KNUCKEY -v- KNUCKEY [2022] WASC 157 (6 May 2022)

3 Probate of the last will and testament of Lynette Knuckey (the deceased) was granted to Dougald on 22 February 2019. The four named defendants are the children of the deceased and were all beneficiaries under the will. The will appointed Dougald as executor of the estate. The will itself was relatively straightforward. There were a number of specific requests, but otherwise money in a bank account and the proceeds of the sale of the deceased's property in Como were to be divided equally between the four beneficiaries. There were three separate clauses requiring each of the beneficiaries other than Dougald 'to make timely arrangements for the collection, sale or disposal of all property ... (stored) at my property'.

4 On the face of it then there was not really much for the executor to do. He had to ensure the beneficiaries of the specific legacies received their entitlement. He had to ensure his siblings collected their various goods and possessions from the Como property so that the property could be sold. He then had to arrange for the sale of the property and distribute the net proceeds between the four beneficiaries. He had to approach the bank where the deceased held an account, establish he was entitled to deal with the deceased's funds by virtue of the grant of probate and then ensure the money in the account was distributed to the beneficiaries. It was inevitable he would encounter difficulties. Banks are notoriously cautious about allowing dealings with accounts of deceased persons. There was clearly some friction between Dougald and his siblings and that led to some difficulties in preparing the Como property for sale and dealing with the estate in general. But this was not a large estate and it was not a complicated administration. It might reasonably have been expected all that needed to be done could be done in a relatively short space of time and at no great expense.

5 It seems the administration of the estate took Dougald rather longer and was rather more complicated than might have been expected. Appearing as attachment DRK8 to Dougald's first affidavit is a document described as 'Executor's Commission Diary'. It runs to 39 pages. It comprises a list of entries which have a date, the time and spent and a brief description of the activity undertaken. For instance, there is an entry for 23 March 2019 which reads as follows:

Buy bluetooth speaker for funeral service. Download Beethoven piano sonatas for service. Test.

6 That activity was said to have taken half an hour. The diary runs from 16 March 2019 to 5 August 2021. The total hours spent is said to have been 631 and the total number of 'Action Items' is 487.

7 The position of Ian can be summarised by quoting pars 10 and 11 of his written submissions. They read as follows:

10. The time spent and the acts of the executor in administering the estate were not of a specialist nature; consisting of acts that other executors perform as a part of executing their responsibilities, and honouring the privilege of being appointed executor by the deceased.

11. The amount of commission claimed amounts to $26,208.46 and is vastly disproportionate to the value the plaintiff engendered to the estate.

8 During the course of the hearing, Ian cross‑examined Dougald and the exchanges which took place really did no more than emphasise Ian's position. He was at pains to point out this was not a complicated estate and he alleged Dougald's time allegedly spent in the administration was either overstated or related to work which was unnecessary. No purpose would be served in my examining in detail Ian's complaints. It is enough if I indicate the general nature of his concerns.

9 Section 98(1) of the Trustees Act 1962 (WA) reads as follows:

The Court may, out of the property subject to any trust, allow to any person who is, or has been, a trustee thereof or to that person's personal representative such commission or percentage for that person's services as is just and reasonable.

10 In Peter Henry Atkins as Executor of the Estate of Robert Charles Godfrey v Godfrey & Ors [2006] WASC 83 Le Miere J considered an executor's entitlement to commission from an historical perspective. His Honour said:

[14] The plaintiff claims remuneration pursuant to s 98(1) of the Trustees Act 1962 which provides that the court may, out of property subject to any trust, allow to any person who is, or has been, a trustee thereof such commission or percentage for that person's services as is just and reasonable. Trustee is defined in s 6(1) to include a personal representative. Thus, s 98(1) confers on the court a discretion to allow an executor remuneration for that person's services as is just and reasonable. Subsection 98(2) provides that the remuneration allowed shall not exceed 5 per cent of the gross value of the trust property.

