BPIR 348
HEARING-DATES: 3 August 2005
3 August 2005
Administration of estate of deceased insolvent - Payment for services rendered to estate of deceased insolvent before insolvency declared Whether such payments were void - Whether ratification possible
Mr PSV died on 18 January 1992. He had been a member of Lloyd's and was facing liabilities as a 'Name'. His son, RV, became his executor and, in July 1992, engaged a firm of solicitors to conduct work on behalf of the estate. T, a partner in this firm of solicitors, acted in this matter and undertook work in seeking to defend Mr PSV's position as a Name. The firm of solicitors, as is common practice in such instances, drew on the estate funds to reimburse themselves for work undertaken. On 1 November 1994, an opinion was received by the firm of solicitors to the effect that the estate might be insolvent. On 4 July 2000, an order was granted on a petition from Lloyd's declaring Mr PSV to be a deceased insolvent. D was appointed trustee of the estate with effect from 5 July 2000. D sought to recover all fees paid to the firm of solicitors in the period between the death of Mr PSV, on 18 January 1992, and 5 July 2000, arguing that such payments were automatically void by virtue of the operation of 284 of the Insolvency Act 1986, as modified by the Administration of Estates of Deceased Insolvents Order 1986 so as to apply to dispositions on behalf of deceased insolvents with effect from the date of the death. The firm of solicitors contended that this provision did not apply and that, even if it did, such payments should be ratified by the court as they were made bona fide in return for beneficial services rendered to the estate.
Held - ruling accordingly -
(1) Adopting a purposive approach to interpretation, the modified s 284 provision applied so as to render automatically void any payments made out of the estate of the deceased person from the date of the death up to 5 July 2000, notwithstanding the fact that the insolvency order was not made until many years after the death. The provisions of the Human Rights Act 1998 relating to expropriation of property were not engaged so as to protect the position of the payee.
(2) By 31 December 1994 at the latest, T should have realised that there was a risk of the estate being insolvent and should have been careful about incurring further expenditure without first seeking the approval of the court. Therefore, after that date payments made to the firm would not be ratified and the sums paid over must be returned to the estate with interest charged at the standard rate. The pari passu rule favouring equal treatment of creditors supported this conclusion and the delay in seeking court ratification made it impossible to establish that the running up of solicitors' costs and fees was for the benefit of the estate.
Per curiam: it was surprising that RV, as executor, had not been joined to as a party (or even given notice of) these proceedings. He should at least be furnished with a copy of this judgment by the trustee.
Companies Act 1948, s 227
Insolvency Act 1986, ss 127, 264, 266, 267, 269, 271, 273, 283-285, 306, 373, 385, 415, Sch 1, Parts II, X
Human Rights Act 1998, s 3(1)
Rules of the Supreme Court 1965 (SI 1965/1776), Ord 85
Administration of Insolvent Estates of Deceased Persons Order 1986 (SI 1986/1999), Art 3, Sch 1, Part I, II
Insolvency Rules 1986 (SI 1986/1925)
Administration of Insolvent Estates of Deceased Persons Order (Northern Ireland) 1991 (SR 1991/365), Art 257
European Convention for the Protection of Human Rights and Fundamental Freedoms 1950
Beddoe, Re; Donwes v Cottam  1 Ch 547, CA
Burton & Deakin Limited  1 WLR 390,  1 All ER 631, ChD
Denney v John Hudson & Co Ltd  BCLC 901,  BCC 503, CA
Gray's Inn Construction Co Ltd, Re  1 WLR 711,  1 All ER 814, CA
McAteer v Lismore  BPIR 804, HC (NI)
Elspeth Talbot Rice for the trustee in bankruptcy; Gregory Denton-Cox for the respondent
Cur adv vult
PANEL: Chief Registrar Baister
JUDGMENT BY-1: CHIEF REGISTRAR BAISTER
CHIEF REGISTRAR BAISTER:
 This judgment concerns three related applications which came on for final hearing on 29 July 2005:
(a) an application dated 28 September 2004 by the trustee to recover fees paid out of the deceased's estate to DJ Freeman (the liabilities of which have now been taken over by Kendall Freeman);
(b) an application dated 29 November 2001 by the trustee, paras 3-4 of which have been restored under the liberty to restore in the order made on 3 January 2002;
(c) an application dated 10 November 2004 by Kendall Freeman for ratification of the payment of some (but not all) of the fees which are the subject of the trustee's application.
They raise questions of greater or lesser difficulty about the construction and application of the Administration of Insolvent Estates of Deceased Persons Order 1986 (the Order) and the basis on which the court should exercise its discretion to ratify payments made between the death of an insolvent and the date of appointment of a trustee.
 I am grateful to counsel for both parties for the timely delivery of helpful skeleton arguments on which I draw extensively below. I am also grateful to the trustee's solicitors for the prompt delivery of bundles. All this meant that a great deal of material was covered speedily and effectively in one day.
 The essential facts can be set out quite shortly.
 Philip Stuart Vos (Mr Vos Snr) died on 18 January 1992 (bundle 2/tab 9/ p 75). He had been a Lloyd's name. In the years following his death, DJ Freeman, solicitors (of which Kendall Freeman is the successor firm), carried out work on a number of matters for the estate of the deceased.
 DJ Freeman was first approached by Mr Richard Vos (Mr Vos), a son and the executor of the estate of the deceased on 23 July 1992, six months after the deceased's death (3/16/558), following the receipt of a cash call from Mr Vos Snr's members' agent at Lloyd's. Mr Vos initially sought advice from DJ Freeman on behalf of the estate as to whether the cash calls should be paid and as to what the estate's exposure to further underwriting losses was likely to be. Dr David Tiplady was the partner at DJ Freeman with whom he dealt.
