The Estate of Frances Kedesch Michell [2020] NSWSC 1300

Supreme Court of NSW|2020-09-15|Before: Hallen J, Powell J

NSWSC 1343 The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358 The Estate of Orre (Supreme Court of New South Wales, 19 December 1991, Powell J, unrep) Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 Wiley Re LED (South Coast) Pty Ltd (2009) 76 NSWLR 428; [2009] NSWSC 946 Texts Cited: E B Smyth and J R Peden, Executorship Accounts (6th ed, 1975, Law Book Co) E Finnane, C Wood and N Newton, 'Equity Practice and Precedents' (2nd ed, 2019, Law Book Co) G P Stuckey and C D Erwin (eds) Mason and Handler, Succession Law and Practice (NSW) (Lexis Nexis, looseleaf) P Suttor and L Ellison SC et al, de Groot's Wills, Probate and Administration Practice (New South Wales) (de Groot's Publishing, looseleaf) Parker's Practice in equity (New South Wales) (2nd ed, 1949, Law Book Company) Category: Principal judgment Parties: Martha Pietor and Benjamin Pietor (first and second Applicants) Robert Christie (first Respondent) Sasha Freeman (second Respondent) Representation: Counsel: S H Hartford Davis (Applicants) R Golovina (Solicitor) (second Respondent) R Christie (first Respondent in person)

Solicitors: Piper Alderman (Applicants) RMG Law & Associates(second Respondent) File Number(s): 2017/337686

Introduction

HIS HONOUR: These are reasons that follow the hearing of a notice of motion, filed by Martha Rose Pietor and Benjamin Francis Anthony Pietor (the Administrators) on 26 June 2020, in which they seek a review, by the Court, under r 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), of the decision of Senior Deputy Registrar in Probate Hoskinson and that certain orders, made on 29 May 2020, by her, be set aside; or alternatively, that the accounts of the estate of Frances Kedesch Michell (the deceased) be passed. (A copy of the accounts sought to be passed was annexed to the notice of motion.)
At the commencement of the proceedings, the Court was informed by counsel for the Administrators that the only ground for review being relied upon, was the first ground, being the one based upon the proposition that the Registrar did not have power to moderate the costs because an order for those costs, calculated on the indemnity basis, to be paid out of the estate of the deceased, had been made: Tcpt, 15 September 2020, p 1(33) - p 2(11). The foundation of this submission was said to be r 42.5(a) of the UCPR which, relevantly, provides that, in the case of costs payable out of property held, or controlled, by a person who is a party to the proceedings in the capacity of administrator, all costs (other than those that have been incurred in breach of the person's duty in that capacity) are to be allowed.
There are two respondents (described as Defendants) named in the notice of motion, being Robert George Christie and Sasha Ralph Freeman, to each of whom more specific reference will be made later in these reasons. It is only the second respondent, Mr Freeman, who has played any active part in the hearing. He was legally represented at the hearing of the notice of motion.
The first respondent, Mr Christie, appeared at the hearing, announced his appearance, but as it was accepted that he had no part to play in, and his interests would not be affected by, the determination of the notice of motion, he was permitted, and decided, to leave: Tcpt, 15 September 2020, p 1 (17-31).
The notice of motion filed by the Administrators was heard on 15 September 2020. Mr S H Hartford Davis of counsel appeared for the Administrators and Ms R Golovina, solicitor, appeared for Mr Freeman. The matter was listed as one of 3 hours duration and it was concluded within that time. I am grateful to the legal representatives for the outline of written submissions provided by each of them to the Court before the hearing, which will remain with the Court file, and for the manner in which the hearing was conducted.
Before proceeding further, I should mention, as Lindsay J did in Re Estate Gowing; Application for Executor's Commission [2014] NSWSC 247 at [5] that "[t]here is no materiality in this judgment in the distinction between a registrar and a deputy registrar. The 'Probate Rules', found in Part 78 of the Supreme Court Rules 1970 NSW ("SCR"), define 'registrar' in terms that include the Registrar (SCR Pt 78 r 1), as does PAA s 3 read with s 120 of the Supreme Court Act 1970 NSW ("SCA")". (The reference to "PAA" is to the Probate and Administration Act 1898 (NSW).)
For convenience, even though the review relates to the decision of a Senior Deputy Registrar in Probate, I shall simply use the term "Registrar".

Procedural and other Background

Before turning to the reasons for the decision of the Registrar, the orders made by her, and the conduct of the review, it is necessary to understand more of the procedural, and other factual, background.
The deceased died on 3 May 2017.
Ms Pietor is a cousin of the deceased (on the deceased's father's side), and Mr Pietor is her son. It is undisputed that each had no "interest" in the deceased's estate (although when this fact was ascertained is not entirely clear). Had the matter of administration proceeded on an uncontested basis, in accordance with the Probate Rules, the Court, without more, may have been reluctant to grant administration of the estate to either, or both, of them.
As the deceased died said to be leaving no spouse, no issue, and no parents surviving, Lynette Inez Margaret Berntsson, who was the deceased's half-sister (on the deceased's mother's side) was the sole beneficiary entitled on intestacy: Succession Act 2005 (NSW), s 129(1). She would also have been the person to whom the administration of the intestate estate could have been granted.
Alternatively, Mr Freeman, who asserted that he was a party to a domestic partnership (as defined in s 105(a) of the Succession Act) with the deceased immediately before her death, that is he had been in a de facto relationship with her that had been in existence for a continuous period of 2 years, a matter that was the subject of dispute, was the only other person to whom administration of the intestate estate of the deceased would have been granted if he had established that relationship. In that case, he would have been entitled to the whole of the deceased: Succession Act, s 111.
Mr Freeman asserted that he had met the deceased about 30 years prior to her death. The nature of his relationship, at the date of the deceased's death, was, as noted above, the subject of dispute between the parties. As will be read, proceedings in which he was involved were compromised, as a result of which compromise he is now one of the only two beneficiaries, with Ms Berntsson, entitled to share the estate of the deceased.
On 6 November 2017, the Administrators engaged as their solicitors the firm, Piper Alderman, to advise and represent them in relation to the proceedings (to which reference will be made) threatened, and then commenced, by Mr Christie, and also in respect of the administration of the estate generally.
The basis of the engagement of the solicitors was a letter dated 6 November 2017 addressed to Ms Pietor, which included the scope of work, a fee estimate and contingencies, the rate of charges of the "Responsible Principal" (Mr R Toltz) and of "other lawyers and assistants".
Subsequently, the solicitors who were involved in the proceedings representing the Administrators included Mr Toltz, Mr M Mennilli, a senior associate, Ms E Cheung, also a senior associate, and Ms H Veldre, an associate. In addition to all of these lawyers, other persons who assisted in the administration of the estate, were Mr T Riddell, a law clerk, who attended the deceased's home at Granville, a suburb in western Sydney, with the Administrators, to search for an original Will of the deceased, and Ms M Powell, a legal agent, who was engaged to attend the offices of the NSW Trustee and Guardian and the Probate Registry to perform searches for any Will.
On 18 June 2018, before the current proceedings were set down for hearing, Lindsay J made orders in three different proceedings, bearing proceeding number 2017/316523, proceeding number 2017/33768, and proceeding number 2018/139237. It is convenient, next, to provide a short summary of each proceeding, all of which were resolved without a fully contested hearing.

Proceedings numbered 2017/316523

Mr Christie, on 19 October 2017, published the online notice of intended application for the probate of the informal will.
A caveat was filed on 10 November 2017 by the Administrators, before any application was filed by Mr Christie. The caveat required him to prove an informal will that he wished to propound in solemn form and stated that the caveators' interest was as intended applicants for administration.
Further explaining their interest in the proceedings, the Administrators stated that the persons entitled in the distribution of the estate were the "step-sister" (if she was alive) or the children of that step-sister (if she had any), or the applicants and a number of other persons.
The Summons for Probate of the informal will was lodged by Mr Christie on 12 November 2017 and was filed on 23 November 2017, after an application for the postponement of the filing fee was approved.
The basis of the application made by Mr Christie was a printed photograph taken on a smart phone of a computer screen of an unsigned Will using two separate fonts.
By agreement of the parties, some months after the commencement of the proceedings, the Summons in this matter was dismissed, with no order as to costs.

