New South Wales Supreme Court CITATION : Hawkins v Barkley-Brown & Anor [No 2] [2010] NSWSC 395 HEARING DATE(S) : 8 April 2010 JUDGMENT DATE : 4 May 2010 JURISDICTION : Equity JUDGMENT OF : Slattery J at 1 1. Order that the orders made by registrar Haggett on 15 April 2009 be and are hereby confirmed, namely, a. The first accounts of John Hawkins and Vicki Barkley-Brown, the Executors of the Will of Rhoda Brenda Farrell covering the period 17th December 2005 to 1 August 2007 be passed. b. The Executor John Hawkins be allowed Commission at the rate of:- -1% on the sum of $5,028,463 representing capital realisations -2% on the sum $445,101 representing income collected and - 0.5% on the sum $485,000 representing assets transferred in specie DECISION : c. The Costs of and incidental to the filing and passing of the said accounts and of the application before the registrar be assessed at the sum of $3,250 plus fees 2. Order that interest accrue on the sum of $64,861.65 (representing the sum of $61,611.65 for commission and $3,250.00 for costs as allowed by registrar Haggett) at the rates prescribed on judgments pursuant to s 101 Civil Procedure Act 2005 computed on and from 15 April 2009 to the date of payment and calculated on daily rests. 3. Order that any interest payable pursuant to order 2 be paid out of the Estate of Rhoda Brenda Farrell ('the deceased"). 4. Order that the notice of motion filed 13 May 2009 be and is hereby dismissed. 5. Order that the applicant Vicki Barkley-Brown pay the costs of the respondent John Hawkins of the said notice of motion on the party/party basis and further that the respondent otherwise be indemnified in respect of her costs of the said notice of motion out of the Estate of Rhoda Brenda Farrell. 6. Order that without prejudice to any other rights that the respondent may have to recover the costs payable pursuant to order 5 he may deduct those costs as agreed or assessed from the applicant's interest in the deceased's estate. 7. Order that the applicant do all things and execute all documents necessary or convenient to enable the respondent to give effect to order 6 and the orders for payment to the respondent of commission out of the deceased's estate. 8. Liberty is granted to either party to restore the matter on 3 days notice for further orders or directions for the implementation or working out of these orders. CATCHWORDS : PROCEDURE - costs - review of registrar's decision to award commission to plaintiff/executor - first defendant's motion for review failed - costs should follow the event - not an appropriate case for the award of costs on an indemnity basis against first defendant - conduct not deliberately delinquent - to the extent that plaintiff's costs are not recovered on a party/party basis from first defendant he should be indemnified from the estate - no costs order made in favour of the first defendant - interest to accrue on the commission awarded from the time of the registrar's orders on 15 April 2009 - plaintiff entitled to deduct from any estate distributions to first defendant the amount of any assessed costs award in favour of the estate - unfairness if first defendant's late application for commission allowed to proceed LEGISLATION CITED : Civil Procedure Act 2005 (NSW) ss 98, 101 Supreme Court Rules 1970 (NSW) Part 78, r 76 (1) CATEGORY : Consequential orders Dodson v Sandhurst & Northern District Trustees Executors & Agency Co Ltd [1955] VLR 100 Hallett v Hallett (1879) 13 Ch D 232 Harrison v Schipp [2001] NSWCA 13 Hawkins v Barkley-Brown & Anor (2010) NSWSC 48 In Re Bowman's Settlement (1929) SASR 1 CASES CITED : In the Will of James Brown (1875) 1 VLR 41 Oshlack v Richmond River Council (1998) 193 CLR 72 Re Akerman (1891) 3 Ch 212 Re Edmondson (1907) 26 NZLR 1404 Re Estate of Ghidella [2005] QSC 106 Re Weston (1900) 2 Ch 164 TEXTS CITED : E S Vance, Executors Commission (1969), Law Book Company of Australia Pty Ltd J D Heydon, M J Leeming, Jacobs' Law of Trusts in Australia (2006) LexisNexis Butterworths Plaintiff/Respondent: John Hawkins PARTIES : First Defendant/Applicant: Vicki Barkley-Brown Second Defendant: Geoff Allars FILE NUMBER(S) : SC 115433/2007 COUNSEL : Plaintiff/Respondent: Mr J E Armfield Defendants/Applicant: Ms E M Picker SOLICITORS : Plaintiff/Respondent: John Fisicaro & Co Defendants/Applicant: Peter Dawson & Associates IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SLATTERY J TUESDAY 4 MAY 2010 115433/2007 JOHN HAWKINS v VICKI BARKLEY-BROWN & GEOFF ALLARS [No 2] JUDGMENT 1 HIS HONOUR: On 8 February 2010 the Court gave judgment on this application, which relates to executor's commission on the passing of first accounts for the estate of the late Rhonda Brenda Farrell: Hawkins v Barkley-Brown & Anor (2010) NSWSC 48. In that principal judgment the Court allowed a review of the registrar's decision granting one of the executors, Mr John Hawkins commission of 1% on capital, 2% on income and 0.5% on assets transferred in specie. In the re-exercise of the applicable discretion on review the Court came to the same conclusion as the registrar about the proper award of commission to Mr. Hawkins. 