 DJ Freeman continued to act for the estate in relation to a number of different matters over the course of the next 9 years (3/17/590). The work carried out by DJ Freeman on the estate's behalf included acting for the estate in relation to:
(a) cash calls against the estate issued by the deceased's members' agent at Lloyd's;
(b) negotiations between the estate and the financial recovery department at Lloyd's to settle the amounts owing by the estate in respect of the deceased's losses at Lloyd's;
(c) litigation between names' action groups and their Lloyd's agents;
(d) a dispute with the deceased's second wife and her family in relation to: (i) an indemnity provided to Mrs Vos to meet her own Lloyd's losses; and (ii) provision out of the estate for Mr Vos's minor children; and
(e) proceedings issued by Lloyd's towards the end of 1998 to recover the amounts it was owed by the estate, including the petition for an insolvency administration order (3/14/365).
 Attempts were made by DJ Freeman to reach a settlement with Lloyd's as to the liabilities of the estate. These were protracted but in the end were unsuccessful, and on 17 September 1998 Lloyd's issued proceedings to recover the sums it claimed were due. The proceedings were resisted, but Lloyd's obtained summary judgment in the sum of £ 1.4m odd plus costs.
 On 10 April 2000, more than 8 years after Mr Vos Snr's death, Lloyd's presented a petition for an insolvency administration order in respect of his estate. DJ Freeman acted for the estate in those proceedings. They defended them with some vigour, but again without success. An insolvency administration order was made on 4 July 2000.
 Mr Dick was appointed trustee on 7 July 2000, with effect from 5 July 2000 (2/7/72). The effect of his appointment was to vest the assets of the estate in him (s 306 of the Insolvency Act 1986 (the 1986 Act) as applied by para 21 Sch 1 Part II of the order).
 The applications give rise to three questions:
(a) whether payments made to solicitors instructed by and acting on behalf of the personal representative of a deceased insolvent's estate between the date of the latter's death and the date of vesting of the estate are void;
(b) (if the former question is answered in the affirmative) whether in the circumstances of this case such payments, in whole or in part, ought to be ratified; and
(c) whether repayment should be ordered of sums paid out of the estate after the trustee's appointment.
The first issue: are the payments made in the relevant period void?
 Article 3 of the Order provides:
'(1) The provisions of the [Insolvency] Act  specified in Parts II and III of Schedule 1 to this Order shall apply to the administration in bankruptcy of the insolvent estates of deceased persons dying before presentation of a bankruptcy petition with the modifications specified in those Parts and with any further such modifications as may be necessary to render them applicable to the estate of a deceased person and in particular with the modifications specified in Part I of that Schedule, and the provisions of the [Insolvency] Rules , the Insolvency Regulations 1986 and any order made under section 415 of the Act (fees and deposits) shall apply accordingly.
(2) In the case of any conflict between any provision of the Rules and any provision of this Order, the latter provision shall prevail.'
Part I of Sch 1 provides a table of substituted references; Part II sets out the provisions of the 1986 Act which apply together with certain specific modifications. Paragraph 5 of Part II of Sch 1 deals with the application of s 271 of the 1986 Act and para 12 deals with the application of ss 283-285 to deceased estates.
 Section 284 of the 1986 Act provides:
'(1) Where a person is adjudged bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it was made with the consent of the court, or is or was subsequently ratified by the court.
(2) Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the bankrupt as part of his estate.
(3) This section applies to the period beginning with the day of the presentation of the petition for the bankruptcy order and ending with the vesting, under Chapter IV of this Part, of the bankrupt's estate in a trustee.'
The modifications pose no problem in relation to subss (2) and (3): subs (2) is unaffected, while para 12 of the Order makes express provision for the relevant period in subs (3) to commence 'on the date of death'.
 Subsection (1) is more difficult. Applied literally, the modifications make no sense. Mrs Talbot Rice says that, 'Translated into the language prescribed by Sch 1 Part I of the Order, and with subs (3) interposed, s 284(1) of the 1986 Act would read as follows':
'Where an insolvency administration order is made against a deceased debtor, any disposition of property made by him or his personal representative in the period beginning with the date of death and ending with the vesting of the deceased debtor's estate in a trustee is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court.'
She derives support for that proposition from Muir Hunter, Personal Insolvency (Sweet & Maxwell, 1987), paras 5-41 to 5-44 . The learned authors begin in paras 5-41 by expressing the view that dispositions of property made in the relevant period will be void under s 284 of the 1986 Act unless made with the consent of the court or subsequently ratified by the court. Dealing with 's 284(1)(2): Relation-back to the date of death' in para 5-42 they say:
'This section, and this subs (1), are applied, without qualification to the administration of the deceased's estate. The question therefore arises, as to which payments or dispositions of property the subsection is intended to refer to, in the case of the deceased debtor. If one translates that subsection, with subs (2), into the language prescribed by Sch 1, Part II, it would read "Where an insolvency administration order is made against a person, any disposition of property made by him or his personal representative in the period between the date of death (which, by s 278, above, is the commencement of the insolvency administration) and the vesting of the deceased's estate in the trustee (subs (3)) is void ..." See note (v), below.'
In paras 5-43 they deal with 'The personal representative: dealings between death and petition' and say:
'The protection afforded by s 284(4) ... cannot apply for the benefit of the personal representative, for he is not a recipient of any such disposition of property, but rather the person who makes it. However, the provisions of subs (5) of the substituted s 271 ... expressly protect any payment made, or any act or thing done, in good faith, by the personal representative before the date of the administration order; that date must, it is submitted, in the premises mean the actual date ... But the sections referred to in s 271(5), above, in respect of which this protection is afforded, do not include s 284, nor do they seem to be relevant in the context of affording protection against any indicated risk of invalidity. [...].'
