Heyward v Moloney

Supreme Court of South Australia
(Civil)
In the Estate of EUGENE PATRICK MOLONEY
HEYWARD v MOLONEY
[2022] SASC 128
Judgment of the Honourable Justice Blue
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - GRANTS OF PROBATE AND LETTERS OF ADMINISTRATION - TO WHOM PROBATE GRANTED - EXPRESSLY APPOINTED EXECUTORS - GENERALLY
The applicants seek orders that:
1 the respondent be passed over as executor of the estate of Eugene Patrick Moloney;
2there be a grant of letters of administration with the Will annexed to Timothy Donlan, a solicitor;
3the administrator be paid remuneration according to the scale of professional fees used by him in his legal practice; and
4the administrator’s remuneration be paid out of the estate pro rata to the value of the assets of the estate to be distributed to each beneficiary.

The application is not opposed by the respondent except in relation to the manner in which the administrator’s remuneration is to be borne.
Held:
1On the basis that the respondent’s co-executors renounce their roles as executors under the will, it is appropriate to make the passing over order sought (at [20]).
2It is appropriate to appoint Mr Donlan an administrator to perform the role that would otherwise have been performed by the executors (at [21]).
3Subject to determining upon which assets the burden of paying that remuneration is to fall, it is appropriate to order that the administrator be paid remuneration in accordance with the Supreme Court scale (at [22]).
4On the proper construction of the will, the will does not alter the incidence of testamentary expenses under the general law, under which they are to be met in the first instance from residuary personal property and then if necessary from all other assets (at [33]).
5This Court has power under section 70 of the Administration and Probate Act 1919 (SA) to make an order not only that remuneration be payable to an executor, administrator or trustee but also out of which assets that remuneration is payable (at [51]).
6In the circumstances, it is appropriate to order that the administrator’s remuneration be borne out of all of the assets of the estate (both real and personal property and whether the subject of specific or residuary gifts) pro rata to the value of each asset (at [56]).

7 The parties to be heard on the wording of the orders to be made (at [58]).
Administration Act 1908 (NZ), s 20(1); Administration and Probate Act 1919 (SA) s 70(1), referred to.
Australian Securities and Investments Commission v Edensor Nominees Pty Ltd [2001] HCA 1, (2001) 204 CLR 559; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, (2006) 226 CLR 256; Calcino v Fletcher [1969] Qd R 8; Harris v Caladine (1991) 172 CLR 84; NH v The Director of Public Prosecutions (SA) [2016] HCA 33, (2016) 260 CLR 546. ; Ramsay v Lowther (1912) 16 CLR1; Starke v James [2009] SASC 40, considered.

In the Estate of EUGENE PATRICK MOLONEY
HEYWARD v MOLONEY
[2022] SASC 128
Probate

BLUE J: The applicants Mary Elizabeth Heyward, Kathryn Mary Humphries, Carolyn Anne Toolis and Margaret Winifred Lehmann seek orders that:
1the respondent Eugene Joseph Moloney be passed over as executor of the estate of Eugene Patrick Moloney (the Estate);
2there be a grant of letters of administration with will annexed to Timothy Robert Donlan, a solicitor;
3the administrator be paid remuneration according to the scale of professional fees used by him in his legal practice; and
4the administrator’s remuneration be paid out of the Estate pro rata to the value of the assets of the Estate to be distributed to each beneficiary.
The application is not opposed by the respondent except in relation to the manner in which the administrator’s remuneration is to be borne.
Background
Eugene Patrick Moloney (Eugene Senior) had six children: Margaret Lehmann (Margaret), Kathryn Humphries (Kate), Carolyn Toolis (Carolyn), Mary Heyward (Libby), Eugene Moloney (Eugene) and Helen Boylan (Helen).
Helen married Paul Boylan (Mr Boylan). Helen died on 12 April 2012, leaving four children: Brigid, Joseph, Esther and Ignatius Boylan (Helen’s children).
Eugene Senior made a will on 10 September 2012 (the Will). The Will was prepared by Mr Boylan and witnessed by Mr Boylan and a clerk employed by his firm. At that time, Eugene Senior owned a farming property known as Brewers comprising 258 hectares[1] (Brewers) (valued in 2018 and 2019 at approximately $4 million[2]) and two other farming properties totalling 377 hectares (the Other Farms) valued in 2018 at approximately $6.85 million.
