Re Mountney
[2017] VSC 364
•23 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE JURISDICTION
S PRB 2014 02640
IN THE MATTER of the Will and Estate of SAMUEL LAYLAND MOUNTNEY, deceased
Application by:
| LORRAINE JOAN MOUNTNEY | Plaintiff |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 March 2017 |
DATE OF JUDGMENT: | 23 June 2017 |
CASE MAY BE CITED AS: | Re Mountney |
MEDIUM NEUTRAL CITATION: | [2017] VSC 364 |
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WILLS AND ESTATES – Executor’s commission – Executor seeks commission at 3 per cent on gross value of estate – Administration and Probate Act 1958, s 65 – Supreme Court (Administration and Probate) Rules 2004, Order 10 – Applicable principles – Whether delay in appointment as executor and delay connected with a Part IV proceeding should affect an award of executor’s commission.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Ravech | Rotman & Morris |
| For the Defendant | Mr S Marantelli | John M Davine |
HIS HONOUR:
Introduction
Samuel Layland Mountney (‘Samuel’) died on 25 August 2013. Probate of his last will was granted to his daughter Lorraine Joan Mountney (‘Lorraine’) on 5 March 2014. Samuel was survived by two stepchildren: Tony Lee Mountney (also known as Tony Lee Wiggins) and Rodney Carl Mountney (also known as Rodney Carl Wiggins); and three children: Lorraine, Kevin Wayne Mountney (‘Kevin’) and Noel Bernard Mountney (‘Noel’).
By his will dated 8 August 2006, Samuel:
(a) appointed Lorraine his sole executor and trustee, but if she was unwilling or unable to act, then Noel and, if he was unwilling or unable to act, then, Kevin; and
(b) left the whole of his estate in equal shares to Tony, Lorraine, Kevin and Noel.
The inventory of Samuel’s assets and liabilities disclosed assets valued at $1,755,992.00. This comprised a personal estate of $761,068.00 and real estate of $975,000.00 in Victoria, and personal estate in New South Wales amounting to $19,924.00. The Victorian personal estate included $740,000.00 as the proceeds (or anticipated proceeds) of Samuel’s interest in the estate of his late wife, Mary Patricia Mountney (‘Mary’), being the value of the net sale proceeds of a house at 52 Marquis Road, Bentleigh, Victoria. The real estate in Samuel’s estate was the land next door at 50 Marquis Road, Bentleigh.
Lorraine makes an executor’s commission claim pursuant to s 65 of the Administration and Probate Act 1958 (‘the Act’). Her brother, Kevin, opposes any award of executor’s commission and submits that Lorraine’s summons should be dismissed and that she should be ordered to pay both her own costs and those of the objector, Kevin, personally.
Affidavits
Lorraine relied upon three affidavits sworn by her on 15 November 2016,[1] 6 February 2017[2] and 7 March 2017,[3] and an affidavit of her husband Stanley Michael Condy (‘Stan’) sworn 6 February 2017, which confirmed material in Lorraine’s Second Affidavit insofar as it was given to her by him. Kevin relied on his affidavit sworn on 23 January 2017.[4]
[1]Affidavit of Lorraine Joan Mountney sworn 15 November 2016 (‘Lorraine’s First Affidavit’).
[2]Affidavit of Lorraine Joan Mountney sworn 6 February 2017 (‘Lorraine’s Second Affidavit’).
[3]Affidavit of Lorraine Joan Mountney sworn 7 March 2017 (‘Lorraine’s Third Affidavit’).
[4]‘Kevin’s Affidavit’.
Neither Lorraine nor Kevin sought to cross-examine the other, notwithstanding that their accounts of the events were at some points contradictory. This is commendable in the context of the summary procedure that applies to applications for executor’s commission, despite some conflicts in the evidence. For the reasons which follow, the conflicts in the evidence are not critical to the determination of the application.
Summary of Conclusions
The evidence given by Lorraine verifies that the work done by her warrants executor’s commission of about 2% on the corpus, or capital, of the estate. There is no indication that the income of the estate, as distinct from the capital, was enhanced by her work performed as the executor. I will not therefore allow commission on the income received by the estate. I will allow commission in the lump sum of $40,000.00. The costs to which Lorraine has been put by the application should be paid out of the estate and Kevin should bear his own costs.
Background
On 16 August 2016, Lorraine filed an administration account and an affidavit verifying the account. The corpus account amounted to $2,159,379.37 and the income account was $84,831.56. At that date, the plaintiff had retained in her solicitor’s controlled monies account and trust account the sum of $190,810.72. Otherwise, the estate had been distributed.
Lorraine’s First Affidavit is an affidavit in the form prescribed by the Supreme Court (Administration and Probate) Rules 2014.[5] Lorraine purports to set out fully the pains and troubles to which she was put in the administration of the estate. Put generally, those ‘pains and troubles’ were arranging the funeral of the deceased, sorting through his belongings and papers, attending solicitors, sorting through the contents of both 50 and 52 Marquis Road, preparing both houses for sale (and cleaning out what amounted to seven truckloads of materials), selling chattels, cleaning the houses and gardens, packing and giving away unsaleable chattels, finding a real estate agent for the sale of the houses, negotiating with State Trustees,[6] defending a claim pursuant to Part IV of the Act by Rodney, represented by his administrator Suzanne Mary Littleton, and engaging in lengthy communications with the beneficiaries and their solicitors regarding the resolution of Rodney’s Part IV application.
[5]Form 3-10B. Paragraph 14 of that prescribed form of affidavit states ‘I have incurred the following pains and trouble in the administration of the estate [set out fully]. ‘
[6]Which was the administrator of the Mary’s estate, relating to the sale of 52 Marquis Road.
Lorraine deposes[7] that her pains and troubles were exacerbated by virtue of her fragile emotional state at the time of Samuel’s death. She was the primary care-giver of Samuel and of Rodney and made arrangements for Rodney after her father’s death and because of her husband’s ill-health. She says she was reluctant to become the executor of the estate and only did so when it came apparent that none of the other beneficiaries would take on that role. Her co-beneficiaries did not welcome her as executor and there was a general spirit of acrimony between her and, in particular, Kevin. Her stress was exacerbated by the lengthy period of time that the Part IV proceeding took to resolve - about 13 months.
