Margaret Szadovszky died, aged 92, in November 2016, leaving one surviving child, Frank, her husband predeceased her. Margaret’s last will, made on 14 January 2009, named her solicitor John Zigouras as her executor, leaving the whole of her estate, to Frank.
John’s legal firm charged the estate $7,699.50 in legal fees for acting in the administration of the estate. The Will did not provide for the executor to engage his own legal firm and to charge full professional legal fees.
John was an experienced, practising solicitor; administration of the estate was straightforward with the court finding there was “no need to arrange the sale of the home, instruct at an auction, clear personal possessions, sort private papers, sell a car, re-home pets, ascertain uncertain financial or taxation information or even arrange the funeral. There was no litigation’.
As we have posted before the role of executor is a fiduciary one; by retaining his own firm, John had a conflict of interest and would be unable to pay legal fees from the estate to his firm in the absence of fully informed consent of the beneficiary. Frank, represented by independent solicitors throughout the administration, gave his consent to John for the legal fees.
John approached Frank seeking an agreement for commission of 1.5 per cent (amounting to about $30,000). Commission is an expense of the estate, payable out of assets like any other expenses, and is incapable of being paid if the estate is fully distributed. By this stage, John had distributed over $1.72 million with $54,000 held pending this claim.
Frank claimed that an amount of $12,777.83 retained until 25 June 2018, should have been distributed over a year earlier; objecting to the $54,000 retained pending finalisation of the taxation and the claim for commission.
An executor is entitled to retain an amount sufficient for a claim for commission at the end of the administration, however, neither the retention of the $12,777.83 or its subsequent release was explained.
The Court didn’t consider that holding on to this amount was significant as the executor is permitted some margin for error, that this amount was required for commission and taxation; it wasn’t flagrant and did not cause a loss to the estate.
However, John failed to produce an itemised bill despite six written request; the Court held that failing to provide details of the legal fees to a beneficiary did not meet the duty to keep a beneficiary informed nor was it acting in good faith.
Similarly, an itemised bill should have been provided in accordance with the obligations imposed by the Civil Procedure Act 2010 (Vic), as without an itemised bill it is impossible to assess whether or not there was any ‘double-dipping’ in this claim.
In exercising its discretion regarding the award of commission the Court held that John’s long delay in making an application, notwithstanding that administration of the estate was fully completed well within the executor’s years as unacceptable. The Court dismissed the application for commission, ordering that John pay both his own and Frank’s costs personally, and not out of the estate.