Hawkins v Barkley-Brown & Anor [2010] NSWSC 48 (8 February 2010)

Last Updated: 5 May 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Hawkins v Barkley-Brown & Anor [2010] NSWSC 48
This decision has been amended. Please see the end of the judgment for a list of the amendments.

JURISDICTION:
Equity

FILE NUMBER(S):
115433/07

HEARING DATE(S):
3 September 2009 & 6 November 2009

JUDGMENT DATE:
8 February 2010

PARTIES:
Plaintiff/Respondent: John Hawkins
First Defendant/Applicant: Vicki Barkley-Brown
Second Defendant: Geoff Allars

JUDGMENT OF:
Slattery J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff/Respondent: Mr J E Armfield
Defendants/Applicant: Mr M D Broun QC & Ms E M Picker

SOLICITORS:
Plaintiff/Respondent: John Fisicaro & Co
Defendants/Applicant: Peter Dawson & Associates


CATCHWORDS:
PROCEDURE
registrar's assessment of commission for executor upon passing of first accounts
registrar awards commission under s 86(1) of the Probate and Administration Act 1898 expressed as a percentage of capital realised, income and assets transferred in specie
review of registrar's decision
award of percentage commission to executor is appropriate even in a large estate
no risk of double compensation where executor also involved in litigation on behalf of estate
executors' involvement in litigation part of executorial duties
assessment based on performance of executorial duties
hourly rate not necessary to calculate executor's commission
quantum of award given by registrar appropriate given the executor's 'pains' and 'trouble' in carrying out his duty

LEGISLATION CITED:
Administration and Probate Act 1890 (VIC) s 26
Charter of Justice 1823 s xvii
Probate Administration Act 1898 (NSW) s 86(1)
Uniform Civil Procedure Rules 2005 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Barkley v Barkley Brown [2009] NSWSC 76
Creer v Estate of Peters [2007] NSWSC 1291
Hall v Transport Infrastructure Development Corporation [2006] NSWSC 1076
In re Allan Mclean (Deceased) (1911) 31 NZLR 139
In re Barr Smith [1920] SALR 381
In the estate of Stone (deceased): Patterson v Halliday [2003] VSC 298
In the Will of Sheppard [1972] 2 NSWLR 714
In the Will of T.S. Douglas deceased (1951) 51 SR(NSW) 282
Macartney v Macartney [1909] VicLawRp 32; (1909) VLR 183
Re Craig (1952) 52 SR (NSW) 265
Re Smith (1916) 16 SR (NSW) 422
Re the Estate of D A Lindsay [2004] NSWSC 575
Re the Estate of Ghidella [2005] QSC 106
Tomko v Palasty (No 2) (2007) NSWCA 369

TEXTS CITED:
Keith Mason, Leslie G. Handler Succession Law and Practice NSW (1985) Butterworths
Eric Vance, Executors Commission (1969) Law Book Company

DECISION:
See paragraph [78] of the judgment.



JUDGMENT:


IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


SLATTERY J

MONDAY 8 FEBRUARY 2010

115433/2007 JOHN HAWKINS v VICKI BARKLEY-BROWN & GEOFF ALLARS

JUDGMENT

1 HIS HONOUR: These proceedings are commenced by way of notice of motion for review of a decision of Registrar Haggart made on 15 April 2009. The applicant on the motion is Ms Vicki Barkley-Brown, one of the beneficiaries of the estate of the late Rhonda Brenda Farrell. Ms Barkley-Brown is also an executor of Mrs Farrell’s will. The first respondent to the motion Mr Hawkins, is the other executor of Mrs Farrell’s will. The second respondent is the solicitor for the estate.

2 The Registrar’s decision on 15 April 2009 passed the executors first accounts for the period 17 December 2005 to 1 August 2007 and allowed Mr Hawkins commission at the rate of 1% on the capital realisations of the estate and 2% on the income of the estate. The Registrar’s decision also gave 0.5% commission on assets transferred in specie. Legal costs of filing and passing of the accounts of $3,250 “plus fees” were also allowed. An assessment has been undertaken by Mr Hawkins’ solicitors of the amount due to him from the award of commission. The Registrar’s award calculates out at a payment of approximately $61,000 to Mr Hawkins.

3 For the conduct of this review it is necessary to understand a little more of the background of the relationship between Mrs Farrell and the parties to these proceedings and matters concerning the administration of the estate.

4 Mrs Farrell, was born on 29 September 1911. She died on 17 December 2005 aged 94. At her death she left an estate which was assessed for probate at approximately $8.4 million. The estate comprised a house property, a substantial share portfolio and other investments together with cash at bank and a small amount of cash on hand. A fuller statement of the deceased’s assets is attached to the probate of her will.

5 Mrs Farrell’s last will is dated 8 September 2000. It is not necessary for the purposes of these proceedings to examine the provisions of the will in any detail. In summary though the will provides that the estate should be dealt with by giving 40% to Ms Barkley-Brown, the niece of the deceased and 20% to each of Ms Barkley-Brown’s two minor sons, and 20% to Ms Barkley-Brown’s oldest son, Paul Barkley.

6 The will did not contain a provision as to the remuneration of the executors. The will nominated three executors, Ms Barkley-Brown, Mr John Hawkins and Ms Norma Clark. Mr Hawkins was a long standing friend and adviser of the deceased. He is a retired Anglican minister in whom the testator had trust and confidence. Norma Clark renounced probate.