Proceedings numbered 2017/337686

The Administrators published the online notice of intended application for the grant of administration on intestacy on 9 November 2017.
By Summons filed 26 July 2018, the Administrators sought the grant of letters of administration to them on intestacy. They obtained Ms Berntsson's Consent to them being the Applicants for Letters of Administration dated 15 March 2018 (styled as UCPR Form 125 but not properly executed). Unsurprisingly, they did not obtain a similar consent from Mr Freeman, at any time, prior to receiving a grant of administration.
Pursuant to orders made by Lindsay J, Letters of Administration in the estate of the deceased were subsequently granted to them. Letters of Administration were issued by the Court on 26 July 2018.
The basis of the appointment of the Administrators appears to have been as a result of the compromise reached between the parties finalising this, and the other, proceedings.
By virtue of the compromise, the Defence filed by Mr Christie, named as the first Defendant, was to be withdrawn, with no order as to costs, other than an order that his costs ($1,500) were to be paid out of the estate of the deceased. The costs, calculated on the ordinary basis, of Mr Freeman, named as the second Defendant, were ordered to be paid out of the estate of the deceased, as were the costs of Ms Berntsson.

Proceedings numbered 2018/139237

By Summons filed 2 May 2018, Mr Freeman sought an order that provision be made out of the estate for his maintenance, education and advancement in life, pursuant to s 59 of the Succession Act out of the estate of the deceased. Lindsay J made an order that he receive, by way of provision out of the deceased's estate, one half of the residue thereof (with the other half of the residue passing to Ms Berntsson). His costs, calculated on the ordinary basis, were ordered to be paid out of the estate of the deceased.
An order was also made that the costs, calculated on the indemnity basis, of the Administrators, in each of the three proceedings, were to be paid out of the estate of the deceased.
In the proceedings, no affidavit was filed by either party relating to the costs of the proceedings, as required by Practice Note SC Eq 7, pars 6(c) and 9.5 respectively. There is no evidence that the Administrators had provided an estimate of their costs to Mr Freeman before the consent orders were agreed. They do not suggest that any disclosure of the likely costs that would be required to be paid out of the estate was made to him prior to the resolution of the proceedings.

The estate of the deceased

Following the appointment of the Administrators, they realised, by sale, the only significant asset of the estate, being the real estate at Granville. On 26 June 2019, they received a total of $476,273.73, being the net proceeds of sale of the Granville property. On 2 July 2019, they closed a bank account which held $802.09.
Ultimately, in the Certificate of Correctness of Accounts, to which reference will be made, the total value of the realised assets was said to be $479,575.82. I shall use this amount as the basis for the calculations to which I shall refer to below.
Mr Christie received no distribution from the estate (although, as stated above, he was paid a nominal amount for his costs).
On 27 June 2019, the solicitor for Mr Freeman advised that he consented to an amount of commission ($10,000) being paid to the Administrators. On 1 July 2019, the solicitor for Ms Berntsson advised that she also consented to the amount of the commission to be paid. On about 10 July 2019, the amount of commission was paid to the Administrators out of the estate of the deceased. Apart from the commission of $10,000, the Administrators received nothing out of the deceased's estate.
The Administrators discharged the liabilities of the estate, and, on 10 July 2019, distributed the net proceeds of the estate to the two beneficiaries. Each received $86,167.06.
There was evidence that the liabilities which had been paid out of the proceeds of realised assets of the estate included legal costs and disbursements, totalling $267,737.70 (inclusive of GST). These costs and disbursements were said to have been incurred by the Administrators as a result of having retained the solicitors.
Based upon the final amount realised in the deceased's estate ($479,575.82), it can be seen that the costs and disbursements claimed ($267,737.70) equate to 55.82 per cent of the net distributable estate. If the reimbursement ordered to be made by the Registrar to the estate were made ($37,133.69), the costs and disbursements are reduced to $230,604.01, which equates to 48.08 per cent of the net distributable estate. Either amount is much more than the total of the amounts distributed to the two beneficiaries.
In the circumstances, it is hardly surprising that Mr Freeman asserted that the costs and disbursements appeared to be excessive and disproportionate to the value of the net distributable estate.
(Counsel for the Administrators submitted that the Court should not, as the Registrar (and presumably Mr Freeman) had, engaged in impermissible "hindsight reasoning". As I understood it, counsel meant that one could not use the value of the distributable estate once it was realised, in circumstances where, at the time of the retainer of the solicitors, the value of the distributable estate had been estimated to be significantly more.)

The proceedings to pass accounts

On 12 July 2019, Mr Freeman's solicitor informed the Administrators' solicitors that Mr Freeman required the solicitors' costs to be assessed or that he required the Administrators' accounts to be filed and passed.
Although attempts were made by the Administrators' solicitors to avoid the need for the accounts to be filed and passed, on 8 August 2019, Mr Freeman commenced proceedings (2019/246755) in which he sought an order that the Administrators have their costs assessed or otherwise that they file and pass accounts of the estate. (Ms Berntsson informed the solicitors that she did not require the Administrators to file and pass accounts.)
On 9 September 2019, the proceedings brought by Mr Freeman were resolved by orders, made consensually, which required the Administrators to file, and pass, accounts of the estate. The parties also agreed that the matter would proceed by way of objections.
On 6 November 2019, the Administrators published a Notice of Intention to make an application, by notice of motion, for an order passing accounts and invited any person wishing to object to the application to file a Notice of Intended Objection and an Appearance.
On 22 November 2019, the Administrators made an application that the accounts of the estate, for the period 2 November 2017 to 10 July 2019, be passed.
On 20 December 2019, the Court received a Notice of Appearance in accordance with Pt 78 r 81(3) of the Supreme Court Rules 1970 (SCR) from Mr Freeman. The rule, which applies if proceedings for the passing of accounts have been commenced, but the hearing of the proceedings has not been completed, permits any person intending to object to the passing of the accounts, to enter an appearance, at any time before completion of the hearing.
Part 78 r 81(4) of the SCR requires any person entering an appearance in the proceedings to be joined as a respondent in the proceedings.
Mr Freeman objected to the passing of accounts by the Administrators on the ground that the legal costs were excessive. Specifically, he objected to fees and disbursements totalling $227,263.98 (incl. GST), which were the subject of six invoices issued by the Administrators' solicitors, that had been charged to the estate.
The Administrators contended that entries for those invoices had been comprehensively itemised and that, in all the circumstances of the case, the amounts claimed were not excessive.
Between 21 February 2020 and 15 April 2020, the Court issued a number of requisitions to the parties going to the accounts that had been filed by the Administrators in the application for the passing of accounts and Mr Freeman's objection to those accounts.
On 31 March 2020, another registrar issued a Certificate of Correctness which showed that the total capital realisations of the estate amounted to $477,045.82. There was no income collected for the benefit of the estate; there were no assets transferred in specie; and there had been a refund to the estate in the amount of $2,530. (The refund explains the difference in the amounts referred to in this paragraph and the earlier paragraph, par 33, relating to the Certificate of Correctness.)
The Court then made orders to certify that the accounts of the estate had been examined by the Registrar; that they appeared to be correct; that they were filed within the time allowed by the rules of the Court; and that, at the close of the accounts, the balance to the credit of the estate was nil.
Subsequently, on 15 April 2020, the Court issued a requisition to the parties, which provided that the accounts the subject of the application to pass the accounts had been vouched by the Court and that, absent the filing and service of any objection by Mr Freeman by 29 April 2020, the accounts would be passed in their present form on 30 April 2020. The Court afforded the Administrators an opportunity to file and serve submissions in reply, by 13 May 2020, in the event that Mr Freeman continued with the objections to the passing of accounts.
On 28 April 2020, Mr Freeman served on the Administrators a document entitled "Narrative To The Objections To The Bill Of Costs". The gravamen of the objections was that the accounts should not be passed because legal costs totalling $227,264.98 were "excessive", "extremely high" and "disproportionate to the whole value" of the Estate.
On 12 May 2020, the Administrators filed and served written submissions in reply to Mr Freeman's Objections. The submissions were limited to the legal and factual issues raised by Mr Freeman.

