In the Will of Michael Paul McLaren (Deceased)
[2022] QSC 276
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- Notable Unreported Decision
- In the Will of Michael Paul McLaren (Deceased)[2022] QSC 276
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In the Will of Michael Paul McLaren (Deceased)[2022] QSC 276
In the Will of Michael Paul McLaren (Deceased)[2022] QSC 276
SUPREME COURT OF QUEENSLAND
CITATION: | In the Will of Michael Paul McLaren (Deceased) [2022] QSC 276 |
PARTIES: | PAUL DAVID MCLAREN (applicant) |
FILE NO/S: | MS 59/22 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Mackay |
DELIVERED ON: | 8 December 2022 |
DELIVERED AT: | Rockhampton |
HEARING DATE: | 30 November 2022 |
JUDGE: | Crow J |
ORDER: |
|
CATCHWORDS: | SUCCESSION – PERSONAL REPRESENTATIVES – COMMISSION – DISCRETION OF COURT – GENERALLY – where the applicant was appointed as sole executor of the estate of his deceased son – where the sole beneficiary of the estate was the deceased’s child – where the estate was of moderate-sized but required complicated administration – where the applicant seeks payment of an executor’s commission pursuant to s 68 of the Succession Act 1981 (Qld) – where the amount the applicant seeks is 4% of the corpus of the estate – whether, in the discretion of the Court, the amount sought by the applicant is not unduly generous reward for the work involved. Succession Act 1981 (Qld), s 68 Uniform Civil Procedure Rules 1999 (Qld), r 657C, r 657E Re Estate of Badstuebner (2020) 4 QR 490; [2020] QSC 144, considered Re Estate of Celestino Ghidella [2005] QSC 106, considered Re Lack [1983] 2 Qd R 613, cited. |
COUNSEL: | M T de Waard for the applicant |
SOLICITORS: | Taylors Solicitors for the applicant |
- [1]Michael Paul McLaren was born 7 December 1983. Mr McLaren passed away on 11 June 2016 aged 32 years in an industrial accident. Mr McLaren and Jenny Snodgrass were in a domestic relationship for a number of years and that relationship produced one son, Cooper McLaren. Cooper is currently 10 years of age but was aged only three when his father passed away.
- [2]Approximately 12 months prior to Mr McLaren passing away, he separated from Ms Snodgrass. Mr McLaren was a busy man. Mr McLaren conducted an earthmoving business as well as working for a cattle grazier and owned two properties. Mr McLaren had executed a will dated 1 February 2013. Mr McLaren’s will left the whole of his estate to his son, Cooper, but with a right for Ms Snodgrass to live in one of Mr McLaren’s properties (subject to certain conditions). The alternative beneficiaries under the will were Mr McLaren’s niece and Mr McLaren’s father, Paul David McLaren. Mr McLaren Snr was appointed executor of the will and upon his son’s passing attended Mackay from his residence in New South Wales to commence the 7.5 year process of finalising the estate of Mr McLaren.
- [3]On 18 November 2022, Mr McLaren Snr filed an application pursuant to s 68 of the Succession Act 1981 (Qld) (Succession Act) and r 657C of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), for the payment of executor’s commission in the sum of $48,420.84. The commission had been quantified at 4% of the corpus of the estate of $1,210,514.50.
- [4]Section 68 of the Succession Act provides:
“68 Commission
The court may authorise the payment of such remuneration or commission to the personal representative for his or her services as personal representative as it thinks fit, and may attach such conditions to the payment thereof as it thinks fit.”
- [5]Rule 657C of the UCPR provides:
657CApplication for commission
- (1)A trustee of an estate may apply to the court for commission.
- (2)The application must be supported by an affidavit of the trustee setting out—
- (a)the basis of the application; and
- (b)the commission sought; and
- (c)the trustee’s justification for the commission; and
- (d)an inventory of the estate; and
- (e)material to identify the appropriate respondents to the application.
