bank has said that it is willing to act without charging the estate, which will assist in safeguarding funds for eventual distribution from the estate. By contrast, although PennTrust has indicated that it is willing to “read in” for taking over the executor-ship without charge, it appears it does propose to charge for its services as executor thereafter;
By negotiating with the PI Claimants and Third Party Defendants to the successful conclusion of getting agreement on the Scheme, which offers a sensible way forward for handling the various personal injury claims, the Bank has established a track record of effective and appropriate administration of the estate in the unusual and testing circumstances of this case. There seems little justification for the court to impose a new executor on the estate, with the risk that would involve that the new executor might not be so effective in dealing with the situation going forward;
The negotiation of the Scheme has required a good deal of give and take between the parties to the negotiations, in the course of which the PI Claimants and the Third Party Defendants have developed confidence in the fair approach of the Bank to handling the claims. The Scheme provides a general framework, but its effective implementation in seeking to arrive at as many settlements of valid and meritorious claims as possible, to facilitate ultimate distributions from the estate, will also depend on effective co-operation between the parties going forward. In my view, it is strongly in the interests of the due and effective administration of the estate that the Bank should remain in place to carry through the implementation of the Scheme, rather than run the risk of severe disruption of such implementation by replacing the Bank with the Trust’s proposed executor, PennTrust, which has not developed equivalent working relationships with claimants.
In this context, I should add that there was some debate at the hearing about the significance of a further potential factor, namely that the testator, Jimmy Savile, had himself chosen the Bank to be executor. I can see that in some cases the choice of the testator might be a significant factor to be brought into account, for instance where a testator has chosen a family member to be executor and can be presumed to have chosen them because of an assessment that they are fair-minded, dependable and in possession of a good understanding of the family context. But in the present case, I do not think that the fact that Jimmy Savile chose the Bank to be executor is a matter which in itself carries significant weight. Of far greater importance are the factors discussed above.
As to the second contention of Mrs Peacocke referred to above, there is no difficulty regarding the due administration of the estate going forward arising from any sense of conflict or hostility between the Bank and the Trust. No participation by the Trust or co-operation between the Bank and the Trust is needed to allow the Scheme to be operated effectively or to secure the due administration of the estate. The Trust does not have a role to play in operating the Scheme or in helping with that administration. All that remains to be done is to assess the extent of valid and meritorious claims against the estate, primarily (it is hoped) by operation of the Scheme.
By contrast with the position of the Trust, the individual beneficiaries say that they do have material evidence which they could contribute to assist with the evaluation of the merits of some of the claims which have been or may be made against the estate, by reason of their knowledge of some of the individuals involved or the circumstances of the claims. But there is no difficulty of co-operation on their part to ensure that there is proper scrutiny of such claims. Mr Cosedge for the beneficiaries confirmed that they would be willing to provide to the Bank what relevant information they have to contribute in relation to any claims. In fact, they have already provided some information of this kind to the Bank.
Accordingly, although the Bank continues to have difficult responsibilities to discharge, this is not a case in which the Bank has duties of a character which, by reason of the unfortunate friction which has arisen with the Trust, cannot be properly performed for the benefit of the estate and the welfare of all those who may be found to have entitlements in respect of it (contrast Letterstedt, at p. 389).
The particular grounds for removal of the Bank put forward by the Trust
Against the background of this discussion, I turn to address the particular grounds which Mrs Peacocke argued should lead to the conclusion that the Bank ought to be removed as executor and personal representative. There are nine, as set out below. I do not consider that any of them by itself, nor by cumulative effect, would justify the removal of the Bank.
First, Mrs Peacocke complained that the Bank should have taken steps promptly after the television programme about Jimmy Savile or after the hearing on 20 February 2013 to advertise for those who wished to make personal injury claims to come forward within a limited time, with a view to cutting off other claims made after that date. As I understood this complaint (despite Mrs Peacocke at another point in her submissions disavowing reliance on the section 1287 of Story’s Equity Jurisprudence as cited in Letterstedt), it was a contention that the Bank had failed properly to carry out its duties as executor to limit the number of claims which might be brought against the estate, with a view to preserving as much of the estate as possible for those claiming under the will and allowing an early distribution of the estate.
