Re McClung (dec'd)
[2006] VSC 209
•9 June 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PROBATE JURISDICTION
No. 1176928 of 2000
IN THE MATTER of the Will and Estate of MARY IRENE McCLUNG
APPLICATION BY: |
| DENNIS COMER AND BRENDAN MEREDITH |
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MASTER: | Evans | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 June 2006 | |
DATE OF JUDGMENT: | 9 June 2006 | |
CASE MAY BE CITED AS: | In the Will of Mary Irene McClung | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 209 | |
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EXECUTORS’ COMMISSION – Summary application to Master – Solicitor executor charging for all professional and non-professional services as executor pursuant to charging clause – Accountant executor charging estate when no charging clause in will – Failure to keep estate funds invested – Duty of solicitor accepting role as executor – Potential conflict of interest – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr R. Wells |
THE MASTER:
Mary Irene McClung (‘the deceased’) died on 28 December, 1999. By a Will made 20 October 1998 she appointed her solicitor, Brendan Joseph Meredith (‘Meredith’) and her accountant, Dennis Comer (‘Comer”) joint executors and trustees of that Will. By Clause 2 of the Will the deceased provided that ‘notwithstanding his acceptance of ‘the Trusteeship’ Meredith shall act as solicitor to my estate and as such be allowed all professional and other charges for his time and trouble which he would be entitled to make if he was not a Trustee. The Will did not contain a similar provision allowing Comer to charge for any accounting services provided to the estate. Probate of the Will was granted to Meredith and Comer on 14 August, 2000.
Apart from some minor bequests the estate was disposed of by the Will as follows:-
(i) the deceased’s house and flat at 65 Church Street, Geelong or the proceeds of sale thereof were to be held on trust for such of the identified grandchildren of the deceased who survived her and attained the age of 25 years as tenants in common.
(ii)the residue of the estate was to be held on trust, invested and the income of that fund to be paid to the deceased’s daughter Sally Lorraine Elizabeth MacKenzie (‘Sally) mother of those grandchildren, during her lifetime and after her death on trust for the children of Sally by her husband Ian MacKenzie who survived the deceased and attain the age of 25 years as tenants in common in equal shares.
The assets in the deceased’s modest estate were valued for probate purposes at $578,203.40. They comprised the house and flat, the contents of the house, a property in Queensland, bank deposits, shares, trust units, two small insurance policies and a 1962 Holden motor vehicle.
Being of the view that their executorial functions have been substantially completed, Meredith and Comer have made application for commission for their pains and troubles in discharging those functions. By Order made on 12 December 2003, Sarah June MacKenzie (in the order named as ‘McKenzie’) then aged 20 years, the oldest of the identified grandchildren, was appointed to represent all of them in this application. I proceeded on the assumption that at the date of the deceased’s death, there were no further grandchildren of the deceased born to Sally and Ian MacKenzie. They are now estranged. Three of the identified grandchildren are still minors.
In determining what commission, if any, be awarded to the executors for their pains and troubles, their roles as her solicitor and accountant respectively for some years should be considered. Their familiarity with her affairs gleaned from years of acting for her for reward would undoubtedly have made their task easier than it would have been for an executor unfamiliar with a testator’s affairs.
It does not appear from the evidence before the court that any particular difficulties were experienced by the executors in realising the assets of the estate.
The difficulties experienced by them were occasioned by a claim by Sally that she was beneficially entitled to the Queensland property and by her claim for further provision out of the estate brought pursuant to Part IV of the Administration and Probate Act 1958 in proceeding number 2001/4385 in this court. Meredith states that the resolution of these claims proved a considerable burden on them in weighing the rival claims and attempting to strike a balance that was essentially fair and equitable. It seems initially, Sarah did not want her mother to receive anything as she had separated from Ian and left the identified grandchildren in his custody.
