• The entire estate vests in the executor or administrator from the date of death, but upon the grant of probate or administration: Probate and Administration Act 1898 (NSW) (‘Probate and Administration Act’) s 44.
  • The executor or administrator is known as the legal personal representative (‘LPR’).
  • From the date of death until the grant is made, property vests in the Public Trustee: s 61.
  • The title of the LPR is deemed to relate back to the date of death upon grant.
  • Certain acts done by the LPR between death and the grant can be validated — The Daily Pty Ltd v White (1946) 63 WN (NSW) 262; Mills v Anderson [1984] 1 QB 704:
    • Dispositions in the course of the administration.
    • Dispositions for the benefit of the estate.
  • The doctrine of relation back cannot validity that which was a nullity or incompetent at the time it was done.
  • An executor cannot commence legal proceedings before obtaining probate, and the proceedings remain nullified even if probate is subsequently obtained: Marshall v Sundin & Co Ltd (1989) 16 NSWLR 463; Byers v Overton Investments Pty Ltd [2001] FCA 760 [29].
  • The LPR remains the representative of the estate until the grant is revoked or unless the grant is limited as to time: Stapleton v FCT (1955) 93 CLR 603.
  • All real estate held by a deceased in trust vests in the LPR subject to those trusts: s 45.
  • If a sole trustee dies, the trustee’s LPR becomes a temporary trustee until a new trustee is appointed, but is not entitled to administer the trust in question.
  • An LPR derives authority from the Probate and Administration Act, the grant and the will; a trustee’s powers derive from the trust instrument.
  • In a will containing trusts the LPR holds the estate upon the trusts on completion of the executorial duties: Attenborough v Solomon [1913] AC 76. See also s 47.
  • It is a question of fact whether executorial duties are complete.
  • The LPR holds the legal and beneficial interest; a trustee holds only bare legal title.
  • A beneficiary under a will has only the right to ensure proper administration, and until completion has no right in law or equity to any interest in the property comprising the estate: Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694; Official Receiver v Schultz (1990) 170 CLR 306; Barns v Barns (2003) 196 ALR 65 [50].
  • The beneficiary under a trust holds a beneficial interest in trust property.
  • A beneficiary cannot demand payment of a legacy or transmission of an asset while the estate is still being administered: Gonzales v Claridades (2003) 58 NSWLR 211, 215–216.
    • Court held that interim payments to cover a beneficiary’s legal costs was inconsistent with the due administration of the estate where proceedings to determine whether the beneficiary killed the testator were pending.
  • The LPR may make a maintenance distribution from the estate to any person who was wholly or substantially dependent on the deceased at the date of death prior to completed administration: Succession Act 2006 (NSW) s 92A.
  • Two or more executors are considered to be one legal person — the acts of each will bind the other(s): Union Bank of Australia v Harris Jones Devlin Ltd (1910) 11 CLR 492.
    • This principle does not apply to the sale of land: Conveyancing Act 1919 (NSW) s 153(1).
      • The LPR has power to sell land provided that only one of several executors can sell with the leave of the court: s 153(4); Colyton Investments Pty Ltd v McSorely (1962) 107 CLR 177.
  • If one executor takes possession of property devised to them jointly with their co-executor this does not make the executor liable for an occupation fee provided they are acting in accordance with their office and seeking to realise the estate: Johnson v Trotter; Estate of Trotter [2006] NSWSC 67.

Judicial advice

  • An LPR who is in doubt as to how they may act or where there is likely to be disputes between beneficiaries should seek judicial advice — an LPR or trustee is permitted to approach the court for advice: Trustee Act 1925 (NSW) s 63.
  • The provision is to protect the trustee from bearing certain costs properly incurred in fulfilment of their office, and to resolve doubts that might harm the interests of the trust, but not to protect the trustee from personal liability: Macedonian Orthodox Church v His Eminence Petar (2008) 237 CLR 66 [71]–[72] (Gummow ACJ, Kirby, Hayne and Heydon JJ).
  • The court must have regard to the interests of the beneficiaries.
  • There are two issues in the case where litigation is to be commenced or defended — Estate of Heyward [2010] SASC 247 [19]:
    • Whether it is appropriate having regard to the role of an executor of an estate.
    • Whether the proceedings would be fruitless in light of the circumstances of the case.
  • Judicial advice may be sought for a range of actions including construction of a will; commencement, continuance or defence of legal proceedings; the carrying on of business; or taking any step in the administration of the estate where there is doubt.
  • An LPR who acts without taking judicial advice may risk exposure to personal liability for costs, or even for the loss of estate assets.

