The Estate of Arthur Michael Falco; Falco v Lambert (No 3)

Arthur Michael Falco (the “Deceased”) died in December 2009 leaving a two page handwritten will dated 18 July 2007 (the “Will”). The principal beneficiaries under the Will are the Deceased’s adult children, three of whom are the Plaintiffs. The Deceased’s fourth child is not a party to these proceedings.

Probate of the Will was granted to the First Defendant (“Mr Lambert”) on 17 February 2010. Mr Lambert was the Deceased’s accountant. The Second Defendant (“Mr White”) is a solicitor who was retained by Mr Lambert in connection with the latter’s administration of the Deceased’s estate (the “Estate”). The net sworn value of the Estate for probate was just under $7,000,000.

The only operative provisions of the Will are the dispositive clauses and the appointment of Mr Lambert as executor. The Plaintiffs place great emphasis on the fact that the Will does not contain a “charging clause”.

The Plaintiffs want Mr Lambert removed as executor of the Will. These proceedings were commenced by statement of claim filed on 27 September 2012. What then followed is set out in more detail below.

This judgment resolves two notices of motion:

As to the Plaintiffs’ notice of motion the Court:

As to Mr White's amended notice of motion:

The Plaintiffs filed their statement of claim on 27 September 2012. The primary relief sought was (and remains) that the grant of probate to Mr Lambert be revoked and that probate of the Will be granted to Patricia Jean Falco, the Deceased’s ex-wife and the Plaintiffs’ mother. However, the consequential and alternative relief sought by the Plaintiffs included these prayers:

In November 2012 Mr Lambert filed a defence and cross claim, the latter being for orders that he be relieved from any breach of trust pursuant to s 85 of the Trustee Act 1995 (NSW) (the “TA”).

On 19 February 2013 the Plaintiffs filed a notice of intended objection to commission in respect of the Estate.

On 1 March 2013 Mr Lambert filed a summons (the “Accounts Summons”) claiming these orders:

On 13 May 2013 the Plaintiffs filed a notice of motion for an order that Mr White cease to act as Mr Lambert’s solicitor in the proceedings. That motion came before me on 27 June 2013. At the conclusion of the Plaintiffs’ submissions the parties agreed that the Plaintiffs should have leave to serve an amended statement of claim joining Mr White. The further hearing of the Plaintiffs’ notice of motion was adjourned to 27 November 2013.

On 12 August 2013 the Plaintiffs filed an amended statement of claim which joined Mr White. The relief sought against Mr White is:

The case pleaded against Mr White is:

Mr Lambert’s defence to the amended statement of claim includes:

Mr White’s defence to the amended statement of claim (filed without admission that the claims against him were maintainable) admits that he rendered invoices to Mr Lambert for services he provided pursuant to a “Standard Costs Disclosure” dated 14 December 2009. More precisely, there were two documents of that date:

The defence also pleads:

Having been joined to the proceedings, Mr White quite properly ceased to act for Mr Lambert. This rendered otiose the Plaintiffs’ notice of motion of 13 May 2013. I dismissed that motion and made orders as to costs: The Estate of Arthur Michael Falco; Falco v Lambert (No 1) [2013] NSWSC 1653. Further interlocutory orders were made relating to production of documents and other matters.

The next relevant directions hearing was on 13 February 2014. On that day Mr White filed a notice of motion which included:

In the course of argument on 24 February 2014 the parties’ focus shifted from the terms of a possible separate question to the utility of a Registrar determining the Accounts Summons before any further steps were taken in the proceedings. As explained in my reasons of that date, I decided that was what should occur (Falco & Ors v Lambert & Ors (No 2) [2014] NSWSC 125):

Pending a Registrar’s determination of the Accounts Summons, the parties continued to have a number of disputes about the production of documents. Senior Deputy Registrar Studdert delivered the Decision on 15 July 2014. In the course of a subsequent directions hearing, the Plaintiffs informed me that they wished to exercise their right to have the Decision reviewed.

On 13 August 2014 the Court made orders for the Plaintiffs to file their motion to review the Decision and for Mr White to amend his motion of 13 February 2014 (see paragraph [19] above) to include prayers that the claim in the amended statement of claim against him be struck out. I fixed both motions for hearing before me on 13 October 2014 for one day.

On 15 August 2014 Mr White filed his amended notice of motion, including:

On 3 September 2014 the Plaintiffs filed their motion for review, including:

I commenced hearing the two motions on 13 October 2014. The hearing was unable to be completed on that day and was stood over to 16 December 2014, being the next date available for the parties and the Court. Unfortunately, the Court’s sittings on that day had to be vacated as a consequence of the tragic Lindt Café siege. The hearing of the motions was concluded on 2 February 2015.

The Decision is set out in a letter to Mr White dated 15 July 2015. It contains the following steps.

First, after noting that an executor and any firm of which he or she is a member may only charge for his or her services if there is an authority to charge, i.e. if there is a charging clause in the will, the Senior Deputy Registrar goes on to say (pp 1-2):

There can be no doubt that this conclusion is correct.

Second, the Senior Deputy Registrar goes on to consider how allowance can be made where an executor who practices a profession has no power to charge for professional work but nevertheless does professional work in respect of the estate. In that regard, the Senior Deputy Registrar observes (correctly) that the Court may allow commission for the professional work for which the executor would have charged had he or she had the power to do so.

In the present case the affidavit filed by Mr White in support of commission includes reference to his duties as an accountant. However, the Senior Deputy Registrar notes that the references appear to relate to entities other than the Estate. Therefore he did not take them into account because s 86 of the Probate and Administration Act 1898 (NSW) (the “PAA”) provides for pains and troubles as executor so that any allowance of a special commission is limited to work done for the estate, not work done for a separate entity.

Third, the Senior Deputy Registrar goes on to consider the bills which had been submitted for moderation. He allowed all of those bills in part or whole. He then goes on to make the following comments about the bills and the approach that he took:

Fourth, the Senior Deputy Registrar deals with the question of the accounts and disputes as to receipts. He says (p 4):

Having regard to the nature of the dispute between the parties in these proceedings, the next part of the Senior Deputy Registrar’s reasoning is important (pp 4-5):

Fifth, the Senior Deputy Registrar declined to consider the question of commission and the formal passing of the accounts until the outcome of the plaintiffs’ application for the revocation of probate in these proceedings had been determined (see further paragraph [125] below).

Sixth, the Senior Deputy Registrar’ order concerning moderation was:

Finally, the Senior Deputy Registrar concludes his reasons by making findings as to amounts upon which the Court may allow commission (see further paragraph [129] below).

The statutory framework governing the passing of accounts is to be found in the PAA:

Division 11 of Part 78 of the Supreme Court Rules 1970 (NSW) (the “SCR”) deals with accounts and commission. In particular:

Finally, given that the subject matter of the review ultimately came to focus on what expenses incurred by Mr Lambert and paid to Mr White were properly to be paid from the Estate, it is helpful to set out what was said by Powell J (as his Honour then was) in The Estate of Barbara Dawn Orre (NSWSC; unreported; 19 December 1991) at pp 5-6 (“The Estate of Orre”):

The plaintiffs’ motion for review is brought under UCPR Part 49 r 19:

The leading appellate authority is Tomko v Palasty (No 2) [2007] NSWCA 369; (2008) 71 NSWLR 61. Basten JA (with whom Ipp JA agreed, subject to the additional remarks of Hodgson JA (with whom Ipp JA also agreed)):

Hodgson JA said:

A compendious summary of the legal principles applicable to the review of a Registrar’s decision was set out by Hallen J in Noble Earth Technologies Pty Ltd v Hampic Pty Ltd trading as Cyndan Chemicals [2012] NSWSC 935, which I respectfully adopt:

To these statements of law I add the observation that, because the review of a Registrar’s decision is the exercise of a power under the Uniform Civil Procedure Rules, it is subject to s 56 of the Civil Procedure Act 2005 (NSW) (“CPA”):

Having regard to these various statements of principle, it is appropriate for the Court to identify with precision the approach it intends to adopt to the Plaintiffs’ motion for review. It is significant that the Decision under review is that of a highly experienced Registrar in a specialist jurisdiction. To say that is not to suggest that experience excludes the possibility of error. It does not. Nevertheless, it bespeaks that a higher degree of deference should be applied where a Registrar makes a decision in an area such as probate practice where, in the ordinary course of his or her duties, that Registrar will be familiar with the current practice of the profession, both as a matter of law and lore, in a way that the Court may not be.

