Supreme Court New South Wales Medium Neutral Citation: The Estate of Helen Manning Shave [2012] NSWSC 1428 Hearing dates: 30, 31 October 2012 Decision date: 23 November 2012 Jurisdiction: Equity Division - Probate List Before: Windeyer AJ Decision: See para 96 of the judgment Catchwords: WILLS, PROBATE AND ADMINISTRATION - disputes between executors and between executors and one beneficiary - claim for costs by solicitor executor - costs included items for executorial work - moderation of costs by Registrar - whether solicitor executor should indemnify estate for moderated costs allowed to co-executor - WILLS, PROBATE AND ADMINISTRATION - application for commission for both executors - whether commission should not be allowed to solicitor executor or reduced due to his conduct Legislation Cited: Legal Profession Act 2004 (NSW) Corporations Act 2001 (Cth) Supreme Court Rules 1970 (NSW) Civil Procedure Act 2005 (NSW) Probate and Administration Act 1898 (NSW) Cases Cited: Foord v Brock [2005] NSWCA 156 Union Bank of Australia v Harrison Jones and Devlin Limited (1910) 11 CLR 492 Charlton v Durham (1868-69) LR. 4 Ch.App 433 Simpson v Gutteridge (1816) 1 Madd 609 Langevad v Langevad; Estate E J Langevad (Unreported, Supreme Court of New South Wales, Hodgson J, 14 March 1997) Will of Holmes (1989) 15 VLR 734 Re Adams (1905) 24 NZLR 892 Re Edmondson (1907) 26 NZLR 1404 Walters; Re estate of Dibbs [2006] NSWSC 1277 Re Zyngol (1958) 75 WN (NSW) 241 Category: Principal judgment Parties: Gillian Barbara Shave - First Plaintiff David William Brown - Second Plaintiff Charles Edward Bradley Shave - Defendant Representation: J.E. Armfield - First Plaintiff A.J. Bulley - Second Plaintiff S.F. Hughes - Defendant Maurice Buckley C T Poole & Son - First Plaintiff DLA Piper Australia - Second Plaintiff TressCox Lawyers - Defendant File Number(s): 2008/300592 Judgment 1HIS HONOUR: This judgment concerns claims for commission by the executors of the will of Helen Manning Shave (deceased), questions of costs and a question of whether one executor should reimburse the estate for certain costs allowed to the other executor out of the estate on the passing of the estate accounts. ESTATE FACTS 2Helen Manning Shave ("Mrs Shave") died on 15 April 2008. She left a will dated 4 May 2006 naming her daughter Gillian Barbara Shave ("Gillian") and her solicitor David William Brown ("Brown") as executors. Probate was granted on 19 June 2008. 3Under the terms of the will Mrs Shave gave Gillian her jewellery, personal effects, furniture and furnishings, paintings and silver, her motor car, her home at 10 Mill Drive, North Rocks free of mortgages, and her home unit at 1/40 Grasmere Road, Cremorne free of mortgages. 4Mrs Shave then gave legacies of $10,000 to the Wesley Mission and $5,000 to the Royal Society for Prevention of Cruelty to Animals. She gave the residue to Gillian and her son Charles Edward Shave in equal shares. I will refer to the Shave parties by their first names as there are complications in the proceedings and I think it will make it more simple. 5The value of assets at the date of death was estimated to be $2,696.751.00. The summary is as follows: Specific Gifts to Gillian 10 Mill Drive, North Rocks $ 750,000.00 1/40 Grasmere Road, Cremorne $ 560,000.00 Furniture and furnishings $ 214,000.00 Motor Vehicle $ 8,000.00 $1,532,000.00 Residue Shares $ 657,493.00 Westpac Bank Account $ 27,256.00 Property 11/10 Westleigh Street, Neutral Bay $ 480,000.00 $1,164,749.00 6The liabilities in the estate at the date of death were stated to amount to $441,270.00. These included a mortgage debt of $89,062.00 secured over the Grasmere Road unit and a mortgage debt of $338,332 secured on the Westleigh Street unit. The former is significant as Gillian took Grasmere Street free of mortgages so that on the figures set out, the net residue after the payment of legacies of $15,000.00 and the estate debts of $441,270.00 amounted to approximately $708,479.00. Gillian and Charles took that residue in equal shares subject, of course, to expenses of administration. COURT FILES Proceedings 115291 of 2009 7These proceedings were commenced by Summons filed on 1 September 2009 in which Charles is the plaintiff and Gillian and Brown are the defendants. This Summons sought an order that the defendants, the executors, verify, file and pass accounts for the period 15 April 2008 to 30 June 2009. The result of this Summons was that the executors commenced the present action so that the only matter for determination in the first action is the question of costs, which question was reserved to be dealt with at the time of consideration of the accounts. Proceedings 122325 of 2009 8This is a Summons filed on 9 December 2009 by the executors for an order passing their accounts up to 31 October 2009 and an order allowing commission. It is this matter which really concerns this judgment. New Numbering System 9When the Court adopted the new numbering system, JusticeLink, as far as I can ascertain both sets of proceedings were given the new number 2008/300592 which has caused some confusion, at least to me, particularly as Charles has now been named as a defendant in the claim by the executors for the passing of accounts and for allowance of commission, there being no defendant when the proceedings commenced. 10On 18 August 2011 White J dealt with a reference from the Registrar who had considered he did not have power to allow or moderate claims when payment had not been made but bills rendered. His Honour held that there was such power. For more abundant caution he added the following orders: I 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. Order that in passing accounts the Registrar may exercise the power of the Court under s 86A of the Probate and Administration Act. 11The purpose of these additional orders was not to allow the Registrar to deal with claims for reduction of executor's commission but to allow him to deal, on moderation, with claims for charges proposed to be made for costs which had been billed but not paid. Claims as to excessive commission could, I think, only arise where a will by its terms provided commission on a particular basis, or where a trustee company relied on its power to charge commission on rates published in accordance with s 601TAA of the Corporations Act 2001 (Cth). 12I am not suggesting Charles has wrongly been added as a defendant. He became a defendant in any event when he became an objector to the accounts although whether or not there was strict compliance under Rules 77A and 78 of the Supreme Court Rules 1970 (NSW) I have been unable to ascertain. In any event, he filed an appearance - as a defendant - in proceedings 122329 of 2009 on 22 December 2009. FURTHER FACTS 13The will of Mrs Shave included the following clause: 10. I declare that any executor or trustee being a person engaged in any profession or business may be so employed and shall be entitled to charge and be paid all usual 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 trust hereof and may in addition apply to the Court for commission for his pains and trouble. 