The Registrar's decision

Having reviewed the accounts as filed, and the submissions by both parties, the Registrar proposed to moderate the accounts, to the extent of the legal costs complained of by Mr Freeman. She relied upon In the Will of Kerrigan (1935) SR (NSW) 242 (Jordan CJ, Stephen and Street JJ), The Estate of Orre (Supreme Court of New South Wales, 19 December 1991, Powell J, unrep) and Shave v Shave; Estate of Shave [2011] NSWSC 1356 (White J), to each of which cases I shall refer later in these reasons.
In her reasons for decision, the Registrar set out a summary of the history of the various proceedings, the orders made by Lindsay J, including the orders for costs that he had made; noted that the Administrators had no "interest" in the estate, and that there would have been some reticence in granting administration to them on intestacy; and the steps taken by the parties, and the Court, to have the accounts and commission determined.
Although the Registrar referred to Mr Freeman as the deceased's de facto partner, a matter which is said to have been the subject of dispute, she did so in the context of the claim that he had made, which by the time the matter was before her, had been determined, in the sense that he was, at least, an eligible person and a beneficiary who was entitled to share equally the intestate estate of the deceased.
In relation to the application for probate by Mr Christie, the Registrar noted that it was "was hopelessly inadequate. Numerous requisitions sent by the Court were never properly answered".
In relation to the reduction of the estimated value of the Granville property, the Registrar wrote that it was difficult "to ascertain the genuine nature of the first offer and in any event, it was open to the parties to speedily obtain a limited grant of special administration. Those mechanisms were not engaged by any party in this matter".
The Registrar then dealt with each of the six invoices the subject of Mr Freeman's complaints. Broadly, the Registrar concluded, in relation to the challenged invoices which included the fees for Mr Toltz (Invoice 404521, Invoice 416892, Invoice 419467 and Invoice 421846), that it was not reasonable for the estate to engage a solicitor with such a high hourly rate as that charged by him; that in relation to some of the invoices, there were charges that should not have been made to the estate (Invoice 416892); and that the invoices which included charges for the conveyance of the Granville property (Invoice 425649 and Invoice 440797) were too high.
The Registrar then set out her decision, at [57] to [62]: "As mentioned above and by their own admission, the administrators had no beneficial interest in the Estate. They volunteered to administer the Estate ahead of the de-facto partner and the half-sister of the deceased. As far as the administrators argue that it was a Court appointment, the answer is that the appointment was by consent and without deciding on the merit of the issues. There were some challenging aspects in this administration. I turn firstly to the issue of the informal will. Mr Christie's application was confused and unclear. The Court was having difficulties with getting proper responses from him. The application was likely to be rejected. However, after filing the caveat, no action was required by the administrators in response to the application by Mr Christie. The caveat operated to protect the administrators and to put them on notice of any future developments in the matter. In the 10 July letter, the administrators assert that the informal will application was the cause of the majority of the legal fees in the invoice No 416892. That said, the matter did not go to trial. The matter had 2 return dates, one of which was before the Registrar for directions. The matter settled on the second return (18 June 2018 orders), in favour of the administrators. Another difficulty was the application for a family provision. This is quite a frequent occurrence in modern estate administrations. I note that the proceedings were settled before the first return of the Summons and there was no protracted litigation with Mr Freeman. The parties' reasonable conduct undoubtedly saved the Estate significant further legal costs. However the amount of costs saved is impossible to ascertain, as the affidavits of costs were not filed. The legal bills I am taken to by Mr Freeman appear quite high and I moderated those, still allowing for a commercial rate of $440 per hour for the majority of legal work. The last matter to consider is Mr Freeman's disputed occupation of the property which apparently lasted around 2 months. The administrators incurred additional legal costs in dealing with this aspect of the matter, majority of which I allowed. Looking at the administration overall, it appears to me that the administrators did not turn their mind to the question of charges being reasonable and proportionate, given the modest size of the Estate."
In broad summary, on 29 May 2020, upon her consideration of the bills for legal costs objected to by Mr Freeman, the learned Registrar refused to pass the accounts of the administration of the estate of the deceased; ordered the Administrators to refund $37,133.69 within 28 days of the date of the making of the order; ordered that upon the refund of that amount, the accounts would be passed; and stated that the parties would receive written reasons (which they did subsequently receive).
Bearing in mind the total costs and disbursements, which were $267,737, the reduction of the total costs amounted to 13.86 per cent of the total costs and disbursements.

The six invoices

Although it is no longer necessary to go to the detail of the six invoices that were the subject of Mr Freeman's objections, they were: 1. Invoice 404521 totalling $17,838.69; 2. Invoice 416892 totalling $151,586.18; 3. Invoice 419467 totalling $13,777.79; 4. Invoice 421846 totalling $17,997.22; 5. Invoice 425649 totalling $14,978.30; and 6. Invoice 440797 totalling $11,085.80.
I shall deal briefly with each of the invoices.
Invoice 404521 for the total amount $17,838.69 was dated 27 November 2017 and covered a period of work said to have been done between 2 November 2017 and 24 November 2017.
This Invoice reveals that in relation to work shown as having been done between 2 November 2017 and 13 November 2017, Mr Toltz performed the work and spent a total of 19.2 hours at a total cost of $11,136. One attendance (8 November 2017) included time spent "examining Succession Act and Probate and Administration Act … examination of issues relating to application for Letter (sic) of Administration competing with application for Probate; further examination of process regarding filing of Caveat against application for Probate; considering issues affecting Robert Christie".
There were a number of attendances on 14 November 2017 between Mr Toltz and Mr Mennilli, in which he attended on Mr Toltz "in relation to factual background to dispute, status of matter and preparing affidavit of service". He then spent time "considering caveat filed with Supreme Court" and performed other work relating to the preparation of an affidavit of service. He then spent time attending on Mr Toltz "to consider matters to be discussed during meeting with Mr Christie on 15 November 2017 and finalising affidavit of service".
Invoice 416892 for the total amount of $151,586.18 was dated 28 June 2018 and covered a period of work said to have been done between 5 December 2017 and 27 June 2018.
In relation to this Invoice, it is to be noted there were costs relating to the attendance by Mr Riddell, a law clerk, at the Granville property on 18 April 2018, to carry out searches for an original Will and general searches for an original Will. An Attendance Schedule attached to Invoice 1468912 revealed that costs incurred as a result of the law clerk's attendance and the preparation of an affidavit in the proceedings by him, sworn 26 April 2018, as to the results of those searches amounted to $2,200: Ex RMT-1, p 132 - p 142.
Invoice 419467 for the total amount of $13,777.79 was dated 27 July 2018 and covered a period of work said to have been done between 28 June 2018 and 26 July 2018. Part of this Invoice related to the costs of carrying out of searches for an original Will.
Invoice 421846 for the total amount of $17,997.22 was dated 29 August 2018 and covered a period of work said to have been done between 27 July 2018 and 29 August 2018.
Invoice 425649 for the total amount of $14,978.30 was dated 29 October 2018 and covered a period of work said to have been done between 29 August 2018 and 29 October 2018. In this Invoice, costs were included for arranging the appointment of a real estate agent for the purpose of the sale of the Granville property and arranging insurance on the estate's real estate. Additionally, there were costs relating to the attendance by Mr Toltz for the auction at the Intercontinental Hotel in Double Bay, and negotiations relating to the sale of the real estate.
Invoice 440797 for the total amount of $11,085.80 was dated 27 June 2019 and covered a period of work said to have been done between 30 May 2019 and 26 June 2019.

The notice of motion to review the Registrar's decision

It is the amount of $37,133.69 that is in issue. Initially, Ms Berntsson, the other beneficiary entitled to receive half of the estate, had stated "that she had no objection to Piper Alderman's fees and she wished to take no active part at any step in this review process in the application to pass the accounts".
However, at the hearing, Ms Golovina, without objection, referred me to a letter, dated 8 July 2020, included as part of an annexure to the Administrator's submissions in respect of an application for a stay of the Registrar's orders, a copy of which was sent with an email dated 15 July 2020 to my Associate. In that letter, Ms Berntsson, by her solicitors, made it clear that "she wishe[d] to be involved [in the proceedings] to the extent that should there any further distributions then it should be equally distributed between herself and Mr Sasha Freeman": Tcpt, 15 September 2020, p 31(34) - p 33(14).
Prior to the hearing, counsel for the Administrators had informed the Court that in the event that the Court dismissed the notice of motion, in whole or in part, the solicitors "will just refund the money to the administrator who will return it to the estate": Tcpt, 25 August 2020, p 7(38-41).