I reject this complaint. The Bank had properly placed an advertisement for claims under section 27 of the Trustee Act shortly after Jimmy Savile’s death, in the usual way. The situation which arose after the television programme in October 2012 was new and complex. The Bank was entitled to take time to work out how to proceed, rather than rushing forward with placement of a new advertisement in an attempt to cut off some claims. There was massive publicity, so it was not necessary to place an advertisement to alert individuals who might have been affected by Jimmy Savile’s activities to the fact that they might have claims against his estate. The Bank was entitled to explore with the PI Claimants who did come forward how their and others’ claims might best be dealt with, and in that context was entitled to discuss and seek to agree a timetable to advertise for further claims to be brought forward before the estate assets were finally distributed. This was another area where the Bank had to strike a balance between competing interests, between the interest of those with potentially meritorious claims against the estate to have a full and fair opportunity to consider their position and to make a claim before the estate is distributed and the interest of those who have entitlements in respect of the estate to be paid out reasonably promptly. It is not possible to say that the Bank has acted unreasonably or in breach of duty by first acting to agree the Scheme and then arranging, as will be done, for a further advertisement to be placed as described above.
Second, Mrs Peacocke complained that the Bank should have tried to arrange for the Trust to be involved in the management of the personal injury claims against the estate, as had been canvassed at the hearing on 20 February 2013. In my view, however, the Bank was fully entitled to conclude, after reflection, that this was not an appropriate way forward. The Trust had no entitlement to be involved. It became clear that the Trust wished to use the estate’s assets (not its own) to defend the claims in the way which the Trust, rather than the executor chose. The Bank was entitled to consider that this would not be the best way to administer the estate and to pursue instead negotiations for the Scheme. It is very unlikely that those negotiations could have been successful if the Trust had been interposed as it demanded.
Third, Mrs Peacocke submitted that the Bank had not responded properly to the complaints of the Trust set out in the letter from PWT dated 17 April 2013. In particular, for no good reason, the Bank failed to follow through on what she contends was the agreement that it should retire as executor in favour of PennTrust. For reasons already explained above, I do not accept these submissions. There was no final agreement by the Bank to retire in favour of PennTrust and there were and are good reasons why the Bank should not retire or be removed as executor.
Fourth, Mrs Peacocke said that the Bank reacted with inappropriate hostility to the Trust when the Trust sent the Bank its draft application notice for removal of the Bank and the draft evidence in support in October 2013. I do not accept this submission. The draft application notice and evidence involved the adoption by the Trust of an unduly hostile and critical stance in relation to the Bank, effectively accusing the Bank of misconduct as executor without good reason, and the Bank was entitled to reject the draft application and the accusations in the robust way it did. It is completely unsurprising that the Bank reacted in this way. It is not a reaction from which it can be inferred that the Bank has formed an attitude of inappropriate hostility to the Trust which is likely to impede it in fulfilling its duties as executor and personal representative in due and proper manner. The Bank was entitled to point out, as it did, that the court would wish to supervise any question of replacement of the executor and that the views of others, including the PI Claimants, would be relevant matters to be taken into account in relation to such a question.
Fifth, Mrs Peacocke complained that the Bank had failed properly to rebuff claims by the PI Claimants for payment out of the estate of their costs of attending the hearing on 20 February 2013, on the grounds that their solicitors had been acting under conditional fee agreements which did not include an obligation on the clients to pay such costs. Accordingly, Mrs Peacocke said, the Bank should have rejected these claims for payment of costs, since they did not satisfy the indemnity principle.
The background to this particular complaint is that at the end of the hearing on 20 February 2013 there was a discussion regarding the order to be made and what costs could properly be paid out of the estate assets, on the basis that they were properly incidental to the due administration of the estate. Counsel for the PI Claimants asked for their costs of attendance to be paid out of the estate. Mrs Peacocke, for the Trust, asked for the Trust’s costs of attendance also to be paid out of the estate. She said that she understood that those acting for the PI Claimants were acting under conditional fee agreements, but did not know if those covered their attendance at that hearing. I indicated that I would have reservations about ordering payment of CFA costs (i.e. base costs plus uplift) out of the estate, and Mr Collins for the PI Claimants indicated that the costs they were claiming were ordinary recoverable costs without an uplift. The transcript of the hearing has not fully captured what was said, but Mr Collins has explained in his evidence for this hearing that this is what he said and I accept this – in fact, it accords with my own recollection. Mrs Peacocke then said that the Trust agreed that all appropriate parties should have their costs paid out of the estate and accepted that it had been helpful to have submissions from the PI Claimants. I accepted the submissions made by the PI Claimants and the Trust that their costs in relation to that hearing should be paid out of the estate, and the order made on that occasion made provision for this.