That deference is also warranted by s 56 of the CPA. The overriding purpose will not be satisfied if the Court sets the bar too low for reviews in a specialist area such as probate. Even before the introduction of the CPA, the Court was conscious of the need to minimise costs and many procedures were introduced in the area of probate, in particular in relation to what might be called the administrative aspects of probate work, for it to be dealt with as informally and inexpensively as possible. This is one of the main reasons why the rules provide for the default position to be that the passing and moderation of accounts is dealt with by a Registrar on the papers and without the attendance of the parties (see paragraph [38] above).

The review has been conducted on the basis of the material that was before Senior Deputy Registrar Studdert. Accordingly, mindful of the considerations set out in the preceding paragraphs, the Court’s approach is that it will not interfere with the Decision unless it is satisfied that as to a significant matter it is obviously wrong or was not reasonably open on the material before him or the Plaintiffs have satisfied the Court that, for some other reason, it is in the interests of justice to exercise the Court’s discretion to interfere with the Decision. While this approach may be redolent of the test in House v The King (1936) 55 CLR 499 (“House v The King”), I have not overlooked that, on the authorities, the question of review is not to be determined by the application of House v The King simpliciter.

As will be apparent from the form of the Plaintiffs’ motion for review, the application falls into two parts: a challenge to the moderation of Mr White’s costs properly payable from the Estate and a challenge to the decision not to require Mr Lambert to redraw the Estate’s accounts. Each of these will be considered in turn.

The material before the Senior Deputy Registrar was:

Mr White’s affidavit attached sixteen invoices from Mr White to Mr Lambert. All but two of the invoices form part of this review. The parties’ submissions before the Senior Deputy Registrar also cross-referred to other affidavits filed in the proceedings.

The Plaintiffs’ challenge in relation to each tax invoice was helpfully set out in detail in their written outline dated 3 September 2014. That outline also set out their fundamental submission (emphasis in original):

By reference to the exposition of the principles set out in paragraphs [41] to [43] above, the Court does not accept the Plaintiffs’ submission insofar as it suggests that House v The King represents the totality of the test to be applied on review. In the end, however, nothing turns on this point. The task before the Court requires it to consider each complaint in relation to each tax invoice. That is done in the next section of these reasons.

This invoice was allowed in full by the Senior Deputy Registrar. The invoice includes an amount of $12,800 plus GST described as “To our professional costs for obtaining probate in accordance with Schedule 4 of the Legal Professional Further Amendment (Fixed Costs) Regulation 2008”.

The Senior Deputy Registrar appears to have overlooked a concession in Mr Lambert’s submissions about this amount, that in calculating the total value of the Estate for the purposes of the probate scale fee, the value of the Deceased’s superannuation fund was included among the assets of the Estate. A concession to like effect was made by Mr Lambert in his written submissions before me, conceding that the correct probate scale fee is $9,391.80 plus GST. The Plaintiffs have not demonstrated why there should be a different value for the Estate for the purposes of the probate scale fee.

The effect of Mr Lambert’s concession is that the amount which the Senior Deputy Registrar ordered Mr Lambert to refund to the Estate will need to be increased by $3,408.20 plus GST (being the difference between what was allowed and what Mr Lambert concedes should have been allowed) less $39.10 plus GST (being the allowance made by the Senior Deputy Registrar in relation to the affidavit of additional assets – see invoice of 25 February 2013 and the Senior Deputy Registrar’s decision in relation to the probate scale fee). The deduction of $39.10 plus GST is required because Mr Lambert’s concession is calculated on the value of the Estate including the additional assets and it is necessary to deduct the Senior Deputy Registrar’s allowance of $39.10 plus GST in relation to the additional assets in order to avoid double counting.

In considering the Plaintiffs’ criticism of the Senior Deputy Registrar having allowed nearly all of this invoice, it is convenient to make a point which relates to a number of the invoices under challenge. The Court has already noted (see paragraph [31] above) this conclusion of the Senior Deputy Registrar (p 2) which is repeated here for convenience:

That observation is, with respect, plainly correct. The Plaintiffs appointed Glasson, Gemmill & McGill to act for them within days of probate having been granted to Mr Lambert. The administration of the Estate took on a deeply adversarial character from the outset, a feature which I have been able to observe in the several hearings over which I have presided. In making that observation I am not to be taken as suggesting that parties are not entitled to assert vigorously what they consider to be their rights. However, a consequence of the approach taken by the Plaintiffs has been to put Mr Lambert in a position where virtually every aspect of the administration of the Estate has been or could potentially be the subject of legal dispute with the Plaintiffs.

The Court therefore agrees with the Senior Deputy Registrar’s assessment as to Mr Lambert’s entitlement to have recourse to a solicitor. In my view the Senior Deputy Registrar understated that entitlement. Resort to legal assistance out of an abundance of caution in the context of the administration of the Estate by Mr Lambert was justified more than it might be in the administration of other estates that were not so thoroughly pervaded by an atmosphere of conflict. For this reason an expansive view of what could be referred to Mr White by Mr Lambert was properly open to the Senior Deputy Registrar.

The legally combative tone set by the Plaintiffs may be demonstrated by one example. Probate was granted on 17 February 2010. On 26 February 2010 one of the Plaintiffs, Joseph Falco, emailed Mr Lambert with copies to the other beneficiaries and to the Plaintiffs’ solicitor Mr McGill. The Court does not accept the Plaintiffs’ submission that this email should be read benignly:

In the invoice under consideration in these paragraphs the Plaintiffs challenged the allowance of attendances and work undertaken between 10 and 17 March 2010. The Plaintiffs submit that the entries for that period described in paragraphs 7.1 and 7.2 of Mr White’s affidavit “represents work that should have been carried out by the executor, the first defendant, Mr Lambert personally and did not require the services of a solicitor”.

These reasons would become unwieldy if the Court set out the evidence on each issue. However, by way of example I will set out Mr White’s evidence in relation to the attendances under challenge:

I accept Mr Lambert’s submission that the work undertaken by Mr White during this period of attending upon and advising Mr Lambert in relation to demands made by the Plaintiffs was not executorial work. Furthermore, Mr Lambert was entitled to have recourse to Mr White in relation to his interactions with the Plaintiffs directly as opposed to matters passing between the solicitors. If the Plaintiffs made assertions or demands to Mr Lambert directly, he was entitled to seek Mr White’s advice in relation to them. In the Court’s view that entitlement continued during the period between October 2010 and November 2011 when the Plaintiffs were not represented by solicitors. As the Court observes in a slightly different context in paragraph [89] below, just because a party which raises matters with potential legal ramifications chooses not to be represented does not make it unreasonable for the other party to seek legal advice.

The Court is unable to discern any error in the Senior Deputy Registrar’s decision to allow the attendances between 10 and 17 March 2010 or any other reason to interfere with this result.

Complaint is made about the allowance of attendances and work undertaken between 13 May 2010 and 30 June 2010 (noting that the Senior Deputy Registrar did not allow an attendance on 14 May 2010). I have read paragraphs 7.4 to 7.8 of Mr White’s affidavit and accept Mr Lambert’s submission that the work undertaken was not executorial. It involved advising Mr Lambert in relation to disputes which arose between the Plaintiffs and Mr Lambert regarding the sale of the Deceased’s property at Woolloomooloo and correspondence in relation to those disputes from both the Plaintiffs and their solicitors. No error has been demonstrated on the part of the Senior Deputy Registrar and no other reason to interfere has been identified.

The Plaintiffs complain that the value of the invoice submitted for moderation is less than the original value of the invoice that was paid by the Estate. Mr Lambert’s submissions accept that proposition and indicate how the Estate has been credited with the overpaid balance. None of that is a matter which affects the moderation of the invoice that was presented to the Senior Deputy Registrar.

I have read paragraph 9 of Mr White’s affidavit explaining the work represented by this invoice.

The Plaintiffs have two complaints. First, they say that the invoice includes “numerous instances of work undertaken by Mr White in dealing with the three plaintiffs as beneficiaries of the Estate, and all such attendances should have been undertaken by the First Defendant, as executor. Dealing with the beneficiaries, even if contentious, is not legal work and is executorial work which should have been undertaken by Mr Lambert”. The Court does not agree. Mr Lambert was entitled to have recourse to Mr White to deal with the beneficiaries in the contentious circumstances of this Estate to which reference has already been made (see paragraphs [57] – [59] above).