Grounds of review

The Administrators' grounds of review were framed as follows: "The Registrar erred in the following respects: Ground 1 - the Orders overlooked and are inconsistent with the indemnity costs order made by Lindsay J; Ground 2 - the disallowance of the hourly rates of Richard Marcus Toltz … was an exercise in hindsight reasoning, which did not make allowance for the fact that the Property was initially attributed by all parties with a much higher value … ; and Ground 3 - the Registrar made various other legal and factual errors."
As earlier stated, the sole basis of the application for review was, however, narrowed considerably at the commencement of the hearing (Tcpt, 15 September 2020, p 1(46) - p 2(11)), when counsel for the Administrators, by reference to his written submissions, indicated that the sole ground for review was that: "28. …the Administrators had the benefit of an order that their costs of the various proceedings were to be paid on an indemnity basis out of the Estate. Rule 42.5(a) of the UCPR relevantly provides that, if a Court determines that costs are to be paid on an indemnity basis out of property held or controlled by a person as an administrator of a deceased estate, "all costs (other than those that have been incurred in breach of the person's duty in that capacity) are to be allowed". There was and is no allegation of breach of duty in relation to the retention of Piper Alderman, or otherwise. Accordingly, the Registrar was obliged to pass the accounts insofar as they concerned costs the subject of the indemnity costs order."
Counsel submitted that, consistently with r 42.5(a) of the UCPR, the Registrar's moderation of the costs the subject of the indemnity costs order did not require any enquiry into the reasonableness, or otherwise, of the costs incurred by the Administrators in circumstances where costs could only be disallowed if they had been incurred in breach of the Administrators' duty. Relevantly, no such breach had been identified by the Registrar, nor alleged by Mr Freeman. In moderating the accounts, the Registrar had disallowed certain legal fees by reducing the allowable hourly charge out rates of Mr Toltz, a consultant of Piper Alderman and the solicitor on record for the Administrators, from $590 (plus GST) and $580 (plus GST) to $470 (plus GST) and $440 (plus GST), respectively. The Registrar's justification for the reduction of Mr Toltz's allowable hourly rates, as set out at par [62] of the Registrar's reasons for decision demonstrated "an exercise in hindsight logic". He added that the Administrators did not know, with certainty, the value of the deceased's estate. Initially, based upon information available to the Administrators, they had believed that the value of the Granville property was between $2.2 and $2.3 million. It was only after events beyond their control had occurred, that it was ascertained that the sale price was substantially less.
Counsel went on to submit that, given the assessed value of the Granville property at the date when the Administrators engaged Piper Alderman, and in circumstances where neither the Administrators, nor Mr Toltz, could have foreseen the subsequent downturn in the Sydney real estate market, the Registrar had erred in seeking to retrospectively characterise the deceased's estate as "relatively modest".
In broad summary, Ms Golovina referred to the principles for review of a Registrar's decision. She stated that respect should be given to the decision and that the Administrators would need to show error by the Registrar. She submitted that the question was whether there were any grounds, or any reasons, which would warrant a review of the orders that had been made by the Registrar and she submitted that there was a natural inhibition against the unrestrained substitution of the reviewing Court's views for those of the Registrar.
Ms Golovina also submitted that the Plaintiff's notice of motion should be dismissed with costs, that pursuant to r 49.19 of the UCPR, the orders of the Registrar, made on 29 May 2020, should be confirmed, or that in the alternative, pursuant to r 49.19 of the UCPR, the orders of Registrar, made on 29 May 2020, should be varied. She proposed that the Court should review all of the invoices by way of variation, but accepted, when raised by the Court, that in circumstances where there had not been a notice of motion on behalf of Mr Freeman identifying the precise nature of his complaints, the Court would not, in effect, review, all that the Registrar had done.
Ms Golovina pointed out that the effect of the review, if successful, would result in the legal representatives of the Administrators receiving more than one half of the available estate, and that the object of resolving issues between the parties in such a way that the cost to the parties had been proportionate to the importance and complexity of the subject-matter in the original disputes between all of the parties would not have been achieved.
Ms Golovina did not make any submissions about r 42.5(a) of the UCPR. She did not refer to any authority on the rule or debate its meaning or effect.

The review of a Registrar's decision

Rule 49.19 of the UCPR, relevantly, provides: (1) Subject to subrule (2), if in any proceedings a registrar gives a direction or certificate, makes an order or decision or does any other act, the court may, on application by any party, review the direction, certificate, order, decision or other act and make such order, by way of confirmation, variation, discharge or otherwise, as the court thinks fit.
An application for review is made by notice of motion filed within 28 days after the date of the order in respect of which review is sought, or by extension either the registrar, or the Court, may fix: UCPR, r 49.20(1) and (2).
In Noble Earth Technologies Pty Ltd v Hampic Pty Ltd [2012] NSWSC 935 at [39], I set out the principles applicable to a review of a registrar's decision under UCPR, r 49.19. "Relevant principles drawn from authorities relating to the nature of a review are: (a) The review power conferred is not an appeal and, accordingly, is not subject to the limitations that apply to proceedings by way of appeal: Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61 at [6], [10], [50], [52]; Al-Shennag v Statewide Roads Pty Limited [2009] NSWSC 210 per Hall J at [44]-[46]; it is 'not restricted' to a reconsideration of the primary material before the Registrar: Lollback v Brakepower Pty Ltd [2010] NSWSC 1457 at [10]. (b) It is unnecessary for the applicant for review to demonstrate any material error of fact, or principle, in the order under review. On the review, the court may exercise its powers regardless of error. However, review, in the relevant sense, involves discretionary intervention: Tomko v Palasty (No 2) at [52]; Lollback v Brakepower Pty Ltd at [13]; the discretion extends to a discretion whether, and if so, how, to intervene. (c) The conduct of the review is at large and in the discretion of the Court. Notwithstanding the foregoing, the review is not accurately described as a hearing de novo: Perpetual Ltd v Barghachoun [2010] NSWSC 108 at [3], although it involves many of the features of a hearing de novo. (d) There is an onus on a person seeking to have a court set aside, or vary, a registrar's decision to make out a case that the court conducting the review, in the interests of justice, should exercise its discretion to do so: Tomko v Palasty (No 2) per Hodgson JA at [7]. In other words, there must be a basis shown for setting aside, or varying, the decision or orders of the registrar. (e) Although on review, the Court should consider the matter afresh, it does not follow that the reasoning of the registrar should be ignored, or that variations in the material presented to her, or him, and the evidence that was adduced are irrelevant. The starting point is, therefore, the decision that is to be reviewed. The court does not merely cast that decision to one side and proceed as if it had never been made. The court will have regard to the basis on which the decision was made and the material placed before the court itself on the application for review: Wily re LED (South Coast) Pty Ltd [2009] NSWSC 946 at [24] - [26]. The real question is whether there are any grounds, or any reasons, which would warrant a review of the orders that have been made by the registrar: Al-Shennag v Statewide Roads Pty Limited at [47]. (f) What will be required to make out a case for intervention will vary depending upon the nature of the registrar's decision under review: Groeneveld v Wollongong City Council [2009] NSWLEC 149; (2009) 168 LGERA 260, per Preston CJ at [12]. However, the court should inform itself of the material before the registrar at the time when he, or she, made the decision, should consider the reasons for the decision, and then should make its own decision based on the material before it after having the benefit of the submissions of each party. (g) It is proper for the Court to exhibit a natural inhibition against the unrestrained substitution of the reviewing Court's views for those of the registrar: Westpac Banking Corp v Abemond Pty Ltd; Westpac Banking Corp v Cameron (NSWSC, 3 November 1994, unreported). (h) When it comes to matters of practice and procedure, there should be a natural inhibition against overturning a registrar's decision: Wentworth v Graham [2002] NSWSC 397; (2002) 55 NSWLR 638 at 640-641. However, where substantive error is established, then the Court would consider reviewing the registrar's decision and would make such other order as it is authorised to make: Al-Shennag v Statewide Roads Pty Limited at [46]. In the case of a decision which finally determines a party's rights, or which (albeit one of practice or procedure) has a decisive impact on those rights, a Court may be more willing to intervene. It may permit further evidence to be led that does not satisfy the strict requirements for fresh evidence, if it is satisfied that the interests of justice require this. It may decide to substitute its own discretionary decision for that of the registrar, even though no House v R (1936) 55 CLR 499 error is shown, again if it is satisfied that the interests of justice require this: Tomko v Palasty (No 2) at [5]-[9], [50], and [52]. (j) If fresh, or additional, evidence, is produced, it may be received by the court and taken into account (Fenwick v Wambo Coal Pty Limited [2011] NSWSC 176, per White J, at [46]), or the court may refer the matter back to the Registrar for consideration as a fresh application: Portal Software v Bodsworth [2005] NSWSC 1115 at [17]. The court may be more inclined to intervene on a review based on fresh evidence, changed circumstances, or where error is demonstrated in the decision under review: Tomko v Palasty (No 2) at [52]. (k) The decision of the registrar stands until it is set aside: Lawteal Pty Limited v Ofo [2005] NSWSC 984, per Malpass AsJ at [19]. (l) The registrar must give sufficient reasons for his, or her, decision: Thompson v New South Wales Land and Housing Corporation [2008] NSWSC 74 per Malpass AsJ at [9] - [16]."
In relation to a review of a registrar's moderation of fees paid by an executor to his solicitor out of an estate, Kunc J adopted what is set out above in The Estate of Arthur Michael Falco; Falco v Lambert (No 3) [2015] NSWSC 1343 at [43]. At [44], his Honour added: "To these statements of law I add the observation that, because the review of a Registrar's decision is the exercise of a power under the Uniform Civil Procedure Rules, it is subject to s 56 of the Civil Procedure Act 2005 (NSW) ('CPA'): 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. …"
At [45]-[47], his Honour wrote: "Having regard to these various statements of principle, it is appropriate for the Court to identify with precision the approach it intends to adopt to the Plaintiffs' motion for review. It is significant that the Decision under review is that of a highly experienced Registrar in a specialist jurisdiction. To say that is not to suggest that experience excludes the possibility of error. It does not. Nevertheless, it bespeaks that a higher degree of deference should be applied where a Registrar makes a decision in an area such as probate practice where, in the ordinary course of his or her duties, that Registrar will be familiar with the current practice of the profession, both as a matter of law and lore, in a way that the Court may not be. That deference is also warranted by s 56 of the CPA. The overriding purpose will not be satisfied if the Court sets the bar too low for reviews in a specialist area such as probate. Even before the introduction of the CPA, the Court was conscious of the need to minimise costs and many procedures were introduced in the area of probate, in particular in relation to what might be called the administrative aspects of probate work, for it to be dealt with as informally and inexpensively as possible. This is one of the main reasons why the rules provide for the default position to be that the passing and moderation of accounts is dealt with by a Registrar on the papers and without the attendance of the parties … The review has been conducted on the basis of the material that was before Senior Deputy Registrar Studdert. Accordingly, mindful of the considerations set out in the preceding paragraphs, the Court's approach is that it will not interfere with the Decision unless it is satisfied that as to a significant matter it is obviously wrong or was not reasonably open on the material before him or the Plaintiffs have satisfied the Court that, for some other reason, it is in the interests of justice to exercise the Court's discretion to interfere with the Decision. While this approach may be redolent of the test in House v The King [1936] HCA 40; (1936) 55 CLR 499 ('House v The King'), I have not overlooked that, on the authorities, the question of review is not to be determined by the application of House v The King simpliciter."
I also refer to Lindsay J's statement in Re Estate Gowing at [101]: "The terms in which UCPR r 49.19 is expressed suggest that the Court must exercise an independent, discretionary judgment about the nature and extent of its review of a registrar's determination, having regard to the type of determination under review. That it should be required to do so is consistent with the guiding principles of case management enacted in CPA Part 6 Division 1 (ss 56-60). They require the Court, in the interpretation and application of the UCPR, to seek to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in proceedings, and to do so having regard to considerations of efficiency in the use of judicial and administrative resources."
At [20], his Honour noted that: "Secondly, there is a need to understand the strong administrative flavour encountered, in the context of PAA s 86(1) no less than in the context of other heads of probate or equity jurisdiction, in the assessment of executor's commission, arising from which officers of the Court routinely engaged in dealing with the Court's probate business (including Senior Deputy Registrar Studdert) have generally acquired specialist expertise."
Robb J also adopted the summary of the principles set out in Noble Earth Technologies Pty Ltd v Hampic Pty Ltd in Chow v Chow [2016] NSWSC 908 at 96. At [112]-[113], his Honour wrote: "… not only does the determination relate to an issue of practice, but it relates to an issue of practice that is conferred by the Probate Rules on a registrar. The registrars who exercise this jurisdiction of the court have … developed particular expertise. Accordingly, the court will be slow to interfere with practice decisions made by a registrar under the Probate Rules, unless there is a clear case for intervention. It would be a bold judge, who is usually engaged in the exercise of the court's general equitable jurisdiction, to disturb a determination made by a registrar as experienced as [she, or he, is] without first being sure that his or her intervention was based on a sound foundation."
In DJ Singh v DH Singh and Others [2017] NSWCA 234 at [60] Gleeson JA quoted Barrett J in Wiley Re LED (South Coast) Pty Ltd (2009) 76 NSWLR 428 at 434; [2009] NSWSC 946 at [26] (who in following Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369) wrote: "… review in the relevant sense, involves discretionary intervention. The starting point for the Court is therefore the decision that is to be reviewed. The Court does not merely cast that decision to one side and proceed as if it was never made. While it is for the Court to make the relevant decision afresh, it will have regard to the basis on which the decision was made and the material placed before the Court itself on the application for review."
In matters relating to the administration of an estate, particularly relating to the passing of accounts, the weight of authority tends to the view that the registrar's decision should be shown to be affected by an error to such an extent it should not stand: Cree - The Estate of Peters [2007] NSWSC 1291 at 11 (Windeyer J) citing Estate of Sharman; Ex parte Verslius [1999] NSWSC 709 at [3] (Young J).
In stating the above, I make clear that the Court can review all aspects of the findings of the Registrar and is not restricted to interfering only if she, or he, has acted on some mistaken principle of law or mistake of fact. Whilst the court determines the matter itself, regard should be had to the reasons of the registrar and to the orders made, even though the reasons for the decisions are not usually published: Indyk Estate - Wiernik v Indyk [2010] NSWSC 713 at [2] (Palmer J); Estate of Sharman at 3
The orders made by the Registrar continue in force unless, and until, the Court, after undertaking a review, makes an order that it be set aside. An application for a review of an exercise of a decision of a registrar does not operate as a stay of the orders under review: see for example, Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9 (Mason CJ, Gaudron, McHugh, Brennan, Deane, Dawson and Toohey JJ).