In evaluating the burden occasioned by these claims, I cannot ignore the fact that Meredith is a solicitor. He does not depose that he has no experience of or familiarity with the litigation process. I will assume that he is, as a solicitor, no stranger to resolving legal disputes and, at least to some degree, inured to the stresses of doing so. After all, he did take on personally, the conduct of the defence of the litigation. Comer had the comfort of a co-executor who was a solicitor and who felt competent to conduct that defence. Both had the comfort of the advice of experienced counsel throughout the conduct of that defence. Finally, both had the comfort of the court approval of the compromise which had been negotiated. In those circumstances, not a great deal of weight can be given to the claim that the resolution of the claim was a considerable burden to the executors. Nevertheless, the time spent by Comer in resolving the claim must be considered as part of his pains and troubles and I have done so.
Indeed, it appears that Meredith sought the comfort of counsel’s advice on a number of occasions not directly connected with the Part IV Application. The advice obtained related to the claim by Sally to be beneficially entitled to the Queensland property, to the proposal that she remain in the property, to a request by the father of the residuary beneficiaries for payment out of the estate of educational and computer expenses and for advice on another subject matter, not identified (See item 66) in exhibit BJM2 to the affidavit of Meredith sworn 3 August 2005. (‘the bill’).
In determining whether or not to award commission and the amount of commission, if it is appropriate, I must consider the extent to which the pains and troubles of the executors have been rewarded by the exactions made from the estate for both professional and non professional services by them.
Meredith has made no distinction between his work as a solicitor for the estate and his functions as executor in the bills he has rendered to the estate. Whether or not he was entitled to do so under the charging clause is debatable. For the purposes of these reasons, I will assume that he was entitled to charge the estate for non professional work. He does identify a number of services for which he has not made any charge to the estate in paragraph 16(6) his affidavit in support of the application for commission sworn 4 September, 2003. He has charged the estate very substantial amounts by way of professional charges as follows:
4/1/00 – 15/12/01 General administration of estate $16,287.00 Sale of No 65 Church Street, Geelong 2,240.00 26/10 – 15/12/01 Supreme Court proceedings 8,065.00 $26,592.00
Meredith states that his files have been costed by the Law Institute or Blackstone Legal Costing. Although he does not say so, I will assume that the amounts charged by him to the estate were the amounts assessed by one or other of those costing services.
His bills of costs are in summary form and it is very difficult to assess whether or not the charges are justified. Long experience in dealing with applications for commission by solicitor executors in relation to the administration of much more complex estates than that of the deceased suggests that the sum of $16,287 for general administration to 4 December, 2001 is extraordinarily high.
I have reviewed the court file in respect of the Part IV proceeding, It reveals that after three consent directions hearings, not attended by the executors the proceeding was resolved at mediation subject to the approval of the court which was subsequently given but the court order does not reveal that Meredith appeared as solicitor. The affidavit in support of the claim was a mere six pages in length. Three brief affidavits were sworn by the executors, two in opposition to the claim and the other, the usual affidavit setting out the financial position of the estate. A further affidavit of five pages was sworn in support of the application for approval of the compromise. A reading of the summary bill left me puzzled as to how the costs charged to the estate by Meredith could possibly be justified.
A reading of the summary bill in respect of the sale of the Church Street property did not satisfy me that the sum of $2,240 was an appropriate charge for acting for a vendor of a property sold for the sum of $195,000. Counsel for the applicants suggested, somewhat imaginatively that it was because of problems associated with removing the tenants from flats on the property. He had no basis for doing so as he was reminded by his clients that the property was sold subject to the existing tenancies. I trust he will be more careful in future when addressing the court on matters of fact not revealed in affidavits before it.
Comer did not mention specifically that he had read Meredith’s bills and satisfied himself that they were properly chargeable to the estate. It was his duty to do so. As I have already indicated, it is not possible on a simple reading of them to be so satisfied.
