Chick & Anor v Grosfeld (no 3)
[2012] NSWSC 1536
•13 December 2012
Supreme Court
New South Wales
Medium Neutral Citation: Chick & Anor v Grosfeld (No. 3) [2012] NSWSC 1536 Hearing dates: 31 October 2012 Decision date: 13 December 2012 Jurisdiction: Equity Division Before: White J Decision: Refer to para [42] of judgment.
Catchwords: WILLS, PROBATE AND ADMINISTRATION - entitlement of executor to remuneration - construction of clause in will providing for entitlement to charge - executor an accountant - executor only entitled to charge professional rates for work that a non-accountant executor would have been justified in retaining an accountant to perform - beneficiaries not estopped from denying executor's entitlement to charge fees otherwise than in accordance with will Legislation Cited: Family Provision Act 1982 (NSW)
Probate and Administration Act 1898 (NSW)Cases Cited: Chick v Grosfeld [2012] NSWSC 1166
Commissioner of Stamp Duties (Qld) v Livingstone [1965] AC 694
Macartney v Macartney (1909) 1 VLR 183
Swanson v Emmerton [1909] 1 VLR 387
In the Estate of Purton (1935) 53 WN 149
In The Estate of Instone (Supreme Court of New South Wales, Powell J, 23 August 1993, unreported; BC9303622)
In Re Craig (1952) 52 SR (NSW) 265
Broughton v Broughton (1854) 5 De G, M and G 160 at 164; 43 ER 831
In Re Doody; Fisher v Doody [1893] 1 Ch 129
In Re Gates; Arnold v Gates [1933] Ch 913
In the Will of Kerrigan (1935) 35 SR (NSW) 242
Sacks v Gridiger (1990) 22 NSWLR 502
Clarkson v Robinson [1900] 2 Ch 722 and Re Chalinder; Chalinder v Herrington [1907] 1 Ch 58
Re Chapple; Newton v Chapman (1884) 27 Ch D 584
Swanson v Emmerton [1909] VLR 387
In the Will of Sheppard [1972] 2 NSWLR 714
In the Will of Shannon [1977] 1 NSWLR 210
Re Ames; Ames v Taylor (1883) 25 Ch D 72
Re Fish; Bennett v Bennett [1893] 2 Ch 413
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Commonwealth v Verwayen (1990) 170 CLR 394Texts Cited: Jacobs Law of Trusts in Australia, 7th ed Category: Separate question Parties: Murray Chick (1st Plaintiff)
Kimberley Runia (2nd Plaintiff)
Johannes Theodorus Grosfeld (Defendant)Representation: Counsel:
M McAuley (Plaintiffs)
A Lakeman (Defendant)
Solicitors:
McAuley Hawach (Plaintiffs)
Angela Anthony & Associates (Defendant)
File Number(s): 2010/258874
Judgment
HIS HONOUR: In my reasons for judgment of 25 September 2012 (Chick v Grosfeld [2012] NSWSC 1166) I asked for further submissions on the construction of clause 18 of the will. For convenience, I again set out the terms of clause 18. It provided:
"18. Entitlement to Charge
Any executor or trustee under this Will being:
a) a legal practitioner;
b) an accountant who is a member of:
i) the Institute of Chartered Accountants in Australia;
ii) CPA Australia;
iii) the National Institute of Accountants; or
iv) the National Tax and Accountants' Association Limited;
c) a financial advisor who is authorised by a person or entity who holds an Australian Financial Services ('AFS') licence, or who themselves hold an AFS licence, or a person referred to in the clause entitled 'Investment Decisions';
will be entitled, in connection with the trusts in this Will and including in respect of acts that an executor, trustee or legal personal representative could have done personally as if he or she were not such an executor, trustee or legal personal representative, to be paid, in lieu of any commission, all professional or other charges for any business or act done by him or her at the hourly rate of a director, principal or partner of the executor, trustee or legal personal representative's firm subject to retaining the responsibility for the management of any business or act done, delegate the work done to an appropriate third party (including member of the executor or trustee's firm), with such work to be charged, separately to the entitlement to commission, at the hourly or other rate applicable to the person performing the work; and charge separately at the hourly or other rate applicable to the person performing the work for the ongoing administration of any trusts created under this Will."