Accounts in Administration

It is convenient next to say something about the process of filing and passing accounts in the administration of estates as the issues that have arisen in this case derive from an order made that the Administrators file and pass accounts.
In Glazier v Australian Men's Health (No 2) [2001] NSWSC 6, Austin J (although dealing with accounts ordered to be taken in equity rather than the process for the taking of statutory accounts under s 85) set out the general principles which the Court should follow when making an order for an account for administration. At [37] - [38], his Honour wrote: "Order for an account of administration An order for an account of administration is made for the taking of accounts of money received and disbursed by the person who is responsible for the administration of a business enterprise or fund or other property, and for payment of any amount found to be due by that person upon the taking of the accounts. For example, the Court routinely orders the taking of accounts of the administration of an estate by an executor, or upon the dissolution of a partnership, or of the administration of property by a mortgagee in possession, or of a trust fund such as a solicitor's trust account. In such a case the making of the order need not imply any wrongdoing by the defendant. Order for an account of administration in common form 38 The usual form of order, referred to as an order in common form or for common accounts, requires the defendant to account only for what he or she has actually received, and his or her disbursement and distribution of it. The defendant prepares accounts and it is open to the other parties to surcharge or falsify items in those accounts. A surcharge is the showing of an omission for which credit ought to have been given, while a falsification is the showing of a charge which has been wrongly inserted, the falsifying party alleging that money shown in the account as paid was either not paid or improperly paid: Parker's Practice in Equity (New South Wales) (2nd ed by GP Stuckey and CD Irwin, 1949), p 269. Part 48 Rule 6 of the Supreme Court Rules preserves these procedures for challenging the account, while abandoning the arcane terminology of the chancery practice."
More recently, in Re Ellis; Ellis v Ellis (2015) 14 ASTLR 475; [2015] WASC 77, at [80], E M Heenan J wrote: "… The purpose of an account is to determine the amount due by an accounting party to the person entitled, whether at law or equity. It involves a process of filing accounts by the accounting party, usually accompanied by an obligation to file vouchers to support the receipts and payments recorded in the account, followed by a review before an officer of the court of the accounts filed at which an interested party can challenge the accuracy of the account through cross‑examination and legal argument. Once the account has been taken and the report or certificate of the result is made by the officer taking the accounts, the account will be regarded as settled and the result may require compensation or restitution by the accounting party, if expenses are disallowed to any degree, or if certain other receipts should have been included. Once the account is settled, steps can be taken to require the accounting party to replenish the fund to such degree as may be necessary or, if the accounts are approved, to proceed with the administration including, if appropriate, to distribute to the persons entitled the balance or balances found due when taking the account."
His Honour added, at [88]: "… The executors or personal representatives of deceased estates are just one species of parties who have an obligation to account and in their case to interested beneficiaries for the administration and distribution of the estate. Conceptually, there are no differences in the principles applying to the obligation of personal representatives to account nor to the availability of various procedures or remedies requiring them to account or the nature of the orders or directions which may be made as to the manner of conducting the account. However, in view of the clear obligation of personal representatives of a deceased estate to account, provisions are available for an account to be taken without proceedings or the need to establish the duty to account or the entitlement of the claimant to payment of whatever may be found due on the account …"
Whilst neither the Probate and Administration Act, nor its predecessor legislation prescribes a format, the Court has a long and well established format for estate accounts, with an approved form of notice of motion for order for, relevantly, the passing of accounts (form 150), and commentary, was introduced in March 2018, templates of which are available on the Supreme Court's website. There are also a number of different texts that provide alternative formats (see for example, Mason and Handler, Succession Law and Practice (NSW) (Lexis Nexis, looseleaf), at [8321] and detailed accounting methodologies (see generally, E B Smyth and J R Peden, Executorship Accounts (6th ed, 1975, Law Book Co); P Suttor and L Ellison SC et al, de Groot's Wills, Probate and Administration Practice (New South Wales) (de Groot's Publishing, looseleaf), at Appendix 4.178).
An essential feature of estate accounts filed in the Supreme Court for passing is that there are established categories of accounting information, including capital realisations, income collections and the value of assets transferred in specie).
The accounts ought to comprise a cashbook style statement, and separate totals for capital realisations and income collections should be provided, as different rates of commission are allowed on capital compared with income. All receipts and payments should be consecutively numbered, in order to enable the registrar to identify receipts and payments with respect to which the registrar requires, or any objectors require, further information, in the process of vouching the accounts.
The accounts procedure serves the informative purpose of allowing the beneficiaries to know the status of the property in the estate and what transformations it has undergone. The beneficiaries should be able to ascertain from the accounts which of the assets in the deceased's estate have been realised; which have been transferred in specie; and which have been retained; what investments have been made by the administrators out of the proceeds of realizations and what income had been derived from any such investments; and, finally, what, if any, distributions have been made to, or for the benefit of, the beneficiaries.
If a challenging party seeks to surcharge or falsify the accounts, then notice should be given of any challenge and particulars of the surcharge and the grounds for the falsification alleged should be provided: see generally, Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) (Austin J).
For a surcharge, the objecting party shows that something has been omitted which ought to have been included in the accounts. The challenging party has the onus of proof: Cavasinni v Cavasinni [2007] NSWSC 619 at [24] (Young CJ in Eq) (applying Pit v Cholmondeley (1754) 2 Ves Sen 565 at 565-566; 28 ER 360 at 360-61 (Lord Hadwicke LC).
For a falsification, what is shown is that a charge or disbursement has been wrongly inserted, or that a reduction in the account ought not to have been allowed. In other words, if the accounts disclosed an unauthorised disbursement then the objecting party may "falsify" the unauthorised disbursement. The falsification would have the effect of creating a deficit in the accounts. The executor or administrator would be required to replenish the estate to that extent.
The falsifying party must show that money shown in the account as paid was either not paid or improperly paid: G P Stuckey and C D Erwin (eds), Parker's Practice in equity (New South Wales) (2nd ed, 1949, Law Book Company), p 269. He or she can then ask for the disbursement to be disallowed.
The taking of the accounts will not in itself result in a judgment for any sum of money.

