A recent High Court decision clarifies proofs for lender applicants seeking to appoint an administrator ad litem

A recent High Court decision of Ms. Justice Stack in Re Joseph Kelly, Deceased [2024] IEHC 87 has given useful guidance regarding the factors the Court will consider in an application pursuant to section 27(4) of the Succession Act 1965 (the “1965 Act”) in the context of intended repossession proceedings. Section 27(4) provides that “where by reason of any special circumstances, it appears to the High Court….to be necessary or expedient to do so, the Court may order that administration of a deceased estate may be granted to such person as it thinks fit” and is the section pursuant to which an application for the appointment of an administrator ad litem is made, more commonly by a plaintiff in intended proceedings seeking to pursue a claim against a deceased estate, where no grant of representation has been extracted.

Who or what is an administrator ad litem?

An administrator ad litem is a person appointed by a Judge of the Probate Court to apply to extract letters of administration (with or without will annexed) in a deceased estate, limited in any way the Court deems fit. It is usually granted to an independent solicitor (nominated by the applicant) who has consented to the making of the Order. The application is usually made by way of originating Notice of Motion in the non-contentious Probate List of the High Court on a Monday. In the context of an administrator ad litem appointed to substantiate intended proceedings to be issued by the applicant, the grant of administration ad litem will state on its face that it is limited for the purpose of substantiating named proceedings and may also recite further limitations, depending on what is contained in the Order. This may include, for example, an undertaking by the applicant (or intended plaintiff) not to take any steps in the intended proceedings beyond issue and service for a period of six months. The making of the Order appointing the administrator ad litem itself is not the final step in the matter. An application will thereafter need to be made to the Probate Office (which application will need to include the perfected Order) and the administrator ad litem will only be formally appointed as the legal personal representative of the deceased estate once the grant issues from the Probate Office. It is only then does the administrator ad litem have standing and the intended proceedings may be issued. The likely timings of these procedural steps are of vital importance if the relevant limitation period applicable to the cause of action in the intended proceedings is fast approaching.

Factual background

The intended proceedings to be issued by the applicant in the instant case (Pepper) involved the usual claim for possession of properties which were provided as security for three separate loans advanced by Bank of Scotland Ireland to the deceased (the “Deceased”) and his brother between the period August and October 2007, which loans subsequently went into default. The Deceased died on 5 August 2016, but no representation to his estate had ever been extracted. The date of death was over two years prior to the intended proceedings being brought by Pepper and in the circumstances, the Court had to consider whether section 9(2) of the Civil Liability Act, 1961 (the “1961 Act”)[1] had the effect that the proceedings were not maintainable. The Court had to consider these matters in its determination as to whether there were “special circumstances” which meant that it was either “necessary” or “expedient”, within the meaning of section 27(4) of the 1965 Act, to permit someone other than the person ordinarily entitled to extract letters of representation in the estate of the Deceased. Ms. Justice Stack ultimately granted the application, however some important issues identified in the decision are detailed below.

What are the key take aways?