The second complaint is that the Senior Deputy Registrar had “not paid sufficient regard to the description of the work in the second defendant’s affidavit such that tax invoice 1549 has not been properly moderated”. The Court is unable to identify any merit in that submission by reference to the material that was before the Senior Deputy Registrar.

The Plaintiffs have failed to demonstrate any error on the part of the Senior Deputy Registrar in relation to this invoice or any other reason to interfere.

The Plaintiffs have no complaint about the Senior Deputy Registrar’s moderation. They raise the issue of an overpayment by the Estate. The Court accepts Mr Lambert’s explanation of how a credit has been allowed in relation to the overpayment and declines, in the exercise of its discretion, to make any further order on the basis that it falls outside the scope of a review.

The Plaintiffs complain about the allowance of attendances on and after 11 March 2011 to 28 April 2011 insofar as (to quote the Plaintiffs’ written submissions) “a large number of the attendances ultimately appear to involve work undertaken by Mr White in relation to the preparation of settlement statements of distribution to the beneficiaries of their entitlements in the estate”. The Court notes that while some of the attendances during that period fit that description, it is difficult to tell whether all of them do.

I have read paragraph 12 of Mr White’s affidavit explaining the work contained in this invoice. On the face of the invoice it is clear that even the preparation of distribution statements for the beneficiaries was being done in the context of demands and disputes raised by the Plaintiffs. For example, the entry for 12 April 2011 is:

The Court is of the view that the Senior Deputy Registrar was entitled, given the pervasive and ongoing disputes between the Plaintiffs as beneficiaries and Mr Lambert, to conclude that the latter was entitled to have recourse to Mr White in relation to the preparation of distribution statements. It is implicit in Mr White’s evidence that Mr Lambert could reasonably have expected that the distribution statements could themselves be the subject of challenge. In the context of the administration of this Estate, the Court sees no error in the Senior Deputy Registrar’s determination that advising and assisting in the preparation of the distribution statements was not work of an executorial nature. No other reason to interfere has been made out.

The Plaintiffs’ complaint in relation to this tax invoice does not relate to moderation but involves an overpayment when the tax invoice as originally rendered to and paid by the Estate is compared to the invoice that was submitted for moderation.

The Court accepts Mr Lambert’s submission that credit has been allowed by Mr White to the Estate and declines to make any further order for the same reason set out in paragraph [70] above.

This invoice was not the subject of moderation. It is therefore irrelevant to the present application. The Court notes Mr Lambert’s statement that a credit has been allowed by Mr White in relation to this invoice and declines to make any further order for the same reason set out in paragraph [70] above.

This is an invoice for $311 plus GST.

The Plaintiffs submit that the work in the invoice is all of an executorial nature, comprising attendances and efforts by Mr White to assist Mr Lambert to obtain a new business broker in relation to the sale of one of the principal assets of the Estate, a company called Tie Fabrications Pty Limited (the “Company”).

I have read paragraph 15 of Mr White’s affidavit which deals with this invoice. That discloses that the background to these attendances was a concern on the part of Mr Lambert and Mr White that a business broker who had previously been retained had been unable to sell the Company after eight months. Mr White suggested another business broker who he knew and made contact with that person on behalf of the Estate.

In those circumstances, the Court is of the view that it was reasonably open to the Senior Deputy Registrar to conclude that this was work not purely of an executorial nature and was properly referable to a solicitor in connection with the administration of the Estate. It is not uncommon for clients to seek advice and assistance from solicitors who, by the nature of their practice and experience, may be able to recommend other professional service providers such as real estate agents and accountants. The Court does not discern any obvious error or other reason to warrant the exercise of its discretion to interfere with the Senior Deputy Registrar’s moderation of this tax invoice.

In relation to this invoice, the Senior Deputy Registrar disallowed a number of attendances. From the Court’s perusal of the tax invoice, the disallowed attendances fall into two categories. First, there are a number of attendances which appear to be of a plainly ministerial or administrative nature. Their categorisation as executorial is correct. The second category relates to attendances involving communications with a Mr Walker, who was the prospective purchaser of the business of the Company. Implicit in the Senior Deputy Registrar’s disallowance of those attendances is the conclusion that those communications with the proposed purchaser (who had not retained a solicitor) were properly a matter for Mr Lambert as executor.

The Plaintiffs complain that there are a number of other attendances which the Senior Deputy Registrar did allow which appear to be in relation to the proposed sale of the Company or its business. I have read paragraph 16 of Mr White’s affidavit. He explains that the attendances to which the Plaintiffs now draw attention were with the new business broker and an accountant who Mr White had suggested should be retained to value the business and provide advice in connection with the proposed sale.

It is normal in a transaction such as a sale of business for the professionals retained by or on behalf of the client vendor – in this case the solicitor, an expert accountant and a business broker – to have communications among themselves. It is entirely artificial and incorrect to characterise such direct communication by Mr White with those people as executorial work. It appears that the Senior Deputy Registrar took the view that, in contradistinction to direct communications with the proposed purchaser, Mr White’s dealings with those professionals and related attendances on Mr Lambert were properly to be characterised as solicitor’s work in the interests of the Estate. The Court shares that conclusion. In any event, quite apart from the Court’s agreement, the Court is satisfied that it was reasonably open on the material for the Senior Deputy Registrar to reach that conclusion.

The Plaintiffs have failed to demonstrate any error on the part of the Senior Deputy Registrar in relation to this invoice or any other basis upon which the Court should interfere.

This is a tax invoice for $21,175.40 plus GST. The Senior Deputy Registrar disallowed $11,599 plus GST in relation to attendances that he formed the view were related to the executor’s accounts and to commission. He gave detailed reasons for that disallowance.

The Plaintiffs object to the allowance of the balance of the invoice because they say the attendances allowed by the Senior Deputy Registrar relate to Mr White’s dealings with the beneficiaries both in connection to the Company and dealings between Mr White and the specialist accountant, Mr Oakeshott, in respect of the sale of the Company or its business. Complaint is also made about the allowance of a number of discussions which Mr White had with the proposed purchaser, Mr Walker.

Insofar as the attendances relate to dealings with the beneficiaries, the Court finds no error in the Senior Deputy Registrar’s approach for the reasons set out in paragraph [62] above. Insofar as there are attendances on Mr Oakeshott in respect of the proposed sale, the Court does not find any error in the Senior Deputy Registrar’s approach for the reasons set out in paragraph [83] above.

Different considerations may apply insofar as Mr White dealt with Mr Walker. The Plaintiffs’ written submissions contend “there is no reason why such negotiations could not have been engaged in by Mr Lambert as the executor of the estate, especially in circumstances where Mr Walker was not legally represented on the purchase”.

The difficulty with this submission is that just because the purchaser chose not to be legally represented does not mean that the Estate was not entitled to be legally represented. On the contrary, even though Mr Lambert was an accountant, he would have been subject to potentially legitimate criticism if he had embarked on selling the Company without appropriate legal and, as he and Mr White appeared to consider necessary in this case, independent accounting advice. The consequence in this case was that Mr White found himself dealing with Mr Walker directly rather than with Mr Walker’s solicitor.

I have read paragraph 17 of Mr White’s affidavit in support of this invoice. It is apparent from that affidavit that negotiations for the sale of the Company were well advanced (as opposed to earlier direct attendances between Mr White and Mr Walker which were disallowed – see paragraph [81] above). The high point of the Plaintiffs’ criticism is an attendance on 21 October 2011 of 4.7 hours described as “Attending to Peter Oakeshott and Mal Walker (including travelling)”. This is explained and the context given in Mr White’s affidavit:

It appears that by the period of the invoice under consideration, the sale of the Company had now become the subject of an offer from Mr Walker. While it may be the case, as it appeared to be in relation to invoice 1945 above, that many aspects of the negotiation of a sale of the asset of an estate are executorial in the sense that the executor will necessarily be the prime mover and be involved in negotiating the sale, there will eventually – and perhaps quite quickly – come a time when an executor will be entitled to have a solicitor involved. That must be the case when detailed negotiations are undertaken. That is not to say that an executor cannot, if he or she feels able, conduct detailed negotiations himself or herself. However, as Powell J pointed out in The Estate of Orre (see paragraph [39] above), if the nature of what was being done made it prudent for the executor to have another do that work, then that cost will be allowed. The use of a solicitor in connection with the detailed negotiations for sale of the Company readily falls into that class.

