Re Niclasen
[2018] VSC 287
•19 June 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PROBATE JURISDICTION
S PRB 2016 02149
IN THE MATTER of the Will and Estate of JAMES PATRICK NICLASEN, deceased
- and -
IN THE MATTER of Section 65 of the Administration and Probate Act 1958
| BEVERLEY MARGARET WHITAKER (in the Will called BEVERLEY WHITAKER) | Plaintiff |
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JUDICIAL REGISTRAR: | Judicial Registrar Englefield |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 April 2018 |
DATE OF JUDGMENT: | 19 June 2018 |
CASE MAY BE CITED AS: | Re Niclasen |
MEDIUM NEUTRAL CITATION: | [2018] VSC 287 |
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EXECUTORS COMMISSION – gifts to executor during life and under the will – alleged misconduct – deduction of solicitor’s costs from quantum of claim – communication with beneficiaries during administration - duration of administration – family disharmony - Administration and Probate Act 1958 (Vic) s 65.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Boaden | Lawson Hughes Peter Walsh |
| For the Objectors Dennis William Kilner and John Patrick Kilner | In person | |
| For the Objectors Gary James Kilner and William John Kilner | No appearance upon being called |
JUDICIAL REGISTRAR:
Introduction
By summons filed 10 November 2017, the plaintiff, Beverley Margaret Whitaker (in the Will called Beverley Whitaker) (‘executor’), seeks an order for executor’s commission pursuant to section 65 of the Administration and Probate Act 1958 (Vic) (‘Act’).
James Patrick Niclasen, the deceased (‘deceased’) died at the age of 87 on 11 November 2015, having never married or had children. By his will made on 23 March 2010, he appointed his niece, Beverley Whitaker, as his executor and left the residue of his estate, valued at around $1.8 million, to the executor and her four brothers, his nephews, Dennis William Kilner, William John Kilner, John Patrick Kilner and Gary James Kilner (collectively the ‘nephews’).
The deceased enjoyed good relationships with his family during his lifetime. In turn, the executor and the nephews held him in high regard. Unfortunately, since the deceased’s death, the relationships between the executor and the nephews have soured. This loss of family harmony is a key factor in this application.
The Claim
The executor relies on two affidavits, the first sworn on 10 November 2017 (‘executor’s first affidavit’) and the second on 9 March 2018 (‘executor’s second affidavit’). The executor seeks 2.5% of the capital and income of the estate, less the amount paid from the estate to her solicitors for professional services in obtaining the grant of probate and the estate administration (including the conveyancing costs connected to the sale of the principal asset of the estate, the deceased’s former home), being $15,554.34. The executor’s claim results in a figure of $30,255.76. For the reasons that follow, this claim will be allowed.
Estate Administration
The executor’s first affidavit, sets out her work and responsibility as executor. Among other things, the executor deposes to having arranged the funeral; collected and sorted the deceased’s papers; distributed his personal belongings; arranged for the deceased’s home to be cleared for sale; arranged for a number of repairs to the home pre-sale; appointed real estate agents and instructed in the sale. The home was sold at auction on 14 May 2016 for $1,356,000, which was $106,000 more than it was valued in the probate inventory.
The administration was essentially complete, but for this claim, within a year of the deceased’s death. Probate was granted in February 2016. The home was sold in May 2016. Following settlement of the sale of the home, an interim distribution of $250,000 was made to each residuary beneficiary in October 2016 and another of $69,000 was made in November 2016. By November 2016, the residuary beneficiaries had received $319,000 each from their uncle’s estate. [1] Less than $135,000 was retained in the estate pending this application. During 2017, attempts to reach agreement on executors’ commission were unsuccessful, resulting in this application.
[1]The administration account in the form required by the rules was filed with the Registrar of Probates on 4 October 2017, as required prior to an application for commission: Rule 10.03 Supreme Court (Administration and Probate) Rules 2014 (‘A&P Rules’).
Procedural History
This application was referred to me to hear and determine by order of Associate Justice Derham, made on 17 November 2017. [2]
[2]Pursuant to Rule 84.04(1) of the Supreme Court (General Civil Procedure) Rules 2015.
By Orders made ex-parte on 28 November 2017 (‘Orders’), the executor was to provide notice of her application to the nephews, who were then required to file and serve a notice of address for service, if they wished to oppose the application.[3] All four nephews filed such notice, without legal representation.
[3]Unless the Court otherwise orders, no person other than the applicant and a person who has filed a notice of address for service shall be entitled to be heard on the application: Rule 10.08 A&P Rules
The Orders also required the nephews to file and serve notice of any exceptions to the plaintiff’s administration account in this estate and of any grounds of objection to the application relating to the manner in which the estate was administered by 4.00 pm on 16 February 2018.
