Home | Databases | WorldLII | Search | Feedback Victorian Civil and Administrative Tribunal

You are here: 

Legal Services Commissioner v Hession (Legal Practice) [2010] VCAT 1328 (11 August 2010)

Victorian Civil and Administrative Tribunal

Legal Services Commissioner v Hession (Legal Practice) [2010] VCAT 1328 (11 August 2010)

Last Updated: 23 August 2010

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION

ORDER

1. The principal registrar is to amend the records of the Tribunal to show the respondent as “Robert Anthony Brendon Hession” instead of Robert Hession.
2. The Tribunal finds the respondent guilty of professional misconduct, being misconduct at common law, in relation to the taking of executor’s commission to which he was not entitled (Charge 3).
3. The Tribunal finds the respondent guilty of unsatisfactory professional conduct in relation to the letter of 14 October 2005 sent by him to beneficiaries under the Will of Margaret Elizabeth Daley deceased (Charge 4).
4. The principal registrar is to appoint a date, time and place for the resumption of his hearing to hear submissions as to any further orders to be made consequent upon these findings.
   

REASONS

THE NATURE OF THIS APPLICATION:

1. The Legal Services Commissioner brings four charges of professional misconduct against Mr. Robert Hession, a legal practitioner. The charges relate to Mr. Hession’s administration of the estate of Margaret Elizabeth Daley deceased (“Mrs Daley”). Mr. Hession was the executor of Mrs. Daley’s Will. He also performed the legal work required to administer her estate.
2. Mr. Hession has been a legal practitioner for about 30 years. The events that gave rise to the charges occurred in 2005, when Mr. Hession practised as a sole practitioner under the firm name Hardys. He continues to practise under that name.

THE FACTS ABOUT WHICH THERE IS NO DISPUTE:

3. There is in evidence a Statement of Admitted Facts. Many of the facts set out in this section of these reasons are taken from the Statement.
4. Mrs. Daley had four children, her daughters Sandra Gibbon (“Sandra”) and Ann Daley now Ann Ryan (“Ann”) and her sons John Daley (“John”) and Colin Daley (“Colin”).
5. On 2 September 1998, Mrs. Daley made a Will. The Will was prepared by the firm of Swan Jones Quay, lawyers. The Will appointed Sandra, Colin and Mrs. Daley’s brother Arthur Charteris (“Arthur”) as executors.
6. On 22 July 2003, Mrs. Daley made a Codicil to her Will. The Codicil was prepared by Hardys. The only change to the Will made by the Codicil related to the executors. Colin remained an executor, but the appointments of Sandra and Arthur were revoked. Ann and Mr. Hession were appointed executors in their place.
7. Mrs. Daley died on 15 March 2005.
8. Monies to which the estate was entitled were paid into the trust account of Hardys.
9. The Will stated in paragraph 19, so far as is relevant:

“Any executor or trustee of mine being a solicitor ... will be entitled to charge and be paid all professional or other charges for any business or act done by him or her or his or her firm in connection with trusts hereof including acts which an executor or trustee could have done personally if he or she were not such an executor or trustee.”

10. Between 15 March 2005 and 3 October 2005 Mr. Hession transferred various amounts totalling $34,032.81 to his own use, from the monies held by Hardys in trust for the estate, to pay for legal services provided by his firm.
11. Neither the Will nor the Codicil contained a provision authorising an executor to charge commission.
12. Between 15 March 2005 and 3 October 2005 Mr. Hession transferred various amounts totalling $109.669.00 to his own use, from the monies held by Hardys in trust for the estate, as executor’s commission. The total amount was 5% of the value of the estate, as calculated by Mr. Hession.
13. Colin and Ann renounced Probate of the Will.
14. Probate of the Will was granted to Mr. Hession on 9 August 2005. He remains the sole executor of the Will and sole trustee of Mrs. Daley’s estate.
15. Hardys’ trust account was inspected on 4, 5 & 6 October 2005 by Mario Appiah, a trust account inspector employed by the Law Institute of Victoria. Mr. Appiah informed Mr. Hession that he was not entitled to charge executor’s commission, if not authorised by the Will, unless he obtained the consent of the beneficiaries or an order of the Supreme Court.
16. As the Will did not authorise the payment of commission, and Mr. Hession did not have the consent of the beneficiaries or an order of the Supreme Court, the appropriation of trust monies as executor’s commission caused a deficiency in the trust monies held by Hardys on behalf of the estate.
17. On 14 October 2005, Mr. Hession paid $125,632.19 into Hardys’ trust account to restore the deficiency.
18. When he gave evidence, Mr. Hession explained why he paid $125,632.19 to restore a deficiency of $109,669.00. On various dates, various amounts of money held by Hardys in trust for the estate were transferred to Mr. Hession. All of the monies transferred were recorded in the trust account ledger for the estate as “Transfer of Costs”. The ledger did not record whether the amounts transferred represented executor’s commission or legal costs for the provision of legal services to the estate. Mr. Hession said that he had his costs for the provision of legal services assessed by Robin Westacott, a legal costs consultant. Mr. Hession added that he then deducted the amount of the assessment from the total amount transferred as “Transfer of Costs” and repaid the balance of $125,632.19. One consequence, as it appears to the Tribunal, was that an excessive amount previously had been transferred as costs for the provision of legal services. If that was so, it is not relevant in the present proceedings.
19. On 14 October 2005, being the same day upon which he repaid the $125,632.19, Mr. Hession wrote separate but identical letters to Mrs. Daley’s four children. He wrote the letters to them in their capacity as beneficiaries in the estate. He asked them to “give an indication as to whether you agree with the payment of commission and at what rate”.

