This article considers arguments about estates involving insolvency, and roles such as those of the "personal representative" of a deceased person's estate.

The following commentary comes from Anna O’Carroll and Elliot Grosvenor-Taylor, who are associates in the dispute resolution team at law firm Kingsley Napley. They talk about disputes over estates and insolvency. In particular, they discuss the financial situation of the late England football manager, Sven-Goran Eriksson. The editors are pleased to share these views; the usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

It was recently reported that the family of Sven-Goran Eriksson will not receive anything from his estate. The estate is said to be insolvent due to a combination of unpaid tax being owed, Mr Eriksson reportedly having fallen victim to a fraud, and his funds potentially having been mismanaged by a financial advisor during his lifetime. 

While Mr Eriksson and his family appear to have been aware of these issues, often it is not until a loved one passes away that problems of this nature come to light. The beneficiaries then find themselves in a position where they have to navigate complex legal issues to determine whether estate funds may be recovered. The good news is that many claims, such as those for professional negligence and fraud survive death, and can be brought on behalf of the deceased’s estate. 

Negligence
If it appears that the deceased’s finances may have been mismanaged by a financial advisor resulting in a loss to their estate, there may be scope to advance a claim against the advisor for professional negligence. 

In order to bring such a claim, it will be necessary to show (1) that the advisor owed the deceased a duty of care, (2) that they breached that duty, and (3) that this has caused a recoverable loss to the deceased. A duty of care can be owed by a financial advisor to the deceased (and occasionally to third parties, such as beneficiaries) both in the law of contract and tort. 

To establish that a duty of care was owed in contract, it will be important to consider the terms of any retainer between the advisor and the deceased and the level of service expected. If no retainer exists, a duty can still be owed in tort if it can be established that the harm to the deceased was “reasonably foreseeable” by the advisor and there was a sufficiently close professional relationship between the deceased and the advisor. All of the circumstances of the matter will then be considered to determine whether the advisor fell below the standard of a reasonably competent financial adviser and that “but for” the advisor’s actions, the deceased would not have suffered the loss claimed for. 

If the deceased lacked capacity before they died, various factors would need to be considered when establishing whether a duty of care was owed to the deceased and then breached, such as whether an attorney or deputy had been appointed to manage their financial affairs, and whether any decisions regarding their finances were made in their best interests, or if powers granted were misused. If someone was appointed as attorney or deputy in their professional capacity such as a financial advisor, the standard of skill and care expected when making investment decisions will normally be higher (7.59 and 8.57 MCA 2005 COP). 

Fraud
If it appears that the deceased was a victim of fraud, it can sometimes be difficult to evidence this, as the deceased will normally have been best placed to confirm and evidence what happened. There is also a risk of the estate being required to pay the defendant’s costs on an indemnity basis if the court does not consider it reasonable for the estate to have advanced an allegation of fraud or dishonesty. 

It is not impossible to bring a successful claim in respect of fraud on behalf of the deceased’s estate, but care needs to be taken to ensure that sufficient credible evidence is obtained to establish an arguable case of fraud or dishonesty. The personal representatives (“PRs”) of the deceased’s estate will be entitled to access the deceased’s financial statements, bank records and correspondence which may help to build a case. Non-party disclosure applications may also be an option in appropriate cases, where it is necessary to obtain further information regarding the fraud.

Who can bring a claim?
The PRs of an estate have an obligation to call in any estate assets and distribute them in accordance with any will or the intestacy provisions. It is usually the family of the deceased who will be best placed to identify if something is amiss with their finances. If it comes to light that assets are missing, or there is a potential negligence claim that has vested in the estate, this is something that must be investigated, and, if appropriate, pursued. 

While the last thing that a family member of the deceased who is appointed as PR may have in mind is litigation, if a potential claim comes to light they should not delay in properly considering this, including any limitation deadlines. Failing to do so may prejudice the beneficiaries of the estate.

Consideration should also be given by the PRs to whether directions or a blessing should be obtained from the court prior to engaging in litigation using estate funds to meet costs. If they do not and the beneficiaries do not agree with steps taken, there is a risk of them facing personal liability for the costs incurred by the estate if the action is later found to have been inappropriate.

If no PR has been appointed, the court may direct that someone is appointed to represent the deceased’s estate in a claim under Civil Procedure Rule 19.12.

Impecunious defendants and costs issues
In addition to considering the merits of any claim, the PRs will need to investigate whether the potential defendant has any assets, as it would be of little use to beneficiaries to incur the costs of bringing a successful claim, if the defendant has nothing to enforce against. 

Professional advisors often have indemnity insurance so, even if they do not personally have assets, their insurance may cover any award made against them. However, insurance policies often exclude coverage where the professional has been involved in a fraudulent act, so it may be more beneficial to bring a claim which is not based on fraud if one is available. 

PRs are not under any obligation to incur the cost of pursuing a claim personally if there are no funds in the estate to do so. In those circumstances, consideration could be given to whether there are any alternative or third-party funding options available to fund a claim. The likelihood of such funding being available will depend on the merits of the claim, and whether the defendant has assets to enforce against if the claim is successful. 

Conclusion
If it appears that an estate has grounds to bring a claim, advice should be obtained at an early stage to give it the best chance of recovering assets, ensuring that there is no further dissipation, and mitigating any losses to the extent possible.