As noted in the earlier reasons, Mr Grosfeld is an accountant and a member of CPA Australia. He has received remuneration of approximately $180,000 up to January 2011. Up to May 2011 his fees charged to the estate were estimated to be $219,750. He has charged remuneration at the rate of $250 per hour plus GST for carrying out executorial duties.
Construction of clause 18: work in connection with the trusts of the will
The first question of construction is whether Mr Grosfeld is entitled to make any charges at all given that his executorial duties remain incomplete at the time the grant of probate was revoked. As a result, no trusts of the will had come into existence (Commissioner of Stamp Duties (Qld) v Livingstone [1965] AC 694 at 707-708, 712, 713). Clause 18 provides for remuneration "in connection with the trusts in this Will".
I do not conclude that clause 18 only relates to remuneration in connection with the trusts of the will once they have come into existence. The words "in connection with" are wide. At the conclusion of clause 18 the draftsman referred to the "ongoing administration of any trusts created under this Will", a narrower concept. The clause provides for remuneration of both an executor or trustee. This indicates that it was to apply while the estate was still under administration and before executorial duties had been completed. All that is necessary is that the things done by the executor be in connection with the trusts in the will. Work done whose purpose or effect would affect the quantum of assets to be held on trust for the residuary beneficiaries would be work "in connection" with the trusts, even though it preceded the trusts coming into existence. The collection and investment of assets, the payment of legacies, the payment of debts, the defence of the Family Provision Act proceedings, and the defence of challenges to the will, would all be work done in connection with the trusts in the will.
Only one area of charge clearly stands out as not being in connection with the trusts of the will. That is time spent on seeking to achieve agreement between the beneficiaries as to the disposal of the deceased's ashes and the steps taken to conclude that question. Mr Grosfeld recorded 57.75 hours in his timesheets relating to the subject of the deceased's ashes. This work was not work in connection with the trusts of the will and hence Mr Grosfeld was not entitled to charge his hourly rate in relation to it, even if he were entitled to charge his hourly rate for other executorial work.
Construction of clause 18: professional charges for executorial work
The second question is whether Mr Grosfeld was entitled to charge fees at his hourly rates for professional work as an accountant for all other work he did in administering the estate.
Unless a will otherwise provides, an executor is not entitled to remuneration for carrying out executorial functions, except to the extent the Court allows the executor commission pursuant to s 86 of the Probate and Administration Act 1898 (NSW). (There is an inherent jurisdiction to allow remuneration, as there is in the case of trustees and financial managers.) As a general rule, an executor is expected to carry out his or her duties, including keeping accounts, personally. If he or she chooses to employ another person to carry out executorial tasks, the charges will be to his or her own account. However, where, having regard to the size and nature of the estate and the tasks that need to be carried out, it is reasonable for the executor to engage the services of another, the expense may be allowed as a disbursement (Macartney v Macartney (1909) 1 VLR 183 at 191-192; Swanson v Emmerton [1909] 1 VLR 387 at 390-391; In the Estate of Purton (1935) 53 WN 149; In The Estate of Instone (Supreme Court of New South Wales, Powell J, 23 August 1993, unreported; BC9303622 at 25).