14Gillian and Charles met with Brown after Mrs Shave died. The will was read. At the outset, or perhaps later, Brown explained his entitlement under cl 10 but said that he would charge for the work he did and would not claim commission. There is some dispute about the words used but that does not matter as it is not claimed that there was any binding agreement not to seek commission. 15Brown rendered his first bill of costs on 15 July 2008 for probate costs of $7,390.00 and costs of other work of $5,250.00. Some of this work was executorial rather than legal. 16On 25 August 2008 Gillian sent a memo to Brown asking to be advised of Any outstanding bill of which I am expecting for your work, I believe we have had two meetings since your invoice was issued and expect there will be some two or three more meetings to sort out instructions to Ms Grubber-Wright and the remainder of the estate. She also asked for a costs estimate relating to the sale of the Westleigh Street property. 17Brown responded that he would send an updated account within the next few days and added In the circumstances I consider commission could be paid to me of $5,000.00. As you would be aware this a lot less than the amount which would be granted to executors if we were to apply for commission. You and Charles would need to approve payment if an application is not made for commission. 18Gillian said that she asked Brown to explain the basis for the commission as she would need to contact her brother about this who was in Hong Kong. It is not suggested that she was given this information. 19On 12 September 2008 Brown sent to Gillian an account for all work to date together with an estimate of $3,000.00 in costs and disbursements to be incurred to finalise the estate. The account which he forwarded of that date included a claim for the amount due under a previous bill of $14,935.75, an amount of $2,440.00 for work done from the date of that account to 12 September 2008 and "a claim for commission" of $5,000.00. The total amount claimed was $23,119.75 but a credit was given for certain monies which had been received in the estate and applied towards costs. 20On 20 October 2008 Gillian sent an email to Brown asking for itemised accounts for his invoices of 15 July 2008 and 12 September 2008. Brown responded by email three days later. Among other things he said: As to our fees, could you clarify why you require an itemised account of our fees. Is the amount due to our firm in dispute? I would be surprised if this was the case as our accounts are in accordance with the quote given to you previously. If the fees are not in dispute then I do not wish to spend a great deal of time in providing itemised accounts. 21Gillian said that she took this as a refusal to provide the itemised accounts. She sent an email on 27 October 2008 asking again for the accounts and she then consulted independent solicitors, Legal Life Planning, who wrote to Brown on 28 October 2008 asking for itemised accounts as a matter of urgency. 22From that time on this matter has taken on a life of its own with various parties incurring large sums for costs. 23Brown provided an itemised account on 11 November 2008. He included with it a letter to Legal Life Planning summarising the amount claimed to be due as follows: Amount claimed in our itemised account $18,366.23 Less amounts shown as receipted in our accounts of 15/7/08 and 12/9/08 $ 9,783.46 $ 8,582.77 Claim for executorial commission including GST as per account of 12/9/08 $ 5,500.00 Total amount due $14,082.77 24On 5 December 2008 Gillian wrote to Brown and to his firm, David Brown & Partners, revoking all instructions to Brown or his firm to act as legal representatives for the estate and stated that the estate did not require further legal representation And in any case under the circumstances it is no longer appropriate for David William Brown, solicitor or David Brown & Partners, Lawyers to act as legal representatives for the estate of the late Helen Manning Shave Accordingly all and any instructions to either David William Brown, solicitor or David Brown & Partners, Lawyer to act as legal representatives for the estate of the late Helen Manning Shave that might be considered current are herewith revoked. For the sake of clarity neither David William Brown in his capacity as a solicitor, nor David Brown & Partners, Lawyers, are to perform any further work (legal or otherwise); issue any communications; or do anything else whatsoever in relation to the estate of the late Helen Manning Shave. Should there at some point in the future be a requirement for legal representation of the estate of the late Helen Manning Shave 25On the same day Gillian and Charles sent Brown a letter as to distributions in the estate and Brown wrote to ABN-Amro stating they were not to act other than on instructions from both executors. There had been earlier correspondence about a refusal to sign a letter of instruction to ABN-Amro but it is not sensible to set out all the correspondence. On the same day Brown again wrote to Legal Life Planning saying Gillian had no authority to revoke instructions to act for the estate in legal work and he would continue to instruct his firm to act and that if Gillian chose to engage another firm that was a matter for her but it could add costs for which she might be liable. 26On 11 December 2008 Brown and Gillian signed a letter to ABN-Amro with instructions to transfer certain shares to Gillian in specie and to sell other shares and pay the proceeds to the bank account of Charles. The letter included the following instruction: The shares covered by item 3 of these instructions must be sold by market close on Friday 27 February 2009. Any shares covered by item 3 of these instructions that remain unsold at market close on Friday 27 February 2009 are to be sold by ABN-Amro Morgans in their ASX "closing auction" on Friday 27 February 2009. The transfer to Gillian of the shares which had been agreed would go to her was completed around 29 December 2008. 27It is not necessary to go into all the correspondence in which complaints and counter-complaints were made. Brown withdrew his offer to accept commission of $5,000.00 and he reserved the right to make a claim for commission through the Court. When Gillian and Charles indicated that they were proposing to lodge a Summons for the passing of the accounts, Brown replied saying that if this was done it must include a claim for commission. 