ByLawyers News and Updates

Wills, Powers of Attorney and Advance Health Directives QLD

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Wills, Powers of Attorney and Advance Health Directives

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
JUNE
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Powers of Attorney – Commentary enriched to include a new section ‘What an attorney can’t do’. Commentary also enriched to include Instruments made in other states.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Wills, Powers of Attorney, Guardianship & Advance Health Directives WA

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Wills, Powers of Attorney, Guardianship & Advance Health Directives

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER 
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
    • Amended to include reference to scale costs.
JUNE
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Commentary enriched to include a new section ‘What an attorney can’t do’. Commentary also enriched to include Instruments made in other states.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

To accept or not accept instructions in urgent will matters

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By Rosslyn F. Curnow Nolch, Principal

Rosslyn Nolch Solicitors

Publisher’s Note: The outcome in Howe v Fischer [2013] NSWSC 462, discussed in this article, was overturned on appeal in Howe v Fischer [2014] NSWCA 286. Following the decision on the appeal, unless the instructions for the will are concluded and unless there is reason to think the testator is at imminent risk of death, then it appears a solicitor is unlikely to be held negligent for failing to advise about, or to procure, an interim will. However each case will turn on its facts and solicitors should take utmost care.

Every case of course turns on its own facts, but two recent cases, and an ageing population, highlight the need for consideration of a number of issues when agreeing to take on a new wills matter.

  1. Fischer v Howe [2013] NSWSC 462

The lawyer was asked to act for a new client in relation to her will. The willmaker (W) had made a number of formal wills between 1982 and 2009 and wished to change certain dispositions in her then latest will made in 2009. In particular, W wished to leave the plaintiff in this matter a 50% share of her estate in lieu of the 25% left to him in the 2009 will.

W had lost faith in her previous lawyer and asked her doctor if she could recommend a lawyer. The doctor knew the defendant lawyer and contacted him, and in the course of the conversation noted that she believed W had testamentary capacity as she was of sound mind, although physically frail. Subsequently the lawyer spoke directly with W and then attended her home, where she resided with the assistance of a carer, two days later (25 March 2010).

At the time of the attendance, the lawyer took instructions during a lengthy conference. He was not provided with details of the 2009 will.

It is pertinent to note that during that conference, as well as stating her wishes in respect to the change in disposition to the plaintiff, W:

  1. did not reveal her age (94), other than by reference to the ages of her children;
  2. wanted her previous lawyer and accountant removed as executors and, when asked who she wanted as executor, ‘suggested that the defendant could be appointed. He (the defendant) advised her to think about whom she wanted and to let him know when he presented her with a draft of the will.’;
  3. did not appear to be suffering from ill-health or appear to be exhausted from the lengthy conference.

This conference was shortly prior to the 2010 Easter holiday. At the conclusion of the conference the lawyer told W that he would be away on leave over the Easter break and would not return to work until after Easter. It was proposed that the lawyer would prepare a draft will and attend W during the week after Easter, with which W agreed, also stating that she would like the plaintiff to be present at that meeting. The lawyer left with instructions, and was to contact W upon his return from leave.

Later that day W spoke to the plaintiff over the telephone and told him that she had seen a lawyer and wanted to ‘schedule’ him to attend after Easter when the plaintiff could be present.

Subsequently, over a very short period of time during which W refused to be admitted to hospital, W became ill. On 31 March 2010 the lawyer commenced leave (Good Friday was 2 April 2010). W died on 6 April 2010, without executing a new will, and her doctor was ‘shocked’ that she had passed away at that time.

Following objections on the basis of a lack of testamentary capacity by a family member left out of the 2009 will, that will was finally admitted to probate with some modifications (which did not affect the plaintiff’s entitlement of 25% under that will). Subsequently the plaintiff brought an action against the lawyer for his ‘lost’ 25%, being the difference between what he received under the 2009 will (25%) and what he would have received under the ‘new’ will had it been made (50%).

