Shave v Shave; Estate of Shave [2011] NSWSC 1356

Supreme Court New South Wales

Medium Neutral Citation: Shave v Shave; Estate of Shave [2011] NSWSC 1356 Hearing dates: In chambers Decision date: 18 August 2011 Jurisdiction: Equity Division - Probate List Before: White J Decision: Refer to para [32] of judgment. Catchwords: PRACTICE AND PROCEDURE - succession - wills, probate and administration - filing, verification and passing of accounts - power of Registrar to modify accounts - whether power to moderate costs is limited to costs actually charged in the accounts - in passing the accounts filed for the executors the Registrar may moderate bills for costs for which executor seeks reimbursement out of the estate notwithstanding that the bills have not yet been paid Legislation Cited: Probate and Administration Act 1898 Cases Cited: In the Will of Lucas-Tooth (1931) 49 WN(NSW) 18 In the Will of Lucas-Tooth (No. 2) (1932) 50 WN(NSW) 86 Estate of Lampard (Supreme Court of New South Wales, Hodgson J, 25 July 1995, unreported; BC9505168) Estate of Orre (Supreme Court of New South Wales, 19 December 1991, Powell J, unreported; BC9101324) Category: Procedural and other rulings Parties: Gillian Barbara Shave (Plaintiff) Charles Edward Bradley Shave (Defendant) Representation: Maurice Buckley, C.T. Poole & Son Solicitors (Plaintiff) TressCox Lawyers (Defendant) File Number(s): 2008/300592

Judgment 1HIS HONOUR: These proceedings concern the filing, verification and passing of accounts. The deceased, Helen Manning Shave, died on 15 April 2008. By her will she appointed the first plaintiff, her daughter, Gillian Barbara Shave and her solicitor, David William Brown, to be the executors and trustees of her will. The principal beneficiaries were her daughter Gillian, and her son Charles. Clause 10 of the will provided: " I declare that any Executor or Trustee being a person engaged in any professional business may be so employed and shall be entitled to charge and be paid all usual and professional or other charges for any business or act done by him or his firm or his or their clerks or employees in connection with my Estate or the Trusts hereof and may in addition apply to the court for commission for his pains and trouble. " 2The estate was estimated to have a net value of $2,255,481.14. 3On 1 September 2009 Charles Shave filed a summons seeking an order that the defendants verify, file and pass their accounts in respect of the administration of the estate from 15 April 2008 to 30 June 2009. He sought an order that his costs of the summons be paid personally by the executors on the indemnity basis. 4On 9 December 2009 the executors filed their accounts for the period from 15 April 2008 to 31 October 2009. The statement of payments included three payments to David Brown & Partners Lawyers on 15 July and 29 August 2008 in amounts totalling $9,783.46. The accounts also listed outstanding accounts rendered by David Brown & Partners between 15 July 2008 and 26 May 2009. There were seven such accounts totalling $40,610.61. The three payments referred to above totalling $9,783.46 were deducted showing " Total Outstanding Billings - David Brown & Partners [$] 30,827.15 ". 5In addition the accounts set out various billings by other lawyers, namely, Legal Life Planning, Bartier Perry, and Morris Buckley CT Poole & Son and Mr Philip Hallen SC. The total amounts described as outstanding to those legal practitioners was $56,991.65. These legal practitioners were retained by Gillian Shave. 6Charles Shave, filed extensive objections to the accounts. He objected that David Brown & Partners had made professional charges for non-professional (executorial) work and had performed work after 5 December 2008, after Gillian Shave had revoked her instructions for David Brown & Partners to act as solicitors for the estate. He made other objections to specific charges. Charles Shave also objected to charges being borne by the estate that related to disputes between the estate and David Brown & Partners as to the bills of costs that had been rendered, in relation to a claim for commission made by David Brown and in relation to the asserted termination of retainer. He objected to the charging of legal costs in relation to disputes in which it was said Mr Brown was seeking to advance his personal interests, including by ensuring the continuation of his firm's retainer and in demanding payment of commission. 7Charles Shave also objected to the tax invoices for Legal Life Planning, Bartier Perry, Mr Hallen SC and Morris Buckley CT Poole & Son. These were costs said to have been incurred by Gillian Shave for which she sought reimbursement from the estate for legal expenses she had incurred. Charles Shave submitted that certain of those amounts should be disallowed as they related to matters of a personal nature for her and should not be borne by the estate. He also contended that Mr Brown and David Brown & Partners should indemnify the estate in relation to such costs. 8Gillian Shave filed an extensive affidavit in relation to her claim to be reimbursed for costs she described as costs incurred in defending the interests of the estate. She set out in detail evidence of the dispute between Mr Brown and her. 9It seems that the dispute between Mr Brown and Gillian and Charles Shave arose, at least in part, from Mr Brown's assertion of an entitlement to be paid at his firm's usual professional rates for executorial work and also his claim to a commission. He invoiced the estate for a commission of $5,000. There were subsequent disputes in relation to Gillian Shave's purported termination of the retainer of David Brown & Partners, the validity of which Mr Brown did not accept as he said that any such instructions had to be given by the executors jointly. There was a further dispute in relation to the non-implementation of a proposal agreed to by Gillian and Charles Shave for the realisation and distribution of certain of the estate assets. Instructions had been given for the sale of certain securities and Mr Brown purportedly revoked those instructions. Issues arise as to the consistency of the position taken. 