Looking at the matter another way, if Mr Walker had been represented and Mr Lambert had chosen to attend, the attendees at the meeting of 21 October 2011 to negotiate in response to Mr Walker’s offer would have been entirely unremarkable as a matter of commercial practice: the vendor, the vendor’s solicitor and the vendor’s accountant meeting with the purchaser and the purchaser’s solicitor. In this case Mr Walker did not have a solicitor but, as the Court has already observed, that does not mean that it was not right or prudent for Mr Lambert to have a solicitor. Furthermore, there is nothing to suggest that matters weren’t at the point where, as sometimes occurs in negotiations, there was utility in having the professional advisers meet to further negotiations in the absence of their principals.

In summary, the Court is satisfied from the material that was before the Senior Deputy Registrar that the negotiations had reached the point where it was prudent for Mr Lambert to protect the Estate’s interests in relation to the proposed sale by involving Mr White. The Court is unable to discern any error in the Senior Deputy Registrar’s approach. Alternatively, having regard to the material before him, it was reasonably open to him to allow the attendances which he did in this invoice. No other reason has been shown for the Court to interfere.

This was an invoice for $1,181 plus GST. The Senior Deputy Registrar disallowed an amount of $660 plus GST in relation to two attendances which concerned the Estate accounts.

The Plaintiffs submit that the Senior Deputy Registrar should have disallowed attendances of $66 plus GST (and possibly further attendances of $132 plus GST, but it is not clear) concerning communications between Mr White and Mr Michael Falco, the independent beneficiary who was not represented by Glasson, Gemmell and McGill. Mr White’s affidavit discloses that the subject matter of those communications was “the offer by Joseph Falco and the options for sale of Tie Fabrications Pty Limited and the information sought by Glasson, Gemmell and McGill”. The Plaintiffs submit that because Mr Michael Falco is not legally represented, that work was of an executorial nature and there is no reason why it ought to have been performed by Mr White.

The Plaintiffs’ submission does not, in relation to these attendances, capture what the Court considers to be the correct test. It is clear that by this time much activity had been undertaken over an extended period of time in relation to the Company and various matters raised by Glasson, Gemmell and McGill. It appears from the tax invoice that the contact with Mr Michael Falco was initiated by a letter from Mr Michael Falco which the Court infers was addressed to Mr White, although little turns on the correctness of that inference. Given everything that had occurred the Court is satisfied that it was prudent in the way described by Powell J in The Estate of Orre (see paragraph [39] above) for Mr White, who had been intimately involved in all of those matters, to provide the relevant information to Mr Michael Falco. The Court finds no error in the approach taken by the Senior Deputy Registrar. Even if there were an error, the amount concerned is de minimis and the Court, in the exercise of its discretion, declines to interfere with the overall result. No other reason justifying interference has been shown.

The Plaintiffs next submit that several attendances by Mr White in replying to the Plaintiffs’ solicitors in relation to the provision of information concerning the Estate should have been dealt with by Mr Lambert directly corresponding with the beneficiaries. They submit that it was not necessary for Mr White to be instructed by Mr Lambert to respond to the inquiries from Glasson, Gemmell and McGill.

That submission is rejected. The inquiries came through Glasson, Gemmell and McGill. It is entirely proper and appropriate for Mr White to have been instructed to respond on behalf of the Estate.

Finally in relation to this invoice, the Plaintiffs note that the Senior Deputy Registrar disallowed two attendances on 11 April 2012 that are clearly recorded as being in relation to “estate accounts”. The Plaintiffs submit that an attendance on 10 April 2012 “Re financial statements” and an attendance on 12 April 2012 “Re accounts” should have been disallowed on the same basis.

The Court accepts Mr Lambert’s submission that Mr White was careful in his invoices to distinguish attendances in relation to the “estate accounts” from other accounts. I have read paragraph 18 of Mr White’s affidavit which provides detail in relation to this invoice. It is clear that around this time Mr White was having to gather financial information unrelated to the Estate accounts in order to respond to requests from Glasson, Gemmell and McGill and the Court infers that is what the attendances on 10 and 12 April concern.

Accordingly, the Court is unable to discern any error in the Senior Deputy Registrar’s approach. Alternatively, if that conclusion is wrong, the two attendances amount to $99 plus GST. As such, they are de minimis and, in the exercise of its discretion, the Court declines to interfere with the overall result of the moderation. No other reason justifying interference has been shown.

The Plaintiffs’ submissions and objections before the Senior Deputy Registrar objected to the inclusion of this invoice for moderation. However, they did not give any specific basis for the objection and, as far as the Court can tell, did not include the matters which the Plaintiffs now seek to raise. Given the nature of a review, that is not a reason for the Court not to take into account the objections now raised. Those objections are not on the basis that the work included in the invoice is “executor’s work”.

The Plaintiffs’ first submission is that while the invoice is dated 18 September 2012 it relates to work undertaken between 11 May 2010 and 16 March 2011. The Plaintiffs submit that some explanation should have been given as to why those attendances were not part of any earlier tax invoices rendered to Mr Lambert.

I have read paragraph 19 of Mr White’s affidavit which explains this invoice. It appears that it all relates to the one subject matter, being the sale of a home unit, mooring pen and parking space owned by the Deceased. It is clearly work appropriate to have been undertaken by Mr White in the interests of the Estate. The absence of an explanation for a delay in billing the work is irrelevant to the issue of moderation and provides no basis to interfere with the Senior Deputy Registrar’s allowance of the entire invoice.

The Plaintiffs’ second submission is that during the period to which this invoice relates, Mr White’s hourly rate was $300 per hour plus GST. It later became $330 per hour plus GST. It would appear that in preparing the invoice in September 2012 Mr White used his then applicable rate rather than the rate which applied at the time the work was done.

Mr Lambert’s submissions before this Court accept that criticism. The Plaintiffs submit that the moderated amount should be reduced to reflect the correct charge out rate, being a difference of $30 per hour plus GST for the 7.2 hours covered by the invoice.

It follows that the amount disallowed by the Senior Deputy Registrar’s moderation should be increased by $216 plus GST. The Court notes that the point on which the Plaintiffs have succeeded in relation to this invoice does not appear to have been raised before the Senior Deputy Registrar.

This tax invoice was for $2,226.40 plus GST, of which the Senior Deputy Registrar disallowed $792 plus GST as relating to either the Estate accounts or executor’s work.

The Plaintiffs submit that the balance of the attendances in the account relate on their face either to attendances by Mr White with Mr Lambert, or Mr Oakeshott and others in relation to the sale of the Company and rely on their earlier submissions that such work was executorial in nature. For the reasons given in paragraphs [83] and [91] above, those submissions are again rejected.

Submissions are also made in relation to the attendances allowed between 2 October 2012 and 19 October 2012. Contrary to the Plaintiffs’ submissions, the Senior Deputy Registrar did not allow attendances in relation to correspondence from Glasson, Gemmell and McGill in relation to the commencement of these proceedings or the Estate accounts.

I have read paragraph 20 of Mr White’s affidavit which provides his explanation in relation to this invoice. As to the attendances between 2 October 2012 and 19 October 2012 it appears that they related either to the sale of the Company or to answering other inquiries from Glasson, Gemmell and McGill. As such, the Court is unable to discern any error in the Senior Deputy Registrar’s approach in allowing those attendances for the reasons given in paragraphs [91] and [98] above. No other reasons to interfere have been shown.

This tax invoice was not included in the invoices for the application for moderation. It is an invoice for $264.55 which the Plaintiffs submit is a duplication of fees charged to and paid by the Estate in another invoice. Mr Lambert’s submissions accept this and indicate that Mr White has allowed a credit to the Estate. This is not a matter which touches upon the Court’s review of the Senior Deputy Registrar’s moderation. In any event, given that a credit has been allowed, in the exercise of its discretion, the Court declines to make any adjustment to the Registrar’s moderation to take account of it for the reason set out in paragraph [70] above.

