The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber

[2020] NSWSC 1539

Supreme Court

New South Wales

Medium Neutral Citation:

The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber [2020] NSWSC 1539

Hearing dates:

17 & 18 March 2020

Date of orders:

6 November 2020

Decision date:

06 November 2020

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Registrar’s decision substantially upheld. Minor variations to the decision in favour of the executors. Directions given for the determination of the remaining issues of costs.

Catchwords:

CIVIL PROCEDURE - review of Registrar’s decision under Uniform Civil Procedure Rules (UCPR) r 49.19 - claim for executors’ commission – Registrar awards commission under Probate and Administration Act 1898, s 86 – beneficiaries allege maladministration of the estate by the executors, disentitling the executors from any award of commission – beneficiaries contend the Registrar’s decision should be overturned.

Legislation Cited:

Civil Procedure Act2005, ss 56, 57, 58, 60

Probate and Administration Act1898, ss 85, 85 (1AA), 85(4), 86(3), 87, 87(1), 87(2), 87(3)

Supreme Court Act1970, s 53(3)(a)

Supreme Court Rules 2006, Part 78, rr 81, 94

Trustee Act1925, s 85

Uniform Civil Procedure Rules 2005, r 49.19

Cases Cited:

Ford v Princehorn; Estate of Ford [2012] NSWSC 1165

Hawkins v Barkley-Brown [2010] NSWSC 48

In the Estate of Purton (1935) 53 WN (NSW) 148

In the Estate of Sheppard [1972] 2 NSWLR 714

In the Will of Jenkins (1904) 4 SR (NSW) 625

In the Will of Kerrigan (1935) SR (NSW) 242

In the Will of T.S. Douglas deceased (1951) 51 SR (NSW) 282

Lawrence v Gunner [2014] NSWSC 121

Lawteal Pty Ltd v Ofo [2005] NSWSC 984

Macartney v Macartney (1909) VLR 183

Re Bosworth (1889) 58 LJ Ch 432

Re Craig (1952) 52 SR (NSW) 265

Re Estate of Ghidella [2005] QSC 106

Re Estate Gowing; Application for Executor’s Commission (2014) 11 ASTLR 128

Re Smith (1916) 16 SR (NSW) 422

The Estate of Barbara Dawn Orre (Supreme Court (NSW), Powell J, 19 December 1991, unrep)

Tomko v Palasty (No 2) (2007) 71 NSWLR 61

Texts Cited:

Eric S. Vance, Executors Commission (1969, Law Book Company)

Category:

Principal judgment

Parties:

First Plaintiff: Denzil Bruce Govett
Second Plaintiff: David Corbo

First Respondent: Matthew William Backhouse
Second Respondent: Daniel Charles Backhouse
Third Respondent: Teysha Deal
Fourth Respondent: Coco Backhouse by her tutor, Tracey Backhouse
Fifth Respondent: Billy Backhouse by her tutor, Tracey Backhouse

Representation:

Counsel:
First and Second Plaintiff: T Catanzariti
First and Second Respondent: A Grant

Solicitors:
First and Second Plaintiff: P Rolfe, Belbridge Hague Solicitors
First and Second Respondent: A F Walsh, Walsh & Associates, Lawyers
Third, Fourth and Fifth Respondents: S Jarrett, SJ Governance Services and Solutions

File Number(s):

2010/118885; 2013/229889

Publication restriction:

No

Judgment

1. The applicants in these proceedings claim to represent the interests of beneficiaries in two estates, each of which is being administered by the same two executors. On 18 September 2018 the Registrar in Probate (Senior Deputy Registrar Brown) decided in both estates to pass accounts and award commission to the executors administering the estates. On 8 October 2018, the applicants filed a motion in each estate under Uniform Civil Procedure Rules 2005 (“UCPR”), r 49.19, joining the executors as respondents and seeking a review of the Registrar’s decision.

2. On 8 November 2018, the Registrar published reasons for her decision in accordance with the practice upon such reviews that was confirmed by Helsham J (as His Honour then was) in In the Will of Sheppard [1972] 2 NSWLR 714 (“In the Will of Sheppard”). The executors also moved to review the Registrar’s decision in one respect as to costs. These reasons determine the reviews of the Registrar’s decision.

3. These proceedings are the latest dispute in a bitter and long-running administration of these two estates. These reasons seek to quell the entrenched controversies that have preoccupied these parties for far too long. The Registrar’s detailed report of her reasons was a comprehensive attempt to do the same. To begin, a brief preliminary overview of the facts is useful.

Overview of the Estates and of the Proceedings

4. Mrs Maureen Laila Huber and Mr Dolf Paul Huber married later in life. Mrs Huber was a widow, with two sons from her first marriage, Mr Matthew Backhouse and Mr Daniel Backhouse, who are the applicants on the two motions for review. Mr Huber, an engineer on heavy duty drilling equipment, had migrated to Australia from Switzerland, leaving behind three siblings in his homeland. Mr Huber had no children from previous relationships, and there were no children of this marriage to Maureen.

5. Throughout these proceedings the parties referred to Mr and Mrs Huber respectively as “Maureen” and “Dolf”. Without intending any disrespect to any person, the Court will adopt the same practice in these reasons.

6. Maureen died on 29 January 2010. Probate of her last will dated 7 August 2009 was granted to her executors, Mr Denzel Govett and Mr David Corbo (“the executors”) on 18 May 2010. The net value of Maureen’s estate was sworn for probate purposes at $1,242,945.80.

7. Maureen’s will created testamentary discretionary trusts, making the executors trustees of these trusts. Matthew and Daniel Backhouse and members of their families were members of the class of trust objects. Matthew and Daniel Backhouse brought these proceedings in their own names but they claim to be acting in the best interests of those testamentary trusts. Before the Registrar, and in these review proceedings, the parties adopted the convenient, but slightly inaccurate, terminology of referring to Matthew and Daniel Backhouse collectively as “the beneficiaries”. In these reasons the Court will use this terminology but will distinguish Matthew and Daniel from other beneficiaries as the context requires. Sometimes Matthew and Daniel are referred to as “the Backhouse brothers”.

8. Dolf died three years after Maureen, on 4 June 2013. Probate of Dolf’s last will of 6 December 2007 was granted to the executors on 8 October 2013. The net value of his estate was sworn for probate purposes at $1,953,209.84. On 18 November 2013, probate of Mr Huber’s will was resealed in the Supreme Court of Victoria in order to deal with certain assets in that State. Similar testamentary trusts for the benefit of Matthew Backhouse, Daniel Backhouse and their families were set up under Dolf’s will.

9. For approximately twelve years before Maureen’s death, Mr Govett and Mr Corbo had been the Huber’s financial adviser and accountant, respectively. Both Dolf and Maureen placed a high degree of trust in Mr Govett and Mr Corbo. And Dolf and Maureen appointed each other as their enduring attorney and guardian, but in the event the other could not act, they each appointed Mr Govett and Mr Corbo to these roles.

10. As the Registrar found, Mr Corbo asked Maureen why she did not want to appoint her sons executors, to which she replied that “she did not trust the boys”, that she “did not believe the boys would do the right thing by Dolf” and that she believed they were “money hungry”.

11. Mathew Backhouse’s explanation as to why his mother set up testamentary trusts with the executors as trustees was consistent with Mr Corbo’s evidence. His understanding was that “Mum had her fears”. She had a fear that the children “might have a disagreement and the trust would protect both of us, that we would not be fighting amongst each other”. And “probably her other fear was that we might have a problem with Dolf when she was gone”.

12. But as the Registrar said, whatever be Maureen’s reasons for not appointing her sons, it is at least apparent that Maureen placed significant trust in Mr Govett and Mr Corbo and chose them in preference to her sons to be her executors.

13. The proceedings were conducted on 18 and 19 March 2020 and post hearing written submissions were completed in May 2020. Mr A. Grant of counsel instructed by Walsh & Associates appeared for the applicants/the Backhouse brothers. And Ms T. Catanzariti of counsel appeared for the respondents/executors, instructed by Belbridge Hague Lawyers.

14. Ms Shauna Jarrett separately represented the three children of Daniel Backhouse: Teysha, Coco and Billy. But they had no separate interest in the issues for present determination and Ms Jarrett was excused from attendance at the hearing on 18 and 19 March. The executors have indicated a desire to retire from their present roles once the current issues are resolved. Ms Jarrett’s clients will have a separate interest in what happens at that point.

15. A more detailed narrative of the background relevant to the matters in issue follows. The Registrar’s comprehensive reasons for decision have provided an important resource for this narrative. But first, the principles relevant to UCPR, r 49.19 reviews and an assessment of the credibility of each of the witnesses are set out.

Reviews under UCPR, r 49.19

16. A UCPR, r 49.19 review is not an appeal and is not subject to the restrictions that apply to appeals: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 (“Tomko v Palasty”). An applicant for review does not have to show a material error of fact or law in the Registrar’s order under review: In the Will of Sheppard. And the formal limitations against allowing fresh evidence on appeal do not apply to the review: Hawkins v Barkley-Brown [2010] NSWSC 48 (“Barkley-Brown”).

17. The rule confers a broad discretion about the procedure to be adopted: Re Estate Gowing; Application for Executor’s Commission (2014) 11 ASTLR 128; (2014) 17 BPR 32,763; [2014] NSWSC 247, Lindsay J at [100]–[101] (“Gowing”). The width of this discretion and Civil Procedure Act2005, ss 56–58 allow reviews without a full rehearing. The review applicant must show that there is a reason to depart from the Registrar’s decision, taking into account the Registrar’s reasons for decision and the material before the Registrar: Tomko v Palasty.

18. A de novo re-hearing on the review will be more apt where the Registrar’s decision has a significant impact on a party’s substantive rights, or where fresh evidence, changed circumstances or error in the registrar’s decision is demonstrated and less apt where the registrar’s decision merely involves a matter of practice and procedure: Tomko v Palasty and Lawrence v Gunner [2014] NSWSC 121. The power to admit further evidence should be used sparingly and to facilitate the review process, not to turn the review into a fresh hearing that makes the proceedings before the Registrar irrelevant: Lawteal Pty Ltd v Ofo [2005] NSWSC 984.

Credibility of Witnesses

19. Decisions of registrars on executors’ claims for commission, such as were considered in Barkley-Brown and Gowing and are at issue this case, involve determinations of substantive rights that weigh in favour of a de novo hearing. But other reasons peculiar to this case also indicated a de novo hearing was inappropriate. The affidavits and the submissions advanced by the parties showed that the Backhouse brothers had developed a high level of distrust of the executors by some time in the first half of 2014. This distrust had fuelled voluminous querulous correspondence over several years in which the Backhouse brothers had made serious allegations of maladministration against the executors.

20. In order to quell the controversy, it was desirable for the Backhouse brothers to identify clearly their allegations against the executors and for the executors to give direct explanations in oral evidence to the questions put on behalf of the beneficiaries. The executors’ professional reputations were at stake as much as the sums they had sought in commission. To bring this controversy to an end, it was important for the Backhouse brothers to be able to witness the explanations that the executors gave to their questions. Up until now, written questions and solicitors’ correspondence in answer to it had done little to satisfy their complaints and reduce their active hostility towards the executors.