28Gillian, supported by Charles, through Legal Life Planning, sought signature by Brown on the three cheques, one for $3,000 to Legal Life Planning, one to reimburse Gillian for payments she had made, and one for part of the proceeds of some units in Mirvac Real Estate Trust. Brown returned these cheques unsigned on 16 January 2009 saying that independent solicitors were required to complete the administration of the estate. While this latter requirement could not apply to executorial work at least for the first and second listed cheques there was reason not to sign them unless Gillian agreed the payments were to be debited to her share in the estate. The payments made by Gillian were expenses relating to the Grasmere Street property which she took under the will and it was at least arguable that the fees to Legal Life Lawyers should not be paid out of the estate. However, Brown did not give reasons when he returned the cheques. 29A draft letter to ABN-Amro was sent to Brown with a request he sign it. This provided that the shares which were to go to Charles should be sold and that the last date for sale was extended from 27 February 2009 to 30 September 2009. It is clear from the evidence that Charles was concerned to alter the earlier February date as he was worried about what was happening in the market. 30On 25 February 2009 Brown wrote to ABN-Amro revoking the prior authority given to sell the shares. At the same time he wrote to Legal Life Planning saying he would not agree to sign the amended letter to the brokers unless it included a requirement that these shares were to be sold on behalf of the estate on receipt of instructions from Charles himself and Gillian and that the proceeds of sale be paid into the estate bank account. He said in that letter to Legal Life Planning there was a real question that the current amount in the estate bank account would not meet the ongoing liabilities of the estate and that until that was done all proceeds of realisation of assets must be paid to the estate account. 31It is the submission of Gillian and Charles that Brown took this course in an endeavour to ensure that his outstanding costs were paid. He denied this and said that by February 2009 he was concerned about the position of the estate and whether or not there would be sufficient funds to pay all estate liabilities. The Westleigh Street property was still held as an asset in the estate but that was not readily available for payment of estate liabilities. If that was not taken into account then the liabilities in the estate exceeded the assets then available in cash to pay the liabilities. I set out the details later in this judgment. 32By letter of 25 February 2009 to Legal Life Planning Brown made suggestions to resolve the impasse between the executors including the appointment of an independent legal firm to carry out any legal work required for the estate, and suggesting three firms; and nominating three firms of accountants to give advice as to liability for capital gains tax in the estate. In the same letter, however, Brown sought payment of costs in the itemised bills and agreement as to future costs. Brown also said that he would be prepared to consent to an order revoking the grant of probate and the appointment of Gillian as sole executor on terms which required all his costs to be paid in amounts agreed or assessed, the costs of obtaining the revocation order to be paid out of the estate, the costs of preparing the estate accounts and any application for commission be paid out of the estate and his right to seek executorial commission be preserved. He went on to say that if that the deadlock continued it might be necessary for him to make an application to the Supreme Court for an order removing Gillian as executor. 33Apparently about this time Legal Life Planning suggested to Gillian that she should engage another solicitor more familiar with the work required and she retained Mr Gerard Basha of Messrs Bartier Perry. He wrote to Brown on 9 February 2009 saying that he had been instructed to act for Gillian and Charles. Charles denied in the witness box that Legal Life Planning or Bartier Perry were acting for him on his instructions but I have come to the conclusion that at least Mr Basha was acting for both Gillian and Charles. His accounts and the items in them make that quite clear although I do not think this is of great significance. 34It appears to have been agreed that Ms Pam Suttor, of L Rundle & Co Solicitors, should be retained as solicitor to finalise the estate administration. It is not clear whether this happened. At one stage Ms Suttor was acting for Brown. 35On 20 April 2009 Brown sent to Bartier Perry a letter enclosing itemised accounts for work to 8 April 2009 together with an account from Mr Blackburn-Hart SC to April 2009. The total amount claimed as payable for costs was $36,890.57 and after giving credit for amounts already taken for costs of $9,783.46 there was stated to be an amount due of $27,107.11. Brown said that he had a claim for commission and that there would be additional costs of filing and passing accounts. He said that he was entitled to interest on outstanding accounts and suggested that Gillian and Charles might make a reasonable offer to settle the commission claim. There was a long response to this which did include an offer to pay $31,123.71 in full settlement of all claims against the estate for costs, commission and future executorial work. That amount included the sum of $9,783.46 already retained. 36By this stage the Westleigh Street property had been transmitted to the names of the executors and on 20 May 2009 Bartier Perry prepared and sent a transfer of that property from the executors to Gillian and Charles as beneficiaries which Brown signed and which has been registered. Efforts to sell the property had apparently not been successful. This distribution has caused additional problems to which I will come in due course. 37Brown did not accept the offer which had been made and made a counter-offer including a claim for $12,000.00 for commission but this need not be gone into further. 38There was further correspondence between the parties about costs and other matters. 39On 1 September 2009 Charles commenced the proceedings 115291/2009 seeking an order that the executors verify, file and pass the estate accounts and that the costs of that Summons be paid personally by the executors on the indemnity basis. Charles said in evidence that he thought this was the only way he could get anything done, and that although his sister had received her share of the Australian investments he had not received his. 40The executors then seem to have agreed that Messrs Maurice Buckley CT Poole & Son, Solicitors would be retained for the purpose of making an application for the passing of accounts and for commission. Previously Gillian had told Mr Basha she would only agree to make such an application if Brown paid half the costs and Mr Basha said he was not willing to bring a claim on that basis. In any event, on the return date of the Summons issued by Charles an order was made by consent that the executors file their accounts within four weeks. That is when the second set of proceedings commenced. 