Lowe v Lowe

Administration of the Estate of the Late Sylvia Yvonne Schutt

1. The dispute up to the time of Lindsay J's judgment. The deceased died on 11 January 2021. She was survived by four of her five children. Her will dated April 2017 appointed William as her executor. Probate of her will was granted to him in May 2021. The will left William a legacy of $120,000 "in appreciation of the considerable wealth he has added to my investments since 1994". The residue of the deceased's estate "including personal and household effects" was to be divided between her four surviving children and her daughter-in-law, the widow of her deceased son.
2. On 10 May 2022, Margaret filed a motion seeking for the executor, William to file and pass accounts. Hallen J made directions for filing of accounts and for the narrowing of the issues in dispute between the parties. William filed an affidavit on 6 October 2022, together with his accounts and supporting documents. Subsequently, William filed supplementary affidavits including an answer to requisitions dated 22 September and 14 November 2022 and 24 February and 28 February 2023.
3. William was directed to file amended accounts and did so by an affidavit dated 21 April 2023. The Registrar received written submissions from both Margaret and William. William also filed an Amended Motion seeking executor's commission.
4. William had managed the deceased's finances for several years before her death pursuant to a power of attorney that he held from her. He prepared all her tax returns. His control over her affairs and his management style appeared to grate with some of his other siblings, especially Margaret. Disputes arose about clearing out the deceased's house and belongings when she moved into a nursing home in 2015. Proceedings were commenced in the New South Wales Civil and Administrative Tribunal (NCAT) to attempt to resolve these and other disputes.
5. The disputes in the accounts related in part to management fees that William had charged the deceased before her death. His entitlement to do so was questioned as he was not conducting a business as a licensed financial advisor. William had had apparently issued invoices for his management of the deceased affairs for many years before her death but when preparing her tax returns on an accruals basis that liability had been accrued but not paid. In the estate accounts that William put forward for passing, he was seeking payment for those invoices from the estate.
6. On the application for the passing of accounts, the Registrar was concerned about several matters: about William changing the information he had advanced about these invoices; about William giving opaque explanations for the charges in the invoices; about William's potential conflict of interest in relation to the payment of these invoices once he became executor; and about William's possible over complication of the deceased's financial affairs before her death. The Registrar did not consider that William's management fee invoices against the estate for periods before 1 July 2020 were appropriate expenses to be allowed on the passing of accounts.
7. But despite some reservations, the Registrar was otherwise prepared to allow executor's commission under the Probate and Administration 1898, s 86 to William of $15,000. The Registrar's reservations related to aspects of William's administration of the estate that the Registrar was not satisfied had been carried out in a proper manner. The Registrar gave several examples of this in her report to Lindsay J upon review of her decision. 1. The will, clause 3(c) provided that the deceased's executor should "divide the remainder of my estate including personal and household effects into five equal parts to be distributed as follows…" And the distribution was directed to the five children or their family. Much of the estate residue was comprised of the deceased's shares that William had managed many years before her death. William as executor sold some of those shares to pay out the beneficiaries. But the executor chose to transfer number of shares in specie to himself. These shares were of the same market value as each of the other shares of residue distributed to his siblings, but the other residuary beneficiaries expressed the concern that he had selected the best quality shares for transfer to himself. William stated he had considered the cost of sale versus transfer of the shares. But one effect of the approach he took with respect to the distribution of these shares was to give himself but not his siblings the capital gains tax deferral that might arise from a distribution of shares in specie. The Registrar queried his approach to the subject but made no change to the accounts on this ground. 2. Next William made his own estimate of the value of household and personal goods that the deceased's children had received when the deceased moved into a nursing home in 2015. William adjusted the entitlements of the residuary beneficiaries under the will, to take into account what they had received at this early time. The Registrar was troubled by how William had gone about this calculus. Unless the residuary beneficiaries had agreed at the time the deceased went into a nursing home, that the furniture and personal effects that they were then receiving would be credited against their future entitlement to residue, there was no proper basis to make that deduction. The household and personal effects given to the deceased's children when she moved into the nursing home became theirs in law. Delivery of the goods into their possession were the indicia of a gift that was sufficient to transfer legal title then to the deceased's children. The will required the equal division of the deceased's estate among the residuary beneficiaries at the time of her death.
