Everyone Makes Mistakes

11th November 2016 By Arman Khosravi

When a businessman died, he left his substantial and complex business affairs in the hands of his executors – his brother, his widow and his accountant. As his business had been run with his brother, it was agreed that the two families’ respective interests were best served by splitting up the businesses they co-ran.

One of the more complex aspects of the demerger negotiations was a claim for VAT refunds totalling tens of millions of pounds. The deceased man’s brother considered the claims were likely to fail and offered to sell his right to pursue them to his fellow executors at a low price, which they declined. After the businesses were split up, the refunds were successfully claimed, which led the deceased man’s wife and accountant to believe that they had been misled by his brother during the negotiations.

A series of lawsuits resulted, with the wife and accountant claiming for ‘equitable compensation’ as regards the estate’s share of the VAT refunds. They brought claims of deceit, breach of contract, negligence and breach of fiduciary duty as an executor. Those claims failed and appeals were lodged with the Court of Appeal.

One of the important aspects the Court had to consider at the outset of the appeals was the effect of an ‘exoneration clause’, which stated that ‘no trustee shall be liable for any loss to the trust premises arising by reason of any improper investment made in good faith or for the negligence or fraud of any agent employed by him or by any other trustee hereof…’, the term ‘trustee’ in this instance including an executor.

The Court concluded that since the brother’s actions had been taken in good faith, the exoneration clause would apply and he was therefore not personally liable for breaches of duty.

Whilst this decision backs up the general proposition that executors and others who act in good faith and with reasonable care will not be personally liable for losses which result, it is likely to be the subject of a further appeal. In addition, the dispute might well have been avoided altogether had more attention been given at an early stage to the possible outcome of a successful claim for the recovery of the VAT.

Source: Concious

Latest News

Award That Requires Borrowing Made Into Court Order

17th May, 2024 By

Disagreements between separating couples all too often result in litigation that substantially reduces the assets available to them, as was illustrated by a case that recently reached the High Court. At issue was whether awards made by arbitrators in financial remedy proceedings can be made into court orders even if that would require one of the parties to borrow money. The couple had previously had a relationship lasting a few years before resuming their relationship in 2015. They had two children before separating again in 2019. Following their separation, the...

Inheritance Disputes – Costs Risks Can Be Reduced

15th May, 2024 By

Arguments about what someone promised before their death can lead to significant legal costs. However, if faced with a claim against the estate, there may be steps the beneficiaries or executors can take to reduce the risks, as a recent High Court case illustrated. A man had left a farmhouse and agricultural land in Cornwall to his wife, with whom he had also jointly owned a neighbouring area of land. After his death, one of the couple's daughters and her husband claimed that he had told them he wanted them...

Share Rounding Error Does Not Prevent CGT Relief

13th May, 2024 By

There are often very specific rules that must be complied with in order to claim tax reliefs, but if a small mistake arises, the courts may be able to provide assistance. In a recent case, the First-tier Tribunal (FTT) found that an investor was entitled to Entrepreneurs' Relief on the disposal of his shares in a company, despite owning one share fewer than he needed to qualify for it. The investor had agreed to purchase 5 per cent of the shares in the company for £500,000. He wished to own...

Wife Entitled to Maintenance Until Sale of Family Home

10th May, 2024 By

When divorcing couples disagree on how assets should be divided, the courts will seek to arrive at a fair outcome for both parties. In deciding how the proceeds of sale of a former couple's home should be apportioned, the Family Court agreed with the wife that she should receive maintenance payments until the sale took place. The couple had married in 2006. Following a brief separation, they had reconciled for two years before finally separating in 2022. The husband and wife both contended that they should be entitled to about...