- (3)Unless the court otherwise orders, the application must be served on any beneficiary of the estate affected by the order sought.
- (4)The court may direct that the application be served on any other person.
- [6]In Re Estate of Celestino Ghidella [2005] QSC 106, Jones J relevantly said:
- “[13]The assessment of the level of commission appears to be at the discretion of the hearing judge. In Re Lack McPherson J referred to a practice of allowing commission assessed on a percentage basis, but in fact awarded commission based on the value of the work undertaken by the executors. Statutory scales provided for work undertaken by trustee companies or the Public Trustee provide some percentage commissions and also provide some guidance for this particular assessment. Such percentages do not necessarily equate to a proper allowance for the “pains and trouble” involved by the executors in carrying out their duties. It is the assessment of the “pains and troubles” which underpins the exercise of the discretion in fixing the allowance. The manner of exercise of that discretion can be by selecting a percentage of the value of the estate or by assessing a lump sum. In Re Barr Smith the Full Court of South Australia favoured the view that assessment by way of percentage of the assets to be realised and the income to be managed is the most appropriate course to follow. As with statutory trustees where the percentage is fixed according to a sliding scale – percentage reducing as the estate is larger – there is a need for moderation in circumstances where the value of the estate is large. However, the assessment must have regard to the value of the efforts of the executors. In Re Sheppard Helsham J said (at p 721):-
'There may be of course an indirect effect again by reason of the size of the estate. It may be that activities resulting in an allowance of commission in the period covered by one set of accounts might render very much easier and less onerous the remaining work to be done in connection with the realization of the estate. But this would be taken into account in assessing the work value when the subsequent accounts are being passed and commission allowed, and it seems to me that the mere fact that the estate is of a particular size is not a factor which requires any a priori limitation upon the rate of commission to be allowed.”
- [14]Mr Jonsson of Counsel has helpfully made available an extract of Wills, Executors and Probate Administration (Queensland) by John de Groot which sets out a list of rates applied for executors’ commissions as applied by the courts in different cases. The range is quite wide spanning from 0.4 % to 5.0%. The text suggests a rule of thumb of 2.5% on income and 4% on capital in a large estate. These figures considerably exceed what is allowed in statutory scales for the receipt of a large estate.
- [15]I have perused the nature of the activities reflected in the accounts passed by the Registrar which rather suggests that the receipt and despatch of money into and out of the estate was largely left to the retained solicitors. The supervision and maintenance of property particularly the property of Dranline Pty Ltd no doubt necessitated activity and care on the part of the executors and these are matters which properly guide my selection of the appropriate percentage. The applicants seek an allowance of 5% on income and 3% on corpus resulting in an aggregate allowance of $87,417.54. That claim greatly exceeds what I consider the appropriate allowance in the circumstances outlined by the accounts and the affidavit material placed before me. In the exercise of my discretion I will allow the following:-
On income ($308,815.57) - 1.5% $ 4,632.00
On corpus ($2,399,225.30) - 2% $47,984.50
$52,616.50
[footnotes omitted]
- [7]The reasons of Jones J in Ghidella were cited with approval by Henry J in Re Estate of Badstuebner [2020] QSC 144 where his Honour said:
- “[22]Where a commission is to be authorised the approach of the court’s has been to make a summary determination of the amount.