What appears to have told against the lawyer was that he was very experienced, had a short time previously attended a seminar on informal wills, and that ‘The defendant accepted that there was no practical impediment to his making an informal will at the conclusion of the conference since it would not have taken long and there was no indication that the deceased’s attention or energy was flagging. He admitted that he did not give any consideration to an informal will which the deceased could have signed that day or shortly thereafter’.

The court stated (at 97):

I consider that the defendant was negligent in failing to procure an informal will at the conference on 25 March 2010. He could have done so. His failure to do so was a breach of his duty to exercise reasonable care. Although the deceased may not have been at risk of imminent death as [the doctor] understood the term, being at risk of dying within hours or within a day, she was, by reason of her age, lack of mobility, need for care and infirmity, susceptible to a not insignificant risk of losing her testamentary capacity in the period of about a fortnight between the initial conference and the proposed conference. There was no reason for her, or her intended beneficiaries, to be subjected to that risk in light of her settled testamentary intentions, both as to dispositions and as to her desire to change her executors, and the circumstance that it was the solicitor who was responsible for the delay.

And (at 102):

The only thing that would have relieved the defendant of the obligation to procure an informal will would have been the deceased’s express instructions that she did not wish to take that course. No such instructions were forthcoming nor could they have been because the defendant did not raise the option with her. I do not accept that the preparation of an informal will was in any way inconsistent with the later execution of the formal will at the conference in April. To the contrary, the purpose of the making of an informal will was to safeguard the implementation of her testamentary intentions against the possibility that the deceased would lose her testamentary capacity either through death or stroke or other event to which her advancing age and frailty made her increasingly susceptible.

The plaintiff was awarded the difference between 25% and 50% of the estate against the lawyer.

  1. Maestrale v Aspite [2012] NSWSC 1420

On 8 July 2002 the lawyer met with the deceased, who was on a day release from hospital, and took instructions for a will – this had been arranged by the plaintiff. Subsequently, on 15 July 2002, the lawyer attended the hospital with the original will for the purposes of having it executed, but unfortunately the deceased died 10 minutes before he arrived.

The plaintiff’s contentions, many of which the court accepted, included that:

  • he had asked the lawyer on several occasions in the three weeks leading up to 8 July 2002 to attend his father for the purposes of making a new will (under which the plaintiff was to receive a greater share than provided in an earlier will);
  • the lawyer negligently failed to have the deceased sign his instructions at the meeting 8 July 2002 (as an informal will);
  • he had contacted the lawyer on 12 July 2002 and 13 July 2002 to say that his father’s health was deteriorating.

In response, the lawyer said that:

  • it was not until the morning of 8 July 2002 that any arrangement was made for him to meet with the deceased;
  • while he understood that the deceased had been diagnosed with cancer, the plaintiff had told him the doctors believed he had six months to live, and that the deceased gave him the same information on 8 July 2002, at which time the deceased appeared to be in a reasonably stable condition;
  • had the plaintiff informed him of the urgency, he would have attended the deceased without delay, but denied having been so informed;
  • he was aware of the applicable informal will provisions (section 18A Probate and Administration Act 1898 (NSW)) 2, but did not advise the deceased of the option of making an informal will because of his assessment of the deceased’s general state of health on 8 July 2002 together with the information the deceased gave him at that time that his doctors had given him some months to live.

The court considered the evidence of various experts and inter alia quoted from Hill v Van Erp [1997] HCA 9 where the solicitor was held liable to the intended beneficiary, the disposition being ineffective because the husband of the intended beneficiary was asked to attest the will:

Thus, when a solicitor accepts responsibility for carrying out a client’s testamentary intentions, he or she cannot, in my view, be regarded as being devoid of any responsibility to an intended beneficiary. The responsibility is not contractual but arises from the solicitor’s undertaking the duty of ensuring that the testator’s intention of conferring a benefit upon a beneficiary is realised. In a factual, if not a legal sense, that may be seen as assuming a responsibility not only to the testatrix but also to the intended beneficiary.