Even where the executor is entitled to incur an expense and charge it to the estate, such as by engaging the services of a solicitor to act on a conveyance, or engaging the services of an accountant to complete the deceased's or the estate's tax returns, unless the will otherwise provides, an executor who is a professional is not entitled to charge for his or her services if he or she does such work. Nor is the executor entitled to engage, for remuneration, a firm of which he or she is a member if he or she would thereby directly or indirectly benefit from the engagement. This follows from the rule that unless the trust instrument or will so provides, or the beneficiaries being sui juris give their informed consent, a fiduciary cannot place himself or herself in the position of conflict or sensible possibility of conflict between his or her personal interest and fiduciary duty. In assessing the quantum of commission that can be allowed under s 86 of the Probate and Administration Act the Court may allow commission at a rate or in an amount that reflects work done by the executor that required the exercise of professional skill. But in the absence of an appropriate charging clause in the will an executor who is a professional, such as a solicitor or an accountant, can only receive remuneration for the exercise of his or her professional skills indirectly through the allowance of commission (In Re Craig (1952) 52 SR (NSW) 265 at 267-268; Broughton v Broughton (1854) 5 De G, M and G 160 at 164; 43 ER 831; In Re Doody; Fisher v Doody [1893] 1 Ch 129 at 134-135; In Re Gates; Arnold v Gates [1933] Ch 913 at 918; In the Estate of Instone at BC9303622 at 30-35).
If the will contains a clause providing for the executor's remuneration, the principles as to whether the executor may claim commission were as stated by Jordan CJ in In the Will of Kerrigan (1935) 35 SR (NSW) 242 at 245, namely:
"The general rule is that if a testator directs that his executor is to receive a particular remuneration for his services as executor, he is restricted to this remuneration, and if he proves the will, the Court will not, in the absence of special circumstances, exercise its jurisdiction to give him different or greater remuneration: In the Estate of Burdekin (1 S.R. (B. & P.) 1); In the Will of Pauton (26 W.N. 51); In the Will of Wheelihan (29 W.N. 98); Winter Irving v. Winter (1907 V.L.R. 546); In the Will of Steele (15 S.R. 247). If, however, the language used by the testator is permissive and not restrictive and he merely authorises the executor to charge for his services, the executor may either, pursuant to the authority, make such charges as he considers reasonable and have the amount moderated on the passing of his accounts, or he may, instead, make no charges but apply for commission in the usual way, bringing the nature of the services rendered to the notice of the Court by affidavit. If, being a professional man, he is by the will authorised to charge for both professional and other services, he may charge for his professional services, moderating his bill before the Registrar and, in respect of his other services, may either apply for commission or render a bill for moderation: In the Will of Marsden (43 W.N. 170). Whether such an authority extends to all work done or only to professional work is a question of construction of the will in which the authority occurs. In In re Ames (25 Ch. D. 72); In re Fish ([1893] 2 Ch. 413); Swanson v. Emmerton (1909 V.L.R. 387), and Re Smith (16 S.R. 422), it was held to apply to all work. In Clarkson v. Robinson ([1900] 2 Ch. 722), and In re Chalinder and Herrington ([1907] 1 Ch. 58) it was held to apply to professional work."
The approach to the construction of clauses in a will for the remuneration of an executor were addressed by McLelland J (as his Honour then was) in Sacks v Gridiger (1990) 22 NSWLR 502 and by Powell J (as his Honour then was) in In the Estate of Instone.
In Sacks v Gridiger, McLelland J said (at 515):
"It is of interest to note that in In the Will of Shannon [1977] 1 NSWLR 210, there was an application for probate of a will which included a clause empowering the testator's executor and trustee (who was a solicitor) 'to charge and be paid all usual professional and other charges for work or business done or transacted by him or his firm in proving my Will or in execution of or in connection with the trusts hereof ...'. The words 'and other' before the word 'charges' were omitted from the grant 'lest they be construed as covering other than professional charges for legal work' (at 212) although it is doubtful whether they would have been so construed: see Clarkson v Robinson [1900] 2 Ch 722 and Re Chalinder; Chalinder v Herrington [1907] 1 Ch 58. In all the cases of which I am aware where an analogous charging clause in favour of a solicitor trustee was held to cover non-legal work there were express words to that effect: see Re Ames; Ames v Taylor (1883) 25 Ch D 72; Re Fish; Bennett v Bennett [1893] 2 Ch 413; Re Smith (1916) 16 SR (NSW) 422; 33 WN (NSW) 134; In the Will of Marsden (1926) 43 WN (NSW) 170 and In the Will of Sheppard [1972] 2 NSWLR 714 at 718-719, with which may be compared Re Chapple; Newton v Chapman (1884) 27 Ch D 584, Clarkson v Robinson; Re Chalinder; Swanson v Emmerton [1909] VLR 387 and In the Will of Kerrigan. As Warrington J observed in Re Chalinder (at 63):
'... It seems to me that in order to enable a solicitor trustee to obtain payment for work for which an ordinary trustee could neither be paid directly nor be allowed payments made to a solicitor, there must be words in the will which shew that that was the testator's intention.'"