7 The origin of the present proceeding is an application by Mr Hawkins to pass accounts for the period 17 December 2005 to 1 August 2007 and for the assessment of commission. He applied to the Registrar for such orders by summons dated 6 September 2007. The form of the summons is the following:

“SUMMONS

RELIEF CLAIMED

The plaintiff claims

1. An Order that the Second Defendant prepare and file the administration accounts for the Estate of Rhoda Brenda Farrell (‘the Estate Accounts’) who died on the 17th December 2005.

2. An Order that the First Defendant join with the Plaintiff and file the Estate Accounts.

3. An Order passing the Estate Accounts covering the period from 17th December 2005 to 1st August 2007.

4. An Order allowing Executors Commission.

5. An Order permitting further time for the Executors to file the next accounts.

6. Costs.”

8 Mr Lawrence Nelson, the estate accountant, assisted in preparing the first accounts which were passed by the Registrar’s decision of 15 April 2009. The solicitor for the estate, Mr Geoff Allars of Vincent Love and Co filed the accounts.

9 The summons refers to an application for executors’ commission. The legal representatives for Ms Barkley-Brown claim that “we do not know how it has happened or arose but Registrar Haggart proceeded ultimately on the basis that only Mr Hawkins was seeking executor’s commission and that Vicki Barkley-Brown, the major beneficiary and the other executor was not seeking commission”. Ms Barkley-Brown submits in these pleadings that she has not indicated that she did not wish to be allowed any commission for her pains and troubles. The issue of whether or not Ms Barkley-Brown herself is entitled to commission is irrelevant to the questions which the Court now has to determine. She is entitled to make her own application for commission if so advised. This can be determined on a separate application. She did not press an application for commission in these proceedings. Nothing in the current application affects her right to claim commission on the passing of these accounts at a future time. I therefore put this issue to one side.

The Proceedings for an Account

10 There are wider disputes between Ms Barkley-Brown and Mr Hawkins in relation to the administration of the estate. On 9 August 2006 Mr Paul Barkley, commenced proceedings in this Court seeking an order for Ms Barkley-Brown to account for monies which he alleged were transferred to her during Mrs Farrell’s lifetime and that she now held on behalf of the estate after Mrs Farrell’s death (“the account proceedings”).

11 Mr Barkley sought to recover $982,304 in the account proceedings which he alleged was being held by Ms Barkley-Brown on behalf of the estate. The sum claimed was amended in the course of the proceedings. Ward J heard the account proceedings [Barkley v Barkley Brown [2009] NSWSC 76] late in 2008 and her Honour gave judgment on 24 February 2009. Her Honour found that Ms Barkley Brown and Mr Barkley should both account to the estate in the terms summarised in paragraph [186] of her judgment as follows:

“[186] I consider the appropriate orders would be for Mrs Barkley-Brown and Mr Barkley respectively to account to the estate for the benefits received by each of them (or their respective families) of the amounts in the respective categories I have identified above, by way of a deduction from any further distribution to them out of the estate of those amounts, plus interest thereon (and that the estate distribution should be calculated as if their share of the distribution was 2/5ths or 1/5th respectively out of the estate as notionally increased by the total amount for which account is to be given under those orders).”

12 The account proceedings were launched by Mr Paul Barkley and by Mr Hawkins. As a consequence of the account proceedings both Mr Paul Barkley and Ms Barkley-Brown were ordered to account to the estate.

13 The existence and conduct of the account proceedings is relevant to the application for the commission because the executors prepared for the account proceedings during the period for which the claim for commission is made. There are contentions on both sides about whether or not Mr Hawkins is entitled to include in his claim for commission any compensation for his efforts in relation to that litigation. These contentions are examined below.

The Legislative Framework

14 The legislative provision governing Mr Hawkins claim for commission is s 86(1) Probate Administration Act 1898 which relevantly provides:

“(1) The Court may allow out of the assets of any deceased person to the deceased person’s executor, ... in passing the accounts relating to the estate of the deceased person, such commission or percentage for the executor’s, ... pains and trouble as is just and reasonable, ....”

15 Ms Barkley-Brown makes no allegations in these proceedings that commission should be refused to Mr Hawkins by reason of any neglect or omission on his part. No criticism is made of him about his conduct of the administration of the estate or of the proceedings. The issues raised in the current action are essentially issues of legal analysis as to what kind of activity on the part of an executor will attract an award of commission, whether or not Mr Hawkins has engaged in that kind of activity and what is the appropriate quantum of commission for that activity.

The Admission of Fresh Evidence

16 Ms Barkley-Brown’s motion sought review of the Registrar’s decision of 15 April 2009. In support of the review Ms Barkley-Brown sought the admission of further evidence which was not before the Registrar. This evidence mostly concerned exchanges of correspondence between the parties that was not tendered before the Registrar. An initial procedural issue for determination was whether or not the Court was entitled to take into account that evidence. The Court took the evidence in but reserved for further argument and final decision of whether or not that evidence could be considered.

17 Ms Barkley-Brown argued that the Court could take the additional evidence into account and Mr Hawkins argued that it could not. Mr Hawkins’ argument was that the Court must be satisfied that the Registrar’s decision is affected by an error to such an extent that it should not stand: Creer v Estate of Peters [2007] NSWSC 1291 at [9]- [11] per Windeyer J. He argued that the Court has a discretion whether or not to accept fresh evidence which was not before the Registrar: Tomko v Palasty (No 2) (2007) NSWCA 369; (2007) 71 NSWLR 61 at [43]- [49]. He argued that in this case the Court should exercise its discretion to exclude material not before the Registrar and not to permit cross examination. To admit such evidence, it was said, would turn the application into a fresh hearing as opposed to a review of the Registrar’s decision: Hall v Transport Infrastructure Development Corporation [2006] NSWSC 1076 at [7]-[8].