8. The Registrar considered other objections, which are not of present relevance.
9. William sought review of the Registrar's decision by the Probate judge, Lindsay J, who decided that there was no reason to intervene to disturb the Registrar's decision either with respect to the passing of accounts or commission: Re Estate Schutt [2023] NSWSC 1159 [21].
10. The present dispute. Margaret now complains in substance by her further motion, filed on 2 February 2024, that despite the passing of the accounts in May 2023 being upheld by Lindsay J in September 2023, the estate has not been distributed in accordance with the will of the deceased and consistently with the passing of accounts. Margaret complains that she and her brother and fellow residuary beneficiary, Graeme Schutt, have been paid less than their entitlements under the will. She claims that $7,557.09 is owed to her and that $6,411.83 is owed to Graeme. The executor, William, says that he has distributed the estate in accordance with the will and consistently with the passing of accounts.
11. The present issue between these parties arises out of an agreement that William says was reached between all five of the beneficiaries in early October 2021. That agreement was said to be that certain assets sometimes described by William as "unrealised assets" would be shared equally among the residuary beneficiaries and would no longer be treated as part of the deceased's estate or as subject to accounting as assets of the estate. These assets were apparently said by William to be gifts, household items donated to charities, items disposed of before the deceased's death and legal fees said to have been paid by the deceased during her lifetime.
12. The heart of the present dispute seems to have two aspects. Margaret says that William has never accepted that she and Graeme received many of the deceased's chattels and personal effects in 2015 when she went into a nursing home and that he now wrongly seeks to treat those items distributed to them some six years before the deceased died, as agreed advances on their distributions from the estate as residuary beneficiaries. Margaret says that there was no such agreement made and that these items distributed in 2015 could never have constituted assets of the deceased's estate at the time of her death, as they had long ceased to be any part of her estate.
13. Several points need to be made about this dispute. The first point is that the dispute is very inadequately articulated by the parties, perhaps because they are not legally represented. But as a result, the Court is not well-placed to resolve the dispute in these reasons. If the matter is not resolved and returns to the Court for a contested hearing, the parties will have to define the issues between them more rigorously. Because of the poor articulation of the issues and the confusing and repetitive organisation of the evidence by the parties, nothing in these reasons should be taken as expressing a final concluded view about the issues. Although the Court has attempted to identify what it sees as potential weaknesses in the parties' cases.
14. The second point is that there appears to be real uncertainty about what was agreed in the so-called October 2021 agreement. On the limited evidence made available to the Court, it appears to involve an exchange of emails between William and the other beneficiaries in October 2021. The Court has reviewed what it believes is the available email correspondence that is said to constitute the agreement, and the alleged agreement is very imprecise and may arguably be incapable of supporting a binding agreement due to the vagueness of the language used.
15. This can readily be illustrated. William wrote to the other beneficiaries on 4 October 2021 indicating that "all gifts and mum's legal fees" should be divided equally among the five residuary beneficiaries. The Court does not have the full text of the 4 October 2021 email. But this language prompts the question as to exactly what "all gifts" means, what gifts are involved, how those gifts are to be valued, and by whom they are to be valued. Moreover, if the "gifts" relate to chattels distributed some years before the death of the deceased and she was going into a nursing home, it is to be wondered what this agreement has to do with the administration of her estate at death. They had prima facie long ceased to be part of her estate. The authorities about the meaning of the words "personal effects" refer to items in the possession of the testator at the time of death: cf the useful summary of the applicable law in Lowe v Lowe [2024] NSWSC 48. The agreement William alleges seems to be open to be interpreted as no more than a just a declaration that when items were distributed when the deceased went into a nursing home in 2015 that the parties were attempting to achieve an equal distribution of that time. That would not necessarily have anything to do with the distribution of the estate upon her death. If the executor thought that it did, he may have been acting under a misapprehension. Moreover, not all the items distributed in 2015 readily fall into the description "personal effects".
