In October 2022, the Inner House of the Court of Session released its decision in a petition by the executors of Sir Peter Hutchison (“the Deceased”), who died in 2019 and was domiciled in Scotland. The case dealt with the question of liability in the distribution of the estate of a deceased underwriting member of Lloyd’s of London (a “Name”).
Background
The Executors had already paid all debts and made distributions of legacies and bequests in relation to the Deceased’s estate. However, the Deceased was a former Name from 1977 to 1988, and the estate faced remaining potential liability as a result. The executors therefore sought direction as to the distribution of the remainder of the estate in accordance with Rule 63.6A of the Rules of the Court of Session 1994. The executors sought directions from the court in respect of the following question:
“Whether the petitioners, as Executors, may properly distribute the Deceased’s estate without retention or further provision to meet any potential claim or claims which might otherwise be made against them in respect of any contracts of insurance or reinsurance underwritten by the Deceased in the course of his business as an underwriting member of the Lloyd’s of London.”
Additionally, the executors sought an order from the court relieving them from personal liability for: any such potential claims; or for distributing the estate in accordance with the directions of the court.
Decision
In reaching its decision, the court referred to the Court of Session Practice Note No. 1 of 2006 and the previous guidance issued in the case of Pardoe’s Executor. In accordance with these and Rule 63.6A(4), the court remitted the petition to a reporter, Mr Robert Howie KC, to enquire into the facts and circumstances and to report.
Having considered the report, the court ultimately answered the above-noted question in the affirmative, directing that the executors may now distribute the Deceased’s estate without retention or further provision for potential liabilities. However, the court declined to make an order relieving the executors of personal liability on the basis that the possibility of such a claim was “extremely remote” and that in the unlikely event a claim was made against the executors personally, reference could be made to the court’s decision.
In reaching its decision, the court referred to important developments that had occurred since the 2006 Practice Note took effect in March 2006 concerning historical liabilities for former Names. Those developments made the likelihood of potential claims even more remote due to liabilities having been erased, transferred or reinsured. In light of this, the court stated that practitioners should consider whether or not applications under Rule 63.6A remain necessary and also suggested that consideration should be given to whether there was now a need for an amended Practice Note to reflect these important developments.
The court’s decision in this case was echoed in the more recent decision in Lyell’s Executors, Petitioners. However, as yet there has been no new or amended Practice Note issued.
How can we help?
Despite these decisions, there remains some uncertainty when considering whether applications under Rule 63.6A are strictly necessary and executors should always seek specialist legal advice before deciding to distribute the estate of a deceased former Name, given the potential for claims, including potential personal liability of executors.
We acted for the executors in the Hutchison case and our expert, cross-departmental Contentious Executries, Trusts and Tax team draws on the expertise of contentious and non-contentious specialists from across our firm, has a wealth of experience in this field.
For enquiries in relation to this issue or any other contentious executries, trusts or tax issues, please contact Thomas McFarlane, Associate in our Dispute Resolution and Litigation team.