18 Mr Hawkins justified exercise of the discretion to exclude this material because of Ms Barkley-Brown’s conduct in relation to the proceedings before the Registrar. It was said that she had ample notice of the application for commission but failed to file a notice of objection. She took no steps to defend the application for commission in the period of 20 months from September 2007 to May 2009. During the same period the parties were actively involved in the account proceedings.

19 I will take into account all the material read and tendered before me, even the material not before the Registrar. This result is compelled by both authority and the circumstances of this case.

20 The principles that apply to the conduct of a hearing of review by the Court of a decision by the Registrar on an application for executor’s commission were stated In the Will of Sheppard [1972] 2 NSWLR 714 by Helsham J.

(a) The review by the Court of the Registrar’s decision upon an application by an executor for commission gives the Court jurisdiction to review all aspects of the Registrar’s findings as well as his actual decision – jurisdiction is not restricted to cases where the Registrar has acted upon some mistaken principle (at 716G-717A).

(b) On the hearing of an appeal from or a review of a Registrar’s decision in relation to an application for executor’s commission the Court is entitled not only to all the matter available to the Registrar and the affidavit material in support of the appeal but also to any report from the Registrar made after the matters of appeal for review has been filed, setting out the Registrar’s reasons for his finding or order (at 717B-C).

21 Helsham J’s reasons in In the Will of Sheppard make clear that additional affidavit evidence on the appeal may be permitted.

The Motion for Review

22 Ms Barkley-Brown’s motion for review of the Registrar’s decision was brought under rr 49.19 and 49.20 Uniform Civil Procedure Rules 2005 (NSW). A review under these rules is not an appeal and is not subject to the restrictions that apply to appeals: Tomko v Palasty (No 2) [2007] NSWCA 369 at [6], [10], [50] and [52]. Ms Barkley-Brown does not have to demonstrate a material error of fact or principle in the Registrar’s decision under review: In the Will of Sheppard (1972) 2 NSWLR 714. The Court may make its own decision on the review on the basis of the material presented to it by the exercise of a fresh discretion as occurred for example in Re the Estate of D A Lindsay [2004] NSWSC 575.

23 Arguments were advanced before me that Ms Barkley-Brown had been denied procedural fairness before the Registrar. Given the nature of the discretion now being exercised I do not have to consider the validity of these arguments before embarking on this review. She is being afforded full procedural fairness now. In any event the Registrar’s reasons do demonstrate error of a different kind warranting a review. The Registrar’s report on his decision (Exhibit 5) shows that he ignored the account proceedings in the exercise of his discretion. For the reasons explained below, I do not think this is the correct approach.

24 It is now possible to turn to Ms Barkley-Brown’s principal arguments.

Applicable Principles of Law

25 The New South Wales Supreme Court has a long-standing jurisdiction to grant commission to executors. The original grant of jurisdiction was contained in the Charter of Justice 1823 s xvii, the form of which is largely reproduced in s 86(1) of the Probate and Administration Act 1898 and is as follows:

“It shall be lawful for the said Court to allow the executors or administrator of the effects of any deceased person (except as herein mentioned) such commission or percentage out of their assets as shall be just and reasonable for their pains and troubles therein.”

26 This jurisdiction is usually exercised on the basis that executors may charge by one rate of commission on capital and another rate of commission on income, rather than on a time charging basis. If, however the executor is a professional such as a solicitor or accountant, and the will permits the executor to charge professional fees to the estate, he or she is entitled to charge professional rates only for those tasks which are professional tasks: Re the Estate of D A Lindsay [2004] NSWSC 575 at [8]- [9].

Ms Barkley-Brown’s Contentions

27 Ms Barkley-Brown advanced three separate arguments in these proceedings. The first was an argument that the award of commission to an executor administering a large estate should not be calculated as a percentage of the estate ("the large estate argument"). The second argument was that commission awarded to Mr Hawkins should be reduced because of the particular functions that Mr Hawkins was performing in the administration of this estate. Her argument included that his executors’ duties were generally much reduced because other professionals were conducting litigation and general estate administration on his behalf (“the executors work argument"). Finally, Ms Barkley-Brown argued that the quantum of commission awarded to Mr Hawkins was too high measured by number of standards ("the quantum argument"). All these arguments are explained below as they were expounded by counsel. They are then analysed.

The Large Estate Argument

28 Ms Barkley-Brown’s large estate argument was that if close attention is given to the words of s 86 (1) it will be seen that an award of commission based upon a percentage is not appropriate for a large estate such as the present one. The reason for this, she argues, is that the Court’s provision of commission should be compensation, as the legislation says, for the executor’s “pains and trouble”. Compensation for “pains and trouble” is the whole basis for the assessment of some “percentage” commission. The argument is developed that in a large estate the relationship between compensation for “pains and trouble” and the awarding of commission on a percentage basis breaks down. The argument concludes that awarding commission on a percentage basis in large estates will tend to over-compensate the executor.

29 Ms Barkley-Brown submits that: the use of a percentage of the estate for awarding commission to the executor also turns the executor into a significant beneficiary; and that a percentage based system does not refer to the “pains and trouble” of the executor or what the executor actually did, as distinct from just linking the executor’s reward to the quantum of the estate.

30 It was submitted on behalf of Ms Barkley-Brown that the registrar’s award under s 86 (1) should be designed or calculated to compensate the executor, Mr Hawkins for actual “pains and trouble”, namely what he did and what his efforts were on behalf of the estate, rather than merely reaching a figure as a function of the total value of the estate.

