Plaintiff v Defendants

2 Probate of the deceased's will dated 12 April 2011 was granted on 29 July 2016 to the executors named therein, namely: the plaintiff, the second defendant, and John Joseph Drummond, a former solicitor ('the first defendant').[1]

3 The deceased left his estate to the plaintiff and the second defendant in equal shares as tenants in common. His third child was excluded from the will. The value of the estate in the inventory of assets and liabilities filed with the probate application was $440,000.

4 While the plaintiff and the two defendants were all appointed as executors, the administration of the deceased's estate was primarily run by the first defendant, with neither the plaintiff nor the second defendant taking an active role.

5 The background to the disputes between the parties is set out in an earlier ruling in this proceeding.[2]

6 In summary, in November 2017, the plaintiff's solicitors began taking steps to ascertain what had happened to the estate funds. Eventually, the estate's then solicitors, S Kourkoulis & Associates, sent a letter dated 5 April 2018, which included a statement said to be an administration statement prepared by the first defendant dated 5 April 2018. That statement included entries which concerned the plaintiff's solicitors.

7 The plaintiff's solicitors wrote to the first defendant but received no information from him. The plaintiff's solicitors then wrote to the Registrar of Probates seeking assistance for the filing of an administration account for the estate.

8 By letters dated 13 July 2018, the Assistant Registrar of Probates requested each of the executors to provide a true and just account within 30 days, verified by affidavit pursuant to r 6.03 of the Supreme Court (Administration and Probate) Rules 2014. No administration accounts were provided by the defendants in response.

9 Further correspondence took place between the plaintiff's solicitors and the defendants regarding disputed amounts and the provision of an administration account and bank statements. Ultimately, the plaintiff commenced this proceeding on 12 December 2018.

10 By originating motion filed 12 December 2018, the plaintiff sought, inter alia, orders that:

(a) the defendants be restrained from making or receiving any distribution from the estate otherwise than in accordance with the deceased's will;

(b) the first defendant repay any amount paid to him from the estate as commission or other remuneration;

(c) the first defendant file a true and just account in Form 3-6AA of the Supreme Court (Administration and Probate) Rules 2014 of the administration of the estate, verified by affidavit; and

(d) the defendants provide to the plaintiff all bank statements and other records relating to the funds of the estate.

11 On 1 February 2019, orders were made that the first defendant file a true and just account of the administration of the estate in Form 3-6AA, verified by affidavit, by 15 February 2019. In accordance with r 6.03(2), such an account should contain full particulars of receipts, disbursements and all assets and liabilities, as well as particulars of distribution of all assets.

12 On 15 February 2019, the first defendant filed an administration account verified by affidavit together with bank statements for the estate's ANZ account for the period 9 June 2016 to 1 February 2019.

13 On 6 March 2019, the plaintiff's solicitors wrote to the first defendant stating that the administration account filed did not comply with r 6.03(2) and Form 3-6AA as the account did not set out the dates and particulars of every receipt and payment. The plaintiff requested that he file and serve a compliant administration account forthwith.

14 On 29 March 2019, orders were made requiring the first defendant to file and serve, by 23 April 2019, any further account in Form 3-6AA of the administration of the estate verified by affidavit and to file and serve an affidavit explaining entries in the 15 February 2019 administration account for $20.492.44, described as 'Reimbursement to Basil expenses as per list $36,819.97', and $600, described as 'Will costs'. The Court also ordered that the second defendant account for the sum of $20,492.44 received by him from the estate, said to be by way of 'reimbursement to Basil's expenses as per list $36,819.97'.

15 On 2 May 2019, by leave granted by the Court, the plaintiff filed an amended originating motion, adding a paragraph seeking orders that the second defendant:

(a) repay to the estate the amount paid from the estate of the deceased as commission; and

(b) account to the estate for all sums received by him from the estate otherwise than as a beneficiary.

16 On 7 May 2019, orders were made requiring the first defendant to produce to the plaintiff's solicitor for inspection all bank statements for accounts in which funds of the estate were held and for the second defendant to provide the plaintiff's solicitors with copies of receipts relating to the sum of $20,492.44 received by the second defendant described as 'reimbursement to Basil's expenses as per list $36,819.97'.

17 At trial, the first defendant raised three preliminary issues. These issues were dealt with during the trial, however, the first defendant requested written reasons for the decisions on these issues.

18 First, the first defendant objected to the affidavits of Mr Mark Mileo dated 26 March 2019 and 2 May 2019 being admitted into evidence on the basis that they did not comply with the Oaths and Affirmations Act 2018. The Court allowed Mr Mileo to be sworn in so that he could swear to his affidavits in accordance with the Act, thereby remedying any defects with the affidavits.

