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Re Estate of Badstuebner

 
Unreported Citation: [2020] QSC 144
EDITOR'S NOTE

The issue in this case was whether an executor who acted in breach of his executor duties – both the “no conflict rule” and his statutory duty to distribute the estate as soon as possible – was entitled to a commission. In reaching the decision to refuse to award an executor’s commission, Henry J found that the executor had acted with “extortionate intent” by refusing to fulfil his role as executor until the other beneficiaries agreed to pay him a commission. The effect of this conduct was to deny the other beneficiaries the right to their inheritance and was so serious that it was not appropriate to award a commission.

Henry J

29 May 2020

The applicant was the executor of his father’s will under which the father’s residual estate was to be divided amongst his four children in equal shares. [1]. The estate was “uncomplicated”, comprising the deceased’s home, almost $1,000,000 in cash in various accounts, two cars and the deceased’s personal possessions. [4].

The discretionary power of the court to award an executor’s commission

Section 68 of the Succession Act 1981 empowers the court to authorise the payment of a commission to a personal representative for his or her services. In exercising its discretionary power, the court is guided by r 657E Uniform Civil Procedure Rules 1999 which sets out a list of considerations that may be taken into account in deciding an application for a commission, including the consideration of the conduct of all persons connected with the administration of the estate (r 657(1)(c)). [26].

Material supporting the executor’s application

In support of his application for a commission, the applicant quantified the time he had spent in the role of executor as equating to 447 hours. As the Court illustrated, this amounted to the equivalent of more than 11 weeks of work, based on a 40 hour working week. [14]. The applicant provided that 65 hours was spent negotiating an agreement under which he would receive the house, the cars and the personal possessions. [18]. This “self-interested” agreement was proposed by the applicant in a draft deed and was ultimately rejected by the other beneficiaries. [19], [39], [94].

In reviewing the applicant’s evidence, his Honour held that an “executor acting reasonably would not have thrown away so much time” pursuing such a self-interested agreement. [19].

The applicant’s evidence was also regarded as an unreliable source for assessing the quantum of an appropriate commission, should the Court have exercised its discretion to award it, as the applicant had either exaggerated his time commitment or had conducted himself in a manner that “went beyond inefficiency”. [20], [25].

The executor’s conduct

His Honour held that the applicant repeatedly breached both his duty to distribute as soon as may be and the no conflict rule by refusing to fulfil his role as executor until the other beneficiaries agreed to pay him an executor’s commission. [45]. The applicant had quantified the amount owing to him as a commission at $2000, plus the distribution to him of the household chattels. [49].

In refusing to fulfil his role as executor, the applicant threatened the other beneficiaries with the cost of engaging a law firm to finalise the administration of the estate and the cost of his application to the court for an executor’s commission. [55], [58]–[59]. His conduct resulted in significant delay to the administration of the estate as the applicant failed to sell the house in a timely manner and refused to make timely interim distributions, despite the repeated requests for such distributions from the other beneficiaries. Henry J held that this conduct effectively amounted to extortion and “put him in breach of both duties”. [38], [65].

The applicant’s conduct was such that even after being accused of blackmail and “bullying” by some of the other beneficiaries and being required to repay fees that he had taken from the estate as purported management fees, he continued to press the other beneficiaries to agree to an executor’s commission. [65], [79], [66]–[68], [71]. His Honour concluded that while the applicant’s conduct did not amount to “positive fraud or dishonesty”, the breaches were “sustained” and involved “a repeated and deliberate abuse” of his position as a personal representative. The “effect of the breach” and the consequence of the applicant’s failure to distribute the estate as soon as possible was that the other beneficiaries were “wrongly denied” their right to have and use their inheritance. [29], [99]. At the time of the hearing, the applicant had continued to refuse to distribute the estate. [99]. His Honour held that the applicant’s protracted breach of his executor duties was “so serious” that it was not appropriate to award the applicant a commission. [69], [99]–[100]. His Honour adjourned the matter of costs but warned the parties that his “tentative view” was that costs should follow the event and that the estate should not bear the costs. [101].

A Hughes of Counsel