While, in the case of a solvent estate, personal representatives in England and Wales must have regard to the interests of the beneficiaries, where the estate is insufficient to meet its debts, they must instead have regard to the interests of the creditors.
The testator (J) died domiciled in England and Wales in May 2017 having executed two wills. The first will dealt with J’s property in Ireland and the second will dealt with J’s property in England. J’s estate in England was insufficient to meet the various debts incurred in England and so the English executor, on behalf of the creditors, sought recourse to the Irish estate.
The Irish executor accordingly sought directions of the Irish High Court by way of an interim application in a separate claim brought by one of J’s children (‘ESL’) for financial provision under section 117 Succession Act 1965 (akin to a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 here).
His position, supported by ESL and the deceased’s wife, was to prevent the transfer of Irish assets to the principal administration in England. In support of that, the Irish court was asked to follow the decision of the English Court of Appeal in Re Lorillard [1992] 2 Ch 638, in which it refused to transfer the assets from an ancillary administration (in England) to a principal administration (in America).
That decision had only persuasive, but non-binding, authority in Ireland.
The applicants relied on Re Lorillard for two reasons. First, it established that a court has discretion to prevent the transfer of assets to a foreign administrator. Second, the Court of Appeal upheld the decision to refuse to order the transfer of the deceased’s assets to the foreign administrator because the debts of the estate in the foreign administration would have been statute barred under the law applicable in the ancillary administration (which followed the facts of this case since J’s English debts were ostensibly statute barred in Ireland where there is a two year limitation period as opposed to the six year limitation period enjoyed here).
Mr Justice Twomey cited the leading Irish text on the conflict of laws, Binchy, Irish Conflicts of Law (Dublin, 1988), namely that the default rule is that the administrator of an Irish ancillary administration should only hand over the residue of the Irish assets to the English administrator once he has collected the assets and paid off the debts in Ireland.
In refusing to follow Re Lorillard, Mr Justice Twomey said, at paragraph 4:
“this Court refuses to make an order preventing the transfer of the Irish assets to England, which if granted would be to the detriment of those creditors in England. It is noted hereunder that the effect of the order sought would be to facilitate a form of legal arbitrage and forum shopping, whereby the testator and his beneficiaries preserve wealth in their family to the detriment of creditors by taking advantage of the differences in the legal protection for creditors in disparate jurisdictions”.
While there was no evidence to suggest that this “forum shopping” arbitrage was deliberate, if it had been then it would involve the testator looking to take advantage of the differences in legal protections for creditors in disparate jurisdictions, which Mr Justice Twomey found to be “akin to a fraudulent preference of creditors in the company law context”.
