Hawkins v Barkley-Brown & Anor

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115433/2007 JOHN HAWKINS v VICKI BARKLEY-BROWN & GEOFF ALLARS JUDGMENT 1 HIS HONOUR: These proceedings are commenced by way of notice of motion for review of a decision of Registrar Haggart made on 15 April 2009. The applicant on the motion is Ms Vicki Barkley-Brown, one of the beneficiaries of the estate of the late Rhonda Brenda Farrell. Ms Barkley-Brown is also an executor of Mrs Farrell's will. The first respondent to the motion Mr Hawkins, is the other executor of Mrs Farrell's will. The second respondent is the solicitor for the estate. 2 The Registrar's decision on 15 April 2009 passed the executors first accounts for the period 17 December 2005 to 1 August 2007 and allowed Mr Hawkins commission at the rate of 1% on the capital realisations of the estate and 2% on the income of the estate. The Registrar's decision also gave 0.5% commission on assets transferred in specie. Legal costs of filing and passing of the accounts of $3,250 "plus fees" were also allowed. An assessment has been undertaken by Mr Hawkins' solicitors of the amount due to him from the award of commission. The Registrar's award calculates out at a payment of approximately $61,000 to Mr Hawkins. 3 For the conduct of this review it is necessary to understand a little more of the background of the relationship between Mrs Farrell and the parties to these proceedings and matters concerning the administration of the estate. 4 Mrs Farrell, was born on 29 September 1911. She died on 17 December 2005 aged 94. At her death she left an estate which was assessed for probate at approximately $8.4 million. The estate comprised a house property, a substantial share portfolio and other investments together with cash at bank and a small amount of cash on hand. A fuller statement of the deceased's assets is attached to the probate of her will. 5 Mrs Farrell's last will is dated 8 September 2000. It is not necessary for the purposes of these proceedings to examine the provisions of the will in any detail. In summary though the will provides that the estate should be dealt with by giving 40% to Ms Barkley-Brown, the niece of the deceased and 20% to each of Ms Barkley-Brown's two minor sons, and 20% to Ms Barkley-Brown's oldest son, Paul Barkley. 6 The will did not contain a provision as to the remuneration of the executors. The will nominated three executors, Ms Barkley-Brown, Mr John Hawkins and Ms Norma Clark. Mr Hawkins was a long standing friend and adviser of the deceased. He is a retired Anglican minister in whom the testator had trust and confidence. Norma Clark renounced probate. 7 The origin of the present proceeding is an application by Mr Hawkins to pass accounts for the period 17 December 2005 to 1 August 2007 and for the assessment of commission. He applied to the Registrar for such orders by summons dated 6 September 2007. The form of the summons is the following: "SUMMONS

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Costs." 8 Mr Lawrence Nelson, the estate accountant, assisted in preparing the first accounts which were passed by the Registrar's decision of 15 April 2009. The solicitor for the estate, Mr Geoff Allars of Vincent Love and Co filed the accounts. 9 The summons refers to an application for executors' commission. The legal representatives for Ms Barkley-Brown claim that "we do not know how it has happened or arose but Registrar Haggart proceeded ultimately on the basis that only Mr Hawkins was seeking executor's commission and that Vicki Barkley-Brown, the major beneficiary and the other executor was not seeking commission". Ms Barkley-Brown submits in these pleadings that she has not indicated that she did not wish to be allowed any commission for her pains and troubles. The issue of whether or not Ms Barkley-Brown herself is entitled to commission is irrelevant to the questions which the Court now has to determine. She is entitled to make her own application for commission if so advised. This can be determined on a separate application. She did not press an application for commission in these proceedings. Nothing in the current application affects her right to claim commission on the passing of these accounts at a future time. I therefore put this issue to one side. The Proceedings for an Account 10 There are wider disputes between Ms Barkley-Brown and Mr Hawkins in relation to the administration of the estate. On 9 August 2006 Mr Paul Barkley, commenced proceedings in this Court seeking an order for Ms Barkley-Brown to account for monies which he alleged were transferred to her during Mrs Farrell's lifetime and that she now held on behalf of the estate after Mrs Farrell's death ("the account proceedings"). 11 Mr Barkley sought to recover $982,304 in the account proceedings which he alleged was being held by Ms Barkley-Brown on behalf of the estate. The sum claimed was amended in the course of the proceedings. Ward J heard the account proceedings [Barkley v Barkley Brown [2009] NSWSC 76] late in 2008 and her Honour gave judgment on 24 February 2009. Her Honour found that Ms Barkley Brown and Mr Barkley should both account to the estate in the terms summarised in paragraph [186] of her judgment as follows: "[186] I consider the appropriate orders would be for Mrs Barkley-Brown and Mr Barkley respectively to account to the estate for the benefits received by each of them (or their respective families) of the amounts in the respective categories I have identified above, by way of a deduction from any further distribution to them out of the estate of those amounts, plus interest thereon (and that the estate distribution should be calculated as if their share of the distribution was 2/5ths or 1/5th respectively out of the estate as notionally increased by the total amount for which account is to be given under those orders)." 12 The account proceedings were launched by Mr Paul Barkley and by Mr Hawkins. As a consequence of the account proceedings both Mr Paul Barkley and Ms Barkley-Brown were ordered to account to the estate. 13 The existence and conduct of the account proceedings is relevant to the application for the commission because the executors prepared for the account proceedings during the period for which the claim for commission is made. There are contentions on both sides about whether or not Mr Hawkins is entitled to include in his claim for commission any compensation for his efforts in relation to that litigation. These contentions are examined below. The Legislative Framework 14 The legislative provision governing Mr Hawkins claim for commission is s 86(1) Probate Administration Act 1898 which relevantly provides: "(1) The Court may allow out of the assets of any deceased person to the deceased person's executor, … in passing the accounts relating to the estate of the deceased person, such commission or percentage for the executor's, … pains and trouble as is just and reasonable, …." 15 Ms Barkley-Brown makes no allegations in these proceedings that commission should be refused to Mr Hawkins by reason of any neglect or omission on his part. No criticism is made of him about his conduct of the administration of the estate or of the proceedings. The issues raised in the current action are essentially issues of legal analysis as to what kind of activity on the part of an executor will attract an award of commission, whether or not Mr Hawkins has engaged in that kind of activity and what is the appropriate quantum of commission for that activity.