William John Kilner filed two affidavits, sworn on 6 and 12 February 2018. John Patrick Kilner filed one affidavit, affirmed on 5 February 2018 (‘John’s affidavit’). Dennis William Kilner filed one affidavit, which was signed in the presence of an authorised witness on 2 February 2018 (whether it was sworn or affirmed is unclear) (‘Dennis’ affidavit’). These affidavits, apparently prepared without legal assistance, raised a number of matters in objection to commission, in summary:
(a) the executor received assets from the deceased, being a car and a ‘burial crypt’, that should replace her right to seek commission;
(b) the beneficiaries ought to have received a higher level of communication about events in the administration;
(c) the legal costs of the administration were unacceptable;
(d) the administration was protracted; and
(e) personal matters relating to family relationships ought be taken into account in negating her claim.
Gary James Kilner sent a letter to the Court in February 2018, which was copied and sent to the other parties, together with a letter in reply from my associate dated 8 February 2018 which:
(a) stated that correspondence sent to the Court must be limited to uncontroversial matters, sent simultaneously to other parties and cannot ordinarily be relied on in the hearing and determination of the matter; and
(b) set out the dates for compliance with the Orders; and
(c) recommended each Objector seek legal advice, but referring them for procedural advice to the Court’s Self-Represented Litigant’s Coordinator.
Only two of the nephews appeared at the hearing, John Patrick Kilner and Dennis William Kilner, who both reside in regional Victoria. Gary James Kilner and William John Kilner, who did not appear, both live interstate. It was explained to the nephews who appeared that they could not make submissions on behalf of the absent nephews, as only a legal practitioner can appear at a hearing on behalf of another person.[4]
[4]Transcript pp 14-15; Members Equity Bank Pty Ltd v Elefterescu [2018] VSC 223, [22].
At the hearing, John Patrick Kilner and Dennis William Kilner submitted that no commission be allowed to the executor, essentially on the same grounds as raised in the nephews’ affidavits and summarised at [10].
Legal Principles
14 Section 65(1) of the Act provides:
it shall be lawful for the Court to allow out of the assets of any deceased person to his executor ... such commission or percentage not exceeding Five per centum for his pains and trouble as is just and reasonable.
Section 65 uses old language. However, ‘pains’ is the ‘responsibility anxiety, and worry’ connected to the role of executor and ‘trouble’ is the actual practical work of the administration.[5]
[5]In the estate of Stone (deceased); Patterson v Halliday [2003] VSC 298 (‘Patterson’); Re Buckingham [2016] VSC 757 (‘Re Buckingham’).
The general approach is that unless an objector establishes otherwise, an administration will be presumed to be on proper lines and the executor will be granted commission.[6]
[6]Eric Vance, Executors Commission (Law Book Company, 1969) 150 (‘Vance’); adopted in Re Joe White, deceased; Tweedie v Attorney General [2003] VSC 433 per Kellam J (‘Tweedie’) and Re Buckingham per McMillan J.
In Atkins v Godfrey,[7] Le Miere J explained the policy principle underlying that general approach as follows:
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.
[7][2006] WASC 83, [17].
In assessing commission, the responsibility of the role as executor needs to be sufficiently taken into account, as well as the performance and complexity of the various tasks required to complete the administration. For example, clearing out a home may take hours of physical work, including appointing, supervising and paying cleaners, removalists and the like, but it can also involve a multitude of decisions about how to deal with each item contained in the home. Any of these decisions may later be challenged. This consideration can be particularly acute if family members are at odds with one another.
Some factors that may be considered in assessing the quantum of commission were set out in Patterson[8] by Smith J as follows:
[8][2003] VSC 298, [27].
(a) the work and judgment involved in the realisation of assets and earning income;
(b) the extent of administrative activities;
(c) the responsibility generally;
(d) the amount of work done not reflected in financial terms;
(e) for how long the estate was administered;
(f) the size of the estate and its capacity to pay;
(g) the work of a non-professional character not undertaken by the applicant and performed by professionals; and
(h) executors' pains and troubles relative to the result.
Other factors which often may be taken into account include:
(a) whether there has been any litigation, such as family provision litigation, against the estate; and
(b) where there is conflict in relation to some of the distribution.[9]
[9]Richards v Richards [2015] VSC 335, [30] (‘Richards’); Re Buckingham, [57]; Re will and estate ofMacleod [2017] VSC 67, [46] (‘Re Macleod’); Re Mountney [2017] VSC 364, [49] (‘Re Mountney’).
Although commission may be awarded up to 5%, in practice 3.5% tends to be at the top end of the scale.[10] On the other hand, where an estate administration is “at the simple end”[11] commission at a lower rate may be awarded. That said, the award of commission is a matter of discretion.
