Refusal of Executors Commission – LexBlog

It is typical for the administration of an estate to be completed within one year of the deceased’s death, a period commonly referred to as the ‘executor’s year‘. This timeline, however, can vary based on the complexity and extent of the deceased’s assets and potential claims against the executor. 

Selecting an executor is an important decision for anyone drafting a Will, and accepting the role is a significant responsibility for the appointed executor. Executors and administrators have multiple duties regarding the Estate of a deceased individual, which encompass:

• Arranging for the funeral and burial (or cremation) of the deceased; 
• Securing a grant of administration if needed for the effective management of the Estate; 
• Gathering the deceased’s assets (which often necessitates a detailed investigation into their financial affairs); 
• Evaluating and resolving the deceased’s debts, along with funeral and estate administration expenses; 
• Addressing any claims made against the deceased’s Estate; 
• Distributing the deceased’s assets according to the instructions in their Will; 
• Managing any testamentary trusts established in the deceased’s Will as a trustee and 
• Maintaining records related to the Estate’s administration.

An executor’s broad responsibilities

Each State and Territory has a provision allowing executors to seek a commission or compensation for the executor’s efforts in managing the Estate. 

Section 65 of the Administration and Probate Act 1958 (Vic) provides executor commission in suitable situations. Consideration of executor and trustees commission has been in place since colonial times. The New South Wales Supreme Court through the Charter of Justice, is empowered to grant “any executor” a percentage of a deceased person’s assets deemed “just and reasonable, for their efforts and troubles.” Furthermore, in most cases the trust instrument itself (the Will) anticipates a “fee for the administration of (the) Estate” for the executor.

The strict principle that a fiduciary is not allowed to benefit from their trust has two main objectives:

• (1) to require the fiduciary to report any gains made at the trust’s expense, and
• (2) to guarantee that fiduciaries act with a level of integrity that surpasses that of the average person.

Executor commissions may act as an exception to the rule prohibiting a fiduciary from profiting from their position as executor or trustee. However, the Court accepts an application in specific circumstances and under thorough scrutiny.

The courts meticulously assess these agreements, maintaining a stance of ‘high caution and scepticism’ concerning their enforcement. They quickly dismiss any hint of inequity or unfairness and ensure a fair and just outcome.

A fiduciary must account to those they owe an obligation for any advantage or profit obtained in scenarios with a significant risk of conflict or where the benefit arises directly from the fiduciary’s position.

Re the Estate of Diana Noelle Whiteman (deceased)[2024] VSC 793 

Diana Noelle Whiteman (the deceased) died on 15 February 2023. The deceased’s last Will, dated 20 May 2019 (Will), named David Fothergill (the first plaintiff), senior partner at the firm Hunt McCullough Kollias & Co (HMCK), as executor of the Estate. The first plaintiff is married to the deceased’s second cousin and, with his wife, is a beneficiary of the Estate. Erica Horsfield (the second plaintiff) is a solicitor at HMCK and serves as co-executor of the Estate. The executors (the first and second plaintiffs) received a grant of probate on 23 June 2023.

The Will

Clauses 4, 5, and 6 provide relatively modest specific gifts to 

• Jean Audrey Whiteman ($15,000), 
• Sally Rushton ($20,000), and 
• The Pastor oversees St Peter’s Anglican Church, Mornington ($15,000).

Clause 7 divides the residue of the Estate into ten equal parts. It directs two parts to each of David Whiteman Callaghan, Richard James Alexander Callaghan, Clair Thomasina Whiteman, David William James Fothergill and Jane Fothergill.

On 15 February 2023, the deceased Estate included:

• (a) a unit located in Koorootang Village Retirement;
• (b) a refundable accommodation deposit at BlueCross, ‘The Mews’ in Canterbury;
• (c) cash kept in bank accounts and
• (d) a share portfolio overseen by Bell Potter.

Executors & Trustees Commission 

Section 65 of the Administration and Probate Act 1958 (Vic) states:

Executors’ Commission

• (1) It is permissible for the Court to grant, from the assets of any deceased person, a commission or percentage to the executor, administrator, or trustee currently appointed, not exceeding five per cent, for their efforts and duties, as deemed just and reasonable. In this context, “executor” encompasses the executor of an executor who, through representation, becomes the executor of the original Estate. 
• (2) Notwithstanding subsection (1), the commission or percentage permitted by the Court concerning a licensed trustee company must not exceed the rate that a licensed trustee company can charge under Chapter 5D of the Corporations Act.