19 Secondly, the first defendant objected to the jurisdiction of the Court to hear the proceeding, asserting that issues of costs were a matter for the Costs Court and issues relating to the reverse mortgage were a matter for the VCAT. These assertions were rejected. As the proceeding concerns the financial accounting for the administration of an estate, it is clearly a matter within the jurisdiction of the Court.

20 Thirdly, the first defendant objected to my hearing the proceeding on the ground of apprehended bias. He did not make any coherent submissions that would substantiate a finding of apprehended bias. It appeared that the first defendant's claims of apprehended bias were based on the fact that he did not want me to hear the matter as I had previously ruled adversely to his interests. The test for apprehended bias is not concerned with the apprehension of a litigant but with the hypothetical reasonable apprehension of a fair-minded lay observer.[3] A fair-minded lay observer could not reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of this proceeding on that basis. Appropriately, during the closing submissions, the first defendant abandoned his oral application for apprehended bias.

21 The plaintiff contends that the first and second defendants failed to account properly for a number of expenses paid out of the estate. At trial, the plaintiff sought a refund to the estate of amounts totalling $84,841.34 consisting of the following items:

(a) a commission paid to the first defendant of $16,200;

(b) amounts described in schedule 2 of the administration account as paid to Felton Farquhar & Co ('Felton Farquhar') for probate costs, conveyancing and other legal issues, totalling $15,840;

(c) amounts totalling $20,492 paid to the second defendant otherwise than as a beneficiary;

(d) withdrawals from the account of the estates made by the first defendant totalling $3,870;

(e) further withdrawals from the account of the estate by the first defendant totalling $27,839.34; and

(f) the cost of the will of $600.

22 The only claims made against the second defendant relate to the commission and the expenses of $20,492.

23 As executors of an estate, the first and second defendant owe fiduciary duties to the beneficiaries under the will. The plaintiff, as a beneficiary, is entitled to hold the defendants liable to make good any loss caused by the breach of their duties by restoring the funds of the estate.[4]

24 A component of the fiduciary duties owed by the defendants is the obligation not to profit from the estate. This rule seeks to avoid conflict between the duties of the executor and their personal interest, and it is for this reason that executors are prima facie expected to act gratuitously. However, there are recognised exceptions allowing for an executor to be remunerated where: (1) the will includes a clause entitling the executor to commission; (2) the affected beneficiaries give their informed consent to the payment of commission; or (3) where the Court authorises a commission pursuant to s 65 of the Administration and Probate Act 1958.[5]

25 Similarly, as fiduciaries, executors have a duty to account to the beneficiaries under a will.[6] The defendants therefore bear the burden of demonstrating that money received and expended by them was properly incurred.

26 As stated in the previous ruling in this proceeding:

A personal representative of an estate must ensure that proper accounts and records are made in order to ensure the due and proper administration for the estate. Such accounts verify what assets have been realised and what liabilities have been paid. The account must contain full particulars of receipts and disbursements, all assets and liabilities and particulars of distribution of all assets. The accounts provide proof that the estate has been administered properly in accordance with the terms of the will.[7]

27 Orders have been made requiring the first and second defendants to produce true and just accounts. If, as the plaintiff contends, they have not accounted for certain funds then they are liable to repay the estate these amounts. This is because beneficiaries under a will are entitled to hold executors civilly liable to restore estate funds and make good any loss caused by an executor's breach of duties.

28 Schedule 3 of the administration account filed by the first defendant identifies a payment of $16,200 described as 'John Drummond Executors Commission'. This payment is also recorded in the administration statement prepared by the first defendant that was included in the letter dated 5 April 2018 from S Kourkoulis & Associates to the plaintiffs solicitors, describing it as 'John Drummond Trustee commission 3%'. The first defendant did not dispute that he had received this payment from the estate.

29 The plaintiff contends that the first defendant is not entitled to a commission and that he should be required to repay the amount to the estate. The plaintiff further contends that the second defendant is also liable for this amount.

30 The deceased's will does not contain a clause entitling the first defendant to a commission.

31 At a directions hearing on 1 February 2019, the first defendant stated that the payment of the commission was an agreement between the deceased and the second defendant. In his affidavit dated 29 March 2019, the first defendant also stated:

On the 28 April 2016 a meeting was held at my residence with the plaintiff and the second defendant. ...