Analysis of the Large Estate Argument

31 There are a number of difficulties with the large estate argument. Because of these difficulties I do not accept it. The argument does not take proper account of the wording of s 86 (1). Authority has already commented adversely on the argument. Nor does the large estate argument give sufficient credit to the practical exercise of the discretion to award commission empowered by s 86 (1).

32 The large estate argument conflicts with the direct command of s 86 (1). The legislation permits the Court to fix a percentage commission on account of “pains and trouble”. The idea that a percentage cannot be fixed for “pains and trouble” in particular sized estates is inconsistent with the terms of s 86 (1), which allows an executor’s "pains and trouble" to be expressed as a percentage of the estate.

33 The large estate argument seeks to constrain a power which is given in an unconstrained form by s 86 (1). Section 86 (1) says that the Court may allow out of the assets of the deceased “such commission or percentage for the executor’s,.....pains and trouble as is just and reasonable” (emphasis added). This combination of words means that the “percentage” that is fixed by the Court is “for”, that is it may bear a relationship to, the executor’s “pains and trouble”. The legislation itself contemplates that the percentage selected shall be selected by the Court because of the Court’s assessment of the executor’s “pains and trouble”. The selection of a particular percentage (as distinct from some other percentage) is the way the legislation contemplates that the Court will recognise a proper relationship between the amount of “pains and trouble” of the executor and the amount received by the executor in compensation. Although Ms Barkley-Brown may argue that the relationship between percentages of the estate and "pains and trouble" lacks rigour, it is a relationship created by the very words of s 86 (1).

34 There is also a false assumption within the large estates argument. The argument seems to assume that a fixed percentage of the estate cannot ever be more than a very diffuse measure of “pains and trouble”. This must be so, so the argument seems to assume, because in a large estate the executor will get more and because the executor is therefore being compensated just for the size of the estate rather than for “pains and trouble”.

35 The problem with this assumption is that it neglects two matters. It firstly neglects the moment of the actual exercise of the discretion in which the Court fixes the percentage. In exercising that discretion in a large estate, the Court can take into account the fact that if the executor’s “pains and trouble” have indeed not been very great, that a commission awarded as a percentage of the estate, which may be appropriate for a small estate, can be adjusted downwards for a large estate. As Helsham J explained in In the Will of Sheppard [1972] 2 NSWLR 714, in setting commission the Court does take into account the indirect effect on the calculation of commission from the size of the estate. But as his Honour explained, the size of the estate does not require any a priori limitation upon the rate of commission to be allowed:

“There may be of course again an indirect effect again by reason of the size of the estate. It may be that activities resulting in an allowance of commission in the period covered by one set of accounts might render very much easier and less onerous the remaining work to be done in connection with the realisation of the estate. But this would be taken into account in assessing the work value when the subsequent accounts are being passed and the commission allowed, and it seems to me that the mere fact that the estate is of a particular size is not a factor which requires any a priori limitation upon the rate of commission to be allowed.”

36 The assumption also neglects the diseconomies of scale which can arise in large estates. An executor may have to discharge a much increased human and administrative burden in a large estate. Such estates can bring with them factors such as greater complexity of administration, more sophisticated and argumentative beneficiaries, and a greater risk of litigation. Such factors in larger estates may require the appointment and retention of executors with special qualities who have the confidence of the testator. A larger award of commission may be warranted as the reward for the discharge of an executor’s duties in the more active circumstances of the administration of a large estate.

37 This precise problem, of the hazards of calculating a proper percentage reward for the executor or of the larger estate was considered by Buchanan J in In re Barr Smith [1920] SALR 381. As Helsham J observed in In the Will of Sheppard (at 721C) there is much force in Buchanan J’s statement In re Barr Smith (at 388) about the problem:

“Under any percentage scale... the allowance in respect of an abnormally large estate, although in itself considerable, will, in relation to the size of the estate, constitute a lighter charge than in the case of a small estate. Nor is it to be overlooked that in estates of exceptional magnitude one finds the testator or settlor as a rule selecting as trustees persons accustomed to large affairs, possessed of more than ordinary experience and acumen, who may well earn, with advantage to their trust estate, what at first blush might have the appearance of being an extravagant reward.”

38 Mrs Farrell selected Mr Hawkins to be one of her executors. Although it could not be said that he was a person "accustomed to large affairs", his life as a member of the clergy is likely to have given him "more than to ordinary experience and acumen”. His evidence before me displayed that quality. Importantly his experience was such that Mrs Farrell entrusted him with the joint administration of her substantial estate. Early last century Buchanan J recognised that executors in his position, who are given a percentage of the income and capital of the estate, may too easily attract criticism for earning what some others might see as an "extravagant reward". Buchanan J emphasised that although executors in larger estates are not awarded commission just for their experience and good judgment, they are being rewarded for their actions in deploying their experience and good judgment to the advantage of the estate.

The Executor’s Work Argument

39 The executor’s work argument took various forms. Through this argument Ms Barkley-Brown contends that Mr Hawkins cannot claim commission for much of the work that he actually did as executor in this estate. The event which dominated the period covered by the passing of the first accounts was preparation for the account proceedings. Ms Barkley Brown submits that none of the work that Mr Hawkins did in relation to the account proceedings was executor’s work.

40 Mr Hawkins’ evidence in support of his claim for commission includes a description of the work he actually did for the estate in initiating and conducting the account proceedings in the general list of the Equity Division of this Court. The period for which the claim for commission is made (17 December 2005 to 1 August 2007) substantially overlaps with Mr Hawkins’ involvement in the account proceedings. Ms Barkley-Brown argues that the Registrar’s exercise of discretion in fixing Mr Hawkins’ commission miscarried because the Registrar appeared to take into account Mr Hawkins’ conduct of the account proceedings when this was a legally impermissible course. Through her counsel Ms Barkley-Brown puts the executor’s work argument in several different ways.