 That is a convenient point, I think, at which to pause and analyse what went on in this case, for the relief which the trustee seeks is not against the personal representative, Mr Vos, but against the solicitors he instructed. As we have seen, Mr Vos retained DJ Freeman, so the contractual obligation to provide legal advice and services and the obligation to pay therefore arose between Mr Vos and the firm. In theory, in circumstances such as these, the solicitors would render their bills to the personal representative, who would be liable to discharge them, subject to his right to be indemnified out of the estate for work he properly instructed the solicitors to undertake. In reality, the bills are rendered and the solicitors draw funds from the estate which is under their control. That, I understand, is what happened here. This analysis is accepted by counsel for both parties. On this contractual analysis of the retainer, the solicitors were at all times a third party. Muir Hunter deals with the position of third parties in paras 5-44:
'The position of third parties ... is considerably more obscure. Paragraph 12 [of the Order] provides that ss 283-285 shall apply to the administration of deceased insolvents' estates as modified by their taking effect as if the petition had been presented, and the insolvency administration order made, on the date of the death of the deceased debtor. Accordingly, s 284(4) must apparently be read as if it ran that there should not be "a remedy against any person in respect of any property or payment which he received before the date of the death of the debtor in good faith, for value and without notice that the petition had been presented". Since the date of death is to be the "deemed date", both of the presentation of the petition and of the making of the order, it seems to be irrelevant how one is to evaluate the absence of notice of a petition which has not been presented; for the making of the order is the crucial juridical event, after the date of which questions of good faith, value and absence of notice would seem to be wholly immaterial.
On this approach, the original protective provisions of s 284(4) will not enure for the benefit of third parties receiving property or payments forming part of the deceased debtor's estate, in the period between the date of death and the actual dates of the presentation of the petition and the making of the order, unless, that is to say, they are entitled to invoke the saving provisions of s 284(1), namely the court's power to consent to, or to ratify, transactions which would otherwise be void under the section.'
 Mrs Talbot Rice submits that her approach to the construction of the order, endorsed by the approach taken in Muir Hunter, is consistent with the pari passu policy of all the insolvency legislation, exemplified by the judgment of Buckley LJ in Re Gray's Inn Construction Co Ltd  1 WLR 711. At 717D, Buckley LJ said:
'It is a basic concept of our law governing the liquidation of insolvent estates, whether in bankruptcy or under the Companies Acts, that the free assets of the insolvent at the commencement of the liquidation shall be distributed rateably amongst the insolvent's unsecured creditors as at that date;'
and later at 718B:
'Since the policy of the law is to procure so far as practicable rateable payments of the unsecured creditors' claims, it is, in my opinion, clear that the court should not validate any transaction or series of transactions which might result in one or more pre-liquidation creditors being paid in full at the expense of other creditors, who will only receive a dividend, in the absence of special circumstances making such a course desirable in the interests of the unsecured creditors as a body.'
 Mr Denton-Cox takes a different approach to the construction of s 284 as amended by the Order. He contends it should be read as follows:
'(1) Where an insolvency administration order is made in respect of a person, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court.
(2) Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the deceased debtor as part of his estate.
(3) This section applies to the period beginning with the day of the death of the deceased debtor and ending with the vesting, under Chapter IV of this Part, of the deceased debtor's estate in a trustee.
(4) The preceding provisions of this section do not give a remedy against any person-
(a) in respect of any property or payment which he received before the date of death of the deceased debtor in good faith, for value and without notice that the petition had been presented, or
(b) in respect of any interest in property which derives from an interest in respect of which there is, by virtue of this subsection, no remedy.'
He submits (paras 13ff of his skeleton argument) that the section thus explicitly applies only to dispositions of property or payments made by 'the person', which must mean dispositions effected by the deceased after his death (where, for example, instructions to make a payment were given prior to his death, or a cheque was written prior to death) or under his will, rather than dispositions made by the personal representative after the deceased's death. The purpose of the section is to ensure that the assets are distributed pari passu as at the date of death. However, where dispositions are made after death by the personal representative or executor of the estate, they are not caught by s 284(1) and are not automatically void. If that were not the case, then the personal representative would be unable to make any dispositions, in good faith and for value, in relation to the administration of the estate after the deceased person's death without the risk of them subsequently being declared void. That interpretation, he contends, is supported by the wording of s 271(5) of the 1986 Act, as amended by the Order:
'Nothing in ss 264, 266, 267, 269, 271 or 273 shall invalidate any payment made or any act or thing done in good faith by the personal representative before the date of the insolvency administration order.'
If s 284 is interpreted so as to render all payments made by the personal representative automatically void, then s 271(5) has no effect whatsoever. Thus, the section does not apply to the payments made to DJ Freeman from the estate's funds. That is why DJ Freeman did not have to make an application for validation of the payments.
 I unhesitatingly prefer Mrs Talbot Rice's construction of the true meaning and effect of the order, supported by the authors of Personal Insolvency (Sweet & Maxwell, 1987). I accept that analysis for the following reasons.
 First, whilst I accept that the way in which the order is framed admits of more than one reading of the relevant provisions (and that any literal translation made by simply substituting the references in Part I of Sch 1 produces a nonsense), it is clear that the court must take a purposive approach to any issue of construction. Article 3 of the Order makes this clear by referring to the application of the provisions of the 1986 Act, specified in the parts of the Order itself, but also to 'any further such modifications as may be necessary to render them applicable to the estate of a deceased person'.
