Analysis
The parties were siblings. The application concerned the estate of their mother, PF. PF had divorced from the parties’ father in 1980, after which PF had continued to live in a five-bed council property (the Property) with the children until they grew up. In 2004, PF acquired the freehold for £192,000. At some point, PF adopted three other children.
In around 2009 (on the defendant’s (D’s) evidence), D moved PF out of the Property and into one of D’s properties. According to the claimants’ evidence, PF was already showing signs of paranoia, and in 2015 D was taken to court by a neighbour because of PF’s instability.
D was made bankrupt on 17 May 2016. He was discharged after a year. While he was bankrupt, PF granted a charge over the Property to a finance company (TCFL) and gave the borrowed sum (thought to be £350,000) to D. As of 16 March 2021, the outstanding debt secured by the charge was £385,000 including arrears of £6,000. D’s case was that this gift was financial assistance explained by his having looked after PF in her later years.
There was evidence that TCFL characterised the loan as a ‘business loan’. D’s explanation was that the Property was being let out to tenants. The claimants alleged that D had been letting it out for many years and keeping the rent.
In February 2017, the claimants’ case was that PF had a stroke and they became aware that she had been diagnosed with dementia. D’s case was that in 2017 PF moved from D’s property to a place of her own in Stratford, and then in 2018 to a specialist care home because she had been paralysed by her stroke. PF died on 21 March 2020.
The claimants believed that PF did not leave a will. The first claimant obtained a caveat against the estate and renewed it on 24 August 2020.
The claimants were also suspicious as to how D had managed to acquire the rents from the Property, and how he had acquired three other properties. They alleged that he must have acquired the properties from funds improperly obtained from PF over the years. They issued proceedings on 4 May 2020 seeking a declaration that D held the three properties on constructive trust for the estate and, there being no will, a declaration that the claimants were each entitled to a quarter share of the estate thereof and a quarter share of the Property in PF’s intestacy.
Shortly before issuing proceedings, the claimants applied on short notice for a freezing order against D which was granted by Birss J on 30 April 2020. Birss J’s order restrained D from dealing with the estate other than on at least 72 hours’ notice, and from dealing with any assets of his own save to the extent that their remaining value was over £1m. The prohibition expressly covered the three properties in D’s own name, the Property, and money in D’s bank accounts. Birss J also ordered D to provide information about his assets, bank accounts (including bank statements), and a copy of any will, and to verify the information by affidavit. On 12 May 2020, Fancourt J continued the freezing order until a hearing on 19 May 2020 and extended time to provide information to 15 May 2020. No information was provided by either date.
On 18 May 2020, the day before the adjourned hearing, D’s counsel served the claimants’ counsel with an unsigned witness statement, attaching a copy of an alleged will said to have been made on 21 March 2008. Under this will, D inherited the Property and all of PF’s personal estate, subject to three small legacies to non-family members and a trust fund of £100,000 for PF’s children who the claimants say had been adopted out of the family.
At the hearing on 19 May 2020, Falk J discharged the proprietary and freezing orders upon an undertaking by D not to attempt to or actually diminish the value of the Property and to put all rents collected from it into a separate bank account and apply the monies only for the purpose of making mortgage payments or other expenditure on the Property. Falk J extended time for the provision of information to 2 June 2020 and adjourned the hearing to 19 November 2020.
D still did not provide the required information and affidavit by 2 June 2020. On 9 June 2020, he provided some limited documents comprising PF’s bank statements and bank statements of an unidentified party up to the end of 2017 but nothing else. No affidavit was served. No acknowledgment of service or defence to the claim was served.
At the adjourned hearing on 19 November 2020, Roth J gave the claimants permission to amend their claim to dispute the validity of the will put forward by D. The amended claim was served on 23 December 2020. It alleged that PF did not know or approve of the will’s contents, lack of testamentary capacity, and undue influence. At the time of service, the claimants’ solicitors asked where the original will was and where it could be inspected. No reply was received and D did not file a defence.
The next the claimants heard from D was an application dated 25 February 2021, stamped by the court on 2 March 2021, seeking a variation of his undertaking to allow him to discharge the mortgage so that he could remortgage the Property with another lender. No details were given of the mortgage. However he said that arrears had risen to over £12,000 because he could not find tenants during the Covid-19 crisis but they were now down to £6,000. He also revealed that the mortgagee had appointed receivers over the Property on 31 July 2020. D also revealed that he had obtained probate of the will which he attached.
In addition, D provided evidence from the receivers that the Property needed to be sold, and that he had received an offer from a finance company willing to lend £442,873.92 for 12 months.
Before D’s application was notified to the claimants, they made a cross-application on 2 March 2021 seeking an administrator pending suit to administer the estate and other remedies. The claimants’ evidence was that the first claimant had not received warning of D’s application to remove her caveat, so D must have misled the probate registry into believing that she had received such notice in order to warn off her caveat. Their evidence was also that, using the grant of probate, D had applied to HM Land Registry to vest the freehold title to the Property in his name pursuant to an alleged assent to himself, and that a solicitor in their firm was prepared to act as administrator pending suit. The claimants also sought an order authorising the new administrator to bring a claim if so advised against the current mortgagee based on undue influence.