41 First Ms Barkley-Brown argues that there is a problem with overlapping compensation. She says that Hawkins’ work on the account proceedings should be treated as a matter of costs of those proceedings rather than as compensation by way of commission, otherwise there is a risk of double compensation.

42 Ms Barkley-Brown also seeks to examine Mr Hawkins’ role in the account proceedings. Ms Barkley-Brown points to the peculiar nature of his involvement in those proceedings. She says that Mr Hawkins joined with Mr Barkley as a plaintiff in the account proceedings but that he did not seek any benefit for himself from those proceedings other than in costs. Ms Barkley-Brown’s contention in the account proceedings was that Mr Hawkins was not a necessary party to those proceedings as the Court held that Mr Barkley was entitled to bring the account proceedings himself as a beneficiary. The argument in these proceedings is that because Mr Hawkins was not a necessary party to the account proceedings his work associated with the account proceedings was done not as an executor but as a witness, work for which should not be rewarded in commission.

43 Ms Barkley-Brown points out that although Mr Hawkins was found not to be a necessary party to the account proceedings, he did become a witness in the action. Because of his friendship and close association with Mrs Farrell he was able to give evidence about her capacity to understand financial transactions and matters associated with her estate at various times leading up to her death. Ms Barkley-Brown submits that Mr Hawkins did not become a witness of fact in the account proceedings as to the amounts alleged to be due to the estate by Ms Barkley-Brown and Mr Barkley. In those circumstances, Ms Barkley-Brown says that he was not fulfilling any executorial function whatsoever through his involvement in the account proceedings. This, it is said, leads directly to the Registrar’s error in assessing the amount of compensation for Mr Hawkins by way of commission.

44 In the executor’s work argument Ms Barkley-Brown also invites examination of the schedule of work that Mr Hawkins claims he did. The larger items in the schedule relate to the account proceedings including participating in conferences with counsel, with Mr Henshaw the solicitor acting for Mr Barkley and in attendances at Court. It is said that as none of this work actually related to Mr Hawkins’ executorial functions, but rather to his functions as a witness in the account proceedings, which was really just litigation between Mr Barkley and Ms Barkley-Brown, that the award of commission of approximately $61,000 for his “pains and trouble”, is a “remarkable amount”.

45 Finally, Ms Barkley-Brown argues that Mr Hawkins has not advanced an hourly rate to justify the amount of compensation for work that he did. It is true that before the Registrar Mr Hawkins did not rely upon the calculation of an hourly rate and a number of hours for his work. The reasons for this will become the subject of separate comment below.

Analysis of the Executor’s Work Argument

46 Analysis of Ms Barkley-Brown’s executor’s work argument demonstrates that its reasoning is invalid in a number of respects.

47 The risk of double compensation. There is no appreciable risk of double compensation between the award of executor’s commission in this case and any award of costs in the account proceedings. This is because any award of costs in the account proceedings would be to compensate lawyers and other professionals involved. It is easy to distinguish Mr Hawkins work from such awards as he has no comparable professional expertise.

48 The authorities make clear that professional charges in the conduct of legal proceedings on behalf of an estate should be compensated separately from the “pains and trouble” of an executor in discharging executorial duties relation to such proceedings. The authorities recognise the distinction between the two for all types of executor’s work, whether in relation to legal proceedings or otherwise: In the Will of Sheppard [1972] 2 NSWLR 714, at 720A-D. If the distinction is kept in mind the risk of double compensation should be minimal.

49 The rules for executor professionals and commission are clear. Generally the amount allowed against the estate for the rendering of professional services in connection with its administration would not be a matter affecting the quantum of commission to be allowed, and this is so whether the professional services are rendered and charged for by the executor or by some stranger to the estate: In the Will of Sheppard [1972] 2 NSWLR 714, at 720A. Where the terms of the will allow the executor to recover for non-professional and professional work at the executor’s professional rates and when non-professional charges are allowed out of the estate, the amount of the non-professional charges must be taken into account in fixing the quantum of the commission, so that the estate does not pay twice in respect of the same work: In the Will of T.S. Douglas deceased (1951) 51 SR(NSW) 282, Re Smith (1916) 16 SR (NSW) 422, at 425 and Eric Vance, Executors Commission (1969) Law Book Company at [143]-[144]. Likewise professional work done by an executor and not charged against the estate as professional fees may be taken into account in as a reason for increasing the allowance of commission: Re Craig (1952) 52 SR (NSW) 265.

50 The distinction between the supply of professional services and performing executor’s duties usually arises in relation to general estate administration unconnected with litigation. Although the receipt of money into and out of the estate may principally be conducted through retained solicitors, accountants or property professionals, the executor’s actions in selecting, co-ordinating, dealing with and making decisions in relation to the advice of these professionals are relevant factors for the Court to take into account in the setting of commission. The discharge by professionals of substantial duties that could otherwise be discharged by an executor does not mean that executor is thereby not entitled to commission for the discharge of related executorial duties: Re the Estate of Ghidella [2005] QSC 106 at [15] and Macartney v Macartney [1909] VicLawRp 32; (1909) VLR 183.

51 In Macartney v Macartney [1909] VicLawRp 32; (1909) VLR 183 the Supreme Court of Victoria was considering a challenge to an award of the maximum allowable commission under s 26 Administration and Probate Act 1890 (VIC), a provision in relevantly similar terms to section 86 (1). Counsel in that case submitted that commission is paid for the trustees "pains and trouble" and not for their responsibility and that where the trustees have employed others to take practically all the "pains and trouble" (in that case in collecting rent) they should not be allowed the maximum percentage commission which would only be given in cases where the trustees have done all the work themselves. Despite the delegation of the work of rent collection to others in that case, Hodges J declined to interfere with the award of the maximum commission of 5% because of the range of administration work actually done by the trustees.