10On 25 August 2010 Gillian Shave and Mr Brown filed a supplementary statement of account covering the period from 1 November 2009 to 30 June 2010. It referred to further outstanding accounts for legal costs. On 26 August 2010 Mr Brown filed submissions in relation to the disputes. 11It seems that on the application of Gillian Shave, five bills of David Brown & Partners dated 11 November 2008, two of 16 January 2009, 17 April 2009, and 26 May 2009 were referred for assessment on the practitioner/client basis. The costs assessor stated that in his assessment he had not allowed costs that related to executorial work. Costs for the first three bills, namely the bill of 11 November 2008 and the two bills of 16 January 2009, were assessed in the sum of $13,980.43. He ordered Mr Brown to pay the costs of the assessment. 12On 30 August 2010 Charles Shave made objections to the supplementary statement of accounts. He seeks costs of his objections on the indemnity basis. He alleges that Mr Brown's revocation of the instructions for the realisation of securities and failure to implement the agreement between him and his sister for the distribution of assets was a breach of trust. He also contends that costs on the indemnity basis should be ordered because of what he claims to be serious delinquency in the purported charging of costs to the estate. 13Charles Shave and Gillian Shave have also made submissions in relation to the right of Mr Brown to charge professional rates for executorial work and to claim commission. 14On 1 October 2010 the Registrar raised a number of observations and requisitions. He stated: " 1. As the objections seem to be mainly to costs only at this stage I will confine the requisitions to costs only at this stage (objection to commission may be dealt with at the commission hearing) and infer that there is no issue as to any other matter. ... 4. The power to moderate costs flows from s85(4) Probate Act and it follows that moderation is limited to costs actually charged in the accounts. Costs charged after the close of the accounts and future costs cannot be the subject of moderation. Initially I propose to informally assess the bills. If there is objection to such assessment the bills may then be formally moderated. " 15The solicitors for Charles Shave and Gillian Shave queried the Registrar's statement that moderation would be limited to costs actually " charged in the accounts ". Further requisitions were raised on 23 March 2011. The Registrar stated: " 4. Assessment or moderation of costs is limited to disbursements in the accounts and it follows therefore that only costs that have actually been paid (an essential characteristic of the process of vouching accounts is that the Registrar must be satisfied that the [disbursements] have actually been paid) may be the subject of assessment or moderation. As to costs that have been billed or invoiced but remain unpaid or if paid (but not out of the estate) remain to be recovered from the estate it seems to me that such costs may [be] the subject of assessment under Legal Profession Act (a modern version of the third party taxations that used to take place under s33 former Legal Practitioners Act) the purpose of the exercise being to determine the indemnity of executors out of the estate in respect of costs. Without in any way seeking to trespass on the assessor's territory, it is my recollection of having been a taxing officer of the court in third party taxations under the former legislation that issues such as whether work is professional or executorial and whether particular costs are recoverable out of the estate (eg where each of the executors has separately incurred costs) are issues that may be determined in such proceedings. I should add that only costs incurred as executor may be considered on moderation and if there are costs that are solicitor-client costs between the executors they cannot be the subject of moderation. It seems to be common ground that the only costs that have actually been paid are those at items, 40, 41 and 73. If such costs are part of the costs claimed in parts A and B referred to in the bill dated 11/11/10 the amounts paid would probably be allowed in full. Costs relating to the accounts and claim for commission must await any order of the court as to costs of the court proceedings. Costs as between the executors would not seem to be costs that should be considered on moderation but might be more appropriate to be considered as part of the costs of ... accounts proceedings, particularly as Mr Poole seeks costs against Mr Brown. I might add that the costs that are allowed on moderation are the costs that executors as executors are entitled to indemnity out of the estate. Personal costs of an executor such as recovery of costs or entitlements to commission (costs of commission are only recoverable pursuant to an order of the court, otherwise they are the costs of the executor because they are not for the benefit of the estate - see comment by Powell J in Estate of Instone (1993) NSWSC PD 23.8.93 re solicitor's costs in respect of any entitlement to commission item 74(a)) and are not costs that are allowable on moderation. 