[7]Lorraine’s First Affidavit, [14(z)].
In accordance with the Court’s directions, Kevin filed an affidavit in opposition.[8] Kevin objects to any commission because Lorraine’s administration of the estate has caused significant losses and delays to the residuary beneficiaries. Kevin’s affidavit exhibits a folder of documents and descends in some detail to the circumstances surrounding both Lorraine’s administration of the estate and the relationships between her and her siblings. Kevin’s affidavit and the two affidavits in response from Lorraine depict a more complete picture of Lorraine’s administration of the estate than her First Affidavit.
[8]on 24 January 2017.
Rodney was born to Mary in 1944 and was nine years of age when Mary married the deceased in 1953. Rodney is a handicapped person[9] and lived at 52 Marquis Road for some 60 years before Samuel’s death.
[9]Within the meaning of the definition in Order 15 of the Rules.
As can be seen from the account of Samuel’s will, no provision was made for Rodney. Lorraine was appointed as administrator of Rodney’s estate by the Victorian Civil and Administrative Tribunal pursuant to the Guardianship and Administration Act 1986 on 3 May 2013, that is, before Samuel’s death. At the time of the grant of probate, she remained Rodney’s administrator, although she commenced the process of resigning her administration in early February 2014, and before her application for the grant of probate was made.[10]
[10]Exhibit LJM-1 to the affidavit of Loraine Joan Mountney sworn 6 February 2017 (‘Lorraine’s second affidavit’).
After Samuel died, it was not practicable for Rodney to continue to live at the Marquis Road property. There was general agreement between all the other four siblings that it was in Rodney’s best interest to be moved to the Brighton Mayflower, a residential aged care facility. A $600,000.00 accommodation bond was required for that purpose but Rodney had only about $400,000.00.[11]
[11]Kevin’s Affidavit, [8].
In November 2013, Kevin offered to lend $200,000.00 towards the bond monies and instructed his solicitor Mr John Davine to prepare a Loan Agreement. He also instructed Mr Davine to prepare a Deed of Family Arrangement setting out a proposal to make provision for Rodney out of Samuel’s estate. Mr Davine sent those documents to Lorraine with a letter dated 13 November 2013. In substance, the Deed of Family Arrangement provided for the division of Samuel’s estate into five equal parts or shares, four of them to go to Tony, Lorraine, Kevin and Noel and one to go to Rodney upon a protective trust and after his death to be divided between the other four siblings.[12]
[12]Ibid.
Kevin maintains that Lorraine did not respond to the proposals made by Kevin’s solicitor other than to say that she did not want to be the executor of the will. Lorraine, however refers to her lengthy letter of 10 March 2014 where she responds to a range of matters, including Rodney’s needs.[13] She did not forward the proposed Loan Agreement or Deed of Family Arrangement to Noel or Tony as she considered it was not her responsibility to do so. Mr Davine did not send it to them either, so far as the evidence discloses.[14]
[13]Lorraine’s Second Affidavit, [5a].
[14]Lorraine’s Second Affidavit, [5b].
On 16 December 2013, Mr Davine wrote to Lorraine confirming her ‘advice’ that she did not wish to be the executor of Samuel’s will and estate and noted Kevin’s concern that the properties in Marquis Road were falling into disrepair and that they may become the target of squatters. The letter set out the procedure to be followed for a person named in the will as the executor of Samuel’s estate to renounce probate and attached a renunciation and an affidavit to be sworn by the person who witnesses the signature to the renunciation. Because the will had provided for Noel to be executor in the event that Lorraine was unwilling or unable to act, the letter from Mr Davine proposed that he would liaise with Noel and let him know that Lorraine had formally renounced her right to administer Samuel’s estate and leave it up to Noel either to proceed with the administration of the estate or renounce.[15]
[15]Kevin’s Affidavit, [10], KWM-1, tab 6.
On 19 December 2013, Mr Davine emailed Lorraine and her husband Stan regarding a telephone conversation he had with Kevin where he noted that Lorraine received contrary advice from another solicitor concerning the process to renounce probate. Mr Davine asked Lorraine to tell him what she had been told to be the correct process or alternatively provide him with the details of the solicitor who had given that advice. In the email, he reiterated Kevin’s concern that the properties at Marquis Road may be targeted by vandals or squatters and may continue to deteriorate given they were both empty. He stated that Kevin could not step into the executor’s role until such time as both Lorraine and Noel formally renounced their right and title to probate and at that point Mr Davine had no knowledge of Noel’s intentions.[16]
[16]Kevin’s Affidavit, [1] and exhibit KWM-1, tab 7.
In response, Lorraine and Stan sent a lengthy and argumentative email to Mr Davine. Relevantly, it refers to a conversation between either Stan or Lorraine, and Kevin where Kevin became aggressive and abusive and made it clear he would not consider becoming the executor. It refers to the reasons why Lorraine decided not to proceed with being the executor. It states:[17]
[17]Ibid, tab 8, p.1.
Almost from the first moment, and before the funeral was over we have been constantly barraged and even been accused of theft, by all of her brothers who also made multiple inappropriate demands. They seem to have the impression that they should be present at all dealings she has with her solicitor and that all decisions must be approved by them. This was notwithstanding that we took great care in discussing all of the possible options with them and also how they felt about the various options available.
In relation to Noel, the email says:[18]
We have sent him the audited VCAT accounts for Rodney on more than one occasion asking if he would support an application for an allotment for Rodney from their dad’s estate. He simply doesn’t respond and claims he is not receiving the documents, and he claims that anyway they are fakes. My other two brothers although asked, have not made any positive attempt to help deliver the documents to Noel. We guarantee you that Noel will simply not respond to you. He will ignore your correspondence and do nothing.
The email goes on to say that if Kevin changes his position and wishes to apply for probate and Noel has renounced his executorship, Stan and Lorraine would of course support Kevin’s application.
[18]Ibid, tab 8, p.2.
