The Estate of Frances Kedesch Michell

HIS HONOUR: These are reasons that follow the hearing of a notice of motion, filed by Martha Rose Pietor and Benjamin Francis Anthony Pietor (the Administrators) on 26 June 2020, in which they seek a review, by the Court, under r 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), of the decision of Senior Deputy Registrar in Probate Hoskinson and that certain orders, made on 29 May 2020, by her, be set aside; or alternatively, that the accounts of the estate of Frances Kedesch Michell (the deceased) be passed. (A copy of the accounts sought to be passed was annexed to the notice of motion.)

At the commencement of the proceedings, the Court was informed by counsel for the Administrators that the only ground for review being relied upon, was the first ground, being the one based upon the proposition that the Registrar did not have power to moderate the costs because an order for those costs, calculated on the indemnity basis, to be paid out of the estate of the deceased, had been made: Tcpt, 15 September 2020, p 1(33) – p 2(11). The foundation of this submission was said to be r 42.5(a) of the UCPR which, relevantly, provides that, in the case of costs payable out of property held, or controlled, by a person who is a party to the proceedings in the capacity of administrator, all costs (other than those that have been incurred in breach of the person’s duty in that capacity) are to be allowed.

There are two respondents (described as Defendants) named in the notice of motion, being Robert George Christie and Sasha Ralph Freeman, to each of whom more specific reference will be made later in these reasons. It is only the second respondent, Mr Freeman, who has played any active part in the hearing. He was legally represented at the hearing of the notice of motion.

The first respondent, Mr Christie, appeared at the hearing, announced his appearance, but as it was accepted that he had no part to play in, and his interests would not be affected by, the determination of the notice of motion, he was permitted, and decided, to leave: Tcpt, 15 September 2020, p 1 (17–31).

The notice of motion filed by the Administrators was heard on 15 September 2020. Mr S H Hartford Davis of counsel appeared for the Administrators and Ms R Golovina, solicitor, appeared for Mr Freeman. The matter was listed as one of 3 hours duration and it was concluded within that time. I am grateful to the legal representatives for the outline of written submissions provided by each of them to the Court before the hearing, which will remain with the Court file, and for the manner in which the hearing was conducted.

Before proceeding further, I should mention, as Lindsay J did in Re Estate Gowing; Application for Executor’s Commission [2014] NSWSC 247 at [5] that “[t]here is no materiality in this judgment in the distinction between a registrar and a deputy registrar. The ‘Probate Rules’, found in Part 78 of the Supreme Court Rules 1970 NSW (“SCR”), define ‘registrar’ in terms that include the Registrar (SCR Pt 78 r 1), as does PAA s 3 read with s 120 of the Supreme Court Act 1970 NSW (“SCA”)”. (The reference to “PAA” is to the Probate and Administration Act 1898 (NSW).)

For convenience, even though the review relates to the decision of a Senior Deputy Registrar in Probate, I shall simply use the term “Registrar”.

Before turning to the reasons for the decision of the Registrar, the orders made by her, and the conduct of the review, it is necessary to understand more of the procedural, and other factual, background.

The deceased died on 3 May 2017.

Ms Pietor is a cousin of the deceased (on the deceased’s father’s side), and Mr Pietor is her son. It is undisputed that each had no “interest” in the deceased’s estate (although when this fact was ascertained is not entirely clear). Had the matter of administration proceeded on an uncontested basis, in accordance with the Probate Rules, the Court, without more, may have been reluctant to grant administration of the estate to either, or both, of them.

As the deceased died said to be leaving no spouse, no issue, and no parents surviving, Lynette Inez Margaret Berntsson, who was the deceased’s half-sister (on the deceased’s mother’s side) was the sole beneficiary entitled on intestacy: Succession Act 2005 (NSW), s 129(1). She would also have been the person to whom the administration of the intestate estate could have been granted.

Alternatively, Mr Freeman, who asserted that he was a party to a domestic partnership (as defined in s 105(a) of the Succession Act) with the deceased immediately before her death, that is he had been in a de facto relationship with her that had been in existence for a continuous period of 2 years, a matter that was the subject of dispute, was the only other person to whom administration of the intestate estate of the deceased would have been granted if he had established that relationship. In that case, he would have been entitled to the whole of the deceased: Succession Act, s 111.

Mr Freeman asserted that he had met the deceased about 30 years prior to her death. The nature of his relationship, at the date of the deceased’s death, was, as noted above, the subject of dispute between the parties. As will be read, proceedings in which he was involved were compromised, as a result of which compromise he is now one of the only two beneficiaries, with Ms Berntsson, entitled to share the estate of the deceased.

On 6 November 2017, the Administrators engaged as their solicitors the firm, Piper Alderman, to advise and represent them in relation to the proceedings (to which reference will be made) threatened, and then commenced, by Mr Christie, and also in respect of the administration of the estate generally.