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The Admission of Fresh Evidence 16 Ms Barkley-Brown's motion sought review of the Registrar's decision of 15 April 2009. In support of the review Ms Barkley-Brown sought the admission of further evidence which was not before the Registrar. This evidence mostly concerned exchanges of correspondence between the parties that was not tendered before the Registrar. An initial procedural issue for determination was whether or not the Court was entitled to take into account that evidence. The Court took the evidence in but reserved for further argument and final decision of whether or not that evidence could be considered. 17 Ms Barkley-Brown argued that the Court could take the additional evidence into account and Mr Hawkins argued that it could not. Mr Hawkins' argument was that the Court must be satisfied that the Registrar's decision is affected by an error to such an extent that it should not stand: Creer v Estate of Peters [2007] NSWSC 1291 at [9]-[11] per Windeyer J. He argued that the Court has a discretion whether or not to accept fresh evidence which was not before the Registrar: Tomko v Palasty (No 2) (2007) NSWCA 369; (2007) 71 NSWLR 61 at [43]-[49]. He argued that in this case the Court should exercise its discretion to exclude material not before the Registrar and not to permit cross examination. To admit such evidence, it was said, would turn the application into a fresh hearing as opposed to a review of the Registrar's decision: Hall v Transport Infrastructure Development Corporation [2006] NSWSC 1076 at [7]-[8]. 18 Mr Hawkins justified exercise of the discretion to exclude this material because of Ms Barkley-Brown's conduct in relation to the proceedings before the Registrar. It was said that she had ample notice of the application for commission but failed to file a notice of objection. She took no steps to defend the application for commission in the period of 20 months from September 2007 to May 2009. During the same period the parties were actively involved in the account proceedings. 19 I will take into account all the material read and tendered before me, even the material not before the Registrar. This result is compelled by both authority and the circumstances of this case. 20 The principles that apply to the conduct of a hearing of review by the Court of a decision by the Registrar on an application for executor's commission were stated In the Will of Sheppard [1972] 2 NSWLR 714 by Helsham J.