On the same day (22 December 2013), shortly after the email sent by Lorraine and Stan, Stan (who was evidently deeply involved in assisting Lorraine in relation to Samuel’s estate) wrote another long email to Kevin.[19] It contains a great deal of irrelevant material but does, however, evidence a fractured relationship between the siblings:[20]
…You and your brothers do not recognise is (sic) that you are the cause of Lorraine refusing to act as executor. Your mistrust and allegations were totally unfounded. Being an executor is a lot of work and time and nobody in their right mind would want to do the job when the beneficiaries are accusatory, interfering and abusive…
[19]Ibid, tab 9.
[20]Ibid tab 9, p.2, ff.
Kevin exhibits these emails for the sake of completeness. He says that his failure to respond to the claims made in them is not to be taken as any admission on his part.[21] He denies that he was aggressive and insulting and that Lorraine had advised him of everything that was happening and that he was involved in every decision. He disputes that he never cared about his father’s health and well-being and says his intention from the outset was to have Lorraine make up her mind whether she was going to renounce or obtain a grant of probate, and see that Samuel’s estate was administered as soon as possible and ensure that proper provision was made out of the estate for Rodney. He purports to express an opinion as to what Lorraine intended.[22] I take no notice of this inadmissible opinion evidence.
[21]Kevin’s Affidavit, [12].
[22]Kevin’s Affidavit, [13].
By letter dated 30 January 2014, Mr Davine called upon Lorraine either to prove the will or renounce probate, failing which Kevin would apply for an order calling upon Lorraine, or the person having possession of the will, to show cause why they should not bring the will into Court and prove or renounce probate.[23]
[23]Kevin’s Affidavit, exhibit KWM-1, tab 10.
On the same day, Stan and Lorraine responded by email saying that the last advice received from Kevin was that he would not apply for probate. If, however, the situation had changed and Kevin wished to apply for probate, the email stated that ‘we will forward the documentation to you on condition that if Kevin does not instigate an application for probate within ten days the documents will be returned without copies being made’. It noted that Noel was not returning any communications and stated that Lorraine’s:
… brothers made it clear they did not accept me as the executor of the estate, making it impossible for me to act. It is now open for them to apply for probate but so far neither of them is willing to do it…After three months they will not step forward. Let alone make an application. In the absence of anyone making it known to me that they wish to apply for probate, I will consider my options, but I will not be bullied.[24]
Kevin denies the allegations made in this email but does not go into any detail about them. He says that what is described by Lorraine and Stan as his disruptive conduct was in truth his insistence that Lorraine get on with the business of administering the estate.[25]
[24]Ibid, tab 11.
[25]Kevin’s Affidavit, [14].
Lorraine then got on with applying for Probate and instructed her solicitor on 28 January 2014.[26] She tendered her resignation as Rodney’s administrator on 4 February 2014.[27] The application for a grant of probate to Lorraine was made by originating motion filed 26 February 2014. Probate was granted to Lorraine on 5 March 2014. On 10 March 2014, Lorraine and Stan wrote a very lengthy letter to Mr Davine.[28] The following relevant matters were raised in that letter:
[26]Lorraine’s Second Affidavit, [9].
[27]Ibid.
[28]Kevin’s Affidavit, exhibit KWM-1, tab 12, Letter dated 10 March 2014.
(a) the beneficiaries had not agreed on further provision for Rodney and until proceedings were commenced, they were unlikely to do so. Lorraine did not wish to deplete the estate funds on unnecessary legal fees;
(b) Samuel clearly wished to see Rodney provided for but he did not wish to over-provide assets which would simply reduce Rodney’s entitlements with no net advantage to Rodney;
(c) Lorraine had been advised by the CEO of Mayflower that the bond charged for entry was incorrect. Arrangements are in progress to rewrite the contract and to refund the difference between the correct accommodation bond and that which was charged. Kevin’s principal and interest was to be refunded plus a handsome sum returned to Rodney. The result is that Rodney is no longer inadequately provided for; and
(d) in addition to his pension Rodney also receives income from superannuation and an annuity. After payment of his accommodation costs which include his food, laundry, cleaning etc, he has a surplus of almost a full pension per annum. On the basis that Rodney is adequately provided for.
On 17 March 2014, Adams & Garde wrote to Mr Davine informing him that Lorraine was dealing directly with the question of the provision for Rodney.[29] There was then some unnecessary correspondence about that on 18 March 2014,[30] and 25 March 2014.[31]
[29]Kevin’s Affidavit, exhibit KWM-1, tab 13.
[30]Ibid tab 14.
[31]Ibid tab 15.
Lorraine agrees that she faced a conflict as executor of the estate and as Rodney’s administrator. She tried to balance her roles and avoid conflict, but was faced with her duty as executor to uphold the Samuel’s Will, on the one hand, and her duty as Rodney’s administrator to consider whether it was appropriate to advocate for provision out of the estate for him. Until the new administrator was appointed, she found she could do neither effectively.[32]
[32]Lorraine’s Second Affidavit, [9].
On 13 July 2014, Suzanne Littleton was appointed Rodney’s Administrator by VCAT. Proceedings on behalf of Rodney pursuant to Part IV of the Act were commenced in the County Court of Victoria in August 2014. It was essentially an assessment as all agreed that provision needed to be made, but there was no agreement as to the quantum of that provision. Correspondence produced by Lorraine shows that Tony and Noel, in particular, did not agree concerning the quantum.[33]
[33]Ibid, [10] and exhibit LMJ-2.
The proceeding was settled at mediation on 1 December 2015.[34] Under the Terms of Settlement, a legacy of $410,000.00 was to be paid by the estate and applied firstly by payment into a special disability trust to be established by the Administrator and as to the balance to be paid to the Administrator in that capacity for the benefit of Rodney. The legacy was to be paid after the residuary estate was applied by paying:
[34]Ibid, [18], tab 16.
(a) the outstanding debts of the estate (including any taxation liability);
(b) the estate administration expenses (including accountant’s fees, but excluding legal costs in respect of the Part IV proceeding);
(c) the executor’s commission as agreed or assessed by the Court together with any costs as are ordered in respect of that application; and
(d) the parties’ costs of the Part IV proceeding (inclusive of GST and payable to the parties’ respective solicitors), in the amounts of $50,000.00 to the plaintiff, $29,000.00 to the defendant (Lorraine), $5,000.00 to Tony and Noel, and $4,000.00 to Kevin, making a total of $88,000.00.
