Re Stuckey; Scholte v Stuckey
[2021] VSC 67
•19 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
IN ITS PROBATE JURISDICTION
TRUSTS, EQUITY AND PROBATE LIST
S PRB 2014 09082
IN THE MATTER of the Will and Estate of MARIETJE ELIZABETH STUCKEY, deceased
- and –
IN THE MATTER of s 65 of the Administration and Probate Act 1958
APPLICATION BY:
| JEANNETTE CARMEL SCHOLTE as legal personal representative for the estate of MARIETJE ELIZABETH STUCKEY | Plaintiff |
| v | |
| RONALD JACOB STUCKEY in both his personal capacity and in his capacity as the parent and guardian of BRANDON STUCKEY and NATHAN STUCKEY | Respondent |
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JUDICIAL REGISTRAR: | Englefield J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 October and 16 December 2020 |
DATE OF JUDGMENT: | 19 February 2021 |
CASE MAY BE CITED AS: | Re Stuckey; Scholte v Stuckey |
MEDIUM NEUTRAL CITATION: | [2021] VSC 67 |
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EXECUTORS COMMISSION – Long running administration – Inordinate delay in administration of the estate – Maladministration – Preference for sui juris beneficiaries – Additional delay in distribution of estate to minor beneficiaries – Inadequate administration accounts – Respondent seeking reduction in commission – Application for commission refused– Administration and Probate Act 1958 (Vic) s 65.
LEGAL FEES –Legal fees of executor’s commission application paid in advance without consent or order permitting – Legal fees excessive – Legal fees reduced.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr NP Jones on 27 October 2020; Mr J Pastro, solicitor, on 16 December 2020 | JP Legal |
| For the Respondent | Ms S Cowle, solicitor, on 27 October 2020; Ms N Lenga on 16 December 2020 | SLC Law |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Material................................................................................................................................................ 3
General Principles............................................................................................................................. 4
Delay..................................................................................................................................................... 5
Introduction and Law Principles................................................................................................ 5
Phases of Delay in this Administration..................................................................................... 6
First Phase of Delay............................................................................................................. 6
Second Phase of Delay........................................................................................................ 7
Third Phase of Delay........................................................................................................... 9
Fourth Phase of Delay......................................................................................................... 9
Conclusion.................................................................................................................................... 10
Administration Accounts............................................................................................................... 10
Introduction and Legal Principles............................................................................................ 10
Discussion.................................................................................................................................... 11
Interim Distributions...................................................................................................................... 12
Application for Reimbursement to the Estate of Certain Expenses....................................... 14
Superannuation Death Benefits.................................................................................................... 15
Legal Fees of the Administration and the Application Already Paid................................... 16
Costs of this Application................................................................................................................ 19
Conclusion......................................................................................................................................... 20
Orders................................................................................................................................................. 20
JUDICIAL REGISTRAR:
Introduction
By summons filed 26 May 2020, the executor made an application for executor’s commission (‘application’) pursuant to s 65 of the Administration and Probate Act 1958 (Vic) (‘Act’). The application is made in the face of protracted delay in the administration of the estate, poorly kept and presented accounts and other issues of maladministration. The application is dismissed, although costs will be partly allowed.
Marietje Elizabeth Stuckey died on 16 January 2013 (‘deceased’) leaving a will dated 23 February 2012 (‘Will’) probate of which was granted to the executor, the deceased’s sister, on 30 June 2014 (‘Grant’).
The deceased was survived by two sons Roland Jacob Stuckey (‘Roland’) and Adam Joseph Mitchall (‘Adam’). The deceased had six grandchildren, Brandon Stuckey (‘Brandon’) and Nathan Stuckey (‘Nathan’) being Roland’s children and, Teigan Mitchall (‘Teigan’), Keah Mitchall (‘Keah’), ABC[1] and XYZ being Adam’s children (collectively ‘the Grandchildren’).
[1]By orders made on 27 October 2020, Adam’s minor children are referred to by pseudonyms.
By the Will, the deceased:
(a) permitted the executor to reside in Unit 2/2 Darebin Street, Heidelberg, Victoria (‘Unit 2’) with Keah until Keah attains the age of 21 years (on 31 March 2016) on conditions, including that the executor pay all outgoings personally, and then gave the executor unfettered discretion to grant an option to any beneficiary of the estate to purchase that property;
(b) gave the executor an option to purchase Unit 1/2 Darebin Street, Heidelberg, Victoria (‘Unit 1’), on conditions;
(c) distributed the residuary estate as follows:
(d) 30% to each of Roland and to a trust for Adam until his release from prison, then to Adam absolutely; and
(e) 40% to the Grandchildren, equally, upon attaining the age of 30 years, absolutely.