[15] Historically equity regarded trusteeship as an honorary position, and in the absence of any special provision for remuneration the services of the trustee were to be provided gratuitously. The practice in the Court of Chancery was to never allow commission to executors except in two instances: where executors were dealing with estates in the East Indies or estates in the West Indies. In such cases commission was allowed because it had been the practice in those regions to do so.

[16] The first Supreme Court in Australia was established in New South Wales by the Charter of Justice. By that Charter the Court had conferred upon it the jurisdiction of all the superior courts of England and, amongst other things, the Court was authorised 'to allow to any executor, or administrator, of the effects of any deceased person, such commission or percentage out of their assets, as shall be just and reasonable, for their pains and trouble therein'. The Crown, therefore, when creating courts of justice in Australia introduced the system that executors were to be paid for their trouble in administering estates if the court thought fit, notwithstanding the rule in England that they should not be paid for that trouble: Nissen v Grunden [1912] HCA 35; (1912) 14 CLR 297 per Griffith CJ at 304.

[17] Section 98(1) of the Act provides that the court may allow to an executor remuneration for that person's services as is just and reasonable. The mere presence of s 98(1) in the Act indicates that it is appropriate in many instances for an executor to receive remuneration for carrying out their obligations. It may be that in times gone by there were more people with the leisure and resources to take on unremunerated trusteeships. However, in contemporary times the payment of executors' remuneration is conducive to the good administration of estates. An executor is more likely to be able to devote the time and resources to the proper administration of an estate if he or she is remunerated for doing so.

[18] The details of work document that is Annexure PHA17 to the plaintiff's affidavit sworn 17 August 2004, shows that in the four year period from June 2000 to August 2004 the plaintiff spent about 210 on the administration of the estate. There is room for argument that some of that time was spent unnecessarily and that some of the work carried out by the plaintiff was of little or no value to the estate. Nevertheless, that document together with the evidence of the plaintiff shows that he rendered substantial services in the administration of the estate. The estate was substantial. It is just and reasonable that the plaintiff be allowed remuneration unless his conduct in or in connective with the administration of the estate disentitles him to such remuneration.

11 His Honour went on to note that where there was misconduct by the executor in execution of his duties, permission could be refused. The defendants argued the executor in that case had acted in breach of trust. His Honour found that not to be the case. He therefore concluded commission was payable. At [78] - [88] his Honour considers the factors which are relevant to the quantum of commission. I would incorporate those paragraphs in these reasons without repeating was his Honour had to say. In the end, it is a matter considering the work undertaken by the executor in the light of the size of the estate and its complexity. Really it is a matter of deciding each case on its merits. So far as fixing the amount of remuneration is concerned his Honour said at [90]:

[90] The proper approach required by s 98(1) of the Act is to form an overall assessment of what remuneration is just and reasonable rather than apply the Barr Smith scale. Nevertheless, the Barr Smith scale is helpful in this case in forming a view as to what remuneration is just and reasonable.

12 The so-called 'Barr Smith' scale is a reference to the decision In Re Barr Smith [1920] SALawRp 36; 1920 SALR 380. This case involved a very substantial estate and the Full Court of the Supreme Court of South Australia took the opportunity to set down the principles for assessment of remuneration. The judgment of the court was delivered by Buchanan J (with whom Murray CJ and Poole J agreed). His Honour put the position as follows:

As regards the assessment of the remuneration for those duties ordinarily devolving upon an executor of getting in his testator's estate, and thereout paying the testamentary and funeral expenses, debts and legacies, and the further duty, frequently imposed, rather qua trustee than qua executor, of holding the balance of the trust estate in a proper state of investment and paying the income thereof as directed until the ultimate period of distribution arrives, and only then distributing the corpus, I think no better or more practicable plan can be devised than that of a percentage or commission upon the amount or value involved. In jurisdictions where Public Trustees or corresponding officers are established their charges are fixed in this way. Here under section 112 of the Administration and Probate Act 1919, the Public Trustee's commission is to be in accordance with a percentage scale set out in the Second Schedule to the Act. A similar scheme for assessing the remuneration for services rendered is usual in the case of incorporated executor and trustee companies, and indeed in mercantile and commercial affairs generally, where the relation is of the nature of principal and agent, rather than of master and servant.

