Construction of clause 18: professional charges for executorial work
6The second question is whether Mr Grosfeld was entitled to charge fees at his hourly rates for professional work as an accountant for all other work he did in administering the estate.
7Unless a will otherwise provides, an executor is not entitled to remuneration for carrying out executorial functions, except to the extent the Court allows the executor commission pursuant to s 86 of the Probate and Administration Act 1898 (NSW). (There is an inherent jurisdiction to allow remuneration, as there is in the case of trustees and financial managers.) As a general rule, an executor is expected to carry out his or her duties, including keeping accounts, personally. If he or she chooses to employ another person to carry out executorial tasks, the charges will be to his or her own account. However, where, having regard to the size and nature of the estate and the tasks that need to be carried out, it is reasonable for the executor to engage the services of another, the expense may be allowed as a disbursement (Macartney v Macartney (1909) 1 VLR 183 at 191-192; Swanson v Emmerton [1909] 1 VLR 387 at 390-391; In the Estate of Purton (1935) 53 WN 149; In The Estate of Instone (Supreme Court of New South Wales, Powell J, 23 August 1993, unreported; BC9303622 at 25).
8Even where the executor is entitled to incur an expense and charge it to the estate, such as by engaging the services of a solicitor to act on a conveyance, or engaging the services of an accountant to complete the deceased's or the estate's tax returns, unless the will otherwise provides, an executor who is a professional is not entitled to charge for his or her services if he or she does such work. Nor is the executor entitled to engage, for remuneration, a firm of which he or she is a member if he or she would thereby directly or indirectly benefit from the engagement. This follows from the rule that unless the trust instrument or will so provides, or the beneficiaries being sui juris give their informed consent, a fiduciary cannot place himself or herself in the position of conflict or sensible possibility of conflict between his or her personal interest and fiduciary duty. In assessing the quantum of commission that can be allowed under s 86 of the Probate and Administration Act the Court may allow commission at a rate or in an amount that reflects work done by the executor that required the exercise of professional skill. But in the absence of an appropriate charging clause in the will an executor who is a professional, such as a solicitor or an accountant, can only receive remuneration for the exercise of his or her professional skills indirectly through the allowance of commission (In Re Craig (1952) 52 SR (NSW) 265 at 267-268; Broughton v Broughton (1854) 5 De G, M and G 160 at 164; 43 ER 831; In Re Doody; Fisher v Doody [1893] 1 Ch 129 at 134-135; In Re Gates; Arnold v Gates [1933] Ch 913 at 918; In the Estate of Instone at BC9303622 at 30-35).
9If the will contains a clause providing for the executor's remuneration, the principles as to whether the executor may claim commission were as stated by Jordan CJ in In the Will of Kerrigan (1935) 35 SR (NSW) 242 at 245, namely:
"The general rule is that if a testator directs that his executor is to receive a particular remuneration for his services as executor, he is restricted to this remuneration, and if he proves the will, the Court will not, in the absence of special circumstances, exercise its jurisdiction to give him different or greater remuneration: In the Estate of Burdekin (1 S.R. (B. & P.) 1); In the Will of Pauton (26 W.N. 51); In the Will of Wheelihan (29 W.N. 98); Winter Irving v. Winter (1907 V.L.R. 546); In the Will of Steele (15 S.R. 247). If, however, the language used by the testator is permissive and not restrictive and he merely authorises the executor to charge for his services, the executor may either, pursuant to the authority, make such charges as he considers reasonable and have the amount moderated on the passing of his accounts, or he may, instead, make no charges but apply for commission in the usual way, bringing the nature of the services rendered to the notice of the Court by affidavit. If, being a professional man, he is by the will authorised to charge for both professional and other services, he may charge for his professional services, moderating his bill before the Registrar and, in respect of his other services, may either apply for commission or render a bill for moderation: In the Will of Marsden (43 W.N. 170). Whether such an authority extends to all work done or only to professional work is a question of construction of the will in which the authority occurs. In In re Ames (25 Ch. D. 72); In re Fish ([1893] 2 Ch. 413); Swanson v. Emmerton (1909 V.L.R. 387), and Re Smith (16 S.R. 422), it was held to apply to all work. In Clarkson v. Robinson ([1900] 2 Ch. 722), and In re Chalinder and Herrington ([1907] 1 Ch. 58) it was held to apply to professional work."