The inventory of assets and liabilities filed by the executor in support for the Grant values the net estate of the deceased at $1,143,891.00. The assets disclosed in the inventory include Unit 1 and Unit 2 (collectively ‘Heidelberg Properties’), a property in Queensland, two superannuation accounts and cash. The inventory discloses liabilities of the estate of a mortgage of $209,709.00 and a small credit card debt.
By orders made on 24 July 2020, notice of this application to an adult on behalf of the minor beneficiaries ABC and XYZ was dispensed with. ABC and XYZ have certain legal protections regarding their location connected to the imprisonment of their father, Adam, which may have been unnecessarily compromised by requiring service of the application.
On 28 August 2020, Roland (in his personal capacity and as guardian for his minor children, Brandon and Nathan) filed a notice of address for service and subsequently material in opposition to the quantum of commission sought by the executor. The interests of ABC and XYZ were not represented in this application. It was sufficient for Roland to oppose the application, as his children had similar interests to ABC and XYZ.
Consent to executor’s commission were signed by each of Adam, Teigan and Keah.
The application was listed for, and part heard on 27 October 2020. Orders were made on that day that, among other things, the hearing be relisted on 16 December 2020 and required the plaintiff to give full and proper accounting of her administration of the estate, by way of a further administration account, including by way of producing separate statements for each real property, discussed further below (‘October Orders’).
Material
The executor relies on the following material in support of the application:
(a) affidavit in support of application for commission sworn by the executor on 14 May 2020 and the exhibits thereto (‘First Executor Affidavit’);
(b) affidavit for paying into Court funds for ABC and XYZ, sworn by the executor on 14 May 2020 (‘Second Executor Affidavit’);
(c) an Administration Account dated 14 May 2020 (‘AA1’);
(d) affidavit of service sworn by John Giancarlo Pastro on 21 October 2020;
(e) affidavit in reply sworn by the executor on 13 October 2020 and the exhibit thereto (‘Third Executor Affidavit’);
(f) further affidavit in support of application for commission sworn by the executor on 26 November 2020 together with exhibits thereto including the second Administration Account to 18 November 2020 (‘AA2’) (‘Fourth Executor Affidavit’);
(g) submissions dated 20 October 2020; and
(h) affidavit of John Giancarlo Pastro sworn on 27 January 2021 and the exhibits thereto.
Roland relies on the following material in opposition to the application:
(a) affidavit sworn by Roland Stuckey on 16 September 2020 (‘Respondent’s Affidavit’); and
(b) the submissions dated 27 October 2020 and 9 December 2020.
There was no viva voce evidence or cross examination and the facts set out below are taken from this material, except where otherwise indicated.
General Principles
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.
‘Pains’ is considered the ‘responsibility, anxiety, and worry’ connected to the role of executor, while ‘trouble’ is the actual practical work of the administration.[2]
[2]In the estate of Stone (deceased); Patterson v Halliday [2003] VSC 298 (‘Patterson’); Re Buckingham [2016] VSC 757 (‘Re Buckingham’).
Generally, commission is allowable out of an estate for an executor’s ‘pains and trouble’ as is just and reasonable. That is, for both the pressure of the responsibility as well as the actual work involved in an administering the estate. The availability of commission is ‘conducive to the good administration of estates’.[3]
[3]Atkins v Godfrey [2006] WASC 83, [17].
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.[4]
[4]Eric Vance, Executors Commission (Law Book Company, 1969) 150 (‘Vance’); adopted in Re Joe White, deceased [2003] VSC 433 and Re Buckingham (n 2).
Some of the matters to which the Court may have regard in considering the pains and trouble of an executor are the work and judgments involved in realising assets and earning income, the extent of administrative activities, the responsibility generally, the amount of work done not reflected in financial terms, how long the estate was administered, the size of the estate and its capacity to pay, the work of a non-professional character not undertaken by the executor and performed by professionals and the executor’s pains and trouble relative to the result.[5]
[5]Patterson (n 2), [27].
Notwithstanding that the Act allows commission up to five per cent, generally 3.5 per cent is considered to be the top end of the scale.[6]
[6]Szmulewicz v Recht [2010] VSC 447, [18].
The award of commission is discretionary. The task is first to determine the amount of commission that is adequate for the executor’s pains and trouble, then convert it to a percentage. Therefore, where only a small amount of work is required in a simple administration, the percentage of commission may be low. The exercise of judgment, the extent of activities, the benefit to the beneficiaries and time involved all weigh into consideration, alongside the capacity of the estate to pay.