The basis of the engagement of the solicitors was a letter dated 6 November 2017 addressed to Ms Pietor, which included the scope of work, a fee estimate and contingencies, the rate of charges of the “Responsible Principal” (Mr R Toltz) and of “other lawyers and assistants”.

Subsequently, the solicitors who were involved in the proceedings representing the Administrators included Mr Toltz, Mr M Mennilli, a senior associate, Ms E Cheung, also a senior associate, and Ms H Veldre, an associate. In addition to all of these lawyers, other persons who assisted in the administration of the estate, were Mr T Riddell, a law clerk, who attended the deceased’s home at Granville, a suburb in western Sydney, with the Administrators, to search for an original Will of the deceased, and Ms M Powell, a legal agent, who was engaged to attend the offices of the NSW Trustee and Guardian and the Probate Registry to perform searches for any Will.

On 18 June 2018, before the current proceedings were set down for hearing, Lindsay J made orders in three different proceedings, bearing proceeding number 2017/316523, proceeding number 2017/33768, and proceeding number 2018/139237. It is convenient, next, to provide a short summary of each proceeding, all of which were resolved without a fully contested hearing.

Mr Christie, on 19 October 2017, published the online notice of intended application for the probate of the informal will.

A caveat was filed on 10 November 2017 by the Administrators, before any application was filed by Mr Christie. The caveat required him to prove an informal will that he wished to propound in solemn form and stated that the caveators’ interest was as intended applicants for administration.

Further explaining their interest in the proceedings, the Administrators stated that the persons entitled in the distribution of the estate were the “step-sister” (if she was alive) or the children of that step-sister (if she had any), or the applicants and a number of other persons.

The Summons for Probate of the informal will was lodged by Mr Christie on 12 November 2017 and was filed on 23 November 2017, after an application for the postponement of the filing fee was approved.

The basis of the application made by Mr Christie was a printed photograph taken on a smart phone of a computer screen of an unsigned Will using two separate fonts.

By agreement of the parties, some months after the commencement of the proceedings, the Summons in this matter was dismissed, with no order as to costs.

The Administrators published the online notice of intended application for the grant of administration on intestacy on 9 November 2017.

By Summons filed 26 July 2018, the Administrators sought the grant of letters of administration to them on intestacy. They obtained Ms Berntsson’s Consent to them being the Applicants for Letters of Administration dated 15 March 2018 (styled as UCPR Form 125 but not properly executed). Unsurprisingly, they did not obtain a similar consent from Mr Freeman, at any time, prior to receiving a grant of administration.

Pursuant to orders made by Lindsay J, Letters of Administration in the estate of the deceased were subsequently granted to them. Letters of Administration were issued by the Court on 26 July 2018.

The basis of the appointment of the Administrators appears to have been as a result of the compromise reached between the parties finalising this, and the other, proceedings.

By virtue of the compromise, the Defence filed by Mr Christie, named as the first Defendant, was to be withdrawn, with no order as to costs, other than an order that his costs ($1,500) were to be paid out of the estate of the deceased. The costs, calculated on the ordinary basis, of Mr Freeman, named as the second Defendant, were ordered to be paid out of the estate of the deceased, as were the costs of Ms Berntsson.

By Summons filed 2 May 2018, Mr Freeman sought an order that provision be made out of the estate for his maintenance, education and advancement in life, pursuant to s 59 of the Succession Act out of the estate of the deceased. Lindsay J made an order that he receive, by way of provision out of the deceased’s estate, one half of the residue thereof (with the other half of the residue passing to Ms Berntsson). His costs, calculated on the ordinary basis, were ordered to be paid out of the estate of the deceased.

An order was also made that the costs, calculated on the indemnity basis, of the Administrators, in each of the three proceedings, were to be paid out of the estate of the deceased.

In the proceedings, no affidavit was filed by either party relating to the costs of the proceedings, as required by Practice Note SC Eq 7, pars 6(c) and 9.5 respectively. There is no evidence that the Administrators had provided an estimate of their costs to Mr Freeman before the consent orders were agreed. They do not suggest that any disclosure of the likely costs that would be required to be paid out of the estate was made to him prior to the resolution of the proceedings.

Following the appointment of the Administrators, they realised, by sale, the only significant asset of the estate, being the real estate at Granville. On 26 June 2019, they received a total of $476,273.73, being the net proceeds of sale of the Granville property. On 2 July 2019, they closed a bank account which held $802.09.

Ultimately, in the Certificate of Correctness of Accounts, to which reference will be made, the total value of the realised assets was said to be $479,575.82. I shall use this amount as the basis for the calculations to which I shall refer to below.

Mr Christie received no distribution from the estate (although, as stated above, he was paid a nominal amount for his costs).

On 27 June 2019, the solicitor for Mr Freeman advised that he consented to an amount of commission ($10,000) being paid to the Administrators. On 1 July 2019, the solicitor for Ms Berntsson advised that she also consented to the amount of the commission to be paid. On about 10 July 2019, the amount of commission was paid to the Administrators out of the estate of the deceased. Apart from the commission of $10,000, the Administrators received nothing out of the deceased’s estate.