52 In Re the Estate of Ghidella [2005] QSC 106 at [15] the Supreme Court of Queensland was considering an executors’ claim for close to the maximum allowance of commission of 5% on income and 3% on corpus. Because the receipt and dispatch of money into and out of the estate in question were largely left to the retained solicitors, Jones J was not prepared to award the maximum commission. Nevertheless he did not deny the executors commission. Jones J looked at their actions overall including their actions in the supervision and maintenance of estate property which necessitated activity and care on the part of the executors and used this, at [15], to guide his selection of the appropriate percentage.

53 In the assessment of executors commission, litigation is treated in much the same way as any other estate asset or liability which needs to be administered. An executor may be compensated through an award of commission for his role as executor in an atmosphere of hostility and stress generated by litigation: In the estate of Stone (deceased): Patterson v Halliday [2003] VSC 298 at [27] - [34]. The fact that the executor is involved supervising the professionals involved in the litigation to maintain the estate's interests in the litigation is a relevant consideration in assessing the proper percentage commission, provided the litigation is a necessary step in the administration of the estate.

54 Mr Hawkins’ role as an executor of Mrs Farrell’s estate cannot easily be confused with the roles of other suppliers of professional services. Mr Hawkins is a retired clergyman who has no qualifications as a solicitor or accountant that might assist the estate with professional services to support the litigation. But he is not disentitled from claiming commission for his involvement in the litigation merely because solicitors were engaged to conduct it. Just how his involvement should be assessed when fixing commission is discussed below under the heading "The Quantum Argument".

55 Another answer to the alleged double compensation problem is that it is an issue that can be taken into account in the exercise of the costs discretion in the account proceedings themselves. If there is a concern that a risk of double compensation remains, the potential for it to occur can be avoided by the parties pointing out to the Court on the costs assessment that the executor has received commission. I now examine Ms Barkley-Brown’s next way of putting the executor’s work argument.

56 Mr Hawkins not a necessary party. Ms Barkley-Brown contends that because Mr Hawkins was not a necessary party to the account proceedings he is not now entitled to commission. This contention is invalid for several reasons.

57 The contention is at odds with the parties’ approach to the litigation before Ward J in the account proceedings. Her Honour was not asked to consider any challenge to the constitution of those proceedings: Barkley v Barkley Brown [2009] NSWSC 76 at [9]. Her Honour recorded (at [7] and [8]) that there had been such a challenge during a strike out application before Macready AsJ. The result was that Mr Barkley was left as a plaintiff and the two executors remained on opposite sides of the record, Mr Hawkins as a co-plaintiff and Ms Barkley Brown as the defendant. Her Honour was not asked to consider and did not find that Mr Hawkins was not a necessary party to the account proceedings.

58 Upon advice Mr Hawkins chose to become a party to the proceedings in his capacity as executor of the estate. Ward J did not criticise his decision to be joined as a party in his capacity as executor. Nor did her Honour find that such joinder should not have occurred. Rather her Honour was asked to grant relief in accordance with prayer 1A of the third amended statement of claim: Barkley v Barkley Brown [2009] NSWSC 76 at [9]. Prayer 1A sought an order that Ms Barkley-Brown account to Mr Hawkins and to herself in their capacity as executors of the will of the deceased in respect of the monies in issue. The advantage of the joinder was that it could not later be disputed by any other parties that the estate was both bound by and would have the benefit of the result of the proceedings. This reduced the risk of multiple proceedings.

59 Ms Barkley-Brown’s contention about Mr Hawkins not being a necessary party to the account proceedings, addresses itself only to a hypothetical situation, not to what Mr Hawkins actually did. Commission is assessed on the basis of the executor’s actual “pains and trouble”, being the responsibility anxiety and worry (“the pains”) and the actual work done (“the trouble”): In re Allan Mclean (Deceased) (1911) 31 NZLR 139 at 144. What he might have done but chose not to do is irrelevant unless it is used perhaps to set a standard for some kind of misconduct on his part. In this case counsel for Ms Barkley Brown made it clear that he was not alleging misconduct in the administration of the estate against Mr Hawkins: T72/47 – T73/19. If Mr Hawkins made the choice, for which Ward J does not criticise him, of becoming a party to the account proceedings on behalf of the estate, any commission payable to him should be assessed on the basis that this is what he actually did. His actions as an executor in the account proceedings are relevant considerations in the assessment of commission. The fact that he might have chosen not to become involved in the proceedings is beside the point.

60 Mr Hawkins’ functions especially in the litigation. Ms Barkley-Brown’s next point is based on the observation that the burden of conducting the account proceedings was borne by Mr Barkley and his solicitors and counsel. It is also said that Mr Hawkins had no cause to exercise any skill judgment or professional responsibility in respect of realisation and collection of the estate through the account proceedings or otherwise. Mr Hawkins’ role was characterised as that of “an amateur”. His sole role was to give evidence about the mental capacity of the deceased, in support of Mr Barkley’s case. It is said this is not an executorial duty.

61 That the principal burden of conducting the account proceedings was being borne not by the estate but by Mr Barkley in the short term was an advantage to the estate flowing from Mr Hawkins’ decision to participate in the proceedings as the estate’s representative. He could as a party quickly preserve the interests of the estate, if the course of the litigation required his intervention but without taking on the full load of conducting it. It is difficult to see why such an essentially prudent decision in the interests of the estate should now be said to have the consequence that he was not fulfilling executorial duties in relation to the account proceedings. The account proceedings were necessary to complete the administration of the estate in accordance with Mrs Farrell’s will, so that the correct distributions could be made to the beneficiaries.