[1] Figures in hectares rounded to the nearest whole hectare.
[2] Figures in dollars rounded to the nearest $10,000 unless otherwise shown.
Eugene Senior (together amongst others with Eugene and his wife Deirdre) was a partner in EP Moloney & Co (the Partnership). The Partnership undertook farming on Brewers and the Other Farms.
Eugene Senior also owned the following assets:
·a unit at Toorak Gardens (valued in 2018 at approximately $500,000);
·a term deposit (approximately $2 million);
·Pivot shares valued in 2018 at approximately $35,000; and
·a personal motor vehicle valued in 2018 at approximately $20,000.
By the Will, Eugene Senior appointed Kate, Mary and Eugene as executors and trustees. Clause 3 of the Will provided:
I direct that my debts, funeral and testamentary expenses be paid from my estate after my death
The chapeau to clause 4 provided:
I give the rest of my estate (in this will called “my residuary estate”) to my trustee upon the following trusts
Subclause 4(a) provided that, if Eugene Senior had commenced farming for the current farming season at the date of his death, the trustees were to carry on the Partnership (with the other partners) until completion of the next harvest.
Subclauses 4(b), (d) and (e) provided that, after completion of the harvest for the current farming season under subclause (a) if applicable in respect of the first three assets and immediately in respect of the other two assets:
(i)Brewers was to be held on trust as to 20 per cent each for Margaret, Kate, Carolyn, Libby and Helen’s children (clause (b)(I));
(ii)Eugene Senior’s remaining farming land (the Other Farms) was to be held on trust for Eugene (clause (b)(II));
(iii)Eugene Senior’s interest in the Partnership (assets and liabilities) was to be held on trust for Eugene (clause (b)(III));
(iv)the Pivot shares were to be held on trust for Eugene (clause (d)); and
(v)any utility motor vehicle was to be held on trust for Eugene (clause (e)).
Clause 4(f) provided that the balance of the residuary estate was to be held on trust as to 20 per cent each for Margaret, Kate, Carolyn, Libby and Helen’s children.
Eugene Senior died on 7 April 2018.
Eugene Senior had purportedly made a later will on 15 February 2018. However, on 29 July 2022 this Court held that it was not a valid will because amongst other things he did not have testamentary capacity at the relevant times.[3] The Court pronounced for the validity of the Will. The Court rectified the Will by inserting a new clause 5 giving to Eugene an option, exercisable within one year of completion of the next harvest after Eugene Senior’s death, to buy Brewers at market value as determined by a licensed valuer nominated by the trustees.
[3] Moloney v Hayward [2022] SASC 79.
Evidence
I received affidavits by Kate sworn on 15 August 2022 and Mary sworn on 12 August 2022 deposing to their willingness to renounce their roles as executors under the Will if an order is made that Eugene be passed over as an executor.
I received three affidavits by Peter Jackson, solicitor for the applicants, sworn on 17 August 2022, 6 September 2022 and 30 September 2022, deposing to relevant facts and exhibiting relevant documents.
I received an affidavit by Mr Boylan sworn on 15 September 2022. He deposed to his preparation of and witnessing of the Will; his firm’s usual practice of shredding a previous will after a new will has been executed; and the fact that the original of the Will can not now be located despite searches for it. He also gave oral evidence.
I am satisfied based on Mr Boylan’s evidence that the original of the Will was destroyed by his firm in accordance with its usual practice after execution of a subsequent will (which may have been before or after the death of Eugene Senior); that the destruction of the original Will does not evidence an intention to revoke the Will independently of execution of the 2018 purported will; and that the copy of the Will produced is a true copy of the original Will.
I received an affidavit by Mr Donlan sworn on 23 August 2022 consenting to act as administrator and stating that, if appointed, he would charge the Estate for his professional services under the Supreme Court scale of costs applicable from time to time.
Passing over and appointment of administrator
Given that Eugene consents to a passing over order and Kate and Mary renounce their roles as executors under the Will conditional on a passing over order being made, it is appropriate to make the passing over order sought.