However, when the PI Claimants put in their statements of costs to the Bank, it was stated that these were costs due under conditional fee agreements (albeit all that was claimed were ordinary costs, with no uplift). The Trust, confused perhaps by the fact that the transcript did not record the full exchange with Mr Collins, objected to the Bank paying these costs. The Bank referred on this objection to the solicitors for the PI Claimants, who have confirmed that the costs claimed are payable by their clients, so that the indemnity principle is indeed satisfied. They have certified as much in the statements of costs which they have submitted.
At this hearing Mrs Peacocke persists in the Trust’s objection to payment of these costs. She also says that the Bank should have done more to clarify the position to the satisfaction of the Trust.
In my view, the Bank acted in an appropriate way by passing on details of the Trust’s objections to the PI Claimants so that they could respond. I am satisfied from the statements of costs for the PI Claimants, certified in the usual way by the solicitors, that the costs really are payable by those claimants to their solicitors and that the indemnity principle is satisfied in relation to them. The costs claimed are £17,539.56 and £9,690.00 (including VAT). They are reasonable and proportionate. To end this chapter of the dispute, Mr Feltham applied for an order that the court now give its sanction for the payment of these costs. I am satisfied that this is appropriate in the circumstances and give such sanction.
Sixth, Mrs Peacocke complains about a feature of the Scheme, as originally put forward. The original version of the Scheme as attached to the Bank’s application notice of 17 December 2013 contained a provision (clause 7(1)(b)) which appeared to make the Bank liable for all the reasonable costs of the PI Claimants in respect of the Chancery proceedings concerning the administration of Jimmy Savile’s estate into the future. I had reservations about whether it was appropriate to include such a provision in the Scheme, which I raised. Counsel for the PI Claimants explained that all that was intended was that the limitation on costs recoverable by the PI Claimants in relation to claims made under the Scheme should not preclude the possibility of them seeking further payment of costs from the estate in relation to participation in the Chancery proceedings, should any such payment be found by the court to be appropriate. It was a simple matter to re-draft clause 7(1)(b) to achieve this effect more clearly and in appropriate terms, and this was agreed by those supporting the Bank’s application for approval of the Scheme.
Mrs Peacocke, however, seeks to rely on the fact that the original version of clause 7(1)(b) was framed as it was in support of a contention that the Bank has shown that it is unwilling or incapable of carrying out the administration of the estate in a proper way. However, this was not an objection to the Scheme raised by the Trust in correspondence, to give the Bank and the PI Claimants an opportunity to respond. The Bank has readily accepted the revised form of clause 7(1)(b) and there is no basis to suppose that it would have failed to do so earlier, had the point been raised. There is nothing in this item of complaint which indicates that the Bank will not fairly and conscientiously carry out its duties as executor and personal representative.
Seventh, Mrs Peacocke complains that the Bank would not agree to pay the Trust’s costs in relation to the hearing on 20 February 2013, despite the order that such costs should be paid. The Bank has in fact been seeking agreement between all parties in relation to the costs in respect of that hearing of all those who were entitled to attend and who are covered by the costs order made. The costs order says that costs are to be assessed “if not agreed”, and the Bank has taken the prudent position that this means that agreement by all parties attending the hearing is required. Because of the Trust’s objection to the payment of the costs of the PI Claimants (see above), it has not been possible to secure general agreement on all the other costs. In the circumstances, it cannot be inferred that the Bank’s omission to agree and pay the Trust’s costs of the hearing is evidence of hostility to the Trust or any indication that the Bank will not fairly and conscientiously carry out its duties. The court having resolved the question of the PI Claimants’ costs of this hearing, above, it is to be hoped that the outstanding costs issues from the hearing on 20 February 2013 can now be agreed.
Eighth, Mrs Peacocke submits that the Bank has wrongly approached its task as executor on the footing that it is under a duty to take into account the interests and wishes of the PI Claimants along with the interests of those claiming under the will, and that the Bank has in all cases preferred the interests of the PI Claimants. I reject both parts of this submission. The Bank has been right to take into account the interests of those with claims against the estate in deciding how to proceed: see above. The Bank has had a particular legitimate need to take into account the wishes of the PI Claimants, because for good reason it has been seeking to agree the terms of the Scheme with them. The Bank has not simply and invariably preferred the interests of the claimants to the interests of those claiming under the will. It has, in an entirely proper manner, sought to achieve a fair balance between the different competing interests in respect of the estate.
