I recently received an inheritance from my cousin, who died intestate domiciled in England. Four other cousins of the deceased shared the estate, so that each beneficiary received a one-fifth interest. One of the five beneficiaries was also the administrator of the estate. The administrator used the services of the deceased’s solicitors in the administration of the estate.
At an advanced stage in the administration of the estate, all the beneficiaries were required by the solicitors to execute an extensive indemnity, whereby the administrator would be indemnified against any further claims or liabilities. We were informed that this was ‘standard practice’.
- refused to execute the indemnity because:
- in my experience, it is not standard practice for a beneficiary to give such an indemnity. Normally, the beneficiary receives his entitlement and that is absolute;
- the administrator and his solicitors were handling the administration and they should have ensured that there were no outstanding liabilities prior to distribution;
- if there were undischarged liabilities within the estate following distribution, it would probably be as a result of the negligence of the solicitors – something against which the solicitors would carry professional indemnity insurance and that insurance should meet the liabilities rather than the beneficiaries; and
- the indemnity to be given by the five beneficiaries included one beneficiary who was to indemnify himself as administrator – that is, a person covenanting with himself. Such a provision is void at law.
Had the indemnity been given, four beneficiaries would each be liable for 25% of any claim and the fifth beneficiary (who is also the administrator) would have no liability. As the administrator would have no liability, he would have no basis for making a claim against the solicitors, thereby protecting the solicitors and their PII policy.
- reported the solicitors to the Solicitors Regulation Authority. Its findings were:
- the taking of an indemnity in the above circumstances is ‘acceptable practice’;
- ‘we have… suggested to [the solicitors] that in its correspondence with beneficiaries, it should consider making the existence of an indemnity clause more prominent; and that beneficiaries should be advised to obtain independent legal advice’; and
- the SRA sees nothing improper in a beneficiary receiving a small distribution of, say, £100 yet incurring an unlimited liability under the indemnity. (Who would take legal advice before receiving a £100 distribution?).
So it is acceptable practice for a solicitor to, in effect, transfer his liability for his negligence on to independent beneficiaries who had no part in the administration of the estate.
If a beneficiary were advised to take independent legal advice, many would take the view that they have received other distributions in the winding up of other estates and all they need do is sign a receipt and take their entitlement – and thus it is unnecessary to engage a solicitor.
For those beneficiaries who do consult a solicitor, many would be told by their solicitor that it is unnecessary to engage him because all he has to do is sign a receipt and receive his entitlement. Having practised in a different jurisdiction and in different fields, I should be interested in what readers think of this practice.
Nigel Martin, Solicitor (retired), Glenageary, Co Dublin, Ireland