 Secondly, and leading on from that, it seems to me that Parliament must have intended the provisions to give force to the policy that unsecured creditors should be paid rateably enunciated by Buckley LJ in Re Grays' Inn Construction Co Ltd and made explicit in every other area of the substantive legislation.
 Thirdly, that approach is consistent with para 12 of Part II of Sch 1 as well as with the provision of para 5(5) dealing with the modifications to be made to s 271.
 Finally, any other approach would produce a situation which, in my view, does not bear sensible analysis. If Mr Denton-Cox's submission were correct, that, as we discussed in the hearing, would mean that the provisions of the Order dealing with relation back could only apply to dispositions made by or under the will itself (ie by the person). That would lead to the absurdity that anything done by or on behalf of the personal representative in the way of incurring costs and so on would be left untouched, whilst any other gift or payment could be clawed back. Parliament cannot possibly have intended to make such a distinction: it would be entirely artificial and would do nothing to further the pari passu principle that lies at the heart of the insolvency regime. Whilst in a sense a person who dies can make dispositions that take effect after death, the reality for practical purposes is that most dispositions are made through the agency of a personal representative whose task is to give effect to the instructions made by the will.
 Mr Denton-Cox also relies on the Human Rights Act 1998 (the 1998 Act), s 3(1) of which provides that:
'So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.'
He relies, in support of his contention that Human Rights Act considerations apply in this case, on McAteer v Lismore  BPIR 804 in which Girvan J, dealing with provisions of the Administration of Insolvent Estates of Deceased Persons Order (Northern Ireland) 1991 which mirror those with which we are concerned here, held that the provision of Art 257 was arguably 'an expropriatory provision which takes away a property right acquired by a third party prior to the adjudication event [the making of the insolvency administration order]' (806G). However, as Mrs Talbot Rice points out, the learned judge also cited the Muir Hunter commentary, as it then stood with apparent approval. He made no finding on the effect of the Northern Ireland Order in the light of the 1998 Act. As the head note makes clear, he merely held that it was arguable that Art 257 could be in conflict with a European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 right. In any event, the facts of McAteer v Lismore are very different to those in this case. Furthermore, as Mrs Talbot Rice points out, this is not a case where rights or property may be appropriated without further ado: the respondents to this application could at any stage have applied for Beddoe's relief (Re Beddoe,; Donwes v Cottam  1 Ch 547) or for validation or ratification (as they now do), so there is no question here of expropriation leaving a potentially aggrieved party without a legal remedy.
 I agree with Mrs Talbot Rice; the 1998 Act provisions are not engaged.
 Accordingly, I hold that the payments made to the respondents between 18 January 1992 and 5 July 2002 are void.
The second issue: should the payments be ratified?
 The burden is on the respondents to justify ratification of the payments.
 As Mr Denton-Cox says in his skeleton argument, s 284 of the 1986 Act (as amended) gives no guidance as to how the discretion to ratify is to be exercised. The court's discretion is wide. Mr Denton-Cox asks the court to exercise the discretion in his clients' favour for a number of reasons.
 He begins his argument on discretion by pointing out the fundamental difference between seeking validation or ratification where a bankruptcy or winding-up petition has been presented and seeking validation or ratification in the case of an insolvent estate. Where a petition has been presented it is reasonable to take the possible or likely insolvency of the debtor as the starting point. In such circumstances, the pari passu principle ought to take precedence over other considerations. However, it cannot be assumed that an estate which ultimately becomes the subject of an insolvency administration order was insolvent from the date of death of the deceased. In this case it is reasonable to assume that the estate was solvent; had it not been a petition would have been presented much earlier than it was. So, 'the court should approach the question of ratification on the basis that the estate was solvent at the time, unless the evidence shows that [it] was in fact insolvent'.
 Re Gray's Inn Construction Co Ltd, which I have already considered, is the leading authority on the issue. Mr Denton-Cox fairly sets out the guiding principles in that authority in his skeleton argument (which I gratefully adopt) as the following:
(a) the court's discretion under s 227 of the Companies Act 1948 (the precursor of s 127 of the 1986 Act) is entirely at large, controlled only by the general principles which apply to every kind of judicial discretion, but should be exercised in the context of the liquidation provisions of the Companies Act 1948 (717C-D);
(b) it is a basic concept of the law governing the liquidation of insolvent estates that the free assets of the insolvent at the commencement of the liquidation should be distributed rateably amongst the insolvent's unsecured creditors as at that date (717D-E);
(c) there are occasions, however, when it is beneficial, not only for the company but also its unsecured creditors, that the company should be enabled to dispose of some of its property during the period after the petition is presented but before a winding up order has been made (717E);
(d) in considering whether to make a validation order the court must always do its best to ensure that the interests of the unsecured creditors will not be prejudiced (717G-H);
(e) where an application relates to a specific transaction this may be susceptible of positive proof; in other cases the proof may perhaps be less positive but nevertheless be cogent enough to satisfy the court that the company's proceeding in the manner proposed would not prejudice creditors; in every case the court must carry out a balancing exercise (717H-718A);
(f) the court should not, in exercising that discretion, validate any transaction which would result in a pre-liquidation creditor being paid in full at the expense of other creditors who would only receive a dividend unless to do so would benefit the unsecured creditors as a whole (718B);
(g) a disposition carried out by the parties in good faith at a time when they were unaware that a petition had been presented would normally be validated unless there were grounds for thinking that the transaction was an attempt to prefer the disponee (718G);
(h) the principle has no application to a transaction which is entirely post-liquidation, as for instance a sale of an asset at its full market value after presentation of a petition (719B).