41On 6 November 2009 Gillian filed an application for assessment of the itemised bill of costs which had been served nearly twelve months previously. R.J. Foster, solicitor, was appointed as the assessor. The bills, the subject of the assessment were as follows: 11 November 2008 - to obtain probate and administrative work $18,366.23 16 January 2009 - act on sale of Westleigh Street $ 1,153.37 16 January 2009 - administration of estate 20 October 2008 to 16 January 2009 $ 5,684.47 17 April 2009 - obtaining advice from senior counsel in other matters concerning disputes with co-executor 27 January 2009 to 8 April 2009 $11,686.50 26 May 2009 - further communications with co-executor 20 April 2009 to 20 May 2009 $ 3,720.04 The assessment was completed on 16 June 2010. The assessor allowed $11,979.63 for the first bill, $909.33 for the second bill and $1,091.47 for the third bill being a total of $13,980.43 from which would have to be deducted the sum of $9,783.46 already paid. 42In coming to his decision the assessor appears to have to disallowed any claim for executorial work and made other adjustments. He made no allowance for the fourth and fifth bills stating that this was work done after Gillian withdrew her instructions. He said that it was clear that from that date the estate would not be paying for the individual costs of each of the parties. The assessor determined that Brown should pay the costs of the assessment largely, as I understand it, because of failure to comply with certain provisions of the Legal Profession Act 2004 (NSW), particularly ss 311 and 309(1)(c). The Certificate of Assessment has been issued and filed. There has been no application for review of the decision of the assessor and no appeal. 43The first accounts of the executors were filed on 9 December 2009, a few days after the assessment process commenced. The accounts showed amounts outstanding to David Brown & Partners of $40,610.61 against which were offset the amount of $9,784.46 paid by deduction. There were also shown accounts of $12,250.65 outstanding to Legal Life Partners, $35,799.50 to Bartier Perry, $2,875.00 to Mr Hallen SC and $6,066.50 to Messrs Maurice Buckley & CT Poole & Son. 44Charles filed detailed objections to the accounts. The objection document runs to 327 pages. The bulk of the objections related to the bills of Brown and for the most part claimed that items charged were for executorial work. There were some objections to the bills of Legal Life Planning and Bartier Perry which were not so significant. 45Paragraph 7.1 of the general objection statement was as follows: The defendant requests that the Court make an assessment as to what is a reasonable amount for Gillian Barbara Shave as executor to be reimbursed out of the estate for the legal expenses she has incurred in retaining in Legal Life Planning, Bartier Perry, Mr Philip Hallen SC and Maurice Buckley CT Poole & Son. 46Three sets of supplementary accounts have since been filed bringing the accounts up to 31 August 2012. The first supplementary accounts cover the period 1 November 2009 to 30 June 2010. They set out again the unpaid amounts for costs and it seems the same objections and some additional ones were made. Further accounts cover the period 1 July 2010 to 30 June 2011 and a final set brings the accounts up to 31 August 2012. 47There were serious problems in the Court relating to probate accounts during 2010 and the first requisition was not issued until 1 October 2010. The Registrar, in dealing with the accounts, took the view that he could not determine on moderation any questions relating to unpaid accounts as he had power to deal with disbursements only. The parties did not accept this and the question was referred to White J as Probate List Judge who on 18 August 2011 held that such bills could be moderated by the Registrar. 48Once that decision was made there was better progress. Charles had objected to the Brown accounts, as had Gillian. The Registrar, in what is called a Requisition, dated 20 October 2010, stated that the charging clause in the will was directed to legal work leaving the executor to apply to the Court for commission. In other words, legal costs could not be charged for executorial work. I should say that this was clearly correct. 49By this time the costs assessment had been completed. The assessor had requested and had been given a copy of the objections to the accounts. The Registrar took note of this and generally accepted the assessment with slight modifications. In respect of the assessed bills he allowed $13,740.43 on moderation being $240.00 less than the assessment figure. He accepted the assessor's reason for not allowing costs after revocation of retainer by Gillian. He added that he would not have allowed these costs in any event because Brown had no right to "demand commission"; and also because, as he said "Why would an executor (who is not a beneficiary) faced with the position where the beneficiaries do not want his firm to act in the estate, not accede to their wishes?". I do not consider there was a "demand" but the commonsense of the second statement is apparent. 50On 22 December 2011 the Registrar determined the moderation. He allowed $50,528.88 for the costs of Legal Life Planning, Bartier Perry and Mr Hallen SC to be reimbursed to Gillian out of the estate on the basis those costs were incurred for the benefit of the estate. He also allowed $17,123.40 for the costs of David Brown & Partners of which $9,783.46 had been paid. 51It seems to me that the decision on moderation is a decision under Pt 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) and that the time for any review has passed. In any event, insofar as the costs of Brown are concerned, no application for review or appeal was filed and he is bound by the assessment and also I consider by the decision of moderation. In the long run it was not argued to the contrary. 52In fairness to Brown, I should say the question of whether one of two executors can unilaterally terminate a retainer given to solicitors by both executors is not entirely clear. In the light of what has happened here that need not be considered further. Procedural Problems 53Both executors are plaintiffs in this Summons for the passing of accounts and allowing commission but they have different interests. They were separately represented on the hearing. One of the issues which I will set out is the claim for commission. In accordance with rules 78 and 85 of the Supreme Court Rules 1970 (NSW), such claims are dealt with after a Certificate of Correctness of Accounts has issued. When the hearing commenced before me no Certificate had been issued although at least so far as the accounts up to 30 June 2011 were concerned, the Registrar had indicated that they were in order. It seems there was some suggestion, which if made was ill-founded, that the Certificate should await determination of the claim by Charles and perhaps by Gillian, and that Brown should pay to the estate the amount of moderated costs allowed out of the estate to Gillian. 