Filing and passing accounts

Section 85(1AA) of the Probate and Administration Act 1898 (NSW) relevantly provides: In respect of the estate of a person who dies on or after 31 December 1981 every person to whom probate or administration has been or is granted and who is: … (e) a person otherwise required to do so by the Court, shall verify and file or verify, file and pass the person's accounts relating to the estate within such time, and from time to time, and in such manner as may be fixed by the rules, or as the Court may order.
Section 85(4) of the Probate and Administration Act provides: Where the Court, in passing any such accounts, disallows in whole or in part the amount of any disbursement, the Court may order the executor, administrator or trustee to refund the amount disallowed to the estate of the deceased. Nothing in the subsection alters, or diminishes, the right of any person to proceed in equity in the same way as if this subsection had not been enacted.
In the Probate Rules, "proceedings for the passing of accounts" means proceedings for an order passing accounts under s 85 of the Probate and Administration Act: SCR Pt 78 r 75. A more useful description of the term is to be found in In the Will of Macnamara (1895) 6 QLJ 219, in which Griffith CJ wrote, at 223: "…the term 'passing accounts' seems to us necessarily to involve an inquiry into their accuracy. Otherwise the proceeding, which is a solemn one undertaken by a court of justice, would be absolutely futile. We think, therefore, that the court has authority on passing executors' or administrators' account to examine them and inquire whether they are accurate or erroneous."
The Probate Rules confer on a registrar the powers of the Court in relation to, amongst other things, the passing of the accounts of executors and administrators. Conferral of power on the registrar referable to s 85 of the Probate and Administration Act is found in Pt 78 r 94(3)(c) of the SCR.
The passing of the accounts must have regard to the interests of any beneficiary, or beneficiaries, having a claim to the account which is being passed.
In this case, the order made consensually for the filing and passing of the accounts was an order for what is described as a common account, rather than an account conducted on the basis of wilful default.
Robb J observed in Chow v Chow at [117]: "… the passing of accounts for probate purposes is a different judicial exercise than the taking of accounts in equity to determine whether a trustee has properly accounted for the trust fund. The probate registrar is to satisfy him or herself that the provisions of the will have been properly executed, and that the assets in the estate have been dealt with in accordance with the will; further, that income to which the estate is entitled has been received and accounted for, expenses have been properly incurred, and distributions made as required by the will. Much of the information required for that purpose may be found in accounts prepared in the modern format in accordance with accounting standards, but perhaps some may not be, or not be set out conveniently. For instance, it may not be a straightforward exercise to trace the assets listed in the inventory of property through accounts prepared in the modern format, and an arithmetical computation will be required to dissect actual receipts out of income that includes notional receipts represented by revaluations in assets. Accounts prepared in order to be passed by a probate registrar are not prepared for the sole purpose of facilitating the resolution of any disputes that may exist between the trustees and the beneficiaries concerning the propriety of individual transactions."
In Bassett v Atherley [2011] WASC 117, at [9]-[11], the following passages relating to passing accounts appears: "Broad principles of passing accounts … When it comes to accounting of payments made by the executor, they must fall into one of two categories to be legitimate. The first category is payments made in satisfaction of the will-maker's commands as to disposition of the estate. The second is that the executor is entitled to charge the estate with the proper and reasonable expenses of administration. In certain circumstances, the proper expenses of administration may include remuneration of the executor. There is no claim in this case by the executor for commission as that term is understood in the law of deceased estates. Nor was there any charging clause in the will of Ms Eva specifically authorising the executor to charge for his time. Rather, the executor relies upon s 98(5) of the Trustees Act. A statutory provision such as that does not give an executor carte blanche to charge. The entitlement of Mr Atherley to charge for his services was limited to charges that were usually charged by others in his profession, and that were reasonable in the circumstances. Such charges may be moderated on the passing of the executor's accounts and may be disallowed on the basis that there are wholly unwarranted, or on the basis that they are excessive: In the Will of Sir Robert Lucas-Tooth (No 2) (1932) 50 WN (NSW) 86, 87."
The passing of the executor's or administrator's accounts, involves the accounts being approved by the Court. In Re Ellis at [101], E M Heenan J citing his earlier decision of The Estate of Erminia Agnes; Rogers v Rogers [2009] WASC 358 at [33]-[40], repeated that "the court's power to require an executor (or administrator) to file and pass accounts is an important part of the court's armoury of powers to enforce the due administration of estates which may be exercised whenever and as often as the requirements of due administration dictate".
In Re Ellis at [92], his Honour wrote: "The passing of an executor's or administrator's accounts of a deceased estate is a common feature of the completion of the process of administration by any person or representative to whom a grant has been made. The passing of the accounts and the implementation of any adjustments to the administration rendered necessary by the passing of accounts, constitutes provisional approval by the court of the actions taken by the personal representative in the administration of the estate. That ratification includes the approval of the collection of the assets and, where required by the will or otherwise, their realisation by conversion into money."
In E Finnane, C Wood and N Newton, 'Equity Practice and Precedents' (2nd ed, 2019, Law Book Co) at 187, the learned authors wrote: "In this context encapsulates preparing the accounts, vouching them by attaching receipts verifying expenditure, and having the accounts reviewed and adjudicated upon by the court. The function of the court in vouching the accounts is to assess the adequacy of the evidence supporting the individual entries. If the registrar is satisfied on the vouching of the accounts, he or she will issue a certificate. The next step is the adjudication on the accounting items, after which the registrar will make an order passing accounts (that is, allowing the accounts after excessive and inappropriate items have been deleted). Legal expenses or professional fees of any significance may be moderated (that is, reviewed to ensure that they are both reasonable and incurred in relation to the estate) as part of the process of passing accounts. An executor, administrator or trustee of a deceased estate also has an obligation to file an inventory of the estate (usually in verified form) setting out the assets of the estate. If the personal representative fails to comply with his or her obligations, there is a process for obtaining an order that they file accounts (usually also that they are verified and passed)."
Thus, the function of the court on such an application is not merely to see that sums entered on the disbursements side of the accounts have, in fact, been disbursed and proper vouchers, or receipts, produced. Rather, it is one akin to that of an auditor, concerned not only with ascertaining whether alleged disbursements have in fact been made, but also with determining whether disbursements have been properly, or improperly, made, in the latter of which cases the disbursements are to be disallowed: see, for example Re the Will of WW Jenkins (1904) 4 SR (NSW) 625 (Walker J); Re the Will of Lucas-Tooth (No 1) (1931) 49 WN (NSW) 18 (Harvey CJ in Eq); The Estate of Barbara Dawn Orre; Re Estate of Instone (Supreme Court of New South Wales, 23 August 1993, Powell J, unrep).
In Ludwig v The Public Trustee (2006) 170 A Crim R 460 at 499; [2006] NSWSC 890 at [247], Campbell J (as his Honour then was) noted that: "Sometimes, but not always, administrators can be required to file, or file and pass, accounts concerning the administration: section 85 Wills Probate and Administration Act 1898. Filing and passing accounts has some consequences analogous to a release, in that it provides the opportunity to question the various dealings that the administrator has engaged in concerning the estate."
In Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247, at [112], Ward J (as her Honour then was), after referring to the conclusion of Campbell J set out above, added: "The consequences of the accounts not being passed is that the accounting party is not in a position to claim commission and that the accounting party would remain (subject to any limitations or defensive equities) open to a claim by the beneficiaries in relation to any alleged breach of duty in relation to the administration of the estate."
In the case of an order for a common account, generally speaking, a registrar, in the course of considering whether to pass accounts: 1. will compare the capital realisations, as shown in the accounts, with the assets listed in the inventory attached to the probate or letters of administration, the purpose of the comparison being to make sure that assets have been correctly collected, and in order to assess the extent to which asset collections are the collections of reinvested assets. (Commission is not allowable on the realisations of reinvested assets.) 2. will look at the income collections to make sure that income has been collected correctly. 3. will ensure that assets collected are correctly shown amongst the capital realisations, and that the income is shown correctly amongst the income collections, and not vice-versa. 4. will consider payment details in order to ensure that they have been allocated correctly between capital and income. 5. will require production of bills for legal costs, accountancy fees, and other charges for professional work, or require an explanation for its absence, to ensure that the charges for which payments have been made are appropriate and reasonable, and necessary for the benefit of the administration of the estate. 6. will seek evidence of publication of the notice of intention to pass accounts. 7. will check the distributions made to any of the beneficiaries (commission is not allowable if no distributions are made). 8. will seek confirmation of the balance held to the credit of the estate at the close of the accounts; 9. will require the production of receipts for distributions to beneficiaries. 10. will consider the objections of any objector to the proceedings to pass accounts and determine whether the objections should be allowed or be disallowed. 11. may moderate charges that are wholly unwarranted, or on the basis that they are excessive: In the Will of Lucas-Tooth (No 2) (1932) 50 WN (NSW) 86 at 87 (Harvey CJ in Eq) and allow them in full, or direct that refunds be made of amounts not considered appropriate, reasonable and necessary. 12. may review other aspects of the accounts, as filed, that she, or he considers necessary.
