Re Pittas [2019] VSC 380 (18 June 2019)

2 Eleni Pittas (also known as Elli Pittas, Eleni Pavlou Kosta and Eleni Kosta) ('deceased'), died on 11 June 2016, a widow, aged 89, leaving eight children from two marriages. Her eldest son, George Costa, died on 3 November 2017.

3 By her last will, made on 2 October 2012, the deceased left the whole of her estate, valued at around $1 million in the probate inventory, to her children equally. Three blocks of land located in Cyprus appear in the inventory valued at E$50,000. The land in Cyprus was to become a significant difficulty in the administration of this estate and this application.

4 The executors seek commission of 3% of the capital and income of the estate. The claim was opposed by four beneficiaries, Paul Constantine, Jack Constantinou, John Pittas and Anastasia Hatzivasiliou ('the responding beneficiaries'). The estate of George Costa and the final beneficiary, Mary Lainas did not participate. For the reasons set out below, the commission of 3% is allowed in respect of the Victorian estate only. This results in a figure of $39,530.37.

it shall be lawful for the Court to allow out of the assets of any deceased person to his executor ... such commission or percentage not exceeding Five per centum for his pains and trouble as is just and reasonable.

6 'Pains' is considered the 'responsibility, anxiety, and worry' connected to the role of executor, while 'trouble' is the actual practical work of the administration.[1]

7 The general approach is that, unless an objector establishes otherwise, an administration will be presumed to be on proper lines and the executor will be granted commission.[2] In Atkins v Godfrey,[3] Le Miere J explained the policy principle underlying that general approach as follows:

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.

8 In assessing commission, the responsibility of the role as executor needs to be sufficiently taken into account, as well as the performance and complexity of the various tasks required to complete the administration.

9 The award of commission is discretionary. The task is first to determine the amount of commission that is adequate for the executor's pains and troubles, then convert it to a percentage.[4] Therefore, where only a small amount of work is required in a simple administration, the percentage may be low.[5] The exercise of judgment, the extent of activities, the benefit to the beneficiaries and time involved all weigh into consideration, alongside the capacity of the estate to pay.

10 The administration of this estate was generally relatively prompt and well run. The executors arranged the funeral, organised the sale of the home and undertook the general tasks of administration.

11 Unusually, the executors applied for the grant of probate personally, saving the estate legal costs.

12 There was a fire at the home prior to sale, resulting in an insurance payment of $39,914.80.

13 The deceased owned three blocks of land in Cyprus and co-owned another three ('Cypriot Land'). The executors engaged solicitors in Cyprus after some searching and false starts. The Cypriot solicitors required the executors to supply copies of the passports of all heirs, obtain 'tax clearance' for the deceased from a Cypriot authority, execute a special power of attorney to a Cypriot resident to lodge an application for a re-seal of the Victorian grant, attend to advertising and other tasks.[6] In order to be permitted to obtain a title search of the Cypriot Land, Louie obtained 'official' recognition from the Mayor of Alaminos, the village near the land.[7]

14 A professional valuation of the Cypriot Land was obtained, dated 31 May 2017 ('the valuation'), which valued the six blocks of land at €388,000 or roughly $620,000.[8] The Interim Administration Account[9] shows that the deceased held 100% in three blocks of land, 25% in two blocks and 20% of one block, so the interest held for the estate was valued at €247,225.00 or $370,837.50.

15 Louie travelled to Cyprus in June 2017 to make inquiries as to how to sell the Cypriot Land. He was away from Australia for 22 days. The Interim Administration Account shows that the total cost to the estate of this trip was $1,699.70.

16 A short sentence in the affidavit of Ilias Pittas sworn 10 January 2018 to the effect that the executors 'liaised with the beneficiaries' regarding the estate, 'including as to how the land in Cyprus will be dealt with'[10] may understate the efforts of the executors to work constructively with their siblings, as will be discussed later in these reasons.

17 The deceased's home was sold for $1,100,000, with net proceeds of sale received by the estate in September 2017. An interim distribution of $100,000 each was made to the beneficiaries on 9 November or on 24 December 2017, so that a total of $800,000 of the estate's capital receipts was promptly in their hands.

18 Unfortunately, the next step the executors took was to make this application for commission. At the time of the first directions hearing on 8 February 2018, the Cypriot Land was unsold, two bank accounts in Cyprus with an equivalent of nearly $20,000 were unclosed, a beneficiary had died but there was no grant of representation in his estate and over $400,000 remained in the estate's Australian bank accounts. The application for commission was clearly premature. This point was raised against the executors at the final hearing. They may have been ill advised, but in the interests of facilitating just, efficient and cost effective resolution, the application was not dismissed but adjourned to permit further time for administration of the estate to proceed and, in particular, to sell the Cypriot Land.