10The approach to the construction of clauses in a will for the remuneration of an executor were addressed by McLelland J (as his Honour then was) in Sacks v Gridiger (1990) 22 NSWLR 502 and by Powell J (as his Honour then was) in In the Estate of Instone.
11In Sacks v Gridiger, McLelland J said (at 515):
"It is of interest to note that in In the Will of Shannon [1977] 1 NSWLR 210, there was an application for probate of a will which included a clause empowering the testator's executor and trustee (who was a solicitor) 'to charge and be paid all usual professional and other charges for work or business done or transacted by him or his firm in proving my Will or in execution of or in connection with the trusts hereof ...'. The words 'and other' before the word 'charges' were omitted from the grant 'lest they be construed as covering other than professional charges for legal work' (at 212) although it is doubtful whether they would have been so construed: see Clarkson v Robinson [1900] 2 Ch 722 and Re Chalinder; Chalinder v Herrington [1907] 1 Ch 58. In all the cases of which I am aware where an analogous charging clause in favour of a solicitor trustee was held to cover non-legal work there were express words to that effect: see Re Ames; Ames v Taylor (1883) 25 Ch D 72; Re Fish; Bennett v Bennett [1893] 2 Ch 413; Re Smith (1916) 16 SR (NSW) 422; 33 WN (NSW) 134; In the Will of Marsden (1926) 43 WN (NSW) 170 and In the Will of Sheppard [1972] 2 NSWLR 714 at 718-719, with which may be compared Re Chapple; Newton v Chapman (1884) 27 Ch D 584, Clarkson v Robinson; Re Chalinder; Swanson v Emmerton [1909] VLR 387 and In the Will of Kerrigan. As Warrington J observed in Re Chalinder (at 63):
'... It seems to me that in order to enable a solicitor trustee to obtain payment for work for which an ordinary trustee could neither be paid directly nor be allowed payments made to a solicitor, there must be words in the will which shew that that was the testator's intention.'"
12In In the Estate of Instone Powell J said (at BC9303622 at 36-37):
"A consideration of the cases in which charging clauses have been considered would suggest that, depending upon the language in which the particular clause is couched, such clauses fall into one or other of the two main classes they being: - 1. those which enable the executor or trustee to charge for his professional work; and 2. those which enable him to charge not only for his professional work but also for his time and trouble.
The cases would also suggest that the first of these classes may be further divided into two sub-classes, they being: - a. those enabling charges only in cases in which a lay executor or trustee would be justified in retaining a professional to act for him (see, for example, In re Chapple; Newton v Chapman (1884) LR 27 Ch D 584; In re Chalinder and Herrington [1907] 1 Ch 58; and b. those enabling charges for all work actually done (In re Ames; Ames v Taylor (supra); In re Fish; Bennett v Bennett (supra); Swanson v Emmerton (supra)); the dividing line seemingly lying in the absence, in the former case, and the presence, in the latter case, of some such phrase as 'whether in the ordinary course of his profession or business or not.'
Finally, the cases would suggest that a charging clause will not be construed so as to enable a professional man to charge for work which a lay executor or trustee would be bound to do gratuitously unless it be clearly so expressed (In re Chapple; Newton v Chapman (supra) at 586; In re Chalinder and Herington (supra) at 63; Swanson v Emmerton (supra) at 390)."
13The present issue is whether clause 18 permitted Mr Grosfeld to be paid remuneration at his hourly rate that he charged for work done in his accountancy practice for all work done in connection with the estate, including executorial work which would not ordinarily require the services of an accountant. Clause 18 does not include some phrase such as "whether in the ordinary course of his profession or business or not".