In this administration, the executor arranged the deceased’s funeral, dealt with the work of retaining and eventually selling three real properties (each with some complication), dealt with death benefit claims in respect of two superannuation funds (one unsuccessfully), taxation matters and interim distributions to beneficiaries. The administration of this estate involved many onerous tasks and considerable time of the executor, who is not herself a beneficiary. However, a significant part of the work created in this administration was as a result of the executor’s own extraordinary delay and other issues of maladministration.
Delay
Introduction and Law Principles
The executor has a positive duty to administer the estate with due diligence.[7] Indeed, ‘unreasonable delay in paying beneficiaries their entitlement’ may constitute unfitness to act as a trustee.
[7]Re Whelan (deceased) [1961] VR 706, 719.
Generally, it is said that a deceased estate should be administered within twelve months of death, often called the ‘executor’s year.’ By s 49 of the Act, generally an executor is not bound to distribute before the end of the executor’s year. However, even after the executor’s year has passed, the beneficiaries do not have an automatic claim against an executor based on delay or absence of due diligence. Each case turns on its own facts by reference to whether or not delay has unduly impacted the welfare of the beneficiaries.[8] Exceeding the executor’s year means that when delay is properly raised by a beneficiary, the onus is on the executor to justify the delay.[9]
[8]Re Thomas; Anderson v Brooks [2020] VSC 60.
[9]Grayburn v Clarkson (1868) LR 3 Ch App 605, 606.
The Will contained a power to postpone the sale of the three real properties in the estate, as well as a conditional right of residence for a period. The power to postpone sale is a fiduciary power and must be exercised solely in the interests of the beneficiaries of the estate, whether within or after the expiration of the executor’s year.[10]
[10]Partridge v Equity Trustees Executors and Agency Co Ltd. (1947) 75 CLR 149, 163.
Therefore, as one would expect, delay is a factor that can either reduce or completely disentitle an executor from an award of commission.[11] The sole undertaking of an executor is to complete the administration of the estate. From this undertaking, a number of subsidiary tasks arise, such as gathering the assets or paying liabilities, all directed to concluding the administration in a timely fashion. An executor is not entitled to commission unless the estate is administered with ‘the utmost punctuality, regularity, impartiality and honesty’.[12]
[11]Chiro v Linton (No 2) [2009] SASC 197; Re Buckingham (n 2), [58]; In the Estate and Effects of Horn (1892) 9 WN (NSW) 71.
[12]Vance (n 4), 221.
Phases of Delay in this Administration
The administration of this estate might conveniently be split into four distinct phases.
First Phase of Delay
Following the death of the deceased, John Pastro, a solicitor from the firm representing the executor in this application, applied for probate of the Will and of an informal codicil that named him executor of the estate and gave Unit 1 (then valued at around $500,000) to the executor. By judgment given on 23 May 2014, McMillan J refused that application.[13] By orders made that day giving effect to that judgment, Mr Pastro’s costs of that application were ordered out of the estate. The costs for that application totalled $19,837.18 and were paid on 13 April 2015.[14] Therefore, the Grant was delayed by the informal codicil application and was not obtained until 30 June 2014, over 17 months after the death of the deceased.
[13]Re Stuckey [2014] VSC 221.
[14]Administration Account dated 14 May 2020 (‘AA1’), Administration Account to 18 November 2020 (‘AA2’) and the affidavit of Jeannette Carmel Scholte sworn 26 November 2020, exhibit JS 4 (‘Fourth Executor Affidavit’).
The application for probate of the informal codicil was a proper step to take in the administration of this estate. Indeed, it is to the executor’s credit that the Grant was ultimately obtained within six weeks of the judgment refusing probate of the informal codicil. Roland complains of 7 years and 7 months of delay,[15] which incorporates the first phase where the executor was incapable of taking any step as the informal codicil appointed an alternative executor. For practical purposes, the date of the Grant is the real starting point for the executor’s administration of this estate, not the date of death, over 17 months earlier. The first phase of delay has no adverse impact on this claim for commission.
[15]Affidavit of Roland Stuckey sworn on 16 September 2020, [6].
Second Phase of Delay
The second phase relates to a period of 21 months from the date of the grant, 30 June 2014, to the expiry of the conditional right of residence in Unit 2 to the executor and Keah, on 31 March 2016, as contained in the Will.