Collection of assets

  • At common law only personalty devolved to the LPR; land passed directly to the devisee or heir at law.
  • In 1833 land was made available for payment of debts.
  • All real and personal property of the deceased vests in the LPR for the purpose of payment of debts: Probate and Administration Act: s 46.
    • This also gives a power of sale which must be read in light of Conveyancing Act 1919 (NSW) s 153.
  • There is a legislative scheme whereby land is equated with personalty so that all property is available for payment of debts: ss 44–48.
    • Executors have the same rights and duties with respect to realty as personalty: s 48.
  • Administrators have the same rights and liabilities as executors in general: Imperial Acts Application Act 1969 (NSW) s 14 (re-enacting 31 Edw 3, st 1, c 1).
  • Only assets beneficially held by the deceased are available for payment of debts.
    • Certain other property is not available: Life Insurance Act 1995 (Cth) s 205; Superannuation Act 1992 (Cth) s 143.
    • Rights to damages for personal injury are unavailable to creditors: Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’) s 116(2)(g).
  • The LPR must identify assets in particular choses in action which survive death.
    • Law Reform (Miscellaneous Provisions) Act 1944 (NSW) s 2 provides that all actions subsisting against or vested in the deceased at the time of death survive for the benefit of the estate except those referred to in the section — relevantly defamation, seduction and claims under the Property Relationships Act 1984 (NSW).
  • Statutory rights will survive death and vest in the LPR unless the statute evinces a clear intention that they do not: Dean v Wiesengrund [1955] 2 QB 120.
    • The nature of the statutory right may show that it is personal to the deceased: R v Jefferies [1968] 3 All ER 238.
      • Rights under the Family Provision Act 1982 (NSW) are personal to the deceased: McEvoy v Public Trustee (1989) 16 NSWLR 92.

Carrying on business

  • Absent specific authority, the LPR has no power to carry on business: Kirkman v Booth (1848) 11 Beav 273; 50 ER 821.
  • If an LPR carries on a business with authority, they may be:
    • Personally liable for all contracts entered into.
    • Unable to be indemnified for this liability out of the estate.
  • A power to carry on business may be express or implied so that a power to postpone sale of a business implies a power to carry on business: Re Crowther [1895] 2 Ch 56.

Delegation

  • An executor may by deed appoint the Public Trustee or a trustee company to act with or in the place of the executor or administrator: Probate and Administration Act s 75A(2).
  • Delegation is not permitted if the will intimates that the office cannot be delegated: s 75(A(3).
  • Notice of delegation must be given to any co-executor and to persons beneficially entitled: s 75A(4).
  • If there is objection delegation cannot occur without leave of the court: s 75A(6).

Payment of debts — insolvent estates

  • Insolvent estates, subject to the Bankruptcy Act, are to be administered in accordance with sch 3 pt 1 of the Probate and Administration Act: s 46C(1).
    • This applies to persons dying after 1 January 1931: s 46C(3).
  • A solvent estate is sufficient to ay all debts in full; an insolvent estate is insufficient to pay all debts in full.
  • All real and personal property of the deceased vests in the LPR for the purpose of the payment of debts: s 46.
  • An insolvent estate may be administered either by:
    • A trustee in bankruptcy: Bankruptcy Act pt XI ss 244–252C.
    • The legal personal representative: Probate and Administration Act sch 3 pt 1.
  • If Probate and Administration Act sch 3 pt 1 applies:
    • Funeral, testamentary and administration expenses are paid first.
    • The same rules as under the Bankruptcy Act apply with the date of death being taken as the date of the sequestration order, but only as to matters expressed in pt 1 cl 2.
  • The effect of pt 1 is that those parts of the Bankruptcy Act dealing with relation back do not apply: Re Leng; Tann v Emmerson [1895] 1 Ch 652.
    • It may be better instead to administer under the Bankruptcy Act than sch 3 pt 1.
  • Bankruptcy Act s 244(13) prevents the presenting of a creditors’ petition where the estate is being administered under a state law without leave of the court.
    • This prevents two courts administering the same estate: Passmore v Underdown [2010] FCA 70.