Section 77 of the Trustee Act 1958 (Vic) states:

Commission permitted to a trustee of a settlement.

It is lawful for the Court or an Associate Judge of the Court to authorise a commission or percentage from the trust funds to the trustee of a settlement, not exceeding five per cent for their efforts and duties, as deemed just and reasonable.

Pains and Trouble

The terms’ pains’ and ‘trouble’ were clarified in Re Allan McLean (dec’d) (1911) 31 NZLR 139, where ‘pains’ was described as the responsibility, anxiety, and concern that come with the role, while ‘trouble’ was interpreted to encompass the actual work performed, including the administrative tasks and decision-making involved.

The Court considers the following factors when assessing executorial commission: 

• (a)       the work and judgment involved in the realisation of assets and earning income;
• (b)      the extent of administrative activities;
• (c)       the responsibility generally;
• (d)      the amount of work done not reflected in financial terms;
• (e)       how long the executor administered the Estate;
• (f)       the size of the Estate and its capacity to pay;
• (g)      the work of a non-professional character not undertaken by the applicant and performed by professionals; and
• (h)      executors’ pains and troubles relative to the result.

The Court may consider the following factors: 

• (i)       whether there has been any litigation or other conflict necessary to the administration of the Estate; and
• (j)        whether there has been any delay in the administration of the Estate – if so, ‘

‘such conduct may disentitle or reduce an executor’s commission, such as no commission on certain assets after the date when distribution should have occurred.’

Re will and Estate of Macleod, [2017]VSC 67, [45]-[46] (per Ierodiaconou AsJ).

Executors Commission 

It is a fundamental principle that the executor or trustee must fully inform all beneficiaries of any potential benefit they might receive before providing informed consent for the fiduciary to accept that advantage. This transparency ensures that all parties are aware of the likely outcomes.

Section 65(1) of the Act provides that:

It shall be lawful for the Court to allow out of the assets of any deceased person to his executor administrator or trustee for the time being, such commission or percentage not exceeding Five per cent for his pains and trouble as is just and reasonable

Sections 65 and 65A to 65E of the Administration and Probate Act 1958 (Vic) provide that an executor, administrator or trustee may apply to the Court to be paid a commission for their ‘pains and trouble’ [in discharging their obligations] as is ‘just and reasonable’; the maximum allowable amount of commission is 5% of gross Estate;

The Court may order that the amount of commission paid to an executor be reduced or repaid to the Estate if it has already been drawn (on the application of any interested beneficiary, creditor, or the Court’s motion).

Information to be provided by an executor to interested beneficiaries

(1)          As soon as reasonably practicable, an executor of a Will seeking commission must inform the interested beneficiary of the following —

(a)          the basis for payment being either under —

(i)        a clause in the Will;

Clause 3 of the deceased’s Will is the basis of the second plaintiff’s claim for Executor’s Commission:

I DIRECT that any of my executors who practises a profession is entitled to be paid all usual professional fees for work done by that executor or his or her firm (as executor, trustee or both) on the same basis as if he or she were not one of my executors but employed to act on behalf of my executors and may, in addition, apply to the Court for Commission for his or her pains and trouble.

The Commission Acknowledgment is signed by the deceased

• (ii)         with the consent of the interested beneficiaries under s 65C; 

Any interested beneficiary has the right to have the executor’s payment claimed or charged reviewed by the Court under s 65A(2)(a)(i).  No objection was submitted from any interested beneficiary seeking to have the commission reviewed by the Court.  

The inventory of assets and liabilities filed with the application for a grant of probate detailed the Estate’s net value at $5,182,972.30. According to the administration account filed with the application for commission, the Estate’s gross value was $5,729,386.80.

The second plaintiff sought payment of executor’s commission under s 65 of the Administration and Probate Act 1958 (Vic) (Act) of 2% of the value of the Estate.

Section 65(1) of the Act provides that:

The executor administrator or trustee commission did not exceed Five per cent for his pains and trouble as is just and reasonable

As the interested beneficiaries had not approved the second plaintiff’s commission of $103,043.00, a Court order under s 65 was sought for a commission or percentage not exceeding 5% for her pains and troubles, as is just and reasonable. The method of calculation of the payment to the executor, including whether the payment will be

• (i)          a commission or percentage of the assets of the Estate and, if so, the applicable commission or percentage; or 2% of the estimated corpus and income.
• (ii)       by charging fees:

As 1(b)(i) applies, there is no need to charge fees.