Under any percentage scale, graduated as is usual, 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.

13 His Honour determined the way in which commission should be calculated should be adjusted slightly from what had prior, to that point, been the usual practice. He concluded as follows:

(a). On special assets got in and realised being - Cash; Moneys in Bank, Treasury or other Deposit Receipts; Moneys receivable under Life Assurances and mortgages; Negotiable Instruments, Moneys received from the Executor, Administrator or Trustee of any other Estate, or Fund, or any Liquidator, or other assets of similar character to any of above - 1½ per cent, on first £1,000 to £100,000; 15s. per cent, on amount over £100,000.

(b). On other assets got in and realized - 5 per cent. On first £1,000; 2½ per cent. on amount over £1,000.

(c). On unrealized real or personal property (not being cash) transferred or delivered in kind to, or specifically appropriated in trust for, any person entitled thereto, being a devisee, legatee next of kin, cestui que trust, beneficiary or other person of a like character, upon the value of such property - Up to £10,000, 1¼; on all in excess of £10,000, 15 per cent.

(d). On income got in yearly - 5 per cent. on first £1,000; 2½ per cent on amount over £1,000.

14 As is sometimes the way with these things, the principles set out in the Barr Smith decision appear to have been adopted generally by Supreme Courts throughout the Commonwealth. However, there is very little authority which deals with this question. It was considered by the Full Court of the Supreme Court of Victoria In re Chirnside; Lewis v Forrest & Ors [1955] VicLawRp 91; 1956 V.L.R 295. At the hearing of the appeal counsel agreed that the court might consult the Master of the Supreme Court to determine whether there was any settle practice with regard to commission. The learned Master prepared a memorandum for the assistance of the court which reads as follows:

My practice in allowing commission on property not realized but transferred in specie, whether to a beneficiary, or appropriated to a trust, and, in the latter case, without awaiting the period of distribution, follows that of my predecessor and accords with South Australian practice. That practice is set out in the enclosed printed memorandum handed to me by Mr. Phillips in 1941.

The view I have consistently acted upon is that an executor in an estate, where a specific trust of residue, is entitled to ask for corpus commission at any time after realisation has reached an advanced stage and definitely so if he can say, 'I have realised all that it is necessary for me to realize. Whatever assets I have not realised, and which I set out in detail, I have lawfully appropriated in specie to the trust, being either trustee investments or assets the retention of which is authorized by the will.' In such a case I would allow commission on the appropriated assets but at a lower of commission, as there would be less physical and mental effort - merely a book entry transfer. The differentiation has really little significance, as I always first assess the total amount to be allowed and then allocate it as between the two classes of assets on percentage bases.

When the trust assets are ultimately realized, the then trustees, I have always assumed, could apply for commission in respect of their pains and trouble involved. If they be the original applicants they would be covered by the form of Order set out in Phillips' book at p. 45, para. (2), as approved by Hood J. In the Will of McLeod [1918] ArgusLawRp 54; (1918), V.L.R 456. I refer you to the accompanying certification: Baker v. Oates 1936 - 314, Bleach v. Equity Trustees Co. 1939 - 238, McCutcheon v. Luxford 1940 - 779, Christie v. McRae 1946 - 607.

15 Delivering the judgment of the court Deane J (with whom Lowe and Gavin Duffy JJ agreed) referred to this minute and the decision in Barr Smith. His Honour said:

There has been a full discussion of corpus commission by the Full Court of South Australia in In re Barr Smith[1920] SALawRp 36; , [1920] S.A.L.R. 380. The testator, who left a very considerable estate, directed his trustees to set apart and invest one sum of 500,000l. on the trusts set out in the will and five sums of 100,000l. on other trusts. The trustees realized a great part of the testator's assets and had been allowed commission thereon. They appropriated out of the original assets of the testator a sum of over 500,000l. to answer the trusts, and it was on the assets so appropriated that a claim for commission was made. It appeared that in 1907, following upon directions given by the Judges, a memorandum had been prepared which formed the basis of subsequent practice. In the case of In re Barr Smith (ante), the Court took the opportunity to reconsider the instructions the instructions in the memorandum. Buchanan J., who read the judgment of the Court, said, at p. 386: '... for the ... original assets of the testator appropriated to answer these trusts the applicants should be allowed remuneration' and said that, for further commission, the trustees must look to the allowance in respect of income alone. His Honour took the view that the appropriation of original assets to the several trusts amounted in substance to a distribution in specie of that much of the testator's estate. In the result it was decided to adhere to the memorandum. Commission was accordingly allowed at varying rates upon the various assets of the estate. It is important to observe that commission was allowed in respect of unrealized assets appropriated to the various trusts.