62 Mr Hawkins presence at Court, his involvement with the solicitors and counsel for Mr Barkley, and his giving evidence in support of a case for augmenting of the assets of the estate, can all be characterised as the discharge of executor’s duties. If the account proceedings had been conducted by the estate against a third party who was not a beneficiary Mr Hawkins would equally have had to attend Court, instruct legal representatives and possibly give evidence to discharge his duties as executor in relation to such litigation. Merely because the legal momentum of the proceedings is being driven by a co-plaintiff does not mean that Mr Hawkins’ functions as an executor in relation to the litigation disappear.

63 The Lack of an Hourly Rate. Ms Barkley-Brown next argues that Mr Hawkins should have produced an hourly rate for his work which multiplied by the number of hours of that work, could be used to calculate a lump sum due to him.

64 This argument is depleted by two considerations. First, the Court’s power to award a ‘commission or percentage’ under s 86 (1) is not limited by any statutory requirement that the commission must be justified according to a schedule of rates and hours. The authorities recognise this. The Court awards commission for the discharge of executors duties without such a calculation even to executors who apply professional expertise which can be measured at market rates: In the Will of Sheppard [1972] 2 NSWLR 714, at 721D-F.

65 Second, where an executor has no relevant professional qualifications for which an hourly rate would be appropriate, it is unreasonable to expect the executor to have to justify his commission by reference to a non existent market rate. How does one value in money the skill of a retired member of the clergy? His qualifications do not easily call to mind an appropriate market rate of remuneration. The very qualities that attracted Mrs Farrell to choosing him as her executor, given his knowledge of her family and her affairs together with the special outlook he brought to the role as a retired clergyman, are all qualities which cannot readily be measured by an hourly rate. The argument that to justify an executor’s commission an hourly rate must be used, seeks to reduce the exercise of a subtle discretion to mere market economics. I do not accept that an hourly rate must be used to calculate commission.

The Quantum of the Award

66 The Registrar’s award allowed commission at the rate of 1% on capital realised, 2% on income collected and 0.5% on assets transferred in specie.

67 I accept the argument advanced on behalf of Mr Hawkins that the rate of commission allowed by the Registrar having regard to the size of the estate and the work done were well within the proper exercise of his discretion. But as I have indicated above I am approaching this matter as a fresh exercise of discretion. In my view, exercising that discretion afresh I would fix commission in this matter at the same rate as that fixed by the Registrar for the following reasons.

68 First, my award and that of the Registrar appropriately reflect the rates of commission commonly allowed. These are described in expert probate texts: Keith Mason, Leslie G. Handler, Succession Law and Practice NSW (1985) Butterworths at [1441.1.1.3]. The ranges of commission awarded in practice are:

(a) From 0.25% to 2% on capital realisations;

(b) From 2% to 4% on income collections;

(c) From 1% to 2% on assets transferred in specie.

69 The allowance I make, which is the same as the Registrar’s allowance, (of 1%) on capital realisations is towards the bottom of the usual range. The allowance I make with respect to income collected (2%) is also at the bottom of the usual range. The allowance I also make in respect of assets transferred in specie (.5%) is below the bottom of the usual range. Measured against common practice none of the components of this award appear excessive. A figure somewhat below or towards the bottom of the usual range is appropriate in this case given the arguments advanced by Ms Barkley-Brown about the delegation of some of Mr Hawkins’ work to professionals.

70 Secondly, I accept Mr Hawkins submission that an allowance of commission in the range $10,000 - $15,000 is “totally inadequate” when contrasted with usual awards in simpler cases. Even where the estate in administration was relatively uncomplicated, the courts have allowed commission at the rate of approximately 1%: Re the Estate of D A Lindsay [2004] NSWSC 575 per Campbell J at [15]. In circumstances where executors delegated the whole function of the receipt and the transmission of money into and out of the estate to retained solicitors, commissions of 1.5% on income and 2% on capital were awarded: Re the Estate of Ghidella [2005] QSC 106. When contrasted with these cases, the award I propose to make does not seem excessive.

71 Thirdly, Ms Barkley-Brown’s position that the appropriate award of commission is $10,000 - $15,000 cannot be justified on the grounds that she advances. When the Court put to Ms Barkley-Brown what the basis of her figure was (T59/11 – 35), no clear formula emerged in response to justify such a low range. Ms Barkley Brown had clearly thought about the issue and gave reasons for this range. She suggested that Mrs Farrell had given legacies of $5,000 to each of three executors named in her 1995 will. She has notionally adjusted these legacies upwards to the range of $10,000 - $15,000 for the change since 1995 and taken account of the small amount of work she thinks Mr Hawkins actually did. The problem with her approach is that the superseded 1995 will is not the correct starting point. There is no confirmation in evidence that the figure of $5,000 was a soundly based estimate of what executor’s commission on this estate should have been in 1995. Also, Ms Barkley Brown would only acknowledge that Mr Hawkins work involved having three or four meetings to sign documents and signing a few cheques. This executor’s work involved more than this.