Kevin calculates that after the provision for Rodney of $410,000.00, each of Lorraine, Tony, Noel and he would receive $374,500.00 and, but for this application, a further sum of $47,500.00, making a total of more than $422,000.00 each. But for the costs incurred in the Part IV proceeding, there would be a further $20,000.00 for each beneficiary.
Kevin places the blame for the costs of the Part IV proceeding on Lorraine. Lorraine agrees that it is regrettable that significant legal costs were incurred. She explains that the failure to reach agreement earlier was not due to her inaction but to the failure of Tony and Noel to agree and to delay by the administrator’s solicitors.
Kevin maintains in his affidavit that Mr Davine had explained to Lorraine that she was under no obligation to administer the estate and explained to her the process for renouncing probate. Kevin maintains that Mr Davine ‘intimated’ to Lorraine in an email on 19 December 2013 that he was prepared to become the executor.[35] Lorraine repeats that she was not aware that Kevin was prepared to be executor and refers to conversations in 2013 in which Kevin said quite plainly that he was not so prepared.[36] Notwithstanding an opportunity to respond to these matters, Kevin has remained silent.
[35]Kevin’s Affidavit, [20].
[36]Lorraine’s Second Affidavit, [12].
Kevin also maintains that the troubles to which Lorraine was put in her administration of the estate in relation to preparing the houses for sale and selling the chattels were undertaken by a number of third party contractors and not by her and that he offered to assist in readying Samuel’s home for sale but Lorraine refused.[37] Kevin also does not accept that Lorraine negotiated with State Trustees in relation to the sale of Mary’s house. He does not, however, elaborate on that matter.
[37]Kevin’s Affidavit, [21].
Lorraine responds that despite engaging some contractors to undertake work, the content of her First Affidavit remains true and correct. She denies that Kevin offered to help readying either house for sale and exhibits some of her correspondence with State Trustees concerning the administration of Mary’s estate.
Kevin refers to Lorraine’s First Affidavit[38] where she describes the protracted negotiations with the beneficiaries to settle the Part IV proceedings and maintains that to be false. Kevin maintains that the only correspondence passing between Mr Davine, on his behalf and Lorraine’s then solicitors, Maurice Blackburn, were two letters on 30 October 2015 and 5 November 2015.[39]
[38]At [14(y)(ii)].
[39]Kevin’s Affidavit, [23], exhibit KWM-1, tabs 17 and 18.
Lorraine’s First Affidavit[40] refers to protracted negotiations with Noel and Tony to which Kevin was not party and it does not refer to work undertaken by the estate solicitor. Kevin does not respond to this.
[40]At [14(y)(ii)].
In relation to Lorraine’s evidence that there were lengthy discussions and correspondence with the beneficiaries and their solicitors, Kevin says that much of that correspondence sent by Lorraine and Stan was hostile, unnecessarily adversarial and did nothing to progress the smooth administration of the estate.[41] Kevin maintains Lorraine’s statement that none of the other beneficiaries would take on the role of executor is untrue.[42] Lorraine responds that the atmosphere of hostility was due in part to Kevin’s actions and attitude and that the correspondence Kevin refers to largely took place before she applied for Probate.
[41]Kevin’s Affidavit, [24].
[42]Kevin’s Affidavit, [25].
In her Third Affidavit, Lorraine estimates that she spent 682 hours in fulfilling her duties as executor of Samuel’s estate, including 546 hours undertaking various tasks and 136 hours of travel time. She produces a record of the times spent. This account was criticised by Kevin’s counsel as not being a contemporaneous record but a reconstruction from a diary kept by Lorraine and Stan. It was also said that calculating executor’s commission by reference to the number of hours spent was not a proper basis for calculating commission.[43]
[43]Re Buckingham, [2016] VSC 757 (‘Re Buckingham’), [77]; Hawkins v Barkly Brown [2010] NSWSC 48.
Applicable Law
Section 65 of the Act provides, in substance, that it shall be lawful for the Court to allow out of the assets of any deceased person to their executor such commission or percentage not exceeding 5% for their pains and troubles as is just and reasonable.
Originally, there was no automatic entitlement to executor’s commission. An executor was generally expected to act gratuitously and, in most cases, an executor would do so, especially where they were also a beneficiary under the will.[44]
[44]Re Buckingham, [47]; see also Re Estate of Gowing; Application for Executor’s Commission, [2014] NSWSC 247, [30]-[44] (‘Gowing’).
In Nissen v Grunden,[45] Griffith CJ explains the origin of the expectation that an executor should act gratuitously, and the changes to that position wrought by the establishment of the summary jurisdiction in the Australian courts now reflected in s 65 of the Act. The vital aspect of the history of the summary procedure for applications for executor’s commission, as related by Griffith CJ, is that the Crown, when creating Australian courts introduced a system where executors were to be paid for their trouble in administering estates if the court thought fit. The practice in England is that they should not be paid for that trouble.
[45][1912] HCA 35; (1912) 14 CLR 297 at 304.
In Peter Henry Atkins (as Executor of the Estate of Robert Charles Godfrey) v Godfrey & Ors,[46] Le Miere J referred to the history of the Western Australian equivalent of s 65 of the Act. After referring, as I have, to the origin of the jurisdiction as set out by Griffith CJ in Nissen v Grunden, his Honour said:[47]
It may be that in times gone by there were more people with the leisure and resources to take on unremunerated trusteeships. However, in contemporary times the payment of executors’ remuneration is conducive to the good administration of estates. An executor is more likely to be able to devote the time and resources to the proper administration of an estate if he or she is remunerated for doing so.
[46][2006] WASC 83 (‘Atkins’).
[47]Ibid [17].
An executor’s ‘troubles’ concern work involved in administering the estate and ‘pains’ refers to the responsibility, anxiety and worry associated with the task.[48]
[48]See In the estate of Stone (deceased),Patterson v Halliday [2003] VSC 298 at [30] (‘Patterson’); Re Buckingham, [54].
The general principle is that unless an objector establishes otherwise, an administration will be presumed to be on proper lines and the executor will be granted commission.[49] If the Court is satisfied that there has been no impropriety or maladministration, then in a proper case, as a matter of statutory construction, s 65 of the Act grants the Court an unfettered discretion to allow such remuneration as is fair, just and reasonable in all of the circumstances of the case. [50] Like all discretions, it must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the matter at hand.