Neither Basil [the second defendant] or Anna [the plaintiff] were prepared to take any active role in the administration of the Estate. I explained to them that I had paid for the Power of Attorney and Will being prepared and had not been reimbursed. I was not prepared to work for nothing and stated that this issue was discussed when Victor signed his Will at his home in 2011. I explained that commission can vary from 1% to 5% of the Estate depending on the complexity and time taken in finalising the Estate. Victor understood this as he wanted to know who was paying for the legal work when he signed his Will. Basil was present at this time and was not financial.[8]

32 In his affidavit dated 15 August 2019, the first defendant stated:

The plaintiff recently found a document confirming the first defendant's entitlement to his commission claimed and for his services performed written on the back of a Southern Health Pharmacy Department invoice dated 3 March 2010.

At the trial, the first defendant confirmed that the reference to the plaintiff was a typographical error and it was in fact himself who found the document.

33 The document referred to is a handwritten document dated 12 April 2011, which is on the reverse of a Southern Health Pharmacy Department invoice ('the handwritten document'). The handwritten document states:

I Victor Bogdanov

19 Morwell Avenue Dandenong

Do confirm the following

(1) All legal expenses relating to the power of attorney dated 8 April 2011 and the will dated 12 April 2011 be paid from my estate after my death.

(2) I direct and confirm that John Drummond shall be compensated for his pains and trouble by payment of commission of no more than 3% of my estate for his services.

Dated this 12 April 2011

Signed by Victor Bogdanov

By his Attorney Basil Bogdanov

Pursuant to Power of Attorney dated 8 April 2011

34 The handwritten document purports to have been prepared the same day as the deceased's will. It is not signed by the deceased, but rather is signed by the second defendant who then held his power of attorney.

35 The first defendant gave evidence that he had lost the handwritten document and forgotten about it until he found it amongst 50 boxes of files he had at his home. The first defendant was unable to say when he received it. He said the handwritten document was in his handwriting, and that it was prepared by him on 12 April 2011 outside the deceased's house after the deceased had signed his will. He said the receipt on which the handwritten document was prepared came from the deceased's home. The first defendant said the handwritten document was prepared after the second defendant asked him: 'How are we going to pay you?'. The first defendant said he did not have the deceased sign the handwritten document as he was very sick at the time.

36 The second defendant also gave evidence regarding the handwritten document. While the second defendant's evidence on the creation of the handwritten document was somewhat equivocal, he stated that he had seen it before and that he signed it at or around the time that he received his father's power of attorney, which was signed on 8 April 2011. The second defendant said that the handwritten document was signed in front of the deceased and that he explained it to his father.

37 The plaintiff submitted that the accounts given about the way the handwritten document came into existence are so different they cannot possibly be talking of the same thing and that the Court should not accept that it was prepared on the date it bears. While it is unusual that this document was not referred to by either defendant prior to August 2019, the Court is not willing to find that it was created later than 12 April 2011.

38 Importantly, finding that the handwritten document was prepared more recently than the date that it bears would amount to a finding of dishonesty on the part of both the first and second defendant. While it was put to the first defendant that the handwritten document was a fabrication or had been created at a later date, it was not so put to the second defendant.

39 Furthermore, the handwritten document is consistent with the earlier statements of the first defendant that the payment of the commission was an agreement between the deceased and the second defendant and that the matter was discussed with the second defendant at the time the deceased signed the will. There were inconsistencies in the evidence between the two defendants of the circumstances in which the handwritten document came into existence - notably, whether it was created on the day the will was signed or the day the power of attorney was signed and whether the deceased was present at the time it was signed. However, it appears more likely that the differing evidence is a result of failing memories of what document was signed on which day in April 2011.

40 Regardless of the authenticity of the handwritten document, it provides no justification for the departure from the prima facie position that the first defendant, as an executor, was expected to act gratuitously. The handwritten document was not sought to be admitted to probate. In any case, as it was signed by the second defendant as the deceased's power of attorney, it did not meet the formality requirements under the Wills Act 1997, and the evidence was unclear as to whether its contents were discussed with the deceased before or after it was signed.

41 The first defendant also appeared to contend that the beneficiaries had consented to his receiving a commission. For example, during his cross-examination, the first defendant stated that, at a meeting in 2016, the plaintiff and the second defendant were told and acknowledged that he was going to charge a commission. While it was not disputed that there was an agreement between the first and second defendant that the first defendant should receive a commission, there does not appear to be any other evidence that the plaintiff actually agreed to any such payment. Even if there was an agreement made at that meeting, there is no evidence that it amounted to informed consent of the kind required for the first defendant to obtain a benefit by reason of his fiduciary position.[9] The first defendant was therefore not entitled to the payment of a commission on the basis of an agreement with the beneficiaries.

