Allen v Union-Fidelity Trustee Co of Australia Ltd

THE APPLICATION FOR REVIEW AND ANTECEDENTS

By a notice of motion, amended after publication of the deputy registrar's "report on decision"(effectively, her reasons for judgment), the plaintiff applies to the Court (pursuant to rules 49.19-49.20 of the Uniform Civil Procedure Rules 2005 NSW) for a review of the deputy registrar's determination of his application (under section 86 of the Probate and Administration Act 1898 NSW, "the PAA") for an allowance of commission out of the estate.
The functions of a registrar of the Court (an expression defined in terms to include a deputy registrar) include the determination of an application under PAA section 86 (Supreme Court Rules 1970 NSW, Part 78 rule 94) subject to a party's right to apply to a judge for a review of the determination.
The plaintiff's application for commission was made by a summons filed, in accordance with the Probate Rules (SCR Part 78) then in force, consequent upon a direction given by White J in his judgment reported at [2012] NSWSC 1165 at [44].
In the course of his judgment his Honour made the following observations (here adapted, editorially, to reflect the current proceedings): "[26] The majority of the beneficiaries [of the deceased] have acceded to the [executor's proposal that he be allowed a commission of $10,000]. It may well be that that proposal is in the interests of all the beneficiaries. It may well be that the costs of filing accounts and attending on the passing of the accounts, plus the amount of commission which might be allowed, would exceed, and perhaps substantially exceed, the amount of $10,000 which the [executor] be paid. But I cannot proceed on the assumption that that will be the case. [27] In any event, I do not accept that the executor was justified in withholding a partial distribution of the estate whilst his claim for commission was either further negotiated or advanced by the filing of accounts and making the claim for commission. [28] The duty of an executor is to act with reasonable diligence in both realising the estate assets and discharging debts, and also in distributing the estate to those entitled (Mavrideros v Mack [1998] NSWCA 286; (1998) 45 NSWLR 80 at [104]; Garthshorn v Chalie (1804) 10 Ves Jun 1; 32 ER 743; and Re Tankard [1942] Ch 69)... [33] [The beneficiaries presently before the Court as defendants] may be acting unreasonably in insisting that the estate be put to the expense of the [executor's] application for commission. If that is so, it may well be a matter which should be reflected in any order for costs that might be made on that application, including any order that might be made as to which beneficiaries should bear the burden of a costs order if it is ordered that the [executor's] application on the passing of accounts and for commission should be borne by the estate… [34] As counsel for the beneficiaries [the present defendants] submitted, an executor is entitled to apply for commission out of the estate, but it is within the discretion of the Court whether commission is allowed and, if so, in what amount. [35] In the absence of misconduct, it would be unusual for an executor to be refused commission in circumstances such as [the present proceedings], but it is within the discretion of the Court to determine how much should be allowed. [36] … [Whether] or not the [beneficiaries, the present defendants] were acting reasonably in asserting [an entitlement to have the executor pass his accounts], the executor was not justified in withholding a partial distribution of the estate. That distribution was only made after proceedings were commenced and I infer that it was made as a result of the commencement of these proceedings…. [41] In the present case I have found that [the executor] acted in breach of his duties as executor, or executor and trustee, in withholding the distribution of the estate for so long as he has done. I do not think that an executor or trustee, properly advised, should have taken that course. [42] Moreover, whilst it might well be found in due course that the executor is entitled to commission of more than the $10,000 sought, nonetheless I think in continuing to press for agreement to that claim and in not making an interim distribution until that claim was resolved, the [executor] has in substance acted for his own benefit rather than for the benefit of the estate. [43] In my view, [the executor] is not entitled to an indemnity out of the estate in respect of his costs or the costs payable to [the beneficiaries, the present defendants, who commenced the proceedings determined by White J] …."
The plaintiff's accounts having been certified by a registrar as correct, the deputy registrar subsequently made orders (presently under review) to the following effect: (1) Order that the accounts of the executor [for a defined period] be passed. (2) Order that the executor be allowed commission as follows: (a) at a rate of 1% on the sum of $662,442 representing capital collections; (b) at a rate of 2.5% on the sum of $49,152 representing income collections. (3) Order that the costs of and incidental to the filing and passing of the executor's accounts and his application for commission be allowed [out of the estate] at the sum of $3,250.