These principles were, he submits, considered in Denney v John Hudson & Co Ltd  BCLC 901. There, Fox LJ (with whom Russell LJ and Staughton LJ agreed) stated his view that good faith and lack of knowledge of the petition were not enough in themselves to justify validation (see 905ff). Having accepted that the parties acted in good faith, Fox LJ posed the questions: (1) were the parties acting in the ordinary course of business; and (2) were the relevant transactions likely to be for the benefit of the creditors generally? (906a-b). He answered both questions in the affirmative. However, the key consideration was whether the payments were likely to be for the benefit of creditors generally:
'[A]lthough the two payments were payments in respect of pre-liquidation debts, they were not payments for which the company got no quid pro quo ... Thus, it was not a situation where one pre-liquidation creditor was preferred to the others. The oil purchased seems to have been of much the same value as the amount paid.
It is true that a creditor can apply to the court for prospective validation of a payment in respect of a pre-liquidation debt, but Hudsons had no cause to do that. Hudsons did not know of the petition. It simply continued in what it, quite reasonably, regarded as the ordinary course of its business. The reality, in my view, is that the parties acted in good faith in the ordinary course of their established business relations, and the company obtained a benefit from the payment ... which would enable it to continue its business.' (906g-907b).
Thus, Mr Denton-Cox submits, if anything more than good faith is required, it is that the insolvent company or individual obtains a benefit from the disposition or transaction, which is in that sense in the interests of creditors. The question in a case such as this must, therefore, be whether the transactions in question were in good faith and for value, given that the disponee may never have knowledge of the deemed but fictional presentation of the petition as at the date of death. This view, he says, is supported by McAteer v Lismore (see Girvan J at 807). McAteer v Lismore also provides support for the proposition that the onus falls on the trustee to show bad faith.
 DJ Freeman, he goes on to say, performed services after the date of death, in the ordinary course of business, without notice of the presentation of a petition, for full value and for the benefit of the estate. It would not, Mr Denton-Cox submits, be unfair to unsecured creditors to ratify the payments made by the estate for those services.
 Another feature of the administration of insolvent estates, on which Mr Denton-Cox relies as militating in favour of ratification, is that it would be virtually impossible for a person to make an application for prospective ratification. That is another result of the quirk that the relation back is to the date of death rather than the date of presentation of the petition. Where a petition has been presented, there are insolvency proceedings on foot, and an application for prospective validation of a payment or payments can be made in those proceedings. However, where an estate is being administered, but there is no petition for an insolvency administration order, there is no obvious court to apply to if one wishes to have a payment ratified in anticipation of the possibility that at some point in the future there might be an insolvency administration order. 'The court' in s 284 of the 1986 Act means 'the court to which, in accordance with s 373 in Part X and the rules, proceedings with respect to that matter are allocated or transferred' (s 385(1)).
 Finally, Mr Denton-Cox contends that if the respondents had applied for ratification in the course of the relevant period, the payments would have been ratified, as the estate was solvent, the payments were reasonably believed to be for its benefit, and would not have been detrimental to the estate (see Burton & Deakin Limited  1 WLR 390).
 Mrs Talbot Rice approaches the matter quite differently. Her starting point is that the respondents must demonstrate, on ordinary administration of estate principles, that in any event the payments made fell to be discharged as properly incurred for the benefit of the estate, since a personal representative is only entitled to his indemnity out of the assets of the estate if the fees are properly incurred in connection with the performance of his duties as personal representative. The Beddoe's jurisdiction exists to enable a personal representative to apply to court so as to avoid subsequent criticism from any beneficiary of the estate. She attacks, in particular, two areas of work for which DJ Freeman were paid as susceptible of criticism:
(a) the defence to the Lloyd's action, which Lloyd's won on a summary judgment application which, by definition, means that the defence had no realistic prospect of success; and
(b) the opposition to the petition for the insolvency administration order which, she says, was wholly misconceived and bound to fail.
In neither case was Beddoe's relief sought or obtained. The trustee's position is that those fees were not properly incurred and should not therefore be ratified.
 Mrs Talbot Rice goes on to submit that even if the respondents can persuade the court that payment of the fees for which they seek ratification were proper expenses of the estate, thus overcoming the first hurdle, they should not be ratified, because there is an even higher hurdle to jump by reason of the insolvency of the estate. The primary purpose of s 284 of the 1986 Act, like its counterpart in corporate insolvency, s 127, is to ensure adherence to the pari passu principle emphasised in Re Gray's Inn Construction Co Ltd. If the payments to the respondents are ratified the estate will suffer and there will be no corresponding benefit. The position is quite different, therefore, from that in Denney v John Hudson & Co Ltd where the expenditure was compensated by the acquisition of a product (the oil) that enabled the business of the company to continue. In this case, apart from the use of estate assets to mount hopeless defences to proceedings, funds were also used to attempt to strong-arm a settlement with Lloyd's by threatening to exhaust the assets of the estate in legal fees, leaving nothing for Lloyd's, the principal creditors.
 She submits that refusing to ratify the payments made to the respondents would not be unfair for the following reasons:
(a) DJ Freeman must have recognised, from the very outset, that there was, at the very least, doubt about the solvency of the deceased's estate because, as they themselves wrote in a letter dated 16 September 1992 to Mr Vos, 'Your father's estate is quite clearly exposed to a massive extent [emphasis added], since he participated in some of the worst loss-making Syndicates at Lloyds in recent years. Furthermore, losses will, in the cases of some of those Syndicates, continue to be incurred for many years to come' (2/10/177).
(b) There was therefore a duty (arising out of the doubt) to administer the estate as if it was insolvent.
(c) The possibility of insolvency became a probability by April 1993 according to Dr Tiplady in a letter to Mr Vos of 7 April 1993 (2/10/178) and a certainty by October 1994 (see Dr Tiplady's letter of 1 October 1994 (2/10/179)).
