Practice and procedure – Stay of proceedings – Immovable property – Deceased’s estate comprising two long leasehold properties – Defendant executors selling properties – Claimant beneficiary bringing claim in administration of estate – Defendant executors applying to stay claim until payment of costs orders made against claimant in earlier proceedings – Whether immovable property becoming movable property on sale – Application granted
The deceased died in 2010. His domicile of origin was Iran but by the time of his death he was a Spanish national living in and domiciled in Spain for English succession and inheritance tax purposes. He left a will which was limited to dealing with his estate in England. His residuary estate principally comprised the legal estate in two long leasehold properties.
The claimant was one of his four children and a beneficiary under his will. The defendants were the joint executors and trustees of the deceased’s will. The claimant sought orders against the defendants for disclosure of documents and information as he wished to hold the defendants to account and intended to bring a claim based upon a breach of trust.
At a directions hearing, the court made an order granting the defendants permission to make an application in relation to the unpaid costs orders obtained against the claimant in earlier proceedings and/or whether the proceeds of the sale of then two properties within the estate constituted movable or immovable assets under English law.
The defendants applied for a stay of the claim until unpaid costs totalling £115,959.22 were paid. The court was also indirectly required to decide whether the sale of two properties by the executors had the consequence that what was for conflict of law purposes immovable property at the date of the deceased’s death had become movable property and therefore fell to be distributed in accordance with Spanish rules of succession.
Held: The application was granted.
(1) The court had an inherent jurisdiction to make an order staying a claim until costs awards made in previous proceedings which were substantially the same had been paid. The purpose of making an order staying the proceeding was to prevent an abuse of the court’s process and do substantial justice between the parties. The power to stay was wide and it was not essential for the two claims to overlap precisely: Sinclair v British Telecommunications plc [2000] EWCA Civ 6 and Investment Invoice Financing Ltd v Limehouse Board Mills Ltd [2006] EWCA Civ 9 considered.
It was necessary to have regard to the considerations which underlay the court’s approach to the commencement by the same person of a second set of proceedings while the costs of the first remained unpaid. It would be unjust to allow a claimant, whose action had failed and he had been ordered to pay the defendant’s costs, to put the defendant to the further expense of a second action until those costs had been paid. To pursue a second action in those circumstances could properly be regarded as an abuse of the court’s process: Powell Entertainment v Ryder [2011] EWHC 2957 (Ch) considered.
(2) The court had to have regard to the nature of the earlier proceedings and their degree of connection with the later proceeding, the outcome of the earlier proceedings, all the surrounding circumstances and the fact that the power to stay was discretionary. The court had to ask itself whether it was unjust to require the defendants to incur the costs of defending the proceedings whilst earlier costs orders had not been met.
Abuse in the earlier proceedings would be a circumstance to be taken into account. It was also open to the court to impose a deadline for the payment of the outstanding costs failing which the new claim would be struck out. Further, it was necessary to consider the claimant’s ability to meet the outstanding costs and whether a stay and/or striking out would stifle the new claim: Investment Invoice, Wahab v Khan [2011] EWHC 908 (Ch) and JEB Recoveries LLP v Binstock [2017] EWHC 1123 (Ch) considered.
(3) Under English law, a leasehold interest in land was treated as an immovable asset and the fact that land vested in the personal representatives upon a trust for sale did not transform immovable property into movable property. The most convenient approach was to consider whether the leasehold land held by the deceased at his death was properly characterised as immovable; and whether its character could change for the purposes of succession upon its sale.
Under section 1(1) of the Administration of Estates Act 1925 real estate, which for present purposes was synonymous with immovable property, vested in the deceased’s personal representatives. Under section 33(1) and (7) of the 1925 Act the real estate was held on trust for sale. The deceased’s will expressly provided that his estate was to be held on a trust for sale and therefore did not conflict with section 33(7). Under section 36, the personal representatives had power to transfer the legal estate they held by virtue of section 1(1). Under section 39, they were given wide powers to manage real estate including all the powers that were set out in section 1 of Trusts of Land and Appointment of Trustees Act 1996.
(4) As a general rule, all questions concerning rights over immovables (land) were governed by the law of the place where the immovable was situate (lex situs). Applying the relevant conflict of law principles, the material validity of the will fell to be assessed at the date of death by reference to English law as the lex situs in so far as it disposed of the English immovable assets. There was no further conflict of law issue to be resolved in respect of the administration of the English immovables and their sale and the distribution of the proceeds was purely a matter of the application of English domestic law to be carried out in accordance with the terms of the will: Re Berchtold [1923] 1 Ch. 192 followed.
In the present case, the English land vested in the executors upon the deceased’s death as immovable property. The sale of the properties did not change the status of the properties for the purposes of the administration of the estate. The fact that immovable property subsequently, in fact, became movable property in the form of cash upon sale did not lead to the application of Spanish law because the decisive moment was the date of death and for present purposes there was only one decisive moment.
The court would make an order staying the claim until the outstanding costs had been paid in full.
The claimant appeared in person; Lina Mattsson (instructed by Berry & Lamberts LLP, of Tunbridge Wells) appeared for the defendants.
Eileen O’Grady, barrister
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