In this period it appears that a real property in Queensland was sold, superannuation death benefits were claimed, bank accounts closed and other steps in the administration were taken. Interim distributions were made of $100,000 to Roland and $13,000 to Teigan. The executor opened a bank account in the name of the estate in November 2014.[16] This bank account was closed in December 2018. During the intervening period, the executor transacted the banking operations of the estate through this account and did not retain solicitors to advise her regarding the general administration of the estate.
[16]Transcript of Proceedings, (Supreme Court of Victoria, S PRB 2014 09082, Englefield JR, 16 December 2020) 6, [5 –17] (‘Transcript’).
However, it is not clear that the conditional right of residence in Unit 2 was properly administered. There is no evidence that the executor resided in Unit 2 during this period or paid any outgoings personally, as required by the Will. The respondent asserts that the executor permitted her daughter and grandchildren or other members of her immediate family to reside at Unit 2 from 2013 to late 2016, then the property remained vacant until its sale in 2018. The executor concedes her daughter and ‘family members’ occupied Unit 2 until 2017,[17] but says that Keah was also in occupation although it is unclear for what period.
[17]Affidavit in reply of Jeannette Carmel Scholte sworn 13 October 2020, [3-5] (‘Third Executor Affidavit’); Transcript (n 16), 19, [7-30].
Unit 1 was retained during this period and rented via a real estate agent. By the Will, Unit 1 and Unit 2 (which were on one title), were to be subdivided and sold with the sale proceeds going into residue. It seems that the Heidelberg Properties were not subdivided in the second phase. No explanation is given for the retention of Unit 1 in this phase. There is no power to lease in the Will.
In addition to the duty to administer with due diligence, the executor has a duty to avoid a conflict of interest and a duty to act solely in the interests of the beneficiaries. The executor has permitted close family members to occupy an estate property rent-free and, during that period of occupation, postponed the sale and therefore delayed the distribution of the estate.[18] Keah’s presence in Unit 2 during this phase of delay, purportedly exercising a right of residence, albeit not in full conformity with the Will, reduces the impact of this phase of delay. However, only fully informed consent may excuse an executor from duties of due diligence and acting solely in the interests of the estate. The minors are incapable of giving valid consent, and by the executor’s own material, there appears to have been no attempt to obtain Roland’s consent.
[18]In certain circumstances, directing benefit to a third party can be a breach of the duty not to deal with the estate for personal benefit. See: Molyneux v Fletcher [1898] 1 QB 648.
The evidence concerning the second phase of delay is far from clear. Other than the Heidelberg Properties, the estate administration appears to have moved forward reasonably well within a year or so of the Grant. However, due to the questions about the retention of both of the Heidelberg Properties during this period, I am not satisfied that the executor’s administration during the second phase proceeded with due diligence and in the sole interests of the beneficiaries.
Third Phase of Delay
The third phase of delay spanned some 2.5 years from the expiry of the conditional right of residence in Unit 2 under the Will until the sale of the Heidelberg Properties (which were the major assets of the estate). It appears the subdivision of the Heidelberg Properties occurred in mid-2016, although again the evidence of this is far from clear. They appeared to have been sold in late 2018, with settlement of the sale of Unit 2 occurring on 21 September 2018 and settlement of the sale of Unit 1 occurring on 19 October 2018.
The executor says that the Heidelberg Properties were held after the expiration of the conditional right of residence in March 2016 pending Adam’s release from prison on parole, originally expected to be in 2016 but eventually occurring in 2018. The executor seeks to rely on the consent of Adam and his two adult children, Teigan and Keah, for holding the properties for this period.[19] Consents from three adult beneficiaries does not release the executor from her duty of due diligence in the interests of the remaining beneficiaries.
[19]Third Executor Affidavit (n 17), [4].
The length of the third phase of delay is protracted and unjustified by the explanation given.
Fourth Phase of Delay
Finally, approximately 19 months elapsed from the settlements of the sales of the Heidelberg Properties to commencement of the commission application, despite it being foreshadowed in a letter dated 19 December 2018, some 17 months earlier. Interim distributions were made to the two adult sons of the deceased of $110,000 each, in August 2019, nearly a year after settlement of the sales of the Heidelberg Properties. The bulk of the estate (approximately $1.3 million) was held into 2020.
The fourth phase of delay is completely inexplicable.
