New South Wales Supreme Court CITATION : Watters Re Estate of Dibbs [2006] NSWSC 1277 HEARING DATE(S) : 27 November 2006 JUDGMENT DATE : 28 November 2006 JURISDICTION : Equity Division Probate List JUDGMENT OF : Windeyer J at 1 DECISION : Decision of Deputy Registar varied CATCHWORDS : WILLS PROBATE AND ADMINISTRATION - executors commission - review of decision of Deputy Registrar for lump sum commission - and disallowing commission on transferred assets as one of two executors a transferee of those assets - whether commission should be by way of percentage or lump sum - whether commission should be ordered on transferred assets - whether commission could be apportioned to particular executors LEGISLATION CITED : Wills Probate and Administration Act 1898 s86 Langevad v Langevad, Estate of Langevad (unreported NSWSC PD Hodgson J 14 March 1997). Perpetual Trustee (Company) Limited & anor v Jefferson (1939) 56 WN (NSW) 18 CASES CITED : Re Adams (1905) 24 NZLR 892 Re Edmondson (1907) 26 NZLR 1404 Spence v Spence [2003] NSWSC 1232 Will of Holmes (1889) 15 VLR 734, PARTIES : Donald Campbell Watters (Plaintiff) FILE NUMBER(S) : SC 104601 of 2005 COUNSEL : Mr J E Armfield (Plaintiff) SOLICITORS : Fox & Staniland Lawyers LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : 104601/05 LOWER COURT JUDICIAL OFFICER : Deputy Registrar Siva LOWER COURT DATE OF DECISION : 2 August 2006 - 9 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROBATE LIST WINDEYER J TUESDAY 28 NOVEMBER 2006 102987/04 DONALD CAMPBELL WALTERS RE THE ESTATE OF JOHN LEWIS DIBBS JUDGMENT 1 This is an application for review of an order of Deputy Registrar Siva allowing commission to two out of three executors of the will of John Lewis Dibbs who died on 27 November 2003. The accounts in respect of which commission was allowed covered the period from 27 November 2003 to 1 March 2005. 2 By his will the deceased appointed Dr Lyndall Joan Dawson, Dr Russell John Fountain and Donald Campbell Watters as executors. They are respectively a niece, nephew and accountant of the deceased. 3 The relevant provisions of the will and the codicil thereto of the deceased were as follows: A. A gift of property 2/10 East Crescent Street, McMahons Point and its contents and any motor vehicle to Dr Dawson and Dr Fountain in equal shares. B. Legacies of $30,000 (indexed) to each of the two doctors and to each of five great nieces and great nephews. C Legacies of $10,000 (indexed) to three charities. D. An indexed annuity of $24,000 to Richard Clarke (given by the codicil). E. The residue to three named charities. 4 The McMahons Point property had an estimated value of $800,000 and the rest of the specifically devised property, including the car, $22,000. The balance of the estate consisted of bank accounts totalling about $126,000 and shares, units and tax credits of about $2,378,000. 5 The codicil which provided the annuity to Mr Clarke also gave power to the executors to appropriate a fund sufficient in their opinion to meet the annuity from income and gave an alternative power to the executors to purchase an annuity. 6 The accounts were passed as correct on 28 June 2006 and certified for the accounts period capital realisations of $2,229,520, transferred assets of $822,000 and income collections of $282,363. The learned Deputy Registrar allowed commission to Dr Dawson and Mr Watters of $25,000 in a lump sum. Dr Fountain did not seek commission. 7 The Deputy Registrar provided reasons for her decision which are dated 2 August 2006 but were clearly not given on that date as according to the file 2 August was the date when the application for commission was heard. It is clear that the reasons were given at a later date after this application for variation was made. That is in accordance with the approved practice in these matters. The reasons to some extent operate as a report to the judge. 8 The amended notice of motion for review sets out three grounds relied upon as follows: 1. The Registrar erred by underestimating the complexity of the task involved in creating the annuity payable to Richard Allen Clarke and failed to give sufficient weight to the amount of time devoted to that work. 2. The Registrar erred in failing to allow commission in respect of assets transferred in specie and incorrectly relied upon the practice of the Court to disallow commission on assets transferred to an executor in that the Registrar failed to appreciate that that practice is not inflexible and that it is inappropriate to apply where there are a number of executors one of them does not receive a benefit from the assets transferred. 3. The Registrar erred in failing to Order that the [sic] second set of accounts should be passed in that since the first set of accounts there have been a further $591,283 of assets realized. 