The importance of this decision is increased for the present purpose by the fact that it and the memorandum upon which it was based have ever since formed the basis upon which in this Court the Master has allowed commission. Counsel agreed that we might consult the Master in order to determine whether there was any settled practice and, if so, what that practice was. The Master has accordingly furnished us with a statement of his own practice and with a copy of the South Australian memorandum. His practice was based upon the Barr Smith Case and upon the South Australian memorandum referred to therein, a copy of which was handed to him by his predecessor, the late Mr. M. M. Phillips, in 1941. This clearly shows that it is not his practice to await final winding-up of the estate before allowing commission, but to allow commission upon assets got in and realized, upon assets specifically transferred to devisees or legatees, and upon assets appropriated to trusts created by the will and held for the purposes of those trusts in a form authorised by the will or by law. It follows, as was said by Buchanan J., that all subsequent work performed by the trustees, including final realization and distribution, and change of invests, etc., must be rewarded by the allowance of commission upon income. The decision of a'Beckett J., in Re Johnson, [1911] V.L.R. 268, supports the view that under sec. 59 the trustee does not have to await the final completion of the administration of an estate settled upon trusts before he is entitled to commission under sec. 59.

It was against that limited background Le Miere J came to decide Atkins. In that case, the executor (Mr Atkins) was a retired solicitor and a friend of the deceased. The estate was substantial although nowhere near as large as the estate in Barr Smith or Chirnside. The decision in Atkins is one of the few, if not the only decision where commission has been claimed by what might be called a lay executor. In both Barr Smith and Chirnside the executors were professionals. Be that as it may, the law in Western Australia is undoubtedly as set out by his Honour in the Atkins decision and s 98(1) of the Trustees Act clearly allows for remuneration of lay executors. The fact that very few executors claim commission is neither here nor there. The fact is that an executor has a statutory right to make a claim and it is for the court to assess the quantum of any commission allowed.

17 The decision of Le Miere J in Atkins makes it plain that each case must be determined on its merits. Perhaps the principle can be stated with no more precision other than to say the more complicated the case the higher the commission is likely to be. It also may well be the case that if the administration of the estate is incompetently handled, no commission would be payable. Section 98(1) of the Trustees Act is very general in its terms. It clearly embodies a discretion. The only guide provided is that the amount of compensation must be 'just and reasonable'.

18 In this case, I am not satisfied the claim made by Dougald is justified. Certainly there were some difficulties with the estate, particularly in relation to the bank account. It is also clear some work needed to be undertaken to ready the property for sale. In most cases such as this with a modest estate, no claim for commission would be made. But that claim having been made, I am satisfied that the proper allowance would be $20,000. This represents slightly less than 2% of the estate and the amount I have settled upon is a reflection of what I see as a relatively straightforward administration.

19 There was also a dispute between the parties as to whether or not Dougald ought to have the cost of this application. In his written submissions, counsel referred to what was said by Le Miere J on this issue in Atkins. I would accept the costs of applying for commission ought to be regarded as part of the costs of the administration. Therefore, the orders that I would make are as follows:

(1) Pursuant to s 98 of the Trustees Act 1962 (WA), the plaintiff be paid a commission for his services acting as trustee in the amount of $20,000.

(2) The estate pay the executor's costs of the application on a trustee basis.

20 Dougald had sought Ian pay the costs of the commission application on the basis Ian had opposed the application and costs should follow the event. I am not satisfied such an order is warranted.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.