The court also quoted from Queensland Art Gallery Board of Trustees v Henderson Trout (a firm) [2000] QCA 93 where a ‘disappointed beneficiary’ was unsuccessful:

It may be accepted that whenever a solicitor takes instructions to make a will, there is a potential for a duty to arise in favour of third parties who may be damaged if the solicitor fails to discharge the retainer with due care. Whether a duty actually arises in favour of a particular third party depends upon a variety of circumstances, and these have not by any means been clearly identified by the cases. … Hill v Van Erp, suggests a variety of potential matters including foreseeability of loss to the third party, control of the situation by the solicitor, proximity between the solicitor and the third party, general public reliance on satisfactory performance by solicitors, assumption of responsibility to discharge the retainer properly, the powerlessness of the third party to do anything to protect himself or herself, whether or not there is any conflict between the duty owed to the client and the alleged duty to the third party and perhaps other matters also.

There is as yet no consensus as to which matters are dominant or any formula which will guide a trial judge in formulating tests that will determine whether or not such a duty is owed. However … (i)t is up to the client to indicate when he or she is ready to make a particular will. Attempts by a solicitor to hurry up an undecided client or to seek to benefit particular beneficiaries are fraught with danger. Recognising this, Courts should be slow to inflict busybody functions or duties of this kind upon solicitors or other professional advisers.

In the circumstances of the present case, particularly in the absence of indication from the testatrix that she wanted to finalise the matter at least to the extent of executing a will that would secure a particular benefit to the art gallery, I do not consider that the stage was reached at which any duty of care arose on the solicitor’s part in favour of the art gallery.

The court then noted (at 106) that the situation in this case was distinguishable from the latter case, and that the deceased ‘had given clear and unambiguous instructions to (the lawyer) to prepare a will under which he intended that the plaintiff would benefit, to a material degree, differently from his other children. There is nothing to indicate that (the deceased) was uncertain as to his testamentary intentions at the conclusion of the (8/7/2002) meeting and everything to support the inference that he was thereafter awaiting the attendance of (the lawyer) to render those intentions final and enforceable.’

And (at 107):

By accepting those instructions, and in pursuance of carrying them out, … (the lawyer) had a coexistent duty to the plaintiff to ensure that in the event of any change in his father’s health or capacity he would make prompt arrangements to attend with a formal will or, if time did not permit, to attend with the file notes so that they might be signed and an informal will created. The breach of duty did not reside in an unduly dilatory approach to preparation of the will by allowing the passage of seven days before the will was prepared but in his failure to respond to the plaintiff’s urgent calls for advice and attention in the interim.

The court awarded damages against the lawyer based on the difference between what the plaintiff received under the ‘old’ will, and what he would have received under the ‘new’ will (with some adjustment for other factors pertaining to the deceased’s expressed wishes).

Other relevant points

Our professional rules, in respect to which the Australian Solicitors’ Conduct Rules (yet to be implemented) are very similar, highlight some areas where an ‘urgent’ will situation can put the lawyer in peril, for example (in addition to rule 10):

  • Agreeing to Act for a Client (Rule 2): consider what might be deemed diligently attending to the work required with ‘reasonable promptness’ in the circumstances;
  • Maintaining confidentiality (Rule 3): consider how to best effect ‘deathbed’ instructions when co-ordination with family members is required (particularly where they are existing clients, as is often the case);
  • Avoiding conflicts of interest between clients and between the client’s and the practitioner’s own interest (Rules 8 and 9) 3: consider how one ceases to act if a material conflict arises when the willmaker’s health is failing.

We also should consider one of the suggestions contained in the 2012 Victorian Law Reform Commission’s Review of Succession Laws that willmakers be obliged to obtain a medical certificate before giving instructions for making a will 4, and also the suggestion that a person authorised to take affidavits or a medical practitioner act as a witness5.