16. Then it is difficult to know what equal division among the residuary beneficiaries of "mum' s legal fees" means. If the deceased had a liability to pay legal fees during her lifetime and that liability was not satisfied, then it should be an identifiable estate liability, which would need to be paid by the executor before any distribution of estate assets took place. This should simply be an exercise in ascertaining what those legal fees are, deciding if they were true liabilities of the deceased, paying those legal fees and then distributing the balance of the estate to the residuary beneficiaries. This would not ordinarily require any special agreement between the beneficiaries and the executor but should just be a routine part of estate administration.
17. As to the uncertainty of inferring an agreement, in reply to William's 4 October 2021 email Margaret says on 5 October after recording the terms of William's email: "I'm hopeful that his stipulation that evidence must be provided will be forgiven and we can all move on. Therefore, your agreement is now sought. I thank you all in anticipation of a positive outcome."
18. This seems to be an indication that aspects of William's proposal are not agreed. On 5 October, Graeme says by email he is "in agreement with this". On 17 October, Kathleen says she agrees with "your final proposal". But then on 18 October William says he attaches "a letter outlining my final position to resolve issues of concern" and he goes on "I await your favourable confirmation to ensure closure once and for all". The evidence presently before the Court does not support the conclusion that "favourable confirmation" was thereafter received from all beneficiaries to a single mutually understood set of final terms.
19. The third point is how will the Court unwind the half-performed agreement said to have been reached because of William's money calculations, if that agreement is found not to be binding. William says that all parties agreed to "include the unrealised assets submitted in the accounts and share the costs". William alleges that in 2015 Margaret and Graeme received 90% of the items distributed pursuant to the unrealised assets agreement and says that he has paid $1,400 into the estate's account in respect of the items he says that he received at that time, and that Margaret and Graeme are to pay an amount of $13,818 on account of what they received. He says that this amount of $13,818 should be paid by Margaret and Graeme to the other residuary beneficiaries as follows - $4,071 to Alan, $4,906 to Kathleen, and $4,841 to William. If the October 2021 alleged agreement is found not to be effective, the executor will be directed to revise his distribution of the estate so that it accords with the way the will operates upon the assets in the estate of the deceased at the time of her death, unaltered by the alleged agreement.
20. The fourth point is that the Court will not permit the estate to be administered in a manner inconsistent with the accounts which the Court has passed and approved. There appears to be a veiled suggestion in William's correspondence that there is something wrong with the Registrar's and Lindsay J's decisions, or that the decisions can be ignored because they did not consider all the evidence in relation to the alleged agreement in relation to the unrealised assets. There was no appeal from the decisions of Lindsay J. The executor will not be permitted by this fractured logic to depart from administering the estate in accordance with those decisions.
21. The final point is perhaps of the most serious concern to the Court and may involve William in personal liability for his actions as executor. Not long after Margaret filed her February motion in this Court, clearly signalling that she had a claim against the estate, William appears to have distributed most, if not all, of the estate to the residuary beneficiaries in accordance with his view of the merits of Margaret's arguments. This distribution appears to have occurred in a peremptory fashion without proper advance notice to all the beneficiaries.
22. This is not how an executor should deal with claims made against an estate that appear to conflict with his view of the estate's administration. The proper and reasonable discharge of executor's duties about a conflict such as this would ordinarily require the executor to approach the Court either to seek judicial advice as to whether he should distribute the estate in accordance with his disputed proposal, or to seek the Court's final determination of the merits of his proposal after all parties had the opportunity to contest the determination.
23. An executor who acts in a peremptory way to distribute the estate without complying with the notice requirements under Probate and Administration Act 1898, ss 92 and 93, cannot avail himself of the protection afforded by those statutory provisions against personal liability after distribution of the estate. The evidence presently available to the Court suggests that William has neither complied with these statutory provisions before distribution, nor received judicial advice about his distribution. If his conduct of his executor's duties turns out to be erroneous and not reasonable and proper, then he may not be able to be indemnified out of the estate assets against his personal liability for errors that he may have made, unless the Court is prepared to excuse them.
24. Here, if he has distributed the estate improperly or unreasonably and not in accordance with the will then he may have to compensate any residuary beneficiary who has received less than they would otherwise have received had he properly distributed in accordance with the will. William may be able to explain the matters raised by the Court. But those explanations do not easily emerge from the materials before the Court.