21. And by the time the proceedings were listed for pre-trial directions, additional affidavit evidence had already been filed. So the Court allowed this evidence to be read and then allowed cross-examination of the executors on the review. One of the applicants, Matthew Backhouse, was also cross-examined. There was therefore an opportunity for the Court to assess the credibility of these witnesses.

22. Mr Corbo presented to the Court as a competent accountant, whose evidence was reliable and whose accounting judgments were well reasoned and drew upon well-recognised accounting principles. He had good recall of the circumstances in which he made his decisions as executor with Mr Govett and was able to give detailed explanations for those decisions. Although to a degree frustrated by the conduct that he encountered from Matthew and Daniel Backhouse, he did not bear any animus towards them. Like his fellow executor, he was keen to be discharged from his future duties to this estate.

23. Mr Govett appeared to the Court to be a thoughtful and thorough financial planner. He gave the impression of having given careful consideration to all his decisions as executor and to have had the best interests of all the parties in mind. He appreciated that he was not only attending to the interests of the Australian beneficiaries but also to the Swiss beneficiaries, Dolf’s siblings. It was clear to the Court that he and Mr Corbo acted cooperatively in their roles as executors.

24. Matthew Backhouse was cross-examined as well. He came across as distrustful of the executors and unwilling to give them much credit for trustworthiness, reliability or professionalism. He displayed a high level of self-confidence in his own opinions about what he claimed was the defective estate administration by these two professional men. But regrettably he had little insight into the professional judgments that Mr Corbo and Mr Govett were making as executors.

25. Matthew Backhouse also came across to the Court as conflict-prone and having an ill-developed sense of proportion about contesting claims for relatively small sums of money in these two estates that, taken together, comprise assets of approximately $4 million. The Court did not find the evidence of Matthew Backhouse to be reliable. Where his evidence and that of the executors was in conflict the Court prefers the evidence of the executors.

26. Whatever may be Mathew Backhouse’s and his brother’s poor cost-benefit insight, the Court is required by Civil Procedure Act, s 60 to ensure that “the cost to the parties [of this litigation] is proportionate to the importance and complexity of the subject matter in dispute”. Before the hearing, the Court warned the parties that it may make cost capping orders to achieve this objective in this case.

Dolf and Maureen Huber, their Family, Wills and These Proceedings

27. The Family Situation. At the time of Maureen’s death she had a number of grandchildren. Daniel has three children: Teysha Coco and Billy. Daniel is separated from their mother. Matthew has no children.

28. Up until her death, Maureen and Dolf lived together in a property known as Babs Court in rural Victoria, a small property with an adjoining hobby vineyard. Dolf also owned a rural retreat or cabin in country New South Wales.

29. Dolf had expertise in servicing large mechanical equipment. Maureen and Dolf owned half each of 100% of the issued share capital of an incorporated engineering business, HB Precision Engineering Pty Ltd (“HBPE”). The business of HBPE was a specialist consultancy providing mechanical engineering services in the oil drilling and mining industry. Dolf was the principal provider of HBPE’s specialist services, although Maureen provided administrative assistance to the company’s operations.

30. The Wills and the Estates - Maureen. On 7 August 2009, Maureen made her last will appointing Mr Govett and Mr Corbo her executors and trustees.

31. Maureen gave a pecuniary legacy of $10,000 to her granddaughter, Teysha. Coco was born shortly before Maureen died and Billy after her death. Maureen gave Dolf a right of residence in Maureen's half share of Babs Court and left him her interest in the Babs Court household chattels, her personal effects and her 50% of the shares in HPBE (including all loan monies owed to Maureen by HBPE).

32. The residue of Maureen’s estate was to be distributed in accordance with the terms of Maureen’s testamentary trust, the Maureen Laila Huber Testamentary Trust. The executors are the trustees of Maureen’s testamentary trust. The eligible beneficiaries of Maureen’s testamentary trust are any of her children, grand-children, or great-grandchildren.

33. On 12 January 2010, approximately two weeks prior to her death, Maureen sent a “letter of wishes” to each of her executors and to her sons concerning the testamentary trusts set up under her Will:

“While the Trust is discretionary for the Executors, my wishes are:

Equal shares between my 2 sons,
Matthew William Backhouse
Daniel Charles Backhouse

All Legal expenses required are to be paid by my Estate.”

34. Maureen left an estate with a gross value of $1,265,969.65 and a net value of $1,101,385.80. The assets are described below. An affidavit of additional assets was later filed which included Maureen’s shares in HBPE and jewellery.

35. Maureen’s will, unlike Dolf’s, did not contain a charging clause. This led to a complication in the Registrar’s management of commission issues in Maureen’s estate. The Registrar observed in her reasons:

“I should note that upon reviewing Maureen's will, I now realise that it doesn't contain a charging clause which would allow Mr Corbo to charge professional rates for his accountancy services. As he had no power to charge I should have asked him to refund any such charges back to the estate. However, as an accountant would have been required and because Mr Corbo was familiar with the affairs of Maureen and his charges were within the normal range for the work performed, I would have had no hesitation in allowing a special commission for him for his professional accountancy services. This would have been in lieu of professional costs and is separate to the general commission to the executors as a body: see Re Craig (1952) 52 SR (NSW) 265 at 267. In practice special commission would have had the same result as allowing the charges, as the refund was less than the amount allowed on commission. I should also note that at paragraph [38] of the answer to requisition dated 15 September 2017, the Executors state that they provided some professional and financial planning services that they elected not to charge for. They would have been entitled to seek special commission on this work also.”

36. The Registrar went on to explain that she moderated the bills in Maureen’s estate and ordered refunds “on the misapprehension that commission was sought”. But she says that that if she had realised that commission was not sought she would have allowed the legal bills pursuant to Probate and Administration Act1898, s 86(3). This statutory provision allows an executor to renounce a right to commission and instead to claim instead an entitlement to legal practitioners’ charges and disbursements moderated in accordance with the professional scale “for nonprofessional work performed in that year to an amount not exceeding the commission to which the executor would have been entitled in the opinion of the court” but for the renunciation.

37. The Wills and the Estates - Dolf. In his will Dolf recognised the claims of his four Swiss siblings upon his testamentary bounty. He gave 30% of the residue of his estate to be shared by his siblings. The other 70% was to be held in Dolf’s testamentary trust, the Dolf Huber Testamentary Trust, which mirrors the structure of Maureen’s testamentary trust. The executors are the trustees of Dolf’s testamentary trust and the eligible beneficiaries are any of Maureen’s children, grand-children or great-grandchildren.

36. Unlike Maureen's will, Dolf’s will contains a charging clause, allowing the executors to be paid the usual professional rates for the provision of any professional services.

37. The Victorian property, the subject of the re-seaI of probate in that State, included Dolf's 100% interest in HBPE, which was valued for probate purposes at $481,191.09.

38. Dolf did not leave a statement of wishes in relation to the administration of his testamentary trust. The Registrar recorded that, according to the executors, Dolf "had no particular relationship with Matthew and Daniel other than being their mother's second husband". But Matthew Backhouse claimed in evidence, and the Court accepts, that the relationship of the Backhouse brothers with Dolf after Maureen’s death was “very good”.

39. At the time of Dolf’s death his estate had a gross and net value of $808,831.16. A death benefit of $1,144,679.68 was also will paid into Dolf’s estate. The Registrar recorded that the executors filed an affidavit of additional assets, which included Dolf’s shares in HBPE and the jewellery he had inherited under Maureen’s will.

40. The Proceedings. On 6 June 2011, the executors filed a motion to pass the accounts in Maureen’s estate for the period 29 January 2010 to 4 May 2011. The accounts were passed but commission was neither sought nor awarded. No contested action took place between these parties during Dolf’s lifetime.

41. But that changed in July 2014. According to Mathew “the fight started in July 2014”. It is difficult to fathom just how the conflict started but the Backhouse brothers appeared to react to something in the estates’ administration, leading them to distrust the executors. Some evidence suggests that the origin of the dispute was that the Backhouse brothers saw that the Babs Court property was being managed in what they thought was a poor fashion. By the end of 2014, the litigation had escalated. On 14 November 2014, the beneficiaries filed a motion in each estate, seeking orders that the executors file and pass their accounts in each estate.

42. The matter came before Lindsay J on 2 March 2015. The Backhouse brothers filed amended notices of motion in each estate seeking relief, that the executors commence proceedings to pass their accounts. Lindsay J ordered that the two proceedings be heard together with evidence in one being evidence in the other. On 17 March 2015, Lindsay J ordered by consent that the executors commence proceedings to verify, file and pass their accounts.

43. On 16 April 2015, the executors filed five summonses in Maureen’s estate and three in Dolf’s estate, for the passing of their accounts and for them to be awarded commission. Directly after this the parties commenced settlement discussions. They advised the Court on 20 July 2015 that the proceedings had been settled in principle. But on 23 November 2015 they told the Court that the settlement discussions had failed.

44. On 10 February 2016 the executors filed two further summonses in Maureen’s estate and two in Dolf’s, again for the passing of supplementary accounts and for an award of commission.

45. Accounts in Maureen’s estate were passed on 6 June 2018. Accounts in Dolf’s estate were passed three months later on 18 September 2018. The Registrar issued a certificate for the accounts in both estates under Supreme Court Rules 2006 (“SCR”) Part 78, r 81 as to the balance of the accounts and as to capital realised, income collected and the value of assets transferred to the beneficiaries during the period to which the accounts relate.

46. The Registrar awarded commission and associated costs in Maureen’s estate as follows:

1. 2.5% on capital realisations of $440,845.09;

2. 5% on income collections of $21,606.40; and

3. the costs of the accounts were allowed in the sum of $4,500 (plus GST) plus fees.

49. The Registrar awarded commission and associated costs in Dolf’s estate as follows:

1. 2% on capital realisations of $2,287,216.52;

2. 5% on income collections of $82,190.34; and

3. the costs of the accounts were allowed in the sum of $10,500 (plus GST) plus fees.

50. Combining the two estates, the Registrar awarded $56,765.46 in commission on capital realisations, $5,189.84 in commission on income collections and $15,000 (plus GST) for the costs of preparing the accounts. Thus the Registrar’s orders awarded a total of $76,955.30 to the executors.

51. Before leaving this brief survey of the history of these proceedings, a feature of them, upon which the Registrar adversely commented, regrettably has continued. The Registrar was sufficiently moved by their labyrinthine complexity to invoke Kunc J’s plea for procedural simplicity in Tugral v Tarrants Financial Consultants Pty Limited (No 5) [2014] NSWSC 437 at [64] – [77].

52. The Registrar commented that the documents filed in these proceedings have been “excessive and confusing”, have involved “substantial repetition” and sometimes give the impression “that hearing it often makes it true”. The Registrar identified one set of submissions was 294 paragraphs and the other had 300 paragraphs. She found the submissions on both sides cross-referenced to paragraphs in multiple affidavits and submissions from different periods, making it “difficult to identify the real issues”.

53. The Registrar’s difficulties in managing the volume of material in this case are entirely understandable. This regrettable approach has continued and the Court has had the same difficulty. Rather unwisely in retrospect, the Court did not put page limits on final submissions after the hearing: the submissions from one side came in at 597 paragraphs, typed on 77 pages. None of this is proportionate to the amounts in issue.