5. The upshot of the above is that it seems to me that, subject to any further submissions, I may proceed to consider passing the accounts and allowing commission. The proceedings may be relisted before the court to determine costs of the court proceedings including costs claimed by Mr Poole and other costs may be assessed separately. " 16In response the solicitors for Charles Shave submitted on 6 May 2011: " 4. We note your comments in relation to the assessment or moderation of costs being limited to disbursements in the accounts. In our submission, we do not agree that it follows that only costs that have actually been paid may be the subject of moderation (in this regard we refer you to section 86A of the Probate and Administration Act 1989). Objections have been made by our client to the payment of various legal fees to David Brown & Partners as well as other outstanding legal fees that have been charged or are proposed to be charged against the Estate all of which are identified in the Accounts and Supplementary First Accounts and copies of which legal fees are available. An amount of $9,783.46 has been paid from the Estate to David Brown & Partners in relation to bills of costs submitted by that firm (see Items 40, 41 and 73 of the Accounts). It is our client's submission that before the Court can reach a determination as to whether these payments to David Brown & Partners should be allowed in full you will at least have to conduct an informal moderation of all the bills of costs rendered by David Brown & Partners. It then follows that all other bills of costs proposed to be charged against the Estate should be informally moderated by the Court so that a determination can be made about the total amount of legal fees to be paid from the Estate. Our client further submits that, before dealing with any commission application, you will at least have to informally moderate the amounts to be allowed in respect of all the legal fees identified and listed in the Accounts and/or Supplementary First Accounts as any legal fees that are allowed potentially impact on the amount of any commission that may be awarded in respect of the periods covered by the Accounts and the Supplementary First Accounts. In order that the Estate be finalised, which it cannot be until the issue of legal fees is resolved, our client requests that there be at least an informal moderation of all the legal fees charged or proposed to be charged against the Estate to which our client has objected. 5. In our client's submission it will not be possible for you to consider passing the Accounts of this Estate until such time as all the legal fees being claimed out of the Estate in respect of the period of the Accounts and Supplementary First Accounts have been moderated and a determination has been made about the total amount of legal fees to be paid from the Estate in respect thereof. Our client reserves his objections to the Executors claims for commission until the Court has issued the Certificate of Correctness in relation to the Accounts and the Executors have served their affidavits in support of their applications for an award of commission. Our client also wishes to exercise his right to be heard in relation to all the objections lodged by him in relation to the Accounts and Supplementary First Accounts. " 17The Registrar responded on 18 May 2011. He noted the submission of the solicitors for Charles Shave, but commented that: " My only comment is that as a registrar I may only do what I have power to do and that is allow, wholly or in part, disbursements. And a disbursement is only a disbursement if it has actually been paid. I have noted 4 of Tress Cox's letter of 6/5/11; power under s 86A Probate Act is exercisable only by a judge so I cannot deal with the matters set out. Otherwise, consideration of the letter should await the executors' response to the requisitions. " 18On 13 July 2011 the parties forwarded to the court a form of consent order signed by the legal representatives for all of the parties. The order proposed reads: " By consent the court makes the following orders: 1. That all parties consent to the Registrar moderating the bills claimed by each executor for reimbursement out of the estate as listed in the accounts as filed notwithstanding that the accounts have not yet been paid by the Estate. 2. The parties are granted liberty to restore the matter to the list on 2 days' notice. " 19With great respect to the learned Registrar, I think he has taken too narrow a view of his powers on moderation of the executors' accounts. There is nothing in s 85 of the Probate and Administration Act 1898 that precludes the court from assessing the reasonableness of an expense that the executor claims has been incurred and from which he or she claims to be entitled to indemnity out of the estate, even though the expense has not been paid. Section 85(4) provides that where the court disallows a disbursement, it may order the executor to refund the amount disallowed to the estate. No doubt a disbursement refers only to an expense that has been paid. It does not follow that the court cannot determine the proper amount of an expense to be charged to the estate before it has been paid. Section 85(4) was introduced to remedy a deficiency identified in In the Will of Lucas-Tooth (1931) 49 WN(NSW) 18 at 19 and In the Will of Lucas-Tooth (No. 2) (1932) 50 WN(NSW) 86 at 87 that although on the passing of accounts the Registrar was empowered to determine whether a disbursement had been properly incurred, he did not have power to compel the executor to remedy the breach by reimbursing the estate. Such a remedy would have to be sought by a separate proceeding in Equity. The effect of disallowance of a disbursement for having been improperly incurred would be to deprive the executor of the protection of s 85(3) and would be a matter taken into account in the determination of a claim for commission. 