In In the Estate of Instone Powell J said (at BC9303622 at 36-37):
"A consideration of the cases in which charging clauses have been considered would suggest that, depending upon the language in which the particular clause is couched, such clauses fall into one or other of the two main classes they being: - 1. those which enable the executor or trustee to charge for his professional work; and 2. those which enable him to charge not only for his professional work but also for his time and trouble.
The cases would also suggest that the first of these classes may be further divided into two sub-classes, they being: - a. those enabling charges only in cases in which a lay executor or trustee would be justified in retaining a professional to act for him (see, for example, In re Chapple; Newton v Chapman (1884) LR 27 Ch D 584; In re Chalinder and Herrington [1907] 1 Ch 58; and b. those enabling charges for all work actually done (In re Ames; Ames v Taylor (supra); In re Fish; Bennett v Bennett (supra); Swanson v Emmerton (supra)); the dividing line seemingly lying in the absence, in the former case, and the presence, in the latter case, of some such phrase as 'whether in the ordinary course of his profession or business or not.'
Finally, the cases would suggest that a charging clause will not be construed so as to enable a professional man to charge for work which a lay executor or trustee would be bound to do gratuitously unless it be clearly so expressed (In re Chapple; Newton v Chapman (supra) at 586; In re Chalinder and Herington (supra) at 63; Swanson v Emmerton (supra) at 390)."
The present issue is whether clause 18 permitted Mr Grosfeld to be paid remuneration at his hourly rate that he charged for work done in his accountancy practice for all work done in connection with the estate, including executorial work which would not ordinarily require the services of an accountant. Clause 18 does not include some phrase such as "whether in the ordinary course of his profession or business or not".
The material parts of clause 18 are first, that the executor being a legal practitioner, accountant or financial adviser is to be entitled to be paid "all professional or other charges for any business or act done by him". The second material part is that he is entitled so to charge "including in respect of acts that an executor ... could have done personally as if he or she were not such an executor ...". The third is that the executor's entitlement so to charge is in lieu of any commission. The clause must of course be read as a whole.
In the passage quoted (at [11]) above from Sacks v Gridiger McLelland J doubted that a clause providing for a trustee who was a solicitor to be paid all usual professional and other charges for business done in connection with the trusts of the will would cover charges other than professional charges for legal work. His Honour referred to Clarkson v Robinson [1900] 2 Ch 722 and Re Chalinder; Chalinder v Herrington [1907] 1 Ch 58. In Clarkson v Robinson the will provided that:
"Any trustee or executor hereunder being a solicitor or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional or other charges for any business done by him or his firm in relation to the management and administration of my estate, and carrying out the trusts, powers and provisions of this my will, whether in the ordinary course of his profession or business or not, and although not of a nature strictly requiring the employment of a solicitor or other professional person".
Buckley J held that to fall within the clause, the work done must be in the course of the trustee's professional business (at 725). His Lordship said (at 726):
"I have looked anxiously to see whether I could find in this clause any words which went to shew that a trustee was to be paid for his time and trouble outside his profession or business as distinguished from being paid for work done in the ordinary course or outside the ordinary course of his profession or business, and I have not found any ..."
