Credit where Creditor’s due

In Randall v Randall [2016] EWCA Civ 494, the Court of Appeal considered whether a creditor of a beneficiary of an estate had sufficient standing to bring a probate claim to challenge the validity of a purported will of the testatrix.

This is an important decision which clarifies the nature of the interest in an estate a person must have in order to entitle that person to bring a probate claim challenging the validity of a will.

Facts

A husband and wife agreed in their divorce proceedings that if the wife inherited more than £100,000 from her mother, she would keep £100,000 and she would give half of the balance in excess of £100,000 to the husband. By her will, the wife’s mother left £100,000 to the wife and the balance of her estate to the wife’s children.

The husband brought a probate claim to challenge the validity of the mother’s will. If the will was invalid, the husband would be entitled to receive around £75,000.

First instance

The court listed the trial of a preliminary issue, namely whether the husband as a creditor of a potential beneficiary of the estate was entitled to bring the probate claim as a person with a sufficient “interest” in the will within the meaning of CPR r.57.7(1), which provides:

The claim form must contain a statement of the nature of the interest of the claimant and of each defendant in the estate (emphasis added).

At first instance, the deputy master held that the husband had no standing to bring a probate claim. The deputy master concluded that the creditor of a beneficiary of an estate had no “interest…in the estate” within the meaning of CPR r.57.7(1) and found that the provisions of s.121 of the Senior Courts Act 1981 provide a safeguard for the court to intervene where there is a risk of injustice.

The husband appealed to the Court of Appeal.

The appeal

Giving the leading judgment of the Court of Appeal, Lord Dyson MR summarised the previous authorities which touched upon this point. He emphasised that there is an important distinction to be drawn between the respective positions of a creditor of an estate and a creditor of a beneficiary of an estate.

In the case of the former, there was no doubt that a creditor of an estate did not have sufficient interest in an estate to bring a probate claim. The creditor of an estate is only interested to see that the estate is properly administered and that the creditor is paid by the personal representatives what he or she is owed by the deceased. A creditor of an estate will almost always be paid before the beneficiaries of the estate are entitled to receive their inheritance.

However, the deputy master had been wrong to confuse the position of a creditor of an estate with that of a creditor of a beneficiary of an estate. The interests of the two types of creditor were fundamentally different.

The interest of a creditor of a beneficiary of the estate is to ensure that the beneficiary receives what he or she is supposed to receive under the will or intestacy, so that the creditor has a better prospect of being paid what he or she is owed by the beneficiary.

Lord Dyson found that the court in Re Seagrave (Deceased) [2007] EWHC 788 (Ch) had correctly adopted a broad construction of what amounts to an “interest” within the meaning of CPR r.57.7 and held that there was no decided case which was inconsistent with such a broad construction. In Seagrave, it was held that a person with a claim under the Inheritance (Provision for Family and Dependants) Act 1975 was entitled to bring a probate claim to challenge the validity of a will, notwithstanding that she had no interest under any previous will or pursuant to the law of intestacy.

The Court of Appeal stated that the issue of whether a person had an interest in an estate was a matter of procedural, rather than substantive, law.

In the absence of any binding authority or cogent arguments requiring a more narrow interpretation of the meaning of “interest” in CPR r.57.7, justice required that “interest” should be given a broad meaning and should extend to include a person such as the husband. Such authority as there is supported that view.

If there was any doubt about whether the husband would have had an interest before the introduction of the CPR 1998, that was resolved by the requirement in the CPR to give effect to the overriding objective: justice required the husband to be able to bring the claim.

Further, the deputy master was wrong to find that s.121 of the Senior Courts Act 1981 provided the husband with a mechanism for the court to intervene on the basis that a grant of probate had been wrongly made or contained an error, for if the husband could not be a party to a probate claim because he did not have an interest, it was difficult to see how the husband would be able to bring his claim to the attention of the Court under s.121.

Comment

This was an issue where conflicting judicial decisions have given rise to considerable doubt for litigants and their advisors. The Court of Appeal’s decision in Randall provides much-needed clarity in this area.