42 The first defendant also submitted that the Court had a discretion to grant him a commission on the basis of the evidence submitted at trial. In his oral submissions, the first defendant cited the following passage from Chapter 6 of Vance's E_xecutor's Commission_:

Upon the extent of the applicants 'pains and trouble' in the performance of his duties will depend the amount of commission to be allowed.[10]

43 That passage, and Chapter 6, relates to the statement of an applicant's pains and trouble supporting an application to the court to allow an executor to receive a commission. It is correct that, under s 65 of the Administration and Probate Act 1958, the court has the power to 'allow out of the assets of any deceased person to his executor administrator or trustee for the time being such commission or percentage not exceeding Five per centum for his pains and trouble as is just and reasonable'. However, the first defendant has not made an application under that section. As stated by Vance, '[a]n executor should not apply for commission until he has got his accounts in order, and made them available or submitted them'.[11] It is also generally appropriate that an action on the accounts is heard as a separate action from an application for the court to grant a commission.[12] In the circumstances, it would be inappropriate to consider any entitlement to a commission under s 65 in the absence of a separate application.

44 It follows from the above that the first defendant was not entitled to the payment of $16,200 as a commission and he must therefore repay that amount to the estate.

45 The plaintiff also sought orders that the second defendant repay the amount of the commission to the estate. The plaintiff alleged that the second defendant breached his duties as an executor by agreeing to and facilitating the payment of the commission to the first defendant.

46 The second defendant did not dispute that he agreed to the payment of the commission to the first defendant. However, the second defendant submitted that:

(a) he acted honestly and reasonably and therefore any breach of his duties should be excused under s 67 of the Trustee Act 1958; or, alternatively,

(b) there had been no wilful default on his part and therefore, under s 36 of the Trustee Act 1958, he is not liable for the funds received by the first defendant.

47 Sections 36 and 67 of the Trustee Act 1958 apply to executors by virtue of s 3 of that Act, which provides that 'the expressions trust and trustee' in that Act 'extend to ... the duties incident to the office of a personal representative, and trustee where the context admits, includes a personal representative'. Section 3 defines 'personal representative' as 'the executor, original or by representation, or administrator for the time being of a deceased person'.

48 The second defendant submitted that he is not a lawyer, he had no prior experience as an executor, and his evidence was that the payment of the commission was in accordance with his father's wishes as recorded in the handwritten document. He submitted that the second defendant was not aware of the fact that payment of the commission was in breach of his duties as executor and he was not reckless as to that fact.

Trustee Act 1958 - s 67

49 The second defendant submitted that, even if he breached his duties, he had acted honestly and reasonably and ought fairly to be excused for his breach of trust under s 67 of the Trustee Act 1958.

50 Section 67 provides:

If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed such breach, then the Court may relieve him either wholly or partly from personal liability for the same.

51 Section 67 grants the court a wide discretion to excuse breaches of trust where the trustee has established three essential elements: that he or she has acted honestly, has acted reasonably, and ought fairly be excused for the breach.[13]

52 It has been said that each case must be decided on its facts and circumstances, and that it is impossible to lay down any general rules or principles to be acted on the exercise of the discretion under an equivalent to s 67.[14] Nonetheless, a failure to seek legal advice can lead to a conclusion of unreasonableness,[15] as can reliance on a co-trustee, even one who is a solicitor.[16]

53 The second defendant's honest understanding was that the first defendant had undertaken a job for which he was entitled to be paid. This belief was reinforced by statements of the first defendant, who was himself a former solicitor. He also believed that the payment of the commission was in line with his father's wishes. The Court therefore accepts that the second defendant acted honestly.

54 However, the real question is whether it was reasonable for him to consent to the payment of a commission to the first defendant.

55 The second defendant did not take an active role as an executor and sought no advice as to his duties in that role. This is despite the fact that there were solicitors for the estate whom he sought to engage on the advice of his broker. Instead, he allowed the first defendant to control the administration of the estate and deferred to him in relation to a number of matters, including in relation to the commission. Such blind reliance on a co-executor cannot be seen as reasonable. This disregard for his responsibilities as an executor under the will means that the Court is unable to find that the second defendant acted reasonably.

56 A reasonable executor in the position of the second defendant would have sought to educate himself as to his responsibilities in that role. Had he done so, any breach of duties in relation to the payment of the commission by the second defendant is unlikely to have occurred.

57 The Court does not excuse the second defendant under s 67 for any potential breach of his duties in relation his agreement for the payment of a commission to the first defendant.

Trustee Act 1958 - s 36

58 Section 36(1) provides:

A trustee shall be chargeable only for money and securities actually received by him notwithstanding his signing any receipt for the sake of conformity, and shall be answerable and accountable only for his own acts, receipts, neglects or defaults, and not for those of any other trustee, nor for any banker, broker or other person with whom any trust money or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss unless the same happens through his own wilful default.