9 I will dispose of ground 3 first ungrammatical and badly worded as it is. It was the practice years ago when an application for commission was made and it was obvious that there would be further accounts for an order to be made giving a further time – say one or more years – in which to file the next accounts. That is no longer the practice or the invariable practice. The failure to make such an order does not prevent further accounts from being filed. In the present case it can be expected that further accounts would be filed and a further application for commission made as the annuitant, Mr Clarke, died on 10 June 2005. By now substantial distributions to the residuary beneficiaries ought to have been made. The fact of the death of the annuitant was not in evidence before the Deputy Registrar and is stated in an affidavit sworn by Mr Watters yesterday. This ground fails 10 In addition to the evidence before the Deputy Registrar there was read on the hearing before me another affidavit of Mr Watters sworn on 29 August 2006 in effect challenging the lump sum order and seeking percentage commissions as set out in paragraph 22 of that affidavit which is as follows: 22. Given my experience, time, effort and liability risk taken, commission based on 2% of capital receipts, 1% of assets transferred in specie and 4% of income would be more appropriate than a flat fee being split between executors. 11 This of course is not evidence and I disregard it. In addition that affidavit set out additional details of the work done in determining the appropriate amount of a fund to cover the annuity, and the decision to set up this fund rather than to purchase an annuity. While I allowed this in it is in my opinion quite inappropriate to ask for a review of a decision, which decision must be based on the evidence available at the time, on the basis of further evidence also then available but not adduced. It is not fresh evidence but additional evidence. In any event the Deputy Registrar had this to say about the annuity: I took into account that that annuity in the codicil would have caused the executors extra work. Little is made of it in the affidavits in support of commission but I thought that it would involve a fair amount of investigation and consideration of investment strategies, tax implications, the likely duration of the annuity, expenses of the investment, returns and amount to be set aside. I also took into account that the provision in the codicil that all pecuniary legacies be indexed to the CPI would have required additional care and consideration. Overall, the executors carried out a prompt, diligent and efficient administration of the estate. 12 It is now appropriate to deal with ground 2. No commission was allowed in the lump sum for the assets transferred in specie. The reason given by the Deputy Registrar for this appears in the following paragraph: I did not allow commission on the assets transferred in specie. It is not the practice of the court to allow commission on transfer of assets to an executor: Geddes et al 589 (footnote 98), Langevad v Langevad, Estate of Langevad (unreported NSWSC PD Hodgson J 14 March 1997). No doubt the basis of the practice is that an executor is not entitled to profit from work done to benefit himself. Since commission is allowed to executors as a body and is not apportioned between them the practice applies also to assets transferred in specie to one of a number of executors who have applied for commission. 13 I do not consider that the case of Langevad or the case of Perpetual Trustee (Company) Limited & anor v Jefferson (1939) 56 WN (NSW) 18 bears on this matter. So far as Mr Watters is concerned this is not a case of an executor transferring to himself as beneficiary under the terms of the will, as in Langevad nor in the terms of Jefferson is it the case of an executor transferring to himself and another as court appointed trustees of the will. Had Dr Dawson not sought commission then there can be no doubt that Mr Watters would have been entitled to commission on the value of the transferred assets, the substantial asset transferred being of course the McMahons Point unit. It would be quite illogical and I think quite unfair to make no allowance for the work of Mr Watters in the transfer of that asset, just because his co-executor would benefit from the transfer of that asset. While it is true that the court does not appropriate or apportion shares in commission to particular executors Will of Holmes (1889) 15 VLR 734, Re Adams (1905) 24 NZLR 892, Re Edmondson (1907) 26 NZLR 1404, that, in my view, does not mean that an appropriate amount should not be allowed for the work of Mr Watters in respect of the transfer of the assets transferred in specie. So far as working the matters out between himself and Dr Dawson one assumes that sense would prevail but in any event it seems to me to give good reason first to order a percentage amount for transferred assets and second, to award that particular amount to Mr Watters alone having regard to his particular work in connection with that transfer. I consider this can be done and that the general principles about non-apportioning need not apply to the special