2 Mr Hawkins is the plaintiff on the summons seeking an award of executor's commission but the respondent to the motion for review of the registrar's decision. Mr Armfield appears on this application for Mr Hawkins. Ms Picker appears for Ms Barkley-Brown. Issues 3 There are three groups of issues for determination in this judgment. They are first whether a costs order should be made in Mr. Hawkins' favour and if so on what basis and what order should be made in respect of Ms Barkley-Brown's costs; secondly aspects of the form of orders to be made and thirdly whether Ms Barkley-Brown herself may now claim commission against the estate. These issues are dealt with in this order. Costs Mr Hawkins' Costs 4 As the Court reached the same conclusion as the registrar and Mr Hawkins was successful, he submits that costs should follow the event: Civil Procedure Act 2005 (NSW) s 98. Ms Barkley-Brown's motion failed and Mr Hawkins submits that in accordance with principle, that should result in a costs order against her. He says that the costs of his successful motion should not come out of the estate. 5 Mr Hawkins also seeks his costs on an indemnity basis. There are several grounds for his submission. First, he submits that as the award of commission represents Mr. Hawkins' compensation for his "pains and troubles", it is inappropriate that this amount should be reduced by the solicitor-client component of the costs of the review. Secondly, he submits that with full knowledge of Mr. Hawkins' application for commission, and having consented to the application being referred to the registrar, Ms Barkley-Brown stood by for approximately 18 months without filing a notice of objection whilst the application for passing accounts and commission was heard and determined by the registrar. Mr. Hawkins says that the present application is brought about by Ms Barkley-Brown's failure to participate in the proceedings before the registrar. Thirdly, Mr. Hawkins says that that as executor he is entitled to indemnity costs for matters relating to estate administration; the present proceedings relate to estate administration; he should have costs on the indemnity basis. 6 The first issue in relation to Mr Hawkins' costs is whether they should come out of the estate or be awarded against Ms Barkley-Brown. On an executor's initial application for commission before the registrar the normal order in relation to the costs of the application is that they should come out of the estate as costs of the administration, as for example, was ordered in Re Estate of Ghidella [2005] QSC 106: see also E S Vance, Executors Commission (1969), Law Book Company of Australia Pty Ltd at Article 26, p51. In the present case an allowance was made in the registrar's orders for the executor's costs for pursuing the claim for commission in the sum of $3,250. If the executor were to appeal from the decision of the registrar and were successfully to have his commission increased then the cost of the appeal would also be a proper cost of the administration. 7 This case is different because a party other than the executor has brought the review and has been unsuccessful. In those circumstances Mr Armfield submits that costs should follow the event and the losing party should pay. 8 I agree with Mr Armfield's submissions. I am not persuaded by Ms Picker's submissions that the estate should pay the costs of both parties to this application. 9 Ms Barkley-Brown did not have to pursue her motion for review. She chose to do so and she has been unsuccessful. She says she was denied procedural fairness at the registrar's hearing. But she had the choice not to pursue a review and could thereby have avoided the estate incurring further costs beyond the registrar's hearing. The review has not altered the commission payable to Mr Hawkins. Her actions have caused this extra expense and she should bear it in the ordinary way. Costs should follow the event. The Claim for Indemnity Costs 10 This is not an appropriate case for the award of costs on an indemnity basis against Ms Barkley-Brown. Even if one accepts the validity of Mr Armfield's criticism that it was Ms Barkley-Brown's fault in standing by and doing nothing about the registrar's proceedings that led to these review proceedings, her conduct was not so delinquent as to constitute relevant misconduct warranting an order for indemnity costs being made against her: Oshlack v Richmond River Council (1998) 193 CLR 72 and Harrison v Schipp [2001] NSWCA 13. She was involved in other substantial and distracting litigation at the time. The evidence does not warrant a finding that her conduct in not acting during the registrar's hearing was a deliberate tactical course of action on her part. 11 Although an indemnity costs