Payment of debts — solvent estates

  • The deceased’s property is to be applied to the discharge of funeral, testamentary and administration expenses, debts and liabilities in the manner set out in sch 3 pt 2: s 46C(2).
  • What constitutes funeral, testamentary and administration expenses: Mullick v Mullick (1829) 1 Knapp 245; 12 ER 312; Murdocca v Murdocca (No 2) [2002] NSWSC 505.
  • The legislation provides the statutory order for the application of property to pay debts: sch 3 pt 2.
    • This order may be varied by the will: s 46C(2).
    • The order is broken into a number classes with the property in class 1 being the first applied to payment of debts, then class 2, and so on.
      • Class 1 — Assets undisposed of by will subject to a retention thereout of a fund sufficient to meet pecuniary legacies
        • Property not attempted to be disposed of as well as property not in fact disposed of: Re Tong; Hilton v Bradbury [1931] 1 Ch 202.
      • Class 2 — Assets not specifically disposed of by will but included (either by specific or general description) in a residuary gift subject to a retention thereout of a fund sufficient to meet pecuniary legacies.
      • Class 3 — Assets specifically appropriated or disposed of by will (either by specific or general description) for the payment of debts.
        • This class has limited operation because most wills that specifically allot property to pay debts shows an intention to vary the statutory order: Re Kempthorne [1930] 1 Ch 268.
          • It was originally thought that this was not the case and that specific appropriation with no further reference did not vary the statutory order: Fuller v Fuller (1936) 36 SR (NSW) 600.
            • This is not a rule of law: Re James; Lloyds Bank v Atkins [1947] 1 Ch 256.
        • The whole of the will must be considered to determine if there is an intention to displace the statutory order: Permanent Trustee Co v Temple (1957) 57 SR (NSW) 301; Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1.
        • In order for a variation to be effective, the will must be worded so as to specify in what way different to the statutory order the burden is to fall: Ebert v Healey (1969) 89 WN (Pt 1) (NSW) 479, 486 (Walsh JA).
    • Class 4 — Assets charged with or disposed of by will (either by specific or general description) subject to a charge for the payment of debts.
      • These are assets the testator has assumed will be partially consumed by the payment of debts; unlike in class 3 where the testator has assumed they would be wholly consumed in payment of debts.
      • It is a question of construction as to which class the testator intended the particular asset to fall.
        • A general direction to pay debts does not bring all assets into class 4: Fowler v Nield (1961) 61 SR (NSW) 52.
    • Class 5 — The fund (if any) retained to meet the pecuniary legacies.
      • This is the fund derived from classes 1 and 2.
      • If only part of this fund is required then the pecuniary legacies will abate rateably: Moore v Littlejohn (1957) 77 WN (NSW) 829.
    • Class 6 — Assets specifically disposed of by will rateably according to value.
      • ‘Value’ means value to the testator; mortgages must be deducted so that the value is the equity of redemption: Re John; Jones v John [1933] 1 Ch 370.
      • If specifically disposed of property is charged with the payment of a legacy the legacy will not be deducted in determining the value: Re Sloan; Stevens v Sloan [1943] VLR 63.
      • The doctrine of marshalling will apply where one creditor may have recourse to two funds and the other to one; the court will ensure that the creditor with recourse to the one fund is subrogated to the creditor with recourse to the two funds so as to ensure both are paid.
      • At common law a devisee of mortgaged property was entitled to have the mortgage paid out of the general estate in accordance with the statutory order.
      • Property charged with a security primarily liable for that secured debt unless a contrary intention is shown in the will: Conveyancing Act 1919 (NSW) s 145 (formerly Re Estate Charges Act 1854, 17 & 18 Vic, c 113 (‘Locke Kings Act’)).
        • If a person disposes of property which was charged with the payment of money or land in respect of which they owed any money under a contract of purchase the property will be primarily liable for the charge unless contrary intention is shown: s 145(1)
        • A general direction for the payment of debts or by a charge of debts is insufficient unless further signified by words referring to the charge: s 145(2).
        • Nothing affects the right of a creditor to claim against the whole estate: s 145(3).
      • To signify an intention to the contrary the testator must indicate the manner in which the charge is to be borne as between the parties entitled under the will: Re Horton [1969] NZLR 598.
        • A direction to pay debts out of a specific fund is sufficient to signify a contrary intention.