54. That being said, the Court understands that when one party generates mountainous affidavits and submissions, the second party’s quick and natural reaction is to launch back a mountain of material in self-defence. But Civil Procedure Act, s 60 suggests another much better solution should be adopted: come back to the Court and ask for directions for the first party to resubmit simplified submissions.

55. I entirely agree with the Registrar’s comments on this aspect of the proceedings. The Court directed that the Backhouse brothers reduce their complaints against the executors to a limited number of defined issues. The 16 issues they have raised are dealt with in these reasons. Strict page limits will be imposed on any further procedural steps in this case.

56. The other consequence of the voluminous material served is that the Court cannot refer to and deal with it all without this judgment becoming tediously long. It has been necessary for the Court to extract in this judgment what the Court regards as the essential material to decide the matters in issue, and only that material. The parties should bear this in mind when reading these reasons for decision.

Applicable Legal Principles

57. The jurisdiction that the Registrar and the Court are exercising and the legal principles to be applied may be shortly described.

58. Under the Probate and Administration Act1898, s 85 (1AA), the executors may be required by the rules of the Court or by order of the Court to file accounts. Sub-section 85(3) provides for the presumption of the correctness of passed accounts and s 85(4) provides for the Registrar’s power to “moderate” disbursements “in whole or in part”:

“(3) The order of the Court allowing any such account shall be prima facie evidence of the correctness of the same, and shall, after the expiration of three years from the date of such order, operate as a release to the person filing the same, excepting so far as it is shown by some person interested therein that an error or omission or fraudulent entry has been made in such account.

(4) Where the Court, in passing any such accounts, disallows in whole or in part the amount of any disbursement, the Court may order the executor, administrator or trustee to refund the amount disallowed to the estate of the deceased.

Nothing in this subsection alters or diminishes the right of any person to proceed in equity in the same way as if this subsection had not been enacted.”

59. The purpose of the Registrar’s power of “moderation” is within limited bounds to fulfil a function “akin to that of an auditor, concerned not only with ascertaining whether alleged disbursements have in fact been made but also with determining whether disbursements have been properly or improperly made, in the latter which cases the disbursements are to be disallowed”: The Estate of Barbara Dawn Orre (Supreme Court (NSW), Powell J, 19 December 1991, unrep) (“Orre”) and In the Will of Jenkins (1904) 4 SR (NSW) 625; (1904) 21 WN (NSW) 95.

60. The process of moderation of legal or other professional fees is distinct from taxation fees. Taxation involves the determination of what amount is properly payable by the executor to the solicitor. Moderation involves a determination of what amount is proper to allow to the executor as an outgoing from the estate: In the Will of Kerrigan (1935) SR (NSW) 242; (1935) 52 WN (NSW) 79, at 251.

61. An executor is bound to keep accounts and to attend to the executor’s duties personally and is for that reason the executor is allowed commission. Except in a limited number of situations, an executor chooses to employ another person to do the work which the executor must pay the person himself and cannot seek to trace the estate with the cost: In the Estate of Purton (1935) 53 WN (NSW) 148.

62. Orre explains what is required for accounts to be passed. They should include separate accounts for capital and income, showing the receipts and disbursements in respect of each. If executors carry on a business, ordinary business financial statement should be produced. If property is appropriated under the will and a sub-trust is set up by the testator for individual beneficiaries, then proper subsidiary accounts in respect of such sub-trust may be required. Finally, the accounts should contain statements of unrealised original assets and the state of investments made by the executor.

63. Proceedings under s 85 are not an administration suit. The Court’s jurisdiction to deal with matters of breach of trust, what assets are part of the estate and what the executors have received, not falling within Probate and Administration Act, s 85, is vested in the Equity Division under Supreme Court Act1970, s 53(3)(a).

64. The authorities make clear that professional charges on behalf of an estate should be compensated separately from the “pains and trouble” of an executor in discharging executorial duties in relation to such proceedings. The authorities recognise the distinction between the two for all types of executor’s work, whether in relation to legal proceedings or otherwise: In the Will of Sheppard at 720A-D. If the distinction is kept in mind, the risk of double compensation should be minimal.

65. The rules for executor professionals and commission are clear. Generally the amount allowed against the estate for the rendering of professional services in connection with its administration would not be a matter affecting the quantum of commission to be allowed, and this is so whether the professional services are rendered and charged for by the executor or by some stranger to the estate: In the Will of Sheppard, at 720A. Where the terms of the will allow the executor to recover for non-professional and professional work at the executor’s professional rates and when non-professional charges are allowed out of the estate, the amount of the non-professional charges must be taken into account in fixing the quantum of the commission, so that the estate does not pay twice in respect of the same work: In the Will of T.S. Douglas deceased (1951) 51 SR (NSW) 282; (1951) 68 WN (NSW) 164, Re Smith (1916) 16 SR (NSW) 422; (1916) 33 WN (NSW) 134 at 425, and Eric S. Vance, Executors Commission (1969, Law Book Company) at [143] - [144]. Likewise, professional work done by an executor and not charged against the estate as professional fees may be taken into account as a reason for increasing the allowance of commission: Re Craig (1952) 52 SR (NSW) 265; (1952) 69 WN (NSW) 205.

66. The distinction between the supply of professional services and performing executor’s duties frequently arises in relation to general estate administration. Although the receipt of money into and out of the estate may principally be conducted through retained solicitors, accountants or property professionals, the executor’s actions in selecting, co-ordinating, dealing with and making decisions in relation to the advice of these professionals are relevant factors for the Court to take into account in the setting of commission. The discharge by professionals of substantial duties that could otherwise be discharged by an executor does not mean that the executor is thereby not entitled to commission for the discharge of related executorial duties: Re Estate of Ghidella [2005] QSC 106 at [15] and Macartney v Macartney (1909) VLR 183; (1909) 15 ALR 139.

The Complaints against the Executors

67. By their motions (one in each estate) of 15 November 2018 the beneficiaries seek to review the Registrar’s decision made on 18 September 2018. The beneficiaries sought to re-agitate their allegations of maladministration of the estates against the beneficiaries that they had pursued before the Registrar also to disentitle the executors from commission. To introduce structure into the conduct of the review proceedings the Court required the beneficiaries to list their contentions of maladministration, which if accepted would lead to a different result of the award of commission. The list comprised of 16 matters which are dealt with below.

1. The Executors pay themselves $35,000 commission in Dolf's Estate

68. The beneficiaries allege that on 19 September 2014 the executors paid themselves commission of $35,000, without either seeking or obtaining Court approval, conduct which should now disentitle them to any commission.

69. The beneficiaries submitted in summary on this subject:

“[102]   The Registrar therefore also erred in failing to take the Executors’ conduct (in connection with the payment of $35,000 to themselves) into account in considering whether or not to award commission (and, if so, how much).

[103]   As submitted below, it is improper (and a breach of trust) for executors to retain commission out of an Estate without obtaining an order of the Court...

[104]   This (alone) was ground for refusing commission (at all) (and this Court should refuse it on review).”

70. The executors accept that there was no proper legal basis for them to pay themselves this amount of commission. They concede that they were mistaken in making the payment to themselves. But they contend that they only made the payment after receiving (what turned out to be incorrect) legal advice that it was proper for them to do so and acting in accordance with that legal advice. The executors say that as laypersons they were entitled to rely upon legal advice given to them, until the advice is shown to be incorrect.

71. Mr Corbo’s evidence, which the Court accepts, was that the executors made the payment after asking the estate’s solicitor for advice as to whether the commission could be paid, and the solicitor advised that it was open to the executors to write to the Swiss beneficiaries to see if they consented to the payment of commission to the executors. The rationale for writing to the Swiss beneficiaries was that they were the only named beneficiaries in Dolf’s will; Dolf’s testamentary trust being the other recipient of estate funds, and the executors being the trustees of that testamentary trust.

72. It is conceded on all sides that there was ultimately no loss to Dolf’s estate from the payment of this commission. The executors proposed that the wrongly paid commission could be set off during the passing of accounts against any order for commission that might be made in their favour. The executors were not cross-examined to suggest that this was not a reasonable approach to rectifying the error.

73. In the course of considering the passing of the accounts, the Registrar ordered that the commission be repaid and it was repaid on 27 August 2017. Moreover, the estate was compensated for lost interest. The executors’ law firm, who had acted during the administration of the estate, Belbridge Hague, repaid interest of $3,914.73 applicable to the capital sum of $35,000, whilst it was out of the estate’s accounts.

74. There was no loss to the estate. Nor was any loss ever in prospect because the executors made arrangements to re-credit or repay the money (with interest), as soon as it was revealed that their legal advice was incorrect.

2. One Executor Purchases a Ford Territory Motor Vehicle

75. One of the executors, Mr Govett, purchased a Ford Territory motor vehicle which had been driven by Dolf. It was purchased for $16,500, when a valuation that Mr Govett had obtained two days before valued it at $21,000. He later sold it for $22,500, allegedly making a $6,000 profit. The beneficiaries allege that, in breach of his fiduciary duty to the estate, Mr Govett made an impermissible profit in what was an act of self-dealing by a trustee, such as would now warrant the reduction in the executors’ commission. They submitted:

“[149]   This Court should find that, in breach of his fiduciary duties as an Executor (and in breach of trust), Mr Govett knowingly purchased the Ford Territory at an undervalue (and attempted to conceal this from Matthew & Daniel (both at their Babs Court meeting in early July 2013 and subsequently)).”

76. The Ford Territory was an asset of HBPE, not Dolf’s estate. Although this does not make much difference to the proper judgment of Mr Govett’s conduct, as he and Mr Corbo were undoubtedly acting in the position of directors of HBPE during their administration of Dolf’s estate.

77. The first part of the beneficiaries’ case is that the Ford Territory vehicle was purchased at undervalue for $16,500. But there is no reliable valuation evidence for the vehicle at the date of purchase. They advanced a letter from HS West Motors that provisionally valued the vehicle in the range $23,000 to $27,000. But HS West Motors’ letter was qualified on the basis that the valuation would depend on the vehicle’s actual condition and what expenditure was required to present it in a good saleable condition. The executors’ case criticised the beneficiaries for not calling the author of the letter, Mr Leon West, to give evidence and be cross-examined. But in proceedings such as these, efficiency does not call for every valuation witness to be cross-examined. But Mr Govett’s evidence is that at the time the vehicle was not in “a good saleable condition”, devaluing the significance of the HS West Motors’ letter. The Court accepts the executors’ evidence that at the time of Dolf’s death, the Ford Territory was damaged on both the front and side panels. The contemporaneous repair invoices for the vehicle establish such damage. The executors genuinely and reasonably formed the opinion that it would not advantage the estate to sell the Ford Territory in a damaged condition.

78. The beneficiaries also advanced a letter from Blacklocks identifying a “trade in: quick appraisal” value for the vehicle of $21,000. But a trade in value is not market value. And the Court accepts Mr Govett’s evidence that the author of this letter, Mr Sam MacDonald, only “had a quick look” at the vehicle. For these reasons, none of the beneficiaries’ evidence as to the value of the vehicle is particularly reliable.