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21 Helsham J's reasons in In the Will of Sheppard make clear that additional affidavit evidence on the appeal may be permitted. The Motion for Review 22 Ms Barkley-Brown's motion for review of the Registrar's decision was brought under rr 49.19 and 49.20 Uniform Civil Procedure Rules 2005 (NSW). A review under these rules is not an appeal and is not subject to the restrictions that apply to appeals: Tomko v Palasty (No 2) [2007] NSWCA 369 at [6], [10], [50] and [52]. Ms Barkley-Brown does not have to demonstrate a material error of fact or principle in the Registrar's decision under review: In the Will of Sheppard (1972) 2 NSWLR 714. The Court may make its own decision on the review on the basis of the material presented to it by the exercise of a fresh discretion as occurred for example in Re the Estate of D A Lindsay [2004] NSWSC 575. 23 Arguments were advanced before me that Ms Barkley-Brown had been denied procedural fairness before the Registrar. Given the nature of the discretion now being exercised I do not have to consider the validity of these arguments before embarking on this review. She is being afforded full procedural fairness now. In any event the Registrar's reasons do demonstrate error of a different kind warranting a review. The Registrar's report on his decision (Exhibit 5) shows that he ignored the account proceedings in the exercise of his discretion. For the reasons explained below, I do not think this is the correct approach. 24 It is now possible to turn to Ms Barkley-Brown's principal arguments. Applicable Principles of Law 25 The New South Wales Supreme Court has a long-standing jurisdiction to grant commission to executors. The original grant of jurisdiction was contained in the Charter of Justice 1823 s xvii, the form of which is largely reproduced in s 86(1) of the Probate and Administration Act 1898 and is as follows: "It shall be lawful for the said Court to allow the executors or administrator of the effects of any deceased person (except as herein mentioned) such commission or percentage out of their assets as shall be just and reasonable for their pains and troubles therein." 26 This jurisdiction is usually exercised on the basis that executors may charge by one rate of commission on capital and another rate of commission on income, rather than on a time charging basis. If, however the executor is a professional such as a solicitor or accountant, and the will permits the executor to charge professional fees to the estate, he or she is entitled to charge professional rates only for those tasks which are professional tasks: Re the Estate of D A Lindsay [2004] NSWSC 575 at [8]-[9].

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Ms Barkley-Brown's Contentions 27 Ms Barkley-Brown advanced three separate arguments in these proceedings. The first was an argument that the award of commission to an executor administering a large estate should not be calculated as a percentage of the estate ("the large estate argument"). The second argument was that commission awarded to Mr Hawkins should be reduced because of the particular functions that Mr Hawkins was performing in the administration of this estate. Her argument included that his executors' duties were generally much reduced because other professionals were conducting litigation and general estate administration on his behalf ("the executors work argument"). Finally, Ms Barkley-Brown argued that the quantum of commission awarded to Mr Hawkins was too high measured by number of standards ("the quantum argument"). All these arguments are explained below as they were expounded by counsel. They are then analysed. The Large Estate Argument 28 Ms Barkley-Brown's large estate argument was that if close attention is given to the words of s 86 (1) it will be seen that an award of commission based upon a percentage is not appropriate for a large estate such as the present one. The reason for this, she argues, is that the Court's provision of commission should be compensation, as the legislation says, for the executor's "pains and trouble". Compensation for "pains and trouble" is the whole basis for the assessment of some "percentage" commission. The argument is developed that in a large estate the relationship between compensation for "pains and trouble" and the awarding of commission on a percentage basis breaks down. The argument concludes that awarding commission on a percentage basis in large estates will tend to over-compensate the executor. 29 Ms Barkley-Brown submits that: the use of a percentage of the estate for awarding commission to the executor also turns the executor into a significant beneficiary; and that a percentage based system does not refer to the "pains and trouble" of the executor or what the executor actually did, as distinct from just linking the executor's reward to the quantum of the estate. 30 It was submitted on behalf of Ms Barkley-Brown that the registrar's award under s 86 (1) should be designed or calculated to compensate the executor, Mr Hawkins for actual "pains and trouble", namely what he did and what his efforts were on behalf of the estate, rather than merely reaching a figure as a function of the total value of the estate. Analysis of the Large Estate Argument 31 There are a number of difficulties with the large estate argument. Because of these difficulties I do not accept it. The argument does not take proper account of the wording of s 86 (1). Authority has already commented adversely on the argument. Nor does the large estate argument give sufficient credit to the practical exercise of the discretion to award commission empowered by s 86 (1). 32 The large estate argument conflicts with the direct command of s 86 (1). The legislation permits the Court to fix a percentage commission on account of "pains and trouble". The idea that a percentage cannot be fixed for "pains and trouble" in particular sized estates is inconsistent with the terms of s 86 (1), which allows an executor's "pains and trouble" to be expressed as a percentage of the estate.