So the questions we might need to consider before accepting instructions for wills include:

  • Is it urgent, not only in time but in terms of the willmaker’s health?
  • Is it urgent from the willmaker’s point of view, or are there really issues of capacity with the urgency being from the point of view of the intended beneficiary?
  • Can one attend to the matter promptly (as in immediately, foregoing holidays, other emergencies etc.)?
  • Is one able to assess competency immediately, as opposed to a slightly longer but more considered approach; and/or is there a legislative requirement for a medical certificate before instructions can be taken, in which case whose responsibility is it to pursue this?
  • Is one prepared to write up an informal will ‘on the spot’ if the need arises, including adequate consideration of potentially difficult areas such as excluding immediate family members who would ordinarily expect to benefit?
  • Is an informal will recognised in the lawyer’s particular jurisdiction, at present 6, or in the future if additional legislative requirements are imposed?
  • What are the risks in errors being made in a hasty informal will, as opposed to one prepared in the serenity of one’s office with precedents and all necessary information to hand?

We also need to consider potential risks, some being obvious and some perhaps not, including:

  • The willmaker may not really want a (new) will, but in the perceived immediacy of the matter the lawyer is given little time in which to give this considered attention, particularly if s/he is being pressured by such statements as ‘If mum dies before this will is signed …’ (we all know how this goes).
  • If the (new) will is made, disappointed beneficiaries may allege all sorts of improprieties against the lawyer.
  • If the (new) will is not made, disappointed beneficiaries may allege their ‘disappointment loss’ is in direct proportion to the alleged negligence of the lawyer.
  • Indicators of diminished competency may be missed in the immediacy of the matter, particularly if the lawyer has not acted for that willmaker previously.
  • An informal will prepared in haste may not meet applicable jurisdictional requirements (see point 3).
  • Drafting errors may be made in the haste to prepare a will.
  • If the willmaker indicates they want the lawyer to act as executor the lawyer may be caught between refusing or asking the willmaker to consider further, leaving him/herself open to accusations of delay; or agreeing, and being accused later of coercing the willmaker to make the appointment and failure to comply with the professional rules.
  • There may be a higher risk of conflict between the interests of the willmaker, the interests of family members if they are existing clients, and also the interests of the lawyer in ensuring that all ethical duties are met as well as a personal interest in not being taken to task afterwards.

So whilst every person should be able to access legal assistance when and where required, there are evolving difficulties in regard to this area of law, and it may well be that in the future only specialist firms are willing to accept this type of work.

Note: Contributed by Rosslyn Nolch, Solicitors, for educational purposes only, and originally prepared for Wills, Powers of Attorney & Enduring Power of Guardianship (VIC) – Step-by-Step Legal Practice Guide and Precedents By Lawyers For Lawyers.

The interpretation is that of the author, and the reader should research all of the materials referred to for him or herself. Primary source of case information unless otherwise noted:

https://www.austlii.edu.au/.

This article does not constitute legal advice.

NOTE:

  1. See also In Check Issue No. 59 www.lplc.com.au.
  2. Section 18A Probate and Administration Act 1898 (NSW).
  3. See also the 2012 Victorian Law Reform Commission’s Review of Succession Laws, referred to below, Point 2.43 and Question W5.
  4. Point 2.43 and Question W4.
  5. Point 2.17 and Question W1.
  6. See for example: Fast v Rockman [2013] VSC 18 where an unexecuted Will was admitted to Probate as a document the deceased intended to be his Will, notwithstanding that he had not actually seen it (but had seen an earlier unexecuted Will to which he wanted minor changes); Re Will and Estate of Brian Bateman [2011] VSC 277 where an informal (draft) Will was admitted to Probate, and Estate of Peter Geoffrey Brock; Chambers v Dowker & Anor; Dowker & Anor v Chambers & Ors [2007] VSC 415; and Estate of Baier [2013] NZHC 504 where a Will approved by telephone by the deceased was admitted pursuant to section 14 Wills Act 2007 (details courtesy Envoy June 2013, NZILE); contrasted with the result in Prucha v Standing [2011] VSC 90 where the Court found the deceased had not intended the document to be his last Will.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

Wills and estates – Death in the house

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Death can impact on a conveyancing transaction in a number of ways, whether the death occurs prior to commencement or during the course of the transaction.