order should not be made against Ms Barkley-Brown, Mr Hawkins should not be out of pocket for his costs of the review of the registrar's decision before me. To the extent that his costs are not recovered on a party/party basis from Mrs Barkley-Brown he should be indemnified in respect of those costs from the estate. The orders will provide for this. Ms Barkley-Brown's Costs 12 Ms Barkley-Brown herself seeks costs out of the estate. She says that really she has been acting properly as an executor rather than as a beneficiary in questioning the decision of the registrar and that now her actions have resulted in the Court giving fuller reasons for the decision to award commission that has been made. It is difficult to accept the analogy of her role in these proceedings as being a role in the nature of an executor. She has not claimed commission. Her sole role in pursuing a review of the registrar's decision has been to argue for a reduction in one executor's commission apparently in the interests of herself and other beneficiaries. Further, her pursuit of an application which merely had the result of producing fuller reasons for the same decision does not seen an adequate basis for awarding Ms Barkley-Brown costs out of the estate. 13 There is no identified basis on which Ms Barkley-Brown should have her costs paid out of the estate. Accordingly I decline to order any costs order in Ms Barkley-Brown's favour of the kind requested. The Form of Orders Interest 14 Mr. Hawkins submits that interest should accrue on the commission as and from the date that the registrar made the order. To avoid further disputes he submits that the order should specifically provide that interest accrues as and from that date. 15 An order for interest of the kind requested is appropriate. Ms Picker does not contest his claim for interest. Given the contentious nature of these proceedings it is better that the final orders clearly spell out the entitlement to interest. 16 Mr. Hawkins was entitled to his commission from the time of the registrar's orders on 15 April 2009. Despite Mr. Hawkins' entitlement he did not receive commission. The estate has had the benefit of the commission on which it has been able to an interest. Interest will be provided for in the orders from that date, namely 15 April 2009. Interest will accrue from that date at the rate provided for in the Civil Procedure Act 2005 [NSW] s101. Set Off 17 Further Mr Hawkins says that he is entitled to deduct the quantum of any order for costs in his favour from Ms Barkley-Brown's beneficial entitlement to a distribution from the estate. He says that it is inappropriate for Ms Barkley-Brown to receive her entitlement from the estate as a beneficiary without first paying the costs of this unsuccessful review. 18 The rights of set off between an estate and beneficiary in these circumstances are clear. If a beneficiary owes money to the trustees, as such, the trustees have a right to retain trust property, whether capital or income coming to such beneficiary: Re Weston (1900) 2 Ch 164 and Dodson v Sandhurst & Northern District Trustees Executors & Agency Co Ltd [1955] VLR 100 and J D Heydon, M J Leeming, Jacobs' Law of Trusts in Australia (2006) LexisNexis Butterworths at [211]. The rule is otherwise if the property in the hands of the trustees is not in their hands as such trustees: Hallett v Hallett (1879) 13 Ch D 232. The rationale for this right of retainer is that a person who owes an estate money and is thereby bound to increase the general mass of the estate by a contribution of his own cannot claim an aliquot share of the estate given to him out of that mass without first making the contribution which completes it: Re Akerman (1891) 3 Ch 212, at 219 per Kekewich J. 19 This rule is applicable here. Mr Hawkins is entitled to deduct from any estate distributions to Ms Barkley-Brown the amount of any costs award in favour of the estate on this judgment. Mr Hawkins is not entitled to deduct any quantification of his costs that he chooses to advance. Rather, the costs that may be so deducted would be his assessed costs or if the costs are not assessed, then his agreed costs. The orders below reflect this. Ms Barkley-Brown's claim for commission 20 Ms Barkley-Brown now seeks commission in the same amount that the Court awarded commission to Mr Hawkins. Her application for commission was made orally in the course of the argument on 9 April 2009. No notice of her claim for commission was made before the registrar. 21 After the Court judgment was delivered on 8 February 2010, Ms Barkley-Brown gave notice of her application for commission to the solicitors for the estate by sending a letter on 2 March 2010. No motion formally claiming commission on her behalf was filed. 22 When the matter was argued in September 2009 Ms Barkley-Brown expressly disclaimed any intention to make a claim for commission. The Court specifically asked her when she was in the witness box whether she wished to claim commission. 