20Section 85(4) was introduced to provide the power to order an executor to reimburse the estate for a disbursement that is disallowed on the passing of accounts. The implication from the express power to order an executor to reimburse an improper expense that has been paid is not that the court can deal only with expenses that have been paid. The implication is that the court can determine what expenses are proper to be paid from the estate and as an incident of that power, can order reimbursement of improper expenses that have been paid. 21There is nothing in Division 11 of Pt 78 of the Supreme Court Rules 1970 dealing with accounts and commission that precludes the court, when making an order for passing of accounts, from dealing with expenses that are yet to be paid. 22The question is whether unpaid liabilities may properly be included in the executor's " accounts ". There is nothing in the word " accounts " that indicates that unpaid liabilities may not be included. To the contrary, unpaid liabilities would naturally come within the conception of a person's accounts. 23No good purpose would be served by requiring an executor first to pay a disputed expense before the court could determine whether the expense was a proper one to be charged to the estate. 24In Estate of Lampard (Supreme Court of New South Wales, Hodgson J, 25 July 1995, unreported; BC9505168) Hodgson J (as his Honour then was) noted that in that case as in many cases, the moderation was of an unpaid bill rendered by a solicitor (at 8). His Honour made pertinent observations as to the role of the court in moderating such a bill where the bill had not been paid. His Honour said (at 11-12): " I accept that, in those cases where the Court is faced with a fait accomplis, 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. " 25There the bill of costs in question was for the costs of the application to pass accounts. The registrar has power to determine questions of the costs of the application. But that makes no difference. The registrar's task was not to tax costs as between executor and solicitor, but to determine what costs could be properly charged to the estate. 26The solicitor for Charles Shave responded to the issue raised by the Registrar that assessment or moderation of costs was limited to disbursements by relying on s 86A of the Probate and Administration Act . That section provides: " 86A Reduction of excessive commission etc Where the Court is of the opinion that a commission or amount charged or proposed to be charged in respect of any estate, or any part of any such commission or amount, is excessive, the Court may, of its own motion, or on the motion of any person interested in the estate, review the commission, amount or part and may, on that review, notwithstanding any provision contained in a will authorising the charging of the commission, amount or part, reduce that commission, amount or part. " 27Section 86A would provide the necessary power, if it did not otherwise exist, for the Registrar to consider the appropriateness of amounts proposed to be charged in respect of the estate. The consent order referred to in para [18] above does not make any express reference to s 86A. An application under s 86A is to be made by summons (Supreme Court Rules, Pt 78 r 75A). The powers of the Registrar under Pt 78 r 5(1) do not include a power to make orders under s 86A, but such power could be conferred by a referral of a matter arising under that section to the Registrar under Pt 78 r 5(2). 28For the reasons I have given I do not think that the parties need to invoke the court's power under s 86A in order for the court to have the power to moderate the bills claimed by each executor for reimbursement out of the estate that have not yet been paid. But for abundant caution I will dispense with the requirement of Pt 78 r 75A and make an order under Pt 78 r 5(2) conferring on the Registrar power to determine any matters arising under s 86A on the application for passing accounts. 29Of 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. 30In his letter of 1 October 2010 the Registrar proposed that he would initially informally assess the bills and that if there were an objection to such assessment, the bills would then be formally moderated. In Estate of Orre (Supreme Court of New South Wales, 19 December 1991, Powell J, unreported; BC9101324) Powell J observed that (at 6, 20): " Although, strictly, moderation involves the preparation of a detailed bill of costs and the process akin to taxation ... , 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 present system of informal assessment by the Registrar was established within the Registry in an endeavour to avoid the costs and delays involved in formal moderation of costs. This being so, it seems to me that, in any case in which an executor is not satisfied with such an assessment by the Registrar, it would remain open to him to apply to have his solicitors' bill of costs formally moderated ... " 31It is a matter for the Registrar how he proceeds with the moderation. In deciding whether he should first make an informal assessment, the Registrar will no doubt have regard to the detail of the bills of costs provided and the detail of the objections. If satisfied that those details are sufficient for a formal moderation, he could reasonably form the view that an informal assessment may not in the long run save costs. 32For these reasons I make the following orders and directions: 1. Direct that in passing the accounts filed for the executors the Registrar may moderate bills of costs for which each executor seeks reimbursement out of the estate notwithstanding that the bills have not yet been paid; 2. Dispense with the requirement under Pt 78 r 75A of the Supreme Court Rules that the application of Charles Edward Bradley Shave under s 86A of the Probate and Administration Act be commenced by summons. 3. Order that in passing the accounts the Registrar may exercise the powers of the court under s 86A of the Probate and Administration Act 1898. 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: 10 November 2011