Kirkpatrick v Kavulak

SUCCESSION - OTHER MATTERS - where testatrix appointed both the applicant and respondent as joint executors - where the applicant had acted as the testatrix's attorney for many years prior to her death - where the applicant renounced his executorship - where the respondent, as executrix, brought an action against the respondent for breach of duty as attorney - where that action settled on terms that fixed the maximum amount for solicitor's costs and accountancy fees that the executrix could claim - where the executrix applied for estate accounts to be passed - where the applicant claims certain legal and accountancy fees should be disallowed because they exceed the limits agreed in the terms of settlement - whether amounts related to the litigation - where the applicant claims certain accountancy fees should be disallowed because it was unnecessary to prepare a full set of accounts - where Uniform Civil Procedure Rules 1999 (Qld) require an executrix to prepare accounts to seek commission - whether expenditure should be allowed

SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - EXECUTORS AND ADMINISTRATORS - COMMISSION - QUANTUM - MATTERS AND CONDUCT AFFECTING - where respondent claimed commission for her work as executrix - whether the terms of settlement of the prior litigation against the applicant precluded her claim of commission - whether she should be remunerated for her efforts in pursuit of the litigation

Succession Act 1981 (Qld), s 68

Uniform Civil Procedure Rules 1999 (Qld), r 646

Re Barr Smith [1920] SALawRp 36; [1920] SALR 380, referred to

Re Estate of Ghidella [2005] QSC 106, applied

Keith Scott & Associates for the applicant/cross respondent

[1] McMURDO J: Mrs H P Kirkpatrick died on 30 August 2000. By her will of 3 August 1992, she left her estate to her son, Mr Kirkpatrick, and her daughter, Mrs Kavulak, effectively in equal shares. They were appointed as executors. Mr Kirkpatrick renounced his executorship in May 2001 and probate was granted to Mrs Kavulak the following month.

[2] The administration of the estate has been the subject of considerable dispute between them. For many years Mr Kirkpatrick had acted as his mother's attorney, and Mrs Kavulak complained that he had breached his duty to her in several respects. As executrix she sued him in the District Court. Those proceedings were settled in July 2004, but the parties are in dispute still in a number of respects. Mrs Kavulak applies for certain estate accounts to be passed and for the court's authority that she be paid an executor's remuneration. Mr Kirkpatrick applies to have the estate finally administered, challenges the executor's accounts in certain respects, and opposes any claim for remuneration.

[3] Mr Kirkpatrick disputes some expenditures within the accounts, on the basis that Mrs Kavulak agreed not to claim them as a term of the settlement of her District Court case. In that case Mrs Kavulak had claimed for the estate a sum of $115,712.15, plus a further $20,000 for legal and accountancy fees and costs. The case was settled on the basis that the estate would recover against Mr Kirkpatrick $35,000. Mrs Kavulak had spent large amounts on legal and accounting fees in investigating and prosecuting it. The terms of settlement included the following:

"3. In the taking of the final accounts of the estate, the plaintiff's indemnity costs of this litigation will be fixed at a maximum of:-

Costs or outlays of the estate in this litigation (if any) in excess of these amounts, shall be treated as items wholly on account of the plaintiff in her personal capacity as a beneficiary.

4. The intent of the preceding paragraph is that the said maximum sum of $80,000.00 be borne by the two beneficiaries to the estate in equal shares.

There shall otherwise be no entitlement of either party to costs of and incidental to this action."

[4] Mr Kirkpatrick says that some legal and accountancy fees which Mrs Kavulak wishes to charge to the estate should be disallowed because they exceed the limits agreed in those terms of settlement. According to his calculations, accounting fees of $22,104.20, all referable to the District Court case, have been charged to the estate as against the agreed limit of $19,000. And at least at the commencement of the hearing of this application, he maintained his claim that $63,107.69 for legal fees for that case had been charged to the estate, as against the agreed limit of $61,000. He says the excess in each case should be disallowed.

[5] The only argument in relation to accounting fees concerns a total account of $2,356.20 made by her to Marriott Foreman, accountants, in July 2004. Mr Kirkpatrick attributes $1,364 of this to work done for the District Court case, and the balance of $992.20 to other estate work. That apportionment is supported by a letter from Marriott Foreman to Mrs Kavulak's solicitors dated 19 August 2004, and I accept it, as I otherwise accept Mr Kirkpatrick's calculation of $22,104.20 as the accounting fees which were for work done for the District Court case. Mrs Kavulak has thereby overcharged $3,104.20 which should be disallowed.

[6] The dispute as to legal fees originally involved some three items. During the hearing, Mr Kirkpatrick conceded two of them, in respective amounts of $148.50 and $430.10. There was debate as to the third item, $1,100 paid on or about 6 March 2003. It was paid to Attwood Marshall, who were the solicitors acting in the District Court proceedings. There is no direct evidence that the fees are referable to other parts of the administration rather than to this litigation. Because they were paid to Attwood Marshall and in March 2003, and absent direct evidence to the contrary, I infer that they were paid for this litigation. It follows that Mr Kirkpatrick's complaint about legal fees being in excess of the agreed $61,000 is made out but to the extent of $1,529.09 (being his originally claimed excess of $2,107.69 less $148.50 and $430.10).