        • A direction to exonerate charged (ie mortgaged) property out of a particular fund operates to exonerate the charged property only to the extent of that fund: Re Fegan [1928] 1 Ch 45.
  • An LPR has two capacities at law:
    • Personal capacity.
    • Capacity when acting on behalf of the estate.
  • A person who lends money to an LPR lends it to them personally and not to the estate; the contract is with the LPR: Fairhall v Fairhall (1871) LR 7 Ch App 123.
  • Where the LPR acts for the purposes of realisation of the estate then a right of indemnity may exist.
  • The most obvious case where liability raises is where the legal personal representative carries on business.
    • Principles relating to liability — Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319, 324–328 (Latham CJ):
      • The LPR may carry on a business only for the purpose of realisation of the estate unless give authority under the will; here the LPR is personally liable but claim an indemnity from the estate.
      • If the LPR is authorised by the will to carry on business other than for the purpose of realisation then the LPR is personally liable but as an indemnity from the estate.
      • If the LPR acts otherwise than for realisation and without authority the LPR is personally liable and will have no indemnity.
      • If a beneficiary authorises the LPR to carry on the testator’s business the LPR will be personally liable but may obtain an indemnity against the beneficiary.
        • The same applies to a creditor who assents.
        • Mere knowledge or ‘standing by’ does not amount to assent.
  • An LPR who commences litigation on behalf of the estate is in the same position as to costs and should therefore seek permission of the court so as to be certain of obtaining an indemnity as to costs.
  • At common law an executor had special defences to plead against personal liability for debts:
    • Plene Administravit — the estate is fully administered and no assets remain.
    • Plene Administravit Preatter — the estate is fully administered except for a sum too small to satisfy the claim.
    • Debts of a higher degree and no assets.
    • Debts of a higher degree and no assets ultra — the estate is fully administered except for a sum too small to satisfy debts having priority to that of the plaintiff.
  • If no plea is made, the executor is taken to have sufficient assets in the estate to satisfy the claim and if upon execution of judgment insufficient assets are found, the executor is taken to have committed waste or devastavit and wil therefore be personally liable: Levy v Kum Chah (1936) 56 CLR 159.
  • Devastavit or waste exposes an LPR to personal liability.
    • It was held that executors owed a duty to identify misappropriation and take steps to recover monies properly belonging to the estate: Bird v Bird [2013] NSWCA 262.
  • The common law position has been expanded by Probate and Administration Act ss 92–95.
  • If the LPR publishes a notice requiring claims on the estate to be made within a name period, then they may distribute the estate having regard only to known claims at the time of distribution; the LPR is not personally liable for claims that come to their notice after the period specified in the notice: s 92.
    • The notice must be published on the NSW Online Registry website (if relates to a grant of representation made or resealed by the Court) or in a Sydney daily newspaper (in any other cases): Supreme Court Rules 1970 (NSW) r 78.93.
    • It must be made in UCPR Form 114.
    • The notice also protects against persons claiming under an intestacy: Newton v Sherry (1876) LR 1 CPD 246; and legatees: Will of Walker (1943) 43 SR (NSW) 305.
    • If the LPR receives a claim under s 92, they may serve a notice on the claimant requiring the claim be prosecuted within 3 months: s 93.
      • If the claim is not prosecuted, the LPR may approach the court of an order barring the claim.
    • The assertion by a person that they are the owner of property which the LPR alleges is part of the estate is a claim for the purpose of s 93: Ludwig v Public Trustee [2006] NSWSC 890.
    • A notice under s 93 need not be served in any particular manner; it is not a court document — service is effected if notice is brought to the attention of the claimant: Ludwig v Public Trustee [2006] NSWSC 890.
    • An LPR who wishes to distribute leaseholds, etc, is protected provided the rents are paid up and a fund is maintained to meet known future claims: s 94.
      • The protection is not available if the LPR has entered into possession and become personally liable: Re Owers; Public Trustee v Death [1941] 1 Ch 389.
    • A beneficiary or creditor is not prevented from following assets into the hands of a person to whom assets have been distributed: Re Diplock [1948] 1 Ch 465.
      • The beneficiary or creditor can trace funds into the hands of a person wrongly paid but must first exhaust any remedy against the LPR.
      • The right to trace such funds is subscribed and statute barred after 12 years: Limitation Act 1969 (NSW) s 47(1).