It would have been desirable in relation to an estate in which the residuary beneficiaries were all young, some indeed, minors, that Meredith had taken the trouble to have prepared itemised bills of costs so that the calculation of his charges would have been transparent and capable of proper evaluation by his co-executor, by someone on behalf of the young beneficiaries and by the court.
I requested that bills of costs in taxable form be prepared in order to properly evaluate the extent to which the charges related to executorial as distinct from legal services, the extent to which the services performed by Meredith had been the subject of the bills rendered and paid out of the estate and the propriety of the amounts charged to the estate for his costs.
Meredith had such a bill prepared by Law Institute Costing for the work done down to 4 December 2001. The bill is exhibit BJM2 to the affidavit of Meredith sworn 3 August 2005. It is divided into 4 parts.
Part A deals with charges for the administration of the Estate. It identifies items claimed to be executorial duties, those items attracting professional charges and disbursements. The description of a very large number of items said to attract professional charges indicates that they were in respect of executorial duties which could have been performed by a reasonably intelligent adult unburdened by legal training. Those items were numbered 1, 11, 16, 21, 24, 26, 31 – 44, 47, 48, 50, 51, 54 – 64, 70, 72, 75, 76, 82, 84, 85, 90, 92, 97 – 100, 103 – 106, 108 – 111, 115 – 117, 119, 120, 122 – 132, 135 – 140, 142 – 146, 148 – 151, 154- 162, 164, 165, 167 – 173, 178 – 186, 188 – 195, 202 – 209, 211, 212, 216 – 218, 220 – 223, 225 – 231, 233, 235, 236, 238 – 260, 262 – 285, 287 – 296, 298 – 302, 310 – 330, 333, 337 – 339, 341 – 353, 356, 362, 363 and 365 – 367. I also entertain considerable doubt as to whether or not the services described in items 27, 40, 65, 101, 102, 152, 210, 212, 219 and 303 required the exercise of legal skill and judgment. Some of them (eg 101,152) involved Meredith making enquiries as to what constitutes the estate.
In part for the assistance of the Taxing Master who may in the future be called upon to tax this bill, I note the following matters:
(i)The scale items for the application for Grant of Probate includes attendance on the executors for the purpose of obtaining instructions as to the assets and liabilities. In this case, the executor who obtained that information is the solicitor. The Taxing Master may in those circumstances, consider it appropriate to disallow item 10 in Part A of the bill ($152) as it effectively had the same function as the attendance by executors on solicitor for that purpose. There are a number of attendances and letters by Meredith simply enquiring as to the assets and liabilities of the estate (see eg items 36, 44, 47) claimed to be of a legal nature.
(ii)Items 20, 21 and 30 appear to be duplicated effort in relation to obtaining and completing withdrawal forms in respect of payment of funeral expenses. These items totalled $132.80.
(iii)Item 31 duplicates part of item 13.
(iv)Items 115 – 117. If the forms were provided to Meredith by Colonial Insurance, a claim for drawing that part in print would be inappropriate.
(v)Item 369 – This was for instructions generally including care and attention, skill and responsibility and is an item difficult to explain to a lay person. It takes into account the number of cheques received written up in trust journals and deposited into the bank. In my view, such matters are built into the scale of costs and are not properly to be taken into account in assessing an appropriate amount for instructions. Given my conclusion that a very large number of items described as legal charges were in relation to executorial duties, I regard the instructions item as excessive.
Part B of the bill deals with the costs charged for the application for the Grant of Probate. Item 370 is the lump sum scale item for such an application. As the application was filed on 8 August 2000, the appropriate figure was that provided in column 2 of Appendix 3A to the Supreme Court Administration and Probate Rules 1994. It is apparent that item 370 ($1030) was calculated by reference to the third column in that appendix which applied to remuneration chargeable from 1 January 2002. It may be that the services attracted G.S.T. That would depend on the terms of the Commonwealth Act introducing that tax which came into force on 1 July 2000.