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35 The problem with this assumption is that it neglects two matters. It firstly neglects the moment of the actual exercise of the discretion in which the Court fixes the percentage. In exercising that discretion in a large estate, the Court can take into account the fact that if the executor's "pains and trouble" have indeed not been very great, that a commission awarded as a percentage of the estate, which may be appropriate for a small estate, can be adjusted downwards for a large estate. As Helsham J explained in In the Will of Sheppard [1972] 2 NSWLR 714, in setting commission the Court does take into account the indirect effect on the calculation of commission from the size of the estate. But as his Honour explained, the size of the estate does not require any a priori limitation upon the rate of commission to be allowed: "There may be of course again an indirect effect again by reason of the size of the estate. It may be that activities resulting in an allowance of commission in the period covered by one set of accounts might render very much easier and less onerous the remaining work to be done in connection with the realisation of the estate. But this would be taken into account in assessing the work value when the subsequent accounts are being passed and the commission allowed, and it seems to me that the mere fact that the estate is of a particular size is not a factor which requires any a priori limitation upon the rate of commission to be allowed." 36 The assumption also neglects the diseconomies of scale which can arise in large estates. An executor may have to discharge a much increased human and administrative burden in a large estate. Such estates can bring with them factors such as greater complexity of administration, more sophisticated and argumentative beneficiaries, and a greater risk of litigation. Such factors in larger estates may require the appointment and retention of executors with special qualities who have the confidence of the testator. A larger award of commission may be warranted as the reward for the discharge of an executor's duties in the more active circumstances of the administration of a large estate. 37 This precise problem, of the hazards of calculating a proper percentage reward for the executor or of the larger estate was considered by Buchanan J in In re Barr Smith [1920] SALR 381. As Helsham J observed in In the Will of Sheppard (at 721C) there is much force in Buchanan J's statement In re Barr Smith (at 388) about the problem: "Under any percentage scale… the allowance in respect of an abnormally large estate, although in itself considerable, will, in relation to the size of the estate, constitute a lighter charge than in the case of a small estate. Nor is it to be overlooked that in estates of exceptional magnitude one finds the testator or settlor as a rule selecting as trustees persons accustomed to large affairs, possessed of more than ordinary experience and acumen, who may well earn, with advantage to their trust estate, what at first blush might have the appearance of being an extravagant reward." 38 Mrs Farrell selected Mr Hawkins to be one of her executors. Although it could not be said that he was a person "accustomed to large affairs", his life as a member of the clergy is likely to have given him "more than to ordinary experience and acumen". His evidence before me displayed that quality. Importantly his experience was such that Mrs Farrell entrusted him with the joint administration of her substantial estate. Early last century Buchanan J recognised that executors in his position, who are given a percentage of the income and capital of the estate, may too easily attract criticism for earning what some others might see as an "extravagant reward". Buchanan J emphasised that although executors in larger estates are not awarded commission just for their experience and good judgment, they are being rewarded for their actions in deploying their experience and good judgment to the advantage of the estate. The Executor's Work Argument

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72 Fourthly, I accept Mr Hawkins evidence about the range of work that he did as executor. It was more than signing a few cheques and attending a few meetings. Much of it was to do with the account proceedings. Involvement in an atmosphere of litigation and the general stress involved in discharging an executor's duties are relevant consideration in the exercise of the Court's discretionary power to fix commission: In the estate of Stone (deceased): Patterson v Halliday [2003] VSC 298 at [27]-[34]. The extent of Mr Hawkins work was set out in Annexure "A" to his affidavit in support of his application for commission sworn 24 June 2008. The contents of Annexure "A" present a very different picture to the description of Ms Barkley-Brown that she and Mr Hawkins were only engaged in a few meetings and signing a few cheques. Annexure "A" covers the period 27 January 2006 to 19 May 2008. The following matters in Annexure "A" are of particular significance in relation to the setting of Mr Hawkins' commission. (a) He had extensive contact with the beneficiaries and their legal representatives in relation to distributions and disputes about distributions and about the initiation of the account proceedings. (b) There are regular entries in relation to ordinary items of estate administration including finalisation and approval of tax returns; dealing with banks; checking upon the extent and disposition of the property of Mrs Farrell; passing on or responding to correspondence about the estate; dealing with capital gains tax issues in relation to Mrs Farrell's extensive share portfolio; and discussions with beneficiaries about the timing and application of distributions to them. (c) Mr Hawkins has regular dealings with Mr Allars, the solicitor for the estate, in relation to legal aspects of the administration of the estate. (d) There is detailed contact with the legal representatives of Mr Barkley in relation to the account proceedings. Something is done in one or other of these categories every few days by Mr Hawkins during the period for which commission is claimed. I ignore for present purposes Mr Hawkins contact with his own solicitor Mr Fisicaro in relation to his own claim for commission. The picture presented by Annexure "A" is of an executor who has been busy and diligent during the period in respect of which commission is claimed.

Hawkins v Barkley-Brown & Anor - [2010] NSWSC 48 - NSWSC 2009 case summary — Zoe

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Judgment (64 paragraphs)

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