In Re Chalinder; Chalinder v Herrington the will provided that one of three trustees who was a solicitor "shall be the solicitor to my trust property and shall be allowed all professional and other charges for his time and trouble notwithstanding his being such executor and trustee." Warrington J held that under that clause the solicitor was entitled to remuneration for his professional services, but not for his trouble as a trustee. The words "and other charges for his time and trouble" covered any charges for time and trouble as solicitor which might not be strictly professional charges (at 62):
"... that is to say, there may be charges for business done, and properly done, by the person employed as solicitor to the trust estate which may yet not come strictly under the head of professional charges ..."
The next question is how do the words "including in respect of acts that an executor ... could have done personally as if he or she were not such an executor ..." affect the construction? To give meaning to those words one must ask when could a legal practitioner, accountant or financial adviser who was not an executor act in relation to the estate? Such a person could act if retained by the executor to provide services as a legal practitioner, accountant or financial adviser for the benefit of the estate. The clause assumes a proper retainer. In other words, those words contemplate that an executor being a legal practitioner, accountant or financial adviser is entitled to be paid professional or other charges for business that such a person could have made if he or she had been properly retained by the executor. That does not authorise the charging for work that an executor would be required to do personally, but only skilled work for which an executor would be entitled to retain a legal practitioner, accountant or financial adviser.
In Re Chapple; Newton v Chapman (1884) 27 Ch D 584, the will provided that the solicitor who was the executor and trustee should "'be entitled to make the same professional charges and to receive the same pecuniary emoluments and remuneration for all business done by him and all attendances, time, and trouble given and bestowed' in the execution of the trusts or powers of the will or the management or administration of the estate 'as if he, not being himself a trustee or executor hereof, were employed by the trustee or executor'". Kay J held that as a trustee or executor would not employ, and ought not to employ, a solicitor to do things which he could properly do himself, the clause did not authorise the solicitor who was the trustee to charge for things that a non-professional trustee would be required to do himself or herself without retaining a solicitor.
The same construction was given in Swanson v Emmerton [1909] VLR 387 to a clause appointing a solicitor to be executor and trustee which provided:
"I appoint [the solicitor] to be the solicitor to my trust property and direct that he shall conduct all the legal business of my estate and shall be entitled to make and receive all such charges and emoluments for business whether of an ordinary, professional or any other character done by him in relation to the administration of my state or the execution of the trusts of this my will as he would have been entitled to make and receive in respect of such business if he had not been a trustee or executor."
Cussen J (as his Honour then was) held that the clause allowed the solicitor/executor to be paid for work where it would be proper for the trustee to employ a solicitor to carry out the work, whether or not it was strictly professional work, but the clause did not authorise a charge in relation to work which an executor would ordinarily be bound to do without payment (at 390). In my view that is how clause 18 is to be construed.
The fact that the "entitlement" described in clause 18 is for payment in lieu of any commission might suggest that the clause was intended to encompass payment both for work which an executor would be justified in retaining a legal practitioner, accountant or financial adviser to do for the benefit of the estate, and executorial work which the executor would be expected to do himself or herself without remuneration, except such as might be allowed on an application for commission. If the executor elected to take remuneration for his professional charges pursuant to clause 18, he would not be entitled to claim commission. On the construction of the will suggested above, he would not be paid for his time and trouble in carrying out executorial duties. Proper charges for professional work (if the will permits such charges to the executor) do not affect an executor's claim for commission for executorial work (In the Will of Sheppard [1972] 2 NSWLR 714 at 720). On the other hand, if provision for remuneration is expressed by the will to be in lieu of any right to apply for commission, the executor will not be allowed commission on an application under s 86 (In the Will of Shannon [1977] 1 NSWLR 210 at 216 and cases there cited; In the Will of Kerrigan at 245).
If the executor's entitlement to remuneration were exhaustively stated in clause 18 this would be a powerful reason for adopting a different construction. The first part of clause 18 describes an entitlement of the executor to be paid moneys in lieu of commission. But it is permissive, not restrictive. That is to say, clause 18 does not require the executor to claim remuneration under the clause. It allows him to do so in lieu of commission. He is entitled to elect to receive commission rather than remuneration provided for by that clause. This is clear from the second part of the clause which contemplates that the executor may retain an entitlement to commission and states that if work is done by an appropriate third party, including the executor's firm, the charging of such work to the estate will be separate from the executor's entitlement to commission. This is in accordance with the usual principle.