Conclusion
There can be no doubt that the delay in the administration of this estate disadvantaged the beneficiaries and complicated the administration. For example, legal costs were generated in correspondence dealing primarily with delay. The respondent rightly criticises the delay. The executor is unable to demonstrate adherence to the terms of the Will regarding the conditional right of residence, improperly allowed family members to reside in an estate property and acted on the consent of only some of the beneficiaries to the detriment of others, particularly the minors. The third and fourth phases of delay are without any justification. In combination, these two phases alone amount to just over four years. Except for the first phase of delay, in this case the executor’s lack of diligence and maladministration is sufficient to refuse any award of commission.[20]
[20]Re Mountney [2017] VSC 364, [82] (‘Mountney’).
Administration Accounts
Introduction and Legal Principles
Before making an application for commission, an executor must file an administration account with the Court setting out full particulars of the administration of the estate and verified by affidavit.[21] This enables the Court to ascertain whether the estate has been properly administered and forms the basis for calculating commission.
[21]Supreme Court (Administration and Probate) Rules 2014 (Vic) r 10.03(1).
An executor has a duty to keep proper accounts, independently of the need for account as part of an application for commission.[22] Maintenance of proper records and accounts is ‘fundamental to good management of a deceased estate’.[23]
[22]Freeman v Fairlie (1817) 3 Mer 24, 43; 36 ER 10, 17; Pearse v Green (1819) 1 Jac & W 135, 140; 37 ER 327, 329; Kemp v Burn (1863) 4 Giff 348; (1863) 66 ER 740; Re Watson (1904) 49 Sol Jo 54; Struss v Wykes [1916] VLR 200, 203–4; Re Craig (1952) 52 SR (NSW) 265, 267; (1952) 69 WN (NSW) 205; Williams v Stephens (NSWSC, Young J, 24 March 1986); Re will of Ruthenberg (QSC, Ryan J, 27 October 1993); Skaftouros v Dimos [2002] VSC 198 (‘Dimos’); Yates v Halliday [2006] NSWSC 1346.
[23]Dimos (n 22), [11].
If failure to keep proper accounts causes loss or expense to the estate, commission may be denied, even though ordinarily poorly prepared accounts are dealt with by disallowing costs.[24]
[24]Vance (n 4), 221.
Discussion
AA1 had a number of deficiencies. By the October Orders, a further administration account was ordered, with specific requirements to assist the Court in considering the application and the quality of the administration of the estate. In addition, the October Orders required the executor, at a minimum and among other things, to provide:
(a) separate statements for each sale of real property, showing the sale price and all deductions, including costs of preparing for sale (‘sales statements’);
(b) a statement of the financial result of the retention of Unit 1, setting out the gross rent and each expense (‘Unit 1 financial result statement’); and
(c) a statement of the total cost to the estate of the retention of Unit 2 setting out each expense (‘Unit 2 cost of retention statement’).
On 26 November 2020, the executor filed the Fourth Executor’s Affidavit which exhibited AA2. AA2 made minor amendments to AA1, but did not otherwise comply with the requirements of the October Orders.
Settlement statements were provided for each of the three sales of real property. These were helpful as they verified the net amounts received by the estate from each sale.
The Unit 1 financial result statement was not provided. At the 16 December 2020 hearing, the solicitor for the executor submitted that the primary documents necessary for the production of such a statement are not available. An accountant’s invoices[25] indicates that estate taxation returns, including a rental schedule and a capital gains tax schedule, had been prepared for Unit 1. It follows that the executor ought to have been able to comply with the October Orders. The solicitor’s submissions reflected poorly on his preparation on this issue.
[25]Fourth Executor Affidavit (n 14), exhibit JS 3 and invoices dated 22 March 2019 and 24 September 2019.
In addition, the Unit 2 cost of retention statement was not provided. Paragraph 15 of the Respondent’s Affidavit, containing unqualified lay opinion of possible gross rental income for Unit 2 from the date of death to the date of sale, was inadmissible and struck out. Equally, submissions by the executor’s solicitor about the inability to produce proper accounts and even speculation as to potential ‘profit’ to the estate’s beneficiaries by the inordinate delay are given no weight. It is simply not possible in the absence of proper accounts to ascertain the burden to the estate of holding Unit 2 during the second and third phases of delay.
The executor cannot rely on the passage of time or a simple failure to obtain primary documents to explain an inability to verify the estate accounts, as it is the executor's own delay or inaction that caused these circumstances. Further, as Gummow and Hayne JJ in Byrnes v Kendle make clear ‘…as a matter of first principle, a trustee should gain no advantage by failure to keep proper records and the court will resolve doubts against a trustee who fails to do so.’[26] This is the executor’s own application to the Court for commission, voluntarily embarked on by her for her own personal benefit. Her failure to present the material required for the Court to understand the quality of her administration of this estate must be taken into account against her claim.
