Impact of law firm incorporation on executor appointment considered

The High Court has found that incorporation of a law firm will not exclude a director of the firm from being eligible for appointment as executor of a will made before the incorporation.

In In the Estate of Kenneth Valdemar Cornelius (Deceased) 20 December 2011, HC Timaru, MacKenzie J CIV-2011-476-542, the deceased had made a will in 1999 which provided for appointment of executor as follows:

"I appoint one of the partners in the firm of Bradley West, Solicitors presently of Timaru and Geraldine or such other firm which at my death has succeeded to and carries on its practice ('my Trustee') to be the Exectutor and Trustee of this my will."

The firm of Bradley West was an unincorporated partnership when the will was made. A company, Bradley West Ltd, was incorporated in August 2007 with the sole practitioner in the unincorporated firm becoming the sole shareholder and director of the company. The firm's business was transferred to the company.

The proceedings were an application for grant of probate in common form. MacKenzie J found the situation raised some points of probate practice of considerable general importance. The Court had to consider the effect of the incorporation of the firm on the appointment of the executor, and then whether the form of appointment clause ("one of the partners" in the firm) was void for uncertainty, even if there had been no change in the status of the firm.

In considering the effect of incorporation, MacKenzie J was assisted by the English decision Re Rogers (deceased) [2006] EWHC 753 (Ch), [2006] 2 All ER 792. This had granted probate to applicants who were profit sharing members of a limited liability partnership (LLP). The reasoning was equally applicable to New Zealand with no distinction between a corporate body under the English legislation and a company under the New Zealand Companies Act 1993. The ordinary meaning of the word "firm", in popular usage, was not confined to a partnership. It was frequently used to describe a legal practice carried on by a sole practitioner, as well as by a partnership. Also, in popular usage, a limited liability company was frequently described as a firm.

"In the days before incorporation of legal practices was possible, a reference in a will to a firm of solicitors woudl necessarily be a reference to a sole practitioner or a partnership. But that arose from the professional obligations of solicitors as to their mode of practice, not from any limitation inherent in the meaning of the word 'firm'," MacKenzie J said [at 10]. "Now that incorporation is possible, I do not consider that there is any reason to attribute to the testator an intention to exclude, from the category of successor firm which may come within the scope of the appointment clause, a practice carried on through a company."

Of importance was the fact that the appointment was not of the firm itself, but of an individual within the firm. MacKenzie J accordingly held that the company Bradley West Ltd came within the description "such other firm which at my death has succeeded to and carries on" the practice of the firm of Bradley West solicitors.

MacKenzie J then considered who were the "partners" in an incorporated law firm. This will should be interpreted so as to give it effect, so far as possible and this would not be achieved if a literal meaning was given to the word "partners". Of importance was the definition of "incorporated law firm" in section 6 of the Lawyers and Conveyancers Act 2006, which created a close analogy between the partners in an unincorporated law firm and the directors in an incorporated law firm.

"I consider that it is appropriate to attribute to a testator who has adopted this form of appointment of executor an intention to specify, in a case where the successor firm is incorporated, the class of persons most directly comparable to the partners in an unincorporated firm. That class is clearly the directors of the incorporated firm," he said [at 13]

The Court held that the persons eligible for appointment were the directors of Bradley West Ltd.

MacKenzie J then considered whether the appointment was precluded by section 63 of the Administration Act 1969, which prevented probate being granted to companies other than trustee companies. He considered the purpose of the section and reviewed the circumstances of its first enactment and the impact of the enactment of the Lawyers and Conveyancers Act and its purpose of permitting law firms to incorporate. His Honour decided that section 63 was not engaged in the circumstances and did not prohibit the grant of probate to a person who fell within the description of "one of the partners in [Bradley West Ltd]". [at 28].

While MacKenzie J said he had reached his decision "with considerable confidence", he noted that this may not always be the case: "Cases may well arise, particularly when a will is made after the law firm has incorporated, which fall squarely within the words of section 63(2). I commend to those responsible the desirability of a re-examination of the interrelationship between section 63 and the provisions for incorporation in the Lawyers and Conveyancers Act, so that problems which may arise can be properly addressed," he noted [at 29].

MacKenzie J also considerd the validity of the form of appointment clause. He noted that this involved a quite different point - one which would have applied to the appointment clause whether or not the practice had been incorporated. In coming to his decision, he considered the discussion in Dobbie's Probate and Administration Practice (which suggested wording similar to that used in the will in question) and several English cases. He concluded that either of the forms of wording suggested in Dobbie would generally be acceptable, and that any uncertainty which either form presented - in an individual case - could be addressed on a case by case basis by the application of section 32 of the Wills Act 2007 (which enables the Court to resolve ambiguities and uncertainties in a will, if these can be resolved by recourse to external evidence).

MacKenzie J directed that the application for probate was to be considered by the Registrar, having regard to the terms of his judgment.