[49]Eric Vance, The Law and Practice in Victoria and an Examination of the Case Law of Australia and New Zealand relating to Executors Commission (1969) (‘Vance’) 150; cited with approval by Kellam J (as he then was) in In Re White; Tweedie v Attorney General, (2003) 7 VR 219, and by McMillan J in Re Buckingham, [51].
[50]Per Kellam J, In Re White; Tweedie v Attorney General, (2003) 7 VR 219, 230.
The Court may refuse commission where there has been some misconduct in the execution of the executor’s duties, particularly where the misconduct is serious or amounts to fraud. If the misconduct amounts to an honest or inadvertent breach of duty, commission may still be allowed. Commission may be reduced or, in serious cases, refused where there has been negligence in the carrying out of the executor’s duties. [51]
[51]Per Le Miere J in Atkins, citing E Vance ”Executor’s Commission” 1969 at p 219 and M Chapman ”Executor’s Commission” (1994) LIJ at 46.
In Atkins, Le Miere J reviews authorities where a serious breach of trust, or other misconduct amounting to fraud or dishonesty, was found to be disentitling conduct, regardless of the degree of loss to the estate. In one of those authorities, the trustee had purchased at auction an asset of the estate in the name of the trustee’s son at an undervalue,[52] a clear breach of fiduciary duty. No commission was allowed. In that case, before remuneration was allowed, the executors had to show that their conduct of the affairs of the trust was free from any suspicion and that there has been no neglect on their part which has in any way prejudiced the estate.
[52]In the Will of Sherringham, (1901) 1 SR (NSW) (B&P) 48.
Other cases reviewed by Le Miere J in Atkins show that it is not every lapse from correct conduct which is visited by Australian courts with forfeiture of commission. But it is important to recognise that every case turns on its own facts. The general position is that if the executor or trustee is found guilty of fraud or dishonesty, they will be refused commission, regardless of the loss to the estate. By contrast, acts or neglects falling short of fraud or dishonesty vary so much in degree and in character that there is no unanimity of result in the decisions given.[53] In one case noted by Le Miere J[54] the distinction envisaged between the types of conduct which would and would not disentitle an executor to a commission was stated, correctly in my view, as:
Where an executor has been guilty of negligence, mismanagement and breach of trust in his management of the estate, but there has been nothing of a dishonest or fraudulent character, and the losses resulting are capable of being compensated for and made good in money, the executor should not to be deprived of compensation.[55]
[53]Executors' Commission, (1934) 8 ALJ 121; cited by Le Miere J in Atkins, [26].
[54]McClenaghan v Perkins (23) CLT 84.
[55]Ibid, cited in Atkins, [26].
Where an executor has not been guilty of fraud or dishonesty, but has been negligent, mismanaged the estate or breached the trust (in a way not involving dishonesty), the test to be applied is by reference to the standard of care applicable to all executors and trustees. The specifics of the trustee’s duty of care are found in the terms of the trust and in the requirements for the proper conduct of the trust. A trustee sufficiently discharges their duty of care if, in managing the trust’s affairs, they take all those precautions which an ordinary prudent person of business would take in managing their own similar affairs.[56]
[56]Speight v Gaunt (1883) 9 AC 1; Atkins, [55].
Apart from conduct disentitling executors from receiving commission, some of the matters to which the Court may have regard in considering the pains and troubles of an executor are:[57]
[57]Ibid, [30] ); Re Buckingham, [55].
(a) the work and judgments involved in realising assets and earning income;
(b) the extent of administrative activities, the responsibility generally;
(c) the amount of work done not reflected in financial terms;
(d) how long the estate was administered, the size of the estate and its capacity to pay;
(e) the work of a non-professional character not undertaken by the executor and performed by professionals; and
(f) the executor’s pains and troubles relative to the result.
Other factors that may be taken into account are whether there has been any litigation and whether there is conflict in relation to the distribution of the assets of the estate.[58] It is also relevant that the executors have been involved in supervising professionals engaged by them for the purposes of the administration of the estate.[59]
[58]Hawkins v Barkley Brown [2010] NSWSC 48 at [53].
[59]Hawkins v Barkley Brown at [53].
An allowance of executor’s commission is customarily expressed in the form of a percentage of income collections, capital realisations or the value of assets. Notwithstanding that the Act allows commission by way of a percentage up to 5% (of Corpus and/or income), commission on corpus tends to range as high as 3.5% which is generally considered to be the top end of the scale.[60] In an appropriate case, the jurisdiction extends to allowing remuneration as a lump sum unrelated to a percentage calculation.[61] The quantum of remuneration that may be allowed is determined having regard to the particular circumstances of each case, by reference to a standard governed by what is just and reasonable for an executor’s pains and trouble in administration of an estate. Where a commission is allowed by way of a percentage of, for example, the value of the assets, it is not applied without reference to the reasonableness or otherwise of the total amount of remuneration allowed in the particular case.[62]
[60]See Szmulewicz v Recht [2010] VSC 447 at [18].
[61]Spence v Spence [2003] NSWSC 1232 at [5]-[10]; Watters, Re Estate of Dibbs [2006] NSWSC 1277 at [15]-[17]; Phillips, Re Estate of Joel [2007] NSWSC 639 at [14] and [18]; Gowing. [47].
[62]Watters, Re Estate of Dibbs [2006] NSWSC 1277 at [16]; Gowing [51].
The scale of remuneration derived from the case of In re Barr Smith[63] is out-dated and lacks relevance.[64] The proper approach is to form an overall assessment of what is just and reasonable remuneration rather than apply the Barr Smith scale.[65]
[63][1920] SALR 380.
[64]See Creer v Estate of Peter [2007] NSWSC 1291 at [29]; Richards v Richards [2015] VSC 335 per McMillan J at [35].
[65]Atkins v Godfrey [2006] WASC 83 at [89]; see also Richards v Richards at [20]-[39].
Submissions
Lorraine submitted that in this case, an appropriate award of commission would be 3% on corpus and income. Kevin submitted that the application should be dismissed with costs. The following is a brief summary of the competing submissions under headings that identify the key points.