79. The executors did obtain a presale estimate of the value of the vehicle from Mr Chris Risman of Brad Jones Racing. This was not in writing and was not entirely satisfactory for that reason. This source of valuation evidence emerged in Mr Govett’s cross-examination, and the Court accepts his evidence on that subject. He did not go through that transaction without some evidence of value. But it was not put to Mr Govett that it was not reasonable for him to rely on Mr Risman’s estimate.

76. The $16,500 was paid to HBPE. Mr Govett did use the vehicle. The Court accepts his evidence that his use was for estate purposes, including transporting personal items including clothing. So Mr Govett did not profit from possession of the vehicle in any other way. The car was sold for $22,000. There can be no reasonable dispute that the market value was $22,000, given that it was advertised for sale for 5 months.

77. In the Court’s view, this is not an issue that detracts in any way from the award of commission to Mr Govett and Mr Corbo. In summary, even if the Court had the power in an application for commission such as this, under Probate and Administration Act, s 85, to make findings in relation to a breach of trust, this is a matter on which the executors have acted honestly, reasonably and ought fairly to be excused for any breach of trust and for failing to obtain the directions of the Court: Trustee Act1925, s 85.

78. It was obviously wholly uneconomic for these executors to seek the directions of the Court under Trustee Act, s 85, to permit them to purchase this property from Dolf’s estate. The application to this Court would probably have cost more than the value of the Ford Territory and much more than their alleged profit. The executors’ conduct was honest at all times in relation to this transaction. The small profit from the transaction was always going to be repaid as part of the plan and there was no loss to the estate. And the estate benefitted from HPBE having the liquid funds to meet its debts as and when they fell due.

79. The Court accepts the evidence of both the executors that Mr Govett acquired the damaged vehicle to maximise the return to the estate from the sale of the vehicle and to solve cash flow issues for the estate. The registered office of HBPE was in the State of Victoria. The Court accepts Mr Govett’s evidence that HBPE’s bank account was frozen when its sole shareholder and director died. HBPE had rising debt levels at the time. The executors believed that the company’s debts would continue to mount and it was unlikely that the company’s bank account could be made operational again before probate was first granted in NSW, and then resealed in Victoria. In the meantime, the company did not have enough liquid funds to repair the Ford Territory to put it into saleable condition.

80. Mr Corbo genuinely thought that the Ford Territory was “worth fixing up a bit to try and get maximum value for the estate.” He emphasised that as HPBE’s bank account was frozen, no funds were available from within the company. So the executors’ agreed solution was transferring the car to Mr Govett, he would pay the costs of its repair, then any profit would be returned to the estate.

81. Once Mr Govett and Mr Corbo had given this account in their evidence, the Court expected the beneficiaries to cross-examine them upon it. But this did not happen. So the Court asked the beneficiaries if they wished to challenge Mr Corbo’s evidence, the executor not directly involved in the transaction. Mr Grant, counsel for the beneficiaries, elected not to challenge this evidence.

82. The Court accepts the evidence of the executors that their plan was always to pay any profits from the sale of the Ford Territory back to HBPE or the estate. They were not challenged that this was their motivation and the Court accepts that it was. And that is what they did. So in the end although Mr Govett put himself in a position of conflict of interest and duty by acquiring an asset from HBPE, neither he nor Mr Corbo profited from the conflict. And the overriding purpose of the transaction was not to make profit so much as to free up some cash for HBPE in the estate.

3. The Executors’ Fail to comply with Orders to file Accounts in Maureen's Estate

87. The beneficiaries claim that the executors did not comply with the Court's order of 18 May 2010 to file accounts in Maureen's estate. The beneficiaries’ claim on this issue does not include a contention of default concerning accounts for the first year of estate administration up to 4 May 2011. The beneficiaries accept that these accounts were filed pursuant to the Court’s order of 18 May 2010. The claim is that later accounts were not filed, so as would now warrant the reduction in the executors’ commission.

88. The beneficiaries submitted the following in respect of the Court’s order of 18 May 2010:

“[213]   The Court’s Order of 18 May 2010 should also be interpreted consistently with SCR Pt 78, r 85(1) (which contains the 12 month requirement). The Order is that ‘Accounts are to be filed in this matter …’. The correct interpretation is that Accounts are to be filed in the matter. If administration of the (entire) Estate can be completed within 12 months, proceedings to pass Accounts (for the entire administration) are to be taken by 18 May 2011. If not, proceedings to pass the first Accounts must be taken within that time (with subsequent annual Accounts thereafter until administration of the Estate is complete).”

89. On this issue the executors say, and the Court accepts, that they relied on the advice of their solicitor: that the Court’s order of 18 May 2010 did not require them to file accounts for any period after that date.

90. Moreover, the executors did not receive any notification under Probate and Administration Act, s 87(1), nor were they ever the subject of an order under Probate and Administration Act, s 87(2), in respect of the accounts after May 2010 that the beneficiaries now complain were not filed. Probate and Administration Act, s 87 sets up a regime of notification of default in filing accounts, followed by the making of an order if default continues, so the executors are given adequate warning of the need to comply with the obligation to file accounts. Probate and Administration Act, ss 87(1) and (2) provide as follows:

“87 Effect of neglect to file etc inventory or accounts

(1)   Where an executor, administrator or trustee neglects to file, or verify and file, an inventory of the estate of the deceased or to file, or file and pass, or verify and file, or verify, file and pass, the accounts relating to the estate in accordance with a requirement made by or under section 85 within one month after the expiration of the time fixed for compliance, the Registrar shall cause the executor, administrator or trustee to be notified of the executor’s, administrator’s or trustee’s neglect.

(2)   Where, on the expiration of one month after having been so notified, an executor, administrator or trustee further neglects to comply with the requirement in respect of which the notification under that subsection was given, the Court may, of its own motion, order the executor, administrator or trustee to show cause before the Court why the executor, administrator or trustee should not be ordered to file, or verify and file, an inventory of the estate of the deceased or to file, or file and pass, or verify and file, or verify, file and pass, the accounts relating to the estate, as the case may require, in the Court forthwith.”

91. It is common ground on this issue that the Registrar did not notify the executors under Probate and Administration Act, s 87(1) in respect of any unfiled accounts after 18 May 2011. Any suggestion that the executors’ did not comply with orders to file accounts comes from the beneficiaries.

92. Moreover, the order that was made on 18 May 2011 should be construed as requiring the filing of accounts for time periods up to the date of that order. It should not be construed as imposing an open-ended obligation on the executors to file accounts for all future years. Such a construction, in any event, would be inconsistent with the scheme of Probate and Administration Act, ss 85 and 87, which requires the filing of accounts pursuant to specific orders for them.

93. In the alternative, the executors say that if they failed to provide formal accounts, when the matter was first listed before Lindsay J on 2 March 2015, they consented that day to an order that they pass the accounts and they have complied with that order.

4. Alleged Failure to Keep Proper Accounts in Maureen’s Estate

94. In this issue 4, the beneficiaries allege that the executors failed to keep proper accounts in Maureen’s estate. In issue 11, the beneficiaries make related allegations that the executors failed to give proper accounts in Dolf’s estate.

95. The beneficiaries allege that the executors failed to keep proper accounts in Maureen's estate and failed in accordance with the requirements of Re Craig (1952) 52 SR (NSW) 265; (1952) 69 WN (NSW) 205 at 267. And the beneficiaries say that the executors were not ready to provide those accounts to them, when required in accordance with the obligations as defined in Re Craig.

96. The beneficiaries made the following more specific submissions on this subject alleging errors on the part of the Registrar:

“[235]   While the Executors may have ‘eventually produce[d] documents’, they only did so for Dolf’s Estate (and not within a reasonable time). Request was made on 14 October 2014, but the documents (for Dolf’s Estate) were only produced (pursuant to this Court’s Order) on 9 December 2014 (almost 2 months later).

[236]   The question was also whether or not the Exectors had kept and rendered proper accounts in both Estates (and were therefore in breach of trust, so as to affect the question of commission). With respect, it was not whether well formatted accounts would have prevented the proceedings. The nature of Dolf’s Trust (and the Executors’ claim the Beneficiaries sought to replace them) were also not relevant to this.

[237]   The documents produced on 9 December 2014 (Ex 4) also cannot not be described as accounts (or, alternatively, proper accounts). They are a voluminous and unorganised collection of largely primary records and other documents (including correspondence) relating to with Dolf’s Estate.

[238]   As the Registrar noted, the Executors are an accountant and a financial planner. There can not be any legitimate excuse for this. Nothing was produced for Maureen’s Estate by 8 December 2014 (by which time it is submitted a reasonable time had passed).”

97. The beneficiaries contend that what they expected to see was “little ‘a’ accounts”. But their argument did not define just what “little ‘a’ accounts” meant. The basic requirements of estate accounts are stated earlier in these reasons. The beneficiaries’ submissions did not get to grips with how the accounts that the executors had provided fell short of those requirements, such as would warrant the reduction in the executors’ commission.

98. But the principal answer to the beneficiaries’ argument on this issue is that the Registrar has passed accounts in both estates up to 2016. The beneficiaries’ motions for review do not challenge the passing of any accounts. They only challenge the orders for the payment of commission and for costs. Thus the executors are able to claim the benefit of the Probate and Administration Act, s 87(3) presumption of the correctness of the accounts: “the order of the Court allowing any such account shall be prima facie evidence of the correctness of the same”. The passing of the accounts brings with it not only the statutory inference of correctness, but by necessary implication, the subsidiary inferences of conformity with Re Craig, that the accounts were kept and were provided to the Court and the beneficiaries. Whatever standard Re Craig implies for “accounts”, the Registrar’s passing of these accounts, and the lack of challenge to the Registrar’s order, means the Court can infer that that standard was met. And the procedure leading to the statutory presumption of correctness from Probate and Administration Act, s 87(3) means it would be absurd for the law to require any other different form of accounts to be provided to beneficiaries.

99. At one point on the first day of the hearing it was suggested by counsel on behalf of the beneficiaries that not all the accounts that the executors claimed in their affidavit evidence to have been served on the beneficiaries had in fact been served. The Court gave the beneficiaries until 10AM on the second day of hearing to tell the Court what particular accounts the beneficiaries contended had not been provided to them in the past. The Court required the list to be provided by 9AM the following morning, otherwise the beneficiaries would lose the right to dispute that those documents had been served on them. No notice of dispute was served by the beneficiaries by following morning. There is therefore no subsisting issue about providing accounts to the beneficiaries. Indeed, the full list of the account documents that the executors say they kept and provided to the beneficiaries are described in Schedule C to an affidavit of Ms Paige Rolfe. All these documents were both kept by the executors and provided to the beneficiaries.

100. But the Court has done its own high-level review. The executors have put into evidence the documents that have been provided to the Court, being the first draft of the accounts provided to the Registrar and the accounts that were ultimately passed. The Court’s own examination of these accounts shows that they generally comply with the requirements of Re Craig.