[7] Some other items are challenged, although not on the basis of the terms of settlement of the District Court case. There is a challenge to $4,455 paid as counsel's fees on 14 July 2005. These applications came before Muir J on 7 July 2005 when directions were made towards this final hearing. The fees are for counsel's work in preparing for these applications and appearing before Muir J. The amount of the fees is not in dispute. It is argued by Mr Kirkpatrick that Mrs Kavulak should not have made her application and should not be resisting his application, so that these fees should not be borne by the estate. As I will discuss, it was proper for her to bring her application, and in particular for her to seek commission. Some of these fees are within the costs which Muir J reserved on 7 July, and at the hearing I indicated that I would hear submissions as to those reserved costs when I had determined the other issues within these applications. The same goes for $7,521.21 paid to Mrs Kavulak's solicitors on or about 15 July 2005. I shall not rule on these amounts until I rule upon the reserved costs.

[8] Next there is a dispute as to $5,500 paid to Marriott Foreman on or about 12 July 2005 for the preparation of the estate accounts. There is no dispute as to the reasonableness of their fees, but Mr Kirkpatrick says that it was unnecessary to prepare a full set of accounts. He says that some more limited accounting was all that was required, having regard to the limits of his queries of the administration. In particular he refers to his written query which is undated but which Mrs Kavulak accepts was received before she had the accountants prepare a full set of accounts. In that document, he referred to the balance in the estate as at 30 June 2004, to the transactions from that date and to what he then calculated was an "unaccounted discrepancy" of $28,931.32. He also referred to the advice from Mrs Kavulak's solicitors in their letter of 3 November 2004 that the then balance in the estate was approximately $130,000. Mr Kirkpatrick wrote that "approximately" was "not good enough" and that he wanted a "fully disclosed accounting of the account from 1 July 2004. I also want complete itemisation of ALL legal and accounting costs from May 2000 with a disection [sic] of these expenses that are related to the administration of the account and those that relate to the action resulting in the Terms of Settlement".

[9] What he thereby requested, I accept, was more limited than a full set of estate accounts. However, it was reasonable for Mrs Kavulak to have these accounts prepared, firstly because r 646 of the Uniform Civil Procedure Rules 1999 (Qld) required them if she was to seek commission. As she was correct in applying for commission, that in itself provides a reasonable justification for the accounts. I accept that the court could award her commission by relieving her of the requirement of r 646. But given the acrimony between these two people over many years, she might well have expected that Mr Kirkpatrick would insist upon compliance with the rule and that she might as well avoid an argument by simply complying with it. Secondly, the accounting required by Mr Kirkpatrick was in itself extensive and may not have been significantly cheaper than a full set of estate accounts. I conclude that this expenditure of $5,500 should be allowed.

[10] There is challenge to a sum of $1,708 the subject of an invoice from Short Flynn & Co dated 1 September 2000, which Mrs Kavulak now concedes.

[11] There is a challenge to an amount of $6,412.79, which Mrs Kavulak paid herself as recently as 23 August 2005 allegedly for her own expenses for things such as travelling expenses and telephone costs. This amount is discussed below.

[12] Section 68 of the Succession Act 1981 (Qld) provides as follows:

The court may authorise the payment of such remuneration or commission to the personal representative for his or her services as personal representative as it thinks fit, and may attach such conditions to the payment thereof as it thinks fit."

[13] Whether s 68 constitutes the sole source of the power to authorise remuneration, or there is also an inherent jurisdiction, the court's discretion is broad. The authorities support the submission for Mrs Kavulak that the allowance of commission is the rule not the exception.[1] Criticism is made by Mr Kirkpatrick of his sister's bringing the District Court proceedings, and spending a large sum of money to recover a relatively small sum. And in a few instances, already mentioned, Mrs Kavulak has claimed more against the estate than she was entitled to pursuant to the terms of settlement. Other than in those respects, however, I do not understand Mr Kirkpatrick to advance any strong criticism of her work as an executor. What then are the considerations against granting her remuneration?

[14] The estate was originally of a capital value of about $1 million, mostly comprised of two rental properties and shares in publicly listed companies. It was not a complicated estate to administer, apart from the complication which resulted in the District Court litigation. However, I accept that Mrs Kavulak was still put to some "pains and trouble" for which she could expect to be remunerated.

[15] It was argued that in some way the terms of settlement of the District Court proceedings should preclude any claim for commission. In addition to the terms I have set out already, it may be relevant to mention also clause 8 which provided: "Nothing herein shall prejudice the rights of either party in respect of the further administration of the estate of the deceased". There is no term of the settlement by which Mrs Kavulak agreed not to claim any commission. And there is no suggestion that Mr Kirkpatrick was in some way induced to settle on these terms in the belief, engendered by Mrs Kavulak, that she would not make a claim.