It then becomes necessary to appoint an administrator to perform the role that would otherwise have been performed by the executors. Given that the parties consent to the appointment of Mr Donlan as administrator, it is appropriate to appoint him as administrator.
Given that Mr Donlan is only prepared to act as administrator if he receives remuneration and the parties consent to his being paid remuneration, subject to determining upon which assets the burden of paying that remuneration is to fall, it is appropriate to order that he be paid remuneration in accordance with the Supreme Court scale. I turn to the issue of the burden of that remuneration.
Burden of remuneration of administrator
The applicants contend that, on the proper construction of the Will, remuneration of an administrator falls within “testamentary expenses” in clause 3 and testamentary expenses are to be borne by all beneficiaries regardless of the class of asset received by them. Eugene agrees that remuneration of an administrator falls within “testamentary expenses” in clause 3 but contends that the Will does not alter the incidence of testamentary expenses under the general law, such that they are to be met in the first instance from residual personal property.
The applicants contend in the alternative that this Court has power under section 70 of the Administration and Probate Act 1919 (SA) (the Act) to make an order in respect of the incidence of remuneration ordered under that section. Eugene takes issue with that contention.
The applicants contend in the alternative that this Court has power in its equitable jurisdiction to make an order in respect of the incidence of remuneration. Eugene takes issue with that contention.
Construction of the Will
It is common ground that, under the general law, assets of an estate are presumptively to be applied in a particular order in payment of debts and testamentary expenses. This presumptive order was originally devised some centuries ago and later underwent modification but has not been modified in recent times to reflect more modern developments. This order was usefully set out by Hoare J in Calcino v Fletcher[4] as follows:
[T]he first class of property is personalty not specifically bequeathed, the executor retaining a fund sufficient to meet any pecuniary legacies.
Class 2 consists of realty specifically appropriated for or devised in trust for (and not merely charged with) the payment of debts.
Class 3 is realty that descended to the heir.
Class 4 includes realty devised, whether specifically or by way of residue and charged with the payment of debts and also personalty specifically bequeathed and charged with the payment of debts …
Class 5 is the fund, if any, retained to meet general pecuniary legacies.
Class 6 comprises legacies and realty devised specifically or by way of residue and not being at the same time charged with the payment of debts …
Class 7 includes realty and personalty which did not belong to the deceased but over which he had a general power of appointment which power was actually exercised by the will.[5]
[4] [1969] Qd R 8.
[5] At 22-23.
The order of application of assets to pay debts and testamentary expenses is one of the forms of what is known as marshalling.
The classes referred to above include a class that is practically obsolete (class 3) and a class that is relatively uncommon (class 7). Eliminating those classes, ignoring cases involving pecuniary legacies (which are not made by the Will) and simplifying the remaining classes leaves the following classes:
1residuary personal property;[6]
2real property appropriated or left in trust for the payment of debts;
3property (real and personal) charged with the payment of debts;
4all other property (real and personal; specific or residuary).
[6] This class includes property of the testator not left by the will (“unbequeathed property”). As this is relatively rare and does not apply in the present case, I ignore it.
Applying the presumptive order in the present case, revised class 1 encompasses the term deposit of approximately $2 million (and some relatively minor assets). Revised class 3 comprises all other property of the testator. The value of revised class 1 would ensure that there was no need to have recourse to subsequent classes.
The presumptive order of application of assets can be displaced by manifestation by the testator of a contrary intention. In accordance with general principles, such manifestation might be express or arise as a matter of necessary implication.
The applicants contend that clause 3 of the Will manifests a contrary intention. This is, they contend, because it provides for payment first of debts, funeral and testamentary expenses before leaving the balance of the Estate (termed the “residuary estate”) in trust under clause 4. Approaching the matter from first principles, the structure of the Will does tend to support the applicant’s construction on the basis that all assets left under the Will are only left after debts have first been discharged.
However, the position is covered by High Court authority. In Ramsay v Lowther[7] the will commenced with “First I direct the payment of my just debts funeral and testamentary expenses as soon as can conveniently be done after my decease”. It then made various gifts of personal and real property. Isaacs J (with whom Barton J agreed) said:
[I]t is manifest that the direction to pay just debts is a charge on all the assets in respect of all debts...