As Powell J observed in In the Estate of Instone in the passage quoted at [12] above, the cases in which an executor, being a professional person, has been allowed professional charges for time and trouble in carrying out executorial duties that, absent such a clause, the executor would be required to do himself or herself and which (in Australia) would entitle the executor to claim commission, are cases where the will expressly authorised such charges whether they were in the course of his professional business or not. In Re Ames; Ames v Taylor (1883) 25 Ch D 72 North J said (at 74-75):
"The testator by his will has empowered any trustee who may be a solicitor to transact any business occasioned by the trusts, powers, or provisions of his will, 'whether such business be usually within the business of a solicitor or not,' and 'to make the usual professional or other proper and reasonable charges for all business done and time expended in relation thereto.' In relation to what? In relation to business transacted by him in connection with the trusts of the will, whether of the nature of the business usually transacted by a solicitor or not."
In Re Fish; Bennett v Bennett [1893] 2 Ch 413, the will permitted a trustee who might be a solicitor to receive "his usual professional costs and charges, as well by way of remuneration for business transacted by him or his partner or partners personally, or by his or their clerks or agents (including all business of whatever kind not strictly professional, but which might have been performed, or would necessarily have been performed in person by a trustee not being a solicitor) ... in the same manner as if [he] ... had not been a trustee ... hereof, but had been employed and retained by the trustees hereof as solicitor in the matter of the trust." Thus, the will expressly provided for the payment of professional charges to the solicitor trustee in respect of work which a trustee, not being a solicitor, would necessarily have performed in person, as if the solicitor had been retained by such a trustee. Accordingly, the distinction drawn in Re Chapple; Newton v Chapman could not be drawn. The Court of Appeal held that the solicitor trustee was entitled to charge not only for his professional services, but for his trouble as a trustee. No such words were included in clause 18.
Clause 18 of the will was prepared using a precedent obtained by the deceased's solicitor from a company called Moore's Legal Pty Limited. The solicitor amended the clause in a way which might arguably have changed its sense. I do not think that the precedent can be used to construe clause 18 and I express no opinion as to how that precedent, if unamended, would be construed.
For these reasons I conclude that Mr Grosfeld was not entitled to charge his hourly professional rate for all the work he did in relation to the estate. He was only entitled to charge and be paid for such of that work as an executor, not being an accountant, would have been justified in retaining an accountant to perform for the benefit of the estate at its expense.
Estoppel
As noted at [99] of my reasons in Chick v Grosfeld [2012] NSWSC 1166, Mr Lakeman for Mr Grosfeld submitted that the adult beneficiaries were estopped from denying Mr Grosfeld's entitlement to charge fees as he had done. I observed in those reasons that no adult beneficiary had challenged Mr Grosfeld's right so to charge.
I accept that Mr Grosfeld assumed that he was entitled to charge his professional hourly rate for carrying out executorial duties. Before the beneficiaries, or any of them, could be estopped from denying the validity of that assumption, it must be shown that a departure from the assumption by the beneficiaries would be unconscionable or unconscientious. That would require that the beneficiaries had induced Mr Grosfeld to adopt or to adhere to that assumption. In this case it is said that they did so by not challenging the assumption. Next, it would need to be shown that Mr Grosfeld acted or abstained from acting in reliance on that assumption and that the beneficiaries knew or intended that he do so. Then it would have to be established that his action or inaction would occasion detriment if the assumption or expectation was not fulfilled (Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428-429). In Commonwealth v Verwayen (1990) 170 CLR 394 at 444-445, Deane J observed that:
"... the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted."
In this case it is said that Mr Grosfeld was induced to adhere to his assumption not by any express or implied representation by the beneficiaries, but by their failure to challenge the correctness of his assumption. However, such a failure could only make it unconscientious for the beneficiaries to deny the assumption if they had a duty in conscience to do so.