Held:
It was inappropriate to vary the undertaking to enable D to remortgage the Property. The evidence indicated that D was not a proper person to be administering the estate. He should therefore be replaced by an administrator pending suit under s117 Senior Courts Act 1981.
In considering s117, the same principles should be applied as in relation to applications under s50 Administration of Justice Act 1985. This meant that the core concern was the best interests of the beneficiaries looking at their interests as a whole, and if there was a good arguable case for removing a person who claimed to act as executor, the court had the power to do so (Schumacher v Clarke [2019] referred to).
There were ten reasons for concluding that D was an inappropriate person.
- First, by its freezing orders, the court had already determined that there were grounds for believing that there was a real risk that D would wrongfully dissipate his or the estate’s assets.
- Secondly, there were reasonable grounds for believing that the three properties in his name were acquired using funds from the deceased, because he had never put in a defence to answer this allegation.
- Thirdly, after the death of D’s father, D put forward a purported will but dropped the claim after he was challenged by D’s stepmother. This appeared to be because that will was obviously a forgery since it referred to a property being left by D’s father to D which D’s father did not own at the time of the purported will.
- Fourthly, despite the extensions of time, D had provided only a fraction of the information he had been ordered to provide and had never provided an affidavit nor explained his failure to do so.
- Fifthly, he still had not acknowledged service of the claim.
- Sixthly, there were reasonable grounds for believing that D obtained probate by falsely telling the probate registry that he had served a warning-off notice on the first claimant.
- Seventhly, to obtain this benefit, he had used the original of the will and thereby took advantage of his failure to lodge it in court as he was required to do if he had lodged an acknowledgment of service by CPR r57.5(2)(b).
- Eighthly, D had tried to use the grant of probate, without telling the claimants, to vest the Property in his own name and get HM Land Registry to register him as sole proprietor.
- Ninthly, there was no witness statement from D explaining these things.
- Tenthly, the correspondence from the receivers showed that he had failed properly to communicate with them or the mortgagee.
Secondly, the threat of an immediate auction of the Property absent remortgaging was not a sufficient reason to allow D to remain in place as effective administrator of the estate. This was for five reasons.
- First, the premise of the application was that he should be allowed to create a misleading public record at HM Land Registry.
- Secondly, the new lender’s offer was just an inprinciple offer – there was no evidence that if the lender knew the truth it would grant the mortgage.
- Thirdly, even if the new lender was prepared to grant the new mortgage, there was no reason for confidence that the same problems would not arise in future with D in control.
- Fourthly, the new mortgage offer was not particularly advantageous to the estate since it involved onerous fees and interest.
- Fifthly, there were real grounds for believing that there was undue influence by D over PF. Whether the current mortgagee was on notice was an open question, but they potentially were. A claim on these grounds might put pressure upon it to withdraw the Property from auction.
D’s application must therefore fail. It was also appropriate to appoint an administrator pending suit. The claimants’ proposed administrator was appropriate – he was an experienced professional and there was no reason to doubt he would perform his duties as such. Nor was there good reason to suppose he would be wrongly influenced by his being a solicitor and consultant at the claimants’ solicitors’ firm. Given the urgency, it was appropriate for him to take over immediately – any problems arising could be addressed later. While this would involve cost to the estate, the claimants were prepared to pay for this cost at the first instance.
The parties agreed that it did not matter that probate had been granted to D and had not been revoked since the will was under challenge in any event.
The court was not prepared to authorise the new administrator to bring a claim against the current mortgagee. While there was a reasonable case that D had exercised undue influence over PF to procure the charge, whether there was a case that the mortgagee was fixed with knowledge thereof was not so clear. It would be for the new administrator to decide whether to bring proceedings. Any proceedings would have to be funded by the Cs in the first instance, as their counsel accepted.
In addition, the claimants’ undertaking in damages should expressly cover any losses resulting from D not being able to remortgage the Property.
Finally, the court directed that D lodge the grant of probate in court, and made a debarring order preventing D from defending the proceedings unless he filed an acknowledgment of service, defence and counterclaim, and provided the information he was already required to supply verified by affidavit. Since further matters might need to be sorted out in light of the judgment, the claim would be left in the High Court for a master to make further directions before any transfer to the county court.
JUDGMENT PETER KNOX QC: [1] I have before me an application by the Defendant, Mr Glenroy Eseh Ugulor, to allow him to remortgage the property known as 41 St Donatts Road, London SE14 6NU in Catford, London with a different lender from the one who currently has a mortgage over it. He wishes to do …Continue reading "Ugolor & ors v Ugolor [2021] WTLR 1127"