Passing Estate Accounts

Estate of David Patrick Roche Frost [2025] NSWSC 994

Executors and administrators must:

• safeguard the estate and collect its assets,
• pay funeral, testamentary expenses, and debts, and
• Distribute the balance according to the Terms of the Will or intestacy laws.

They must also maintain accurate probate accounts that accurately reflect the estate’s management and provide information to the beneficiaries. Usually, accounts do not need to be filed with or approved by the Court.

Filing Accounts

• Filing Only: Accounts filed with the Court in affidavit form (UCPR Form 150) require no motion or fee if not seeking formal verification or passing. Beneficiaries may inspect filed accounts.
• Verified Accounts: Section 85 of the Probate and Administration Act 1898 (NSW) provides for the filing of verified accounts where:
  • The executor/administrator is a creditor of the estate,
  • They act as guardian of a minor beneficiary, or
  • Donation to charity of a substantial part of the estate.

Filing may also be prudent if disputes are likely to arise.

Passing of Accounts

To have accounts passed (formally examined and approved), lodge the motion and affidavit in Form 150, accompanied by the filing fee. Courts usually only require this when:

• Requested by a beneficiary,
• Commission sought by the executor/administrator or
• The Court orders it.

Timing of Accounts

• General Rule: Pt 78 r 85 of the Supreme Court Rules provides that filing of accounts occurs within 12 months of the grant (or within an extended period ordered by the Court).
• Court Orders: The Court can extend time, dispense with filing further accounts, or order that accounts be verified, filed, and passed at the request of a beneficiary.

Executors/Administrators Commission

• Entitlement: Executors/administrators may apply for commission (s 86 PAA) to compensate for their “pains and trouble,” unless their appointment was conditional on receiving a legacy.
• Applications: Typically, multiple executors require a joint application; however, a single executor can submit one alone. Executors/administrators must have accounts passed for the relevant period before commission can be awarded.
• Beneficiary Agreement: If residuary beneficiaries consent to a fair amount, Court approval is unnecessary. When making a Court application, legal costs will usually be payable from the estate, thereby reducing the beneficiaries’ shares.
• Practical Considerations: Court applications take time and may delay distribution. Resolving the commission by agreement is often preferable.

Passing of Estate Accounts (NSW)

The passing of accounts is a Supreme Court process that reviews an executor’s financial management of a deceased estate to ensure fairness, accuracy, and accountability. A beneficiary’s request usually triggers it, or when the executor applies for commission. In some circumstances—such as when the executor is also a creditor or managing a minor beneficiary’s share—the process is mandatory.

Executors must pass Accounts

• Beneficiary or Court Request: Accounts are typically passed at the request of a beneficiary or when the executor seeks a commission.
• Exceptional Circumstances: Required if the executor is a creditor of the estate or a guardian of a minor’s interest.

The Process

1. Prepare Accounts: Record all receipts, expenses, asset sales, and income.
2. Collect Evidence: Gather receipts, invoices, and bank statements to document expenses.
3. File with Court: Lodge accounts with an affidavit confirming accuracy.
4. Give Notice: Publish notice at least 14 days before filing via the NSW Online Registry.
5. Court Scrutiny: A judge checks the accounts and considers any objections.
6. Certificate of Correctness: Issued if the Court is satisfied with accuracy and compliance.

Court’s Focus

• Financial Accuracy: Verification of all income, assets, and expenses.
• Reasonable Expenditure: Ensuring costs are estate-related and fair.
• Breach of Duty: Detecting any misconduct or default by the executor.

Outcomes

• Approval: Court formally approves the accounts, confirming proper administration.
• Commission and Costs: Executor’s commission may be allowed, and legal costs are usually payable from the estate if the executor acted reasonably.

Estate of David Patrick Roche Frost

The deceased, David Patrick Roche Frost of Bondi Junction, died in 2021. His de facto partner, Cheryl Lee Carmody, is the applicant. The executor is the deceased’s brother, Mark Dominique Frost. Because the applicant is under a legal disability, her father, Michael Edward Carmody, acted as her tutor in the proceedings.

The central issue before the court was whether the executor’s conduct justified an order requiring the executor to indemnify the estate for the plaintiff’s legal costs personally.

Ordinarily, in probate litigation, costs are at the discretion of the court and generally follow the outcome (see Estate of Nelly Mary Aston; Estate of Riley Davis Aston [2024] NSWSC 1346 at [109]). However, where a beneficiary successfully applies for the passing of accounts, that does not automatically entitle them to a costs order against the executor. Such applications are not necessarily based on allegations of breach of duty but rather stem from the inherent relationship between beneficiaries and estate representatives. Accordingly, costs orders are not usually appropriate in this context (Dal Pont, Law of Executors and Administrators, 2022, at [12.42]).

A trustee’s duty to maintain proper accounts is fundamental to the administration of trust property. Where beneficiaries seek information, trustees are entitled to reimbursement or even upfront payment of the reasonable costs of providing such accounts (Waterhouse v Waterhouse (1998) 46 NSWLR 493; Gatt v Vella [2024] NSWSC 1009 at [48]).

The governing principle for indemnification is the so-called “negative test”: trustees and executors may be indemnified for expenses unless incurred unreasonably or improperly. This principle traces back to Re Beddoe [1893] 1 Ch 547 (Lindley LJ). While it has faced criticism in later decisions (Gatsios Holdings Pty Ltd v Kritharas Holdings Pty Ltd (in liq) (2002); Nolan v Collie [2003] VCA 39; ASIC v Letten (No 17) [2011] FCA 1420), it remains influential and aligns with the standard under the Uniform Civil Procedure Rules, r 42.25.

