House v The King

1 HIS HONOUR: This is an application brought by amended notice of motion filed in court today for review of a decision of Deputy Registrar Siva allowing commission to the plaintiff, Mr Phillips, as executor of the will of James Thomas Langley Joel, who died on 26 September 2003. Probate of his will dated 28 August 1992 was granted to Mr Phillips on 21 November 2003. The executor was required to file and pass his accounts, and would, I assume, have done so in any event, as he would have wished to make an application for commission for his pains and troubles as executor. 2 The executor filed two sets of accounts. The first was for the period up to 30 June 2004 and the second for the period 1 July 2004 up to 30 June 2005. Substantial distributions to the beneficiaries have been made, and the whole estate has been distributed apart from an amount retained for any final tax matters and determinations of this application. In other words, the executor has stated that he does not intend to file any further accounts, none being needed. 3 The most substantial asset in the estate was a waterfront property which the deceased owned on Quakers Bay at Beauty Point, Mosman. In the probate application it was estimated to have had a value of about $10 million. Ultimately, it was sold together with the assets of a boat building business, to which I will return, for a figure of $6.6million. Other assets in the estate were of little value. They have all been realised, and the total amount of the capital realisation in the estate is $6,741,005. There has been some income collected, of a relatively small amount, totalling $87,000, not being referable to the boat shed business. There is apparently a small cottage on the Quakers Bay property, but its main value, apart from the land, was in a boat shed business conducted at the bottom of the property on land leased by the deceased, but owned by or controlled by New South Wales Waterways, or the Waterways Authority of New South Wales, whatever description is proper now, or then. There was erected on that land a boat shed and slipway, and in addition the deceased had a licence for 44 moorings, which licence was probably attached to the deceased's lease rather than to the freehold land. 4 The executor had significant problems attending to the matters arising from the lease, and to some extent from the moorings. Those difficulties arose first because, although the business was operating at a loss probably partly because the deceased was about 90 years of age, the right to have the business conducted as an adjunct to the land might have been perceived to be valuable by any purchaser, even if that purchaser did not wish to operate the business but in some way sought to retain the boat shed slipway and adjacent features which were allowed under the terms of the lease. The problem was that the lease had expired and the deceased was holding over from year to year. It would have been possible for the executor to give notice on 28 January in any year which would have terminated on 28 February the following year. As I understand, it would have been possible for the lessor to have done the same thing. 5 The plaintiff had negotiations over a considerable period with the lessor as to whether or not an assignment of the lease would be allowed. An assignment would enable him to sell the benefit of the holding over period, which might have been a benefit for a purchaser endeavouring to negotiate a renewal of the lease with the lessor authority. After considerable difficulty, consent to an assignment was obtained. The property was sold but subject to a let-out provision, if somehow the assignment could not take place. In fact the consent was withdrawn but subsequently put back in place again. 6 All this for obvious reasons took a considerable amount of time and work for the executor. In the meantime the executor determined to keep the business running because it was earning income from the moorings and because even if he had ceased to keep it running, he would have had considerable expenses in relation to it because he would have to keep the moorings income, if that at all was possible. In the long run, when the property was sold, what was sold was the property together with whatever rights were available in respect of the lease and the moorings licence. It is not suggested that there was a great deal of trouble in the administration of the balance of the estate. 7 On the passing of accounts, the Deputy Registrar allowed commission in a lump sum in respect of both accounts in the sum of $30,000. 8 In the reasons for the decision, the Deputy Registrar set out the general principles to be applied in determining commission. She stated that the main difficulty encountered by Mr Phillips was in relation to the sale of the Mosman property and in connection with the lease of the boat shed business and the requirement to assign it, if that were possible. She dealt with this matter and the legal costs referable to it, but I think it is fair to say that, insofar as the Deputy Registrar might have thought that Mr Phillips was a member of the firm of Roper & Steggall, and obtained some benefit from the costs, that is not correct. It was stated in the reasons that the boat shed business was a specialised business which could only be carried on by people with the necessary skills, and, as it was running at a loss, it would have been prudent to sell it as soon as possible rather than to run it at a loss for another two years. The reasons, however, do not note whether there were difficulties in disposing of it, so that whether or not this statement was a criticism of the executor, I am unable to determine. 9 The Deputy Registrar also noted that appropriate professionals, such as an accountant, a manager for the boat shed, a bookkeeper, and a caretaker for the Mosman property, were engaged and were paid for their services, all of which, I have assumed, have been allowed in the accounts. 