[10]Szmulewicz v Recht [2010] VSC 447, [18].
[11]Re Estate of D A Lindsay [2004] NSWSC 578, [15].
When might Commission be Refused?
The nephews submitted that commission should not be granted at all. Commission may be refused where there is:
(a) a legacy or gift given by the Will in place of commission;[12] or
(b) misconduct in the execution of the executor’s duties, although not every lapse from correct conduct results in forfeiture of commission.[13]
[12]In the Will of Raphael [1915] VLR 350.
[13]Re Mountney, [44]-[45]; Atkins v Godfrey [2006] WASC 83, [27]-[29].
Gifts to the Executor
By the Will, the executor is given the deceased’s car. The nephews submit that this gift prevents or reduces the executor’s claim for commission.
The car is not described in the evidence or the inventory and no specific value was given to it. As it happened, one of the nephews delivered the car to the executor during the last weeks of the deceased’s life and it appears that the family treated this delivery as completing the gift contained in the Will.
A gift in a will does not replace the executor's right to commission unless the will clearly and distinctly says so.[14] Here, Clause 3.3 of the Will says “I give and bequeath any motor vehicle owned by me at the date of my death to my niece.” This gift does not take the place of commission, because the Will does not say that it does.
[14]In Re Birch; White (decd) [1924] VLR 510; Tweedie [51]; Re Lack [1983] 2 Qd R 613; Vance, [27].
In addition, during the lifetime of the deceased, it appears that he gave a ‘burial crypt’ to the executor. The nephews submit that this gift should be treated, along with the car, as a gift in place of commission.
It is not clear if what the parties refer to as a ‘burial crypt’, is in fact a right to internment and whether it is capable of sale.
The deceased is said to have purchased three ‘burial crypts’ in Melbourne General Cemetery (‘Cemetery’) during his lifetime. In 1999, he purchased a double ‘crypt’ for himself and his brother Michael, who lived with the deceased from 1973 until Michael’s death in 2001. Also in 1999, the deceased bought a ‘crypt’ for his disabled sister, Eileen, who is also now deceased. In 2005, the deceased purchased another ‘double crypt’ (‘2005 crypt’). The executor says the 2005 crypt was a gift to her and her husband and in that year, the parties’ mother, another sister of the deceased, was buried in that crypt.
At times, the nephews accepted that the 2005 crypt was given as a gift to the executor during the deceased’s lifetime and argued, on this basis, that it ought be taken into account in reduction of the claim for commission. However, a gift given 10 years before death cannot be taken into account in assessing executor’s commission. Such a gift is entirely unconnected with the application.
I raise for the sake of completeness that, at other times, the nephews’ position was that the 2005 crypt was not given to the executor, but falls into the estate to be distributed equally to them and the executor. As well as being clear from the inventory, the executor’s claim to the 2005 crypt was put to the nephews by the estate solicitors in a letter dated 8 April 2016.[15] The nephews did not bring any action to seek that the 2005 crypt be bought into the estate and are now bound by that decision. They cannot convert the hearing of the executor’s claim for commission into an administration action.[16] While I do not need to decide this point, I note that the executor’s first affidavit gives some evidence of receiving the 2005 crypt as a gift[17], while the nephews rely on a long-running ‘family joke’ about the deceased letting the next in the family to die be buried in a double crypt held by him.[18]
[15]Exhibit BMW-1 to the executor’s second affidavit.
[16]Vance, pp 137-138.
[17]Executor’s first affidavit paragraph 14.10 which, confusingly, also sought to present general advice from the Cemetery which is irrelevant and inconsistent.
[18]Denis’ affidavit paragraph 3; John’s affidavit paragraph 10.
No Misconduct
While the nephews raised concern about things such as communication, delay, costs or inaccuracy in the executor’s description of family interactions, they did not make any specific allegation of breach of executor’s duty to properly administer the estate. The nephews did not challenge the accuracy of administration accounts, for example, the payment of various accounts of the deceased, payments connected to the sale of the house and the distribution of the bulk of the estate. The chronology prepared by the executor’s counsel for the hearing which set out the major events and transactions of the estate administration was accepted.[19] Where there has been no impropriety or maladministration, the Court has discretion to allow such remuneration as is fair, just and reasonable in all of the circumstances of the case.[20]
[19]Transcript p 9;
[20]Richards [22]; Re Buckingham [52].
What amount of Commission should be allowed?
As commission will be awarded in this case, I turn now to consider the quantum or amount of commission to be allowed, taking into account some particular features of this administration.