Background

The deceased passed away on 14 October 2021 while residing in aged care. The deceased’s last Will, dated 18 September 2017, appointed the executor, who published a notice of intended probate in November 2021. The Court granted probate in March 2022. The deceased estate was valued at approximately $416,000 gross and $344,000 net, with liabilities of about $72,000.

In May 2022, the executor filed a Notice of Intended Distribution in line with statutory requirements. The estate’s main assets included:

• An interest in a trust arising from a family provision settlement in the deceased’s father’s estate; and
• Two classes of shares in a family company of uncertain value.

Under the Will, the applicant received a life interest in the shares with remainder to the executor, plus the residuary estate.

The deceased and the applicant had lived together in a Bondi Junction apartment (the apartment) owned by a company controlled by the executor, with their right of residence granted under the Will of the deceased’s mother, Diana Frost (d. 2007) which also provided that if the the applicant survived the deceased, the applicant could continue living in the apartment for life, with outgoings paid by the Diana Frost’s estate and additionally directing ongoing weekly maintenance payments to the deceased which have occurred following his death, to the applicant from Diana Frost’s estate, not the deceased’s.

In September 2024, the executor transferred $373,560.68 to the applicant, mainly from the deceased’s estate settlement, which the executor considered the final distribution of the deceased’s estate. However, the applicant raised concerns about the full and proper distribution of the deceased’s assets and filed a motion on 18 October 2024. The Court’s later discussion addresses the administrative issues raised between the deceased’s death and the filing of the motion.

On 18 October 2024, the applicant filed a motion seeking

(a) that the executor verify, file, and pass the estate accounts, and

(b) that he personally pay her legal costs on an indemnity basis.

Shortly after, on 12 November 2024, the Court ordered the executor to file and serve an affidavit verifying the accounts, resolving that substantive issue. The only remaining matter was the question of costs, along with other issues raised by the applicant not formally included in the motion.

The applicant’s motion sought two prayers for relief:

1. The first prayer for relief sought an order requiring the executor to verify, file, and pass accounts of the deceased’s estate.
2. The second prayer for relief sought an order that the executor personally pay the applicant’s costs of the motion on an indemnity basis.

At the first return date on 12 November 2024, the executor consented to the first order but resisted any costs order against him personally. He later complied with the first relief by filing an affidavit of accounts on 12 February 2025.

The matter then came before the Probate List judge on 25 February 2025. The Court ordered the executor to provide fuller responses to the applicant’s outstanding information requests, encouraging cooperation to avoid unnecessary adjournments.

The applicant’s requests included details about:

• Transfer of shares in the family company (DiFrost Pty Ltd) to which the applicant was entitled;
• The deceased’s life insurance policy.
• Investment of estate funds; and
• Any estate tax returns or financial statements.

By the April 2025 hearing, the applicant maintained that the executor had given insufficient information regarding the shares and the life insurance. The executor had responded about the investment of funds and confirmed that the estate had not filed tax returns.

The final disputes between the parties fell into three categories:

(1) provision of information,

(2) delay in administration, and

(3) costs.

The executors excluded requests relating to transactions from the deceased’s mother’s estate (Diana Frost) as irrelevant.

(1) Provision of Information

The applicant criticised the executor for not providing details about shares in the family company (DiFrost Pty Ltd) and about a possible life insurance policy. The executor did not include these matters in the motion but instead addressed them through court orders in February 2025. 

The executor agreed to transfer the shares to the applicant for life, resolving that issue. As for the alleged life insurance, bank statements suggested policies existed. Still, the executor explained these were accidental death policies that did not respond to the deceased’s death, which was due to chronic illness rather than an unexpected event. 

The Court accepted that an accidental death policy was doubtful to apply, but allowed the applicant to pursue further investigation if she indemnified the executor for costs.

(2) Delay in administration 

There were delays in the administration, partly due to the applicant’s failure to respond to correspondence and delays in verifying her tutor’s authority. While the executor was sometimes slow, especially under previous solicitors, his overall management of the estate was reasonable and attentive. The delay was not so serious or improper as to justify depriving him of indemnity or making him liable for the applicant’s costs.

(3) Costs

The applicant initially sought indemnity costs but later sought party–party costs. The executor suggested that each side should bear their own costs, noting that he had already personally paid substantial legal fees, had fully distributed the estate, And could not recover them.

The Court accepted that the executors’ conduct had been reasonable, and that the motion did not of itself justify a costs order. Accordingly, the Court ordered that each party bear their own costs.

Court orders

1. On 4 April 2025, reports indicated the executor would transfer Class D and Class H shares in DiFrost Pty Ltd to the applicant.
2. Directs that those shares be transferred to the applicant within 21 days, if not already done.
3. Refers the matter to the Registrar to certify the passing of accounts under Supreme Court Rules 1970 Pt 78 r 84.
4. Dismisses the applicant’s motion of 18 October 2024.
5. Notes that there is to be no order as to costs, with the result that each party bears their own costs of the motion.
6. Grants liberty to relist the matter in the week of 20 October 2025 before Slattery J, but only on the issue of the insurance policy, provided notice is given to his Chambers by 21 September 2025.