[26]Byrnes v Kendle (2011) 243 CLR 253, 270-1.
Interim Distributions
The following interim distributions were made from the estate to 27 February 2020:
Date
Beneficiary:
Interim Distribution
27 March 2015
Roland
$100,000.00
27 March 2015
Teigan
$10,000.00
22 February 2016
Teigan
$3,000.00
5 August 2019
Roland
$110,000.00
13 August 2019
Adam
$110,000.00
9 October 2019
Teigan
$60,000.00
27 February 2020
Roland
$200,000.00
27 February 2020
Adam
$300,000.00
27 February 2020
Teigan
$15,000.00
27 February 2020
Keah
$85,000.00
Sometime between July 2019 and May 2020, an interim distribution for each of the minor beneficiaries of approximately $92,000 each were made. Pursuant to a Deed of Family Arrangement purportedly dated 8 July 2019, the funds for Brandon and Nathan, the children of Roland, were paid to State Trustees Limited as trustee. The funds for ABC and XYZ were paid into Court under s 69 of the Trustee Act 1958 (Vic).
In Gonzales v Claridades, Campbell J considered the obligation to make an interim distributions from an estate which has not yet been fully administered and said:
Sometimes it can be the duty of a legal personal representative to make an appropriation of estate assets so that he or she can pay a pecuniary legacy or distribute a specific legacy or devise, or make an interim distribution of pecuniary legacies or interests in residue, even though the duties of administration are not complete. If the legal personal representative is in a situation of knowing that there are some distributions of the estate which could be made in accordance with the will or the rules of intestacy which govern the distributions of that estate, that there was no realistic prospect that that distribution could be cut down or affected by those aspects of administration of the estate which remained unperformed, and that the remaining tasks of administration were not likely to be completed soon, then it may be the duty of the legal personal representatives to make an interim distribution to that extent.[27]
[27]Gonzales v Claridades [2003] NSWSC 508, [47].
Substantial interim distributions may have been made once the sales of the Heidelberg Properties settled in late 2018. There is a real question whether a duty to make interim distributions arose at that time, rather than round a year later, or longer. This maladministration reinforces the refusal of commission.
Further, an executor has a duty to act impartially between beneficiaries, yet the adult beneficiaries received interim distributions earlier than the minors and Keah. The October Orders required the executor to explain this discrepancy, with a table for ease of reference, setting out dates and amounts of distribution (such details being missing from Part E of AA1). No table was produced and Part E of AA2 still lacked the details of distribution. The executor submitted that the minors required the appointment of a trustee to administer their funds before any distribution could be made on their behalf. Yet, clause 7 of the Will empowered the executor to make advances for the benefit of the minors, from capital or income, with a receipt from any caregiver of the minor being a discharge for the executor. Alternatively if the executor required the appointment of a trustee for a distribution to a minor, that step may have been taken earlier. It is regrettable that these children were not given access to any part of their inheritance earlier, as there can be irreplaceable benefits of funds being available for education or health during childhood or youth. This maladministration further reinforces the refusal of commission.
Application for Reimbursement to the Estate of Certain Expenses
At the second hearing, counsel for Roland made oral application for orders that the executor reimburse the estate for all payments made to the executor personally for expenses (being a total of $17,600 in November 2014) or paid to Hayden Price, a family member of the executor, for ’upkeep of the Heidelberg units’ (being a total of approximately $13,000 in 2018) as verification of these expenses was not supplied, despite numerous requests.
The executor says that she paid expenses of the three properties in the estate personally following the death of the deceased.[28] It is also conceivable that during the first phase of the administration, prior to the Grant, the executor paid expenses such as the funeral, mortgage repayments or similarly proper expenses but awaited the Grant to be reimbursed.
[28]Affidavit of Jeannette Carmel Scholte sworn 14 May 2020, 21(d).
It is not ideal that the Court is reduced to speculation due to the poor quality of the administration accounts. However, no notice was given of this application for reimbursement of estate expenses.[29] An executor is entitled prima facie to an indemnity for estate expenses.[30] Stripping a trustee of the right of indemnity from a trust for expenses of the trust is an extremely serious step and not one to be embarked on summarily.
[29]A respondent needs to give notice of all objections to accounts.
[30]J D Heydon and MJ Leeming, ‘Jacobs’ Law of Trust in Australia’ (LexisNexis Butterworths Australia, 2006), [2104].