There are fundamental difficulties with the claim of estoppel. The first is that there is no evidence that Mr Grosfeld was induced to adhere to his assumption by any action or omission on the part of the beneficiaries. So far as appears, he assumed that he was entitled to charge as he did from his own reading of the will. He did not seek judicial advice about his entitlement so to charge. There was no evidence that he obtained any advice.
So far as the evidence reveals, the earliest advice provided by Mr Grosfeld to any beneficiary of how he was charging was in a letter dated 7 May 2010 from his solicitor, Ms Anthony, to Carroll & O'Dea who then acted for Ms Jennifer Brown and Mr Ian Chick in the Family Provision Act proceedings. On 7 May 2010, Ms Anthony replied to an email from Carroll & O'Dea dated 14 April 2010 which must have included a query as to how the executor's fees had been calculated. She advised that the executor's fees were calculated on an hourly rate basis at the rate of $250 per hour plus GST as authorised by clause 18 of the will. She said that the work done and still to be done included dealings with beneficiaries, application of probate, legal dealings regarding caveats on probate, defending the family provision claim, attending to various property inspections, calling in investments of the estate and other numerous administrative estate matters. In a letter to Carroll & O'Dea dated 18 June 2010 Ms Anthony advised that the total hours recorded and charged by Mr Grosfeld from 10 December 2007 to 31 May 2010 had amounted to 517.25 hours. This represented charges of in excess of $140,000. Thus, so far as appears the bulk of the charges had been paid out of the estate account to Mr Grosfeld before any of the beneficiaries were aware of the basis upon which he was charging.
Even had the beneficiaries had knowledge of the basis upon which Mr Grosfeld proposed or was purporting to charge, their failure to challenge his entitlement to such charges does not make it unconscientious for them to dispute his entitlement. They had no duty to advise Mr Grosfeld how he was entitled to charge. It was a matter for Mr Grosfeld to take the appropriate advice. There is no evidence that any beneficiary intended that Mr Grosfeld should continue to act on the assumption that he was entitled so to charge. To the contrary, at least from the time of his filing of his first accounts, the beneficiaries challenged the quantum of the charges.
There is no evidence that Mr Grosfeld would have acted differently had his construction of clause 18 of the will been challenged. It was not reasonable for him to assume from the lack of challenge that there would be no challenge, particularly as the principal beneficiaries under the will were the grandchildren entitled to participate in the education fund. A number of those grandchildren were and are minors.
Nor is it shown that Mr Grosfeld suffered any detriment by acting on the assumption that he was entitled to charge his hourly professional rate for the work he did as executor. Mr Lakeman submitted that there was "sufficient evidence" of the reliance of Mr Grosfeld on his entitlement as executor to charge pursuant to clause 18 and that he acted to his detriment in the use of his time and expertise in the administration of the estate. But having assumed the office of executor, Mr Grosfeld was obliged to do all that was necessary in the administration of the estate. He would not suffer a "detriment" if he spent more time on the estate's affairs because he thought he was entitled to charge for his time, than he would have done had he not had that belief. I think Mr Grosfeld did spend more time on estate matters than he would have done if he had thought that his only remuneration would be commission allowed by the court. I have already found that even if Mr Grosfeld was entitled to charge for executorial work, his charges are excessive, although it would be a matter for moderation of his accounts for the Registrar to determine how far they were excessive. But Mr Grosfeld cannot be heard to say that he did more work than needed to be done because he thought he was entitled to be paid for it at his usual hourly professional rates. It would be a breach of his fiduciary duty to his beneficiaries to do more work than was needed in order to enrich himself in reliance on clause 18.
For these reasons I do not accept that any of the beneficiaries is estopped from disputing the basis upon which Mr Grosfeld has sought to charge. It is unnecessary to consider whether, if one or more of the beneficiaries was so estopped, it would be possible to quarantine the entitlements of the minor beneficiaries in the Education Fund.