• Prior notice – while Ms. Justice Stack acknowledged that lenders may have difficulty in ascertaining whether a deceased died testate or intestate and/or who may be entitled to extract representation in a deceased estate, she stated that prior to any ad litem application, some reasonable steps should be taken to identify family members or at the very least, to write to those entitled to represent the deceased at his/her last place of residence. The Court noted that this address would often be known to the lender as it will be found on bank statements, statements of account, previous correspondence, loan documentation etc. Family members or those entitled to extract a grant may be identified on the death notice of the deceased on rip.ie, which would normally state the name(s) of any surviving spouse, children, siblings etc. The purpose of the notification of the intention to bring the application is to give family members of the deceased the opportunity to communicate their position as regards extracting the grant. For example, perhaps they may wish to extract the grant and defend any intended proceedings, on the basis that they would have access to more information relevant to any potential defence. In the instant case, the daughter of the Deceased appeared in person on one occasion and there was evidence that the brother of the Deceased was aware of the application, but there was still no indication that an application for representation would be made. Further, it was clear that Pepper was taking steps to enforce its security. Consequently, the Court held that there were “special circumstances” which warranted making the Order pursuant to section 27(4).
• “Necessary” or “expedient” – the next question to be considered was whether it was “necessary” or “expedient” that an Order would be made. The Order is discretionary and therefore the Court had to consider whether it should be made in circumstances where the application was brought more than two years after the death of the Deceased, which is outside the limitation period pursuant to section 9(2) of the 1961 Act. The Court opined that it would be undesirable to make an Order where it is obvious that any debt sought to be recovered is statute barred. This is in circumstances where the limitation period pursuant to section 9 is a matter to be pleaded in a defence, rather than being an absolute bar to proceedings. However, an administrator ad litem is appointed only to allow an intended plaintiff to constitute proceedings and he/she is not obliged to take active steps to defend proceedings, particularly where he/she may not have the requisite instructions or knowledge of relevant facts to plead a defence. For example, Pepper in this instance only acquired the loans and related security in 2018 and it appeared from the statements of account that there may have been a default on at least one of the loans prior to this, but after the date of death of the Deceased. It was therefore possible that a formal demand in respect of that loan was made prior to the acquisition of the loans, and that fact would only be known to the family members of the Deceased, who may have access to documentation relating to the loan. The Court considered the decision in Cawley v Dun Laoghaire Rathdown County Council[2] as a useful authority in circumstances where the Court of Appeal held in that case that a co-defendant should be joined to proceedings when it seemed likely that the cause of action was statute barred, unless it could be the case that the cause of action was “hopelessly statute barred”. Ms. Justice Stack held in this case that an Order under section 27(4) should not be made for the purpose of constituting an action which is doomed to fail, but short of that, the merits of the action can be determined in the course of the substantive intended proceedings.
• Which limitation period? – the Court noted that the critical issue in considering which relevant limitation period applies (i.e. the two-year period under section 9(2) of the 1961 Act or the longer periods provided in the Statute of Limitations) is to identify when the cause of action accrues. If the cause of action accrues before the date of death, then the claim is one which is “subsisting” prior to death and is therefore deemed to “survive”. The two-year limitation period under section 9(2) applies to all actions which “survive”. However, causes of action which do not accrue prior to death cannot be said to “survive” death. So, if the cause of action accrues prior to death, then proceedings need to be instituted within two years of the date of death. Conversely, if it accrues after death, then the usual limitation period under the Statute of Limitations applies, namely either six or twelve years from the date of death, depending on whether the relevant obligation is contained in a deed.
• Necessary proofs to be exhibited – the Court went on to state that the first step in considering whether the intended proceedings are hopelessly statute barred is to examine the loan documentation, which would consist of the loan offer and acceptance and the relevant terms and conditions. They would often provide that where a borrower fails to make payment(s), this would be an event of default, a formal demand would be served and no cause of action would accrue until the demand is served. However, in some instances, no formal demand is required and the sums may become automatically due and owing on the event of a default, as defined in the terms and conditions. In addition, a repayment date may be expressly stated in special conditions of the facility letter which would generally override general terms and conditions, in which case the cause of action would accrue from that specific date. It is therefore a necessary proof in an application pursuant to section 27(4) that all of the relevant loan documentation and mortgage(s), including the applicable terms and conditions, are exhibited, together with any formal demand for payment. If the applicant doesn’t have a copy of any demand for payment and/or information as to whether formal demand was made, then statements of account should be exhibited which may assist in establishing whether it is likely that a demand had previously been made and if so, when. In the instant case, the default occurred after the death of the Deceased, in circumstances where the loan terms were for a period of ten years and therefore the repayment dates were September 2017, in respect of two loans, and October 2017, in respect of the third. In the circumstances, the Court was satisfied that for the purposes of the application before it, it could not be said that the intended proceedings were clearly statute barred by reason of section 9(2) of the 1961 Act, albeit it was not making a final determination on that specific issue. As the administrator ad litem was being appointed to “substantiate” the intended proceedings, there would be no obligation on him/her to raise this issue by way of defence to the proceedings, but it would be open to family members of the Deceased to raise the issue if they saw fit.

Having regard to all of the foregoing, the Court found that there were special circumstances which made it either necessary or expedient to allow someone other than the persons next entitled to extract a grant in the estate of the Deceased and granted the application on the usual terms.

Conclusion

The decision provides useful guidance for lenders in particular on the steps which should be taken before an application to appoint an administrator ad litem is contemplated, in addition to detailing the necessary proofs in any such application. However, it can often be the case that applications of this nature need to be made on an urgent basis, particularly where there is a looming statute date. In addition, there may be a dearth of information available to the applicant. In that regard, it is important that information gathering is commenced and reasonable notification to next of kin of the deceased issued as soon as possible, to ensure that the application can be heard and determined in the Probate List, and the relevant application subsequently lodged in the Probate Office, with sufficient time before the expiry of any limitation period.

[1] Section 9(2) of the 1961 Act provides that “no proceedings shall be maintainable in respect of any cause of action whatsoever which has survived against the estate of a deceased person unless either:

(a) proceedings against him in respect of that cause of action were commenced within the relevant period and were pending at the date of his death; or

(b) proceedings are commenced in respect of that cause of action within the relevant period or within the period of two years after his death, whichever period first expires”.

“Relevant period” here means the period of limitation prescribed by the Statute of Limitations or any other limitation enactment.

[2] [2021] IECA 266