Survivorship

One common example is where one joint tenant dies after the parties have separated. The survivor claims the whole of the property by survivorship, but the beneficiaries of the deceased argue that the separation of the parties severed the joint tenancy and that survivorship does not apply. It is impossible to provide a categorical formula for resolving such disputes as each case will very much depend upon the length and circumstances of the separation. The one thing that is certain however is that the lawyers will, as always, be regarded as the bad guys no matter how the dispute is resolved.

Sales generally

The fact that a registered proprietor has died does not necessarily mean that a proposed sale has to go ‘on hold’. There may be good reasons why an asset should be disposed of promptly after the death of the owner, but equally good reasons why the estate of the deceased may take some considerable time to be finalized. A sale in such circumstances need not await all of the formalities of a grant of probate as an executor of a will is entitled to enter into a contract to sell an asset of the estate even though the executor has not obtained a grant of probate at the time the contract is entered into. The sale is made subject to the executor obtaining a grant of probate and the proposed settlement date takes that condition into account, for instance by specifying settlement ‘on the 1st June or 14 days after the vendor obtains probate’.

However an executor in such circumstances cannot enter into a terms contract as the executor is not ‘presently entitled to become the registered proprietor’ as required by s 29D Sale of Land Act.

This ability to ‘intermeddle’ with estate assets is only available to an executor named in the will and is not available to a person who may intend to apply for a grant of letters of administration of a deceased estate as such an appointment is very much at the discretion of the Court.

Sensational deaths

That someone died in a house that is now for sale is a reasonably common event. To date such circumstances have not caused the common law any concern and fall within the ambit of caveat emptor – let the buyer beware, so a vendor in such circumstances has no duty to bring the death to the attention of a prospective purchaser. That someone was murdered in the house does not alter the common law’s view, but modern statutory principles of misleading and deceptive conduct may impose additional vendor disclosure obligations. A case involving such circumstances came before the New South Wales Administrative Decisions Tribunal late last year in the context of disciplinary proceedings against an agent involved in such a sale: Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257 and Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 299. Whilst the comments do not directly bear on the vendor’s obligations, it is noted that the vendor did in fact agree to release of the purchaser from the contract when the purchaser became aware of the circumstances of the death after entering into the contract.

A vendor proposing to sell such a property might consider including a special condition in the contract to the effect that the purchaser is aware that the former owner died whilst residing in the property and that the death occurred in unusual circumstances.

Death during the course of the contract

If a vendor dies during the course of the contract, the vendor’s lawyer should advise all parties concerned of the death and take steps to establish the ability of the legal personal representative (either executor or administrator) to complete the transaction – (1989) Law Institute Journal 1149 (December) – which may require a ‘temporary’ grant (ad colligendum bona) if settlement is imminent. Whilst the ‘easy’ solution would appear to be to rely on existing documents (particularly if the transfer of land has been signed by the deceased in anticipation of settlement) such action is fraught with danger. The same may be said of relying on a transfer signed by an attorney under power when the donor/vendor has died.

Settlements conducted in such circumstances are liable to be challenged by the ‘prodigal son’ or other unexpected potential beneficiary of the deceased’s estate who finds that the main asset of the estate has been disposed of and distributed on the basis of a transfer which took place after the death of the deceased.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Executor’s commission 1 – Executor’s commission and the professional executor

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By Roz Curnow

A number of recent cases have highlighted the need for care where executor’s commission is sought by a ‘professional’ executor such as a legal practitioner, in particular where the will makes no specific provision for the payment of commission.

A useful starting point for a discussion of a claim for commission by any executor is section 65 of the Administration of Probate Act 1958 which provides that ‘It shall be lawful for the court to allow out of the assets of any deceased person to his executor, administrator or trustee for the time being such commission or percentage not exceeding five per centum for his pains and trouble as is just and reasonable.’