Delay
Kevin submits that Lorraine intentionally stalled in deciding whether to accept or renounce as executer. She eventually applied as executor for probate of Samuel’s will – but this was not granted until 7 months after Samuel’s death.[66] Kevin disputes Lorraine’s assertion that none of the other beneficiaries would take on the role of executor.[67]
[66]Kevin’s Affidavit [14] and [15].
[67]Kevin’s Affidavit [25], Kevin’s Submissions [36].
Lorraine submits that she never knew Kevin was prepared to be the executor as he had become aggravated at the mere suggestion by her of this and told her he did not want to be the executor.[68]
[68]Lorraine’s Second Affidavit [12].
Pain and troubles
Kevin submits that the Court will not order commission if the executor acted improperly or the alleged pains and troubles are not adequately particularised. He says: ‘that is the case here’, leaving the Court to speculate whether it is the inadequate particularisation or improper conduct or both relied upon. Kevin does not squarely allege improper conduct, but does criticise the claim as insufficiently particularised.[69] That criticism was made before the detail reconstruction from Lorraine and Stan’s diary was put in evidence by Lorraine’s Third Affidavit.
[69]Objector’s Outline of Argument (‘Kevin’s Submissions’) [10], [28], [31].
Lorraine’s application is predicated on the pains and trouble she undertook in administering Samuel’s estate. Lorraine notes that Kevin is the only objecting beneficiary to her application for commission[70] and that Kevin does not allege that she has incorrectly or incompletely kept records, behaved inappropriately or has overestimate her pains and troubles.[71]
[70]Outline of Submissions for the Plaintiff filed 21 February 2017 (‘Plaintiff’s Submissions’).
[71]The Plaintiff’s Submissions [4] – [5].
Part IV Application
Kevin submits that Lorraine acted for some time in conflict of her duties as executor of Samuel’s estate, and as the administrator of Rodney’s financial affairs.[72] Lorraine did step aside as Rodney’s administrator, but it was nearly a year following Samuel’s death before a replacement was appointed. Kevin says that Lorraine took her time as she was of the view that Rodney being left out of the will was appropriate and any further provision he would receive from the estate could reduce his Centrelink payments and increase his nursing home accommodation costs.[73] Kevin submits that there is a probability that Rodney’s claim would have been settled in late 2013 to early 2014 without the need for a Part IV application had Lorraine stood down as Rodney’s administrator earlier in light of the conflict. Further, there was a significant time wasted[74] and Kevin alleges that Lorraine spent time interviewing solicitors - a cost that could have been avoided.[75]
[72]Kevin’s Submissions [14].
[73]Kevin’s Affidavit [15] and the content of the letter at tab 12.
[74]Kevin’s Submissions [17].
[75]Kevin’s Submissions [21].
Kevin notes that the Part IV application was made to ensure Rodney was adequately provided for and took much longer than necessary to settle. The final settlement agreed to at mediation reflected a Deed that was sent to Lorraine some two years earlier.[76] The Part IV proceeding was conducted as an assessment with no argument that provision ought be made for Rodney. Kevin submits that this was an inevitability that could have been avoided. The legal costs of the Part IV proceeding were $88,000.00[77] which equates to each beneficiary receiving over $20,000.00 less than if Rodney’s application was dealt with in a timely manner. Kevin submits that Lorraine was the architect of the pains and troubles she suffered in relation to the Part IV proceedings.[78]
[76]Kevin’s Submissions [18].
[77]Although Kevin’s submission asserts they were more than $100,000: [13] and [19].
[78]Kevin’s Submissions [12].
Lorraine submits that there was no agreement between the other beneficiaries as to the appropriate quantum for Rodney in the Part IV application, and this figure was determined at the mediation.[79] Lorraine adds that the protracted Part IV proceeding was not due to inaction on her part as it took time to reach agreement between the beneficiaries as to the amount to settle Rodney’s claim, and that, additionally, the delay was largely attributable to Ms Lyttleton’s lawyer’s failing to serve the originating process expeditiously.[80]
[79]Lorraine’s Second Affidavit [10].
[80]Lorraine’s Second Affidavit [11].
Double commission
When the 52 Marquis Road property was sold, the net proceeds of the sale were paid by State Trustees into Samuel’s estate. State Trustees were paid their statutory commission of 5.5% on the sale, amounting to about $50,000.00. To allow Lorraine to claim a commission on the full amount of the proceeds coming into the estate for her role in the sale will result in double commission being incurred by the estate.[81]
[81]Kevin’s Submissions [26].
Lorraine disputes this is the correct analysis. In addition to the fact that the net proceeds came into Samuel’s estate, the itemised account of the pains and troubles exhibited to Lorraine’s Third Affidavit (‘Itemisation’) shows that Lorraine cleared out both houses, and that this included a great deal of personal papers of Mary and Samuel, as well as a huge volume of chattels. Lorraine noted in the Itemisation that ‘my parents seem to have never thrown anything out’.[82]
[82]Lorraine’s Third Affidavit, [4], LJM-5, 1/02/14.
Analysis
Breach of Trust
I have set out the evidence at some length so as to expose whether there is any proper basis to conclude that Lorraine has been guilty of any fraud or dishonesty, or has been negligent, has mismanaged the affairs of the estate or has been guilty of any breach of trust. In particular, I have quoted extensive extracts from the correspondence from Lorraine (and her partner Stan) to Kevin (and his solicitor) so as to show what appears to me to have been a genuine and honest belief by Lorraine that what she had done and was doing was proper in the circumstances.
There is therefore no evidence of any dishonesty on the part of Lorraine, and no evidence of a breach of trust, even accepting that Lorraine was in a position of conflict of interest and duty whilst she was administrator of Rodney’s estate and the executor first named in Samuel’s Will. In this regard, there is no breach of trust or breach of fiduciary duty because Lorraine commenced the process of resigning her position as administrator of Rodney’s estate immediately after she instructed her solicitors to make application for a grant of probate. The fact that the process of resigning as administrator did not come to completion until July 2014, after the grant of probate is not evidence of any wrong doing on her part.