101. The beneficiaries’ submitted at one stage that the executors did not reply to their correspondence seeking accounts and related documents. It was contended there was no reply to the beneficiaries’ letter of request of 14 October 2014. The Court accepts that the executors did reply to this letter on 7 November 2014, 12 November 2014 and 4 December 2014 and that there is no justifiable case of poor conduct to be made out against the executors warranting any reduction in the commission, based upon a failure to respond to the beneficiaries’ correspondence. There was a blanket tendency on the part of the beneficiaries in this correspondence to request primary accounting documents such as receipts and invoices rather than secondary accounting documents such as ledgers and financial statements. There are limits to which executors are required to provide such material.

102. The executors argue that the beneficiaries lost any entitlement to accounts because they were not willing to pay for the cost of providing the accounts. The executors are relying upon the important qualification to Re Craig that a trustee/executor is not bound to supply copies of accounts or trust documents which necessitates expenditure, except at the cost of the beneficiary who requires them: Re Bosworth (1889) 58 LJ Ch 432. The executors point out that here there is no evidence that the beneficiaries offered to pay for the executors to provide the accounts to them. But the executors did provide accounts to them in response to their request and did not take this point at the time. The point is not available to them now.

103. Finally, the beneficiaries submit that the reason that the Court ordered the executors just before the commencement of the hearing to provide the current net balance of the estate, is because they could not understand what the current value of the estate was based on the accounts that had been passed.

104. But this is not accurate. The accounts that had been passed by the Registrar were accounts up to 2016, almost 4 years before the hearing. It could not be expected to look to these accounts to identify the current balance of the estates as at the date of the hearing.

105. From the Court’s consideration of this issue, there is no basis to reduce the commission that the Registrar awarded to the executors.

5. Failure to Disclose and to Administer all of Maureen's Property

106. The beneficiaries allege that the executors failed to disclose all of Maureen's property to the Court on their initial application for probate and that the executors subsequently failed to administer that property properly. The following items of Maureen’s property was alleged not to have been disclosed:

1. Maureen's 50% shareholding in HBPE;

2. Loans due to Maureen from HBPE;

3. Maureen’s jewellery; and

4. Maureen’s furniture, personal effects and household chattels.

107. Maureen’s 50% shareholding in HBPE. As to sub issue (1), the beneficiaries allege that Maureen’s equity in HBPE was not disclosed in the initial application for probate in her estate.

108. The beneficiaries conceded no loss resulted from the executors' failure to disclose Maureen’s shareholding in HBPE.

109. But there was no failure ultimately to account for Maureen’s shareholding in HBPE, which passed to Dolf. All the shares in HBPE were accounted for in the administration of Dolf’s estate.

110. HBPE Loans. As to sub issue (2), the beneficiaries allege that Maureen’s equity and loan interests in HBPE were also not disclosed in the initial application for probate in her estate.

111. The executors explained that they did not disclose Maureen’s loan to HBPE because the loan was a joint directors’ loan that passed to Dolf by survivorship, not through the estate. The Court accepts Mr Corbo’s evidence that Maureen and Dolf’s directors' loans to HBPE were not itemised in the books of the company as individual loans but were treated as being owed to the couple jointly. This had been the position ever since he had been the couple’s accountant.

112. And once again, the beneficiaries did not contend any loss arose from their failure to disclose the HBPE loan in Maureen’s estate. The loan was ultimately dealt with in the course of the administration of Dolf’s estate.

113. Maureen’s Jewellery. As to (3), Maureen’s jewellery, the beneficiaries allege that the executors obtained and disclosed neither an inventory nor a valuation of Maureen’s jewellery in their application for probate of her estate.

114. The executors say that there was an agreement to deal with the jewellery informally. The beneficiaries dispute in their submissions that the affidavit evidence of executors justifies that conclusion. But the executors affirmed this in their oral evidence.

115. The executors dispute the beneficiaries’ interest in raising this issue. They say the beneficiaries had no interest in Maureen’s jewellery as Maureen’s will expressly gifted it to Dolf. But this answer is not persuasive. Dolf’s will bequeathed the jewellery to Matthew and Daniel, so they had at least an indirect interest in having a proper inventory of the jewellery available.

116. The beneficiaries could not point to any particular missing jewellery or any other specific loss arising from the executors’ failure to itemise an inventory of jewellery.

117. Maureen’s Furniture. As to (4), Maureen’s furniture, the beneficiaries allege that the furniture either owned or co-owned by Maureen at the time of her death included some items of substantial value. The beneficiaries say that no proper inventory was ever made of this furniture and that no valuations or appraisals of it were ever obtained.

118. It can be accepted that the executors did not disclose Maureen’s furniture in their application for probate of Maureen’s estate.

119. But the executors point out that the household furniture at Babs Court was jointly owned with Dolf, so he inherited it by survivorship. Alternatively, Maureen expressly bequeathed to Dolf any furniture that was not jointly owned. They say therefore that the beneficiaries had no interest in this complaint about an inventory for Maureen’s furniture. The beneficiaries could not identify any specific loss arising from the executors’ failure to disclose an itemised inventory of Maureen’s furniture.

120. None of the matters raised under this issue provides any reason to disturb the Registrar’s assessment of commission for these executors of these two estates.

6. Alleged Failure to Identify the Objects of Maureen’s Testamentary Trust

121. The beneficiaries allege that after Maureen’s death the executors failed to identify all of the beneficiaries under Maureen’s will and under Maureen’s testamentary trust, namely her children and grandchildren. They allege that this remained the case until the Backhouse brothers expressed concerns in October 2014 about the executors’ lack of action on this subject.

121. The beneficiaries submitted as follows on the subject:

“[332]   The Beneficiaries submit this discloses a breach of trust by the Executors (in Maureen’s Estate). Maureen had died on 29 January 2010, but searches as to the identities of all existing beneficiaries (or potential objects) only began to be made in October & December 2014.

[333]   They also submit this discloses a lack of good faith on the Executors’ part (which this Court can and should take into account on commission).”

123. It is difficult to see how that this issue could possibly affect the award of commission to the executors. The executors were not cross-examined about the issue and the beneficiaries do not claim that they have suffered any loss by reason of the executors’ conduct.

124. This issue is emblematic of the tensions between these parties and the, at times, unreasonable conduct of the beneficiaries in respect of some of the issues now being raised. The executors asked the beneficiaries for assistance to identify the objects of Maureen’s testamentary trust. In reply, Daniel Backhouse surprisingly declined to provide any details about his own daughter. Beneficiaries who fail to cooperate in providing such identification information to the trustees have no persuasive authority to complain about the executors’ failure to find the identification information.

7. Failure to Lodge Tax Returns for Maureen’s Estate

125. The beneficiaries allege that the executors failed to prepare, or to lodge, tax returns for Maureen's estate. The beneficiaries allege this was a significant default, particularly because one of the executors, Mr Corbo, was an accountant.

126. In criticism of the Registrar’s decision the beneficiary submissions made the following points:

“[351]   However, it was not Mr Corbo’s evidence that he considered it more efficient to lodge all tax returns together ‘on 26 November 2014’. More fundamentally, the Registrar did not address the Beneficaries’ basic point that all tax returns had only been lodged after repeated request (and the filing of the 14 November 2014 Motions).

[352]   The amount of tax payable was also, with respect, beside the point. The submissons as to Dolf’s Estate do not appear to have been considered at all.

[353]   The Beneficiaries submit the evidence is clear that the tax returns (in both Estates) were only lodged after repeated request for an explantion by the Beneficiaries (commencing on 11 July 2014) and the filing of the 14 November 2014 Motions.”

127. Mr Corbo’s answer to this allegation is persuasive. He said that as Maureen’s accountant of many years he knew that she had no tax to pay. In his professional judgment in dealing with the ATO, in the case of the taxation affairs of a deceased estate there was no risk of adverse action by the ATO if he took steps to save the estate money. He said that he was unable to finalise Maureen’s estate and lodge a final tax return because her estate still owned the half of Babs Court that was subject to Dolf’s continuing life estate.

128. Mr Corbo said, and the Court accepts, it was cheaper for him to complete all the tax returns for Maureen’s estate at the one time and lodge them together after Dolf’s death when the estate could be finalised, rather than do them one at a time over a number of years. He said, and the Court accepts, that this saved Maureen’s estate $2,000 to $3000 in professional accountancy fees.

129. Once again, the beneficiaries cannot point to any loss arising from the executors’ conduct on this issue. The available evidence on the issue shows that the estate made a significant financial saving because of Mr Corbo’s exercise of professional judgment without being exposed to any other financial risk. There is no basis to criticise the executors on account of this issue.

8. Failure to Maintain and Market the Babs Court Property to its Best Advantage

130. The beneficiaries allege that after Dolf's death in June 2013 that the executors failed properly to maintain and to market the Babs Court property.

131. The beneficiaries allege that the executors neglected the Babs Court property in a number of ways. The beneficiaries say that the executors’ neglect was discovered during Daniel’s visit to the Babs Court property in July 2014 when the property was being marketed for sale. The beneficiaries say the executors’ neglect was evident in the following respects: lawns were not mowed; gardens were dead; small trees were growing out of gutters; cool rooms were still running even though the property was unoccupied; electricity and telecommunications services had not been disconnected; and an infestation of millipedes had colonised the inside of the house throughout the carpet and inside the walls of the property. The beneficiaries contended that the executors’ neglect had diminished the property’s marketability.

132. On this subject the beneficiaries submitted the following about the evidence of the parties and of certain written statements that were tendered:

“[391]   The Beneficiaries also submit the Executors failed properly to maintain and market Babs Court for sale.

[392]   The (unchallenged) evidence of Mrs Lawler as to the condition in which she and Daniel found Babs Court on 6 July 2014 should be accepted. It is also substantially corroborated by Mr Govett’s and Ms Jackson’s contemporaneous file notes.

[393]   Matthew’s (unchallenged) evidence on the other matters referred to above (under ‘Relevant facts’) should also be accepted. For the reasons submitted above, to the extent this conflicts with the evidence of Mr Govett, Mr Govett’s evidence should not be accepted.”

133. On this issue, each side criticised the other on the grounds that various written statements of potential witnesses were not cross-examined upon. But in a challenge to an award of executors’ commission of less than $80,000, the Court was not going to allow witnesses to be cross-examined on either side on issues such as this. The executors criticised the beneficiaries for not cross-examining the real estate agent, Mr Chris Philpott, who the executors relied upon to give evidence about the state of the Babs Court property, and the viticulturist, Mr Mark Walpole, who gave evidence about the state of the vineyard attached to the property. The executors also criticised the beneficiaries for relying in their case upon hearsay statements about the property from Ms Margaret Lawler and Daniel Backhouse. But the Court was not prepared to turn this into a full-scale hearing on all issues and was left to do the best it could to weigh the written material from these witnesses and compare and contrast it with the oral evidence.

134. The Court accepts the executors’ detailed refutation of this claim. Mr Corbo and Mr Govett both looked after the Babs Court property. Mr Corbo gave well remembered and precise evidence about what he did to look after the Babs Court property before it was sold, all of which the Court accepts. He gave a strong impression to the Court of being an executor who cared about getting the best price for estate assets. His office was some 80 kilometres away from Tocumwal, where the Babs Court property was situated. His habit was to close his office and drive to the Babs Court property to meet pest controllers, builders and other tradesmen. He was familiar with Dolf’s hobby vineyard at the property and was in a position to get the best assistance to maintain it.

