Solicitor mistake - overpayment

[Bex_holt]

Hi, I have a friend who has benefitted under the intestate rules but has now been told that the solicitor executor has distributed the estate incorrectly and she needs to pay a proportion back. Does anyone know what the legal position is ie can she be forced to repay (but what if it's spent) or should executor (his insurance) bear the loss?

[des8]

Re: Solicitor mistake - overpayment

Hi and welcome.
Executors are personally liable to the extent of all the assets which have passed through their hands during the course of the administration (and in some circumstances for assets they should have received if they had acted properly). This means that if they have paid out all the estate and there is a subsequent claim against it they are personally liable to meet that claim unless they have taken steps to protect themselves. If Executors have made the payments to the beneficiaries under the compulsion of a court order they have an automatic right to compel the beneficiaries to refund the overpayment. If an executor has paid over the assets voluntarily (ie without a court order telling him to) the presumption is that he has sufficient assets to pay all legacies. Executors only have a right to a refund from the beneficiaries in these circumstances if liabilities appear of which they had no previous notice.

Do you why the executor overpaid your friend? Was it just an error or did debts or another beneficiary of which no one could have been aware suddenly appear?

[Bex_holt]

Re: Solicitor mistake - overpayment

Thanks for this, it's helpful. I believe the overpayment was a mistake - the money was divided evenly between 3 beneficiaries whereas he now says it should have been 50:25:25

[des8]

Re: Solicitor mistake - overpayment

Having posted earlier I had a niggle (technical term!) that whilst the executor is liable to the underpaid beneficiary they could try and recover any overpayment made to another beneficiary. (My apologies if I have misled you).
The overpaid beneficiary would have a defence of "change of position" if they had spent the overpayment.

Quote fromhttp://holbech.co.uk/trusts-and-probate-claim-concerning-solicitors/:
The trustee may also have a personal claim against the beneficiary to recover any payment made to a beneficiary on the basis that the payment was made under a mistake. However, such a claim will be subject to the defence of change of position (Lipkin Gorman v Karpnale Ltd [1992] 4 All ER 512).
The defence of change of position will be available to defendants who have incurred extraordinary expenditure in reliance on their receipt of the benefit which forms the subject-matter of the claim: i.e. because having received the benefit, they have decided to spend their money in ways that they would not otherwise have contemplated. A defendant who changes his position in anticipation of a benefit which is subsequently paid to him can also raise the defence (Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193). In the event that a defendant changes his position by purchasing an asset which remains in his possession at the time when the claim is made, he cannot rely on the defence to the extent that he remains enriched by his possession of the asset^.
Therefore, a beneficiary who has spent the distribution on a holiday will no longer be enriched, and will have a defence of change of position. A beneficiary may also have changed his position by spending money on augmenting the value of an existing asset to which he attaches special worth. It might be unfair to expect the beneficiary to sell the asset to fund the repayment.
Generally, a recipient who has paid off debts earlier than he would otherwise have done will not have a defence of change of position. The recipient will be no worse off if he has to repay the trustees, rather than the lender. The defence will be available if and to the extent that the trust property has been stolen, destroyed, or depreciated in value, through no fault of the recipient.
There must be some causal link between the receipt of the payment and the change of position. It is not enough that the recipient has experienced a downturn in his fortunes since receiving the payment. The burden of proving change of position lies on the recipient.
The defence will not be available if the recipient is guilty of bad faith. This may include a case where the recipient has good reason for believing that the payment was made by mistake, but pays the money away without first making enquiries of the person from whom he received it (Fea v Roberts [2006] WTLR 255). Bad faith is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself. However, this formulation excludes negligence^, and a defendant can raise the defence although he negligently failed to recognise the flawed nature of the transfer by which he was benefited. Defendants can also raise the defence although they have changed their position by making foolish investment decisions: if they honestly believe that money is theirs’ to spend as they choose, then they cannot be penalised for spending it unwisely^: Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579 [125].


But how did a solicitor get the intestate rules wrong? Was he acting on behalf of the administrator or as administrator himself?