The Plaintiffs submitted that in addition to the order made as to the amount disallowed which Mr Lambert should refund to the Estate, an order should be made against Mr White to repay those amounts. Three arguments were made in support of that submission:

Mr White resisted that submission for these reasons:

The Court accepts Mr White’s submissions. There is an additional reason why the Court declines to extend any refund order to Mr White.

It is the executor who applies for the passing of the accounts and commission. As the executor and applicant, the Court has jurisdiction to make an order against the executor. The juridical basis for such an order is that the executor is, in effect, found to have appropriated assets of the estate to pay an agent for work which, for whatever reason, the Court has determined the executor should have undertaken himself or herself and is therefore not entitled to be indemnified from the estate. The agent, in this case the solicitor, is not a party to the moderation. The Court’s finding does not require a determination as to whether the executor acted innocently or otherwise.

Insofar as Mr White has been paid out of the Estate, some basis in law would need to be demonstrated to justify an order against Mr White. The Plaintiffs’ counsel accepted in argument (correctly) that the Plaintiffs would have to make out a claim against Mr White based on Barnes v Addy (1874) LR 9 Ch App 244 (“Barnes v Addy”). Such a claim was pleaded in the Amended Statement of Claim. No such claim having yet been argued, let alone proven, it is clear that no order can be made against Mr White.

The defendants submitted that Mr Lambert should not have to make any refund to the Estate in relation to disallowed items until his claim for commission had been determined. This was put on the basis that it was quite common in relation to the administration of estates for any amount ordered to be refunded to be set off against any commission to which the Court found the executor was entitled (or the actual award of commission reduced accordingly). In other cases an executor will recover, by way of commission, amounts he has expended but as to which the Court has determined he is not entitled to indemnity from the estate.

The Court does not accept that submission in this case. Mr Lambert could have filed his own motion for review of the Decision in relation to that point. He did not. There is no application for review by anyone of the Decision insofar as it was to the effect that the question of commission should abide the determination of the Plaintiffs’ revocation proceedings. In those circumstances, subject only to the outcome of this review, any order for the payment of a refund to the Estate by Mr Lambert should be complied with in the usual way. Failure to comply with such an order, quite apart from raising questions of possible contempt, could in and of itself become a significant matter in the revocation proceedings.

Mr Lambert’s affidavit affirmed on 28 February 2013 attached a set of accounts in relation to which Mr Lambert said:

The attached accounts were divided into a series of what were described as “sub-accounts”. The first sub-account was described as “receipts and disbursements from White & Associates Solicitors accounts for the estate” (the “Estate Sub-Account”). This listed some 24 separate items as receipts and 25 items as disbursements. The majority of the disbursements were legal fees paid to Mr White’s firm.

The accounts then went on to include four additional sub-accounts, being for the Company, the Falco Superannuation Fund, A&P Falco Investments Pty Limited (trustee for the Falco Family Trust) and Anvil Properties Pty Limited, which was the trustee of the Falco Superannuation Fund and also used by the Deceased as a share trading company.

On 3 March 2014 Senior Deputy Registrar Studdert issued requisitions to Mr Lambert, which included:

By letter dated 14 May 2014, Mr Lambert’s solicitors responded to Senior Deputy Registrar Studdert’s requisitions. In relation to the accounts they said “These are the accounts which the executor seeks to pass. However, should it be of assistance, further accounts from 30 June 2012 to date can be provided”.

In the Decision the learned Senior Deputy Registrar concluded that, for the purposes of the PAA, the sub-accounts for the various entities referred to in paragraph [122] above were irrelevant. Only the Estate Sub-Account needed to be considered (see paragraph [123] above). He therefore adhered to the view he had expressed in his requisition of 3 March 2014 that he would not require the accounts to be redrawn “for no greater reason than that I doubt such a course would achieve any great purpose” (p 5). The Senior Deputy Registrar then goes on to deal with the question of commission (p 5):

In their written outline before this Court, the Plaintiffs submitted that:

The Plaintiffs submitted that the present case was on all fours with the outcome in The Estate of Orre, in which Powell J concluded (at p 19):

The Plaintiffs relied on their submissions and objections before the Senior Deputy Registrar for the proposition that the accounts attached to Mr Lambert’s affidavit of 28 February 2013 were so inaccurate that they did not represent the true and proper accounts of the Estate of the Deceased, such that the Court should order them to be redrawn.

Finally, the Plaintiffs submitted that the figures which the Senior Deputy Registrar provided for the r 84 certificate including capital of $3,375,419 and an income of $15,668 were not properly explained in the Decision. They submitted that because of their various complaints about the form of the accounts “the figures reached by the Registrar could not on any view be correct”.

Mr Lambert submitted that the Senior Deputy Registrar was correct, for the reasons given by him, not to require the accounts to be redrawn. Insofar as the Plaintiffs sought to re-agitate their criticism of the accounts, Mr Lambert relied upon his detailed responses that had previously been before the Senior Deputy Registrar.

In relation to commission, Mr Lambert propounded a calculation which he said reflected the Senior Deputy Registrar’s decision but produced a figure $8.44 lower for income and $144.15 lower for receipts than those in the Decision. Mr Lambert submitted that the difference in calculations was not material but that he would accept the figure in any future certificate of correctness being the lower one.

The Plaintiffs’ motion for review challenges the Senior Deputy Registrar’s decision not to require the accounts to be redrawn.

For the reasons given by the Senior Deputy Registrar, the Court is satisfied that there is no error insofar as he did not require those sub-accounts referred to in paragraph [122] above to be redrawn because they did not deal with the subject matter for accounts required by the PAA. The Senior Deputy Registrar’s decision not to require the Estate Sub-Account to be redrawn must then be considered.

In dealing with this latter point the Court notes that the Senior Deputy Registrar did not explicitly state why he doubted that requiring the accounts to be redrawn “would [not] achieve any great purpose”. However, a fair reading of the Decision discloses at least one express reason and another implicit in the approach taken by the Senior Deputy Registrar.

First, earlier in the Decision the Senior Deputy Registrar makes the point (at p 4) that “there is no prescribed form of accounts and accounts vary widely in their format, particularly those drawn by accountants. As stated in the original requisitions, the accounts should have been restricted to the receipts and outgoings of the Estate only”. The Court agrees with this reason for the Senior Deputy Registrar’s conclusion that, given the absence of a prescribed form of accounts, nothing would be achieved by requiring the Estate Sub-Account to be redrawn because it apparently set out the receipts and disbursements of the Estate. That might be referred to as a reason going to the form of the Estate Sub-Account.

Second, in the Court’s view the decision not to require the Estate Sub-Account to be redrawn cannot be separated from and is consistent with the Senior Deputy Registrar’s decision – which is not challenged in this review – that consideration of commission and the formal passing of accounts should await the outcome of the Plaintiffs’ revocation proceedings. This reason might be said to be a reason going to the substance of all of the sub-accounts, which it is obvious will form a significant part of the debate in the Plaintiffs’ main proceedings for revocation of the grant of probate to Mr Lambert.

Contrary to the Plaintiffs’ submission that the Senior Deputy Registrar does not appear to have taken into account their extensive submissions and objections in relation to the accuracy of the accounts attached to Mr Lambert’s affidavit of 28 February 2013, the conclusion expressed in the preceding paragraph depends upon the Plaintiffs’ submissions having been considered. Those submissions contain detailed criticisms of all of the sub-accounts presented by Mr Lambert. However, even if attention is confined to the Plaintiffs’ criticisms of the Estate Sub-Account, almost every item is the subject of some commentary or criticism. Significantly for present purposes, many of those criticisms are obviously and inextricably linked to the Plaintiffs’ main case for the removal of Mr Lambert.

Two examples will suffice. In relation to receipt item 11, the Plaintiffs’ submission includes:

As to disbursement item 20, the Plaintiffs’ submission includes:

Given that many of the Plaintiffs’ criticisms of the accounts, even in relation to the Estate Sub-Account, are said to evidence Mr Lambert’s dereliction of duty, the Court is of the view that this is another reason why the Registrar’s decision not to require those accounts to be redrawn was correct. The Court is not to be taken as suggesting that the Plaintiffs were not entitled to frame their criticisms in the way they did. The point for present purposes is that their criticisms demonstrate that their complaints about the accounts (including their accuracy) will inevitably form part of the main proceedings. It would have been quite inappropriate for the Senior Deputy Registrar to embark upon a consideration of matters that will have to be dealt with as part of the wider, main proceedings.

