February 2010

Wills & Estates Law Update: disputed estates, executor's commission & private charitable giving

Disputed Estate ? Independent Interim Administrator

A recent case involving disputed wills and whether the deceased had testamentary capacity when she made her last will highlighted an important general practice of the Court. The general practice related to the appointment of an administrator for the estate pending determination of the disputed wills legal proceedings.

The case was Gray v Hart [2010] NSWSC 55. It involved an elderly lady who died in September 2009 leaving a very large estate. The two wills in contest were dated July 1996 and April 2005. Each side in the legal proceedings filed a notice of motion for the appointment of a different administrator to look after the estate pending the determination of the legal proceedings as to which of the two wills is valid.

The defendants sought to appoint a chartered accountant who was the deceased's son-in-law and the financial manager of the deceased prior to her death by virtue of a Guardianship Tribunal appointment. The plaintiff opposed that application and nominated a trustee company as the administrator.

In making his decision, Justice Palmer said:

"In an application for the appointment of an administrator pending determination of a contest as to the validity of the wills, the Court will not, as a general practice, appoint a party to the proceedings unless all parties consent: ....The reason for the practice is obvious. If the estate is in contest between beneficiaries under competing wills, there will often be mutual distrust and hostility in the administration of the estate if one of the contestants, or a person apparently biased towards one of them is appointed administrator. That circumstance will often generate needless litigation to the detriment of the estate. That is why the Court generally prefers an administrator independent of both sides in the dispute:....."

Executor's Commission ? Court Challenge

The case of Hawkins v Barkley-Brown [2010] NSWSC 48 involved reviewing a decision of a Supreme Court Registrar that allowed commission of about $61,000 to one of two executors of an estate. The estimated value of the estate for probate purposes was about $8.4million.

The proceedings were commenced by way of a notice of motion for review of the Registrar's decision. The applicant on the motion was a beneficiary of the estate and also an executor.

The case is important because of the useful judgment of Justice Slattery which looks at the legislative framework, applicable principles of law and the practice and procedure in relation to the granting of commission to executors.

It was noted that the legislative provision governing claims for commission is section 86(1) of the NSW Probate and Administration Act 1898. It is that provision which gives the NSW Supreme Court jurisdiction to grant commission to executors.

Justice Slattery said that the Court's 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 charging on a time basis. His honour also noted that if the executor was a professional person (such as a solicitor or accountant) and the deceased's will allows the executor to charge professional fees to the estate, the professional executor can only charge professional fees for those tasks which are professional tasks (such as providing legal or accounting services to the estate).

The judgment also noted the following ranges of commission awarded in practice:

  • From 0.25% to 2% on capital realisations.
  • From 2% to 4% on income collections.
  • From 1% to 2% on assets transferred in specie.

Justice Slattery allowed the review of the Registrar's decision. However, in re-exercising the applicable discretion on his review, Justice Slattery came to the same conclusion as the Court Registrar about the commission ? that is, the commission of about $61,000 awarded to the executor was the proper award of commission.

Private Charitable Giving ? New Private Ancillary Fund Model Trust Deed

Previous Bartier Bulletins looked at the area of private charitable giving and private ancillary funds (formerly called Prescribed Private Funds). Such funds were originally introduced by the Howard Government in 2001 to encourage private philanthropy in Australia.

The Australian Taxation Office recently updated the model trust deed for private ancillary funds. The new version of the deed as at 1 February 2010 replaces the model deed issued on 1 December 2009.

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.

Gerard Basha