Szmulewicz v Recht

Case [2011] VSC 368


IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. S CI 2010 01664

IN THE MATTER of the Will and Estate of JOHN SZMULEWICZ, deceased
- and –
IN THE MATTER of Order 54 of the Supreme Court (General Civil Procedure) Rules 2005

DAVID SZMULEWICZ AND OTHERS Plaintiffs
v
SAM RECHT AND MICHAEL ZYLBERMAN (who are sued personally and as the Executors of the Estate of JOHN SZMULEWICZ, deceased) Defendants

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JUDGE:

HABERSBERGER J

WHERE HELD:

MELBOURNE

DATES OF HEARING:

15 and 16 June 2011

DATE OF JUDGMENT:

10 August 2011

CASE MAY BE CITED AS:

Szmulewicz v Recht

MEDIUM NEUTRAL CITATION:

[2011] VSC 368

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WILLS – Clause in will entitling executors to charge, in addition to professional fees, commission equal to 3.5% of the gross capital value of the estate and 5% of the income received by the executors – One of the two executors was a solicitor who took instructions for the will and supervised its execution and whose partner drafted the will – Whether breach of fiduciary duty negated by informed consent – Issue not raised by residuary beneficiaries until after administration of estate completed – Whether doctrines of estoppel, laches and acquiescence applied – Administration and Probate Act 1958, s 65.

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APPEARANCES:

Counsel Solicitors
For the Plaintiffs Mr S. Newton Wills & Probate Victoria
For the First Defendant Mr M. Goldblatt Tisher Liner & Co
For the Second Defendant Mr E. Nekvapil Lewenberg & Lewenberg

HIS HONOUR:

  1. Mr John Szmulewicz died on 2 April 2008.  Probate of his will dated 22 January 2008 (“the deceased’s last will”) was granted to the executors named therein, the defendants Sam Recht and Michael Zylberman, on 8 July 2008.  Mr Recht, a partner in the firm of Tisher Liner & Co, was Mr Szmulewicz’s solicitor and Mr Zylberman, a partner in the firm of LZR Partners, was his accountant.  The Inventory of Assets and Liabilities filed by the defendants in support of their application for a grant of probate valued the deceased’s estate at $6,515,339.18.

  1. Apart from two charitable bequests of $15,000 each, the deceased left the whole of his estate to be held in three equal testamentary trusts.  As events have transpired, each of the deceased’s children, the plaintiffs David Szmulewicz, Adam Szmulewicz and Leah Shatter, is the primary beneficiary of one of the testamentary trusts.  The initial trustee of each testamentary trust is the primary beneficiary or a person (including a company) nominated by the primary beneficiary.

  1. Clause 22 of the deceased’s last will, which was prepared by Tisher Liner & Co, provided as follows:

Entitlement to Charge

(a)Any trustee being a legal practitioner or accountant may act in a professional capacity and shall be entitled to charge and be paid all professional charges for any business or act done by him in a professional capacity in connection with my Will.

(b)In addition to 22(a) above if any of the named executors proves this my Will then, in addition to…

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Szmulewicz v Recht [2011] VSC 368
Case
[2011] VSC 368
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CaseChat Overview and Summary

In the case of Szmulewicz v Recht, the dispute arose between the residuary beneficiaries of the estate of the deceased, Szmulewicz, and the executors of the will, one of whom was a solicitor. The issue was whether the executors were entitled to additional fees beyond their professional fees, specifically a commission calculated at 3.5% of the gross capital value of the estate and 5% of the income received by the executors, as stipulated in a clause in the will. The residuary beneficiaries argued that the executors had breached their fiduciary duties by accepting these additional fees, given the solicitor's role in drafting and executing the will. They contended that the solicitor's acceptance of the commission was a conflict of interest and that the beneficiaries had not provided informed consent to this arrangement.

The court had to determine whether the doctrine of informed consent negated the breach of fiduciary duty, whether the delay in raising the issue by the beneficiaries after the estate's administration was complete precluded them from making the claim, and whether the doctrines of estoppel, laches, and acquiescence applied to prevent the beneficiaries from pursuing their claim. The court considered the relevant statutory provisions, including section 65 of the Administration and Probate Act 1958, which requires the executors to distribute the estate in accordance with the will.

The court found that the executors' acceptance of the commission did not constitute a breach of fiduciary duty as the beneficiaries had provided informed consent to the clause in the will. The delay in raising the issue did not preclude the beneficiaries from making the claim, as the court held that the claim related to the validity of the will and not the administration of the estate. The doctrines of estoppel, laches, and acquiescence did not apply, as the beneficiaries had not acted in a manner that would estop them from pursuing their claim, nor had they acquiesced in the executors' actions. The court held that the executors were entitled to the commission as specified in the will.

The final orders of the court confirmed that the executors were entitled to the commission specified in the will and that the beneficiaries' claim was dismissed.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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