23 Her answers to the Court's questions are instructive. After Ms Barkley-Brown gave an account of the work that Mr Hawkins had actually done as executor, she said the following [T59/36-T60/1] Q. And you and he have done that work together have you not? A. Yes. Q. Are you going to apply for commission? A. No I don't feel I have to apply for commission, no. Q. One difference between you is you received 40 percent of an estate of how much is it, eight million dollars? A. Eight and a bit million. Q. Whereas he is not a beneficiary? A. No he is not. Q. Is that why are you not applying for commission? A. That's correct. 24 The Court was left with the impression that she was not claiming commission. This is the basis on which the Court determined the application. This has important consequences for Ms. Barkley-Brown's attempt now to claim commission. 25 Mr Hawkins submits that Ms Barkley-Brown should not be allowed commission because commission is ordered to executors as a body. That award has been made after he alone made a commission application for the period in question. The plaintiff notified his co-executor Ms Barkley-Brown of the application but she did not join in the application. The plaintiff says that in the circumstances that Ms Barkley-Brown is now precluded from obtaining commission for the period covered by the first accounts. Mr. Hawkins also says that there is no formal application by Ms Barkley-Brown for commission before the Court and that the oral application was not advertised in accordance with Part 78, r 76 (1) Supreme Court Rules 1970 (NSW). He says that there is nothing for the Court to determine in relation to Ms Barkley-Brown's commission. 26 Mr Hawkins' point that there is no formal application for commission before the Court and no advertising of that application can be put to one side. The Court prefers to deal with the substance of the matter rather than deciding it upon whether or not there is a motion before the Court or whether the application has been advertised. Ms Picker moved orally after her instructing solicitors gave notice by letter on 2 March 2010. Mr Armfield has been able to deal with the motion in the course of his submissions. Ms Picker has undertaken that if a formal written motion is required that it can be filed within seven days. Were I minded to allow this application to proceed Ms Picker's undertaking could be taken up. Directions to notify the other beneficiaries could be given to overcome any lack of advertising. For other reasons, however, Ms Barkley-Brown's application for commission fails. 27 Ms Barkley-Brown's application for commission comes too late. Her application cannot now be entertained without potentially creating unfairness either to the estate or to Mr Hawkins. 28 The unfairness that would arise from acceding to Ms Barkley-Brown's application made after my principal judgment on 8 February 2010 arises because of an important principle applicable to applications for executor's commission. Courts award commission as a total sum, to the body of executors, leaving it to be divided as they may privately agree: E S Vance, Executors Commission (1969), Law Book Company of Australia Pty Ltd at Article 9, p 15. Where only one of several executors applies for commission and the other executors refuse to apply the Court has no power to grant commission to the other executors, but only to the "executors generally", the Court taking the view that it should be left to the executors to apportion amongst themselves the amount so granted: Re Edmondson (1907) 26 NZLR 1404. Where only one of two executors is claiming, Courts have "narrowed the allowance" so as to allow commission to one of several executors without having to engage in an apportionment among them: In the Will of James Brown (1875) 1 VLR 41. If one executor has waived commission, adjustments can be made to the amount ordered to determine a just and reasonable allowance for the executor who is claiming: In Re Bowman's Settlement (1929) SASR 1. Procedurally in some jurisdictions, the course is taken of having a non-claiming executor consent to the award of commission to a claiming executor on the undertaking of the non-claiming executor that he will not later apply for commission. 29 No formal undertaking was sought in the present case. This is not surprising given Ms Barkley-Brown's unequivocal evidence on the subject. She acknowledged that she was not seeking commission because of her substantial interest as a beneficiary. This was a fixed state of affairs. Unsurprisingly Mr Armfield did not seek an undertaking that she would not claim commission in respect of the same accounting period. It appeared to be unnecessary. 30 That had the consequence that the Court proceeded on the basis that commission would be determined for the executors for this period with a sole claim from Mr Hawkins. 