In her "report on decision", the deputy registrar made the following observations, which expose her reasoning: "[5] The work performed by the executor is set out in his affidavit… in support of commission. The executor prepared the application for probate without engaging a solicitor. He met with an agent regarding the sale of the deceased's property and obtained an appraisal but prior to listing one of the beneficiaries decided to purchase the property. Consents of the other beneficiaries were obtained and the property was sold to the beneficiary and the sale was completed on 29 July 2011 for $350,000. The executor undertook the conveyancing transferring the property to the beneficiary. The executor transferred money from the deceased's bank accounts to the estate accounts and paid accounts owed by the estate, prepared the accounting and the deceased's personal income tax return up to the date of death and for the following two years. Interim distributions to the beneficiaries were made but only after proceedings were taken. [6] The beneficiaries who had brought the action against the executor filed submissions to the effect that commission should not be allowed on the basis of the executor's breach of duty. [7] I took the view that the [executor] should be allowed commission for the work performed in administering the estate. The executor has had a costs order made against him and there has been no evidence put before me as to any loss or substantial loss to the estate. [8] An executor is entitled to employ professional people to carry out professional work concerning the estate and is entitled to be reimbursed out of the estate for the costs of such work. Where an executor chooses to carry out the professional work himself he is only entitled to have this taken into account as part of his pains and trouble when assessing commission. [9] As stated by Slattery J in Hawkins v Barley-Brown & Anor [2010] NSWSC 48, the ranges of commission awarded in practice are: (a) from 0.25 to 2% on capital realisations; (b) from 2% to 4% on income collection; (c) from 1% to 2% on assets transferred in specie. [10] This was a small and straightforward estate. The solicitor for the executor has gone to great lengths to set out what the Court should consider when assessing commission. He has set out what rates should be applied under headings of 'Low', 'Medium' and 'High'. This is both unhelpful and irrelevant. It is not for a practitioner to dictate to the Court how a Registrar should calculate commission when exercising their discretion. [11] When assessing commission in this matter I have taken into account the fact that the executor carried out certain professional work himself and the fact that he had a large number of beneficiaries to deal with. The percentage awarded on capital and income [at the rate of 1% on capital realisations and at the rate of 2.5% on income collections] equates to an amount of $7,853.22, an amount totally commensurate with the executor's pains and trouble in administering this small and straightforward estate."
The deputy registrar was, perhaps, overly harsh in her characterisation of the executor's solicitor's submissions as an attempt to "dictate to the Court" how an executor's commission should be calculated. However, her rebuke reflects a perception, not wholly unjust, that the plaintiff has consistently conducted his administration of the deceased's estate upon an overbearing assumption that an executor has a right to commission, not merely a right to apply for commission the availability, and quantification, of which lies within the (judicial) discretion of the Court.
Four vices sometimes encountered in an executor reasoning from a claim of entitlement to commission as a starting point on an application for commission are: first, such reasoning overlooks the fiduciary character of an executor's office and, accordingly, distorts an executor's relationship with the deceased and beneficiaries whose interests are bound to be served; secondly, it is but a small step between a claim of entitlement and an unauthorised appropriation of "remuneration"; thirdly, a perception of entitlement to commission encourages in an executor an overly grand expectation of personal benefit; and, fourthly, it blinds an executor to the possibility that, if given a timely warning of a prospective claim to commission, those interested in due administration of an estate might prefer to make alternative, less expensive arrangements for administration of the estate than any arrangement involving the particular executor seeking remuneration.
The deputy registrar's reference to particular rates of commission identified in Hawkins v Barkley-Brown & Anor [2010] NSWSC 48 at [68]-[69] is a reference to rates which, at that time, were recorded in Mason and Handler, Succession Law and Practice (NSW), paragraph [144.1.1.3] as rates of commission commonly allowed in practice.
For reasons explained in Re Estate Gowing; Application for Executor's Commission [2014] NSWSC 247; (2014) 17 BPR 32, 763; 11 ASTLR 128 at [48]-[62], a focus on the application of percentage rates of commission that might be perceived to be those that have been, or should be, "ordinarily" or "usually" applied may be an invitation to error. Such rates can be a useful guide to decision making, but they are no more than a guide. The quantum of remuneration (if any) that may be allowed to an executor is to be determined, in the particular circumstances of each case, by reference to a standard governed by what is "just and reasonable" for the executor's "pains and trouble" in administration of an estate.