(d) DJ Freeman were advised by counsel on 1 November 1994 that very serious consideration should be given to the possibility that the estate was insolvent and that if there was any doubt as to whether it was, it should be administered as an insolvent estate (2/11/258 and 2/12/281ff).
(e) On 17 August 1995, DJ Freeman asserted to Lloyds that the estate 'was clearly insolvent' (2/10/180).
(f) DJ Freeman knew or ought to have known that payment of its fees was at risk unless and until the court validated them (see Re Gray's Inn Construction Co Ltd (718D)). They took the risk of failing to do so.
(g) The evidence on which ratification is now sought is insufficient. No attempt has been made to produce detailed bills of costs to justify the fees. To the extent that there is a dispute about the availability of sufficient information, the point must operate against the respondents who now seek relief.
I should also say that she takes issue with Mr Denton-Cox as to the availability of prospective relief. Section 385 of the 1986 Act indeed defines 'the court' as Mr Denton-Cox submits, but para 33 of Part II, Sch 1 to the Order applies s 385 of the 1986 Act 'with the modification that at the end of the definition of "the court" there shall be added the words "and subject thereto 'the court' means the court within the jurisdiction of which the debtor resided or carried on business for the greater part of the six months immediately prior to his death"'. I agree with Mrs Talbot Rice.
 I have some sympathy for the position in which DJ Freeman and Dr Tiplady found themselves when they first received instructions from Mr Vos. Anything involving Lloyd's may be complicated, but matters were, as is common knowledge, especially intractable at about the time when DJ Freeman was first called upon to advise. I accept that when they were first instructed they could not have known that Mr Vos Snr's estate was necessarily going to be found to be insolvent. However, it is plain that insolvency was an issue from the outset. In para 5 of his witness statement of 19 June 2000, Dr Tiplady confirms this:
'On 30 July , in accordance with the instructions I had received from Mr Vos at our meeting on 28 July, I wrote Mr Vos a letter of advice. ... The letter reviewed the various topics discussed at the meeting, including the question whether the estate was effectively insolvent.' (1/17/632 and 667)
It is true, therefore, that insolvency was an issue from a very early stage and, as Mrs Talbot Rice says, that as early as 1992 Dr Tiplady told Mr Vos that the estate was 'quite clearly exposed to a massive extent', but that letter is not, to my mind, conclusive as to solvency, for as Dr Tiplady says in the same letter, 'It is quite impossible to estimate the extent of the exposure of your father's estate to losses at Lloyd's and it is likely to remain impossible to estimate such losses with any degree of accuracy for some considerable time to come' (2/10/177). By 7 April 1993, as we have seen, Mr Vos had real doubts about the solvency of the estate. In a letter of that date (2/10/178) he expressed the view that there was 'a greater probability that the estate will ultimately be insolvent'. But as Mr Denton-Cox points out, that is not the whole story. In July 1992, Dr Tiplady did consider solvency. He wrote to Mr Vos projecting the underwriting losses. He estimated that the estate was solvent (3/17/669). When Mr Vos expressed doubt about solvency in April 1993, Dr Tiplady advised on various names' action groups, presumably on the basis that joining in any action might produce funds for the estate (3/17/685-686). In 1993 there was a possibility of mediation. Throughout that year Dr Tiplady was monitoring the progress of various cases being taken against Lloyd's, the outcome of which, I have no doubt, would have had an impact on the estate.
 I think it is legitimate of the estate to have sought advice and I think it was legitimate of DJ Freeman to have given advice, even without resort to a Beddoe's application, at least for some time. When to make such an application is always a matter of judgment. The extent to which Dr Tiplady entered into discussions and negotiations with Lloyd's at this relatively early stage, as well as undertaking tasks that appear to have had to do with non-Lloyd's aspects of the administration of the estate, may be easy to criticise with the benefit of hindsight but I think that the court should be slow to adopt too strict an approach. I, therefore, reject Mrs Talbot Rice's primary submission that all the payments in respect of which ratification is sought ought to be disallowed on the basis that no application was made to the court under the Beddoe's jurisdiction and that the work was not done for the benefit of the estate.
 Plainly, however, even allowing a reasonable time in which to investigate the estate and see what could be done, there came a time when Dr Tiplady realised, or ought to have realised, that the estate was insolvent or at least that there was a strong possibility of its being so. There are a number of dates at which one could place this occurrence; it could have been almost any of those relied on by Mrs Talbot Rice and set out above. To me, the most significant is the date on which counsel advised that this point required consideration. In 1994, DJ Freeman sought the advice of Ms Marian Conroy. She gave a written opinion on 1 November 1994. In para 23 (under the heading 'Action to take') she said, 'Very serious consideration must be given to the possibility that the Deceased's estate is insolvent'. That, I think, was action she was advising be taken in the light of paras 13 and 14 of her opinion. In para 13 she defined insolvency, pointed out that it was a matter of fact, and that the court could direct an inquiry. She went on:
'If there is any doubt as to whether an estate is insolvent or not it is suggested that it be administered as an insolvent estate until all the expenses and debts are paid in full.'
She then set out the three ways in which an insolvent estate could be administered (out of court by the personal representatives, by Chancery Division administration pursuant to Rules of the Supreme Court 1965, Ord 85, or in bankruptcy). She then said, 'I prefer the last alternative, as it requires creditors of the estate to prove for their debt'.
 Ms Conway did not say, in her opinion, that the estate had to be administered as insolvent. However, the indications she gave are clear. Taken with the likelihood expressed in the correspondence, to which I have already referred, it seems to me that any solicitor properly considering the position ought at that point to have advised that the estate be administered as insolvent, if only out of an abundance of caution. There is no evidence that counsel's advice was acted on. As late as 3 September 2002, Dr Tiplady was still of the view that the estate was not insolvent (3/17/670).