It should be noted here that executor’s commission is effectively an exception to the general rule that a fiduciary cannot profit from his position as executor or trustee, and therefore the courts scrutinise such agreements very closely, are ‘extremely cautious and wary’ in upholding them, and will refuse to enforce them at the slightest sign of unfairness or undue pressure and, in practice, a full five percent overall is rarely awarded. See Bray & Anor v Dye & Anor (No 2) [2010] VSC 152.

Where there are two or more executors, the total commission percentage awarded will be shared between them; although this will not necessarily be evenly distributed between those executors, but may be dependent upon their respective contribution(s).

Then we move on to consider what is meant by ‘pains and trouble’ in terms of section 65. There are many cases containing reference to this: see Re Estate of Zsusanna Gray [2010] VSC 173 for recent commentary. It has been explained by the court in the following terms:

  1. ‘pains’ relates to the responsibility, anxiety and worry generated by the executorial function; and
  2. ‘trouble’ relates to the administration of the estate.

It has also been stated by the court in Patterson v Halliday [2003] VSC 298 that in assessing commission ‘at least’ the following should be considered:

  • the work and judgment involved in the realisation of assets and earning income,
  • the extent of administrative activities,
  • the responsibility generally,
  • the amount of work done not reflected in financial terms,
  • how long the estate was administered,
  • the size of the estate and its capacity to pay,
  • the work of a non-professional character not undertaken by the applicant and performed by professionals, and
  • (the) executors’ pains and troubles relative to the result.

So we can gather from this that an application for commission by any executor is by no means a simple process, and detailed consideration needs to be given to all of the above aspects.

Then we move to an additional overlay of duties imposed upon a legal practitioner who seeks the payment of executor’s commission; including points 3 and 4 below which are particularly relevant where the payment of commission is sought by way of the consent of sui juris beneficiaries rather than by order of the court:

  • A higher level of fiduciary duty: see Dimos v Skaftouros & Ors [2004] VSCA 141.
  • The absence of ‘double dipping’*.
  • The absence of unfairness or undue pressure on beneficiaries*.
  • Evidence that the beneficiaries are ‘fully informed as to any potential benefit to be made by the fiduciary before [they] … give an informed consent to the fiduciary receiving that benefit’ – Bray & Anor v Dye & Anor (No 2) [2010] VSC 152 and cited with approval in Legal Services Commissioner v Hession (Legal Practice) [2010] VCAT 1328 – with disclosure taking into account the beneficiaries’ sophistication, and including at a bare minimum:
    • The work that (the executor) has done to justify the commission. This should be done with particularity i.e. by assessment: Re Estate of Zsusanna Gray.
    • If (the executor) is invoicing the estate for legal fees and disbursements he ought to identify with particularity what constitutes the basis for same i.e. providing the beneficiaries with such information as is necessary to enable them to distinguish between legal work and the performance of executorial functions: see Re McClung (dec’d) [2006] VSC 209. 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.
    • That the beneficiaries are entitled to have this court assess his (the executor’s) commission pursuant to s 65 of the Act. This needs to be explained fully.
    • That it is desirable that the beneficiaries seek independent legal advice as to their position on this issue of consent. In many cases where the beneficiaries are unsophisticated people and the issues are complex he (the executor) ought to insist upon them receiving independent legal advice and ought not enter into any commission agreement until they have.

* See the cases Re Estate of Zsusanna Gray [2010] VSC 173 and Bray & Anor v Dye & Anor (No 2) [2010] VSC 152 in particular.