circumstances here. 14 There was no evidence of work required on or for any of the transferred assets but I assume that some document must have been signed for the motor car but not for any of the other assets apart from the home unit in respect of which there would either have had to be either a transmission to the executors and transfer to the beneficiaries or a transmission to the beneficiaries as devisees with the consent of the executors. Very little in the way of pains and trouble would have been required for any of this and I think the appropriate rate of commission to be allowed for this would be 0.25%. It would I suppose be possible to translate that into a lump sum and order that it be paid to Mr Watters alone but having regard to what I will say on ground 1 I think that would be undesirable. In coming to the 0.25% rate it has to be remembered that the assets the subject of the devise have to be identified, valued and transferred. 15 I come now to the first ground. The Deputy Registrar appeared to give two grounds for deciding to award a lump sum rather than a percentage. The first of these was that while the value of the assets was considerable there was nothing complicated about them and all the shareholdings appear to have been sold at the same time. That does not mean however that attention was not given as to the question of whether that was appropriate. The second reason that appears to have been given, although in an indeterminate way, was that I had decided in the case of Spence v Spence [2003] NSWSC 1232 that a lump sum commission was appropriate at the time of final accounts or where there would be only one set of accounts for the reasons which I set out in that decision. I adhere to the view which I there expressed. If the lump sum was ordered on the basis there would be no further accounts then there was an error of fact. 16 What is to be considered is the work done by the executors and what is a reasonable allowance for that work. It is not to be determined by rates of pay based on hourly rates for professional persons with large administrative offices to support. Neither, for that matter, is it to be determined by looking at hourly rates of pay of Registrars in this Court as was mentioned in the decision under review. It is true that values of assets, particularly real estate, and to some extent shares, have increased considerably over the past 20 or 30 years, but the value of money has decreased. Where the major asset in an estate is a home, sold for $2 million, commission of 2% on its realized value may be seen to be too high a figure for the executorial work done in bringing about the sale. It depends upon the facts of particular case. The value to the estate of an executors work may to some extent be reflected in the price obtained for an asset. It is not possible to lay down any particular rule and I would not wish to be seen to be attempting to do so. The Registrar said that if he were fixing commission by percentage he would have applied a rate of 0.75% to capital realisations and 3% to income. As I have come to the conclusion the decision should be reviewed and varied and an allowance made for the transferred assets I must determine myself what commission should be ordered. 17 As I consider further accounts are certain to be filed, and as pursuant to my decision in Spence I think that generally speaking where there are continuing accounts percentage awards are preferable to lump sums, I propose to order percentage allowances. I have come to the conclusion that commission of 0.75% of capital realisations is not sufficient, particularly bearing in mind the work which was required to done for the annuity and on the indexed pensions, both of which I accept were mentioned by the Deputy Registrar. I consider that commission should be allowed at 1% on capital realisations, 0.25% on transferred assets and 3% on income collections. So far as transferred assets are concerned I can see no reason why an order should not be made that the commission on the transferred assets go solely to Mr Watters and I propose to make that order. 18 So far as costs are concerned, as Mr Watters was really the sole applicant, I do not think indemnity costs should be ordered. To some extent his interests were adverse to the estate. 19 The orders are therefore as follows: 1. Order that Order 2 of the orders made on 2 August 2006 entered on 13 September 2006 be varied as follows: Order 2 be revoked and in lieu thereof the following order be substituted: 2(a). The executors Donald Campbell Watters and Lyndall Joan Dawson be allowed commission at the rate of 1% on capital realisations and 3% on income collections. 2(b) That the executor Donald Campbell Watters be allowed commission at the rate of 0.25% on transferred assets. 2. The costs of the applicant of the amended notice of motion be paid out of the estate of the deceased. ********** 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. 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