Lloyd's Name: judgment decrees insolvency rules apply from the date of death

A City firm was ordered to pay back more than £140,000 in fees for the administration of the estate of a deceased Lloyd's name this month - in a ruling that could mean other solicitors acting for deceased clients who are declared insolvent will now be forced to hand back fees.


Kendall Freeman, the successor firm to DJ Freeman, was ordered to pay more than £200,000 in fees, interest and costs in relation to the estate of Lloyd's name Philip Vos.


The judgment clarified that insolvency rules apply from the date of death, rather than the date insolvency is declared. Richard Glithero, a partner at Manchester firm Pannone & Partners who acted for Andrew Dick, the trustee in bankruptcy who brought the successful claim, said: 'This judgment will have wider implications for solicitors.


'Now it is clear that if someone is made bankrupt ten years after their death, that insolvency is deemed to commence at the date of death. So any payments [a solicitor deducts from the estate to cover fees] are void, unless the court approves them. It means solicitors could be administering an estate for some years, and then if the deceased is declared insolvent, there is a risk that payments made to them will not be ratified by the court.'


He added: 'I know of other people in the profession who were waiting to see what the outcome of our case would be, who now feel they have valid claims for the reimbursement of fees.'


The court found that DJ Freeman should have realised there was a 'strong possibility' of insolvency and failed to follow the proper legal procedure before deducting its fees from the estate.


The judge criticised the actions of former DJ Freeman partner David Tiplady over 'horsetrading' with a creditor when he should have known the estate was insolvent, and saying in a fax that he would not charge Lloyd's for his actions in defending a petition for the estate to be wound up, and then later retained almost £7,400 in relation to this, which he said related to costs.


The judge said to allow payment for defence of the petition would 'amount to condoning behaviour on the part of a solicitor that simply cannot be countenanced'.


Kendall Freeman senior partner David Kendall said the firm had not yet decided whether it would appeal the judgment. He added that Mr Tiplady had left the firm in April.


Mr Tiplady robustly defended his actions, saying the judgment 'demonstrates no understanding of what was happening at Lloyd's at the time'. He considered the decision on when the insolvency began to be a 'nonsense' - 'for at least part of [the administration], the estate was solvent', he explained.


Mr Tiplady also strongly refuted the allegations over his own conduct and criticised the registrar for his findings. He said he plans to contact the Law Society to see if it can carry out an investigation that would vindicate him.