54Neither of the parties has any problem with the last set of supplementary accounts which, apart from one item, relate only to bank interest collected and bank fees paid. I said that I required a Certificate of Correctness to be issued before I delivered judgment, at least on the payment of commission, and as a result the Registrar has signed a Certificate of Correctness of Accounts dated 16 November 2012. 55The next procedural problem concerns the issues to be decided. To some extent these were articulated in a directions hearing before White J on 30 July 2012. At the commencement of the hearing before me I said that in the absence of pleadings, and in view of the relationship between the plaintiffs, it was essential to have agreement on the issues to be determined. The parties then prepared a document headed Agreed Issues for Hearing as follows. AGREED ISSUES FOR HEARING 1. Whether the Court should order that the second plaintiff indemnify the Estate with respect to the costs incurred by the first plaintiff during the dispute between them such costs having been allowed out of the Estate by Senior Deputy Registrar Studdert in the moderation. 2. The plaintiffs' claim for commission. 3. Whether any order should be made as sought by the second plaintiff with respect to his accounts of 16 January, 17 April and 26 May 2009. 4. Whether the second plaintiff should pay the costs of the defendant on the indemnity basis with respect to his summons seeking orders that the executors file and verify accounts. 5. Who should pay the costs of these proceedings including the costs of the moderation before Senior Deputy Registrar Studdert and the costs of and incidental to the hearing on 30 and 31 October 2012 and, if so, on what basis? 56It is not necessary to deal with issue 3. Brown does not press for any order in respect of costs after the purported termination of retainer. Issue 1 Whether the Court should order that the second plaintiff indemnify the Estate with respect to the costs incurred by the first plaintiff during the dispute between them such costs having been allowed out of the Estate by Senior Deputy Registrar Studdert in the moderation. 57Charles claimed this order should be made. Gillian supported Charles. The basis for any such order must be that the allowance of Gillian's moderated costs out of the estate meant a loss to the estate caused by actions of Brown in breach of his responsibilities as co-executor. Counsel for Charles relied solely on s 98 of the Civil Procedure Act 2005 (NSW) and in particular sub-sections 1 and 6(a) as giving power to make such an order. He relied upon the decision in Foord v Brock [2005] NSWCA 156. No submissions were made to the contrary. 58Two main claims are made. The first is that the costs resulted from the response of Brown to the request for an itemised bill. Gillian said she regarded this response as a refusal and that it was this and this alone which caused her to seek separate advice. It was also submitted that the response of Brown and his subsequent actions resulted from a conflict of interest in his preferring his own interest in getting his bills paid to the interest of the estate and its beneficiaries. 59Next, it is claimed that in presenting a lump sum bill, and later an itemised bill which included charges for non-legal work, and at the same time sending a letter which included claims for amounts set out in the itemised bill and a claim for commission, Brown was in breach of his duty to make clear disclosure of the fact he was first seeking double payment and second, he could only obtain commission by order of the Court or by consent properly obtained. 60I do not think the first complaint has any real substance. The response of Brown could not be thought to be a refusal to provide a detailed bill. The response was a reasonable inquiry. The extraordinary feature of this case is that it was the reaction of Gillian which set off a chain of events being fought out in these proceedings. I say this accepting as was put to me that Gillian was entitled to an itemised bill as a matter of law. 61The commission matter is somewhat different. Brown originally suggested $5,000.00 would be reasonable but made it clear that consent was needed. However, he did indicate the $5,000.00 in the bill he rendered when he sent the later detailed bill. In the cross-examination at transcript page 70, when it was put to him that he had charged in his legal bill for executorial work and then sought commission as well and that would be double-dipping, he said "No, not if the beneficiaries both agree". The following then appears from line 50 on page 70 to line 40 on page 71 of the transcript: Q. Yes. But if they were going to agree then they should have been advised that if they were to insist on the application of the rules, that you could not get paid for both? A. I've advised them on numerous occasions and they had their own legal advisers. Q. You advised them in relation to that, did you? A. I advised them that to get - if I was to be paid any commission at all, including the $5,000, that would be subject to the approval of both beneficiaries unless there was an application made to the Court for commission, and then it would be whatever the Court agreed to. Q. But you didn't advise them, did you, that they should not agree to the payment of commission if they were going to pay the bills in full because in effect you'd be getting paid twice for the executorial work? A. I think that's a confusing question. What I have said, and that is earlier on, that the beneficiaries can agree to pay me any commission that they like in addition to the legal costs, as long as they both approve it. Q. Well, Mr Brown, you were the legal adviser for the estate at least up until 11 November 2008? A. My termination officially was from 5 December 2008. Q. Yes, so at least up until the time of this itemised account you were still the legal adviser for the estate? A. I don't know that that is the case because Ms Shave has in her letters said that - via Legal Life that they are to act for her further in relation to this matter. Q. Well, Mr Brown, as at 11 November 2008 you were still purporting, through your firm David Brown & Partners, to be acting as the legal adviser for the estate. Correct? A. Correct. Q. And as the legal adviser for the estate, it would have been necessary, I'd suggest to you, to properly discharge your duties as legal adviser, to warn the beneficiaries that if they were to agree to pay your accounts in full, including the non-legal work, and in addition agree to pay you commission, they would be paying you something that you could not get via the courts? A. If they've got their own legal advisers, I don't believe that I need to give them that advice. They have their own legal advisers. 62This passage does indicate, I think, that there was a clear conflict of interest and, I think, a breach of obligation which even at trial did not seem to be understood by Brown. 