Alternatively, for the reasons given in the preceding paragraph, the Court is satisfied that the Senior Deputy Registrar’s decision was not so obviously wrong or was not reasonably open to him. For either this reason or that given in the preceding paragraph, the Court, in the exercise of its discretion, declines to interfere with the Registrar’s decision. The Plaintiffs remain free to deploy their criticism of the accounts in whatever way they see fit in the revocation proceedings. The Court may then make findings in those proceedings which will demonstrate that the Estate Sub-Account contains errors requiring it to be redrawn before the balance of the Accounts Summons can be determined.

The Plaintiffs (correctly) do not appear to submit that it was not within the Registrar’s power to postpone final consideration of commission and the passing of accounts until the determination of the revocation proceedings. The Court has a wide discretion as to whether or not it passes accounts and in what form. So much is apparent from SCR Part 78 r 84 which is prefaced by “If the Court makes an order passing accounts”. The complete rule is set out in paragraph [38] above.

The Plaintiffs’ motion for review does not seek an order in relation to the Senior Deputy Registrar’s conclusions as to commissionable amounts. Nevertheless, the Plaintiffs made submissions before this Court calling those conclusions into question (see paragraph [129] above).

The Senior Deputy Registrar expressly declined to issue a certificate of correctness under SCR Part 78 r 84 because the balance of the Estate was yet to be administered and proved. It is not necessary for the Court to make any order in relation to the Senior Deputy Registrar’s findings as to commissionable amounts at this time. If or when the question of commission and the passing of accounts is revisited by a Registrar after the determination of the Plaintiffs’ revocation proceedings, that future Registrar (Senior Deputy Registrar Studdert having now retired) will be able to take into account any of the Court’s findings in those proceedings insofar as they may touch upon the accuracy of the accounts. As no certificate of correctness has been issued, the Senior Deputy Registrar’s conclusions could be ignored by that future Registrar as having been overtaken by any findings in the revocation proceedings.

The relief for which Mr White pressed at hearing is set out in paragraph [23] above. At the hearing, the argument was structured in four parts.

First, it was submitted that the entire claim against Mr White should be dismissed under UCPR Part 13, r 13.4:

Alternatively, it was submitted that the claim against Mr White should be struck out, if necessary (but not conceding) with leave to the Plaintiffs to replead, in reliance on UCPR Part 14, r 14.28:

Further, and in the alternative, it was submitted that the claim against Mr White should be stayed pending the completion of the Court’s consideration of the Accounts Summons, in particular Mr White’s claim for commission. When this submission is combined with the Senior Deputy Registrar’s determination that the resolution of the Accounts Summons should abide the outcome of the Plaintiffs’ revocation proceedings, this meant that any stay would continue until the revocation proceedings had been determined. The application for a stay was made pursuant to UCPR Part 28, r 28.5:

Finally, and alternatively, it was submitted that pursuant to UCPR Part 28 r 28.2, which provides that “the court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings”, the following question should be determined first as a separate question in the proceedings:

Insofar as Mr White submitted that the proceedings against him should be dismissed or struck out, his counsel (correctly) accepted that the application was governed by the well-known test stated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130 (“General Steel”). The learned Chief Justice there sets out a number of ways in which the test has been expressed. For the purpose of these reasons I shall summarise them by saying, particularly in relation to summary dismissal, that exceptional caution must be exercised and that a case will not be dismissed summarily if it appears there is a real question of fact or law to be determined upon which the parties’ rights depend.

The submissions put on behalf of Mr White moved seamlessly through these various alternatives and I shall record and consider the arguments in the same way. The relevant pleadings are set out in paragraph [14] above.

Mr White’s primary submission in support of the summary dismissal of the proceedings against him was premised on the observation that they were fundamentally based on the Plaintiffs’ proposition that the absence of a charging clause in the Will meant that Mr Lambert was not entitled to retain and pay Mr White from the Estate. It was submitted that proposition was plainly wrong and had been conclusively rejected by the Senior Deputy Registrar. Any case, no matter how pleaded, could never succeed against Mr White if premised upon the absence of a charging clause.

Reference was then made to a number of preliminary allegations in the amended statement of claim:

These preliminary allegations then led into the case pleaded against Mr White which is set out in paragraph [14] above. Particular attention was drawn to the following (which are reproduced again for convenience):

The extracts referred to in the preceding two paragraphs were said to demonstrate that the allegation of the absence of a charging clause was the essential element of the case against Mr White.

It was next submitted in support of the dismissal application that Mr White’s reliance on s 53 of the TA constituted a complete defence. This conclusion was said to be supported by the decision of Nicholas J In the Estate of Purton (1936) 53 WN (NSW) 148 (“Purton”). Section 53 provides:

The final part of Mr White’s dismissal argument focused attention on the Plaintiffs’ allegations being grounded in Mr White having been wrongfully or improperly retained to do non-legal or administrative or executorial tasks. Mr White submitted that the Plaintiffs’ active participation in the Registrar’s determination with respect to the moderation of Mr White’s invoices had effectively dealt with all of those arguments. That part of their case was therefore an abuse of process for raising the same issues that had already been determined by the Senior Deputy Registrar.

The submissions then moved to the alternative proposition that the erroneous reliance on the absence of a charging clause warranted, at the very least, all of those parts of the pleading against Mr White being struck out.

In addition to the proposition summarised in the preceding paragraph, particular complaint was made as to the lack of a basis as to how the duties described in paragraph 9P of the Amended Statement of Claim arose.

The argument in support of a stay was based on the observation that, as the particulars to paragraph 9R of the Amended Statement of Claim made clear, the loss being pursued by the Plaintiffs against Mr White related to the money which had been paid to him out of the Estate in satisfaction of his invoices. While the position may have formally been reserved in the pleading and submissions, the whole tenor of the case pleaded against Mr White and the way it was argued before me centred upon the return of those moneys to the Estate.

Against that background, Mr White submitted that the case against him should be stayed pending the final determination of the Accounts Summons, particularly the application for commission, because:

Finally, it was submitted for Mr White that, given the importance on his case of the absence of a charging clause, there was utility, if the case was otherwise to proceed, in answering the separate question proposed on his behalf.

In answer to Mr White’s submissions for dismissal of the proceedings against him, the Plaintiffs responded that it was incorrect to say that the Decision vindicated Mr White’s position that the question of the absence of a “charging clause” was irrelevant in the proceedings. The Plaintiffs placed heavy reliance on this passage from the decision of White J in Chick & Anor v Grosfeld (No 3) [2012] NSWSC 1536 (“Chick”):

The Plaintiffs went on to explain (in their written outline of submissions in reply):

Next, although expressed more elegantly and in greater detail, the Plaintiffs resisted the dismissal application by seeking to demonstrate that there was a clearly arguable Barnes v Addy case culminating in the allegation in paragraph 9O of the Amended Statement of Claim. Furthermore, there was at the very least an arguable case pleaded in paragraph 9P that (to quote the Plaintiffs’ written outline of submissions in reply) “in the circumstances … the Plaintiffs will allege that the manner in which the Estate was administered by both the First Defendant and the Second Defendant gives rise to an arguable case that the law would imply certain duties upon Mr White” (emphasis in original). Therefore, the stringent test in General Steel had not been satisfied.

The Plaintiffs then submitted that it was incorrect to suggest that the moderation by the Senior Deputy Registrar had somehow supplanted or rendered their case against Mr White otiose. On the contrary, the moderation exercise had established that there was clearly work for which Mr White had charged for which he was not entitled to be paid out of the Estate.

The Plaintiffs concluded this part of the argument by submitting that s 53 of the TA could not be a complete defence in the present case. This was because s 53(5) itself represented a fetter on what was payable from the Estate. Furthermore, contrary to Mr White’s submissions, Purton and the passage from White J’s judgment in Chick made it clear that an executor does not have an unfettered right to retain agents whose fees could be visited upon the Estate.

As to the strike out, the Plaintiffs submitted that if their submissions opposing dismissal of the case against Mr White were accepted, it necessarily followed there was no basis to strike out any part of the pleading.

In response to Mr White’s submissions for a stay, the Plaintiffs argued:

Finally, as to the proposed separate question, the Plaintiffs submitted that the Decision had rendered the question otiose. In addition, the Plaintiffs’ Barnes v Addy claim and allegation of breach of duty (paragraphs 9O and 9P of the amended statement of claim) meant that answering the proposed question would not completely dispose of the proceedings. In accordance with orthodox considerations, that was a sufficient reason not to order the separate question.