 I think that even if there was an obligation after 1 November 1994 to administer the estate as insolvent, that was not absolute. Dr Tiplady would have needed time to consider the advice and to pass it on and discuss it with his client, Mr Vos. I think it would have been reasonable to have done so within a month or so of receipt of the opinion, say by 31 December 1994.
 But Dr Tiplady did not do that. Instead he embarked on extremely protracted negotiations with Lloyd's and a range of activity described in detail in paras 46ff. of Mr Denton-Cox's skeleton argument. At some point, as Mr Denton-Cox pointed out in his submissions at the hearing, Dr Tiplady believed that he had reached a settlement with Lloyd's. It is referred to in his letters of 10 April 1995 (3/15/544), in which he confirms terms of settlement, and 17 August 1995 (2/10/181) ('Having believed that we had reached an agreement in substance earlier this year'). But that was in 1995, after Ms Conway's advice. In any event, there was no settlement, as the court later found when Lloyd's applied for summary judgment. Even after it was clear that there was no settlement, Dr Tiplady continued to make settlement offers to Lloyd's on behalf of the estate but they were often coupled with threats to engage expensive leading counsel (2/10/192 and 199), experts (1/10/199) and warnings that doing so would dissipate the assets available. For example, on 5 November 1997 (3 full years after receiving counsels' advice) he warned, 'that the choice for Lloyd's remains between accepting the sum offered by my clients or receiving nothing whatsoever' (2/10193).
 It is one thing to adopt tactics of that kind in ordinary commercial litigation, but different considerations apply where one is dealing with money that should be held on trust for the general body of creditors and beneficiaries of an insolvent estate. In taking the approach he did, in my view, Dr Tiplady misunderstood completely what his obligations were. From the point when he realised, or ought to have realised, that the estate was insolvent it was no longer acceptable to engage in horse trading with one of the creditors of that estate. His obligation was to ensure that each creditor of the estate received that to which it was entitled under the statutory regime. He was under no obligation to see that Lloyd's got anything more than it was entitled to, but he had no business trying to ensure that Lloyd's claims were dealt with other than fairly, that is to say rateably. In an affidavit sworn in these proceedings on 14 February 2002, Dr Tiplady confessed that he never practised or held himself out as practising or having expertise in either the law of personal or corporate insolvency or the law of administration of estates. He said that from 1989 until 1996 his practice consisted almost entirely of Lloyd's litigation (3/16/557 and 558). That may be so; indeed, I accept that it was so. But I think I can take judicial notice of the fact that DJ Freeman were well known for undertaking insolvency work. Even if I am wrong to do that, Dr Tiplady himself indicates that two of his partners were deputy registrars of this court, so I may reasonably assume that he could have taken insolvency advice had he decided to do so and as, in my view, he ought to have in late 1994.
 I conclude, therefore, that on or about 31 December 1994, DJ Freeman ought to have put the estate into insolvent administration or at least advised
Mr Vos to administer it as if it were insolvent. Although at a very late stage DJ Freeman claimed that the estate was being administered in this way (see Dr Tiplady's letter to Lloyd's of 5 October 1999 (3/15/409)), in fact it was not. Payments were made to Lloyd's without regard, it seems, to the principles of pari passu distribution (see, for example, Dr Tiplady's letter of 15 December 1999 (3/15/399-400)). For that reason alone, I do not believe that any court properly informed about the position of the estate (which, including the contents of counsel's opinion, would have had to have been put before the court on any ex parte application) would have made any order prospectively ratifying the payments made to DJ Freeman after 31 December 1994.
 To the extent that it might be arguable in this case that payments made in good faith at a time when the recipient was unaware of the presentation of a petition should be ratified unless there are grounds for thinking that the transaction was an attempt to prefer the disponee, I reject the argument on the facts of this case. It is, indeed, harsh that under the regime governing insolvent estates, the relevant time dates back to the date of death. However, for the reasons I have already given, DJ Freeman ought to have been on notice of the likelihood of insolvency, so good faith cannot be relied on. Furthermore, as Mrs Talbot Rice points out, it is hard to see that there was a benefit to the estate constituting a quid pro quo for the payments made (as there was in the case of the oil sale in Denney v John Hudson & Co Ltd). There was a benefit for DJ Freeman. But for what they received out of the estate they would have been (subject to their relationship with Mr Vos) unsecured creditors in practice, so the effect of what has occurred has been to prefer them. It may be that some of the work done did benefit the estate more generally. But what is relevant is whether it benefited the estate as a whole (that is to say the estate including all the creditors of which Lloyd's was one) and resulted in gains (or even preservation of assets) rather than depletion of the available assets. I cannot conclude that there was such a benefit. To the extent that I am unable to do so, as a result of a lack of detailed information and the passage of time, I agree with Mrs Talbot Rice that this is the result of the delay in making an application. It may be that if DJ Freeman had applied as the fees were being incurred, some of them would have been allowed as being of benefit to the estate. That is not easy to assess now. The burden on DJ Freeman as applicants has not been satisfied.
 The foregoing matters alone militate against ratification of any sums drawn from the estate after 31 December 1994. However, there are other matters that fall to be considered.
 By no stretch of the imagination can it have been proper to expend substantial sums (or indeed any sums) on defending the Lloyd's claim for summary judgment without the sanction of the court. For the reasons I have already given, I do not believe that the court would have validated payments to allow the proceedings to be defended. The court would, in my judgment, have formed the view that the Lloyd's claim would have been better dealt with by a trustee of an insolvent estate.
