SRA interventions – An increasing trend

Recently, our team have observed an increase in matters where a professional executor (and/or the firm they work for) has been intervened by the Solicitors Regulation Authority ("SRA") during the administration of an estate. These situations present a number of difficulties and disproportionately impact charity beneficiaries for the simple reason that professional executor appointments often go hand in hand with estates left to charity. 

SRA interventions

The SRA has the power to intervene with regulated firms of solicitors and individual solicitors where there has been (or there is suspected to have been) a serious breach of the SRA standards & regulations or if other circumstances have led to the practice no longer being viable, e.g. where a sole practitioner dies or loses capacity. The objective of an intervention is to protect the public, and in particular to safeguard clients' interests and assets. The SRA closes the firm with immediate effect and collects the clients' monies, documents and files/data. An intervention agent, usually another law firm, is appointed to manage ongoing matters and protect the clients' interests in the process.  Importantly, it is not the intervention agent's role to act on and/or progress clients' matters. Impacted clients are advised to find new law firms to take over their matters and the intervention agent's role is to ensure a smooth transition to those law firms.

There have, unfortunately, been some large-scale interventions in recent years which have impacted thousands of clients and involved many millions of pounds, a significant proportion of which was tied up in wills and trusts with charity beneficiaries. It is, therefore, a very serious issue for the charity legacy sector.

Charity beneficiaries may find it particularly difficult to navigate situations where a professional executor has intervened. The intervention agent can only release files to another firm with the authority of the client. Ordinarily, this is not problematic. Take, for example, a conveyancing transaction to sell a property. The seller is the client, so they can instruct a new solicitor and authorise the intervention agent to hand over the files. In a probate matter though, the professional executor is the client, and yet they are the one who has been intervened. What happens next, therefore, depends on whether the professional executor is cooperative. If they are, a situation can often be negotiated where the charity beneficiaries instruct a firm to continue the administration, and the professional executor then consents to that firm receiving the files. If the professional executor is not cooperative, charity beneficiaries can be left in the difficult situation of having to obtain a grant of representation from the probate registry first, and only then can the files be obtained from the intervention agent. This risks causing significant delays to legacy income.

Pre-grant cases

Where the intervention takes place before the grant has been issued, the situation is not too difficult.  It is generally accepted by the probate registry that the intervention of a professional executor represents sufficient grounds for an order under Senior Courts Act 1981, s116 directing that they be passed over so that a residuary beneficiary can take the grant instead. Charity residuary beneficiaries are of course used to acting as personal representative in the absence of executors, and this therefore becomes another one of those situations. There can be challenges in obtaining the necessary information for the application – especially as regards the assets and liabilities – due to the lack of access to the file, but it is generally accepted that the application (including any inheritance tax return) may have to be made on incomplete information on the basis that corrections will be made later. It is usually possible to arrange for the intervention agent to send the original will – if available – directly to the probate registry for this purpose. 

Post-grant cases

These are the more difficult cases. Where the intervened professional executor is named on the grant, the estate administration essentially stalls until such time as a new grant is obtained. There are two possible pathways to achieving this, one involving the High Court and the other involving the Probate Registry.

High Court

In an optimistic hypothetical scenario, the professional executor would consent to an application to the High Court under Administration of Justice Act 1985, s50 for their removal and replacement with a new personal representative, such as a charity residuary beneficiary or perhaps a law firm trust corporation on the charity's behalf. Where the professional executor does not consent or is uncooperative (or perhaps even uncontactable), the same application is required, but takes a lot longer and there is an increased likelihood of court hearings being necessary. Even with consent, this work falls within the remit of contentious probate and is therefore best handled by litigation solicitors experienced in probate disputes.  

Probate Registry

Whilst the high court route is the more common approach in intervention situations, the probate registry does present a potential alternative as the registrars have power under Non-Contentious Probate Rules 1987, r41 to revoke an existing grant and then issue a new one in favour of somebody else. We have engaged with the probate registrars on this, highlighting the increasing number of interventions. They have confirmed that, in cases where the intervened professional executor does not consent, or is otherwise uncooperative or uncontactable, the application will always have to be made to the high court. However, where the professional executor consents, and is willing to cooperate with the application, the registrars are open to considering applications for revocation instead, which is helpful as, if allowed, this will invariably be much quicker and more cost effective than an application to the high court. The registrars have advised that, as all matters have to be assessed on their own specific facts, it will be best to make use of the probate registry's pre-lodgement enquiry service to obtain the registrars' advance views on the prospects of success of a revocation application. This is helpful advice, as the risk of taking the probate registry route is that the registrars then direct that the application should be made to the high court. That would create wasted time and costs, as, with hindsight, the application could have been made to the high court in the first place. The pre-lodgement advice service, therefore, presents a useful middle ground.

The probate registry will also consider applications where there was a defect in the professional executor's application, meaning it should not have not been issued in the first place. An example of this might be if the professional executor declared in the application that they were a director of a company (the directors of that company having been appointed as executors) when they were in fact an employee and not a director.

Protecting and preserving assets

Sadly, many of the interventions that we have encountered lately have happened due to the SRA suspecting dishonesty on the part of the professional executor. That is not to say that all interventions relate to dishonesty, as they absolutely don't, but it does appear to be a trend. This is naturally of great concern, as, whilst the intervention shuts down the solicitor's practice, any grant of probate in that solicitor's name as professional executor remains valid and effective in the meantime. Even in the face of regulatory proceedings, there is nothing to stop the executor from, say, selling a property and taking receipt of the sale proceeds into their personal bank account.

This is why, in intervention situations, it is always sensible to focus on protecting and preserving assets whilst the relevant efforts are made to take over the estate administration via a new grant as above. With properties, this generally entails ensuring that buildings (and, if relevant, contents) insurance is in place and considering what protective steps might be taken at the land registry to prevent a sale, or at least to ensure that the relevant charities or their representatives are notified if there is an attempted sale. For other assets, much depends on what we know about them, which brings us back to whether the file can be released from the intervention agent. For example, if it can be established which banks the deceased had accounts with, it is sensible to write to those banks to explain the situation and to ask them not to release any funds until a new grant is obtained. 

Sometimes, estate funds will already have been taken into the solicitor's client account at the time of the intervention, e.g. from closing bank accounts or even selling properties. The SRA seizes all client account funds as part of the intervention process so it is usually the case that, subject to an accounting exercise, the estate funds can be recovered in due course. In the worst-case scenario where funds have been misappropriated or stolen, claims can be made to the solicitor's compensation fund for the missing funds to be restored, although it is worth noting that, largely due to the large-scale interventions mentioned above, the fund is known to be under significant strain at this time. There has, however, not been any suggestion that the fund will not be able to meet all valid claims in the future. 

If your charity is facing a situation involving an SRA intervention, or if you would like to discuss generally, please do not hesitate to get in touch with Gavin Holt or Weronika Stefaniak.

Our charity probate & advisory service, led by Gavin Holt, is available to legacy teams when they face challenging situations as beneficiaries of wills and trusts.  The service covers the full spectrum of advice that can be required by charity beneficiaries, but commonly involves matters such as tax mitigation & recovery (e.g. the misallocation of IHT), deeds of variation, will & trust interpretation and, increasingly, estates where a professional executor has been intervened by the SRA, as well as the routine administration of estates where charities are the named executors and find themselves in a position where they need to administer the estate.