Distribution

  • A person applying for probate or letters of administration is required to disclose to the court the assets and liabilities of the deceased: Probate and Administration Act s 81A.
  • The LPR is not permitted to deal with property disclosed to the court: s 81B.
  • Filing and passing of accounts by the court is required: s 85.
    • This requirement (except with some special categories of LPR) random at the discretion of the court: s 85(1AA) for the estate of persons dying on or after 31 December 1981.
  • It is no defence to an order to pass accounts that the plaintiff has engaged in laches, acquiescence or delay; the court may exercise its discretion to order accounts to take into consideration the reasons for delay and whether any utility would be served by ordering accounts many years after the administration was complete: Hons v Hons [2010] NSWSC 247.
  • Where accounts are required to be filed and passed they must be filed within 12 months of the grant: Supreme Court Rules 1970 (NSW) r 78.85.
  • The role of the court in passing accounts is that of an auditor and the Registrar will look at whether there are receipts to verify expenses and the accounts are accurate.
    • The Registrar will also look to see if disbursements have been properly incurred.
  • If the court in passing the accounts disallows a disbursement the court can order an LPR to repay the moneys expended to the estate: s 85(4).
  • The process of passing the accounts is called vouching and may be done without an appearance before the Registrar if there is no opposition to the accounts: Supreme Court Rules 1970 (NSW) rr 78.81–78.82.
  • Proceedings for the passing of accounts for an estate must be commenced by notice of motion in the parent proceedings: rr 78.76.
    • At least 14 days before the commencement of proceedings a published notice must be made on the NSW Online Registry website for the filing of accounts and the order(s) claimed in the proceedings: rr 78.79.
  • The ‘executor’s year’ is the period in which the estate must normally be administered.
    • An executor cannot be compelled to pay a legacy within this period irrespective of any direction in the will to the contrary: Brooke v Lewis (1822) 6 Madd 358; 56 ER 1128.
      • Creditors can sue immediately: Re Tankard [1942] Ch 69.
  • ‘Assent’ is the legal process whereby the LPR indicates that property is no longer needed for administration purposes; what is actual assent in any given case depends on the facts: Wise v Whitburn [1924] 1 Ch 460.
    • Assent occurs where property is released to a beneficiary or where the legal personal representative commences to hold the property pursuant to the trusts contained in the will.
  • Under s 46E realty is not divested from the estate unless:
    • There is a registered conveyance.
    • There is an acknowledgment: s 83.
    • There is registration under the Real Property Act 1900 (NSW).
  • A beneficiary cannot be compelled to accept a gift and therefore may disclaim; once a gift is accepted or disclaimed it cannot normally be retracted: Tantau v MacFarlane [2010] NSWSC 224 [108].
    • However, if a gift is accepted or disclaimed without full knowledge of the conditions attached, the acceptance or disclaimer may be retracted at least where the rights of third parties are not affected: Tantau v MacFarlane [2010] NSWSC 224 [109].