Ninth, the Trust complains that the Bank has improperly shared confidential or legally privileged information with the PI Claimants. I reject this complaint as well. The Bank has shared information of various kinds with the PI Claimants with a view to encouraging them to agree the terms of the Scheme. The decision to do this fell well within the scope of the decision-making discretion allowed to the Bank as executor and personal representative. Even if it had information in its hands which was protected by legal professional privilege of the Bank or was confidential, in the sense that the Bank could have chosen to withhold it from the PI Claimants, the Bank could properly decide to provide such information to the PI Claimants if it judged that this would assist in the negotiation of the Scheme, even if in some respects it might be unhelpful to the Bank if litigation later ensued. In fact, however, Mrs Peacocke did not show me any information in the hands of the Bank which might have any significant detrimental impact upon its ability to defend the personal injury claims, which the Bank disclosed to the PI Claimants.
For the reasons given above, I dismiss the Trust’s application for the Bank to be removed from its position as executor of Jimmy Savile’s will and as his personal representative.
The Bank’s application for approval of the Scheme
For the reasons already explained, I consider that the Bank was entitled to seek to negotiate the Scheme with the PI Claimants and the Third Party Defendants; that it would be lawful and appropriate for the Bank to enter into the Scheme (or, if Mind drops out, its equivalent); and that it will be lawful and appropriate for the Bank to seek to operate the Scheme with a view to securing fair scrutiny of the personal injury claims being brought forward and settlement of claims to the greatest extent as may be possible and appropriate. I am satisfied, on the information available, that the notice to be given by advertisement of the Scheme will be long enough to give a fair opportunity for all persons who think they have a claim against the estate, but have not yet brought it forward, to do so. It is therefore likely that, after the Scheme has been brought into operation, the Court will give sanction for payments to be made out of the estate and for the estate, in effect, to be wound up in accordance with the timetable contemplated under the Scheme.
It is just and appropriate for the court to give its approval and sanction for the Bank to enter into the Scheme and to operate the Scheme.
The Bank’s application for validation and sanction of expenses incurred in the administration of the estate
The parties are agreed that the general framework for consideration of this application is that set by my ruling on 20 February 2013: see [2013] EWHC 770 (Ch). The Bank seeks validation under section 284 of the Insolvency Act 1986 in respect of two classes of expenses. The first class is those expenses incurred or to be incurred in the ordinary course of administration of the estate, such as the costs of conveyancing in relation to realising the assets in the estate. The second class is the legal expenses involved in dealing with the personal injury claims which have been brought forward, with the disputes which have arisen in relation to the handling of the administration of the estate and with the negotiation of the Scheme. The legal expenses incurred have been substantial.
No objection to any item in the first class has been pressed in submissions. All these items appear clearly to be proper expenses of the administration which the Bank is entitled to recoup out of the estate. It is appropriate to grant a full validation order in respect of these items.
As regards the second class, the Bank seeks a validation order in respect of these items for the purposes of the insolvency regime, but without prejudice to the ability of any person with an interest in the due administration of the estate to make objection in due course – on the issue whether the expenses should be borne by the estate – to the appropriateness and extent of the expenses. This was the order made in relation to such expenses on the last occasion.
In my view, it is appropriate to make an order in this form in relation to all the items of legal expense for which sanction is sought on the present application. There is no item of expense which, on the material before the court, can be seen to be improper and not fit for validation on this basis. In particular, as is clear from what I have said above, the Bank has acted properly and for the due administration of the estate in seeking to get agreement on the Scheme and is in principle entitled to recoup the proper and reasonable legal expenses involved in doing so. The order to be made will allow for scrutiny of the detail of the legal expenses at a later stage, if objections are to be made to their amount.
I should add here that there is nothing in the material before me regarding the charges made by the Bank or by Osborne Clarke to the Bank which supports any case by the Trust – if such a case is still relied on by it, despite Mrs Peacocke not distinctly including it in her nine grounds of objection to the Bank’s actions as developed in submissions – to the effect that the Bank has overcharged the estate.
Conclusion
This judgment sets out the reasons for the rulings about which I informed the parties at the end of the hearing. I dismiss the Trust’s application to remove the Bank as executor and personal representative. I accede to the Bank’s application for approval of the Scheme. I also accede to the Bank’s application for full validation of certain expenses of the administration of the estate, as referred to above, and to its application for validation of legal expenses of the administration, subject to the possibility of challenges later on to their recovery out of the assets of the estate. I give sanction for payment of the PI Claimants costs in relation to the hearing on 20 February 2013.