135. In the Court’s assessment, both Matthew and Daniel Backhouse looked with an overly critical and fault finding eye at the work of the executors concerning the Babs Court property. The Court accepts the executors’ explanations of the beneficiaries’ criticisms about the poor state of the Babs Court property when they observed it. The grass was couch grass that dies off in winter. The plants were annuals and were probably dormant when observed. The Court accepts that the executors employed the same gardener that Dolf had employed during his lifetime. The executors had the grass around the house mowed. But the grass among the vines was not mown: that was an agricultural area and there was a risk of damage to the gardener’s mower. And the executors rely upon an affidavit of a viticulturist, Mr Walpole, that the vines were properly maintained.

136. The Court accepts the executors’ refutation of the allegation there were large weeds or small trees growing out of the gutters of the Babs Court property. The gutters had gutter guards and the executors’ regularly visited the property. The Court accepts they did not witness this phenomenon.

137. The executors explained, and the Court accepts, that the cool room at the property needed to be left running, because turning it off increased the risk of the loss of refrigerant gas, which would then require further servicing and gas replacement. And the executors left the electrical power to the Babs Court property on and the telephone lines connected so that the alarm system would continue to function.

138. From time to time, the executors commissioned professional cleaners at the Babs Court property. And at times they were not satisfied with these cleaners and required them to redo their work. The Court accepts Mr Corbo’s evidence that the executors attended the property “numerous times”. The Babs Court property had an acknowledged white ant problem. The executors were conscious of this and sought to contain it by engaging regular pest control services.

139. To mount their attack on the quality of the executors’ maintenance of the Babs Court property, the beneficiaries relied on Mr Govett’s file note of a meeting he held with Daniel Backhouse. The file note lists deficiencies in relation to the property. But Mr Govett explained that these deficiencies were not his own observations of what he thought of the property. Rather they reflected Daniel Backhouse’s instructions about what he (Daniel) thought needed to be done by way of maintenance at the property, instructions with which Mr Govett did not necessarily agree.

140. Finally, correspondence at the time of sale of the Babs Court property does not suggest there had been any unremedied maintenance problem there. The real estate agent, Mr Philpott, sent an email to the executors on 20 October 2015 expressing the opinion that “I believe the property was shown in the best possible light.” Moreover, the property was on the market for nine months. Mr Philpott opened the property for inspection on nine occasions. Mr Philpott did not relay any dissatisfaction about the state of the property or its maintenance to the executors resulting from these viewings.

141. The Court sees nothing in the executors’ conduct of maintenance at the Babs Court property which would warrant consideration of any reduction in their commission.

9. Failure to Conduct a Competent Sale of the Babs Court Property

142. The beneficiaries allege that the executors did not competently conduct the sale of the Babs Court property. They point to specific alleged defaults on the executors’ part associated with the sale.

143. First, the beneficiaries say that the executors made three attempts to sell the property to the (same) ultimate purchasers. And the executors ultimately agreed to reduce the originally agreed price for the sale of the Babs Court property down to $465,000.

144. Second, despite the fact that the Backhouse brothers had expressed interest in purchasing Babs Court from Dolf's estate, the executors sold the property to a third party without seeking any offer from (or otherwise consulting) the solicitor for the Backhouse brothers.

145. The beneficiaries submitted on these subjects:

“[399]   The onus lay with the Executors, but no explanation was given in the (extensive) Affidavit evidence served (in February 2016) for the $20,000 reduction in price. The Executors also claimed the failed Contracts for Sale were conditional, but they did not tender them. Even if they were, such a reduction in price should not have occurred. There was also no explanation of the (abnormally small) deposits of $3,000 (0.6185%) (or why they were refunded on each occasion). In such circumstances, the Court should resolve any doubts against the Executors : Byrnes v Kendle (2011) 243 CLR 253 at 270-271 [42]-[43].

[400]   On any view, it cannot be said the Executors obtained the best price. In the letter from Walsh & Associates dated 11 July 2014, Matthew & Daniel clearly expressed an interest in purchasing Babs Court (including the 30% notional interest of the Swiss). However, the Executors exchanged contracts with the Campbells on 25 July 2014 without seeking any offer from Matthew & Daniel.”

146. The executors agreed with the real estate agent, Mr Philpot, to list the Babs Court property for sale in October 2013 for $499,000. In Mr Philpot’s opinion, this asking price was at the high end of what the vendors might reasonably expect to achieve on sale. The Babs Court property consisted of a house situated in about two acres of land which Dolf had planted with four rows of grape vines about 100 metres long. It was a hobby farm, which was under a flight path, without river frontage, and was priced higher than most residential properties and hobby farms in the area. Not every purchaser is interested in viticulture, somewhat limiting its appeal in Mr Philpot’s opinion.

147. The beneficiaries contend that the executors should not have entered into conditional contracts for the sale of the Babs Court property. But the Court accepts that during the 11 months that Babs Court was on the market, there was only limited interest shown by purchasers. There were only six viewings and only one potential purchaser emerged, a Mr and Mrs Campbell. They made an offer but were only prepared to proceed on the basis that they could sell their existing property. The executors entered into a contract with them on 4 February 2014 for $465,000 on this basis.

148. To the extent that the beneficiaries complain about the price of $465,000, Mr Govett’s diary records that Daniel and Matthew Backhouse were spoken to by the executors about the price on the day that contracts were exchanged. The Court accepts that Daniel and Matthew had no issue with the proposed purchase price at the time, whatever they may say now.

149. The Campbells could not sell their existing property. The first contract did not proceed. The beneficiaries contend that the executors should not have refunded the deposit to the purchasers when the first contract did not proceed. The Court accepts that the contract was unenforceable because the condition was not fulfilled and the executors were bound to refund the deposit.

150. Subsequently, on 25 July 2014, the Campbells entered into a second contract with the executors to sell the property for $465,000. This contract was unconditional. The Campbells had sold their existing property. The Court accepts the executors’ judgment of the situation that had they insisted on an unconditional contract at the beginning then the Campbells would probably not have entered any contract for the Babs Court property.

151. Matthew and Daniel Backhouse claim that they were interested in purchasing the Babs Court property. The executors could treat with them about the possible sale of the property, if the executors so chose, but were not obliged to do so. The issue here is whether Backhouse brothers claimed interest in the property was worthy of further investigation. The executors judged that it was not.

152. Matthew and Daniel Backhouse did not commit to purchasing the Babs Court property. The Walsh and Associates letter sent on behalf of the Backhouse brothers on 11 July 2014 touched upon this issue among many others. It requested valuations for “all jewellery, Babs Court property, Denison cabin and all items that are currently in storage”. It continued, “[o]n receipt of the above my client will be in touch concerning the buyout of the overseas beneficiaries’ 30% share in the home and cabin”.

153. But the Backhouse brothers are two of a class of objects of the discretionary testamentary trusts. They cannot speak on behalf of the trusts. The Backhouse brothers were not entitled to treat with the executors on the basis that they could acquire the Babs Court property by paying 30% of its value to the Swiss beneficiaries. That ignores that the other objects of the two discretionary trusts are represented in these proceedings by Ms Jarrett. At this time they were unrepresented. Leaving aside these problems, the correspondence on behalf of the Backhouse brothers at this time does not present them as realistic purchasers, when the Campbells were in active negotiations and signed a contract for sale with the executors on 18 July 2014.

154. This is not a basis to reduce the executors’ commission.

10. Failure to Market Dolf’s Cabin at Lake Mulawa

155. Dolf had erected a Kybren prefabricated “Denison” Cabin on land he owned at Lake Mulwala on the Murray River. The land and cabin were ultimately sold for less than their sworn probate valuation. The beneficiaries’ claim the executors had failed to maintain and market this property.

156. Among other contentions the beneficiaries submitted on this subject:

"[440]   Matthew’s (unchallenged) evidence as to the condition in which he found the Cabin (and the Site Administrator’s complaints about it) on 3 March 2014 should be accepted. So too should his evidence that, as at 3 March 2014, the Executors had previously had access to the Cabin (because the furniture, Dolf’s good quality wine (and other personal items of Maureen & Dolf) had been removed).

“[441]   Again, this was at a time the Cabin was on the market for sale.

[442]   On 7 July 2014, Daniel clearly requested a written valuation for (among other things) the Cabin (which was repeated in the Walsh & Associates letter of 11 July 2014).

[443]   It was clear from that letter that this was with a view to Matthew & Daniel purchasing the Cabin (including buying out the nominal 30% interest of the Swiss).

[444]   However, there is no evidence the Executors approached Matthew & Daniel for any offer before selling the Cabin in March 2015. In fact, there is little evidence from the Executors about the sale of the Cabin at all.

[445]   As submitted above (concerning Babs Court), the Executors’ duty was to provide a full and proper account of what had occurred (including an explanation of why they did not approach Walsh & Associates or Matthew & Daniel for an offer).

[446]   However, despite the Executors’ extensive Affidavit evidence, this has not occurred (including the Contract for Sale not being in evidence). In such circumstances, the Court should again resolve any doubts against the Executors: Byrnes v Kendle (2011) 243 CLR 253 at 270-271 [42]-[43].”

157. The beneficiaries cross-examined Mr Govett about the failure to obtain a formal written valuation of the property. But Mr Govett explained that a formal valuation was not obtained because of its likely cost. This is a not unreasonable approach to the sale of a specialised property. The executors did have an estimate of value and advice from the real estate agent, Mr Philpott, to put the property on the market for $499,000. Mr Govett acknowledged he did not get a valuation from a registered valuer but the Court accepts he discussed value with the manager at the cabin park, and a real estate agent from nearby Yarrawonga. The Court does not accept Matthew’s evidence about the condition of the cabin. And as to the Backhouse brothers alleged interest in purchasing the cabin the correspondence on their behalf does not make an offer to purchase it. Rather it makes same impermissible generalised offer to buy out the Swiss beneficiaries’ 30% interest in the asset.

158. The beneficiaries have not identified particular loss arising from their criticism of the executors in relation to this sale. It is not a basis for reducing the executors’ commission.

11. Alleged Failure to Keep Proper Accounts in Dolf’s Estate

159. The beneficiaries make the same allegation of failure to keep proper accounts in relation to Dolf’s estate as they had in respect of Maureen’s estate (in issue 4). This issue is decided in the same way as the related issue 4 and for much the same reasons.

12. Failure to Disclose Dolf’s Property in the Application for Probate

160. The beneficiaries allege that the executors failed to disclose all of Dolf's property in the initial application for probate on 8 October 2013 and that the executors subsequently failed properly to administer this property. The property alleged not to be disclosed was:

1. Dolf's 100% shareholding in HBPE;

2. Dolf’s jewellery; and

3. Dolf’s furniture, personal effects and household chattels at Babs Court.

161. As to (1), after Maureen’s death Dolf's inherited her 50% of the issued shares in HBPE, so he then owned 100% of the company’s issued share capital. The beneficiaries contend that Dolf’s shareholding in HBPE did not appear in the executors’ initial application for probate in Dolf’s estate.

