Lane v Lane & ors [2024] WTLR 615

Analysis

The claims concerned the estate of Monica Lane (the deceased), who died on 8 May 2019. The deceased had three children, David, Susan (the first defendant) and Peter, the last of whom predeceased her leaving two children, the second and third defendants. David died on 17 January 2021 and Karen (the claimant) was David’s widow and personal representative of his estate.

The deceased and David formed a trading farming partnership, embodied in a 12 October 2002 partnership agreement. That agreement provided that the partnership would dissolve on, among other things, permanent incapacity of a partner. The partnership did not comprise land, but rather machinery and a capital account.

The deceased’s final will was dated 23 February 2013 (the will). By the will the deceased left David her ‘share and interest’ in the partnership (the gift), among other assets. The first defendant and David were named as executors. After further specific bequests the three children were named as residuary beneficiaries.

The first defendant contended that the deceased became permanently incapacitated shortly before her death, causing the dissolution of the partnership. The gift failed by ademption and fell into residue.

Relations between the first defendant and the claimant were poor. The claimant sought a declaration that the gift was not adeemed (the construction claim) and the removal of the first defendant as executrix (the removal claim).

The second and third defendants had played no active part in the proceedings save to express support for the first defendant staying in office.

The value placed on the estate in the grant of probate was just under £2.5m.

Held:

The construction claim

1. (1) The doctrines of interpretation and ademption fit together as follows. First the gift had to be interpreted to determine what the subject matter was. Then the doctrine of ademption required one to ask whether the subject matter of the gift had ceased to exist as the testator’s property or its nature had fundamentally changed.
2. (2) To evaluate the rights of a departing partner from the point of dissolution involved considering what dissolution was. Dissolution did not mark the moment of extinction. One could still speak of someone having a share or interest in a partnership while the winding-up process was ongoing. The share or interest did not disappear at dissolution, but was crystallised. Dissolution turned it into a cash sum. A share or interest included what a partner ultimately got out of the partnership.
3. (3) The purpose of s43 Partnership Act 1890 was not to destroy the share or interest at the point of dissolution and turn it into a debt. The right of the deceased partner’s representative consisted of having an account of the property, its collection and application, and of receiving that portion of the clear balance that accrues to the deceased’s share and interest in the partnership (Knox v Gye (1871-72) applied). Section 43 stated that the amount due in respect of the share should be a debt. The departing partner had the right to have the continuing partners account and to have the winding-up conducted properly. The departing partner retained a bundle of rights.
4. (4) Having conduct of the winding up was not decisive in whether someone has a share or interest at the very least when one is looking at the content of the partner’s economic rights. Whether the deceased had a share in the partnership did not turn on whether the partnership entered dissolution through agreement or incapacity.
5. (5) Once the winding up of the partnership was at a complete end for all practical purposes and the partners had been paid out, the partner no longer had any rights. Their share had been turned into cash.
6. (6) The construction of the gift was straightforward. The deceased wished her son to have the whole of the partnership of which she was a 40% partner. If she had died before she became incapacitated, this would have passed to David the sum that was produced for him through the winding-up process, which would have been treated by s43 as a debt from the point of death, rather than a right to continue to participate in the partnership. The deceased still had a share in the partnership at the date of her death because there was no completed winding up and the deceased had not yet been paid out. This was also consistent with how the phrase ‘share and interest’ was commonly used in partnership law.

The removal claim

1. (1) The touchstone of s50 Administration Act 1985 was to further the interests of the beneficiaries of the estate as a whole. The court was not being asked to find for one party or another. If, for whatever reason, it had become impossible or difficult for the administration to be completed by an existing personal representative, then an order for their removal would usually follow.
2. (2) The court had a number of serious concerns about how the administration of the estate had proceeded:
   1. (a) Court directions should have been sought on the issue of ademption. While the sums at stake formed a relatively small part of the estate, the issue had needed to be resolved to bring clarity to David (and after his death, his estate). The issue had impeded the administration of the estate.
   2. (b) There had been no response to the detailed letter of claim sent on behalf of the claimant.
   3. (c) No evidence had been produced to contradict the allegation in the letter of claim that the first defendant had provided no explanation as to whether agricultural property relief (APR) or business property relief (BPR) were being claimed. Whatever the first defendant considered to be the correct approach should have been communicated to the claimant and the court.
   4. (d) The court would have expected an up-to-date account of the estate and its assets by the first defendant.
   5. (e) There were a number of potential challenges and flashpoints ahead. Those included: the interpretation of a clause in the will as to where the burden of inheritance tax should fall; identifying the part of an area of Spragg’s Wood which was to pass to David, along with a possible dispute as to the division of the remainder; and there remained a potential for future disputes over APR and BPR.
   6. (f) One of the reasons the obtaining of the grant had been delayed had been the first defendant’s concerns over the validity of the will. That had contributed to the worsening of relations and it was difficult to understand the capacity challenge when Susan had conducted herself under a lasting power of attorney executed after the date of the 2013 will.
3. (3) The clear view was that the beneficiaries would be better served by the appointment of an independent professional administrator. There had been continual friction in the administration of the estate. Continuing with the current personal representative was likely to incur the greater cost in the long run. Although the defendants were against this course of action, this was outweighed by the concerns about administration and the court took into account that David was the principal beneficiary of the estate.

JUDGMENT JONATHAN HILLIARD KC: Introduction [1] This case concerns a dispute over the effect of a will and the administration of an estate, specifically whether a gift under the will has adeemed and whether the executrix should be replaced by an independent solicitor. [2] The estate is that of Monica Lane (the ‘Deceased’), who died …

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