Accordingly, the second defendant is not liable to repay the estate for the commission received by the first defendant unless the loss to the estate occurred through his 'wilful default'.

59 On the meaning of 'wilful default', counsel for the second defendant cited the following passage from Segelov v Ernst & Young Services Pty Ltd:[17]

[T]he expression "wilful default" ... requires nothing less than conscious and wilful misconduct on the part of the trustee: Armitage v Nurse.[18] Millett LJ continued, citing with approval the following statement of Maugham J in In Re Vickery,[19] that the trustee must be:

'conscious that, in doing the act which is complained of or in omitting to do the act which it is said he ought to have done, he is committing a breach of his duty, or is recklessly careless whether it is a breach of his duty or not.'

60 In Re Vickery, Maugham J found that a sole executor, who retained a solicitor to wind up the estate but who ultimately absconded with funds of the estate, was not liable for a breach of trust in permitting the funds to be received and retained by the solicitor under an equivalent provision to s 36 of the Trustee Act 1958, as the loss had not occurred through his own 'wilful default'. The executor did not know the solicitor had previously been suspended from practice at the time he retained him and authorised him to collect money belonging to the estate. Justice Maugham stated that the sole executor was guilty only of an error of judgment. Relevant to this finding was the fact that the executor had spent his life as a missionary in the city of London and was completely ignorant of business affairs.[20]

61 While there has been some criticism of the meaning of 'wilful default' adopted in Re Vickery,[21] it has been adopted in Australia in the context of equivalent provisions to s 36(1) of the Trustee Act 1958.[22]

62 For example, in Dalrymple v Melville, Long Innes J accepted the meaning set down in Re Vickery in relation to s 59(2) of the Trustee Act 1925 (NSW). In that case, the defendant was co-trustee and executor with a solicitor. The defendant acted honestly throughout, however, he provided his co-trustee with a blank transfer of shares and permitted him to have sole custody and control of certain bank cheques. The co-trustee ultimately cashed the cheques and completed the transfer of shares, absconding with the funds.

63 Justice Long Innes found that the defendant was in wilful default by not taking the precautions he should have taken to protect the estate. His Honour held that the defendant had at least a certain amount of suspicion that there was an element of risk attaching to his conduct and saw no reason to doubt that he had the ordinary knowledge of an ordinary citizen and therefore knew that, in omitting to take precautions, he was committing a breach of his duty.

64 In Wilkinson v Feldworth Financial Services Pty Ltd, Rolfe J noted the criticism of the Re Vickery formulation of 'wilful default' and comprehensively considered the authorities.[23] Ultimately, his Honour concluded that 'it seems to me that a reasonable interpretation would be that there must be default... wilful in the sense accepted in Re Vickery and Dalrymple v Melville'.[24]

65 As to the meaning of 'recklessly', Rolfe J found assistance in the decision of the Court of Appeal in SS Pharmaceutical Co Ltd v Qantas Airways Ltd,[25] in which the majority, Gleeson CJ and Handley JA, adopted what had been said in Goldman v Thai Airways International Ltd[26] as to the meaning of the word: that the person concerned 'acts in a manner which indicates a decision to run the risk or a mental attitude of indifference to its existence'.[27]

66 The question in relation to s 36(1) of the Trustee Act 1958 is therefore whether, in agreeing for the first defendant to be paid a commission, the second defendant had a consciousness of breach of duty, or was recklessly careless in the performance of his duty in the sense that he acted in a manner indicating a decision to run the risk or a mental attitude of indifference.

67 As stated above, the second defendant submitted that he was not aware of the fact that payment of the commission to the first defendant was in breach of his duties as executor and he was not reckless as to that fact.

68 The Court accepts that the second defendant was not aware that the payment of the commission was in breach of duty. The second defendant believed that the payment of a commission was in accordance with the deceased's wishes and he was not aware of any law that prevented the payment of the commission. Indeed, the second defendant gave evidence that the payment of the commission was normal: '[W]hen you've got a job you have to get paid. Nothing's for free anyway'.

69 The question therefore is whether the second defendant was recklessly careless.

70 As stated, the second defendant did not take an active role as executor and left 'the paperwork' and 'running around' for the first defendant. The second defendant did not seek legal advice about whether the first defendant should be paid a commission or about his obligations as an executor more generally.