Use of Solicitors instead of performing tasks personally
If an executor has delegated some of the work to professionals and the estate has paid for that work, such delegated work is not taken into account in determining the executor’s pains and troubles, since the estate should not pay twice for the same services. However, an executor’s efforts in dealing with the professionals, making decisions in the light of the advice provided, and supervising the professionals who have been engaged, is relevant for the purposes of determining the amount of commission.[21]
[21]Richards [29]; Re Macleod [48]; Re Mountney [49].
Here, the executor acknowledges the work done by the solicitor by decreasing her claim by the full amount paid for legal costs of the administration. By this process an appropriate balance is struck between avoiding ‘double dipping’ and failing to provide proper remuneration to the executor for her other pains and trouble, including her pains and trouble in selecting and supervising the solicitors, receiving and acting on their advice and considering their costs.
The nephews criticise the solicitors’ costs in the administration, but without quantifying what amount of legal costs they say would be reasonable. It is important to note, as already stated, that the executor applies for the full amount of the legal costs of the administration to be subtracted from any commission awarded to her. This approach means that, effectively, whether the legal costs are reasonable, or to any degree excessive, the beneficiaries are no worse off than if no solicitors acted and commission were awarded to the executor without subtraction.
Duration of Administration
Substantial delay in an administration may reduce the entitlement to commission.[22] However, this administration was not delayed. The need to sell the home meant that time was needed to prepare the home for sale, for the sales campaign and, once sold, for settlement of the sale to occur. Nonetheless, the administration was effectively completed within a year of death. In comparison to many estates that come before the Court, this administration was relatively prompt. As such, there is no basis to reduce commission.
[22]Richards [31]; Re Buckingham, [58]; Re Macleod [46].
Communication with Beneficiaries
The nephews submit that they should have received a greater amount of communication during the administration and as a result the commission should be denied or reduced.
It is clear that communication was problematic during the administration. For example, by letter dated 4 February 2016, the estate solicitors asked the nephews not to contact the executor directly, but to communicate via the solicitors. By further example, after the solicitors informed the beneficiaries about matters relating to the sale of the estate property, one of them directly contacted the real estate agent for more information, albeit unsuccessfully.
I am not satisfied that the nephews have established that the amount and content of the communication with them, in what was a relatively straightforward administration, was insufficient. The nephews did not identify any topic that was not communicated at all. While the nephews felt they ought to have greater amount of information, they were kept generally informed of the progress of the administration. The executor’s commission will not be reduced on this basis.
Family Disharmony
Family disharmony infected the parties’ affidavits and even, briefly, the hearing. Essentially, the nephews hold the executor responsible for the failed family relationship and therefore, seek that commission be reduced or dismissed. On the other hand, the executor seeks a higher amount of commission because of the hostility surrounding the administration.
One factor that caused the nephews concern was a request by the executor soon after the death of the deceased for a payment from each of them of $15,000 in recognition of her ‘out of pocket’ expenses arising in her care of the deceased and other elderly family members during his lifetime. They declined and the request was not repeated. It is strictly speaking a family matter that the request was made and rejected, but it has undoubtedly added to the ill feeling that clouds the administration of this estate.
The authorities are clear that an atmosphere of family disharmony may increase the stress, responsibility and anxiety resting on the executor, making the obligations more onerous and arduous and be deserving of higher commission.[23] I do not need to determine the cause of the hostility, as its very presence adds to the burden of the task of administering the estate, regardless of how the family first came to fall out. Therefore, as is ordinarily the case, commission will not be reduced due to the presence of hostility and indeed, my overall assessment is that this factor weighs in the executor’s favour.
[23]Patterson [32- 34].
Commission Allowed at 2.5% less Solicitors’ Costs
While I have set out various factors from earlier cases which are relevant to this application, and dealt with the parties submissions, the crux of the claim is that the commission to be allowed needs to be “just and reasonable” for the pains and trouble of the executor. This application, while unhappily borne down by family disharmony, involves a relatively straightforward estate administration which was, in the main, promptly and efficiently run. Further, I am satisfied that the executor had extensive pains and troubles during this administration. Taking into account the circumstances summarised above, I determine that it is fair and reasonable that the executor be allowed the sum of $30,255.76, being calculated as 2.5% of capital and income of the estate reduced by the amount of the solicitor’s costs in the administration.
Costs
The executor seeks her costs of this application, including $14,003 for the solicitors’ professional fees[24] and disbursements of $10,483.00, including counsel’s fees and transcript, a total of $24,486.
[24]A calculation of professional fees in accordance with scale of $14,003 by the LIV Costs Lawyers, dated 13 April 2018, was tendered in Court.
The two nephews who appeared at the hearing are to be congratulated on their brevity, as they raised a significant number of matters in a relatively short span of time without the assistance of legal representation. As a result, the hearing was concluded within two hours, avoiding further costs.
In my preliminary view, the executor’s costs ought to be paid out of the estate, taxed in default of agreement. 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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