Choosing executors carefully is an essential aspect of any estate plan

A recent New South Wales Supreme Court decision serves as yet a further reminder of the need to carefully consider the appointment of executors under the terms of your will.

In Galea v Camilleri; The Estate of Patricia Camilleri [2023] NSWSC 206, a number of the beneficiaries of the estate claimed against the executor, alleging misconduct in administering the estate. They alleged they suffered loss caused by the executor's failure to act in accordance with his administration duties, in particular his delay and other actions that they argued were in breach of his duties.

The beneficiaries also argued that the executor was not entitled to receive executor's commission, which the executor made a claim for between $400,000 and $500,000 (the estate was valued over $23 million).

While the court dismissed some of the allegations, or found that no loss had been suffered in relation to others, it found that the executor had defaulted in some instances where:

1. there was a delay of almost five years in arranging for the sale of shares, resulting in a lesser sale price in respect of Telstra shares
2. the executor put himself in a position of conflict with the estate by not disclosing to the beneficiaries that he obtained an interest in an estate property and did not obtain the fully informed consent of the beneficiaries in relation to that conflict
3. the executor deliberately failed to invest deposit monies in relation to the purchase of an estate property which constituted wilful default
4. the executor delayed settlement of the property which he obtained an interest in and, in doing so, acted in his own interests rather than the estate's interest which constituted wilful default.

The court found that the executor's default in relation to the estate property (as outlined in (2) to (4) above) was very significant, particularly his lack of transparency in obtaining an interest in the property and the lack of consent from the beneficiaries.

When deciding whether the executor was entitled to a commission, the court considered factors such as:

• whether the estate administration was complex
• what work was performed by the executor and what work was carried out by professionals
• whether there were any breaches of executorial duties.

The court found that while the estate administration was complex, the executor received considerable assistance from professionals. It also found that the estate administration was unnecessarily prolonged, leading to some loss for the estate. The executor's lack of transparency in not disclosing his interest in the purchase of the estate property and his failure to obtain informed consent was considered by the court as a breach of his duty, which was further compounded by his failure to invest the deposit and his delay of settlement, all to suit his own interests.

The court found that the executor materially failed the standard expected of him and the executor's claim for commission was rejected.

This case serves as a reminder that executors must administer an estate promptly and not cause unnecessary delay. Most importantly, executors must act in the best interests of the estate and not prefer their own interests above the interests of the beneficiaries. Having said that, the costs of bringing such a claim against an executor are significant with no guarantee of success. Therefore, choosing your executors with thought and consideration as to their fitness for the position is an essential aspect of any estate plan.

• This article was originally published in Queensland Country Life.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Kylie Wilson

Deborah Johnson

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