Probate 101 (Part 2): Executor’s Breach of Fiduciary Duties

In our previous article “Probate 101 – Executor’s Duties”, we touched on the main duties and responsibilities of an executor, and we have also seen the possible challenges that may arise during the administration process. 

In this article, we will be looking at the possible implications that an executor may face if he or she fails to understand and properly implement the terms of the Will or violates his or her duties of administration. Legally speaking, he or she is said to have committed “devastavit” (Latin: liability for maladministration or any breach of trust) when loss occurs to the estate owing to his or her omission to act promptly or to his or her negligence. 

The reason is that the executor owes the beneficiaries a fiduciary duty where the executor must act in good faith in administration the estate. For example, even though the executor may not be a finance expert but will have to reasonably consider whether to convert any assets to general income for the benefit of the beneficiaries. The reason being that executors are trustees in essence. 

There are a few ways that an executor can breach their fiduciary duties, including but not limited to the following: 

• Spending the estate’s monies for your own benefit; 
• Did not preserve the assets for payment of debts;
• Distribution of assets before settling the debts; 
• Showing preference for one beneficiary over another;
• Failure to keep accurate or detailed records;
• Making speculative investments. 

In view of the above, it is important for an executor to remain neutral and to not be influenced by personal preference or also condone to personal gratification as the interest of the beneficiaries triumphs over the others. A good example to explain this is by referring to this case – Re Yorke (deceased); Stone and another v Chataway and another [1997] 4 ALL ER 207. 

In this case, the testator by his Will appointed 3 executors – A, B and C (i.e. his wife, his eldest son and his brother respectively). It was admitted that B, the active executor, had committed various breaches of trust while A, being a semi literate woman, knew little or nothing about business matters. Trial evidence showed that B consults C, an elderly successful businessman on most matters relating to the management of the estate. B regularly obtained C’s opinion on estate management, and has also shown the accounts kept, of which C was satisfied with.

The court held that A had acted reasonably and honestly, and ought fairly to be excused from her duty as an executor. However, C was held to be jointly liable for the devastavit committed by B.

The court had this to say which is quite relevant in respect to the priorities involved in the administration process. 

“Amongst the various possible forms of devastavit is that which occurs where an executor has paid obligations of an inferior degree ahead of a superior one; where, for example, he has paid legatees ahead and to the detriment of creditors. Where such a devastavit is provided, the executor concerned becomes personally liable in respect of the assets so misapplied. He may be liable for interest thereon. He is also very likely to become personally liable to the creditors in respect of costs” 

We can also refer the case of Re Estate of Lee Wee Nam, Decd; Lee Hiok Ping & Ors v Lee Hiok Tng & Anor [1982] 1 MLJ 109. 

In this case, the beneficiaries complained that the executors (i) have not ascertained the assets, (ii) have not called in the assets, (iii) did not account to the beneficiaries, (iv) were not ready with full and complete information regarding the estate, and (v) have not distributed the estate despite accepting the office 19 years ago. 

The court held that despite the executors also being the beneficiaries of the estate, they owed fiduciary duties to all the beneficiaries. This further fortifies the principal that an executor is not to act to the detriment of the trust or convert monies belonging to the estate for his own use.

Based on the cases illustrated above, it is of utmost importance for executors to understand his/her duties and responsibilities before diving into the estate administration process. One must be fully equipped with the necessary knowledge in order to perform an executor’s duty properly. It is advisable to seek legal advice to prevent any mismanagement (or in a fancy legal term – devastavit) of the estate to prevent potential liability.