The task of the Court in this application is to consider the administration account to establish the course of the administration, compliance with the Will, discharge of liabilities and the present position of the estate.[31] A claim for devastavit cannot be run inside a commission application.[32] If the beneficiaries wish to seek orders against the executor for reimbursement of over $30,000 of allegedly falsely claimed expenses (which is the substance of the oral application) or for any other form of loss, that needs to be mounted by a separate proceeding. In appropriate cases, the Court might adjourn the commission application to permit an objecting beneficiary to commence an independent action against the executor, as advised. There was no application to adjourn this claim for commission for that purpose.
[31]Vance (n 4), 73.
[32]Vance (n 4), 150, 204.
That said, the failure to verify these expenses has caused expense to the estate, by way of unnecessary solicitors’ correspondence, production of evidence regarding the issue, and submissions and time in the hearing. Therefore, not only is the poor record keeping or failure to supply verification of these expenses relevant to the executor’s legal costs of this application, it further reduces the merit of this application for commission.
Superannuation Death Benefits
There was some confusion regarding the superannuation death benefits. It seems the deceased had been a member of two funds, but the executor refers to one of those funds by two different names in her material. One of the funds, called ‘Summit’ or ‘North AMP’ by the executor, paid a superannuation death benefit of (perhaps) $71,386.00 directly to Roland and Adam, equally, despite an application by the executor for it to be paid into the estate. The other fund, called in the executor’s material ‘MLC’, paid a superannuation death benefit of $22,612.83 into the estate.
It is not acceptable that the correct legal name of the fund was not used consistently and the deceased’s membership details (such as her membership number) are missing from the executor’s material. An administration account should contain details of superannuation death benefits not dissimilar to the details required for a bank account. However, the confusion created here was resolvable by the respondent himself. The fund in question paid the death benefit to him in his personal capacity, so presumably he has the relevant material to confirm the name of the fund and the amount of the death benefit. Therefore, I reluctantly accept submissions made by the executor’s solicitor at the hearing on 16 December 2020 that the deceased was a member of only two superannuation funds at the date of her death and the executor properly sought payment into the estate from both funds. It appears that the cost of obtaining proper material from the executor vastly exceeds the likelihood that the deceased was a member of a third superannuation fund.[33]
[33]Transcript (n 16) 3, [17-31], 4, [1].
Legal Fees of the Administration and the Application Already Paid
As noted, the costs of the unsuccessful informal codicil application were less than $20,000. Invoices are provided for the legal work in selling the Queensland property (including a lost title), subdividing the Heidelberg Properties, the application for probate, and selling each of Unit 1 and Unit 2, totalling $9,502.74. Each of these invoices seem reasonable and were not criticised by Roland’s counsel.
However, by two further invoices (numbered 3178 and 5632)[34] $29,265.51 is charged by the solicitors for the executor for legal fees in respect to what may be called general estate administration. Some entries in invoice 5632 relate to this application for commission but the invoice has already been paid in full. An executor cannot take their legal costs of an application for commission in their own interests without fully informed consent or an order for costs.[35] In Re Estate of Zsuzanna Gray, Daly AsJ said:
… Making a claim for commission is not of itself an executorial function in respect of which costs should automatically be borne by the estate. Ultimately, the liability for costs of any such application is and should be a matter for the Court, and no party should presume that the Court will invariably order that such costs would be recoverable from the estate. The question of costs is always a matter for the discretion of the Court, having regard to all of the circumstances of the case.[36]
[34]Fourth Executor Affidavit (n 14), exhibit JS-4.
[35]Richards v Richards [2015] VSC 335, [109] (‘Richards’).
[36]Re Estate of Zsuzanna Gray [2010] VSC 173, [34].
At the conclusion of the hearing on 16 December 2020, the plaintiff's solicitor was ordered to provide an affidavit of itemised costs covering the work in invoice 5632, so that the costs relating to this application could be identified and consideration may be given to ordering reimbursement. The affidavit of the plaintiff’s solicitor dated 27 January 2021, discloses that $4,061.75 (including GST) charged by invoice 5632 relate to this claim for commission.
However, it is clear that a number of charges in invoice 5632 relating to the preparation of the administration account are not included in that total. Traditionally the costs of preparing the administration account were not part of the legal costs of the application.[37] However, administration accounts are now no longer filed routinely in every estate. The administration accounts were prepared solely for the purposes of this application for commission. Therefore, I consider that the legal work connected to preparation of the administration account is part of the costs of this application.
All charges appearing on invoice 5632 for legal work in respect to the preparation, checking and filing of the administration account, including its verifying affidavit, will be added to the total of charges connected to this claim for commission. Taking this step adds another $1,857.50 to the total.
[37]Vance (n 4), 227.