…
The general constructive charge, of course, does not exclude marshalling unless the testator so declares. It is impossible to imagine, for instance, that unbequeathed or residuary personalty are to be placed in the same plane with specific gifts by mere force of the direction to pay debts… The classes are still distinct…
Marshalling regulates the order of different classes of assets, and does not operate between assets of the same class.[8]
[7] (1912) 16 CLR 1.
[8] At 23.
Applying that approach to the Will, clause 3 creates a charge over all assets for the payment of debts, funeral and testamentary expenses but this does not manifest an intention to exclude marshalling insofar as such debts, funeral and testamentary expenses are to be met first out of residuary personal assets.
Power under section 70
Subsection 70(1) of the Act provides:
70—Commission may be allowed to executors, administrators or trustees
(1)The Court may allow to any executor, administrator, or trustee, whether of the estate of a deceased person or otherwise, such commission or other remuneration out of the estate or trust property, and either periodically or otherwise, as is just and reasonable.
Under the general law, unless the will or trust deed otherwise provides, an executor/administrator or trustee is not entitled to remuneration. The Court of Chancery exercised a power to authorise remuneration to an executor/administrator or trustee in appropriate circumstances. Subsection 70(1) confers a general statutory power on the Court to make an order for the payment of remuneration to an executor/administrator or trustee. This subsection confers power to order the payment of remuneration to Mr Donlan.
The applicants contend that it is incidental to the exercise of a power to order remuneration that the Court order out of what assets of the deceased estate or trust it is to be paid. Eugene takes issue with that contention.
It is well established that, when the legislature confers a power on an executive or judicial body to do something, it implicitly confers incidental powers to do what is incidental and necessary to the exercise of the principal power. For example, in the context of the conferral of jurisdiction on a court, in a passage cited with approval in several subsequent High Court decisions,[9] Toohey J in Harris v Caladine[10] said:
Jurisdiction is the authority which a court has to decide the range of matters that can be litigated before it; in the exercise of that jurisdiction a court has powers expressly or impliedly conferred by the legislation governing the court and 'such powers as are incidental and necessary to the exercise of the jurisdiction or the powers so conferred'.[11]
[9] Australian Securities and Investments Commission v Edensor Nominees Pty Ltd [2001] HCA 1,(2001) 204 CLR 559 at [64] per Gleeson CJ, Gaudron and Gummow JJ; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, (2006) 226 CLR 256 at [5] per Gleeson CJ, Gummow, Hayne and Crennan JJ; NH v The Director of Public Prosecutions (SA) [2016] HCA 33; (2016) 260 CLR 546 at [68] per French CJ, Kiefel and Bell JJ.
[10] (1991) 172 CLR 84.
[11] At 136.
Subsection 70(1) confers power on this Court to order the payment of remuneration to an executor/administrator out of the deceased estate (or trustee out of trust property) if it is just and reasonable. This is a broad power.[12] The power is expressed to order remuneration “out of the estate or trust property”: this connotes that the Court may, if just and reasonable, order that the remuneration be paid out of a specified part of the estate or trust property.
[12] Starke v James [2009] SASC 40 at 11 per Judge Lunn.
Subsection 70(1) confers power to order the payment of remuneration to a personal representative when they would not otherwise be entitled to any remuneration. In those circumstances, the testator will have proceeded on the basis that the personal representative will not be paid remuneration out of the estate.
When the Court makes an order under subsection 70(1), by definition it is imposing a new obligation on the estate which was not anticipated by the testator. Given that the Court is imposing that obligation, determining how the estate is to bear the obligation is a natural concomitant to imposing the obligation. There is no natural connection between the presumed intention of the testator as to how the estate is to bear the payment of debts or ordinary testamentary expenses and how the estate should bear remuneration to the personal representative which was not provided for by the will.
The Court might appoint an administrator and authorise the payment of commission to the administrator at any stage of the administration of the estate. An administrator might be appointed on a temporary and holding basis pending determination of a dispute such as over the validity of a will. An administrator might be appointed at a late stage of the administration of the estate where, for example, only certain assets remain to be collected and distributed.