162. What does appear in the inventory of property filed with the application for probate in Dolf’s estate on 8 October 2013 under the heading “debts owed to deceased” is the entry “monies owing from [HBPE] – balance as at date of death $182,262.92.” A supplementary affidavit of additional assets in Dolf’s estate was sworn by the executors on 10 March 2015, being assets of the deceased not previously disclosed, recorded two ordinary shares in HBPE valued at the date of death in the sum of $182,647.00, a sum almost $400 more than the loan. Mr Corbo explained that were the loan, as originally disclosed, repaid, the company’s assets would be reduced to almost nil, so that recording of the loan efficiently defined the value of the asset in question. No loss was occasioned to the estate by reason of the executors structuring the original inventory in this manner.

163. As to (2), Dolf owned what the beneficiaries allege was a substantial amount of jewellery, some of which was his own and some he had inherited from Maureen. The beneficiaries complain that the executors did not disclose the true value of the jewellery in the inventory of property filed on 8 October 2013 nor did they undertake a timely valuation of this jewellery. The beneficiaries do not point to any particular loss from this aspect of the executors’ administration.

164. The facts are straightforward. The jewellery appeared in the 8 October 2013 probate inventory at the nominal value of $1000. The executors did not commission a formal valuation at that time. After a valuation in December 2014, the supplementary affidavit of additional assets of April 2015 recorded the value of the jewellery at $60,140.

165. The executors came up with a scheme to treat the Australian and Swiss beneficiaries equitably in Dolf’s estate. They proposed the idea that if the jewellery was to be valued and Matthew and Daniel selected (for notional purchase) particular items of the jewellery, the Swiss beneficiaries could then be credited with 30% of the items so selected. This was one way of treating equitably the various classes of persons benefiting under the will.

166. The beneficiaries contend this system of “notional purchase” amounts to maladministration of the estate by the executors, in part because the executors did not promptly arrange a valuation.

167. But the execution of this proposal was marred by a misunderstanding between the executors and Matthew Backhouse, who thought that the executors were requiring him to actually pay money and buy the jewellery. He persisted in this misunderstanding right up until he gave evidence.

168. But the executors’ original inventory was based upon their understanding that there was an informal agreement to deal with the jewellery, or that any notional purchase would have been on the basis of the probate value of $1,000. The executors’ correspondence of 5 December 2014 records this understanding and the Court accepts that was the original proposal. It had the advantage that the estate would not have to bear the cost of a valuation. But the beneficiaries required a formal valuation, which came in at a value for the jewellery of $68,000.

169. The claim of delay against the executors is not made out. The supplementary inventory of assets was filed by 10 March 2013. Since then, the jewellery has not been distributed but this was not the fault of the executors. They asked the beneficiaries if they wanted the jewellery several times in 2015 and received no answer. Eventually the Court set up a regime in orders made on 18 March 2020 for its collection from the solicitors for the executors.

170. The Registrar found nothing wrong with the executors’ conduct here and the Court sees no reason to disturb that finding.

171. As to (3), Dolf also owned substantial quantities of furniture, personal effects and household chattels, including items that he had inherited from Maureen. The beneficiaries allege that the executors had not seen to the taking of any proper listed inventory of these items or to their prompt valuation, or to their distribution.

172. As to the allegation that the executors failed to prepare a list of the furniture, in the Court’s view, the executors did the next best thing and undertook a process which was a quite adequate discharge of their duties. They informally arranged with Matthew and Daniel Backhouse that they would place different coloured stickers on the individual items of furniture that they each wanted, then they would photograph the piece of furniture with the sticker on it, and Mr Corbo would then arrange for the furniture to be put into storage for the Backhouse brothers’ later retrieval.

173. As to the formal valuation and distribution of the furniture, the executors believed the furniture could be dealt with informally but the Backhouse brothers wanted a formal valuation, which was completed in December 2014. The executors offered the furniture to the beneficiaries in April and August 2015 but they received no response, presumably because the litigious hostilities had begun.

174. The fact the furniture was still in storage, and incurring storage charges, came to the Court’s attention during the hearing. Unlike the jewellery which was in the safe at Belbridge Hague, this furniture storage was costing the estate money. So the Court made orders on 18 March 2020 making clear that the Backhouse brothers had the right to collect the furniture immediately.

175. Any storage charges that Dolf’s estate incurred on account of this issue are as much the responsibility of the Backhouse brothers as they are of the executors, because of the beneficiaries’ failure to respond to the executors’ past invitations to collect the furniture. The executors’ conduct is not to be criticised on this account

13. Failure to Deal with HBPE’s Debt to Dolf

176. The application for probate of Dolf’s will disclosed a debt of $182,262.92 due to Dolf from HBPE. The beneficiaries allege that the executors failed to collect or otherwise deal with this debt.

177. On this subject the beneficiaries’ submissions were as follows:

“[462]   The Beneficiaries submit that the Executors failed to collect or otherwise deal with the debt (at least until the Beneficiaries began to press the matter).

[463]   On Mr Corbo’s own evidence, the debt still existed as at 2 February 2015. The Executors had been granted Probate on 8 October 2013.

[464]   In his 2 February 2015 Affidavit, Mr Corbo’s evidence was also that the balance of HBPE’s bank accounts had been deposited into that for Dolf’s Estate (with more detail given 1 year later in his February 2016 Affidavit). However, no date for this deposit (or deposits) is given in either Affidavit (merely ‘[d]uring the administration of Dolf’s estate’). No bank statement, accounting record or other contemporaneous document was tendered.

[465]   Further, even if this was an accounting exercise, there is no evidence that the accounting exercise had been completed as at 2 February 2015. The Executors were also given the opportunity to provide an explanation between October 2014 and February 2015, but the (uncontested) evidence is that they did not do so.

[466]   The issue having been raised by the Beneficiaries, the Executors also again had a duty to give a full explanation and proper account of what had occurred (but they did not do so). Any doubts should again be resolved against the Executors.”

178. The Court accepts Mr Corbo’s evidence that during the administration of Dolf’s estate he closed HBPE’s bank accounts and transferred the balance of $312,229.78 in those accounts to Dolf’s estate bank accounts. This incidentally collected the debt and created a debt in Dolf’s estate to HBPE. This is a complete answer to the beneficiaries’ contentions on this issue. There is no basis to criticise the executors’ conduct on this issue. In the Court’s view they accounted for their actions adequately.

14. Failure to Sell HBPE’s Business

179. The beneficiaries allege that the executors failed to market and sell HBPE's business. They contend that prior to Maureen's death in January 2010 HBPE's business operated as a going concern with a turnover of approximately $2 million per annum. The beneficiaries say that the executors should have taken early advantage of any goodwill associated with HBPE and explored selling it soon after Dolf’s death.

180. The beneficiaries submitted the following on this issue.

“[484]   There is no issue that Dolf was the key person in HBPE’s business. However, it is, with respect, not correct that HBPE was merely a vehicle for his services. While Maureen was alive, it was clearly effectively a partnership (with Maureen responsible for HBPE’s financial affairs and client contact).

[485]   As at 2013, the agency arrangement with Sulzer (for Australasia as a whole) had also been in existence for 23 years. The business’s assets and infrastructure were also in place. Sulzer may well have been amenable to an approach to continuing the agency with others (or its own staff), but this never occurred.

[486]   There is also no explanation from the Executors as to what became of HBPE’s plant & equipment (and other assets) (apart from a generator, which was included with the furniture : ECS, [90])). Again, the Executors had a duty to give a full explanation and proper account of what had occurred (but did not do so).”

181. But the difficulty with the beneficiaries’ contentions on this issue is that they cannot establish that HBPE had any significant market value at the time of Dolf’s death. And there is every indication from the pattern of its turnover, by the time of Dolf’s death and the nature of its business, that the executors’ opinion was correct: that it probably then had no market value as a going concern.

182. The Court accepts Mr Corbo’s evidence to the following effect that after Maureen died in January 2010, Dolf outlook saddened and he lost interest in conducting HBPE’s business. The business of the company was personal consulting services, providing the personal services of Dolf to fix equipment, mainly compressors and boilers, in oil rigs, breweries and factories. He was in the process of winding the business down when he died in June 2013. Dolf had put the factory from where the business was operated on the market before he died: indeed an offer was received on the day of his death. The business had money in the bank which kept the balance sheet stable from year to year. But sales turnover, the better indicator of business activity in a one-man business such as this, was declining markedly in the last four years of Dolf’s life. The turnover for HBPE between FY08 and FY12 was as follows: 2008 – $1,333,147, 2009 – $451,074, 2010 – $162,199, 2011 – $133,245 and 2012 – $80,222. And in the year of his death, HBPE’s taxable income continued on the same steep downward trend: it was approximately $33,000, some $15,000 of which was the sale of the Ford Territory vehicle.

183. The Court accepts Mr Corbo’s evidence that as a one-man company providing Dolf’s services, upon Dolf’s death, HBPE was only worth the realisable value of its assets. These were no more than cash at the bank, a generator (which was included in the storage with the furniture) and the Ford Territory vehicle (which was sold to Mr Govett). The Court accepts there was no other economic value to be derived from HBPE.

184. The beneficiaries’ case on this subject is weak. They advance no evidence of any potential purchaser of HBPE. And that is not surprising because such a person is unlikely to exist. Alternatively, the beneficiaries suggest that HBPE could have been sold to the Swiss company Sulzer, whose equipment Dolf was an expert in servicing. But Sulzer did not have a distribution or licensing agreement with HBPE in Australia, which may have had realisable value. HBPE was not an authorised franchisee or distributor of Sulzer, but was merely a preferred repairer. But a possible sale to Sulzer was really speculation, because Matthew Backhouse had not had any discussions with Sulzer, which might suggest any purchasing interest on its part in HBPE.

185. The executors’ evidence is to be accepted that there was no point in marketing HBPE for sale as a going concern because there was nothing to sell without Dolf. In the Court’s view, the executors are not to be criticised for not attempting to market the company for sale.

186. There is no basis to criticise the executors’ conduct in not attempting to market HBPE for sale soon after Dolf’s death. Indeed, they prudently saved the estate money by not wasting its funds on a fruitless marketing exercise.

15. Failure to Lodge Tax Returns for Dolf’s Estate

187. The beneficiaries allege that the executors failed to prepare and lodge tax returns for Dolf's estate. They contend this was especially deficient because Mr Corbo is an accountant.

188. The executors lodged Dolf’s tax returns for FY14 and FY15 on 1 February 2016. The FY14 return was slightly overdue. Dolf's estate’s tax return for FY14 was due to be filed by 31 May 2015. But the Court accepts that Mr Corbo appreciated HBPE had franking credits which could be used to the advantage of Dolf’s estate. He first wanted HBPE to issue fully franked dividends to Dolf’s estate in FY14 to reduce its tax burden. Mr Corbo also estimated that Dolf’s estate would have to pay some tax and, in his experience, there was no probable downside to the estate waiting to pay the tax to the ATO, allowing Dolf’s estate to earn interest income in the meantime. And there were undoubtedly cost savings in doing the FY14 and FY15 returns together, as there had been with Maureen’s estate.