The Administrators discharged the liabilities of the estate, and, on 10 July 2019, distributed the net proceeds of the estate to the two beneficiaries. Each received $86,167.06.

There was evidence that the liabilities which had been paid out of the proceeds of realised assets of the estate included legal costs and disbursements, totalling $267,737.70 (inclusive of GST). These costs and disbursements were said to have been incurred by the Administrators as a result of having retained the solicitors.

Based upon the final amount realised in the deceased’s estate ($479,575.82), it can be seen that the costs and disbursements claimed ($267,737.70) equate to 55.82 per cent of the net distributable estate. If the reimbursement ordered to be made by the Registrar to the estate were made ($37,133.69), the costs and disbursements are reduced to $230,604.01, which equates to 48.08 per cent of the net distributable estate. Either amount is much more than the total of the amounts distributed to the two beneficiaries.

In the circumstances, it is hardly surprising that Mr Freeman asserted that the costs and disbursements appeared to be excessive and disproportionate to the value of the net distributable estate.

(Counsel for the Administrators submitted that the Court should not, as the Registrar (and presumably Mr Freeman) had, engaged in impermissible “hindsight reasoning”. As I understood it, counsel meant that one could not use the value of the distributable estate once it was realised, in circumstances where, at the time of the retainer of the solicitors, the value of the distributable estate had been estimated to be significantly more.)

On 12 July 2019, Mr Freeman’s solicitor informed the Administrators’ solicitors that Mr Freeman required the solicitors’ costs to be assessed or that he required the Administrators’ accounts to be filed and passed.

Although attempts were made by the Administrators’ solicitors to avoid the need for the accounts to be filed and passed, on 8 August 2019, Mr Freeman commenced proceedings (2019/246755) in which he sought an order that the Administrators have their costs assessed or otherwise that they file and pass accounts of the estate. (Ms Berntsson informed the solicitors that she did not require the Administrators to file and pass accounts.)

On 9 September 2019, the proceedings brought by Mr Freeman were resolved by orders, made consensually, which required the Administrators to file, and pass, accounts of the estate. The parties also agreed that the matter would proceed by way of objections.

On 6 November 2019, the Administrators published a Notice of Intention to make an application, by notice of motion, for an order passing accounts and invited any person wishing to object to the application to file a Notice of Intended Objection and an Appearance.

On 22 November 2019, the Administrators made an application that the accounts of the estate, for the period 2 November 2017 to 10 July 2019, be passed.

On 20 December 2019, the Court received a Notice of Appearance in accordance with Pt 78 r 81(3) of the Supreme Court Rules 1970 (SCR) from Mr Freeman. The rule, which applies if proceedings for the passing of accounts have been commenced, but the hearing of the proceedings has not been completed, permits any person intending to object to the passing of the accounts, to enter an appearance, at any time before completion of the hearing.

Part 78 r 81(4) of the SCR requires any person entering an appearance in the proceedings to be joined as a respondent in the proceedings.

Mr Freeman objected to the passing of accounts by the Administrators on the ground that the legal costs were excessive. Specifically, he objected to fees and disbursements totalling $227,263.98 (incl. GST), which were the subject of six invoices issued by the Administrators’ solicitors, that had been charged to the estate.

The Administrators contended that entries for those invoices had been comprehensively itemised and that, in all the circumstances of the case, the amounts claimed were not excessive.

Between 21 February 2020 and 15 April 2020, the Court issued a number of requisitions to the parties going to the accounts that had been filed by the Administrators in the application for the passing of accounts and Mr Freeman’s objection to those accounts.

On 31 March 2020, another registrar issued a Certificate of Correctness which showed that the total capital realisations of the estate amounted to $477,045.82. There was no income collected for the benefit of the estate; there were no assets transferred in specie; and there had been a refund to the estate in the amount of $2,530. (The refund explains the difference in the amounts referred to in this paragraph and the earlier paragraph, par 33, relating to the Certificate of Correctness.)

The Court then made orders to certify that the accounts of the estate had been examined by the Registrar; that they appeared to be correct; that they were filed within the time allowed by the rules of the Court; and that, at the close of the accounts, the balance to the credit of the estate was nil.

Subsequently, on 15 April 2020, the Court issued a requisition to the parties, which provided that the accounts the subject of the application to pass the accounts had been vouched by the Court and that, absent the filing and service of any objection by Mr Freeman by 29 April 2020, the accounts would be passed in their present form on 30 April 2020. The Court afforded the Administrators an opportunity to file and serve submissions in reply, by 13 May 2020, in the event that Mr Freeman continued with the objections to the passing of accounts.

On 28 April 2020, Mr Freeman served on the Administrators a document entitled “Narrative To The Objections To The Bill Of Costs”. The gravamen of the objections was that the accounts should not be passed because legal costs totalling $227,264.98 were “excessive”, “extremely high” and “disproportionate to the whole value” of the Estate.