Delay
A good deal of the material advanced by Kevin goes to the period prior to the application by Lorraine for the grant of probate, so as to show the delay caused by this conduct. Although counsel for Kevin did not make much of this in submissions, because it features so prominently in the evidence, I should say something about it. In my view, there is no basis for any conclusion other than that in procrastinating about whether to accept or renounce the executorship of Samuel’s estate Lorraine was genuine and honest in her belief that Kevin was unwilling to accept the position and that Noel was simply unresponsive.
An objective assessment of the events that I have described leads to a similar conclusion. Clearly, Lorraine did procrastinate about whether to make application of probate or to renounce. The evidence shows this clearly. But despite Kevin’s evidence that he was willing to take on the task as executor, my assessment of the evidence from Lorraine is that she rightly concluded that he did not wish to do so, and in any event he could not do so until Noel had renounced, and that was at least problematic. I accept Lorraine’s evidence, which Kevin did not in any event contest, that Noel was simply non-responsive to communications at the relevant time. In those circumstances, had Lorraine renounced her role, in order for Kevin to be appointed executor, an application would have to have been made calling for him to prove or renounce. That would have unduly burdened the estate with further delay and costs.
Further, there is no evidence that the delay in applying for probate, or delay in the realisation of the assets of the estate, caused any monetary loss to the estate. It is likely that the delay resulted in a significant increase in the sale prices of the two houses, and this is supported by the difference in value of the house at 50 Marquis Road in the Inventory of Assets when compared with the amount realised after sale.[83] It is a matter of which I can take judicial notice that property prices in metropolitan Melbourne were increasing steadily over the relevant period.
[83]The value attributed to 50 Marquis Rod in the Inventory was $975,000. The net proceeds of sale appears to have been $1,244,159 ($88,400 + $1,155,759).
Pains and Troubles
Kevin’s complaint that Lorraine’s First Affidavit does not set out fully the pains and troubles to which she was put in the administration of the estate is misplaced. The executor’s affidavit in support of a claim for commission generally sets out the pains and troubles in the way Lorraine does in her First Affidavit. The pains and troubles are set out in 33 sub-paragraphs – work that Lorraine later sets out (in her Second and Third Affidavits) in even greater detail. The requirement of the Rules that those matters be ‘set out fully’ is open to different interpretations according to the nature and scope of the duties performed. In this case, Lorraine’s First Affidavit was an acceptable compliance with the Rules. Having regard to Kevin’s response, it became clear that further detail was required and this was given in the Second Affidavit and, particularly, by the Itemisation.
It overstates the position for Kevin to submit that pains and troubles are not adequately particularised. It is only when the basis of the objection to the award of commission is known, or the Court sees reason to question the account given, that the executor needs to go further than Lorraine has done in her First Affidavit.
It is true, as counsel for Kevin submitted, that an estimate of hours is not a proper basis for calculating commission. A calculation of the time does however indicate the degree of the burden involved and the extent of the ‘troubles’ that warrant an award of commission. In this case, that burden was considerable. Apart from all matters associated with the Part IV proceeding (to which I refer further below), the account given of the work involved in cleaning out both houses, and preparing them for sale involved a lot of work and time, including the time organising others to do work. Kevin challenges the amount of work done by Lorraine herself and identifies a number of contractors who undertook work. Lorraine admits this, but says it does not seriously detract from the amount of work she undertook. Complaint is made that Lorraine claimed to have engaged agents for the sale by State Trustees of 52 Marquis Road, the property in Mary’s estate. Clearly, the actual engagement had to have been made by State Trustees. But the un-contradicted evidence is that the work in identifying the agent and preparing the property for sale was arranged by Lorraine.
There are a number of matters of complaint by Kevin that, in my view, merely reflect the fractured relationship between him and Lorraine. An example is the complaint by Kevin that Lorraine obstructed him acquiring or purchasing his father’s chattels and personal effects. The evidence in response by Lorraine show’s that some of the correspondence regarding those chattels and personal effects was with the estate solicitors. However, the Itemisation shows that she was personally involved in distributing these items and did considerable work. At p 4 of the Itemisation, Lorraine gives a brief account of the work involved and notes that she contacted the beneficiaries repeatedly to collect their goods.
Lorraine has performed her duties as executor and has done so in circumstances of significant acrimony and family dysfunction. Clearly, for whatever reason, she was not welcomed by her siblings as the executor. This increased the work she had to do to satisfy them that all was done properly and introduced a further layer of anxiety and worry in her job and exacerbated the pains ordinarily arising in the administration of the estate.
Part IV Application
Kevin makes much of the fact that the settlement of Rodney’s Part IV claim was broadly the same as the Deed of Family Arrangement he proposed at the outset. Looking at the matter now, and without the material prepared on behalf of Rodney and the estate in the Part IV proceeding, it might seem obvious that the result achieved ought to have been obvious at the beginning. However, the letter Lorraine and Stan sent to Mr Davine on 10 March 2014 (referred to above at paragraph 24) shows that there was a basis to think that Rodney’s needs may have been adequately provided for from his own resources without further provision from Samuel’s estate.
The proposition that the result of the Part IV proceeding ought to have been foreseen needs to be supported by evidence of what took place in the Part IV proceeding. I obtained the County Court file in order to see what material had been filed. There was little material filed, which is not uncommon in matters where the parties aim to reach agreement as to the provision to be made.
Lorraine’s Itemisation is the only substantive evidence of what occurred. It shows that the Administrator[84] obtained, as she was required to do, a needs report from an independent expert. The initial report was received by Lorraine from the solicitors acting for Rodney[85] on 13 February 2015, a long time after the commencement of proceedings. An extensive analysis of this report was undertaken by Lorraine with the assistance of Stan. Investigations were undertaken by Lorraine as to the institutions recommended by the initial needs report for Rodney’s care. Lorraine engaged appropriate solicitors to represent the estate in the proceeding. There is nothing to suggest that this was not appropriate and it is to be inferred that the estate’s solicitors were not experienced in the field.
[84]Suzanne Lyttleton, who is a respected and professional administrator experienced in acting in matters of this kind.
[85]McNab McNab and Starke.