189. But the beneficiaries’ contention is complicated by the fact that in December 2014 they requested that the status quo be maintained pending resolution of this litigation. It was only on 23 November 2015, that Lindsay J noted that the beneficiaries “do not object” to the executors “proceeding hereafter to lodge such tax returns they may be obliged to lodge in relation to the estates and testamentary trusts associated with the estates”. The returns were filed in February 2016 soon after this notation.

190. The beneficiaries do not identify any adverse ATO action or other financial loss occasioned to Dolf’s estate arising out of this issue. The executors conduct on this issue does not adversely affect their claim to commission.

16. Delegating Executorial Duties to Belbridge Hague

191. Ms Nicole Jackson, a probate clerk at Belbridge Hague has been engaged to undertake many tasks in relation to the administration of both estates. The beneficiaries allege that Ms Jackson performed substantial executorial duties for the executors and in relation to the administration of the two testamentary trusts. They contend that it is not permissible for the executors to employ Ms Jackson and to charge the estates to perform what are effectively their executorial duties in the day to day administration of both estates.

192. The contention that the executors retained a probate clerk to provide assistance can be analysed in two sub issues: (1) whether the work of the probate clerk so diminished the executorial work undertaken by the executors that their commission should be reduced; and (2) whether any part of the legal bills rendered for Ms Jackson’s work should be disallowed on the basis that the work was really executorial in nature, because, as the earlier authority shows, professional fees mounted can be charged for professional work and other work of the executors can be undertaken personally.

193. As to issue (1), these executors did a very substantial amount of executorial work themselves. Based on its own independent assessment and having seen them cross-examined, the Court agrees with what the Registrar said (at [96] and [97]) about the nature of these executors’ work on these estates:

“[96]   Maureen and Dolf appointed two people they knew and trusted, and who were familiar with their affairs. I placed a great deal of store in the fact that they chose Mr Gavett and Mr Corbo to be their executors and represent their estates upon her death and that the Executors have not received any personal benefit.

[97]   The Executors pains and trouble are set out in their affidavits for each estate, sworn 15 September 2017. Both expressed how deeply stressful the conflict and litigation had been for them professionally, personally and on their families. Mr Corbo expressly stated that he had only agreed to accept the roles out of respect for Maureen and Dolf, but that his business has suffered, he had suffered financially and it is a decision he deeply regrets.”

194. In stark contrast to the submission that is made by the beneficiaries, these two executors were very “hands on” in the discharge of their executorial duties, evidenced by detailed diary entries. They were directly and personally involved in a wide range of estate administration functions. Some examples are the following: they personally attended the Babs Court property on occasions when the furniture was removed, when pest control was undertaken and when the wine stocks were cleared; they took personal items to op shops; they arranged garage sales; they personally attended at the Lake Mulwala cabin; and they personally liaised with real estate agents in relation to the sale of the Babs Court property, the Lake Mulwala property and the factory.

195. And they did not receive any legacy under either Maureen’s or Dolf’s wills. Their only recompense for their pains and trouble was an award of commission.

196. These executors bore a weightier burden than many in the administration of these estates. That should be quite evident from the Court’s disposition of the beneficiaries’ largely groundless contentions in these reasons. In her reasons, the Registrar commented aptly upon the responsibility the executors carried in these two estates reasons, comments with which the Court entirely agrees, as a result of its own separate assessment of the evidence, the quality of the executors’ performance of their duties and the experience of the contest between these parties. After mentioning that the executors should have been more transparent in their dealings with the beneficiaries and that their accounts could have been kept in reasonable order to be able to be produced on request, the Registrar said (at [107] and [108]):

“[107] On balance I am satisfied that the Executors went about the business of administering the estate with reasonable diligence and care, in spite of the litany of complaints from the Beneficiaries. In my view the Beneficiaries have embarked on a fault­ finding exercise rather than a fact-finding exercise. It is as though the Executors are guilty of all allegations until they have proven beyond reasonable doubt (with evidence that is acceptable lo the Beneficiaries) that a particular allegation is untrue. The Beneficiaries seem to have approached every action of the Executors with suspicion and a relentless determination to uncover· some sort of misdemeanour, even when the allegation evinces no prejudice to the estate. Every question or request for documents incorporates an implicit accusation that builds momentum the more times it is repeated. The unremitting criticism levelled at the Executors has in my view been unwarranted and unreasonable. In spite of the force of the objections, the Executors have answered each one of them and the requisitions to my satisfaction, and for that reason I passed the accounts.

[108] The Executors have carried great responsibility, suffered significant anxiety and worry and completed a great deal of work in two estates where they receive no benefit and where they were personally selected by the testators to represent their respective estates. In my view, they have acted in good faith to fulfil their duties. Because of the parties pain and trouble which they have experienced I did increase the percentage that I would normally award on capital realisations but that increase was conservative, as given the toxic nature of the proceedings, I did not want to trigger further litigation.”

197. The two executors, Mr Corbo and Mr Govett, bore unusually high “pains and troubles” in the administration of these two estates. The Registrar expressly recognised this in her award of commission to them. The Court sees no basis to fault this aspect of her approach to the award of commission.

198. As to issue (2), the Registrar has already fully moderated some of Ms Jackson’s costs and ordered executors to refund $4,280.85 to the estate on the basis that they were legal bills for what were really the execution of executorial duties. The Registrar required the amounts to be refunded and for the executors to provide proof of the refund, and for Ms Jackson’s executorial costs to be paid out of the executors’ commission. The executors subsequently refunded the amount to the estates. The Registrar then expressly commented (at [105]) that she had not taken this amount into account in considering the award of commission to the executors. The Court sees no reason to differ from the Registrar’s assessment of the degree to which Belbridge Hague’s fees should be moderated.

199. But otherwise, to the extent that some of Belbridge Hague fees were in relation to professional non-executorial costs, the executors are entitled to charge these fees to the estates, without adversely affecting their claim to commission: In the Will of Sheppard.

The Executors’ Notice of Motion

200. As the extract above from paragraph [108] of the Registrar’s reasons indicates, she accepted that it is usual for “the executors’ cost of preparing the accounts [to be] on the indemnity basis, when they have been compelled by beneficiary to file their accounts and no breach of duty is found.” But in this case she decided to “err on the side of caution” and only award these costs on the ordinary basis.

201. In their motion, the executors seek to review this aspect of this decision, contending that the Registrar should have allowed the executors’ costs on the indemnity basis, or at least on a party/party basis. The beneficiaries submitted on this issue as follows:

“[570]   The Executors’ costs have also been awarded on the ordinary (or ‘party-party’) basis (in accordance with the Court’s usual practice).

[571]   If the Executors wished to make submissions as to the quantum of those costs, in accordance with the Court’s practice, those submissions should have been filed with the Affidavits in support of commission in September 2017. It is now too late to do so (not least because the Registrar’s costs orders have been made).

[572]   The same is true for the claim for costs on the indemnity basis. There is also no evidentiary basis for the Executors to receive any costs on the indemnity basis.”

202. Ordinarily, the costs of an application for the passing of accounts and allowing of commission are a necessary incident of the administration of a deceased estate. In the event that an executor exercises a right to apply for commission, the costs of passing accounts is usually in an amount assessed on a party basis. What is, or may be, required for costs is a summary assessment of what is just and reasonable in the particular circumstances. The general principles governing the award of costs on the passing of accounts are discussed in Ford v Princehorn; Estate of Ford [2012] NSWSC 1165.

203. As the Registrar observed, the passing of accounts in these estates involved significant work over four years in Maureen’s estate and two years in Dolf’s estate. The executors were required to prepare six affidavits from the executors, a solicitor, the probate clerk, an accounts clerk, as well as a real estate agent and a viticulturist.

204. The Backhouse brothers served extensive objections. They filed objections of some 45 pages in 16 June 2015 and submissions of a further 15 pages. On 24 March 2016, the Backhouse brothers filed further objections. And on 26 June 2018, they responded to the Registrar’s requisitions even when they were not invited to respond. At other times the Backhouse brothers requested documents that have not been requested by the Registrar. The Registrar issued two requisitions in each of the estates. And she noted (at [107]) that all her requisitions were answered to her satisfaction, allowing her to pass the accounts.

205. Belbridge Hague calculated their costs of passing their accounts as $80,832.56 + GST or $88,915.82. The Registrar ordered a total of $15,000 + GST costs, broken down as to $4,500 in Maureen’s estate and $10,500 + GST in Dolf’s estate. This was well below half of the executors’ actual costs.

206. In this case the conduct of the beneficiaries in pursuing these claims, as demonstrated by these reasons, was so consistently unreasonable that the executors should have their costs of passing the accounts on the indemnity basis. Most of the beneficiaries’ arguments both before the Registrar and in this Court were so wholly without merit that they should never have been raised. They considerably added to the pains and troubles and costs of the executors. This is a most appropriate case for the executors to receive a full indemnity in respect of their costs before the Registrar of the passing of accounts.

207. This does not include the costs of this review, which will be determined separately. As Matthew and Daniel Backhouse drove the questioning of the executors’ conduct, issues may arise as between Backhouse Brothers and the other beneficiaries, who Ms Jarrett represents, as to how these costs should be borne. The same kind of issue may arise for consideration when the Court comes to deal with the costs of this review.

Conclusions and Orders

208. The Court has a very useful power of delegation for the detailed working out of its orders in executors’ commission cases such as this one. Under SCR, Part 78, r 94 the Court may refer any matter to the Registrar and the Registrar may exercise the functions of the Court in respect of that matter. The parties should consult with one another about some of the matters raised in these reasons, with a view to identifying whether it may be more efficient for some matters to be referred back to the Registrar. In the meantime, the Court will require the parties to bring in short minutes of order to give effect to these reasons.

209. The Court indicated during the proceedings that the Court would deal with issues of the costs of this application for review after giving judgment. The Court will give the parties directions to file submissions about costs commencing with the executors, who have been the more successful parties on this application. The parties’ submissions in these proceedings have been voluminous, so their cost submissions will have page limits.

210. On the question of costs, Ms Jarrett may wish to put her own submissions on behalf of the infant beneficiaries that she represents and who have submitted to orders of the Court. There may well be a case for the Court to insulate the testamentary trusts created under Maureen’s and Dolf’s wills from suffering any financial disadvantage as result of the present litigation brought by the Backhouse brothers.

211. The Court makes the following orders and directions:

1. Direct the parties to bring in agreed short minutes order to give effect to these reasons by Monday, 16 November 2020 at 4PM and if the parties cannot agree then a single set of orders but marking up the differences between the parties should be provided by Wednesday, 18 November 2020 at 4PM.

2. Direct the executors and the applicants to provide submissions in relation to the costs of this review in accordance with the following timetable:

1. the executors’ submissions in chief (of no more than five pages) by 4PM on Monday, 23 November 2020; and

2. the applicants’ submissions in reply (of no more than seven pages) by 4PM on Monday, 30 November 2020; and

3. the executors’ response to the applicants’ submissions (of no more than two pages) by 4PM on Thursday, 3 December 2020.

3. List the proceedings for further mention on Friday, 4 December 2020 at 9:30AM or at such other time as is arranged by agreement of the parties with my associate; and

4. Grant liberty to apply.

Decision last updated: 06 November 2020