19 A grant of representation was obtained for the deceased beneficiary's estate on 14 March 2018. The following day, the executors distributed a further interim distribution of $50,000 per beneficiary, or $400,000 in total[11], and held a meeting with five of the beneficiaries, including the responding beneficiaries ('March 2018 Beneficiary Meeting')[12]. The March 2018 Beneficiary Meeting dealt with five agenda topics, including the Cypriot Land.

20 Louie travelled again to Cyrus in June 2018. The need for the June 2018 trip was discussed at the March 2018 Beneficiary Meeting. The minutes of that meeting notes that the Cypriot solicitors cost estimate was considered excessive, a trip to Cyprus and an application for probate without solicitors may be necessary, and in addition, agreement reached on the proposed process of sale of the Cypriot Land.

21 Louie spent four weeks in Cyprus in June 2018 but returned to Australia without the re-seal of the Victorian grant. Unfortunately, the District Court of Larnaca, Cyprus could not 'fit in' the re-seal application prior to its summer break. The Cypriot Court also required Mario to travel to Cyprus to personally confirm a guarantee to twice the value of the Cypriot Land.[13]

22 Both executors travelled to Cyprus for two weeks in September 2018. Another beneficiary meeting was held on 13 September 2018 ('September 2018 Beneficiary Meeting'). It is clear from the minutes of that meeting that the beneficiaries consented to the process that occurred in administering the Cypriot estate.[14] According to the minutes, alternatives were presented, but the beneficiaries present instructed the executors to transfer the Cypriot Land in specie to the beneficiaries and wait for an offer 'to the value of the properties'. They further agreed 'to continue renting [the Cypriot Land] and discuss progress in a year'. Each of the responding beneficiaries are recorded as present at this meeting.

23 For completeness, it is noted that at some point, it became clear that the Cypriot Land could not be sold out of the estate, apparently as the executors did not have a power of sale under Cypriot Law.[15]

24 On 25 September 2018, the Victorian grant was re-sealed in Cyprus. In obtaining the re-seal, the executors for the second time did their own probate application, including drafting affidavits, with exhibits properly verifying the beneficiaries, the Cypriot Land, the Cypriot bank accounts and the Victorian grant, as well as drafting the parchment, all in Greek and all professionally translated and exhibited to the executors' second affidavit in this application.[16]

25 On 5 October 2018, land transfers were lodged at the Land Registry Larnaka ('Land Registry'), Cyprus transferring the Cypriot Land to the beneficiaries.[17] An 'acceptance of inheritance' document, apparently prepared for the District Court of Larnaca, has been signed by or for each beneficiary, before a witness, to confirm that they had received their share of the movable and immovable property of the estate in Cyprus, which acknowledges 'documents' lodged with the Land Registry .[18]

26 The total cost to the estate of the executors' travel to Cyprus in 2018 was approximately $6,500 and included car hire, petrol, accommodation and flights. The executors were quoted $20,000 to $25,000 for the cost of obtaining a re-seal in 2017, so their attendance in Cyprus may have saved the estate over $10,000. It may have sped up the process, as the local solicitors warned it could take up to two years. In addition to the distribution of the Cypriot Land, the executors gathered $22,000 into the estate from the closure of Cypriot bank accounts and rent from some part of the Cypriot Land. Full distribution of the Cypriot estate had been achieved by the executors between February and October 2018.

(i) the executors should receive no more than 1.5% commission;

(ii) the Cypriot Land should not be included in the calculation of the value of the estate for the purposes of commission; and

(iii) the executors should not be entitled to any 'further reimbursements'

28 The responding beneficiaries say there was no attempt to seek the beneficiaries' agreement to commission prior to commencing the application.[19] The executors dispute this, but unfortunately the only evidence in support of their position are the minutes of the March 2018 Beneficiary Meeting[20], where this commission application may have only be addressed indirectly. The fifth topic of the minutes is headed: "Addressing concerns from beneficiaries", and sub-paragraph (e) of this topic records the question "who is paying for the solicitor and Barrister representing Louie in court?". Beneath this question, in a different shade of ink, it is recorded "The courts will make that determination." This meeting occurred after the application for commission was commenced.[21]

29 There is no doubt that all executors must seek the consent of fully capable, adult residuary beneficiaries prior to making an application to the Court for commission, or they may lose their costs of the application.[22] Under amendments to the Act[23] (which do not apply here) there is a statutory requirement to seek 'informed consent', the information required to be given to secure such informed consent is prescribed and contravention disentitles an executor to commission.[24] In January 2018, the executors' solicitors ought to have advised them to seek consent from the beneficiaries, rather than issue this application. However, as George Costa had died and no grant of representation had been made in his estate, it was not possible to obtain complete consent at the time of the application. This meant that even if consents were given by the other residuary beneficiaries, an application would still have been required at the time the application was issued_._ In these circumstances, I do not need to determine whether or not consent to commission was requested in advance of issuing.