On 12 May 2020, the Administrators filed and served written submissions in reply to Mr Freeman’s Objections. The submissions were limited to the legal and factual issues raised by Mr Freeman.

Having reviewed the accounts as filed, and the submissions by both parties, the Registrar proposed to moderate the accounts, to the extent of the legal costs complained of by Mr Freeman. She relied upon In the Will of Kerrigan (1935) SR (NSW) 242 (Jordan CJ, Stephen and Street JJ), The Estate of Orre (Supreme Court of New South Wales, 19 December 1991, Powell J, unrep) and Shave v Shave; Estate of Shave [2011] NSWSC 1356 (White J), to each of which cases I shall refer later in these reasons.

In her reasons for decision, the Registrar set out a summary of the history of the various proceedings, the orders made by Lindsay J, including the orders for costs that he had made; noted that the Administrators had no “interest” in the estate, and that there would have been some reticence in granting administration to them on intestacy; and the steps taken by the parties, and the Court, to have the accounts and commission determined.

Although the Registrar referred to Mr Freeman as the deceased’s de facto partner, a matter which is said to have been the subject of dispute, she did so in the context of the claim that he had made, which by the time the matter was before her, had been determined, in the sense that he was, at least, an eligible person and a beneficiary who was entitled to share equally the intestate estate of the deceased.

In relation to the application for probate by Mr Christie, the Registrar noted that it was “was hopelessly inadequate. Numerous requisitions sent by the Court were never properly answered”.

In relation to the reduction of the estimated value of the Granville property, the Registrar wrote that it was difficult “to ascertain the genuine nature of the first offer and in any event, it was open to the parties to speedily obtain a limited grant of special administration. Those mechanisms were not engaged by any party in this matter”.

The Registrar then dealt with each of the six invoices the subject of Mr Freeman’s complaints. Broadly, the Registrar concluded, in relation to the challenged invoices which included the fees for Mr Toltz (Invoice 404521, Invoice 416892, Invoice 419467 and Invoice 421846), that it was not reasonable for the estate to engage a solicitor with such a high hourly rate as that charged by him; that in relation to some of the invoices, there were charges that should not have been made to the estate (Invoice 416892); and that the invoices which included charges for the conveyance of the Granville property (Invoice 425649 and Invoice 440797) were too high.

The Registrar then set out her decision, at [57] to [62]:

In broad summary, on 29 May 2020, upon her consideration of the bills for legal costs objected to by Mr Freeman, the learned Registrar refused to pass the accounts of the administration of the estate of the deceased; ordered the Administrators to refund $37,133.69 within 28 days of the date of the making of the order; ordered that upon the refund of that amount, the accounts would be passed; and stated that the parties would receive written reasons (which they did subsequently receive).

Bearing in mind the total costs and disbursements, which were $267,737, the reduction of the total costs amounted to 13.86 per cent of the total costs and disbursements.

Although it is no longer necessary to go to the detail of the six invoices that were the subject of Mr Freeman’s objections, they were:

I shall deal briefly with each of the invoices.

Invoice 404521 for the total amount $17,838.69 was dated 27 November 2017 and covered a period of work said to have been done between 2 November 2017 and 24 November 2017.

This Invoice reveals that in relation to work shown as having been done between 2 November 2017 and 13 November 2017, Mr Toltz performed the work and spent a total of 19.2 hours at a total cost of $11,136. One attendance (8 November 2017) included time spent “examining Succession Act and Probate and Administration Act … examination of issues relating to application for Letter (sic) of Administration competing with application for Probate; further examination of process regarding filing of Caveat against application for Probate; considering issues affecting Robert Christie”.

There were a number of attendances on 14 November 2017 between Mr Toltz and Mr Mennilli, in which he attended on Mr Toltz “in relation to factual background to dispute, status of matter and preparing affidavit of service”. He then spent time “considering caveat filed with Supreme Court” and performed other work relating to the preparation of an affidavit of service. He then spent time attending on Mr Toltz “to consider matters to be discussed during meeting with Mr Christie on 15 November 2017 and finalising affidavit of service”.

Invoice 416892 for the total amount of $151,586.18 was dated 28 June 2018 and covered a period of work said to have been done between 5 December 2017 and 27 June 2018.

In relation to this Invoice, it is to be noted there were costs relating to the attendance by Mr Riddell, a law clerk, at the Granville property on 18 April 2018, to carry out searches for an original Will and general searches for an original Will. An Attendance Schedule attached to Invoice 1468912 revealed that costs incurred as a result of the law clerk’s attendance and the preparation of an affidavit in the proceedings by him, sworn 26 April 2018, as to the results of those searches amounted to $2,200: Ex RMT-1, p 132 – p 142.

Invoice 419467 for the total amount of $13,777.79 was dated 27 July 2018 and covered a period of work said to have been done between 28 June 2018 and 26 July 2018. Part of this Invoice related to the costs of carrying out of searches for an original Will.