71 However, he had no experience or any apparent understanding of his obligations as an executor. He was of the belief that the payment of the commission was at the wishes of the deceased and entirely uncontroversial. While it may be said that, by relinquishing the administration of the estate to the first defendant, the second defendant displayed a mental attitude of indifference to his duties as an executor, the second defendant actively gave his consent on the belief that the payment of a commission was uncontroversial and in line with the wishes of the deceased. Unlike the defendant in Dalrymple v Melville, the second defendant was not aware that there was an element of risk pertaining to his conduct. He was not indifferent to the risk but instead honestly did not perceive any risk at all.

72 It also cannot be said that, by consenting to the payment of the commission, he was recklessly careless in the sense that he had decided to run the risk of breaching his duties. In granting his consent to the payment of the commission, he acted in what he honestly believed were the wishes of the deceased and was the usual course - that 'when you've got a job you have to get paid'.

73 It can be said that the second defendant's approach to his responsibilities as executor was careless, but, in relation to his agreement for the payment of the commission, it cannot be said that he was recklessly so. In the circumstances, the actions of the second defendant amount to more of an error of judgment than to wilful default.

74 Therefore, the second defendant is not liable for the commission paid to the first defendant by virtue of the implied indemnity in s 36(1) of the Trustee Act 1958.

75 The second defendant is indemnified from liability for the funds received by the first defendant by s 36(1) of the Trustee Act 1958. Therefore, he is not liable to repay the $16,200, paid as a commission to the first defendant, to the estate.

(b) amounts totalling $15,840 said to be paid to Felton Farquhar

76 Schedule 2 of the administration account filed by the first defendant identified the following payments totalling $15,840 to the law firm Felton Farquhar:

77 These amounts were also included in the administration statement prepared by the first defendant in 2016, which was included in the letter dated 5 April 2018 from S Kourkoulis & Associates to the plaintiff's solicitors. They appeared under the heading 'estimates to be deducted agreed by Basil [the second defendant] and JD [the first defendant]'.

78 Felton Farquhar are former solicitors of the estate and the second defendant's solicitors in the present proceeding.

79 The plaintiff says she had not seen any documents to demonstrate that those fees had in fact been paid. In a letter to S Kourkoulis & Associates dated 18 May 2018, the plaintiff's solicitors requested clarification regarding these fees, noting that the plaintiff had not been provided with an account from the former solicitors for the estate. A subpoena was subsequently issued to Felton Farquhar for the production of invoices relating to those fees. In a letter to the plaintiff's solicitors dated 20 October 2019, Felton Farquhar stated: 'The simple answer to your Subpoena is that I and this office do not have any of the documents that you seek.'

80 In his affidavit filed 2 April 2019 by the second defendant, Romano Anthony Piva of Felton Farquhar stated:

This allegation is made without the plaintiff's Solicitor inspecting the files or the bills of costs. The two Executors being the defendant's [sic] agreed to my firm's legal costs. The majority of the three Executors justify the decision in the circumstances. ...

On the 20 May 2016 all three Executors being the plaintiff and the two defendants signed a Disclosure Statement and Costs Agreement. This document will be produced at the hearing.

No disclosure agreement or costs agreement was provided at trial.

81 In cross-examination, the first defendant said that he had did not have any evidence of the payment of these costs as he threw the invoices away. The first defendant claimed these costs were paid sometime after the house was sold and before the proceedings were commenced in this matter.

82 The plaintiff submitted that, on the material before the Court, it is impossible to say that these amounts were paid and, if they were paid, there has been no justification for it. They also submitted that there is no evidence regarding the work done relating to probate, no evidence that Felton Farquhar did the conveyancing, and no evidence as to what the other legal issues might comprehend.

83 The plaintiff's submissions must be accepted. There is no objective evidence before the Court relating to the work done by Felton Farquhar for which the payments relate, nor to demonstrate that the funds were indeed paid to the firm.

84 The first defendant has failed to account for these payments and must therefore repay the estate $15,840 in relation to this item.

(c) amounts totalling $20,492 paid to the second defendant

85 Schedule 1 of the administration account filed by the first defendant identified a payment of $20,492.44 described as 'Reimbursements to Basil expenses per list $36,819.97'.

86 After receiving the administration account, the plaintiff, through her solicitors, made further enquiries about this item. On 29 March 2019, after the plaintiff sought leave to amend the originating motion, the Court made orders requiring the second defendant to account for the sum of $20,492.44 received by him from the estate.

87 In his affidavit dated 13 May 2019, the second defendant said that in October 2017 he sought reimbursement of sums he believed he was entitled to from the estate in accordance with a list of expenses totalling $36,819.97. However, the first defendant reduced the amount by deducting the following three sums totalling $16,327.53:

Tobin Bros Funeral Account 11,250.00

Belvedere 4,464.70

Energy Australia 612.83

The list containing the items reimbursed was annexed to the affidavit. However, the second defendant's affidavit provides no further information or evidence relating to the expenses allegedly incurred and the source of funds used for these expenses.