Part D of the bill relates to the costs chargeable in respect of the Transmission Application relating to the deceased’s property at 44 Swallow Street, Inala in Queensland. On 26 September 2000, Meredith received the transmission application prepared by Queensland agents for signature by the executors (Item 379). On October 9 he attended (query whether in person or by telephone) on Comer to discuss inter alia, the Queensland property (Item 201). It seems he did not then make an appointment for Comer to sign the Transmission Application. This was done later, on October 17 (Item 382). That attendance as unnecessary.
It is apparent from the bill that Meredith has charged fully if not fulsomely, for the services performed in the period to which it relates. Paragraph 16(3) of his affidavit sworn 4 September 2003 confirms the impression gained on reading it that it was a comprehensive bill for all executorial and legal services performed by him for that period. I do not understand his justification for doing so advanced in that sub‑paragraph.
The bill, in total, is lower than the amounts actually charged to the estate in respect of the subject matter of that bill. I note that Meredith has subsequently obtained a detailed costing from Blackstone Costing Service which exceeds the amount charged. Having carefully scrutinised the bill, subject to the criticism I have made, the item charging appears to reflect the appropriate use of the scale of costs. Accordingly, I do not propose to carefully scrutinise the Blackstone bill.
The executors also obtained from Law Institute of Victoria Costing, a bill of costs in taxable form in relation to the sale of the deceased’s Geelong property. It is exhibit BJM 6 to Meredith’s Affidavit sworn 3 August 2005. The bill covers the period 12 October, 2000 to March 2001. Settlement of the sale occurred on 31 January, 2001. Item 44 ($30.80) is an attendance (? by Meredith) on Sally discussing the property. I note that on the same day, there was a half hour attendance on her (Item 278 - $61.60 - ‘BJM2’). Further information would be required to ascertain whether the items involve duplication. Item 93 in this bill is an amount of $250 for instructions generally. The transaction is not said to have had any complexities in it. The property was sold for a mere $195,000. It was a transaction by the executor for the executors. The items relating to obtaining the information necessary to prepare the contract amounted to a process of self instruction, In the circumstances, I do not consider that the item is warranted.
Meredith also had a draft bill of costs in taxable form prepared in respect of the Part IV proceeding (Exhibit BJM7). The following items may require the consideration of the Taxing Master.
(i)Items 33 -36 relate to the solicitor attending a conference with counsel. Counsel was briefed to confer with the executors. Item 33 ($300) involves solicitor attending counsel at the conference. This would be inappropriate if he attended as client. If he did, he may have been entitled to charge for the attendance pursuant to item 13 in the Practitioners Remuneration Order. That charge would have been significantly less than the amount claimed in the draft bill.
(ii)Item 34 ($500) relates to the solicitor’s absence from office. Further information would be required to confirm that the time specified in item 33 was not also included in this item. This item is allowable pursuant to item 38 of Appendix A Chapter 1 of the Rules of Court to a solicitor qua solicitor in addition to reasonable expenses for travelling and sustenance where the journey was necessary and proper for the purpose of the proceeding. If it was not necessary for the solicitor to attend the conference other than in his capacity as executor, a charge under this item would not be justified. It may have been open in that event, under the charging clause in the will, to charge under item 18 of the Practitioners’ Remuneration Order. The amount chargeable under that item would amount to less than half of the amount claimed.
(iii)Items 35 ($51) and 36 ($24) relate to travelling and parking expenses.
These items would, it seems only be claimable if he attended the conference as solicitor.
(iv)Items 147 – 150 relate to the hearing of the application for approval of compromise. Item 147 is a claim for solicitor instructing counsel. The court record does not reflect the fact that Meredith attended as solicitor. If he attended simply as executor, then much lower charges pursuant to the Practitioners’ Remuneration Order may have been appropriate and the travelling and parking expenses would not be claimable.