Invoice 421846 for the total amount of $17,997.22 was dated 29 August 2018 and covered a period of work said to have been done between 27 July 2018 and 29 August 2018.

Invoice 425649 for the total amount of $14,978.30 was dated 29 October 2018 and covered a period of work said to have been done between 29 August 2018 and 29 October 2018. In this Invoice, costs were included for arranging the appointment of a real estate agent for the purpose of the sale of the Granville property and arranging insurance on the estate’s real estate. Additionally, there were costs relating to the attendance by Mr Toltz for the auction at the Intercontinental Hotel in Double Bay, and negotiations relating to the sale of the real estate.

Invoice 440797 for the total amount of $11,085.80 was dated 27 June 2019 and covered a period of work said to have been done between 30 May 2019 and 26 June 2019.

It is the amount of $37,133.69 that is in issue. Initially, Ms Berntsson, the other beneficiary entitled to receive half of the estate, had stated “that she had no objection to Piper Alderman’s fees and she wished to take no active part at any step in this review process in the application to pass the accounts”.

However, at the hearing, Ms Golovina, without objection, referred me to a letter, dated 8 July 2020, included as part of an annexure to the Administrator’s submissions in respect of an application for a stay of the Registrar’s orders, a copy of which was sent with an email dated 15 July 2020 to my Associate. In that letter, Ms Berntsson, by her solicitors, made it clear that “she wishe[d] to be involved [in the proceedings] to the extent that should there any further distributions then it should be equally distributed between herself and Mr Sasha Freeman”: Tcpt, 15 September 2020, p 31(34) – p 33(14).

Prior to the hearing, counsel for the Administrators had informed the Court that in the event that the Court dismissed the notice of motion, in whole or in part, the solicitors “will just refund the money to the administrator who will return it to the estate”: Tcpt, 25 August 2020, p 7(38–41).

The Administrators’ grounds of review were framed as follows:

As earlier stated, the sole basis of the application for review was, however, narrowed considerably at the commencement of the hearing (Tcpt, 15 September 2020, p 1(46) – p 2(11)), when counsel for the Administrators, by reference to his written submissions, indicated that the sole ground for review was that:

Counsel submitted that, consistently with r 42.5(a) of the UCPR, the Registrar’s moderation of the costs the subject of the indemnity costs order did not require any enquiry into the reasonableness, or otherwise, of the costs incurred by the Administrators in circumstances where costs could only be disallowed if they had been incurred in breach of the Administrators’ duty. Relevantly, no such breach had been identified by the Registrar, nor alleged by Mr Freeman. In moderating the accounts, the Registrar had disallowed certain legal fees by reducing the allowable hourly charge out rates of Mr Toltz, a consultant of Piper Alderman and the solicitor on record for the Administrators, from $590 (plus GST) and $580 (plus GST) to $470 (plus GST) and $440 (plus GST), respectively. The Registrar’s justification for the reduction of Mr Toltz’s allowable hourly rates, as set out at par [62] of the Registrar’s reasons for decision demonstrated “an exercise in hindsight logic”. He added that the Administrators did not know, with certainty, the value of the deceased’s estate. Initially, based upon information available to the Administrators, they had believed that the value of the Granville property was between $2.2 and $2.3 million. It was only after events beyond their control had occurred, that it was ascertained that the sale price was substantially less.

Counsel went on to submit that, given the assessed value of the Granville property at the date when the Administrators engaged Piper Alderman, and in circumstances where neither the Administrators, nor Mr Toltz, could have foreseen the subsequent downturn in the Sydney real estate market, the Registrar had erred in seeking to retrospectively characterise the deceased’s estate as “relatively modest”.

In broad summary, Ms Golovina referred to the principles for review of a Registrar’s decision. She stated that respect should be given to the decision and that the Administrators would need to show error by the Registrar. She submitted that the question was whether there were any grounds, or any reasons, which would warrant a review of the orders that had been made by the Registrar and she submitted that there was a natural inhibition against the unrestrained substitution of the reviewing Court’s views for those of the Registrar.

Ms Golovina also submitted that the Plaintiff's notice of motion should be dismissed with costs, that pursuant to r 49.19 of the UCPR, the orders of the Registrar, made on 29 May 2020, should be confirmed, or that in the alternative, pursuant to r 49.19 of the UCPR, the orders of Registrar, made on 29 May 2020, should be varied. She proposed that the Court should review all of the invoices by way of variation, but accepted, when raised by the Court, that in circumstances where there had not been a notice of motion on behalf of Mr Freeman identifying the precise nature of his complaints, the Court would not, in effect, review, all that the Registrar had done.

Ms Golovina pointed out that the effect of the review, if successful, would result in the legal representatives of the Administrators receiving more than one half of the available estate, and that the object of resolving issues between the parties in such a way that the cost to the parties had been proportionate to the importance and complexity of the subject-matter in the original disputes between all of the parties would not have been achieved.

Ms Golovina did not make any submissions about r 42.5(a) of the UCPR. She did not refer to any authority on the rule or debate its meaning or effect.