We must also note particular professional rules and regulations within the context of the above:

  1. Where a legal practitioner draws a will appointing the practitioner or an associate of the practitioner as an executor, the client must first be informed in writing of any entitlement of the practitioner/the practitioner’s firm/associate to claim executor’s commission; of the inclusion in the will of any provision entitling the aforementioned to charge legal costs in respect to administration of the estate; and, if there is an entitlement by the aforementioned to claim executor’s commission, that the testator could appoint an executor who might make no claim for commission: rule 10, Law Institute of Victoria Limited Professional Conduct and Practice Rules 2005, as emphasised in the Registrar of Probates’ recent Notice to Practitioners “Receiving a benefit under a Will or other instrument” and Re McClung (dec’d) [2006] VSC 209;
  2. Where a legal practitioner receives instructions to prepare a will under which any of the aforementioned may receive a substantial benefit (other than any proper entitlement to commission if applicable, and reasonable professional fees) then the legal practitioner must decline to act and offer to refer the person concerned to an independent legal practitioner: see rule 10 supra, including some very limited exceptions; and, for completeness, see also reference to preparation of any other instrument under which the aforementioned may receive a substantial benefit in addition to reasonable remuneration; and
  3. Relevant information must be included in the (firm’s) Register of Powers and Estates in respect to trust money: regulation 3.3.32 Legal Profession Regulations 2005.

Finally, but not least, any executor, administrator or trustee needs to consider the aspect of personal liability should he or she fail in his or her duty towards the estate. This duty will generally be assessed at a higher level should that executor, administrator or trustee be a ‘professional’ such as a legal practitioner, accountant and the like; and consequently a higher potential for liability may also arise.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

Executor’s commission 3 – A fiduciary duty

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Most property lawyers will also be involved in the administration of deceased estates and, on occasions, may in fact act as the executor of a deceased estate. This is entirely appropriate, as there will always be clients who do not have a close friend or relative who they can appoint to fulfil this role and would prefer to appoint their solicitor, rather than an impersonal trustee company.

Rule 10 of the Professional Conduct and Practice Rules 2005 requires a lawyer to inform the client in writing before the will is signed that the will entitles the lawyer to charge commission and that the client could appoint an executor who might not charge commission. Signing of the will after receipt of that advice operates as client consent to the charging of commission, thereby negating any potential conflict of interest. However, like many other examples of the lawyer-client relationship, simply establishing the relationship on a solid footing does not ensure that problems will not arise thereafter. The recent case of Walker v. D’Alessandro [2010] VSC 15 confirms that the lawyer continues to owe duties to the client and the estate.

The lawyer was appointed as executor of the estate and was authorised to charge commission. The estate consisted largely of cash accounts valued at approximately $1.6m and all of the six beneficiaries were nieces and nephews of the deceased with legal capacity. As the time for distribution approached the lawyer wrote to the beneficiaries advising that, subject to two minor matters, the estate could be finalised and an interim distribution of $1.4m could be made. This letter sought consent from the beneficiaries to the charging of commission at the rate of 3%.

The alternative was for the beneficiaries to require the executor to apply to the Court for an order authorising commission, in which case commission of up to 5% could be awarded. The estate would be liable for the costs of this application and the lawyer was ‘unable to say with any degree of accuracy’ when the distribution might be made.

In these circumstances the beneficiaries all returned the signed consent forms and an interim distribution was made. However some of the beneficiaries thereafter had second thoughts and issued these proceedings to overturn the claim for commission.

The duty owed by the executor to the beneficiaries is perhaps the purest example of the concept of a fiduciary duty. The beneficiary depends entirely on the executor to well and truly administer the estate and distribute the proceeds upon finalisation of the estate. The task of the executor in fulfilling these trust obligations was regarded by the common law as an honorary one, but statutes regulating the administration of estate have long recognised an entitlement to commission to compensate the executor for ‘pains and trouble’: s65 Administration and Probate Act 1958. Importantly, the object of the payment is compensatory, rather than profit-based and the Courts take seriously their supervisory role.

The Court suggested that the lawyer/executor must:

  1. detail the work performed as executor;
  2. differentiate between work performed as executor and legal work;
  3. fully explain the right to have a Court assessment; and
  4. insist upon independent legal advice.