It might be entirely unjust and unreasonable for the remuneration payable to the administrator to be borne by those assets that, under the will, are to bear debts or ordinary testamentary expenses. For example, if the residuary personal assets comprised a single term deposit distributable under the will to a single beneficiary and an administrator were appointed due to the complexity of collecting or distributing real property, it might be unjust and unreasonable that the remuneration payable to the administrator be paid out of the term deposit. Conferral of the power to order the payment of remuneration when it is just and reasonable necessarily connotes that the Court must determine out of which assets the remuneration is paid in a manner that is just and reasonable.
Considered without reference to authority, on the proper construction of subsection 70(1), the Court has power to order the payment of remuneration out of particular assets comprising the estate or trust property.
Eugene contends that the construction advanced by the applicants would disturb long established legal principles about the order in which the assets of a deceased estate should be applied to meet liabilities. However, for the reasons given above, those legal principles identify the presumptive intention of the testator in relation to liabilities of the testator or addressed in the will. When the Court makes an order under subsection 70(1) for the payment of remuneration where there is no entitlement to remuneration under the will or the general law, this is a new liability that has no necessary connection with the order of application of assets to pre-existing liabilities.
Eugene contends that subsection 70(1) only addresses payment of remuneration out of the entire estate and not out of particular assets comprising the estate. I reject that contention for the reasons given above.
Eugene contends that an order that remuneration be paid out of particular assets might operate in a manner contrary to the usual administration of an estate or the will of the testator. For example, if the testator left a specific asset (a house or car) to a beneficiary and an order could be made under subsection 70(1) that that asset bear remuneration, either the personal representative would need to sell the asset or the beneficiary would need to pay money to the estate to avoid it being sold.
However, this could equally occur on application of the traditional marshalling rules as to the order of application of assets to liabilities. If there is no residuary personal property left under the will, or it is inadequate to meet the liabilities, under those rules frequently recourse will be had to all property (both specific and residuary) in class 4 or class 6 as outlined in Calcino v Fletcher[13] to meet liabilities. Recourse could only be had to the specific property by selling it or the beneficiary paying money to the estate to avoid its being sold. In addition, this consideration properly goes to the exercise, rather than existence, of the power conferred by subsection 70(1).
[13] [1969] Qd R 8 at 22-23.
The parties have not located any authority on the construction of subsection 70(1) of the Act. The parties have located a single authority on the construction of an equivalent provision in another jurisdiction. That authority related to subsection 20(1) of the Administration Act 1908 (NZ) which provided:
The Court may, out of the assets of any deceased person, allow to his administrator or trustee for the time being, in passing his accounts, such commission or percentage, not exceeding five pounds per centum, for his pains and trouble as is just and reasonable.
In Re Rathbone deceased[14] the testator left half of the residuary estate to her children and the other half to charities. The executors were apparently entitled to remuneration. The Registrar recommended that, in addition to this remuneration, the executors be paid an additional £880 15 shillings, being one per cent of the monies to be distributed to the charities, due to the additional work involved in relation to the distribution to the charities. The children submitted that this additional remuneration should be borne by that part of the estate payable to the charities. Reed J held that there was no power under subsection 20(1) to make the orders sought by the children. Reed J said:
To hold that there was power to charge this half of the residue with an administration expense would be to override the expressed intention of the testatrix, just as much as if an order were made charging a specific devise with the payment of an executor's remuneration.
…
Counsel has not been able to cite any case in which the remuneration to an executor has been made payable out of a specific bequest on account of its benefiting by the work of the executors. I do not think, therefore, that there is any jurisdiction to order that the £880 15s. be paid out of the share bequeathed to charities.[15]
[14] [1929] GLR 122.
[15] At 122-123.
It may be, as contended by the applicants, that the ratio decidendi of that case is confined to a decision that there was no power to make the order sought by the children in the particular circumstances of that case. However, it is more likely that Reed J intended to hold that the statutory provision did not confer power to order that remuneration be paid out of any particular assets or part of the deceased estate. If so, I respectfully decline to follow that decision. For the reasons given above, the conferral of the power to order the payment of remuneration by subsection 70(1) of the Act (which is not materially different to subsection 20(1) of the New Zealand Act) confers an incidental power to order that the remuneration be paid out of particular assets.
