Executor Commission Denied

Failure to Timely Notify Beneficiaries & Disentitled Conduct

Being an executor of an estate can sometimes be a demanding and a time-consuming task. Depending on the size of the estate, the duties of an executor can range from relatively straightforward through to somewhat complex. Due to the'  significant'  nature of an executor's obligations, there are'  provisions'  for executors to apply to be awarded executor's commission. This is remuneration for the executor's efforts in administrating the estate. There is no automatic right for an executor to claim commission. An executor can only claim commission in the following circumstances:

1. Where the deceased's Will specifically authorises payment to the executor;
2. Where the beneficiaries agree; or
3. The Supreme Court orders that commission should be paid.

Any executor claiming executor's commission must notify all interested beneficiaries as soon as reasonably practicable and the notice must be in plain language or form that each beneficiary will be able to understand. Section 65D in the Administration and Probate Act 1958 (Vic) (Act) provides that the executor must inform each beneficiary of the following:

• the basis for the proposed payment;
• the method of calculation;
• an estimate of the commission sought; and
• the beneficiaries' right to challenge it in court.

In the case of Fothergill v Horsfield [2024] VSC 793, the Court had to determine whether the executor had properly followed the statutory process for securing commission under section 65 of the Act.

Fothergill v Horsfield [2024] VSC 793

Facts

Diana Noelle Whiteman (deceased) died in February 2023, leaving behind an estate valued at more than $5 million. Her Will appointed two executors namely, Mr David Fothergill (a relative and beneficiary) (Mr Fothergill), and Ms Erica Horsfield (Ms Horsfield), a solicitor from the firm that prepared the Will. Probate was granted to Mr Fothergill and Ms Horsfield on 23 June 2023. A disagreement arose over Ms Horsfield's intention to claim executor commission of 2% of the value of the estate being approximately $103,043.00 (on an estimated estate net value of $5,152,132.75). Therefore, Ms Horsfield made an application to the Court seeking executor's commission pursuant to section 65 of the Act.

Pains & trouble

Executor's commission is awarded to an executor for the pains and trouble incurred by taking on the responsibility of administering the estate. "Pains" recognises the responsibility and anxiety an executor is put in during the administration of the estate.'  "Trouble" is used to assess the work which is actually attended to by the executor. Mr Fothergill argued that Ms Horsfield's claim for commission was excessive given that it was a simple estate to administer. Mr Fothergill said that Ms Horsfield's contribution to the administration of the estate was limited to reviewing emails, approving the engagement and actions of the estate's advisors and signing forms when required. Mr Fothergill further deposed that most of the work was carried out by an independent law firm, to whom professional fees had been paid. In Ms Horsfield's affidavit she sets out the pains and troubles she had incurred in administering the estate. The Court noted that almost one third of the matters outlined in Ms Horsfield's affidavit related to either the issue of whether Ms Horsfield's firm should be engaged to a205ct for the estate, or to the issue of Ms Horsfield's executor's commission. In the Court's view neither'  of those issues are regarded as an executor's troubles in administering an estate.

Notification to Beneficiaries

Ms Horsfield submitted that she had informed the interested beneficiaries of her intention to claim executor's commission as soon as practicable. Mr Fothergill opposed Ms Horsfield's application on the bases that Ms Horsfield did not notify the residuary beneficiaries of the estate of her intention to claim commission 'as soon as reasonably practicable' as required by s 65D of the Act and nor did her notification include all of the information. Mr Fothergill also submitted that even if Ms Horsfield did comply with section 65D of the Act, she has engaged in conduct that the Court should find disentitled her from payment of an executor's commission.

Court's Decision

The Court considered all the evidence and the Court was not satisfied that Ms Horsfield provided the information as soon as reasonably practicable to the interested beneficiaries and held that Ms Horsfield had failed to meet the statutory obligations set out in section 65D of the Act. The Court noted the following:

• Ms Horsfield had been considering the bases on which she would seek executor's commission since 7 March 2023 but only informed the residuary beneficiaries on 28 February 2024 of her intention to apply to the Court for an executor's commission.
• Ms Horsfield filed her application on 29 February 2024, one day later. The Court considered that Ms Horsfield's email to the beneficiaries sent less than 36 hours before she commenced proceeding was poorly timed, confusing in content, and ultimately non-compliant with the plain language and intent of section 65D.
• The estate instructed a separate law firm to administer the estate. Ms Horsfield's evidence was that she relied on the firm to convey to the residual beneficiaries that she was requesting executor's commission. The Court noted that this was inappropriate and Ms Horsfield had no authority to instruct the law firm to convey information about her own application for executor's commission to beneficiaries at the expense of the estate.

Disentitling Conduct

Even if Ms Horsfield had technically complied with the notification requirements, the Court found her conduct disentitled her to any commission. Several factors contributed to this:

• She imposed unreasonable deadlines on beneficiaries to respond to her request;
• She filed her application for commission while the response window was still open;
• Her claim included exaggerated estimates of costs and failed to clearly articulate her legal basis; and
• Her "task lists" inflated the number of hours worked and included time spent dealing with her own commission dispute, which the Court held was not part of her executorial duties.

Furthermore, the Court criticised her for attempting to restrict estate distributions until her commission was resolved. This action was considered inappropriate given her fiduciary obligations.

Executor Commission Conclusion

' The Court found that Ms Horsfield was not entitled to payment of executor's commission from the estate and her application was dismissed. This case reiterates that executor's commission is not automatic and that it is a discretionary payment, awarded only when the executor's conduct has been exemplary and when the statutory requirements are strictly adhered to.

Key takeaways

This case is a reminder that:

• Executors must provide written notice of their intent to claim commission early, ideally soon after probate is granted.
• All required information under section 65D of the Act must be clearly and plainly communicated to each beneficiary, not merely discussed with one or assumed to be passed on.
• The relationship between executor and beneficiary is fiduciary in nature. Any benefit to the executor such as commission must be disclosed fully and without pressure. Failure to do so may result not only in the loss of the commission but also in reputational damage and cost consequences.

If you are an executor considering in making an application for executor's commission or if you are a beneficiary seeking advice about executor's commission, we can assist you. Contact Hunt & Hunt's experienced' Wills & Estates lawyers' today to discuss on 03 8602 9202 or at' [email protected].