The deputy registrar was, I apprehend, conscious of this when she described the submissions of the executor (under structured headings of "low", "medium" and "high" rates of commission) as unhelpful and irrelevant.
Although she (appropriately) consulted the rates of commission identified by Slattery J, and accordingly produced an allowance for commission with an appearance of exactitude greater than warranted by a summary process of reasoning involving an estimation of a money sum that is "just and reasonable", her adoption of that amount as the amount of commission to be allowed depended, ultimately, upon her judgement that it was "an amount totally commensurate with the executor's pains and trouble in administering this small and straightforward estate".

ANALYSIS

The amount in issue in these proceedings puts one in mind of Robertson v Balmain New Ferry Co. Ltd (1906) 6 SR (NSW) 195; (1906) 4 CLR 379; [1910] AC 295, the famous Australian case in which a Sydney barrister elevated a dispute about one penny into point of principle fought all the way to the Privy Council, and duly lost.
The amount in issue in these proceedings is more than a penny; but, in commercial terms, not much more.
Any point of principle that emerges from the proceedings is not sympathetic to litigation of an executor's perceived "entitlement" to commission out of a deceased estate where the estate is small and its administration is, and ought to have been, uncomplicated.
Nor is it sympathetic to parties, on any side of a dispute about executor's commission, extending their dispute to, or allowing it to be driven by, an argument about legal costs.
In the administration of a deceased estate, large or small, the character of an executor as a fiduciary and the purposive character of the Court's probate jurisdiction need to be borne in mind. This is lest false expectations about an executor's "entitlement" to remuneration sour relations between persons interested in due administration of the estate; impede administration of the estate; and expose everybody to unnecessary costs and delay.
The powers of a registrar called upon to determine an application for commission (PAA section 86; SCR Part 78 rule 94 (3)(c)), and any question of costs associated with such an application (Civil Procedure Act 2005 NSW, section 13; Supreme Court Delegation SC Del 10 Part 1), are entirely statutory. A registrar is not empowered to exercise the Court's inherent (equitable) jurisdiction to award executor's commission. Nevertheless, in a case such as the present one, there is no need for an exercise of inherent jurisdiction, and the powers exercised by the deputy registrar are substantially the same as those available to a judge exercising original, rather than review, jurisdiction.
An exercise of those powers is constrained by the case management principles enunciated in Part 6 Division 1 (sections 56-60) of the Civil Procedure Act 2005, including an imperative requiring a focus on "the real issues" in proceedings (CPA section 56) "with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute" (CPA section 60).
An assessment of "the real issues" in probate proceedings requires mindfulness that the governing purpose of an exercise of the Court's probate jurisdiction is, generally, the due and proper administration of a particular estate, having regard to any duly expressed testamentary intention of the deceased and the respective interests of parties beneficially entitled to the estate: In the goods of Loveday [1900] P 154 at 156; Bates v Messner (1967) 67 SR (NSW) 187 at 189 and 191-192; Boyce v Bunce [2015] NSWSC 1924 at [45]. The task of the Court is generally to carry out a testator's testamentary intentions, and to see that beneficiaries get what is due to them.
An allowance of commission made by the Court in favour of an executor as an accounting party is available as a form of relief from the strictures of equity consequent upon characterisation of the office of executor as that of a fiduciary. A fiduciary is not entitled, without due authority, to profit from his, her or its office as a fiduciary. Nor is a fiduciary allowed to put himself, herself or itself in a position where personal interests and duties of the office conflict. The powers of the Court to allow remuneration to an executor exist as a means of granting to an executor relief against the rule that, generally, a fiduciary may not derive any profit or advantage from his, her or its position if not duly authorised to do so: In the Will of Shannon [1977] 1 NSWLR 210 at 214G-215D.
The starting point for consideration of an application to the Court for an allowance of executor's commission remains that the (fiduciary) office of an executor, administrator or trustee is, prima facie, a gratuitous one: Robinson v Pett (1734) 3 P.WMS. 249; 24 ER 1049.