In this case, it is the consequence of the moderation of the six invoices for legal costs objected to that has led to these proceedings.
In Re the Will of Kerrigan, at 251-252, Jordan CJ (with whom Stephen and Street JJ agreed) explained that when moderating: "… the question really is what sum should be allowed to an executor out of the estate. In strictness, moderation is a process for determining what charges may properly be allowed to an executor against an estate. If an executor employs a solicitor, the solicitor renders him a bill of costs for any professional services and an account for any other services: In re Shilson Code &Co ([1904] 1 Ch. 837); and the executor may have the bill taxed to determine what is payable as between him and the solicitor. But it is also necessary for the executor to pass his accounts in probate in order to justify, as between himself and the estate, any payment which he may make. It does not necessarily follow that, because a bill has been taxed as between the executor and the solicitor, the amount allowed to the solicitor on taxation will be allowed to the executor as a proper outgoing on a moderation as between the executor and the estate: Brown v Burdett (40 Ch. D. 244). And, e converso, it does not follow from the fact that a bill of costs rendered by the solicitor bas been moderated as between the executor and the estate, that either the executor: In re Creagh and Williams (12 W.N. 85), or the solicitor, is bound, as between themselves, by the amount allowed on the moderation … I think that the Registrar is not bound by the taxation; but he will, no doubt, as a matter of comity, attach such weight to it as he thinks it deserves.
In Re the Estate of Instone, Powell J, after quoting the above passage added, at 27: "It does not necessarily follow that, because a bill has been taxed as between the executor and the solicitor, the amount allowed to the solicitor on taxation will be allowed to the executor as a proper outgoing on a moderation as between the executor and the estate; Brown v Burdett(40 Ch. D. 244). And, e converso, it does not follow that the fact that a bill of costs rendered by the solicitor has been moderated as between the executor and the estate that either the executor: In re Creagh and Williams (12 W.N. 85), or the solicitor, is bound, as between themselves, by the amount allowed on the moderation; although it is not unusual for both parties to accept the result of the moderation."
In Re Estate of Orre, Powell J, at 5-6, described "moderation" in the following terms: "In relation to disbursements sought to be claimed, it should be noted that, as a general rule, and subject to any provision to the contrary in his testator's Will, (see, for example, Re Smith (1916) 16 SR 422) an executor is bound to keep accounts, and attend to his duties personally - it is for this that he is allowed commission - and that, except in the situations to which I will next refer, if he chooses to employ some other person to do the work which he should have done, he must pay such person himself, and cannot seek to charge the estate with the cost (see, for example, In the Estate of Purton (1935) 53 WN 148); where, however, the nature of what was to be done was particularly onerous, or was such as to make it prudent to do so, the cost incurred by an executor in having the work done by another may be allowed (see, for example, In re Corsellis; Lawton v Elwes (1887) LR 34 Ch D 675; Macartney v Macartney [1909] VicLawRp 32; (1909) VLR 183, 191-2). … It is perhaps as well to point out, here, that, strictly, taxation involves a determination of what amount is properly payable by the executor to his solicitor, while moderation involves a determination of what amount it is proper to allow to the executor as an outgoing from the estate (see Brown v Burdett (1888) LR 40 Ch D 244, 254- 255 per Kay J.; 265 per Cotton LJ, 267 per Lindley LJ; In the Estate of Purton (supra); In the Will of Kerrigan (1935) 35 SR 242, 251) it following that the amount allowed to a solicitor on a taxation of his bill against an executor will not necessarily be allowed to the executor as a proper outgoing on a moderation against the estate. Although, strictly, moderation involves the preparation of a detailed bill of costs and a process akin to taxation (Supreme Court Rules 1970 Pt 52 r 68), in an endeavour to avoid the delay and expense involved in formal moderations, there has been instituted in the Registry a practice pursuant to which solicitors produce bills in narrative form, which bills are then informally assessed by the Registrar; the course which will need to be followed if, the Registrar's assessment is not accepted by the executor or his solicitors is a matter to which I will return later in these reasons."
His Honour also remarked at 20: "This being so … in any case in which an executor is not satisfied with such assessment by the Registrar, it would remain open to him to have his solicitors' bill of costs formally moderated." (citations omitted).
In Re Estate of Lampard (Supreme Court of New South Wales, Hodgson J, 25 July 1995, unrep) at 8, (cited by White J (as his Honour then was) in Shave v Shave, Estate of Shave at [24]), Hodgson J made the following observations as to the role of the Court in moderating a bill where the bill (for the costs of the application to pass accounts by a solicitor) had not been paid. Although, equally apt to the present constellation of facts, his Honour said, at 11-12: "I accept that, in those cases where the Court is faced with a fait accompli, in particular where the legal personal representative has already paid the costs to someone other than a solicitor who is now representing the legal representative before the Court, disallowance of amounts paid can only be on the basis that the legal personal representative has acted improperly in incurring or paying the costs. However, in my opinion, if the bill in question is from the very solicitor who is now representing the legal personal representative in having the bill moderated, and has not been paid, the Court can in effect say, to both the legal personal representative and the solicitor, that as to certain amounts the legal costs are excessive for the function that has been performed; and accordingly, unless they have been brought about by some act or omission of the personal legal representative, they are of an unreasonable amount and/or are unreasonably incurred as between the solicitor and the legal personal representative as client, and for that reason, ought not to be charged by the solicitor to the client or borne by the estate."
I also note that in Shave v Shave, Estate of Shave, at [29] (White J), it was pointed out that the registrar's function in moderating bills of costs was not to determine the amounts that the solicitors retained by the Administrators may properly charge their clients, but to determine what amounts payable by the administrators ought to be borne by the estate.
Thus, it seems that even where a bill of costs has not been the subject of assessment as between solicitor and client, the persons beneficially interested are entitled to question the amounts charged to the executor or administrator as an item of discharge: Allen v Jarvis (1869) LR 4 Ch App 616 at 620-621. That decision was based on the proposition that the Court has always had power to make executors and administrators personally liable for the costs of useless and improper litigation "even in an administration suit": affirmed in Brown v Burdett (1888) LR 40 Ch D 244 at 254 (Kay J, with whom Cotton, Lindley and Bowen LJJ agreed).
Kay J wrote in Brown v Burdett at 244-254: "Costs which a trustee may be bound to pay to his own solicitor might be very improper costs as against the trust estate. Suppose a trustee, having little or no interest in the estate, were to allow a solicitor to use his name as plaintiff in an administration action, and were to encourage or permit him to carry it on in an unusually costly manner, although he might be liable for all such costs to the solicitor so employed, it would be impossible to maintain that the Court would be bound to permit such costs to be paid even out of a trust estate from which the trustee was entitled to the usual indemnity. The rule is thus stated in Lewin on Trusts 'A trustee will have no claim to reimbursement out of the trust fund where the legal proceedings were occasioned by his own negligence in the first instance ; or were improperly instituted by himself; and a trustee will not be allowed, without question, whatever sums by way of costs he may have paid his solicitor, for the bill, as between trustee and cestui que trust, though not submitted to a regular taxation (which is between solicitor and client) will be moderated by the Court by a deduction of such charges as may appear irregular and excessive'."
The character of the obligation by the accounting party to replenish the estate is restitutionary in nature and was identified by James LJ in Re Collie; Ex parte Adamson (1878) 8 Ch D 807, at 819, as an equitable debt or liability in the nature of debt.
Once the Registrar is satisfied with the accounts, she, or he, will provide details of the total capital realisations, the total income collections and the total value of assets transferred in specie and will then request the provision of a draft certificate of correctness of accounts. If that is in order, the Registrar will issue the certificate of correctness. The figures in the certificate become the figures for determination of commission, and the assessment of costs for the preparation and filing of the accounts and of any application for commission.