63The next matter raised by Charles is the revocation of the Brown retainer. Brown had maintained that this could only be done with his consent. It was put in submissions he had to consent to his own sacking. For reasons which I have previously explained, not much time was spent in arguing this matter. In general, joint executors are considered as one so that one has authority to bind the estate: Union Bank of Australia v Harrison Jones and Devlin Ltd (1910) 11 CLR 492. One of two executors can give a discharge for a debt: Charlton v Earl of Durham (1868-69) LR. 4 Ch. App 433, or assign a lease: Simpson v Gutteridge (1816) 1 Madd 609. 64Mr Bulley, counsel for Brown, submitted one executor could not revoke a retainer if the retainer of a solicitor was entered into by both executors. There may well be force in that submission although Charlton v Earl of Durham appears to be against it. However, it was not pursued as the matter was subject to a decision of the costs assessor. In any event, I consider the Senior Deputy Registrar was correct in saying that common sense should have indicated to Brown that a new solicitor should be appointed by agreement so that to continue to act and charge for legal work after the revocation letter could only be thought to be the result of self-interest rather than estate interest. 65In saying that, however, I do not consider the fault was all on one side. The reaction to the question about an itemised bill and the terms of the letter revoking the retainer were, to say the least, impulsive. A face to face meeting one would have thought could and should have sorted out any problems, particularly as up to then Gillian had a good relationship with Brown and I think the estate administration was progressing well. Email exchanges, like daggers drawn, are not the best means of resolving conflict. 66The other set of actions by Brown which are said to show his preferring his own interest to those of the estate and its beneficiaries and causing costs to the estate are those I will call the ABN-Amro transactions. These are said to bear upon the question of refund to the estate of the amount of the moderated costs but the ABN-Amro matters had less to do with that than the costs claims. They may of course bear on the question of Commission. It seems, however, at least from the Bartier Perry bills, that some of the costs related to advice about the refusal of Brown to allow the proceeds of sale to be paid direct to Charles 67As I have said, the executors originally gave joint instructions for some of the shares held in the estate to be transferred in specie to Gillian and the balance sold (with a final date for sale of 27 February 2009), with the proceeds paid into a bank account of Charles. 68Charles was concerned about the market and wished the date to be extended. Brown had written to ABN-Amro on 5 December 2008 advising there was a dispute between the executors and requesting no further action be taken without the authority of both executors. 69However, it is what took place on 25 February 2009 that is significant. The two letters to Legal Life Planning and ABN-Amro, to which I have already referred, really brought about a stalemate in the affairs of the estate which ultimately resulted in Charles bringing his own proceedings for accounts. He said that the refusal of Brown to sign certain cheques unless his outstanding fees were paid and the threat to take proceedings to remove Gillian as an executor clearly showed a conflict between the interests of the estate and the interests of the solicitor, with Brown preferring his own interests. 70Brown's explanation of his conduct was that while of course he wanted to be paid, he was concerned about the financial position of the estate and considered there was a risk there would be insufficient funds to pay the estate's liabilities which would, of course, include his costs, if the proceeds of sale of these shares intended for Charles were not paid into the estate account. 71At that stage the position of the estate, leaving out the shares intended for Charles, was as follows: Assets Bank Account $ 72,393.00 Westleigh Street Property $480,000.00 $552,393.00 Liabilities Grasmere Street Mortgage $ 88,050.00 Westleigh Street Property $335,845.00 Other liabilities $ 90,063.00 $513,958.00 Balance $ 38,435.00 72Although at that stage the Westleigh Street property was still in the names of the executors, I consider it was reasonable for Brown to form the view there would be a risk if further distributions were made, although of course, if the proceeds of sale of shares intended for Charles were used to pay general liabilities that could result in Gillian having received an excessive distribution which could only be adjusted by the executors, if she did not cooperate, putting monies back into the estate by selling Neutral Bay and making the necessary adjustments from the proceeds of sale so as to bring about equal distributions of residue. 73To complete the story about the shares, Charles brought the proceedings to which I briefly referred - 2009/115291 - seeking an order that the shares be sold and the proceeds less $40,000.00 be paid to him. Shares were in fact sold and he received a distribution of $110,000.00 in October 2010, the balance being paid to the estate. Those facts are in evidence but the action was settled on terms not disclosed. Decision on Moderated Costs of Gillian 74As I have said, the hearing before me was conducted on the basis that the Registrar had accepted the accounts and had decided the moderation question which could not now be challenged. While that decision involved a finding that the costs incurred by Gillian were for the protection of the estate, it does not necessarily involve a finding that these or all of them were incurred through the actions of Brown. He did have an argument about termination of the retainer; and he never refused to provide an itemised account for his costs, that being the reason and only reason Gillian advanced for her decision to instruct Legal Life Planning. 75On the other hand, Brown's refusal to realise that he should not insist on continuing to act as solicitor, his wrongly including claims for executorial work in his bill of costs, and his claims for additional commission without proper explanation of the requirements for this allowance were reasons for continuing costs being incurred by Gillian. Both executors were at fault; Gillian should have had a face to face meeting with Brown before the positions became entrenched; and it is fair to say Gillian put considerable pressure on Brown during the first six months of the administration and I consider that for an estate where the administration did present difficulties quite reasonable progress was made in the 2008 year. Further, although there could be differing views on this, I do not consider the ABN-Amro matters themselves sufficient to justify an order against Brown. Costs are in the discretion of the Court although, of course, the discretion is to be exercised in a principled way. I do not think it reasonable to order Brown to pay the whole of the moderated amount, but having regard to the degree of his responsibility in this whole sad affair, I consider he should bear sixty five per cent of those costs in a figure amounting to $32,843.78. I will order he pay that amount to the estate. 