- [23]This sometimes results in the court quantifying the amount of commission as a percentage of the estate’s capital and income. According to de Groots’ Wills, Executors and Probate Administration (Qld), that “practice has been to award commission on corpus within the ranges of 1.50%-3% and on income in the range of 3%-5%”.[1] It is by no means a fixed range however and courts may eschew adopting percentages that result in an award disproportionate to the true extent of the demands upon the executor. For instance, in Re Estate of Celestino Ghidella,[2] because much of the work was left to the estate’s lawyers, Jones J only awarded 1.5 per cent on income and two per cent on corpus. In a similar vein, where an estate is simple to administer but very valuable, lower percentages may be adopted because higher percentages would result in an excessively high award relative to the modest demands of the executorship.[3]
- [24]Sometimes the court instead opts to fix a monetary amount reflective of the work actually involved.[4] For example, in Re Lack[5] McPherson J chose not to quantify the commission by reference to a percentage and instead awarded an amount resulting in what he regarded as “a not unduly generous reward for the work involved”. Such an assessment is a summary determination of an amount the court considers appropriate in the circumstances. It does not involve calculations of hours worked and application of rates per hour as if an executorship were a commercial exercise.[6] That would, as Slattery J observed in Hawkins v Barkley-Brown,[7] reduce the exercise of a subtle discretion to mere economics. It would also ignore relevant though less readily quantifiable considerations of the kind to which r 657E(1) UCPR refers, for instance the composition of the estate, the nature of the work, the efficiency of the administration and the conduct of persons including the executor.
- [8]In Badstuedner, Henry J concluded that no commission ought to be allowed to the executor as the executor had breached his duty to the estate. As to the duties of the executor in Badstuedner’s case, Henry J said as follows:
- “[14]He did however purport to quantify the hours he spent on the administration of the estate. His summary of work done totals 447 hours. The summary does not itemise travel time separately from associated tasks. Nor does it explain why some tasks, which on the face of it could have been tended to by email or telephone, required travel. However, even if a material proportion of work required travel it is still surprising that the total hours is as high as 447. To illustrate, expressed in comparison to a 40-day working week, that total is the equivalent of more than 11 week’s work. Such a comparison ought not be taken too far, in that the executor’s tasks inevitably fall to be performed in disrupted spurts rather than as the continuous work of a conventional working day. Nonetheless, it well illustrates the enormity of the total hours asserted.
- [15]This was not a complex or unusually large estate to administer. Indeed, the most valuable component of it was simple cash holdings in various accounts. Even allowing for Thomas’ remote location it is surprising that the estate’s administration, if approached with reasonable efficiency, would have consumed so many hours of the executor’s time.
- [16]The summary of work throws up some striking sub-totals of time spent. A total of 52 hours was allegedly consumed in various tasks attributed to “sale and disposal of household chattels”. According to the inventory there was one garage sale and nine individual sales of chattels, raising $3,031. Even allowing for travel time and time spent sorting and disposing of unsold chattels, sales of $3,031 seems to be a disproportionately low return for an investment of 52 hours of the executor’s time. It suggests inefficiency and or over-estimation. So too do some of the entries in support of the sub-total. For instance, they include entries, on 15 separate dates, each identically worded as: “Attended to disposal of unwanted and damaged chattels of no monetary value including trips to/from charity shops and council waste facility at Atherton”.”
[footnotes omitted]
- [9]The estate of Mr McLaren is not a large estate, at a little over $1.2 million, however, the administration of the estate was, in my view, complex. Mr McLaren owned and operated a civil earthmoving business which operated in the Mackay and Central Queensland region. It owned 102 items of plant and equipment which were subsequently auctioned. Many of the items of machinery were the subject of equipment finance with two different financiers – BOQ Finance and Capital Finance Australia. It was necessary for Mr McLaren Snr as executor to obtain the assistance of both solicitors and accountants to reconstruct business records in order to invoice outstanding works in progress and determine the contracts that the business had entered into.
- [10]Mr McLaren Snr had to dispose of the rural enterprise and property owned by his son at 790 Marlborough Sarina Road. The property carried 90-100 head of cattle which had to be cared for, marketed, and then sold in tranches before the property itself was sold. Mr McLaren’s smaller property, the 6.8 hectare property at Munbura also had to be marketed and sold. Mr McLaren had three superannuation policies on foot, the proceeds of which needed to be collected and the debts upon the estate extinguished.