72 Fourthly, I accept Mr Hawkins evidence about the range of work that he did as executor. It was more than signing a few cheques and attending a few meetings. Much of it was to do with the account proceedings. Involvement in an atmosphere of litigation and the general stress involved in discharging an executor’s duties are relevant consideration in the exercise of the Court’s discretionary power to fix commission: In the estate of Stone (deceased): Patterson v Halliday [2003] VSC 298 at [27]- [34]. The extent of Mr Hawkins work was set out in Annexure ”A” to his affidavit in support of his application for commission sworn 24 June 2008. The contents of Annexure “A” present a very different picture to the description of Ms Barkley-Brown that she and Mr Hawkins were only engaged in a few meetings and signing a few cheques. Annexure “A” covers the period 27 January 2006 to 19 May 2008. The following matters in Annexure “A” are of particular significance in relation to the setting of Mr Hawkins’ commission.

(a) He had extensive contact with the beneficiaries and their legal representatives in relation to distributions and disputes about distributions and about the initiation of the account proceedings.

(b) There are regular entries in relation to ordinary items of estate administration including finalisation and approval of tax returns; dealing with banks; checking upon the extent and disposition of the property of Mrs Farrell; passing on or responding to correspondence about the estate; dealing with capital gains tax issues in relation to Mrs Farrell’s extensive share portfolio; and discussions with beneficiaries about the timing and application of distributions to them.

(c) Mr Hawkins has regular dealings with Mr Allars, the solicitor for the estate, in relation to legal aspects of the administration of the estate.

(d) There is detailed contact with the legal representatives of Mr Barkley in relation to the account proceedings.

Something is done in one or other of these categories every few days by Mr Hawkins during the period for which commission is claimed. I ignore for present purposes Mr Hawkins contact with his own solicitor Mr Fisicaro in relation to his own claim for commission. The picture presented by Annexure “A” is of an executor who has been busy and diligent during the period in respect of which commission is claimed.

73 Fifthly, I place particular emphasis in selecting the rates of commission that I have in this case on the “pains” that Mr Hawkins suffered in his role as executor. The expression “pains” includes responsibility anxiety and worry: In re Allan Mclean (Deceased) (1911) 31 NZLR 139, at 144. For Mr Hawkins the “pains” were intense at times. I accept his evidence that his work as executor was stressful. Much of his stress related to the conduct of the account proceedings but it also arose from the ambient general hostility existing between the various parties. He accepted that the whole situation was also stressful for Ms Barkley Brown. He thought that the litigation should not have been happening at all in Mrs Farrell's estate. His stress was also triggered by being executor for the first time and attending to all the matters that were needed in relation to the litigation (T69/3 – 37). Even Ms Barkley Brown was prepared to acknowledge from the other side of the account proceedings that Mr Hawkins "would have a little bit of stress but not as much stress as I had, no, no way." She was "very stressed out by it all". This is also an indirect indicator of what he was going through. Given his background, given his knowledge of Mrs Farrell and given the nature of the allegations in the account proceedings of Ms Barkley Brown's failure to account, I find that his involvement with the administration as well as the account proceedings was a particularly anxious time for him.

74 Sixthly, Mr Hawkins’ work and particularly his involvement in the account proceedings was beneficial to the estate. Ward J made orders for Ms Barkley Brown and Mr Barkley to account to the estate for the benefits received by each of them or their respective families of very substantial sums of money. The account was ordered to be by way of a deduction from any further distribution to them out of the estate of those amounts plus interest thereon. Her Honour’s orders, which determined the dispute between the parties to the account proceedings, were essential for the proper administration of the estate in accordance with Mrs Farrell's will.

75 Finally, it is useful to look globally at the effect of Ms Barkley-Brown’s submissions. Her contention is that on an estate of $8.4 million that commission of only $10,000-15,000 should be allowed on these first accounts. The allowance of commission only at the rate of 0.12%-0.18% on an estate of this size, given the work that Mr Hawkins actually did, risks being characterised as parsimonious. It does not give proper recognition to the real “pains” Mr Hawkins endured and his “trouble” in the discharge of his duties, including monitoring the account proceedings from the estate’s perspective.

76 Although I am exercising a fresh discretion and not reviewing the Registrar's decision, some reconciliation of our two approaches is called for. The Registrar said in his report on fixing the commission that he did not take the account proceedings into consideration in determining the rate of commission. I have accepted the submission put on Mr Hawkins’ behalf that on the authorities this may not have been a correct approach. Nevertheless I have found the same rate of commission should be awarded for each of the components of capital, income and assets transferred in specie. The additional consideration of Mr Hawkins’ work in instructing solicitors attending the hearing and subjecting himself to the stress and anxiety of the proceedings would tend to lift the award of commission. However, as Ms Barkley Brown submits, some account needs to be taken of the overall amount that Mr Hawkins should receive as a percentage a relatively large estate. Because of such considerations I am not inclined to raise the total amount awarded to Mr Hawkins beyond the figure I have selected.

77 Mr Hawkins’ submissions before me sought to account for Ms Barkley Brown's application for review of the Registrar’s commission decision as the result of her dissatisfaction with the outcome of the account proceedings. The motives for bringing of these proceedings are not relevant to the issues have to determine. However, I have found that Ms Barkley Brown expressed a firm view that $10,000 - $15,000 was the proper range of commission for Mr Hawkins in this case. Although I have found that view was without foundation, it appears to me to be genuinely held and was consistent with the case that her counsel put on her behalf.

Conclusion

78 Accordingly I allow the review of the Registrar’s decision. However in re-exercising the applicable discretion on this review I come to the same conclusion as the Registrar did about the proper award of commission to Mr Hawkins. I direct the parties to bring in short minutes to give effect to these reasons. I will hear submissions on questions of costs at a time to be appointed.

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AMENDMENTS:


04/05/2010 - Change to date of registrar's decision - Paragraph(s) 1,2,8 &16


LAST UPDATED:
4 May 2010