76Question 2. I will leave question 2 to the end. 77Question 3. This is not pressed. If an answer were required, the answer would be "no". 78Question 4. Whether the second plaintiff should pay the costs of the defendant on the indemnity basis with respect to his summons seeking orders that the executors file and verify accounts. 79There is no basis for an order against Brown alone. It was in fact the fault of Gillian the accounts were not filed earlier as she had insisted on a condition that Brown personally bear half of the costs. Her solicitor, Mr Basha, refused to proceed on that basis. Charles was entitled to accounts and in the circumstances it was reasonable for him to commence proceedings. There is no basis for indemnity costs. I consider the proper order to be that the costs of all parties be paid out of the estate. The costs should not be very large as orders for accounts were immediately made by consent. 80Question 5. Who should pay the costs of these proceedings including the costs of the moderation before Senior Deputy Registrar Studdert and the costs of and incidental to the hearing on 30 and 31 October 2012 and, if so, on what basis? 81I will deal with this in two parts. Part 1: Costs Other Than Hearing on 30 and 31 October 2012 82In ordinary uncontested matters for the passing of accounts and allowance of commission, the Registrar assesses the costs of the Summons as a lump sum to be allowed out of the estate. In the present case there were additional costs incurred through the objections to the accounts filed by Charles, most of which were directed to the claims by Brown for costs which, while mostly unpaid, were moderated by the Registrar pursuant to the order of White J. Those objections were filed before the costs assessor made his decision on costs but that was not the fault of Charles. To some extent it was the fault of Gillian in allowing nearly twelve months to pass before filing the first bill for assessment. 83Brown was clearly pressing for allowance of his bills which included many items for executorial work. It was these items which were disallowed. Some of the objections were, I think, minor and trivial and substantial objections in respect of the costs of the charges of the brokers ABN-Ambro were not upheld. In general, the Registrar's decision conformed with that of the costs assessor. 84I should also say that the objections are so lengthy and so detailed that a vast amount of money must have been spent in preparing them, which should not necessarily be recovered from Brown. There were long submissions as to whether Brown should be responsible for the moderated costs, a matter probably not within the powers of the Registrar to determine. They are not in a form normal for objections to accounts. I should also point out that the Registrar would in any event have disallowed those items claimed by Brown for costs which were really claims to charge for executorial work. That followed from the charging clause in the will and also from the fact that a claim for commission was made on the Summons. However, Charles was entitled to object to the accounts and it was Brown who was putting forward his bills for payment. 85I consider that Brown should pay the reasonable costs of Charles on the objections to accounts. These costs should be assessed by the Registrar as a separate lump sum. Charles said in evidence his costs to date were in the order of $90,000.00. That is out of all proportion to the amounts involved although such costs do not relate only to the objections to accounts. The Registrar is the person best acquainted with the work involved with the objections. It is not a matter where there should be assessment under the assessment scheme by a costs assessor. 86Subject to that the Registrar should assess the costs of the executors on the passing of accounts excluding the objections but not on the application for commission and these should be paid out of the estate. 87Question 2 The plaintiffs' claim for commission. 88Both executors seek commission pursuant to s 86 of the Probate and Administration Act 1898 (NSW). Gillian submitted that Brown should get no commission on transferred assets but suggested both executors should receive commission on capital realisations and income collected. Charles submitted Brown should get no commission at all. 89The main arguments of Charles against Brown's claim were Brown's continued claims for commission when his costs charged included claims for executorial work, his continuing to insist that his firm could continue to act, and his actions in connection with ABN-Amro. I have discussed this third ground in paras [66]-[72]. While I accept Brown was concerned about his costs, I do not think an executor can be blamed for insisting the proceeds of sale of estate assets be paid to an estate account. It was not put that there was some agreement for partition binding Brown. There is no evidence there was any loss to Charles as a result of delay and the shares could have been sold at any time had Charles accepted that the proceeds would go to an estate account. This ground put forward to refuse commission is not made out but the other grounds did cause unnecessary difficulties in the estate which call for some reduction in the commission which would otherwise be ordered. This can best be accommodated in dealing with commission on transferred assets. 90There is no doubt both executors did a considerable amount of work in administering the estate and were put to pains and trouble, partly as a result of conflict with each other. It is not necessary to set this work out as it is detailed in the affidavits of the executors. I consider it proper to allow commission at the rate of two per cent on capital realisations of $295,110.00. So far as commission on income collections which amounted to $89,790.00 is concerned, a large proportion of the income collected was rent which was collected by agents who, of course, charged a commission I consider a proper allowance for commission on income is 3.5 per cent. So far as commission on transferred assets is concerned, Gillian can get no commission on the assets transferred to her: Langevad v Langevad; Estate E J Langevad (Unreported, Supreme Court of New South Wales, Hodgson J, 14 March 1997). She can, however, claim commission on assets transferred to Charles, as can Brown. The value of those assets transferred amounted to $295,157.00. I would allow commission at the rate of 0.5 per cent on that amount to the executors. That is reasonably generous as the major asset transferred was the interest in the Westleigh Street property and it does seem little attention was given to this transfer which