 Even more stretching of the imagination are the circumstances in which Dr Tiplady embarked on a defence of the petition for the estate to be wound up. Quite apart from the fact that the judgment which Lloyd's obtained made them the largest creditor of the estate (so I was told at the hearing), there was no conceivable justification for defending a petition designed to do what ought to have been done in late 1994. What makes matters worse, however, is the fact that Dr Tiplady wrote to Lloyd's by fax on 20 June 2000, saying:
'My services to the Vos estate in respect of your petition are provided entirely free of charge. There is, therefore, no question of the estate's assets continuing, in your words, "to be dissipated in legal fees."' (2/10/128)
In fact, Dr Tiplady did charge the estate in spite of this assurance. His explanation for doing so is to be found in para 29.3 of his witness statement of 9 February 2005:
'At paragraph 10 of Mr Dick's statement he refers to a letter I wrote to Paul Martin of Lloyd's dated 20 June 2000, in which I stated that my services to the Estate in respect of the petition for the IAO were "provided entirely free of charge". This was the case at the time. As I stated in my letter dated 9 July 2001 to [the trustee's former solicitors], the Firm wrote off over £ 17,000 worth of unbilled fees in April 2001. However, on receipt of over £ 60,000 of the Estate's funds in July 2001, I concluded that it was disproportionate to write off such a large sum and hence I retained £ 7,395.55 to pay outstanding and ongoing costs.' (3/14/373)
This remarkable statement does Dr Tiplady no credit. Either his letter of 20 June 2000 was dishonest (in which case Lloyd's was lulled into not taking steps it might have taken to prevent the use of estate funds on Dr Tiplady's fruitless defence of the petition) or it was true (in which case the indemnity principle was never engaged and the subsequent taking of money in respect of work that was not to be charged to the personal representative of the estate was dishonest). Whatever the case may be, the court would not have validated payments to defend the petition if it had been made known that there was to be no fee for the work done. To ratify payment now would amount to condoning behaviour on the part of a solicitor that simply cannot be countenanced.
 The explanation for the presentation of the petition given by Lloyd's to Dr Tiplady was concern about the level of fees being taken from estate. Dr Tiplady appeared to find this irrational. That is the tenor of paras 75ff of his witness statement of 19 June 2000 (3/18/648). In the light of his threats to exhaust the estate one can only register surprise at the fact that Dr Tiplady was surprised.
 The trustee has taken issue with the amounts of some of the charges made. In view of the conclusions I have reached so far, I do not think it would be proportionate or helpful to express any comment on the point.
 For all the foregoing reasons I will ratify payments made or falling due up to, and including, 31 December 1994 but not thereafter.
The third issue: should repayment of sums taken out of the estate after 5 July 2000 be ordered?
 The answer is plainly yes. As Mr Dick points out in his evidence, the estate vested in him on that date so only he could authorise their use. There is no jurisdiction to ratify such payments as they did not take place in the relevant period.
 There was some argument in the course of the hearing as to the cause of action but it is unnecessary for me to consider it since Mr Denton-Cox, in my view properly, conceded the point.
 There are a few points which arose to which I have not so far alluded but about which I should make some comment.
 In the course of the hearing, Mr Denton-Cox pointed out that substantial sums had been received by Lloyd's out of the estate without validation or ratification, yet no steps appeared to have been taken by the trustee to recover those for the benefit of the estate.
 It is a fair point, as far as it goes. However, as far as the applications before me are concerned the point is not relevant. It may be that to the extent to which DJ Freeman or their successors find themselves to be unsecured creditors as a result of this judgment they will be in a position, as creditors, to challenge the trustee's decision not to make an application against Lloyd's. It may be that the trustee has or will apply. However, it may also be the case that he has concluded that Lloyd's will receive a dividend in at least the sum they have already received, in which case an application would be otiose. This is not the time or place to speculate. In any event, it lies ill in the mouth of DJ Freeman to complain about the manner in which estate assets have been dealt with. They bear the primary responsibility for what has occurred.
 I have a residual concern about the position of Mr Vos. I expressed concern that he had not been joined to or given notice of these applications. At one stage, I understood Mr Denton-Cox to contend that any judgment on this application could affect him by acting as an issue estoppel against him. I do not accept that. Nothing in this judgment can constitute res judicata against a party who is not before the court. I do, however, have some concern about the fact that neither party (nor for that matter the court) has sought to join Mr Vos to this application, in which he may have a legitimate interest or at least give him notice of it. What if the respondents now seek to enforce their costs against him, leaving him to claim an indemnity out of the estate as an unsecured creditor? I suspect that Mr Vos would have an answer to any claim, but, again, this is not the time or place to speculate about that. The best I think I can do, in the circumstances, is to direct the trustee to send a copy of this judgment to Mr Vos so that he can consider what, if any, steps he might wish to take in the light of it.
 Finally, there is the question of interest. Mrs Talbot Rice seeks interest on any sums recovered. Mr Denton-Cox takes the point that there is no specific prayer for interest in the trustee's application so he should not be entitled to any. He recognises, however, that the trustee's application does seek 'such further or other relief as to the court seems just' which Mrs Talbot Rice says covers interest.
 I agree with Mrs Talbot Rice. There can be no prejudice. The respondents are solicitors, so a claim for interest can hardly come as a surprise. The formula used in the application is well known to practitioners. Furthermore, I think it would be just in the circumstances to order that interest be paid at the standard rate. I will allow Mrs Talbot Rice's application made orally at the end of the hearing and direct, if only out of an abundance of caution, that the application be amended accordingly. I will dispense with re-service.
Pannone and Partners for the trustee in bankruptcy; Kendall Freeman for the respondent
 BPIR 348