31 If the Court were now to proceed to entertain Ms Barkley-Brown's application for commission, it would have to proceed as though both executors were applying for commission and seeking for one amount to be awarded and apportioned between them. This would produce unfairness at several levels. 32 The estate has incurred one set of costs in relation to the contested claim for executor's commission. Without good reason being shown the estate should not have to bear the costs of a second application which could have been made at the same time as the first application but was not so taken. Dealing with Ms Barkley-Brown's claim for commission will inevitably lead to incurring more costs. For example her claim would have to be formalised by motion and dealt with by the estate's solicitors. Then the apportionment between the executors of any commission awarded would have to be negotiated. 33 Moreover, were her claim allowed to proceed the estate would be exposed to the potential for an increased burden of commission. Both executors would undoubtedly put to the Court that there should be an order to allow enough commission to provide for a fair apportionment between them so that Mr Hawkins receives no less than he has under the Court's principal judgment. This could be seen as rather like a "widening" of commission, somewhat in the nature of the reverse of what happened In the Will of James Brown (1875) 1 VLR 41. I do not see why the estate should have to bear this risk now. 34 Further there is the potential for unfairness to Mr Hawkins. He already has a determination in his favour as a result of contested proceedings in September last year for an award of commission in his favour. A re-opening of the award of commission risks the outcome that even if the total amount of commission is increased, that upon apportionment of that commission Mr Hawkins will receive less than the amount to which he is now entitled. To resist such a possible outcome would involve Mr Hawkins in re-arguing the substance of case that was argued in September last year. Such a result should not be permitted. Ms Barkley-Brown had her opportunity to have her case argued on the basis that she was claiming commission and she declined to advance it on that basis. She should now be bound by the way that she conducted the case last year. 35 There is nothing to prevent Ms Barkley-Brown making a claim for commission in respect of future accounting periods. Conclusion and Orders 36 In the result therefore I will award costs against Ms Barkley-Brown but not on the indemnity basis and I decline to allow her claim for commission in respect of the period of first accounts to proceed. The Court will therefore make the following orders. 1. Order that the orders made by registrar Haggett on 15 April 2009 be and are hereby confirmed, namely, a The first accounts of John Hawkins and Vicki Barkley-Brown, the Executors of the Will of Rhoda Brenda Farrell covering the period 17th December 2005 to 1 August 2007 be passed. b. The Executor John Hawkins be allowed Commission at the rate of:- -1% on the sum of $5,028,463 representing capital realisations -2% on the sum $445,101 representing income collected and - 0.5% on the sum $485,000 representing assets transferred in specie c. The Costs of and incidental to the filing and passing of the said accounts and of the application before the registrar be assessed at the sum of $3,250 plus fees 2. Order that interest accrue on the sum of $64,861.65 (representing the sum of $61,611.65 for commission and $3,250.00 for costs as allowed by registrar Haggett) at the rates prescribed on judgments pursuant to s 101 Civil Procedure Act 2005 computed on and from 15 April 2009 to the date of payment and calculated on daily rests. 3. Order that any interest payable pursuant to order 2 be paid out of the Estate of Rhoda Brenda Farrell ('the deceased"). 4. Order that the notice of motion filed 13 May 2009 be and is hereby dismissed. 5. Order that the applicant Vicki Barkley-Brown pay the costs of the respondent John Hawkins of the said notice of motion on the party/party basis and further that the respondent otherwise be indemnified in respect of her costs of the said notice of motion out of the Estate of Rhoda Brenda Farrell. 6. Order that without prejudice to any other rights that the respondent may have to recover the costs payable pursuant to order 5 he may deduct those costs as agreed or assessed from the applicant's interest in the deceased's estate. 7. Order that the applicant do all things and execute all documents necessary or convenient to enable the respondent to give effect to order 6 and the orders for payment to the respondent of commission out of the deceased's estate. 8. Liberty is granted to either party to restore the matter on 3 days notice for further orders or directions for the implementation or working out of these orders. ********** 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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