14The material parts of clause 18 are first, that the executor being a legal practitioner, accountant or financial adviser is to be entitled to be paid "all professional or other charges for any business or act done by him". The second material part is that he is entitled so to charge "including in respect of acts that an executor ... could have done personally as if he or she were not such an executor ...". The third is that the executor's entitlement so to charge is in lieu of any commission. The clause must of course be read as a whole.
15In the passage quoted (at [11]) above from Sacks v Gridiger McLelland J doubted that a clause providing for a trustee who was a solicitor to be paid all usual professional and other charges for business done in connection with the trusts of the will would cover charges other than professional charges for legal work. His Honour referred to Clarkson v Robinson [1900] 2 Ch 722 and Re Chalinder; Chalinder v Herrington [1907] 1 Ch 58. In Clarkson v Robinson the will provided that:
"Any trustee or executor hereunder being a solicitor or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional or other charges for any business done by him or his firm in relation to the management and administration of my estate, and carrying out the trusts, powers and provisions of this my will, whether in the ordinary course of his profession or business or not, and although not of a nature strictly requiring the employment of a solicitor or other professional person".
Buckley J held that to fall within the clause, the work done must be in the course of the trustee's professional business (at 725). His Lordship said (at 726):
"I have looked anxiously to see whether I could find in this clause any words which went to shew that a trustee was to be paid for his time and trouble outside his profession or business as distinguished from being paid for work done in the ordinary course or outside the ordinary course of his profession or business, and I have not found any ..."
16In Re Chalinder; Chalinder v Herrington the will provided that one of three trustees who was a solicitor "shall be the solicitor to my trust property and shall be allowed all professional and other charges for his time and trouble notwithstanding his being such executor and trustee." Warrington J held that under that clause the solicitor was entitled to remuneration for his professional services, but not for his trouble as a trustee. The words "and other charges for his time and trouble" covered any charges for time and trouble as solicitor which might not be strictly professional charges (at 62):
"... that is to say, there may be charges for business done, and properly done, by the person employed as solicitor to the trust estate which may yet not come strictly under the head of professional charges ..."
17The next question is how do the words "including in respect of acts that an executor ... could have done personally as if he or she were not such an executor ..." affect the construction? To give meaning to those words one must ask when could a legal practitioner, accountant or financial adviser who was not an executor act in relation to the estate? Such a person could act if retained by the executor to provide services as a legal practitioner, accountant or financial adviser for the benefit of the estate. The clause assumes a proper retainer. In other words, those words contemplate that an executor being a legal practitioner, accountant or financial adviser is entitled to be paid professional or other charges for business that such a person could have made if he or she had been properly retained by the executor. That does not authorise the charging for work that an executor would be required to do personally, but only skilled work for which an executor would be entitled to retain a legal practitioner, accountant or financial adviser.
18In Re Chapple; Newton v Chapman (1884) 27 Ch D 584, the will provided that the solicitor who was the executor and trustee should "'be entitled to make the same professional charges and to receive the same pecuniary emoluments and remuneration for all business done by him and all attendances, time, and trouble given and bestowed' in the execution of the trusts or powers of the will or the management or administration of the estate 'as if he, not being himself a trustee or executor hereof, were employed by the trustee or executor'". Kay J held that as a trustee or executor would not employ, and ought not to employ, a solicitor to do things which he could properly do himself, the clause did not authorise the solicitor who was the trustee to charge for things that a non-professional trustee would be required to do himself or herself without retaining a solicitor.
19The same construction was given in Swanson v Emmerton [1909] VLR 387 to a clause appointing a solicitor to be executor and trustee which provided:
"I appoint [the solicitor] to be the solicitor to my trust property and direct that he shall conduct all the legal business of my estate and shall be entitled to make and receive all such charges and emoluments for business whether of an ordinary, professional or any other character done by him in relation to the administration of my state or the execution of the trusts of this my will as he would have been entitled to make and receive in respect of such business if he had not been a trustee or executor."
20Cussen J (as his Honour then was) held that the clause allowed the solicitor/executor to be paid for work where it would be proper for the trustee to employ a solicitor to carry out the work, whether or not it was strictly professional work, but the clause did not authorise a charge in relation to work which an executor would ordinarily be bound to do without payment (at 390). In my view that is how clause 18 is to be construed.