In conclusion, on the proper construction of subsection 70(1), the Court has power to order not only that remuneration be payable to an executor, administrator or trustee but also out of which assets that remuneration is payable.
Exercise of power
If an order were made under subsection 70(1) that remuneration be paid to Mr Donlan without making any order as to the assets out of which it is to be paid, the whole of that remuneration would be borne by the proceeds of the term deposit that forms the vast majority of the residuary personal property of the Estate. The work involved in Mr Donlan collecting and distributing that asset would be extremely small compared to the work involved in his collecting and distributing the real property of the Estate. Assessed objectively, Eugene Senior expected that three of his children would act as executors and no remuneration would be payable to them. It would be both unjust and unreasonable for the beneficiaries entitled to the proceeds of the term deposit to bear the entirety of the cost of the remuneration payable to Mr Donlan.
The applicants propose that Mr Donlan’s remuneration be borne pro rata to the value of the various assets of the Estate. Under the general law, estate liabilities are borne as between beneficiaries receiving the same class of assets pro rata to the value of the assets received by each beneficiary. It is just and reasonable that Mr Donlan’s remuneration be borne in this pro rata manner. Eugene does not contend that, if an order is to be made as to how Mr Donlan’s remuneration is to be borne, this method is unfair or another method should be adopted.
Eugene does contend that, as a matter of discretion, no order should be made as to how Mr Donlan’s remuneration is to be borne because, if it is to be borne in part by reference to assets that Eugene is to receive, either one of those assets would need to be sold or Eugene would need to pay money in lieu of its being sold. However, this submission is put on a theoretical basis: Eugene does not submit, or adduce any evidence in support of a submission, that this would cause any prejudice to him (other than the obvious prejudice of his having to bear a portion of Mr Donlan’s remuneration).
Eugene contends that an order as sought by the applicants would impose an administrative burden on Mr Donlan to value each asset and in addition the calculation of the proportion of which costs are to be borne by, and consequentially distributions made to, beneficiaries could not be determined until finalisation of the Estate. However, this will always be the case when liabilities of an estate are to be borne out of the same class for the reasons given above. Eugene does not submit, or adduce any evidence in support of a submission, that any particular difficulties will be created in these respects in this case.
In the circumstances, it is appropriate to order that Mr Donlan’s remuneration be borne out of all of the assets of the Estate (both real and personal property and whether the subject of specific or residuary gifts) pro rata to the value of each asset.
Conclusion
I propose to make the following orders:
1Upon noting that Kathryn Mary Humphries and Mary Elizabeth Heyward shall renounce probate of the Will of Eugene Patrick Moloney deceased (the Deceased), order that:
(a)    Eugene Joseph Moloney be passed over as an executor of the estate of the Deceased; and
(b) there be a grant of letters of administration with the Will as contained in a copy in solemn form as rectified pursuant to the order made on 12 August 2022 by the Honourable Auxiliary Justice McMillan to Timothy Robert Donlan, Solicitor, of Level 2, 60 Hindmarsh Square Adelaide 5000 (the Administrator).
2Upon Kathryn Mary Humphries and Mary Elizabeth Heyward the other executors as described in the will duly renouncing probate and letters of administration with the will annexed of the estate of the Deceased and the Administrator making an application for the grant in a form acceptable to the Registrar of Probates (inclusive of the provision of an engrossment of the will as rectified), the Registrar is directed to issue the grant to the Administrator as soon as practicable.
3Subject to the Court’s power to moderate or disallow the charges, the Administrator be paid remuneration for all work done by him or a member of his firm in the administration of the estate of the Deceased, whether such work be in the ordinary course of his profession or not, such remuneration to be charged in accordance with the Higher Courts scale.
4The remuneration be paid and borne out of all of the assets of the estate of the Deceased in proportion to the value of each asset and, where an asset is left to more than one beneficiary, as between those beneficiaries, in proportion to the share of that asset left to each beneficiary.
5      There be no order as to the costs of this action.
6      Liberty to the parties and to the Administrator to apply.
I will hear the parties concerning the precise wording of the orders to be made and any other orders sought.

[2022] SASC 128

11 November 2022