30 The real flaw in the commencement of this application may have been that it was too early. An application for commission need not wait until final distribution and indeed, some funds need to be retained in order to pay the commission, if it is ordered.[25] However, the executor needs to have completed the administration, paid the legacies, appropriated specific assets (if required by the Will) and made interim distributions, so that there is only an appropriate reserve in the estate for the outcome of the commission application. The commission is allowed to executors when they have 'discharged their duty as executors'.[26] The reason for this rule is to avoid the cost to the beneficiaries of multiple applications for commission, say following each significant realisation.

31 The responding beneficiaries submitted that the application was premature. There is no doubt this application was issued prematurely, but by 19 February 2019, when it was heard, the administration was complete. There is little merit in seeking to reverse to February 2018 and dismiss the application to await a fresh application, when a different course had been adopted in the interests of all the residuary beneficiaries at that time.

32 The responding beneficiaries say that the use of a real estate agent and a conveyancer to sell the deceased's home in Melbourne reduced the pains and troubles of the executors in the sale. Similarly, the responding beneficiaries rely on the executors' use of a professional valuer in Cyprus to say that this made obtaining the transfer of title to the Cypriot Land less onerous.

33 The use of professionals may reduce the quantum of commission where a professional has been paid out of the estate for various tasks and an executor then seeks to be awarded commission for essentially the same tasks.[27] However, in this case there is no such 'double dipping'.

34 The use of a real estate agent to sell a home is unremarkable and perhaps even advisable. The executors are not seeking commission for such things as conducting the open for inspections, taking calls from potential buyers or any of the work of that real estate agent might do and for which the agent's commission has been charged. Commission is awarded for the responsibility of selecting an agent, overseeing a sales campaign, considering any offers and instructing at the auction (if one is held). It is also awarded for the work of clearing or supervising the clearing of the home, dealing with professionals and beneficiaries and completing the administrative tasks of sale (for example, disconnecting utilities). The executors' material could have presented greater detail. However, the home was sold by agent and no beneficiary assisted in any of the tasks or took responsibility of any administration[28], so I infer that various necessary steps were undertaken in this sale. I can see no connection between engaging an agent to sell the deceased's home and a reduction in the pains and troubles of this administration.

35 Equally, I can see no connection between the valuation of the Cypriot Land and the task of transferring the six titles to eight beneficiaries (including involving co-owners in three transfers) in a foreign jurisdiction.

36 Indeed, the executors relied less on professional assistance than usual as they personally obtained a grant of probate in Victoria and a re-seal in Cyprus, to the advantage of the beneficiaries in cost saving.

37 The responding beneficiaries allege the executors failed to communicate and provide information regarding the administration. The executors have produced the minutes of two beneficiary meetings that show a high level of communication and clarity about the progress and problems of the estate. The minutes of beneficiary meetings show that the beneficiaries were given opportunities to discuss various issues for determination, including at times taking votes. The executors performed their duties to keep the beneficiaries informed.

38 Where family disharmony occurs in the course of an administration it may increase the stress, responsibility and anxiety resting on the executor, making the obligations more onerous and arduous and be deserving of higher commission.[29] It is to the credit of the executors that they make no negative comment about the conduct of any of the beneficiaries. Therefore, this element is not considered in assessing the quantum of this claim.

39 The responding beneficiaries submitted that this was a straightforward or even simple estate to administer which should have been dealt with 'reasonably easily and quickly.'

40 The Victorian estate was dealt with reasonably quickly. The manifest difficulty in further administration between the death of George Costa in November 2017 and the grant of probate in his estate in March 2018, held up both the Victorian and Cypriot administrations. The reason for the delay from June to September 2018 in Cyprus is explained. On the other hand, the duration of the burden of office on the executors from the deceased's death to June 2019, when this application was finalised and their duties neared completion, is significant and adds to the quantum of their claim. For three years, they have had the heavy responsibility of the administration of this estate.