- [11]As the executor, Mr McLaren Snr had to deal with a family provision claim brought against the estate by Ms Snodgrass. That proceeding alone required a great deal of attention. The family provision claim was successfully mediated. In order to properly protect the interests of Cooper under the estate, an independent trustee, Equity Trustees, were appointed by trust deed to provide the trust for Cooper during his infancy.
- [12]Exhibit PDM10[8] is a ten-page exhibit listing in excess of 530 emails that Mr McLaren Snr had to consider in his role as the executor. Exhibit PDM9[9] shows that Mr McLaren Snr faced animosity and personal abuse in attempting to carry out his role as an executor. Unlike Badstuedner’s case, the applicant, Mr McLaren Snr, has not descended to the detail of the number of hours of work, including travel time from his home in New South Wales that he has expended in the proper execution of his onerous duties as the executor of the estate. As Badstuedner’s case also shows, sometimes estimates of hours expended, in the absence of a contemporaneous recording of the hours, may be shown either to be wildly inaccurate or, if true, an extraordinarily inefficient use of the executor’s time.
- [13]As observed by Jones J in Ghidella, some guidance may be obtained from fees and charges able to be levied by the Public Trustee or other approved statutory trustees. Section 9 of the Public Trustee (Fees and Charges Notice) (No. 1) 2021 (the Notice) provides that the fee payable by the Public Trustee for acting as an agent for an executor to administer the estate of a deceased person is calculated by applying the total number of “standard units of effort” required to administer the estate in Schedule 2 Part A to determine the appropriate service level as specified in Schedule 1. It is not possible to determine the number of standard units of effort with respect to activities set out in Schedule 2 Part A of the Notice as, for example, the number of debts due to Mr McLaren’s business is not known, and so the fee for debt collection cannot be determined.
- [14]Exhibit PDM7[10] includes the commercial rate of fees charged by Equity Trustees for the work undertaken by that trustee for Cooper’s trust. The rates for the fee services for the trustee’s duties, which are far less onerous than the duties undertaken by Mr McLaren Snr as executor, are on a sliding scale of 1.54% on the first million, 0.935% on the next four million, 0.715% on the next five million, and 0.66% over $10 million with such fees to be charged annually. Accordingly, the evidence of a commercial rate on the corpus sum of $1,210,514.50 is $17,368.31 per annum (1.54% x $1,000,000) + (0.935% x $210,514.50). As those fees may be charged annually for 6.5 years, then the commercial rate for the duties performed by Mr McLaren Snr is a sum of $112,894. Although it is somewhat arbitrary to use a rule of thumb of 4%, it may be observed that the sum claimed by Mr McLaren Snr of $48,420 is approximately 42% of the commercial sum.
- [15]In the 6.5 years that Mr McLaren Snr has acted as executor, claiming a total of $48,420 in fees represents a charge of approximately $7,500 per annum. I note that this is less than the asset management fee set out in sch 6 of the Public Trustee (Fees and Charges Notice) (No. 1) 2021 which sets out an annual fee of $7,837.50 as an “asset management fee” for a service level 11 to service assets ranging between $1 million and $1.5 million. When reference is had to the principles as set out by McPherson J in Re Lack,[11] and Jones J in Ghidella, the claim of $48,420 sits comfortably within the principles.
- [16]Firstly, it is justifiable with reference to statutory scales of trustee’s fees, and less than half the commercial rate as evidence by the fees of Equity Trustees. As the statutory and commercial scales show, the percentage of fees reduce as the estate value increases. Mr McLaren’s estate could not be described in contemporary terms as a large estate, and as set out above, it was a relatively complex estate administration for a moderately-sized estate. As Henry J said in Badstuedner’s case “courts may eschew adopting percentages that result in an award disproportionate to the true extent of the demands upon the executor”,[12] however, courts have also grown to eschew “calculations of hours worked and applications of rates per hour as if an executorship were a commercial exercise”.[13]
- [17]The cases show that there is not one set approach to the quantification of commission which fits all circumstances, and that is appropriate, given the broad discretion in s 68 of the Succession Act to “authorise the payment of such remuneration or commission as” the court “thinks fit”.