Rule 49.19 of the UCPR, relevantly, provides:

An application for review is made by notice of motion filed within 28 days after the date of the order in respect of which review is sought, or by extension either the registrar, or the Court, may fix: UCPR, r 49.20(1) and (2).

In Noble Earth Technologies Pty Ltd v Hampic Pty Ltd [2012] NSWSC 935 at [39], I set out the principles applicable to a review of a registrar’s decision under UCPR, r 49.19.

In relation to a review of a registrar’s moderation of fees paid by an executor to his solicitor out of an estate, Kunc J adopted what is set out above in The Estate of Arthur Michael Falco; Falco v Lambert (No 3) [2015] NSWSC 1343 at [43]. At [44], his Honour added:

At [45]–[47], his Honour wrote:

I also refer to Lindsay J’s statement in Re Estate Gowing at [101]:

At [20], his Honour noted that:

Robb J also adopted the summary of the principles set out in Noble Earth Technologies Pty Ltd v Hampic Pty Ltd in Chow v Chow [2016] NSWSC 908 at 96. At [112]–[113], his Honour wrote:

In DJ Singh v DH Singh and Others [2017] NSWCA 234 at [60] Gleeson JA quoted Barrett J in Wiley Re LED (South Coast) Pty Ltd (2009) 76 NSWLR 428 at 434; [2009] NSWSC 946 at [26] (who in following Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369) wrote:

In matters relating to the administration of an estate, particularly relating to the passing of accounts, the weight of authority tends to the view that the registrar’s decision should be shown to be affected by an error to such an extent it should not stand: Cree – The Estate of Peters [2007] NSWSC 1291 at 11 (Windeyer J) citing Estate of Sharman; Ex parte Verslius [1999] NSWSC 709 at [3] (Young J).

In stating the above, I make clear that the Court can review all aspects of the findings of the Registrar and is not restricted to interfering only if she, or he, has acted on some mistaken principle of law or mistake of fact. Whilst the court determines the matter itself, regard should be had to the reasons of the registrar and to the orders made, even though the reasons for the decisions are not usually published: Indyk Estate - Wiernik v Indyk [2010] NSWSC 713 at [2] (Palmer J); Estate of Sharman at 3

The orders made by the Registrar continue in force unless, and until, the Court, after undertaking a review, makes an order that it be set aside. An application for a review of an exercise of a decision of a registrar does not operate as a stay of the orders under review: see for example, Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9 (Mason CJ, Gaudron, McHugh, Brennan, Deane, Dawson and Toohey JJ).

It is convenient next to say something about the process of filing and passing accounts in the administration of estates as the issues that have arisen in this case derive from an order made that the Administrators file and pass accounts.

In Glazier v Australian Men’s Health (No 2) [2001] NSWSC 6, Austin J (although dealing with accounts ordered to be taken in equity rather than the process for the taking of statutory accounts under s 85) set out the general principles which the Court should follow when making an order for an account for administration. At [37] – [38], his Honour wrote:

More recently, in Re Ellis; Ellis v Ellis (2015) 14 ASTLR 475; [2015] WASC 77, at [80], E M Heenan J wrote:

His Honour added, at [88]:

Whilst neither the Probate and Administration Act, nor its predecessor legislation prescribes a format, the Court has a long and well established format for estate accounts, with an approved form of notice of motion for order for, relevantly, the passing of accounts (form 150), and commentary, was introduced in March 2018, templates of which are available on the Supreme Court’s website. There are also a number of different texts that provide alternative formats (see for example, Mason and Handler, Succession Law and Practice (NSW) (Lexis Nexis, looseleaf), at [8321] and detailed accounting methodologies (see generally, E B Smyth and J R Peden, Executorship Accounts (6th ed, 1975, Law Book Co); P Suttor and L Ellison SC et al, de Groot’s Wills, Probate and Administration Practice (New South Wales) (de Groot’s Publishing, looseleaf), at Appendix 4.178).

An essential feature of estate accounts filed in the Supreme Court for passing is that there are established categories of accounting information, including capital realisations, income collections and the value of assets transferred in specie).

The accounts ought to comprise a cashbook style statement, and separate totals for capital realisations and income collections should be provided, as different rates of commission are allowed on capital compared with income. All receipts and payments should be consecutively numbered, in order to enable the registrar to identify receipts and payments with respect to which the registrar requires, or any objectors require, further information, in the process of vouching the accounts.

The accounts procedure serves the informative purpose of allowing the beneficiaries to know the status of the property in the estate and what transformations it has undergone. The beneficiaries should be able to ascertain from the accounts which of the assets in the deceased’s estate have been realised; which have been transferred in specie; and which have been retained; what investments have been made by the administrators out of the proceeds of realizations and what income had been derived from any such investments; and, finally, what, if any, distributions have been made to, or for the benefit of, the beneficiaries.

If a challenging party seeks to surcharge or falsify the accounts, then notice should be given of any challenge and particulars of the surcharge and the grounds for the falsification alleged should be provided: see generally, Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) (Austin J).