(v)Items 15, 23, 43, 58, 67, 96, 143 153 were all instructions items, If, as would appear, Comer simply left the conduct of the defence of the application to Meredith, then there is a degree of artificiality and duplication of items in the general administration bill which qualified Meredith for the purpose of instructing himself.
(vi)Item 140 should be scrutinised to ensure that none of the copy documents were prepared for earlier briefs.
(vii)Item 153 ($2,225) is an item for instructions for brief for obtaining approval of a compromise. The solicitor sought counsel’s assistance throughout the brief life of a relatively uncomplicated Part IV application. The amount claimed is prima facie excessive.
(viii)The Part IV bill does not make a claim for counsel’s fee for appearance on the application for approval of the compromise. Such fee should have been that appropriate to an appearance before a Master and not before a Judge as the application ought to have been made to a Master.
Comer has also charged the estate for services performed. Some are clearly in respect of the discharge of his executorial functions. The total amount of charges was $2,713.30. To the extent that the charges related to his executorial functions, they anticipate a grant of commission and ought not to have been levied (Crout v Beissel,[1] (Grunden v Nissen).[2] To the extent that they represent charges for professional services rendered, the charging of such fees as not authorised by the will of the deceased. It is a corollary of the old rule that a trustee must act gratuitously (Robinson v Pett)[3] that an executor cannot charge for professional work done by him for and on behalf of the estate he is administering as executor (Re Whitehead)[4] unless the will of the deceased contains a provision authorising such a charge. As I have noted earlier, the will of the deceased did contain such a provision in respect of Meredith, but not in respect of Comer’s professional and other charges. Accordingly, Comer should not have made the charges on the estate and they are refundable with interest to the estate (Crout v Beissel;[5] Grunden v Nissen)[6] less the amount if any allowed, for commission. Meredith as a solicitor should have been well aware that the charges were not claimable from the estate and should not have allowed them.
[1](1909) VLR 207.
[2](1911) VLR 97.
[3](1734) 3 P. Wms. 249; 24 ER 1049.
[4](1958) VR 143 at 145.
[5]supra, at 207.
[6]Supra, at 107.
There are other matters which ought to be taken into account in considering this application.
(i)Between August 2000 and June 2002, considerable estate funds remained in Meredith’s trust account. Those moneys, or at least a substantial part of them should have been invested at interest if only in short term deposits. The opportunity to earn interest was lost by virtue of the executors inaction. In dealing with a similar situation in Hill v Roberts (BC9502508;SC (Vic) Ashley J, 27.10.95, unreported), Ashley J determined what was a reasonable sum to be retained by the executors in the solicitor’s trust account and 14 days as the period beyond which it was in breach of the duty to permit an amount in excess of that sum to remain uninvested ibid, (at 45,46). He held that it was open to the court to order interest on a compounding basis on the sums that should have been invested even in the absence of wilful default or of the trustee making interest or the profit out of the trust funds. Meredith has also retained in his trust account pending the hearing and determination of this application the sum of $18,234.05. This sum should also have been invested. The observation I have already made apply to it. A Master may not make such orders.
(ii)The contents of the Church Street house were bequeathed to Sally. The executors spent $3,707 transporting them to her. That was not an expense which should have been charged to the estate and the residuary estate has been depleted to that extent.