(c)       the estimated value of the payment to the executor;

The probate registry accepted the Estate’s net value and income as $5,152,132.75. The estimated value of the commission payment to the second plaintiff as executor is $103,043.00, which is 2.0% of that amount.

(d)          the right of any interested beneficiary to have the payment claimed or charged by the executor reviewed by the Court under section 65A(2)(a)(i).

The first plaintiff opposes the second plaintiff’s application on the basis that:

(a) The second plaintiff failed to inform the residuary beneficiaries of her intention to claim commission as soon as was reasonably possible, as stipulated by s65D of the Act. Additionally, her notification lacked essential information required by that section;

(b) Even if the second plaintiff had adhered to s65D of the Act, her actions have been such that the Court determined she is not entitled to receive an executor’s commission and

(c) Alternatively, the second plaintiff’s request for commission is disproportionate since the Estate was straightforward to manage, and the independent law firm has received payment for their legal services.

Both plaintiffs submitted written statements to the Court.

Decision

Irving AsJ denied the second plaintiff’s application for executor’s commission, concluding she had not met the requirements of section 65D of the Act. Furthermore, suppose Irving AsJ is mistaken and the second plaintiff complied with s65D. Her conduct disqualifies her from receiving the executor’s commission as notification of her intention to claim commission was not given ‘as soon as reasonably practicable’, nor did her notification include all of the information needed for that section

• (a) The second plaintiff failed to inform the residuary beneficiaries of her intention to claim commission as soon as was reasonably possible, as stipulated by s65D of the Act. Additionally, her notification lacked essential information required by that section;
• (c)   Alternatively, the second plaintiff’s claim for commission is excessive, given that it was a simple estate to administer and complete legal work by an independent law firm, including payment of their professional fees.

For the following reasons, Irving AsJ refused the application for executor’s commission, finding that the second plaintiff did not comply with the requirements of s 65D of the Act. Additionally, if Irving AsJ was wrong and the second plaintiff complied with s 65D of the Act, she has engaged in conduct that disentitles her to an executor’s commission.

Abandonment of Initial Claim

The second plaintiff’s counsel abandoned reliance on clause 3 of the Will as the basis for her executor’s commission and pursued a claim under s 65(1) of the Act instead. This late concession caused unnecessary preparation of affidavit material and submissions, wasting resources.

Failure to Inform Beneficiaries Appropriately

The second plaintiff failed to provide the necessary information to all interested beneficiaries required by section 65D. Her communication efforts, which included reaching out to a co-executor, their solicitor, and the Estate’s lawyers, were insufficient to meet an executor’s obligations. Moreover, the email sent on 28 February 2024 was considered the only direct communication to all beneficiaries and did not adequately address their needs.

Delay in Providing Information

Despite contemplating a claim for a commission from March 2023 and finalising her intent by July 2023, the second plaintiff delayed notifying beneficiaries until February 2024. The Court found the delay unjustified and did not meet the requirement of providing information “as soon as reasonably practicable.”

Deficiencies in Emails

The emails dated 6 December 2023 and 28 February 2024 did not satisfy the statutory requirements outlined in s65D. The content of these communications was unclear and misleading, placing unreasonable deadlines on the beneficiaries and creating undue pressure. Additionally, the emails misrepresented the basis for the commission claim and the beneficiaries’ rights, failing to convey this information in straightforward, plain language.

Disentitling Conduct

The second plaintiff imposed unreasonable deadlines for beneficiaries’ responses and prematurely filed her application with the Court. Her documentation included inconsistent file notes and activity lists, which raised concerns concerning the accuracy and integrity of her records. Moreover, she claimed that several activities were non-executorial, including unexplained adjustments to the time units recorded. Linking interim estate distributions to her commission claim also placed undue pressure on the beneficiaries.

As a result of her actions, the second plaintiff failed to comply with s65D, which disentitled her from claiming executor’s commission. Even if the Court were to assume that she had complied with s 65D, her overall conduct collectively disqualified her from any entitlement. Ultimately, her application for your commission was dismissed, with the deferment of costs discussions.

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