The Court concluded that the executor has failed to satisfy three of these four requirements and had thereby failed to fulfil the fiduciary obligations owed to the beneficiaries. Criticism was also made of the inappropriate use of the potential for delay that an application for Court approval might have caused. There was nothing preventing the executor making an interim distribution pending approval, but the contrary was suggested. This also undermined the beneficiaries’ consent.

The agreement that 3% commission be paid was set aside. This was one of the orders that were initially sought by the beneficiaries and the one which became the focus of the hearing. However the beneficiaries had also sought an order that the lawyer provide an itemised bill of costs in relation to legal work performed for the estate. These costs were in the region of $16-17,000 and whilst one of the obligations propounded by the Court was the need to differentiate between estate work and legal work, no further comments were made in relation to these costs.

However the inherent conflict facing a lawyer in this situation was described In the Matter of the Will and Estate of Mary Irene McClung [2006] VSC 209 as having the lawyer ‘on the horns of a dilemma’. An executor/lawyer who is wearing two hats and seeks to charge the estate in both capacities may expect close scrutiny if challenged before a Court. Whilst it is possible to differentiate between the work performed in those two roles, it is fair to say that a Court will require clear evidence that there is no overlap in charging. Arranging and attending a clearing sale is undoubtedly an executorial role, but arranging a discharge of mortgage is merely legal work. Keeping a clear demarcation line between the two roles and maintaining separate records is an absolute minimum that will be expected if an assessment is undertaken and any suggestion of ‘double dipping’ will be disallowed.

The times they are a-changing.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

Executor’s commission 2 – Horns of a dilemma

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Lawyers face difficulties as regards charging costs and/or commission when acting as a lawyer to, and executor of, a deceased estate.

Traditionally lawyers practising in all but large city firms would dabble in property law and wills & estates.

And despite moves during the past couple of decades for lawyers to build practices by concentrating on specific areas of law, these areas remain important income sources for many practitioners in small to medium size firms. However, practitioners who do not deal exclusively in those areas need to be aware of changes brought about by greater regulation of practice standards and supervision by the courts and other authorities.

One such development is the effective prohibition on lawyers acting as both lawyer to, and executor of, a deceased estate and charging both professional costs and executor’s commission. A useful summary of the law in this area was provided in an article in the LIJ in September 2002 at page 77 called “The solicitor-executor”.

Undoubtedly, it was common practice in the past for lawyers to be asked by their clients to act as executor of the client’s estate. The euphemistic reference to “the senior partner for the time being” is well known to lawyers, as is the practice of including a provision that the firm preparing the will would be appointed to act for the estate. However, just as such a provision is unenforceable (Nowakowski v Gajdobraski, unreported Vic Sup Crt, 12 April 1996) so too the habit of appointing a lawyer as executor is subject to much greater scrutiny – at least in relation to the financial consequences of that appointment.

That courts are more prepared than ever to closely scrutinise the lawyer’s role in this area was reinforced in a recent decision (In the Matter of the Will and Estate of Mary Irene McClung [2006] VSC 209) that warned that “[t]he occasion on which a solicitor receives instructions for the preparation of a will for a client by a solicitor can place the solicitor on the horns of a dilemma if the solicitor is asked to act as executor under the will” and described such a situation as giving rise to a “very real potential for a conflict arising between the interests of the client and the interests of the solicitor”.

This scrutiny also extends to the retention of estate funds, with the case of Hill v Roberts, unreported, 21 October 1995 having established that trust funds ought not lie in trust for longer than 14 days.

It is not only the courts that are taking a greater interest in such matters. The Professional Conduct & Practice Rules now require a practitioner to disclose to a client details of any commission or costs clauses included in a will and to advise the client that the client could appoint an executor who might not claim commission (r 10.1.1-10.1.3).

It may be concluded that great care must be exercised if a lawyer seeks to act as executor. Given that it is not permissible to charge both commission and costs, consideration should be given to instructing another firm to administer the estate and complete details of all “pains and trouble” should be kept to support a claim for commission.

Alternatively, the executor/lawyer’s firm undertakes the legal work and no claim is made for commission.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

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