- [18]In the exercise of that discretion, r 657C of the UCPR sets out information the court requires to be placed in an affidavit in order to properly exercise its discretion. Without proscribing the full extent of matters which can be taken into account in the exercise of the discretion under s 68 of the Succession Act, r 657E of the UCPR provides useful guidance. Rule 657E of the UCPR provides:
657EDecision on application for commission
- (1)In deciding an application for commission by a trustee of an estate, the court may take into account—
- (a)the value and composition of the estate; and
- (b)the provisions of the will or trust instrument for the estate; and
- (c)the conduct of all persons (including the parties) connected with the administration of the estate; and
- (d)the nature, extent and value of work done by persons other than the trustee, including non-professional work delegated to a lawyer; and
- (e)the result of any assessment of the estate account, including the scope and merit of any objections raised in a notice of objection before the estate account is passed; and
- (f)the efficiency of the administration of the estate; and
- (g)any other matter the court considers relevant.
- (2)The court may make any order for commission the court considers appropriate.
- [19]The affidavit material provided by Mr McLaren Snr as executor shows that although the nett value of the estate was a little over $1.2 million, Mr McLaren Snr had to authorise approximately $3.5 million in payments to and from the solicitor’s trust account on behalf of the estate in respect of numerous transactions. The estate, with three claims upon superannuation life insurance policies, winding up of a rural business and an earthmoving business, as well as the sale of two rural properties, leads me to conclude that there was a great deal of work and consideration by the executor in carrying out his duties in a moderate but complicated estate. It is apparent that Mr McLaren Snr had to carry out his fiduciary obligations as an executor in circumstances of family conflict and animus.
- [20]As the decision in Ghidella’s case shows, if an estate is a simple, largely cash estate, any percentage fee raised upon corpus ought to be relatively low, such as 2%. In the present case, although it is a moderate-sized estate, it was a complicated administration and Mr McLaren Snr has sought only 4% based upon corpus and not any additional percentage upon the income generated during the course of the executorship. It seems to me in all of the circumstances that an award of 4% of the corpus fit comfortably within the phrase as “a not unduly generous reward for the work involved”.[14]
- [21]I therefore order:
- (a)Pursuant to s 68 of the Succession Act 1981 (Qld) the applicant be paid an executor’s commission in the sum of $48,420.84 from the estate of Michael Paul McLaren.
- (b)The applicant’s cost of this application be paid on an indemnity basis from the Estate of Michael Paul McLaren.
- (a)
Footnotes
[1]De Groot’s Publishing, Wills, Executors and Probate Administration (Qld), vol I, (at May 2020) [603].
[2][2005] QSC 106.
[3]See for example the observations of Windeyer J in Re Phillips [2007] NSWSC 639, [11].
[4]Sometimes both approaches are drawn upon in summarily determining a commission appropriate to the case. For example, in Kirkpatrick v Kavulak [2005] QSC 282, McMurdo J, as he then was, after reasoning why a modest remuneration was appropriate, concluded an amount of $20,000 was a reasonable remuneration in the circumstances, observing it represented “slightly less than two per cent on capital of $1 million and one per cent of the income”.
[5][1983] 2 Qd R 613, 617.
[6]Re Estate Gowing (2014) 11 ASTLR 128, 143.
[7][2010] NSWSC 48, [65].
[8]Affidavit of Paul David McLaren, filed 18 November 2022.
[9]Affidavit of Paul David McLaren, filed 18 November 2022.
[10]Affidavit of Paul David McLaren, filed 18 November 2022.
[11][1983] 2 Qd R 613.
[12]At [23].
[13]At [24].
[14]Re Lack [1983] 2 Qd R 613 at 617.