For the reasons which follow the Court has decided that:

The Court has concluded that the Plaintiffs’ unrelenting concentration on the absence of a charging clause has been an unhelpful distraction in the proceedings. The Senior Deputy Registrar’s conclusion in relation to the irrelevance of the absence of a charging clause in this case (see paragraph [27] above) is plainly correct.

By letter dated 29 August 2013 Mr White sought particulars of what the Plaintiffs meant by a “charging clause”:

The Plaintiffs’ solicitors responded by letter of 20 September 2013:

The Plaintiffs’ solicitors’ reply demonstrates the irrelevance of any allegation concerning a charging clause. If the absence of such a clause really mattered, it would be necessary for the Plaintiffs to define precisely what they said such a clause contained. For the purposes of his Decision, the Senior Deputy Registrar adopted what the Court considers to be the generally accepted meaning of “charging clause” as relating to an executor, who happens to be a professional, charging his or her usual rate for the provision of his or her professional and other services as executor. The presence or absence of such a clause is completely irrelevant to the question of how an agent, including a solicitor, retained by an executor may be remunerated. Similarly, what White J says in the passage upon which the Plaintiffs relied from Chick is, with respect, undoubtedly correct but sheds no light on the present problem.

It follows that the references in the Amended Statement of Claim to the absence of a charging clause should be struck out as irrelevant. This will incidentally have the effect of striking those references out insofar as they relate to Mr Lambert but that must be the correct outcome. That allegation is equally irrelevant to the case made against him. However, contrary to Mr White’s submissions, this conclusion does not mean that the case against him must be dismissed. On a fair reading of the amended statement of claim it is not correct to say that the whole case against Mr White was predicated on the absence of a charging clause. It is therefore necessary to consider the other arguments raised by Mr White in support of his dismissal application.

Subject to what is next said about the adequacy of the pleading, the Court accepts the Plaintiffs’ submission that there may be an arguable Barnes v Addy case against Mr White. It is arguable that Mr Lambert’s payments out of the Estate for work for which indemnity was subsequently disallowed were a breach of trust and that Mr White received the payments with notice of the breach. Similarly, although with an even lower degree of persuasion, the Court accepts the theoretical possibility of a breach of duty case against Mr White. This will also have to be repleaded in considerably more detail than its present form.

The Court accepts the Plaintiffs’ submission that s 53 of the TA is not a complete defence to the claim. In the opening paragraph of his judgment in Purton, Nicholas J (at 148) rejects a submission similar to that put on behalf of Mr White:

In Purton, an executor had employed a solicitor, among other things, to receive and distribute money and to prepare and send letters. On the passing of the executor’s accounts the solicitor’s professional costs for such work were disallowed because it was a charge for work for which an executor was not entitled to employ a solicitor. Nicholas J held that while the solicitor’s professional costs for that work could not be paid out of the estate, the executor could be allowed an amount for the work done charged on a non-professional basis if it was reasonable to have employed someone to do it. In reaching that conclusion, Nicholas J relied upon the limitation in s 53(5) of the TA and concluded (at 149):

However, his Honour found that the matter did not end there because some charge could be allowed to the executor under s 59(4) of the TA, which provides that “a trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee’s trusts or powers”. His Honour’s reasons demonstrate (at 149) how fact based the inquiry must be:

The Decision is an eloquent example of how each case must turn on its facts. The Senior Deputy Registrar’s moderation of Mr White’s invoices demonstrates that there were many things undertaken by Mr White which could be properly charged against the Estate (albeit strictly through the right of Mr White as executor to indemnity from the assets of the Estate). The Decision also demonstrates that there were a number of items, disallowed by the Senior Deputy Registrar, which were not matters that could be charged from the Estate. Contrary to Mr White’s submissions, s 53(5) in particular meant that s 53 justified the Senior Deputy Registrar’s disallowances rather than providing a general defence.

Finally in relation to Mr White’s dismissal argument, the Court does not accept his submission that the Decision rendered it an abuse of process for the case against him to continue. On the contrary, the Decision had the effect foreseen by the Court in referring the Accounts Summons to the Senior Deputy Registrar: to quantify the extent of any claim, if there be one, against Mr White by determining those charges which had been levied by him and paid out of the Estate but in respect of which Mr Lambert was not entitled to indemnity.

The conclusions in paragraphs [177] to [182] above mean that Mr White’s application to have the case against him summarily dismissed does not succeed.

Insofar as striking out the claim against Mr White is concerned, the parties’ concentration on questions said to arise from the absence of a charging clause obscured what the Court has concluded is a fundamental deficiency in the pleading of the Barnes v Addy case. This reaches its high point in paragraph 9O of the amended statement of claim (which is reproduced here again for convenience):

It is now well accepted in equity jurisprudence that Barnes v Addy claims have two limbs. This was explained by the High Court in Farah Constructions Pty Limited v Say-dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 (“Farah”):

The difficulty which the Court has identified is that while the tenor of the way in which the Plaintiffs’ counsel explained the case against Mr White suggested that the case against him was nothing more than a first limb case of “knowing receipt”, the use in paragraph 9O of the amended statement of claim of the words “knowledge and furtherance of, and participation in” is redolent of a second limb “knowing assistance” case.

As the High Court observed in Farah, a second limb Barnes v Addy case raises serious issues which much be pleaded and particularised:

The pleading is currently ambiguous as to the type of claim which Mr White must meet. If the Plaintiffs wish to bring a second limb Barnes v Addy case against Mr White, it will be necessary for them to plead and particularise Mr Lambert’s dishonest and fraudulent design (as to which see Hasler v Singtel Optus Pty Ltd [2013] NSWCA 266; (2014) 87 NSWLR 609) and how, precisely, Mr White is said to have known of and participated in it. Given the potential consequences for a solicitor such as Mr White, the need for full and precise pleading of such serious allegations is only fortified. Mr White is entitled to know exactly what case he has to meet.

On the other hand, in a first limb Barnes v Addy case, dishonesty is not required on either the part of the trustee or the third party. It is sufficient if it can be shown that a defendant has received trust property with notice that such receipt was in breach of a trust or fiduciary duty. Nevertheless, it is still necessary for the alleged breach of trust or fiduciary duty to be precisely identified (including as to how it is said to have arisen) and how the defendant had the requisite notice. The type of notice alleged (for example, actual or constructive knowledge) must also be clearly identified because the law is not without its complications as to what kind of notice will be sufficient even in first limb Barnes v Addy cases. During the course of argument the Court adverted to the difficulty which may attend proving the requisite notice if Mr White received money from the Estate in satisfaction of his invoices which both Mr Lambert and Mr White reasonably and in good faith believed could properly be visited upon the Estate only to have that conclusion controverted by a subsequent decision of a Registrar on moderation.

For the reasons given in paragraphs [185] to [189] above, if the Plaintiffs wish to press a Barnes v Addy case against Mr White, it will have to be repleaded.

Similarly, the Court accepts Mr White’s criticism of paragraph 9P of the amended statement of claim (reproduced here again for convenience):

Simply to assert such duties arose “in the circumstances” is inadequate as a matter of pleading. Nor is this something that can be cured by particulars. Primary facts must be alleged and the legal nature of the duties asserted must be specified. The contractual, tortious and fiduciary duties which a solicitor owes to his or her client primarily arise by reference to the solicitor’s retainer. That retainer will include both the instructions received at the start of the professional relationship and, to the extent relevant, instructions received or other developments during the course of the relationship. On the basis of what the Court has seen during the course of argument, and far from expressing any final view on the question, some of the duties alleged in paragraph 9P may be more obviously applicable than others in the circumstances of this case. For present purposes it is sufficient to conclude that the facts, matters and circumstances relied upon for the existence of the alleged duties must be pleaded and how it is said they have been breached.

The Court’s earlier conclusions as to the irrelevance of the allegation concerning the absence of a charging clause and the inadequate pleading of both the Barnes v Addy claim (paragraph 9O) and breach of duty claim (paragraph 9P) are sufficient to justify the order which the Court proposes to make striking out the entirety of the claim against Mr White but with leave to the Plaintiffs to replead. To the extent it may assist in that process and while not the subject of argument, the Court has also concluded that the claim of breach of duty alleged in paragraphs 9I to 9K must be repleaded (reproduced here again for convenience):

There are at least two difficulties with this pleading.