[16] It is said that she should not be given a commission, given the amount spent on the District Court case against the relatively small amount recovered. There may be many reasons for the difference between those two amounts. Possibly, as Mr Kirkpatrick suggests, she extravagantly applied estate funds towards an unmeritorious claim, or one which had merit for only a small amount. But as far as this court can now ascertain, without in effect hearing what was the District Court claim, it may have been a good claim which he managed to resolve on terms favourable to him in that they did not reflect the underlying merits. So it may be his fault that so much was spent by the estate. I am unable to say whether one possibility is more likely than the other, and I cannot conclude that the large amount spent in pursuing Mr Kirkpatrick should disentitle her to remuneration.

[17] Next it is said that whilst she acted as executrix for many years, so did he act as his mother's attorney for something approaching eight years, so that effectively their efforts cancel each other out. One difficulty with that submission is that I am not in a position to determine whether Mr Kirkpatrick did discharge his duties as an attorney honestly and diligently in all respects. I am unable to make a finding about that one way or another. I am not persuaded that upon this ground, I should refuse or reduce an otherwise appropriate remuneration.

[18] Undoubtedly much of her efforts as executrix were spent in the pursuit of the District Court case. I accept that she should not be remunerated for those efforts, because the apparent intention of the parties in settling that case was to resolve any claim which either party had made or might make in relation to the subject matter of those proceedings or in consequence of the proceedings themselves. As I have said already, I am not persuaded that the terms of settlement are a contractual bar to any claim for commission. But in relation to a claim for commission for the "pain and troubles" of pursuing this litigation, it seems to me that by implication from the terms of settlement, such a claim is precluded. The notion that Mrs Kavulak could claim for her own time and expense in pursuing the District Court claim whilst apparently settling it and agreeing to cap the estate's liability for legal and accounting fees, seems to me to be inconsistent with the common purpose expressed in the terms of settlement.

[19] Mrs Kavulak seeks commission on the basis of three per cent of the capital and five per cent of the income. The claim is ultimately put on the basis of the quantification of remuneration, not by the amount of time spent, but by the size of the estate to be administered, in reliance upon in Re Barr Smith [1920] SALawRp 36; [1920] SALR 380 and cases which have followed it. Her submissions also rely upon the recent judgment of Jones J in Re Estate of Ghidella [2005] QSC 106 in which his Honour allowed remuneration at 1.5 per cent of income of $308,815 together with two per cent on capital of $2,399,255. I also have the benefit of the comparison of rates for remuneration set out in de Groot Wills Probate and Administration Practice (Qld) at para 603.

[20] In this case a relatively modest remuneration is appropriate for a number of reasons. First and most importantly, the administration of the estate was not a complicated one, apart from the claim which resulted in the District Court proceedings. The rental properties were easily realised. The shares have been divided between the two beneficiaries. Secondly, Mrs Kavulak has paid herself the amount of $6,412.79 for alleged expenses incurred in the administration. Much of these claimed expenses, if they do correspond with her actual expenses, must be attributable to the District Court case because much if not most of her efforts as an executor must have been towards that matter. I do not think that it is possible to determine precisely how much of this claim represents expenditure properly chargeable to the estate: if it could be done, the costs of the court's investigation of that question would not warrant the exercise. But as I think it likely that many of these expenses relate to the District Court litigation, there is a further reason for awarding her a relatively modest remuneration if the $6412.79 is to be allowed. It was argued on her behalf that the disallowance of an expense is one matter but the assessment of a level of remuneration is a distinct question, which should be unaffected by my misgivings about the expense claim. I accept that submission in principle; but by paying herself this $6,412.79 she has already compensated herself to the extent of at least some thousands of dollars not for expenses properly paid from the estate but in effect for her pains and trouble. In any case, the amounts claimed by her are excessive when compared with what was allowed by Jones J in a case where the executor seemed to have a stronger case for a substantial remuneration than the present.

[21] I was told without objection by counsel for Mr Kirkpatrick that the capital of the estate was worth about $1 million before it was enlarged by accumulations of income. The executrix puts her claim on the basis that the income to 30 June 2004 was about $232,000. In my conclusion a reasonable remuneration in all the circumstances is of the order of $20,000, which represents slightly less than two per cent on capital of $1 million and one per cent of the income. This is on the basis that I will allow the whole of the $6412.79 which she has already drawn for expenses.

[22] The parties will prepare minutes of orders to reflect these reasons. I will hear the parties as to costs of each application, including the costs reserved by Muir J.

[1] Geddes, Rowland and Studdert: Wills Probate and Administration Law in New South Wales at [86.02] citing Nissen v Grunden [1912] HCA 35; (1912) 14 CLR 297; Will of Shannon [1977] 1 NSWLR 210 and Re Lack [1983] 2 Qd R 613