Further, there are also a number of charges on invoice 5632 that partially relate to this application (including preparation of the administration account) and partially relate to general estate administration. For example, a charge of $240.00 appears for “drafting and producing email to beneficiaries’ solicitor providing progress update; drafting and producing email to client advising as to documents required to complete Administration Account and requesting meeting date.” None of the narrative items in invoice 5632 include dates, duration or the name or position of the staff member performing the work. The solicitor is silent on these mixed charges in his affidavit (as he is on the treatment of costs of the administration account). Therefore, doing the best I can with the material to hand, if one item in invoice 5632 deals one other matter as well as this application, I will treat 50% of the costs of that mixed item as relating to this application. If an item deals with two other matters, I will treat 33% of the cost of that mixed item as relating to this application and so forth. All calculations will be rounded down to the nearest dollar. This results in a figure of $794.00 for costs apportioned to this application from mixed items in invoice 5632.
Therefore, a final total of $6,713.25 is obtained for the legal costs of this application are charged by invoice 5632 and paid in full by the estate in advance of the determination of the application. I will return to these costs later in these reasons.
Deducting $6,713.25 for the legal costs of this application, leaves $22,552.26 as the general legal costs charged in the administration of this estate by invoices 5632 and 3178. Some legal costs were incurred for correspondence with the respondent's solicitors regarding delay, which were necessary only due to the executor's own inaction. Simple administrative tasks appear to have been performed by the executor’s solicitor or staff of his firm. Where an executor has delegated some of the work of the administration to professionals who have been paid for that work, such delegated work cannot be taken into account in determining the executor's pains and trouble to avoid the estate paying twice for the same work.[38] Therefore, the quantum of these legal costs, representing as it must that a significant amount of the work of administering the estate was not personally undertaken by the executor, further reduces the merit of this application and reinforces the conclusion that no commission should be awarded.
[38]Re Mountney (n 20), [49]; Re will and estate ofMacleod [2017] VSC 67, [48]; Richards (n 35), [29]; Vance (n 4) 143.
Costs of this Application
Roland seeks his costs from the estate. This is appropriate. The Court has been greatly assisted by his legal representatives, especially in dealing with the poor quality of the executor’s material. In addition, he represented his own minor children which permitted the Court to consider the aligned interests of ABC and XYZ. His legal costs of $8,000 are reasonable.
As ordered in December 2020, the affidavit of John Giancarlo Pastro sworn on 27 January 2021 exhibits an invoice for the further legal fees of this application. The executor’s solicitors seek a further $32,063.35 in legal costs incurred from 7 February 2020.[39] Coupled with the legal costs of this application included in invoice 5632 of $6,713.25, this gives a total of $38,776.60. This is excessive.
[39]Affidavit of John Giancarlo Pastro sworn 27 January 2021, exhibit JGP 2.
The administration of this estate was woefully slow and disorganised. The solicitors have assisted the executor to get the administration finalised, as well as preparing and filing this application. Despite the failure of the application, the cost to the beneficiaries of preparing an administration account is warranted, as it verifies the proper administration of the estate, especially for the minor beneficiaries. In the absence of this application, it is possible that the delay in distribution and the uncertainty regarding accounts may have continued. Therefore, some of the executor’s legal costs relating to this application will be allowed.
In the peculiar circumstances of this case, I will not order reimbursement of the costs of this application improperly paid in advance. Therefore, the solicitors will retain the sum of $6,713.25 received by them from the estate relating to the legal costs of this application in the payment of invoice 5632. Further, another $4,000 for legal costs (including the solicitor’s appearances and further administration account expenses) and disbursements of $6,859.51 will be allowed from the estate, despite the lack of success in this application. This is still a very high figure for an application of this type, however the solicitors appear to have done a significant amount of work for the executor to the eventual benefit of the beneficiaries, even though the application itself has failed.
Conclusion
The administration of this estate can only be described as irregular and unsatisfactory. All beneficiaries of the estate, including those who have consented to commission, have suffered inordinate delay. The executor has not been able to produce complete accounts of the administration. The application must be dismissed.
Orders
The following orders will be made giving effect to this judgment:
1.The application is dismissed.
2.The respondent’s costs fixed in the sum of $8,000 be paid from the estate.
3.The executor’s further legal costs of this application fixed in the sum of $4,000 and disbursements fixed in the sum of $6,859.51 be paid from the estate and any further costs or disbursements are disallowed. Any costs or disbursements of this application paid from the estate on 7 February 2020 in accordance with invoice 5632 be retained by the solicitors.
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