10 There also seems in the reasons to have been some criticism of the filing of two sets of accounts, which, if it is a criticism, is, in my view, clearly not justified. In any event, it does not seem to me that this had any bearing upon the allowance made for commission, and whether or not it had some bearing on what was allowed for costs, I am unable to determine, and I have not been asked to do so. 11 In coming to her decision, the Deputy Registrar set out what are sometimes described as usual rates of commission as between 0.25 and 2.5 per cent on capital realizations, 1 per cent to 2 per cent on assets transferred in specie, and 1 per cent to 5 per cent on income. It is correct that this is a general range of rates, but each case must be looked at on its own facts. It is also correct to say that if the estate is a very large one, then commission is usually allowed not at the top end of the rates but towards the middle or the lower end of the rates. To some extent, this depends upon the assets in the estate and to a greater or lesser extent the value of the real estate compared with the total value of the property. It is necessary, I think, to point out that with real estate values as they are at the present time, the value of real estate sometimes comprises a large percentage of the total value of the assets in the estate, and yet if it is an ordinary property, real estate does not require a great amount of work on the part of the executor to bring about a successful sale - it can, but, in many circumstances it does not. 12 So far as the present matter is concerned, I say that although this is a review matter and, therefore, does not depend upon the principles in House v The King (1936) 55 CLR 499, nevertheless, the practice of the court is to take notice of the decision of the Registrar, being a discretionary decision, and only to interfere with it if it is shown to be seriously incorrect rather than there just being some small difference of opinion as to what might have been a reasonable amount to allow. In this case I am of the clear view that the discretion miscarried and that the allowance made was quite inadequate. 13 The reason I have come to that conclusion is that it was, I think, perfectly clear from the affidavit of Mr Phillips, lodged in support of his application for commission, that he undertook a considerable amount of work and expended pains and trouble in connection with the management of this property and the bringing about of a satisfactory sale of the real estate together with the business assets. It was not, I think, a matter where it would be possible or sensible to allow commission on the gross income of the business and, of course, an allowance on the net income would produce a negative result. I think what should have been done was to take into account and make a proper allowance for the work done in connection with the sale of the business, and the work done in obtaining the consent to an assignment of the lease and ensuring the availability thereafter of the moorings to be sold in conjunction with the real estate, when considering the amount to be allowed for capital realisations, those assets being part of the assets in respect of which commission was sought. 14 When the Registrar came to her decision, she said, in accordance with a decision of mine in Spence v Spence [2003] NSWSC 132, that when commission is allowed as a lump sum, usually because there are to be no further accounts, it was the practice of the Registrar fixing the lump sum to make an estimate of what would be a reasonable amount if allowed on a commission rather than on a lump sum basis, and to make adjustments to the amount, having regard to, among other things, the final work which would be involved in making a final distribution of the estate. I adhere to the view I there expressed. 15 The Registrar making her decision said ordinarily she would have allowed 0.25 per cent on capital realisations of $6,741,005 and 4 per cent on income collections of $87,144 which she said would have brought about a commission of $20,087, but that she took into account the pains and troubles in relation to the sale of the Mosman property and increased the percentage on capital realisation to 0.4 per, cent rounding off the realisation sum to a figure of $30,000. 16 I have come to the view, as I have said, that this allowance is not nearly sufficient and does not properly take into account the pains and troubles of this executor in administering this estate. Looked at in accordance with the method which I have suggested should be undertaken, I consider that the proper amount to be allowed for capital realisations would 1.25 per cent. In coming to that conclusion, I do so on the basis not only of the value of the property as a real estate property, but a property which required considerable additional effort in connection with the business being run on that property. There can be no criticism of the executor in carrying on the business for two years after the date of death, and, in fact, there is nothing to show that this was not done to the advantage of the estate. I would have also added to that amount an amount of commission on income at 4 per cent which would have brought about a figure of $3,486. It is not necessary to come to a figure precisely but those two figures added together come to $87,751. 17 There is still some work to be done in the final distribution, and it must be borne in the mind that, as the events have happened, there are a large number of beneficiaries in the estate. In any event, the figure of 1.25 per cent, in my view, would be increased rather than decreased. I, therefore, consider that as a lump sum the proper amount to be paid to this executor for his pains and troubles in the administration of this estate is the sum of $95,000 and I so order. 18 I set aside the decision of Deputy Registrar Siva of 21 February 2007. In lieu thereof, order that the plaintiff be allowed commission for his pains and troubles as executor of the estate of James Thomas Langley Joel in a lump sum of $95,000. Order the costs of the notice of motion be paid out of the estate of the deceased on an indemnity basis. The exhibit can be returned.

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Judgment (13 paragraphs)

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