First, as currently drafted, it does not go anywhere. There is no allegation that the failure to advise alleged in clause 9K was a breach by Mr White of his alleged duties to Mr Lambert. The absence of such an allegation means it is unclear whether the alleged failure to advise is to be included as one of the breach of duties relied upon in paragraph 9R for the allegation of loss being suffered by the Estate.

Second, assuming without deciding the correctness of the allegation in paragraphs 9I and 9J, there is a conceptual gulf between the allegations in paragraph 9J and 9K. What is missing is any allegation by reference to any properly pleaded retainer or other fact, matter or circumstance to be relied upon for the proposition that Mr White had a duty to advise Mr Lambert of the matters alleged.

If the allegations in paragraphs 9I to 9K are to play a part in these proceedings, they will need to be repleaded. When combined with the Court’s earlier conclusions it is clear that there is a proper basis for the Court to exercise its discretion to strike out the entirety of the claim against Mr White (including the references to the absence of a charging clause wherever else they appear in the amended statement of claim) with leave to replead.

In considering Mr White’s stay application, the Court will not hesitate over the question of whether the Accounts Summons and the Plaintiffs’ revocation proceedings constitute “several proceedings” for the purposes of UCPR Part 28, r 28.5. All of the various motions and claims in these proceedings are brought within the original probate proceedings. There is nothing wrong with that. However, it does mean they all bear the same case number. “Proceedings” is not defined in the UCPR. No point was taken about this by the Plaintiffs and they were correct not to do so. If it be necessary to decide, the Court is of the view that the Accounts Summons and the amended statement of claim constitute “several proceedings … pending in the court”. In any event, the Court has power to grant the stay sought by Mr White under its inherent jurisdiction.

Generally, for the reasons advanced by Mr White (see paragraph [161] above), the Court accepts his submission that the proceedings against him should be stayed pending determination of the Accounts Summons (and, therefore, necessarily pending determination of the revocation proceedings). The Court has reached this conclusion primarily by reference to what appears to be the very small amount of “damages” for which Mr White may be liable (if he has any liability at all) and the desirability of recourse first being had against Mr Lambert as executor to make any refunds. This conclusion is based upon considerations of proportionality and the overriding requirement under s 56 of the CPA to exercise the power to stay in a way which achieves the overriding purpose to ensure the just, quick and cheap resolution of the real issues in dispute.

As the Court has already observed (see paragraph [160] above), what the case against Mr White is really about is his receipt of fees from the Estate in respect of matters which have been disallowed in the Decision. The Decision has fulfilled the Court’s expectation in referring the matter to the Senior Deputy Registrar (see paragraph [20] above) to ascertain how much the parties are really arguing about. Counsel for Mr White’s written submissions included an appendix which purported to demonstrate that, after moderation, an amount of $2,819.94 (inclusive of GST) was properly owing from the Estate to Mr White. The result of this review (an increase in the amount disallowed by $3,585.10 plus GST) will, on the calculations presented by Mr White, mean that no more should be paid out of the Estate to Mr White. However, it also means that there are no potential “damages” because not all of Mr White’s invoices submitted for moderation had been paid by the Estate in any event.

On the other hand, by letter dated 22 July 2014 to Mr White’s solicitors, the Plaintiffs’ solicitors propound a calculation which suggests that as a result of the Decision an amount of $1,364.96 (inclusive of GST) remains to be refunded to the Estate by Mr White (assuming he has any obligation to make any refund to the Estate at all). Again, without necessarily accepting the correctness of the Plaintiffs’ calculation, that amount will increase by $3,585.10 plus GST as a result of this review. It nevertheless remains unclear whether that or any other amount, after payment by Mr Lambert of the refund pursuant to the Decision and this review, could possibly be left as “damages”, being amounts paid to Mr White out of the Estate in respect of matters which had been disallowed on moderation. What is clear, however, is that the amount for which Mr White might potentially be liable in respect of such payments appears to be less than $4,000 plus GST. If the parties cannot work it out then in due course, and subject to the stay being lifted and liability against Mr White being established, it could be worked out by a Registrar.

There can be no doubt that the costs to all parties of the case sought to be run against Mr White and the time it would add to any trial against Mr Lambert are significantly disproportionate to the amount that appears to be at stake. However, that may not, in and of itself, justify a stay of proceedings. It is that factor, when combined with the recognition that there is a longstanding and well understood process of dealing with these matters by way of a refund from the executor of disallowed payments out from the Estate, that persuades the Court that a stay is appropriate in this case. When measured against the current scheme for moderation of executor’s accounts and refunds by the executor, the case sought to be brought against Mr White constitutes collateral litigation of a kind which should be discouraged when it appears to be for such a relatively small amount.

In reaching this conclusion the Court has also placed some, but not in and of itself decisive, weight on the possibility that Mr Lambert may receive commission which would be offset against any refund liability. As the Senior Deputy Registrar pointed out in his requisition of 3 March 2014 (see paragraph [123] above), commission has been allowed even where there has been a breach of trust e.g. In the Will of Sherriff [1971] 2 NSWLR 438. In saying this the Court expresses no view on whether a breach of trust has occurred in this case beyond acknowledging that the Barnes v Addy claim is arguable (see paragraph [177] above).

The Court’s conclusions mean that some consideration needs to be given to the interaction between the striking out of the amended statement of claim with leave to replead and the stay. If the Plaintiffs wish to press their claim against Mr White, a further amended statement of claim should be prepared and served in the near future, notwithstanding the proceedings will then be stayed. Depending upon the form of any further amended statement of claim which the Plaintiffs are ultimately permitted to file, the practicability of the stay may need to be reconsidered. Mr Lambert will have a real interest in this question in his own right to the extent there may be a risk that he would have to “come back” if the outcome of the revocation proceedings and the completion of consideration of the Accounts Summons meant that any case against Mr White would still be pressed by the Plaintiffs.

Finally, the Court’s conclusions mean that there is no basis upon which the separate question proposed by Mr White should be ordered. That result would follow even if the case were proceeding on the amended statement of claim and the stay had not been granted. This is because the issue of the absence of the charging clause is irrelevant and the difficulty of defining a “charging clause” means that a satisfactory formulation of a useful question is most unlikely, if not impossible. The Court also accepts the Plaintiffs’ submission that the separate question would also have no utility because on any view it would not dispose of the entirety of the proceedings.

The Court will make directions for the parties to make such submissions as may be necessary to enable final orders to be made to give effect to these reasons, including as to costs.

There are also two general observations which the Court wishes to make in concluding these reasons.

First, these proceedings demonstrate that it is, at the very least, desirable, and usually essential, for a solicitor retained generally by an executor in connection with the administration of an estate to advise the executor, upon receiving instructions, as to the executor’s duties and as to how the executor and those agents the executor retains may be remunerated. This observation and the giving of that advice is not intended to have a chilling effect on the degree to which an executor should properly have recourse to the services of a solicitor or other advisers. In my experience, the vast majority of work done in the ordinary course by solicitors for executors in connection with estates is properly remunerated from the assets of the estate or, to the extent an executor must bear those costs personally, by an allowance of commission. Nevertheless, these things should be explained by a solicitor to his or her client at the start of their relationship.

Second, a difficulty with applying the observations made in the preceding paragraph is that it would appear, again as a matter of personal observation and anecdotal evidence, that many practitioners may not be familiar with the principles and practice which have been canvassed in these reasons. It is now possible to qualify as a legal practitioner without formal tertiary study in the areas of probate and succession. The wisdom of that development is open to question, given that matters in connection with wills and the administration of estates are something which most people might still have to consult a solicitor about.

In other areas of social activity it is frequently observed that more Australians are living longer and that the proportion of older citizens to the total population is increasing. The legal needs of such people and their families now fall into an area which is often described as “elder law”. The demographic phenomenon to which I have referred suggests that there is a strong case for members of the profession to ensure that they are able to advise competently what appears to be an increasing number of people in matters of probate, succession, guardianship and related areas. In making these observations I stress that I am not to be taken as in any way reflecting on the competence or experience of any of the legal practitioners involved in these proceedings nor am I expressing any view as to the outcome of the revocation proceedings.