88 The list of expenses was provided to the first defendant with a letter from Felton Farquhar, who were then acting for the estate, dated 30 October 2017. In the letter, Felton Farquhar stated that the second defendant had 'receipts for many of the expenses claimed'. Neither the list nor the letter disclosed the source of the funds for the payments. In his affidavit dated 17 April 2019, the first defendant said that he agreed to reimburse only $20,492.44 after disallowing some amounts in the list as 'not being relevant'. At trial, the first defendant gave evidence that the higher figure had included the Tobin Brothers funeral costs, which had already been reimbursed, and other amounts that did not come from the second defendant's funds but from the deceased's funds.

89 The plaintiff submitted that $20,492 was paid to the second defendant, purportedly in reimbursement of expenses, but that the second defendant has failed to account for that figure. The plaintiff says that, even if it is accepted that these expenses were incurred, there is no evidence of the source of the funds used for these expenses and, even if the amounts for reimbursement were paid initially by the second defendant, he may have reimbursed himself from the deceased's reverse mortgage.

90 At trial, the second defendant sought to have a bundle of receipts and invoices admitted into evidence. However, these documents were not admitted as they did not assist in determining the source of the funds used to pay these alleged expenses.

91 The second defendant claims that he is entitled to the $20,492 in accordance with the provisions of the will and that this amount was to reimburse him for money he had advanced to his late father in order to support him. The second defendant submitted that, while there is no documentary evidence of where the funds for the claimed reimbursements came from, the Court could accept his evidence that he paid the amounts claimed.

92 Ultimately, the second defendant has not provided sufficient justification for the reimbursements claimed. The second defendant has failed to account for the $20,492 received by him otherwise than as a beneficiary and is therefore required to repay the $20,492 to the estate.

(d) withdrawals of the first defendant totalling $3,870

93 In his affidavit dated 26 March 2019, Mark Mileo, the plaintiff's solicitor, identified the following withdrawals from the estate's ANZ account, totalling $3,870, made by the first defendant ,which he was unable to reconcile with the administration account filed by the first defendant:

(a) $1,470 on 21 June 2016;

(b) $1,400 on 11 July 2016; and

(c) $1,000 on 22 August 2016.

94 The first defendant offered the following explanation for these withdrawals in his affidavit filed 17 April 2019:

The withdrawals of $1,470, $1,400 and $1,000 represented monies being repaid for the advances made by me in paying Fleming and Rhoden legal fees to obtain the reverse mortgage file, and transport and costs associated with investigating the status of the deceased home and arranging the sale at that time. ... These monies are reimbursements of my expenses including medical expenses relating to the time that I fell over and sprained my angle [sic] to my right foot at Dandenong during my investigations.

95 The first defendant said that he paid these expenses with his Bendigo Bank pension account. However, he did not produce withdrawal statements, receipts, invoices, or any other evidence to establish that any such amounts were in fact paid.

96 Putting to one side the entitlement of the first defendant to the reimbursements described, there has been no accounting for the withdrawals. The first defendant has provided no evidence that he actually incurred the expenses described in his affidavit. Accordingly, the first defendant is required to repay the estate the $3,870 for these withdrawals.

(e) withdrawals by the first defendant totalling $27,839.34

97 In his affidavit dated 2 May 2019, Mr Mileo also identified the following withdrawals from the estate's ANZ account, totalling $27,839.34, made by the first defendant on 1 September 2016, which he was unable to reconcile with the administration account filed by the first defendant:

(a) $1,395;

(b) $4,444.34; and

(c) $22,000.

These amounts do not appear in the administration account filed by the first defendant.

98 The plaintiff submits that there is no adequate explanation from the first defendant for these withdrawals and, as they have not been accounted for, he needs to repay those amounts to the estate.

99 At trial, the first defendant stated that these amounts relate to 'the rental moneys that were in the account at the time' and that he thought that the $22,000 was withdrawn to give each of the beneficiaries $11,000, as he remembered giving them each $11,000 on a couple of occasions. Other than these assertions, the first defendant has provided no account of these three withdrawals.

100 The first defendant has not provided an adequate explanation for these withdrawals. No receipts or evidence has been provided to establish what was actually done with these funds. Accordingly, the first defendant is required to repay the estate the $27,839.34 for these withdrawals.

