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Scotland's personal injury court confirms competency of suing executors no longer in office

  • 13 January 2021 13 January 2021
  • UK & Europe

  • Insurance & Reinsurance

Scotland's personal injury court confirms competency of suing executors no longer in office

John Jordan v Anthony O'Reilly

This action for pleural plaques involved asbestos exposure during employment with the late Carlton Dunlop O'Reilly, trading as N M Cafferty & Co, an unincorporated entity that was dissolved many years prior to the pursuer developing pleural plaques.

The action was raised against Anthony O'Reilly, the late Carlton O'Reilly's son. Carlton O'Reilly died intestate (without a will) and the defender was appointed executor dative. The estate was relatively small, involved no heritable property, and investigations confirmed that it was wound up many years prior to the action being raised. As such, the defender was discharged from his office of executor, which therefore no longer existed.

The defender argued that it was not competent for the pursuer to sue him in his capacity of executor as that office was terminated on distribution of his father's estate. The defender's liability was limited to the extent of the estate to which he was confirmed, and as executor he was not a trustee for the deceased's creditors.

The defender argued that an action of constitution was available to the pursuer in order to constitute a claim on the deceased's estate.

The pursuer argued that the defender was confusing substance with procedure, and assets with liabilities. As a means of accessing the underlying employer's liability insurer of N M Cafferty & Co, it was competent for the defender to be sued in his capacity as executor. The pursuer undertook to make no claim against the defender as an individual.

 

The Judgment

The Sheriff found that the authorities are in favour of a person being entitled to bring an action against an executor who has ingathered and distributed the estate, in order to constitute a money claim.

The action was not incompetent for the purpose of constituting a claim and was therefore relevant.

 

The Implications

This action was challenged on the basis that it is widely accepted that a non-existent entity cannot be party to a court action. Strict guidance from the Faculty of Advocates and the Law Society of Scotland has previously been issued to this effect in relation to dissolved companies. Whilst the procedure of restoring an incorporated entity to the Companies Register remedies this issue to some extent, it does not of course apply to deceased sole traders or partners.

The judgment distinguishes that position by seeking to separate substantive law from procedure.

The extension of the law by the Sheriff in this way has the implication that those taking on the role of executor for a sole trader or partner, whose employees may have worked with asbestos, may be left with a continuing liability after undertaking their duties. This continuing liability raises several issues including:

  • Who would be responsible for payment of caution;
  • What would be the consequence if the executor failed to act;
  • What would be the consequence if the executor declined to engage with the insurer; and
  • What would happen if the executor received money under the insurance policy and then failed to make payment to the pursuer?

The unforeseen consequences of this judgment may well come to the fore in future personal injury actions, and there will no doubt be implications in the field of executry law.

Meantime, we are at least provided with certainty that:

  1. If all members of an unincorporated insured entity are dead, an action can be raised against any executor or former executor of any one member, purely to establish the debt, which could ultimately become an enforceable decree. Although the precise mechanics are unclear, in terms of the Third Party (Rights Against Insurers) Act 2010, with that decree the insured's estate could be sequestered with a view to establishing the insurer's liability under the 2010 Act;
  2. If no executors exist, whether never appointed or dead, the action would have to be raised against the insured's next of kin, and decree cognitionis causa tantum sought in order to establish the debt; and
  3. If the pursuer cannot trace any executor or next of kin, the action simply cannot get off the ground.

End

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