The final needs report was not received until 5 August 2015. In the meantime, there was a report from a financial planner received on 6 March 2015. Lorraine’s analysis of both reports revealed errors, and the solicitors acting for the estate in the Part IV proceeding[86] engaged a respected independent expert to prepare a report as to Rodney’s needs. This was received on 18 August 2015. There was also an actuary’s report obtained by the estate. The Itemisation shows that considerable time and effort was expended by her in considering and assessing the various reports obtained. Lorraine carried out extensive work analysing the needs reports and financial planning reports. Having regard to her prior role as Rodney’s administrator and her intimate knowledge of his needs, the probability is that there was justification for this work. The estate obtained its own needs report, based on detailed instructions given by Lorraine.
[86]Maurice Blackburn.
There were conferences with the solicitors and counsel acting in the proceeding.[87] The mediation was held on 1 December 2015 and settled.
[87]Shane Newton and later Andrew Verspaandonk, both experienced and respected barristers with a specialty in Probate and Administration law, particularly Part IV proceedings.
These matters show that the delay in the finalisation of the Part IV proceeding was not brought about by delay caused by Lorraine.
Kevin submits that there is a probability that Rodney’s claim would have been settled in late 2013 to early 2014 without the need for a Part IV application had Lorraine stood down as Rodney’s administrator earlier in light of the conflict she faced. That, in my view, is not borne out by the evidence. Once Lorraine determined to apply for probate of Samuel’s Will, she commenced the process of resigning as Rodney’s administrator. Her delay in applying for probate is in my opinion a consequence of the reluctance of Noel and Kevin to take on the task.
Kevin’s submission that, there was significant time wasted[88] and that Lorraine spent time interviewing solicitors - a cost that could have been avoided,[89] is not supported by any sufficient evidence. It is mere assertion without a foundation. Lorraine’s Itemisation gives detail of the work done in this respect, but there is no factual evidence for or against the engagement of separate solicitors to represent the estate in the Part IV proceeding, apart from the inference to which I have already referred. In my view, Lorraine should not be prejudiced in her claim for commission for adopting a careful approach to the selection of solicitors.
[88]Kevin’s Submissions [17].
[89]Kevin’s Submissions [21].
Double commission
The essence of Kevin’s submission relating to ‘double commission’ is that because State Trustees received a commission, to award Lorraine commission on the proceeds of sale will burden the estate unduly. The evidence shows, however, that the work done by Lorraine included a lot of work in relation to preparing Mary’s property at 52 Marquis Road for sale, and also included considerable dealing with State Trustees. This undoubtedly saved Mary’s estate costs and expenses in undertaking the work that would have been incurred by State Trustees. The Itemisation also shows that debts due by Mary’s estate were paid out of Samuel’s estate because of an absence of cash resources available to State Trustees. Moreover, it seems plain that the contents of Mary’s property included a considerable quantity of personal chattels and effects of the family members which, in their nature, require a family member to attend to their disposal.
The commission paid State Trustees is a statutory entitlement. It enables State Trustees to provide the service that it does for estates of all sizes, some of which are quite small. It does not necessarily reflect the work done or the responsibility undertaken. The fact that an award of commission to Lorraine will have the effect of depleting the funds in Samuel’s estate is a consequence of the appointment of State Trustees by Mary’s Will and the effect of that Will. I see no reason why Lorraine should be prejudiced by the choice made by her mother.
General Matters
Where the executor’s lack of diligence or care and attention causes expenditure by the estate which ought not to have been incurred, or a loss to the estate, it is appropriate that the commission that otherwise would be allowed to the executor be reduced to reflect that wasted expenditure or loss.[90]
[90]Atkins, [59].
Kevin’s evidence of the correspondence between Loraine and Stan, on the one part, and Kevin and Mr Davine, on the other, and Lorraine’s Itemisation, show that Lorraine and Stan were verbose in their writings and Lorraine tended to overwork the matters at hand. They seem to me to have been distracted by irrelevant matters and took on themselves the task of dealing with matters that might have better left to professional advisers. However, those matters do not show any want of diligence or care and attention, quite the reverse. It may be that the work performed by Lorraine in relation to Rodney’s claim reduced the legal and other costs, but there is insufficient evidence to come to a conclusion on that matter, one way or the other. Moreover, I have insufficient evidence to conclude that these matters involve any negligence in the administration of the estate or that they have increased the costs burden on the estate.
Accordingly, I find no basis to reduce any award of commission to Lorraine arising from her conduct prior to or after she obtained the grant of probate.
Conclusion
It is at the Court’s discretion whether or not to award commission to an executor and this is usually permitted save for cases of serious misconduct or negligence. That means an executor should be paid such commission as is just and reasonable for services rendered to the estate.
I am satisfied that the pains and troubles to which Lorraine was put in the administration of the estate were extensive. They covered all the general areas I have summarised. The detail given initially was sufficient to comply with the requirements of the Rules. The detail given in response to the evidence given by Kevin verifies by considerable detail that the work done warrants executors commission of about 2% on the capital value of the estate. Applying that rate to the value of the assets in the administration account, valued at $2,159,379.00, would result in an award of commission of $43,187.58. That sum is, in my assessment, a little high and should be rounded down to $40,000.00. I should add that there is no indication that the income of the estate, as distinct from the capital, was enhanced by the work performed by Lorraine. I will not therefore allow commission on the income received by the estate.
In this case, there is no basis for any reduction from the commission to reflect the wasted expenditure occasioned by delay in the resolution of the Part IV proceedings. The legal costs agreed to be paid at the mediation are not overly large by general standards. The evidence of the work performed as contained in the Itemisation shows that there is no basis to reduce the costs or to reduce an award of commission on the basis that they should have been less.
In general, an executor’s costs of applying to be allowed commission should be treated as part of the costs of administration of the estate. The objector’s costs are another matter altogether. Where there is merit in the opposition raised by an objector, it is appropriate that their costs be paid out of the estate, at least where the Court awards some commission. Where the application for commission is wholly unsuccessful due to an objector’s grounds being successful, the executor may be ordered to pay the costs of the estate and the objector personally.
The opposition by Kevin to an award of commission resulted in the filing of further evidence giving more detail of the pains and troubles to which Lorraine was put. To that extent, this assisted the Court. But Kevin’s opposition has been entirely unsuccessful. In my view, Lorraine’s costs ought be paid out of the estate on an indemnity basis and that Kevin should bear his own costs. I will, nevertheless, give the parties an opportunity to make submissions as to the costs in the event that there is any matter that affects my preliminary view.
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