101 Schedule 1 of the administration account filed by the first defendant on 15 February 2019 contains the expenditure of $600 for 'will costs'. A payment of $600 for the 'legal costs re will (2011)' is also recorded in the administration statement prepared by the first defendant in 2016 which was included in the letter dated 5 April 2018 from S Kourkoulis & Associates to the plaintiff's solicitors.

102 The plaintiff submitted there is no evidence to show who was paid for the will or the reasons for the payment.

103 The first defendant gave the following evidence regarding this amount:

(a) In his affidavit filed 17 April 2019 the first defendant stated: 'The will costs of $600.00 were incurred in 2011; prior to the Grant of Probate and not relevant to these proceedings.'

(b) He later said that Mr Piva, of Felton Farquhar, prepared the will.

(c) In cross-examination, the first defendant said that the will was paid for some time in 2017 or 2018 and that he had evidence of it being paid somewhere but that he was unable to produce it at the time of trial. He said that he believes he paid the amount and then was reimbursed. He said he adopted this course as, while there was money in the ANZ account, there was no cheque book.

104 The handwritten document also contains reference to the costs of the will. However, for the same reasons as in relation to the commission, it does not assist the first defendant.

105 There are no receipts, invoices, statements or other records before the Court to demonstrate who was paid the $600 for 'will costs', nor is there sufficient evidence of the reasons for the payment. The first defendant has therefore failed to account for this amount and is liable to repay the estate the $600.

106 On the basis of the accounting carried out above, the first defendant is liable to repay the estate a total of $64,349.34 comprised of:

• the commission paid to the first defendant of $16,200;
• amounts described in schedule 2 of the administration account as paid to Felton Farquhar for probate costs, conveyancing and other legal issues, totalling $15,840;
• withdrawals from the estate account made by the first defendant totalling $3,870;
• further withdrawals from the estate account by the first defendant totalling $27,839.34; and
• the cost of the will of $600.

107 The second defendant is also liable to repay the sum of $20,492 being the amount paid to him in purported reimbursement of expenses.

108 The amounts repaid to the estate are then to be distributed in accordance with the deceased's will.

109 In default of agreement on costs, the parties are to file and serve short written submissions by 24 January 2020.

[1] Mr Drummond formerly carried on practice under his former name, Joseph Lo Presti. Mr Drummond's name was removed from the roll of legal practitioners held by the Supreme Court in 1993 following his conviction and imprisonment for offences arising out of his practice as a solicitor.

[2] Re Bogdanov; Atkins v Drummond [2019] VSC 70.

[3] See, eg, Sloan v The Queen [2015] VSCA 240, [8] (Hansen, Osborn and Priest JJA).

[4] See, eg, Reid v Hubbard [2003] VSC 387, [36] (Nettle J).

[5] See, eg, Re Buckingham (2016) 51 VR 453, 463 [48] (McMillan J); Walker v D'Alessandro [2010] VSC 15 (T Forrest J).

[6] Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 198-9 (Deane J).

[7] Re Bogdanov; Atkins v Drummond (n 2) [21].

[9] Walker v D'Alessandro (n 5) [27]-[30] (T Forrest J).

[10] Eric Vance, The Law and Practice in Victorian and an Examination of the Case Law of Australia and New Zealand relating to Executors Commission (The Law Book Co, 1969) 127.

[12] See, eg, Re Pittas [2019] VSC 380, [48] (Englefield JR).

[13] Pateman v Heyen (1993) 33 NSWLR 188, 199 (Cohen J); Re Turner; Barker v Ivimey [1897] 1 Ch 536, 541 (Byrne J).

[14] Re Turner; Barker v Ivimey (n 13). See also Pateman v Heyen (n 13); Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149.

[15] Partridge v Equity Trustees Executors and Agency Co Ltd (n 13) 165 (Starke, Dixon and Williams JJ).

[16] Re Turner; Barker v Ivimey (n 13); Dalrymple v Melville [1932] NSWStRp 64; (1932) 32 SR (NSW) 596; Reid v Hubbard [2003] VSC 387.

[17] [2015] NSWCA 156; (2015) 89 NSWLR 431, 459 [150] (Gleeson JA).

[19] Re Vickery; Vickery v Stephens [1931] 1 Ch 572, 583 ('Re Vickery').

[20] Ibid 573. See also Dalrymple v Melville (n 16) 603 (Long Innes J).

[21] See, eg, GE Dal Pont, 'Wilful Default Revisited - Liability for a Co-trustee's Defaults' [2001] (October) Conveyancer and Property Lawyer 376.

[22] See Dalrymple v Melville (n 16); Re Hodgekiss [1962] SR (NSW) 340; Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642.

[26] [1983] 1 WLR 1186.