Conclusion
It will be a matter for the Registrar on the passing of accounts to determine how much Mr Grosfeld was entitled to charge the estate for his services as an accountant that would be a proper disbursement if the executor retained an accountant for the purposes of providing professional services.
I will hear submissions from the parties as to what consequential order, if any, should be made for the reimbursement of the estate for the moneys Mr Grosfeld was paid by way of remuneration. My prima facie view is that the moneys paid out should be returned. If it is found that Mr Grosfeld is entitled to any further payment out of the estate, such payment can be made by the NSW Trustee and Guardian. However, I will hear submissions on that question.
The general rule is that an executor is put to his election between claiming remuneration for executorial work pursuant to a charging clause in a will and claiming commission pursuant to s 86 of the Probate and Administration Act, and that once that election is made it is binding. However, Mr Grosfeld probably made his election not to seek statutory commission by reason of what I have found to be a mistaken view as to the scope of clause 18. Prima facie it seems to me it would not be just that he be held to such an election, but I have not heard any submissions on that question.
Mr Grosfeld's entitlement to indemnity out of the estate for his legal costs of these proceedings
I have received submissions from Mr Grosfeld and the plaintiffs on the question whether Mr Grosfeld is entitled to be indemnified out of the estate in respect of his legal costs of defending these proceedings, or whether he should repay the estate the moneys drawn from the estate to pay his legal expenses. On 30 October 2012, I heard argument on the question of what costs order should be made in the proceedings. I did not give judgment on that question because the plaintiffs sought an order that their costs be paid out of the estate. They submitted that Mr Grosfeld should be ordered to pay to the estate the costs they seek out of the estate. The other beneficiaries who are not parties to these proceedings would be affected by such an order, and so they, or a person representing them, should have the opportunity to be heard. I decided that I could not decide the question of costs without hearing from the other beneficiaries, or from someone representing their interests. I stood the matter over until the NSW Trustee and Guardian, which has been appointed administrator of the estate in the place of Mr Grosfeld, could deal with the question.
The questions of what costs orders should be made in the proceedings and whether Mr Grosfeld is entitled to be indemnified out of the estate in respect of his own costs are distinct questions. He submitted that there should be no order as to the costs of the proceedings, whereas the plaintiffs sought payment of their costs out of the estate on the indemnity basis. Whilst the questions are conceptually distinct, there are matters that may need to be decided that are common to both. Thus, Mr Grosfeld submits that he is entitled as of right to costs out of the estate unless he has been guilty of some misconduct (citing Jacobs Law of Trusts in Australia, 7th ed at [2109]). Counsel submitted that Mr Grosfeld's removal as executor was not due to maladministration of the estate as alleged by the plaintiffs, but through the deficiencies in his accounting for the use of trust funds that emerged following cross-examination. He submitted that the vast majority of the preparation for the hearing was spent on matters involving complaints about the administration of the estate on which the plaintiffs were unsuccessful. These same matters were relied upon by Mr Grosfeld in support of his argument that there should be no order as to costs of the proceedings. Similarly, the plaintiffs' submissions as to why Mr Grosfeld should not be entitled to be reimbursed out of the estate for the costs he incurred also go to the question as to whether I should make no order as to the costs of the proceedings, or whether I should make an order that the plaintiffs receive their costs, or a proportion of them, either out of the estate or from Mr Grosfeld.
Because I cannot decide the question of what costs order should be made without the beneficiaries, or someone representing them, being heard on that question (owing to the order sought by the plaintiffs that their costs be paid out of the estate), I have decided that I should not at this stage determine the question of whether Mr Grosfeld is entitled to be indemnified out of the estate for his legal expenses or should be required to return to the estate the moneys paid for his legal expenses. The same or similar issues will have to be addressed and the decision on what costs orders should be made could be embarrassed by a finding on the question of Mr Grosfeld's entitlement to indemnity.
Accordingly, the only declarations or orders I will make at this stage will be those relating to my decision on the construction of clause 18 of the will. I will hear the parties on what declaration or orders I should make consistently with these reasons on that question.
Decision last updated: 13 December 2012
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