Nevertheless, empowerment of the Court to grant an allowance of executor's commission requires recognition that it is open to the Court, in the exercise of ordinary (not extraordinary) jurisdiction, to relieve an executor, administrator or trustee of the burden of this strict approach to remuneration: Nissen v Grunden (1912) 14 CLR 297 at 304-305.
PAA section 86 (1) provides a summary procedure (in lieu of a general, or partial, order for the administration of an estate in court) whereby the Court can award "such commission or percentage for [an] executor's, administrator's or trustee's pains and trouble as is just and reasonable": Nissen v Grunden (1912) 14 CLR 297 at 305; Re Estate Gowing [2014] NSWSC 247 at [21]-[22], [38] and [49]-[50].
An executor is not entitled to an award of commission under PAA section 86. A right to apply for commission does not carry with it a right to be allowed commission. Although an allowance of commission is normal where an executor has been involved in "pains and trouble", it lies within the discretion of the Court and may be refused for proper reason (eg., where an executor has been guilty of a breach of fiduciary obligations, neglect or delay): Re Estate Gowing at [67]-[69].
An allowance of commission, governed by a requirement that it be "just and reasonable", is not quantified by a standard of "reasonableness" such as that applied on a common law claim of right to remuneration (in contract, or restitution, on a quantum meruit) for work done.
A range of discretionary factors may need to be taken into account in weighing what is "just and reasonable" in the circumstances of the particular case: eg., ES Vance, Executor's Commission (Law Book Co, Australia, 1969), pages 187-190; Allen v Union-Fidelity Trustee Co of Australia Ltd (1986) 6 NSWLR 341 at 345E-346D. As illustrated by Re Estate Gowing at [113], those factors may include the size and complexity of the estate required to be administered; the amount of work carried out by the executor, and time spent doing so; the amount of responsibility involved in administration of the estate; and the diligence of the executor in administering it.
Although customarily calculated as a percentage of entries in estate accounts (as a percentage of income collections, a percentage of capital realisations and/or a percentage of the value of assets transferred in specie during an accounting period in respect of which commission is sought), the jurisdiction of the Court extends to an allowance of remuneration in a lump sum unrelated to a percentage calculation: Re Estate Gowing at [45]-[49].
Essentially, what is required is consideration, on the facts of the particular case, of the work done by the executor who applies for commission, and what is a just and reasonable allowance for that work, not shifting the primary focus of the Court from what is required for a due administration of the estate.
As a matter of practice, applications to the Court for an allowance of executor's commission are determined by a registrar on the passing of accounts: SCR Part 78 Division 11 (rules 75-89). When an application is made for review of a registrar's determination, the registrar who made the determination provides to the Court, and the parties, reasons for the determination in the form of a report of the Court: In the Will of Sheppard [1972] 2 NSWLR 714 at 717B; Creer-the Estate of Peters [2007] NSWSC 1291 at [9]; Re Estate Gowing at [29].
Upon a review of a registrar's determination, the Court does not need to find error on the part of the registrar in order to intervene but may, upon an independent exercise of discretion, decline to intervene if no error can be identified in the reasoning or decision-making processes leading to the registrar's making of his or her discretionary determination: Re Estate Gowing at [100]-[108], citing In the Will of Sheppard [1972] 2 NSWLR 714 at 716G-717B and Tonko v Plasty (No. 2) (2008) 71 NSWLR 61 at 64 [4]-65 [11].
Upon consideration of the plaintiff's application for review of the deputy registrar's determination, I have considered the application for commission afresh; the deputy registrar's determination; her reasons for decision; the evidentiary material placed before the Court by the parties; and the parties' extensive written submissions. I have considered afresh the questions whether there should be any (and, if so, what) allowance of commission and whether any (and, if so, what) costs orders should attend the application for commission.
In undertaking this exercise I have considered whether the reasoning or decision-making processes of the deputy registrar could be said to be (as the plaintiff contends they are) erroneous. Leaving aside the adjustments which the parties are agreed should be made to the determination under review, and which will be made in disposition of the application for review, I find no error requiring me to intervene with the determination. The deputy registrar acted within her authority, applying accepted principles to facts correctly found and characterised, and she made a determination (both as to commission and costs) within reasonable bounds.