25. One footnote to this contest relates to costs. The parties have made various allegations about recovering costs from one another including for the NCAT proceedings. The parties are not presently legally represented and cannot claim the costs of these proceedings, nor can they claim compensation for the inconvenience of these proceedings. They may be able to claim some disbursements such as filing fees. As to the NCAT proceedings, it is unlikely that William will be able to recover his professional time for conducting those proceedings. He is not a lawyer and is not a clearly articulated basis for recovery.

The Options from Here

1. This continuing contest about the "unrealised assets" associated with this estate is entirely unsatisfactory. All the beneficiaries need the administration of this estate to be finalised, which is the general object of case management in the Probate list. The Court has jurisdiction to decide any matter that could have been decided in a general administration suit: Uniform Civil Procedure Rules 2005, r 54.3. The points at issue here are whether the "unrealised assets" are indeed estate assets and whether they should be brought to account in calculating distributions to residuary beneficiaries and whether there is any binding agreement about unrealised estate assets among the beneficiaries. If the various alternative options set out below are not pursued, then the Court will exercise its power to decide this question and to decide whether William bears any personal liability as executor for what has occurred. But given the small amounts of money involved determination by the Court is not the first course that should be chosen.
2. If this issue is not resolved in the near term by agreement or by a Court determination, the nature of the dispute and the time during which it has been brewing in the Probate list and the correspondence which the Court has seen give it little confidence that William has the capability to manage the issue to a conclusion as executor. Moreover, William's correspondence lacks both the objectivity and balance that the Court expects of executors. His correspondence is unnecessarily combative and at times it is provocative or didactic. Of equal concern is that he arguably may be administering the estate in a manner inconsistent with the Court's passing of estate accounts. Ordinarily, an executor conducting himself that way would face a question as to whether he should be removed as executor. The question presents itself as to whether he is now becoming an obstacle to, rather than a facilitator of, the proper and efficient administration of this estate.
3. The Court has the option of its own motion of removing William and replacing him with another executor and if the current impasse continues, the Court may have to first consider this course especially if there are any other administration issues to be resolved apart from that of "unrealised assets". But the downside of taking this course is that unless another person or persons from within the family can replace William, a professional administrator may have to be appointed in his place. But this may be prohibitively expensive, compared with the relatively small amounts remaining in issue among the residuary beneficiaries.
4. The first option is that it may be possible for William to be removed and be replaced by two other family members who act as joint executors. Ideally, that should be someone who takes Margaret and Graeme's perspective and someone else who takes the perspective either of William or the other residuary beneficiaries. One of the reasons that the administration of this estate continues to be so unsatisfactory and has led to multiple applications to this Court is that William appears to have been taking decisions as executor which are of questionable legal justification and without clear legal advice Appointing two administrators in William's place may solve this problem and lead to more consensual resolution. William may be able to answer these points. But those answers are not obvious from the submissions that he has made so far.
5. The second option is for the Court now to order a Court annexed mediation involving all residuary beneficiaries under Civil Procedure Act 2005, s 26. But such a mediation would take place under the shadow the actions foreshadowed in these reasons.
6. This possibility should focus the minds of the parties in seeking to come to a compromise. If on the other hand the parties now indicate to the Court that they are unlikely to agree at a mediation, the Court may determine the issues now on a final basis after briefly hearing further from the parties, who will have the benefit of these reasons to assist them in narrowing the issues and developing their arguments.

Conclusions and Orders

1. For these reasons, for the further and better management of the administration of this estate the Court makes the following orders and directions: 1. Order that the balance of these proceedings be referred for a Court annexed mediation under Civil Procedure Act 2005, s 26 in light of the Court's reasons published today, 6 August 2024; 2. Direct the parties to approach the Registrar for obtaining a date for a Court annexed mediation; 3. Order that if these proceedings do not settle at mediation they will be listed before the Registrar at a suitable date after the mediation and the parties may apply to the Registrar to refer the proceedings back to Slattery J to determine all the remaining issues to bring the administration of this estate to an end; and 4. Grant liberty to apply. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 August 2024