(iii)Another aspect of the administration which merits criticism is in relation to a 1962 Holden Sedan valued in the inventory at $1,000. Probate was obtained by the executors on 14 August, 2000. The will made no specific bequest of the vehicle. There was a specific bequest of the contents of the deceased’s house at 65 Church Street, Geelong West to her daughter Sally MacKenzie. Assuming that the vehicle was on the property at the date of death, I doubt that it was parked in the house so as to fall into the description of contents of that house. I note that counsel’s advice in relation to the compromise of the Part IV Application asserts that the deceased gave the car to Sally MacKenzie in the will. Item 292 in the bill reflects an assumption by the solicitor that she was entitled to the vehicle pursuant to the terms of the Will. If the car was in fact delivered to Sally that occurred no earlier than around November 2001 when it still was in Ian’s possession. The deceased died on 28 December 1999 and Probate was obtained on 14 August 2000. The car should have fallen into the residue of the estate and been disposed of promptly. Instead, insurance on it was renewed around November 3, 2000. The bill reveals a lengthy course of attendances, advices and letters relating to transfer of ownership, registration and lapse of registration of the vehicle. Items 234, 237, 246, 247, 262, 264, 271, 277 (262 – 277 are for the same service) 278, 292, 348 – 350, 359 – 364 all relate to the saga of the vehicle. They total $457.15. In the draft bill prepared in respect of the Part IV proceeding (Exhibit BJM7) to the Affidavit of Meredith sworn 3 August 2005 of the Part IV proceeding there is one further item relating to the transfer of the vehicle (Item 86 - $25). The cost of renewal of the insurance on this wasting asset was $109.01. It is a sorry saga of wasted effort and money. A number of the items appear to be advice for the benefit of Sally and Ian MacKenzie and ought not burden the residuary estate.
In summary form, the matters noted above which are relevant to the application are as follows:
1.Most of the executorial services were performed by Meredith.
2.Meredith charged the estate fully if not excessively for those services, whether executorial or legal for the period covered by the bill and for the legal services in relation to the sale of the Geelong property and the Part IV application.
3. Comer knew or ought to have known that Meredith was charging the estate for those services.
4.Comer was competent to and could have performed all of the executorial services without charge to the estate but chose to leave Meredith to do so. Accordingly, he should accept responsibility for what Meredith did or did not do and the criticisms which I have made of Meredith.
5. Comer charged the estate for services without being authorised to do so in the will of the deceased.
6.Meredith permitted him to so.
7.Meredith failed to dispose of a wasting asset (the car) promptly and incurred unnecessary expense in his dealings in relation to it which burdened the residuary estate.
8.Meredith burdened the residuary estate with the cost of delivering to Sally personalty left in the will. It was an expense she should have borne.
9.Meredith failed to keep estate moneys properly invested.
By reason of those matters, I have no hesitation in dismissing the application. Any outstanding executorial or legal services performed by Meredith not included in the bills to which I have referred may, if the charging clause so authorises, be the subject of properly informative bills.
Meredith should ensure that any disbursements relating to the application and preparation of any of the bills of costs which have been charged to the estate be refunded with any interest lost and that the balance of the funds held in his trust account after payment of any outstanding costs be invested promptly on trust for the residuary beneficiaries.
It will be for Sarah and the guardian of the minor beneficiaries to decide what is the appropriate course to adopt in relation to the concerns I have raised in relation to the costs and charges exacted by the executors in the administration and to the aspects of the administration of which I have been critical.
The occasion on which a solicitor receives instructions for the preparation of a will for a client by a solicitor can place the solicitor on the horns of a dilemma if the solicitor is asked to act as executor under the will. It is not a position which the solicitor should seek. It is reasonable for the solicitor to preface acceptance with a requirement that the will contain a charging clause in relation to any legal services performed for the estate. To request inclusion of a charging clause so wide as to enable the solicitor to charge for all executorial functions is not reasonable unless the solicitor ensures that the will provides that such charges may be made in lieu of any entitlement to commission and the full import of the clause is explained to the client.
The solicitor is under a duty to inform the client seeking his services as executor that he would be entitled to make a claim for commission for doing so, as to the maximum rate of commission which could be charged and the possible burden such commission may impose both on the corpus and income of the estate.
Given the very real potential for a conflict arising between the interests of the client and the interests of the solicitor on such an occasion, it would be preferable that solicitors declined to act as executors. At the very least, the solicitors code of conduct should provide very clear guidelines as to the proper course of conduct on such an occasion and require the provision of written advice in relation to the decision to appoint a solicitor as executor.
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