Contrary to a submission made on behalf of the plaintiff, the deputy registrar did have due regard to the earlier judgment of White J. That is evident from her rejection of the defendants' contention that, because of the plaintiff's failure to maintain the standards required of a fiduciary, he should be allowed no commission. On a fair reading of his Honour's judgment, White J thought otherwise. The deputy registrar agreed with him.
Nothing his Honour said was intended to constrain a registrar's decision about the costs of proceedings on the passing of accounts or on an application for commission. The deputy registrar was required to exercise her independent judgement in all things, and her quantification of the commission and costs to be allowed in favour of the plaintiff demonstrates that she did so.
In my opinion, the interests of justice, including the interests of due administration of the deceased's estate, would best be served by an order that, save for the agreed adjustments, the plaintiff's application for review be dismissed.
Without the benefit of the deputy registrar's determination and reasons, and without feeling obliged to calculate commission as a percentage of accounting entries, I would have been inclined, in any event, to allow commission, and to allow it as a lump sum, in the range between $5,000-$10,000, favouring the lower end of the range. The deputy registrar's determination is close enough to the mark, in a practical sense, to warrant endorsement. So too is her assessment of the amount and incidence of costs to be allowed in favour of the plaintiff, even though that assessment leaves the plaintiff out-of-pocket.
An award of costs on an executor's passing of accounts and application for commission does not lend itself, simply, to an order that "costs follow the event" (to paraphrase UCPR rule 42.1) as if the application for accounts to be passed and commission to be allowed is an adversarial proceeding in which all affected interests are parties to a contest in the nature of a trial. An award of costs in favour of an executor generally takes the form of a specified gross sum instead of assessed costs (CPA section 98(4)(c), providing a contribution towards costs incurred, not necessarily an indemnity for them. In the context of a small estate, in which special attention needs to be given to the proportionality of costs, the jurisdiction to award costs may take colour from the nature of the jurisdiction for which PAA section 86 provides. In such a case, what is, or may be, required is a summary assessment of what is just and reasonable in the particular circumstances.
Within reasonable bounds, an application for commission, and opposition to it, can ordinarily be characterised as an incident of due administration of an estate.
If any party to an application engages in misconduct, or transcends what is reasonable, the Court could, as White J recognised, mould costs orders taking that into account. In probate proceedings in which there is a strong element of estate administration independent of any adversarial contest, it is open to the Court to make such an order as to costs as appears to it to be appropriate: Williamson v Spelleken [1977] Qd R 152.
Nothing in this judgment should be taken as an encouragement to beneficiaries to incur legal costs, or to allow costs to be incurred, upon an officious insistence that estate accounts be formally passed (even if informally provided) or in opposition to a reasonable request for an allowance by way of commission. A beneficiary who engages in misconduct or acts unreasonably is not, and ought not to be, considered immune from the Court's jurisdiction to award costs.
Implicit in the deputy registrar's costs determination in these proceedings is a decision that the defendants should bear their own costs of their opposition to the plaintiff's application for commission. In my opinion, all things considered, that is appropriate. The defendants pushed to the limits of what was reasonable their opposition to the plaintiff's application. They must bear some of the burden for having done so. They were not entitled, in justice, to the benefit of a costs order against the estate, or the plaintiff, for having done so. The deputy registrar's costs determination was, in all respects, just and reasonable.
For these reasons, I do not propose to interfere with the deputy registrar's orders except to the extent of increasing (by $1,366.75) to $12,469.97 the total amount of commission and costs to be allowed to the plaintiff out of the estate of the deceased.
The costs of the plaintiff's application for a review can, and should, follow the event, in accordance with established practice. The application was made by the plaintiff in his own interests, not as an incident of due administration of the estate.
Accordingly, I make the following orders: 1. ORDER that order 2 of the orders made in these proceedings by the deputy registrar on 18 November 2014 be varied by allowing to the plaintiff commission in the total sum of $9,219.97 in lieu of the total sum of $7,853.22 allowed by the deputy registrar. 2. ORDER that the plaintiff's amended notice of motion dated 5 March 2015 otherwise be dismissed. 3. ORDER that the plaintiff pay the defendants' costs of the motion (assessed on the ordinary basis) without recourse to, or an indemnity from, the deceased's estate.

At a glance

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Judgment (6 paragraphs)

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Cases Cited (11)

Cited By (4)