For a surcharge, the objecting party shows that something has been omitted which ought to have been included in the accounts. The challenging party has the onus of proof: Cavasinni v Cavasinni [2007] NSWSC 619 at [24] (Young CJ in Eq) (applying Pit v Cholmondeley (1754) 2 Ves Sen 565 at 565–566; 28 ER 360 at 360–61 (Lord Hadwicke LC).

For a falsification, what is shown is that a charge or disbursement has been wrongly inserted, or that a reduction in the account ought not to have been allowed. In other words, if the accounts disclosed an unauthorised disbursement then the objecting party may “falsify” the unauthorised disbursement. The falsification would have the effect of creating a deficit in the accounts. The executor or administrator would be required to replenish the estate to that extent.

The falsifying party must show that money shown in the account as paid was either not paid or improperly paid: G P Stuckey and C D Erwin (eds), Parker's Practice in equity (New South Wales) (2nd ed, 1949, Law Book Company), p 269. He or she can then ask for the disbursement to be disallowed.

The taking of the accounts will not in itself result in a judgment for any sum of money.

Section 85(1AA) of the Probate and Administration Act 1898 (NSW) relevantly provides:

Section 85(4) of the Probate and Administration Act provides:

In the Probate Rules, “proceedings for the passing of accounts” means proceedings for an order passing accounts under s 85 of the Probate and Administration Act: SCR Pt 78 r 75. A more useful description of the term is to be found in In the Will of Macnamara (1895) 6 QLJ 219, in which Griffith CJ wrote, at 223:

The Probate Rules confer on a registrar the powers of the Court in relation to, amongst other things, the passing of the accounts of executors and administrators. Conferral of power on the registrar referable to s 85 of the Probate and Administration Act is found in Pt 78 r 94(3)(c) of the SCR.

The passing of the accounts must have regard to the interests of any beneficiary, or beneficiaries, having a claim to the account which is being passed.

In this case, the order made consensually for the filing and passing of the accounts was an order for what is described as a common account, rather than an account conducted on the basis of wilful default.

Robb J observed in Chow v Chow at [117]:

In Bassett v Atherley [2011] WASC 117, at [9]–[11], the following passages relating to passing accounts appears:

The passing of the executor’s or administrator’s accounts, involves the accounts being approved by the Court. In Re Ellis at [101], E M Heenan J citing his earlier decision of The Estate of Erminia Agnes; Rogers v Rogers [2009] WASC 358 at [33]–[40], repeated that “the court’s power to require an executor (or administrator) to file and pass accounts is an important part of the court's armoury of powers to enforce the due administration of estates which may be exercised whenever and as often as the requirements of due administration dictate”.

In Re Ellis at [92], his Honour wrote:

In E Finnane, C Wood and N Newton, ‘Equity Practice and Precedents’ (2nd ed, 2019, Law Book Co) at 187, the learned authors wrote:

Thus, the function of the court on such an application is not merely to see that sums entered on the disbursements side of the accounts have, in fact, been disbursed and proper vouchers, or receipts, produced. Rather, it is one akin to that of an auditor, concerned not only with ascertaining whether alleged disbursements have in fact been made, but also with determining whether disbursements have been properly, or improperly, made, in the latter of which cases the disbursements are to be disallowed: see, for example Re the Will of WW Jenkins (1904) 4 SR (NSW) 625 (Walker J); Re the Will of Lucas-Tooth (No 1) (1931) 49 WN (NSW) 18 (Harvey CJ in Eq); The Estate of Barbara Dawn Orre; Re Estate of Instone (Supreme Court of New South Wales, 23 August 1993, Powell J, unrep).

In Ludwig v The Public Trustee (2006) 170 A Crim R 460 at 499; [2006] NSWSC 890 at [247], Campbell J (as his Honour then was) noted that:

In Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247, at [112], Ward J (as her Honour then was), after referring to the conclusion of Campbell J set out above, added:

In the case of an order for a common account, generally speaking, a registrar, in the course of considering whether to pass accounts:

In this case, it is the consequence of the moderation of the six invoices for legal costs objected to that has led to these proceedings.

In Re the Will of Kerrigan, at 251–252, Jordan CJ (with whom Stephen and Street JJ agreed) explained that when moderating:

In Re the Estate of Instone, Powell J, after quoting the above passage added, at 27:

In Re Estate of Orre, Powell J, at 5–6, described “moderation” in the following terms:

His Honour also remarked at 20:

In Re Estate of Lampard (Supreme Court of New South Wales, Hodgson J, 25 July 1995, unrep) at 8, (cited by White J (as his Honour then was) in Shave v Shave, Estate of Shave at [24]), Hodgson J made the following observations as to the role of the Court in moderating a bill where the bill (for the costs of the application to pass accounts by a solicitor) had not been paid. Although, equally apt to the present constellation of facts, his Honour said, at 11–12:

I also note that in Shave v Shave, Estate of Shave, at [29] (White J), it was pointed out that the registrar’s function in moderating bills of costs was not to determine the amounts that the solicitors retained by the Administrators may properly charge their clients, but to determine what amounts payable by the administrators ought to be borne by the estate.