The UCPR

As stated, the Administrators relied upon UCPR r 42.5(a). There is more than enough authority to enable me to reject the submission made on their behalf on the topic.
In Brown v Grosfeld [2011] NSWSC 1429, White J (as his Honour then was) wrote, at [29] and [31]: "An executor is entitled to his costs on the indemnity basis, being all costs incurred other than those incurred in breach of his duty in that capacity (Uniform Civil Procedure Rules, r 42.5) … … An order that the executor's costs be paid out of the estate on the indemnity basis does not preclude the beneficiaries from contending on the passing of an executor's accounts that an expense for legal costs should not be recoverable from the estate because it was not properly incurred. An assessment of costs as between solicitor and executor is not the same as the moderation of costs to be allowed out of the estate. The executor might make himself liable to the solicitor for costs that he is responsible for incurring, yet be disallowed those costs out of the estate. An order that the executor's costs be assessed on the indemnity basis does not affect that principle (see In the Estate of Lampard (Supreme Court of New South Wales, Hodgson J, 25 July 1995, unreported; BC9505168); Shave v Shave [2011] NSWSC 1356 at [24]-[27], [29])."
In Shave v Shave; Estate of Shave, White J had written at [29]: "Of course, the Registrar's function in moderating the bills in question is not to determine the amounts which the solicitors retained by each executor may properly charge their clients, but to determine what amounts payable by the executors ought to be borne by the estate. It seems that only some of the bills in question have been assessed by a costs assessor. However, as Hodgson J explained in Estate of Lampard in the passage quoted above, it will be open to the Registrar on a moderation of the bills that have not been assessed by a costs assessor, to consider whether any of the amounts claimed were of an unreasonable amount or unreasonably incurred as between solicitor and client, as a step in determining what amounts ought properly to be charged to the estate."
In In the Estate of Margaret, deceased [2012] NSWSC 1490, White J, again, referred to the rule, stating at [58]: "… An indemnity order for costs entitles the executors to all costs other than any that have been incurred in breach of their duty as executors (Uniform Civil Procedure Rules 2005 (NSW), r 42.5(a)). Such costs are determined as between solicitor and client. Whether the executors may be required to reimburse the estate in respect of any part of such costs would be determined on a moderation by the Registrar on an application to pass the executors' accounts if there is a dispute. An order that the executors' costs be paid on the indemnity basis out of the estate does not affect the rights of the beneficiaries to seek a moderation of the executors' accounts."
Although his Honour referred to "executors", the principle stated applies equally to administrators.

Conclusion

Upon consideration of the application for review of the Registrar's determination, I have considered the application afresh; the Registrar's determination; her reasons for the decision; the evidentiary material placed before the Court by the parties on the review application; and the parties' written and oral submissions.
Having limited the Administrators' position to the proposition that the Registrar did not have power to moderate the costs of their solicitors because of the terms of r 42.5(a) of the UCPR, a submission which, on the authorities should not be accepted, it is unnecessary to further review the Registrar's decision.
The moderation does not affect the costs arrangements between the solicitors and the Administrators. As stated, what is determined is the amount that should be recovered by the Administrators from the estate.
Even though the Registrar in undertaking moderation does not conduct a costs assessment, she, or he, does consider whether or not the costs and disbursements are reasonable, necessary, and proper, in all the circumstances. There is no longer any suggestion to the contrary.
In my view, the Registrar was fully justified and acting entirely in accordance with authorities to moderate the costs and disbursements of the Administrators' solicitors, in circumstances where an order for indemnity costs had been made. In the circumstances, the notice of motion filed on 26 June 2020, must be dismissed.
The orders made by the learned Senior Deputy Registrar will stand and when the amount has been repaid to the estate the estate accounts will be passed as she ordered. I shall extend the time for the Administrators to 14 days from the date of publishing these reasons.
No claim was made by Mr Freeman for interest on the amount that was paid out of the estate by the Administrators.
In this case, the solicitors have stated to the Court that they will refund to the Administrators the amount determined by the Registrar: Tcpt, 25 September 2020, p 7(31-42). In the circumstances, that is an appropriate course to follow. It will then be for the Administrators to distribute the amount received to Mr Freeman and to Ms Berntsson (subject to what costs orders are made).

Costs of the notice of motion

During the course of the hearing, I suggested to the legal representatives that they endeavour to reach agreement on the question of costs whatever the result of the proceedings. This they were unable to do.
However, following the conclusion of the hearing, the Court received an email from each of the legal representatives of the parties, dated 18 September 2020. In her email to the Court, Ms Golovina indicated that in the event the notice of motion were to be dismissed, the second Respondent would seek a gross sum costs order, in support of which an affidavit and outline of submissions would be filed.
Later the same day, the Administrators' solicitors (copied to Mr Freeman's solicitor) sent an email to the Court noting: "It is in our view, appropriate for any costs order in respect of a dismissal of the Motion to be made against the plaintiffs, as opposed to Piper Alderman, on the basis that the plaintiffs are the relevant parties to the proceedings, notwithstanding that Piper Alderman has reached an agreement with the plaintiffs pursuant to which Piper Alderman will indemnify the plaintiffs in respect of any amount to be refunded to the Estate including in respect of any costs order, as confirmed by our clients' Counsel at the hearing of the Motion. We have sought to confer with the solicitor for the second defendant in respect of any gross sum costs order that could be made upon the dismissal of the Motion. Although we have on three separate occasions asked the solicitor for the second defendant for a breakdown of the costs and disbursements that have been incurred by the second defendant nor the composition of those costs has been disclosed to us. We have also written to the second defendant's solicitor to seek her consent to order being made to dismiss the Motion and which either provided the parties with a further period of time to confer in respect of the gross sum costs order or, failing that, that an order be made to require our client's to pay the second defendant's costs of the Motion as agreed or assessed. The proposed course was not consented to by the second defendant. In the circumstances, it would seem that any further conferral between the parties is unlikely to result in an agreement as to the amount of any gross sum costs order to be made. Accordingly, the plaintiffs respectfully seek that orders be made which: 1. dismiss the Motion; and 2. require the plaintiffs to pay the second defendant's costs of the Motion, such costs to be as agreed or assessed … "
In the circumstances, the Court: 1. Orders that the notice of motion filed on 26 June 2020 be dismissed. 2. Orders that the Administrators pay the second Respondent's costs of the notice of motion. 3. Orders in the event that the second Respondent seeks a specified gross sum, instead of assessed costs, the evidence in support of the application, together with any submissions, be served within 7 days of the date of the making of these orders. 4. Directs that the Administrators serve any evidence in opposition to the application for a specified gross sum, together with any submissions, within 7 days thereafter. 5. Orders that the issue of costs be determined in Chambers on the papers.

Addendum

By way of addendum, I should say that these reasons are more extensive than they may have needed to be. The controversies which arose prior to, and at, the hearing of these proceedings, which went to the procedure to be followed on the filing and passing of accounts, the law relating to the basis upon which accounts are taken, and the manner of dealing with objections, all raise important questions of law and practice. The experience of other Judges, and my own experience, over many years, and more recently in the Succession List, as well as the experience of Registrars, evidenced by the number of requisitions that are often required to be sent (as appearing in Court files), suggests that many practitioners are not familiar with the principles and practices that have been canvassed by these reasons. I can only hope that these reasons provide a greater understanding of the way in which the system of filing and passing accounts operates.

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: 25 September 2020

Succession Act 2005(NSW)

(Uniform Civil Procedure Rules 2005(NSW)

(2009) 168 LGERA 260

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