has caused an imbalance in distributions. The practice has always been to award one sum in cases of multiple executors and not to split it between them so that these three amounts are awarded to the executors jointly. I accept that if no commission should be allowed to Brown the position could be different, but that is not the case here. The Court, in refusing to split commission has followed the decisions in Will of Holmes (1889) 15 VLR 734; Re Adams (1905) 24 NZLR 892 and Re Edmondson (1907) 26 NZLR 1404. Those decisions were based on wording similar to s 86 of the Probate and Administration Act 1898 (NSW). I consider they were correct and should be followed. In any event, there are good reasons to adhere to the practice as executors should be treated as one. 91So far as assets transferred in specie to Gillian are concerned these are the two real estate properties, the furniture, car and other personal property she took under the will and the shares which were transferred in specie as part of her share in residue. The total value of these transferred assets is $1,996,340.00. Gillian cannot claim for commission on those assets but in accordance with my decision in Walters; Re estate of Dibbs [2006] NSWSC 1277 Brown can be awarded commission separately on assets transferred to Gillian. It is here that I consider a reduction in what would otherwise be allowed should be effected. In determining this I do take into account the fact that by his actions he has caused unnecessary difficulties to this estate. He did not do all the work involved with the transferred assets and the broker did the work for the transfer of shares. Gillian, of course, performed some of the executorial work involved on transfer of those assets. Had both executors been entitled to commission an allowance of 0.5 per cent would have been appropriate. Bearing in mind the part Gillian played in the transfers and making some reduction for the difficulties Brown has caused the estate, I allow Brown commission of 0.2 per cent on assets transferred to Gillian. Can the Order for Commission Be Made? 92The balance of the credit of the estate as shown in the accounts is $76,278.42. From that will be deducted the unpaid moderated accounts of Gillian of $50,528.83 and there will be added back the amount which I have determined should be paid back to the estate by Brown in respect of the moderated costs amounting to $32,843.78. There will then be a balance in the estate account of approximately $58,593.00. From that amount will have to be paid the general costs of the passing of accounts as determined by the Registrar plus any costs of these proceedings I order be paid out of the estate and the costs of the original proceedings commenced by Charles. All these costs would have to be paid as administration expenses before any commission could be met. 93In view of the costs which I am about to deal with it may be unlikely that there will be any funds in the estate available out of which commission could be paid. It was held in Re Zyngol (1958) 75 WN (NSW) 241 that the Court cannot order commission if there are no assets left in the estate out of which commission can be allowed. The main reason that may be the position here is that the executors agreed to transfer the Westleigh Street property in specie to the beneficiaries. I should add that in doing so the executors may have brought about a situation where Gillian will have been overpaid and Charles underpaid their respective shares in the estate but Charles could have prevented this by not agreeing to the distribution in specie. All one can hope is that the beneficiaries will be able to adjust this between themselves. As it is not possible to ascertain at this stage whether or not there will be monies out of which commission can be paid it was accepted that I would determine what amounts I would have allowed for commission rather than have this await a separate decision at a later date. If there is some money available out of which commission can be paid but not enough to satisfy all amounts, that on realised assets and income and assets transferred to Charles in specie should be paid first. Question Five, Part Two: Costs of the Hearing on 30 and 31 October 2012 94The following are some preliminary views as the parties asked that there be further argument on costs. The issues that took time were issues 1 and 2. Gillian and Charles were in the same interest on issue 1 and have succeeded at least in part. 95Brown succeeded at least in part on issue 2. If the issues were treated separately he would probably have his costs on that issue out of the estate. Although Gillian is an executor and did not so strongly resist commission to Brown other than on transferred assets, it is not clear she should receive costs to the prejudice of Charles. On that basis there would be no costs order in respect of issue 2 other than that for Brown. 96The previous two paragraphs are to assist counsel in submissions. It is not desirable to make costs orders on separate issues if that can be avoided and the lawyers should consider how that can be avoided. Proposed Orders (1)Order that the accounts and the supplementary accounts in the estate covering the period from 15 April 2008 to 31 August 2012 be passed. (2)Order that the second plaintiff reimburse the estate for the sum of $32,843.78 being sixty-five per cent of the moderated costs allowed out of the estate to the first plaintiff. (3)Order that the second plaintiff pay the costs of the defendant on the objections to accounts and order those costs be assessed by the Registrar in a lump sum (4)Subject to order 3 order that the costs of preparing and passing of the accounts be assessed by the Registrar and paid out of the estate. (5)Order that the costs of all parties to the proceedings commenced as 115291 of 2009 be paid out of the estate. 97Order that subject to there being assets in the estate commission be allowed to the executors as follows: (a)To the executors at the rate of two per cent on capital realisations and at the rate of 3.5 per cent on income collections and at the rate of 0.5 per cent on assets transferred in specie to the defendant. (b)To the second plaintiff at the rate of 0.2 per cent on assets transferred in specie to the first plaintiff. 98I stand over the question of balance of costs to a date to be fixed. Final problem 99The Certificate of Correctness of Accounts shows a balance to the credit of the estate on 31 August 2012 as $85,300.05 "less an amount due to G B Shave of $9,021.91 leaving a net balance of $76,278.14 which is held as follows: For C E B Shave $47,680.28 For the two residuary beneficiaries C E B Shave & G B Shave $28,597.86" I do not know whether the moderated costs have been paid to Gillian but if not, it is possible that amount should be retained to ensure there is no further imbalance in distributions. The parties should consider this. ********** 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: 23 November 2012