41 The whole administration of this estate could not be described as simple. Even the sale of a home can be complex task depending on expertise, temperament and market conditions. An insurance claim as legal personal representative adds a layer of complexity. The death of George Costa, added further issues to the administration. However, it was the task of dealing with the Cypriot Land that was the most complex, time consuming and onerous task in this administration. This was a burdensome administration ably managed by the executors.

42 There is little doubt that commission may be allowed on foreign assets that have been sold and the proceeds of sale bought into Victoria, with an undertaking that no claim for commission will be made in the foreign jurisdiction.[30] However, where an asset lies outside Victoria and has been either transferred in specie or sold and the sale proceeds are distributed or are held outside Victoria, the risk of duplicate claims for commission has meant that commission on external assets has been refused in earlier cases.[31]

43 In this case, a further issue arises. While the valuation assigns a value of $620,000 to six blocks of land, the deceased had a 100% interest in only three blocks and minority share in the other three, giving a value in the accounts of $370,837.50. The true value of the partial shares may be less than a simple division of the market value of the whole six blocks. Further, on 20 December 2018, Louie offered to buy 'all the land in Cyprus for the sum of AUD $80,000 (subject to the remaining beneficiaries' agreement)'.[32] The executors say this offer was to 'indicate to the objecting beneficiaries that they were undervaluing the land in Cyprus.'[33]

44 The Cypriot Land has been distributed and now belongs to the children of the deceased and the estate of George Costa (or his heirs according to Cypriot Law, as the case may be). The beneficiaries may buy or sell their shares to each other, or cooperate in a sale to a third party, or retain the land, as they chose. There is no impropriety in the offer by Louie to purchase from his siblings. However, it seriously undermines any attempt to rely on the valuation for the purposes of calculating commission on the Cypriot Land.

45 Without a reliable valuation it is not possible to consider commission, even setting to one side the issue of the land being located outside Victoria. In all the circumstances, I decline to award commission on the Cypriot Land.

46 The responding beneficiaries challenge the necessity of the travel to Cyprus, the length of the stays and any 'further reimbursement' of travel-related expenses. The challenge raised concerns regarding the Administration Accounts.

47 Administration accounts in an executors commission claim are ancillary to the sole purpose of the application, the granting of commission. They are intended to show:

(a) whether the estate has been prima facie properly administered; and

(b) the extent of the pains and trouble; and

(c) the amount upon which the commission should be assessed.

48 Objections to the accounts may raise substantive issues, but if so, the beneficiaries should take separate action as advised.[34] However, of course, minor or administrative errors may be corrected by objection. For example, an objection may allege that a reimbursement to an executor is excessive, but only to the extent that it does not convert the application for commission to an action on the accounts.[35] Where substantial questions of excessive or improper expenditure from an estate arise, there must be a clear separation of actions, as different evidential and costs implications may arise.[36] It is unfair to conduct summary determination of a substantive dispute on the accounts in the midst of what is a completely different proceeding.

49 Gathering the assets, paying the expenses and distributing the net estate are the key elements of any executorship. All executors are therefore empowered by their appointment to pay the expenses of the proper administration from the estate. In addition, a legal personal representative who incurs expense out of his or her own pocket in the course of the proper administration of an estate is entitled to be indemnified for those expenses out of the assets of the estate.[37]

50 Obtaining a re-seal in Cyprus and transferring the Cypriot Land to the beneficiaries was a necessary step in the administration of this estate. The costs were modest in the scheme of things. Expenditure of less than $10,000, resulted in the transfer of cash of over $20,000 and valuable real property into the hands of the beneficiaries.

51 I am satisfied that the costs of the trips to Cyprus are justified by the material for the purposes of the commission application.

52 Unfortunately, the executors did not prepare a further and updated Administration Account prior to the hearing, nor did the responding beneficiaries file material as directed by the orders made on 13 November 2018. The responding beneficiaries explained their delay on the basis that the parties were attempting to negotiate a settlement[38], which is always to be encouraged. A late exchange of affidavits and material was filed by consent, neither side applied to adjourn the hearing and the executors undertook to produce 'up to date' accounts within 14 days after the hearing. At the conclusion of the hearing, orders were made for an updated administration account by 5 March 2019, with an opportunity for the responding beneficiaries to object to that account by 2 April 2019, a directions hearing was listed for 7 May 2019.

