New Zealand Law Society - Estate claims — Executors' obligations

Estate claims — Executors' obligations

Estate claims — Executors' obligations

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An executor's primary obligation is to carry out the terms of the will. Executors owe duties to the beneficiaries of the will. However, executors also have obligations – in some situations – to potential claimants against an estate. A duty of even handedness will exist in some circumstances. The exact content of that duty, and when it will be owed, can be difficult to determine.

The recent case of Estate of Carson [2017] NZHC 3144 considered the estate of a father who made no provision for his children, with whom he had had no contact since his separation from their mother more than 30 years prior to his death. One year had passed since the grant of probate. His four children were unaware of his death. The estate was substantial. The executors of the estate sought the court’s directions as to their obligations toward the children, who did not have the status of beneficiaries of the estate, only the status of potential claimants. One of the questions was whether the executors were obliged to locate the children and notify them of the death of the deceased.

Duty of even-handedness

The law in this area was set out in the case of Sadler v Public Trust [2009] NZCA 364, [2009] NZFLR 937, (2009) 28 FRNZ 474. The starting point is that executors and trustees owe a duty to treat beneficiaries even-handedly. The Court of Appeal looked at a number of categories where executors may also owe such a duty to potential claimants against an estate (at [41]):

“(a) A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim.

“(b) This duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.

“(c) We leave open the question of whether the duty of even-handedness may extend to those of whose claim the executor ought to be aware. We also leave open whether any duty of even-handedness to such potential claimants would extend to a duty to inform those potential claimants of the fact of death.

“(d) There is no general duty on an executor to advertise the fact of death or to inform all potential claimants of the fact of death. This applies even where there may be a suspicion (but not sufficient to bring the potential claimant within category … (c) above) that a particular potential claimant may wish to make a claim. This means that the question left open by this Court in Price v Smith [2004] NZFLR 329 (see at … (c) above) has now been answered in the negative.”

In the recent Carson case, the trustees of the trust which was to receive the residuary estate submitted that there was no duty to notify the deceased’s estranged children of his death, in circumstances where no contact had been made and no enquiries were being made in relation to the estate. That is, that the case fell into category (d) of Sadler.

Obligations towards potential claimants

It is clear that where an executor is aware that a party wishes to make a claim against an estate, they have certain obligations towards potential claimants. These include the duties set out at categories (a) and (b) of Sadler, and include, when litigation has commenced, providing relevant information to the court (for example, pursuant to ss 11 and 11A Family Protection Act 1955). Executors who have concealed information from prospective claimants who have requested it, particularly financial information, have been criticised.

However, it is not clear what the boundaries of the intermediate category (c) of Sadler are, or when an executor might owe a duty to a prospective claimant of whose claim they “ought to be aware”, or what that duty would extend to.

The recent Carson decision only illuminates the issue. After the hearing, but before a judgment was released, the executors were contacted by one of the deceased’s children and it was agreed that the executors came within category (b) of Sadler and a duty of even-handedness was owed. The judgment of the court confirmed that they should fully disclose estate information to the deceased’s children in light of the recent contact.

Although the Carson case seems extreme in that it dealt with a very large estate and an estranged family, this type of situation has arisen on a number of occasions over recent years. Executors dealing with potential claimants who may be unaware of a death will need to carefully consider their obligations in the particular circumstances.

Kimberly Lawrence (kimberly.lawrence@trustlaw.co.nz) is a solicitor at Wellington firm Greg Kelly Law Ltd.

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