Commission

  • The court has power to allow commission to an LPR: s 86.
    • The court will not allow commission where (if required) accounts have not been passed.
  • Commission is in the discretion of the court and is awarded for the ‘pains and trouble’ that an LPR may be put to administer the estate: Nissen v Grunden (1912) 14 CLR 297.
    • The court will examine the difficulty or easy of the administration of the particular estate in considering the amount to be awarded and also the executor’s conduct: Re Estate of Gray [2010] VSC 173.
  • Factors relevant to determining level of commission — Estate of Gowing (Senior Deputy Registrar Studdert, 23 January 2013):
    • The size of the estate.
    • The complexity of the estate.
    • The complexity of the terms of the will or scheme or distribution under the will.
    • The degrees of promptness, efficiency and diligence shown by the executors in carrying out their duties.
    • The amount of work carried out by the executors and time spent.
    • The amount of responsibility involved.
    • Problems encountered by the executors in the court of administering the estate.
  • The ranges that the court usually allows as commission by way of percentage are:
    • 0.25–1.25% on assets transferred in specie.
    • 0.50–1.50% on capital realisations.
    • 1.00–5.00% on income collections: Estate of Gowing (Senior Deputy Registrar Studdert, 23 January 2013).
  • Commission operates as an exception to the rule that a trustee could not benefit from the trust: Will of Shannon [1977] 1 NSWLR 210.
  • The executor must do the work and not rely upon a co-executor: Will of Wallace (1934) 51 WN (NSW) 84.
  • There is no commission for future work: Will of Gaukroden (1915) 15 SR (NSW) 192.
    • However, where future work may be required to administer the estate the court may order commission on a percentage basis rather than lump sum: Spence v Spence (2003) NSWSC 1232.
  • Professional skill of the executor will be considered: Re Craig (1952) 52 SR (NSW) 265.
    • If, however, the executor is a professional such as a solicitor or accountant, and the will permits the executor to charge professional fees to the estate, they are entitled to charge only for those tasks which are professional in nature: Estate of Lindsay [2004] NSWSC 575 [8]–[9].
  • An executor who is a professional can charge professional fees for their work unless authorised to do so by a professional charging clause in the will: Chick v Grosfeld (No 3) [2012] NSWSC 1536 [8].
  • An executor is normally expected to perform their executorial duties personally but may in complex estates by permitted by the court to recover the costs of services of lawyers and accounts as disbursement: Chick v Grosfeld (No 3) [2012] NSWSC 1536 [7].
  • Unless authorised to do so by the will or all beneficiaries who are sui juris, an executor who is a professional person cannot engage their own firm to do executorial work as this violates the principle that a trustee must not be able to prefer their own interest: Chick v Grosfeld (No 3) [2012] NSWSC 1536 [8].
  • An executor may make an agreement with beneficiaries if all are full of age as to the amount of commission payable.
    • Agreement may be set aside where there is not full disclosure — Walker v D’Alessandro [2010] VSC 15 [30]:
      • Work done to justify the commission must be disclosed.
      • If the executor is invoicing the estate for legal fees and disbursements they ought to identify with particularity what constitutes the basis for the same — only then can a beneficiary accurately measure the ‘pains and troubles’ occasioned to the executor beyond the subject matter of those legal fees and disbursements.
      • Beneficiaries must be informed and it must be fully explained that they are entitled to have the court assess the commission.
      • Beneficiaries must be told that it is desirable that they seek independent legal advice as to their position on the issue of consent.
        • In cases where the beneficiaries are unsophisticated and the issues complex, the executor ought to insist upon them receiving independent legal advice and ought not enter into any commission agreement until they have.
    • The basis of this decision is that the executor occupies the position of a fiduciary viz the beneficiaries.
  • There is a presumption that a gift to an executor is in lieu of commission; this is a weak presumption and easily rebutted: Public Trustee v Kuehn [1983] 1 NSWLR 195, 196.
  • There will be no commission if:
    • The executor is directed to retain a sum as payment for services.
    • A legacy to the executor is expressed to be in consideration of their undertaking the role.
    • The legacy is expressed to be in lieu of commission, but not if it is so small as to be illusory: Re Murphy [1928] St R Qd 1.
    • The will gives commission on the realisation of the corpus of a fund and income thereof.
    • A legacy is given expressly ‘as executors’. In this case it is a question of the testator’s intention; the executor may however renounce the gift and claim commission provided the executorship is not conditional upon acceptance of the gift: Will of Oddie [1976] 1 NSWLR 371.
  • As a general rule, if the will provides for the remuneration of the executor and the executor proves the will then the executor must accept what is provided under the will: Will of Kerrigan (1935) 35 SR (NSW) 242, 245.