In a landmark decision that has sent shockwaves through the estate administration and banking sectors, the Supreme Court of Nigeria has ruled in DAURA & ANOR v. UNION BANK (2024) LPELR-62008(SC) that administrators of deceased persons’ estates are under a mandatory legal duty to identify and settle the debts of the deceased before distributing assets to beneficiaries.
Justice Emmanuel Akomaye Agim, JSC, delivering the leading judgment, emphatically stated:
“An administrator of an estate cannot avoid this duty by simply claiming or asserting that he or she is not aware of the existence of a particular debt… It is the duty of the administrator to take steps to identify and inventory both the assets and debts of the estate and pay the debts before distribution.”
The appellants, who were administrators of a deceased person’s estate, had distributed the estate’s assets among the beneficiaries while claiming ignorance of an outstanding debt owed by the deceased to Union Bank. The Bank, upon discovering the distribution, initiated legal proceedings to recover its debt, insisting that the administrators were duty-bound to have identified and settled the debt before sharing the estate.
The administrators’ defense was straightforward: “We didn’t know about the debt.”
But the Supreme Court wasn’t having any of it.
The apex Court clarified a critical legal principle: ignorance is no defense when it comes to estate debts. The Court held that:
Administrators must act as responsible fiduciaries. They are legally obligated to conduct a thorough inventory of the deceased’s financial obligations, including debts, before proceeding to distribute the assets.
Actual knowledge of the debt is irrelevant. It is the duty of the administrator to actively search, inquire, and uncover any debts, irrespective of whether such debts are disclosed by beneficiaries or readily apparent.
Creditors have enforceable rights against the estate. The estate remains liable for debts incurred by the deceased, and administrators cannot shield themselves from liability by claiming ignorance.
This ruling is a stark warning to estate administrators and executors across Nigeria. The days of hurried estate distributions, without due diligence into the liabilities of the deceased, are over.
Estate Distribution Must Follow Debt Settlement: Administrators who rush to share assets without verifying debts now risk personal liability for any unpaid obligations.
Comprehensive Estate Inventory is Mandatory: Both assets and liabilities must be identified before any distribution. This will necessitate collaborations with banks, creditors, and even public notices inviting claims.
Creditors are Empowered: Creditors can now confidently challenge improper distributions and pursue administrators who neglect their duties.
Legal Exposure for Careless Administrators: Ignorance or negligence is no longer a shield. Courts will hold administrators accountable if they fail to conduct due diligence.
Justice Agim’s pronouncement reinforces the fiduciary responsibility that comes with administering estates. The judgment realigns estate administration practices with principles of fairness and prudence, ensuring that beneficiaries do not unjustly benefit at the expense of unpaid creditors.
For legal practitioners and financial institutions, this decision is a game-changer. For families handling the affairs of a deceased loved one, it is a wake-up call: Before you share, you must pay.
