Withers delivers success in claim against obstructive estate co-administrator

Deputy Master Francis has awarded the administrator of an estate the costs of a claim against her sister, who was obstructing the administration. Click here to read the judgment.

What happened?

Mrs Berger and Mrs Schuman are the daughters of Mrs Phyllis Knopp, who died in 2021.  As their mother's will could not be found, the sisters took out a grant of letters of administration to administer her estate and appointed solicitors to assist them.

Mrs Berger simply wanted the estate to be administered but she faced obstruction from her sister which ultimately led to her instructing Withers (the solicitors acting in the administration were conflicted) and issuing the proceedings.

Selling the flat

Mrs Knopp's principal asset was her London flat.  In 2021, the flat was valued for probate at £610,000.  In February 2022, the sisters appointed Winkworth – Mrs Schuman's choice of agent – to sell the property.  Winkworth recommended an asking price of £650,000.  Mrs Berger wanted to follow that advice, but Mrs Schuman insisted that it be listed at £670,000.  There were few viewings and no offers.  

In October 2022 the agent recommended reducing the asking price to £630,000.  Again, Mrs Berger wanted to follow that advice.  Mrs Schuman insisted that Winkworth's advice was not correct and that the flat should not be reduced below £650,000.  In November 2022 there was an interested buyer, but Mrs Schuman refused to entertain the £625,000 potential offer and instead proposed moving the sale to another estate agent, saying that Winkworth were underperforming.

Mrs Berger agreed to move the sale to Dexters – again, Mrs Schuman's choice – on the condition that she and her sister both committed to following Dexters' professional advice.   But when Dexters recommended launching the property at £600,000, Mrs Schuman refused to list any lower than £625,000 (despite Dexters pointing out to her that 're-listing at the same price where the previous agent had no success is counterproductive').  By this time the property had been on the market for over a year.

Ownership of funds in a bank account

The second issue related to a bank account in Mrs Schuman's name.  Mrs Schuman had originally said (via her then-solicitors) that funds belonged to the estate and she subsequently confirmed to the solicitors advising her and Mrs Berger that the money in the bank account had been provided entirely by her mother.  

However, almost a year later, Mrs Schuman changed her story: she said that the account also contained her own money.  When the solicitors asked her for evidence of this so that they could correct the position with HMRC, she initially reverted to saying that the money was her mother's, and then that it was her 'own money' and nothing to do with Mrs Knopp at all.  Despite requests from the solicitors and later from Withers, she refused to provide any evidence one way or the other.

Solution

After giving her sister numerous opportunities to co-operate Mrs Berger finally issued a claim asking the Court (i) to give her sole conduct of the property sale, on the basis that Mrs Schuman was refusing to follow any professional advice even after agreeing to do so, and (ii) to order Mrs Schuman to produce relevant bank statements.

Even after the claim was issued, Mrs Schuman continued to reject Dexters' advice – including when the sisters finally received an offer of £577,000, which Dexters strongly advised them to accept.  

The outcome

In August 2023, Master Brightwell gave Mrs Berger sole conduct of the sale as she asked.  He also ordered Mrs Schuman to disclose copies of the relevant bank statements so that Mrs Berger could ascertain where the funds had in fact come from.

The sale at £577,000 was lost due to the delay.  Ultimately Mrs Schuman bought the property herself, deciding at the eleventh hour to match an offer of £498,000 from another third-party buyer.  

She belatedly produced the bank statements, from which it became clear that the account contained both Mrs Knopp's money and Mrs Schuman's.  The remaining amount which derived from Mrs Knopp was comparatively modest and it would not have been economic to ask the Court to adjudicate between Mrs Berger's understanding of the evidence and Mrs Schuman's continued insistence that the money was all hers.  Mrs Berger therefore waived any entitlement to the account in her personal capacity as beneficiary of the estate.

Who paid the legal costs

A hearing then took place in May 2024 before Deputy Master Francis to deal with costs.

In relation to the flat, the Deputy Master concluded that 'it was entirely reasonable for the claimant [Mrs Berger] to have sought the direction of the court in relation to the sale of the flat… in circumstances where the claimant wished to follow professional advice in that respect and where, in contrast, the defendant did not accept the professional advice as being correct and was not prepared to follow it. In those circumstances, in my judgment, it was inevitable that the claimant would have to seek the directions of the court in relation to the sale.'

He found that Mrs Berger was the 'successful party' in relation to the flat sale.  He ordered Mrs Schuman to pay the costs which Mrs Berger had incurred relating to that aspect of the claim personally.

Where the bank account was concerned, the Deputy Master agreed that 'The difficulty for the claimant was that different and inconsistent explanations were being given without there being any independent verification of precisely the position… That was a question which concerned her as administrator and also as beneficiary. It was also a question which was relevant to the estate’s accounting to Her Majesty’s Revenue & Customs for inheritance tax'.

He concluded that in relation to the bank account, Mrs Berger was not the 'successful party' in that the Court had not ultimately determined to whom the money belonged, but it had been 'perfectly reasonable … to seek the directions of the court as to the question as to the estate’s entitlement to the funds in the account'.

He therefore ordered that Mrs Berger should be paid her costs of that issue out of the estate.

The final question was how then to work out how to allocate the costs between the two issues (flat and bank account).  

The Deputy Master agreed that it would not be appropriate for a costs draftsman (a specialist costs lawyer) to try to distinguish between the costs relating to the flat and the bank account.  He said that he had been assisted by Withers' own calculation that 60% related to the flat and 40% to the bank account, and adopted this as a 'fair and reasonable assessment of the relevant apportionment'. 

The upshot was that Mrs Schuman had to pay 60% of the costs personally, and 40% came from the estate (reducing what she received).

The judgment is a reminder that the Court will step in to assist personal representatives where an estate administration is being held up by unreasonable behaviour.  It should also be a cautionary tale for obstructive parties: having the status of administrator, as Mrs Schuman did, does not give carte blanche to ignore professional advice repeatedly if it is unreasonable to do so.

Paul Hewitt and Rosalind Russell acted for Mrs Berger, instructing Owen Curry of XXIV Old Buildings.   Mrs Schuman appeared in person.