Executors who fail to collect estate assets can be liable to beneficiaries

The role of the executors of a will is to identify and collect the assets of the estate and then distribute them according to the will left by the deceased. But what happens if the executors fail to perform their role properly?

In the case of Bird v Bird, the executors failed to discover that the wife of the deceased hadn’t paid the proceeds of the sale of real estate into the account of the deceased (while he was still living), and also failed to recover those proceeds from her. The executors paid the price for this oversight when the Court of Appeal gave judgment for Ms Deborah Bird (who was a beneficiary) against them in an action known as devastavit.

The facts of Bird v Bird [2013] NSWCA 262

Deborah Bird commenced legal proceedings against her two brothers (and a solicitor), in their capacity as executors, for financial losses suffered by her after the distribution of assets from her father’s estate. As a result of the failure of the executors to recognise and include among the assets the proceeds of a property sold by her father’s wife Mona Bird, (with proceeds put into her own account and not his), Deborah decided to take legal action on the following two bases:

1. Her executor brothers received part of the proceeds of the sale with knowledge that it was unauthorised, and thus they were liable to indemnify the estate for that part, based on a case known as Barnes v Addy (1874) LR 9 Ch App 244; alternatively
2. The executors breached their duties by not recouping the sale proceeds from Mona Bird and should thus indemnify the estate for those losses.

The Court of Appeal’s decision

The Court of Appeal found that the first limb of the case failed because it could not be proved that the executors knew Mona was not authorised by the Power of Attorney to place the proceeds of the sale of real estate into her own account. It also could not be proved that the executors knew that the source of the funds paid to them were from a “tainted” source.

However, the Court of Appeal found the executors should have discovered that the wife of the deceased sold real estate and then failed to account to the deceased for the proceeds. If that was discovered, the executors would have sought the views of the beneficiaries and an adjustment would have been made for Deborah’s share. The loss was basically the amount they would have agreed upon as the adjusted amount.

Comment by Streeterlaw

People who find themselves in the difficult position of knowing about assets that have been left out of a will should consult a solicitor who has experience in wills and estates.

If you find yourself in a situation where the executors of a will are not properly collecting in the assets of the estate and you are unsure about your rights and what action you should take, we would advise you to find out if you can claim against the executors, and look at how to go about it.

For further information or advice, please contact Streeterlaw on 02 8197 0105 or email advice@streeterlaw.com.au.

Written by Mark Streeter

The Director of Streeterlaw, Mark has been practicing Law since 1994. He has attained his Masters of Law in 1999 and in 2006 was awarded his Specialist Accreditation in Commercial Litigation. Mark is a member of ARITA, a graduate of the AICD and a member of AICM. A member of STEP, Mark enjoys working in the area of Wills and Estates. In 2020 Mark is the Chair of STEP NSW.

Call us on 02 8197 0105 to book an appointment with Mark Streeter!