21The fact that the "entitlement" described in clause 18 is for payment in lieu of any commission might suggest that the clause was intended to encompass payment both for work which an executor would be justified in retaining a legal practitioner, accountant or financial adviser to do for the benefit of the estate, and executorial work which the executor would be expected to do himself or herself without remuneration, except such as might be allowed on an application for commission. If the executor elected to take remuneration for his professional charges pursuant to clause 18, he would not be entitled to claim commission. On the construction of the will suggested above, he would not be paid for his time and trouble in carrying out executorial duties. Proper charges for professional work (if the will permits such charges to the executor) do not affect an executor's claim for commission for executorial work (In the Will of Sheppard [1972] 2 NSWLR 714 at 720). On the other hand, if provision for remuneration is expressed by the will to be in lieu of any right to apply for commission, the executor will not be allowed commission on an application under s 86 (In the Will of Shannon [1977] 1 NSWLR 210 at 216 and cases there cited; In the Will of Kerrigan at 245).
22If the executor's entitlement to remuneration were exhaustively stated in clause 18 this would be a powerful reason for adopting a different construction. The first part of clause 18 describes an entitlement of the executor to be paid moneys in lieu of commission. But it is permissive, not restrictive. That is to say, clause 18 does not require the executor to claim remuneration under the clause. It allows him to do so in lieu of commission. He is entitled to elect to receive commission rather than remuneration provided for by that clause. This is clear from the second part of the clause which contemplates that the executor may retain an entitlement to commission and states that if work is done by an appropriate third party, including the executor's firm, the charging of such work to the estate will be separate from the executor's entitlement to commission. This is in accordance with the usual principle.
23As Powell J observed in In the Estate of Instone in the passage quoted at [12] above, the cases in which an executor, being a professional person, has been allowed professional charges for time and trouble in carrying out executorial duties that, absent such a clause, the executor would be required to do himself or herself and which (in Australia) would entitle the executor to claim commission, are cases where the will expressly authorised such charges whether they were in the course of his professional business or not. In Re Ames; Ames v Taylor (1883) 25 Ch D 72 North J said (at 74-75):
"The testator by his will has empowered any trustee who may be a solicitor to transact any business occasioned by the trusts, powers, or provisions of his will, 'whether such business be usually within the business of a solicitor or not,' and 'to make the usual professional or other proper and reasonable charges for all business done and time expended in relation thereto.' In relation to what? In relation to business transacted by him in connection with the trusts of the will, whether of the nature of the business usually transacted by a solicitor or not."
24In Re Fish; Bennett v Bennett [1893] 2 Ch 413, the will permitted a trustee who might be a solicitor to receive "his usual professional costs and charges, as well by way of remuneration for business transacted by him or his partner or partners personally, or by his or their clerks or agents (including all business of whatever kind not strictly professional, but which might have been performed, or would necessarily have been performed in person by a trustee not being a solicitor) ... in the same manner as if [he] ... had not been a trustee ... hereof, but had been employed and retained by the trustees hereof as solicitor in the matter of the trust." Thus, the will expressly provided for the payment of professional charges to the solicitor trustee in respect of work which a trustee, not being a solicitor, would necessarily have performed in person, as if the solicitor had been retained by such a trustee. Accordingly, the distinction drawn in Re Chapple; Newton v Chapman could not be drawn. The Court of Appeal held that the solicitor trustee was entitled to charge not only for his professional services, but for his trouble as a trustee. No such words were included in clause 18.
25Clause 18 of the will was prepared using a precedent obtained by the deceased's solicitor from a company called Moore's Legal Pty Limited. The solicitor amended the clause in a way which might arguably have changed its sense. I do not think that the precedent can be used to construe clause 18 and I express no opinion as to how that precedent, if unamended, would be construed.
26For these reasons I conclude that Mr Grosfeld was not entitled to charge his hourly professional rate for all the work he did in relation to the estate. He was only entitled to charge and be paid for such of that work as an executor, not being an accountant, would have been justified in retaining an accountant to perform for the benefit of the estate at its expense.