Thus, it seems that even where a bill of costs has not been the subject of assessment as between solicitor and client, the persons beneficially interested are entitled to question the amounts charged to the executor or administrator as an item of discharge: Allen v Jarvis (1869) LR 4 Ch App 616 at 620–621. That decision was based on the proposition that the Court has always had power to make executors and administrators personally liable for the costs of useless and improper litigation “even in an administration suit”: affirmed in Brown v Burdett (1888) LR 40 Ch D 244 at 254 (Kay J, with whom Cotton, Lindley and Bowen LJJ agreed).

Kay J wrote in Brown v Burdett at 244–254:

The character of the obligation by the accounting party to replenish the estate is restitutionary in nature and was identified by James LJ in Re Collie; Ex parte Adamson (1878) 8 Ch D 807, at 819, as an equitable debt or liability in the nature of debt.

Once the Registrar is satisfied with the accounts, she, or he, will provide details of the total capital realisations, the total income collections and the total value of assets transferred in specie and will then request the provision of a draft certificate of correctness of accounts. If that is in order, the Registrar will issue the certificate of correctness. The figures in the certificate become the figures for determination of commission, and the assessment of costs for the preparation and filing of the accounts and of any application for commission.

As stated, the Administrators relied upon UCPR r 42.5(a). There is more than enough authority to enable me to reject the submission made on their behalf on the topic.

In Brown v Grosfeld [2011] NSWSC 1429, White J (as his Honour then was) wrote, at [29] and [31]:

In Shave v Shave; Estate of Shave, White J had written at [29]:

In In the Estate of Margaret, deceased [2012] NSWSC 1490, White J, again, referred to the rule, stating at [58]:

Although his Honour referred to “executors”, the principle stated applies equally to administrators.

Upon consideration of the application for review of the Registrar’s determination, I have considered the application afresh; the Registrar’s determination; her reasons for the decision; the evidentiary material placed before the Court by the parties on the review application; and the parties’ written and oral submissions.

Having limited the Administrators’ position to the proposition that the Registrar did not have power to moderate the costs of their solicitors because of the terms of r 42.5(a) of the UCPR, a submission which, on the authorities should not be accepted, it is unnecessary to further review the Registrar’s decision.

The moderation does not affect the costs arrangements between the solicitors and the Administrators. As stated, what is determined is the amount that should be recovered by the Administrators from the estate.

Even though the Registrar in undertaking moderation does not conduct a costs assessment, she, or he, does consider whether or not the costs and disbursements are reasonable, necessary, and proper, in all the circumstances. There is no longer any suggestion to the contrary.

In my view, the Registrar was fully justified and acting entirely in accordance with authorities to moderate the costs and disbursements of the Administrators’ solicitors, in circumstances where an order for indemnity costs had been made. In the circumstances, the notice of motion filed on 26 June 2020, must be dismissed.

The orders made by the learned Senior Deputy Registrar will stand and when the amount has been repaid to the estate the estate accounts will be passed as she ordered. I shall extend the time for the Administrators to 14 days from the date of publishing these reasons.

No claim was made by Mr Freeman for interest on the amount that was paid out of the estate by the Administrators.

In this case, the solicitors have stated to the Court that they will refund to the Administrators the amount determined by the Registrar: Tcpt, 25 September 2020, p 7(31–42). In the circumstances, that is an appropriate course to follow. It will then be for the Administrators to distribute the amount received to Mr Freeman and to Ms Berntsson (subject to what costs orders are made).

During the course of the hearing, I suggested to the legal representatives that they endeavour to reach agreement on the question of costs whatever the result of the proceedings. This they were unable to do.

However, following the conclusion of the hearing, the Court received an email from each of the legal representatives of the parties, dated 18 September 2020. In her email to the Court, Ms Golovina indicated that in the event the notice of motion were to be dismissed, the second Respondent would seek a gross sum costs order, in support of which an affidavit and outline of submissions would be filed.

Later the same day, the Administrators’ solicitors (copied to Mr Freeman’s solicitor) sent an email to the Court noting:

In the circumstances, the Court:

By way of addendum, I should say that these reasons are more extensive than they may have needed to be. The controversies which arose prior to, and at, the hearing of these proceedings, which went to the procedure to be followed on the filing and passing of accounts, the law relating to the basis upon which accounts are taken, and the manner of dealing with objections, all raise important questions of law and practice. The experience of other Judges, and my own experience, over many years, and more recently in the Succession List, as well as the experience of Registrars, evidenced by the number of requisitions that are often required to be sent (as appearing in Court files), suggests that many practitioners are not familiar with the principles and practices that have been canvassed by these reasons. I can only hope that these reasons provide a greater understanding of the way in which the system of filing and passing accounts operates.