53 On 7 May 2019, the responding beneficiaries raised objections to the Administrative Account filed on 15 March 2019. One objection was conceded, that was that the payment from the estate of disbursements of $1,773 relating to this claim for commission should not have been made in advance of any order of this Court. The executors agreed to promptly reimburse this amount. Otherwise, the remaining objections were adjourned to 21 May 2019 for further directions in order to provide time for the responding beneficiaries to obtain legal advice.

54 On 21 May 2019, the responding beneficiaries withdrew their objections, save for the one that had been conceded.

55 Practitioners for the executors and the responding beneficiaries sought orders fixing the costs of the entire application up to and including the directions hearing on 21 May 2019 from the estate, in the following amounts:

(i) $15,000 for the executors' costs; and

(ii) $10,000 for the responding beneficiaries' costs.

56 The practitioners had remained busy with emails in the period between the adjournment of the directions hearing 7 May 2019 and the next directions hearing on 21 May 2019. Another affidavit was filed on 21 May 2019, which including exhibits that ran to 27 pages, setting out various exchanges. It is clear that the parties reached consent very close to the directions hearing being called on in Court on 21 May 2019. It is understandable, therefore, that neither side sought consent to the quantum of their costs from the two non-participating beneficiaries, the estate of George Costa and Mary Lainas. Therefore, I did not make a proposed consent order fixing costs handed up by the parties on 21 May 2019, but reserved this question.

57 Nonetheless, the fact that both sides essentially jointly submitted that fixing costs of the application would be in the interests of the estate is significant. If the costs are fixed, on receipt of this judgment, commission and costs can be promptly paid and the final distribution made. I note that an arms-length review of each other's costs had been made by the practitioners and almost all beneficiaries instructed that these costs were reasonable and ought be paid from the estate. The responding beneficiaries were successful on some points and their submissions were helpful on somewhat difficult questions that arose for consideration. I am satisfied that all parties' costs in this application should be paid out of the estate.

58 The central requirement of section 65 of the Act is that commission be 'just and reasonable'. In all the circumstances, I will order that the executors receive commission of 3% of the capital and income of the Victorian estate. The costs will be fixed and paid out of the estate in the following amounts:

(i) $15,000 for the executors' costs; and

(ii) $10,000 for the responding beneficiaries' costs.

59 The parties are asked to prepare and submit draft Orders giving effect to these reasons.

[1] In the estate of Stone (deceased); Patterson v Halliday [2003] VSC 298 ('Patterson'); Re Buckingham [2016] VSC 757 ('Re Buckingham').

[2] Eric Vance, Executors Commission (Law Book Company, 1969) 150 ('Vance'); adopted in Re Joe White, deceased; Tweedie v Attorney General [2003] VSC 433 per Kellam J and Re Buckingham per McMillan J.

[3] [2006] WASC 83, [17].

[5] Re Estate of D A Lindsay [2004] NSWSC 578, [15].

[6] Affidavit of Ilias Pittas sworn 10 January 2018 ('Executors' First Affidavit') [16], Exhibit IP2.

[9] Interim Administration Account, dated 27 December 2017, filed in the probate proceeding ('Interim Administration Account').

[10] Executors' first affidavit (n 6) [14(g)].

[11] Administration Account dated 12 March 2019 ('Updated Administration Account')

[12] Affidavit of Ilias Pittas sworn 19 February 2019 ('Executors' Third Affidavit') Exhibit IP1 - the minutes of the March 2018 Beneficiary Meeting.

[13] Affidavit of Ilias Pittas sworn 7 May 2019 ('Executors' Fourth Affidavit') [3(b)].

[16] Affidavit of Ilias Pittas sworn 12 November 2018 ('Executors' Second Affidavit').

[19] Affidavit of John Pittas, sworn 16 February 2019 ('responding beneficiaries' first affidavit') [4].

[20] Executors' Third Affidavit (n 12) Exhibit IP1.

[21] The summons was issued on 11 January 2018.

[23] Administration and Probate Act 1958 (Vic) ('Act').

[24] Sections 65C and 65D of the Act.

1. [27] Re will and estate of Macleod [2017] VSC 67, [48]; Richards v Richards [2015] VSC 335, [29]; Vance (n 2) 143.

[28] Executors' First Affidavit (n 6) [20].

[31] In the Will of John Ferguson [1908] NSWStRp 69; (1908) 8 SR NSW 298.

[32] Affidavit of Miriam Ungureanu, solicitor, sworn 18 February 2019 ('Ungureanu Affidavit'), filed on behalf of the responding beneficiaries.

[33] Executors' Third Affidavit (n 6) [6].

[36] Especially where allegations of breach of duty or fraud arise.

[37] Trustee Act 1958 (Vic) s 36(2).