[It is common ground that Mr. Hession did not write to any of the other beneficiaries under the Will. The Legal Services Commissioner referred to that fact when setting out particulars of the disciplinary charges presently before the Tribunal. However, during the course of the present hearing, counsel for the Commissioner stated that the Commissioner would not rely upon the fact that Mr. Hession did not seek the consent of the other beneficiaries.]

20. There is an issue in these proceedings as to whether the identical letters of 14 October 2005 contained information that was misleading, incomplete or incorrect, or omitted to include information that should have been provided to the beneficiaries. We will deal with those matters in due course.
21. The beneficiaries did not respond to the letter by agreeing to the payment of commission, and Mr. Hession has not applied to the Supreme Court for an order authorising the payment of commission.
22. The Legal Services Commissioner received a complaint from John Daley on 31 March 2006. John complained about two matters concerning Mr. Hession. The first matter related to a dispute between Sandra, John and Ann on the one hand and Colin on the other. It was alleged that Colin, over a lengthy period, had used monies belonging to his mother for his own purposes. John’s complaint was that Mr. Hession was acting for Colin and for Mrs. Daley’s estate in relation to the dispute, and therefore had conflicting interests. The second matter concerned Mr. Hession’s appropriation of executor’s commission, although John acknowledged in his complaint that the commission had been repaid.
23. The Commissioner commenced an investigation of the complaint, and then delegated the investigation to the Law Institute of Victoria.
24. On 17 May 2006, the Law Institute required Mr. Hession to provide within 14 days an explanation in writing of his conduct in relation to the subject matter of the complaint. Mr. Hession did not respond until 14 February 2007, although the Law Institute did extend the time for provision of an explanation. The response included the following explanation:

“I used to use a costs consultant Robin Westacott who advised me that as Executor of the Estate I was entitled to charge 5% commission and that I should take that as the file progressed. The commission was taken on the days referred to in the accompanying statements.

When the auditor attended at the office the transactions were transparent and readily recognisable. Once it was pointed out to me that it shouldn’t have occurred the files were costed and the funds were immediately replaced. I was relying on the advice of Mr. Robin Westacott.”

25. On 16 May 2008, the Court of Appeal handed down its decision in Byrne v Marles [2008] VSCA 78. The case concerned a complaint made to the Legal Services Commissioner about a legal practitioner. The Court of Appeal decided that the practitioner had a right to make submissions to the Commissioner as to whether the complaint should be treated as a disciplinary complaint, and as to whether the complaint should be summarily dismissed.
26. On 25 June 2008, the Commissioner wrote to Mr. Hession giving him an opportunity to make submissions as to whether John’s complaint should be treated as a disciplinary complaint, and as to whether John’s complaint should be summarily dismissed. Mr. Hession obtained advice from Terry Forrest QC, now Justice T. Forrest of the Supreme Court.
27. On 4 July 2008, Mr. Hession responded to the Commissioner’s letter of 25 June 2008 by enclosing a letter of advice received from Mr. Forrest. The letter of response said that Mr. Forrest’s advice “states our position in relation to these matters”. Mr. Forrest’s advice set out many matters that have been mentioned in these reasons, being matters that are not in dispute, and we will not repeat them. However, Mr. Forrest’s advice set out the following information, most of which we have not mentioned before:

“In July 2003 Sandra Gibbon applied to VCAT to make her mother the subject of a Guardianship Order. Mrs. Margaret Daley contacted Hardys shortly thereafter and executed Powers of Attorney in favour of her son Colin and daughter Ann. On 4 August 2003 Ms Gibbon was advised by Hardys (per Mr Hession) that her existing Power of Attorney (granted by her mother) had been revoked and that her application for guardianship would be opposed.

Ms Gibbon made application to VCAT seeking amongst other things a revocation of the enduring Power of Attorney granted to Colin and Ann Daley. The details are immaterial but the upshot of it was that Ms Gibbon withdrew her application and Mrs. Margaret Daley instructed Hardys to amend (by Codicil) the executors of her Will. The new executors were to be Colin Daley, Ann Daley and Robert Hession. This codicil was executed on 22 July 2003. [paragraphs 18 & 19]

.....

As to the “commission and costs” issue I am instructed that the facts are reasonably clear. Mr. Hession was advised by his costs consultant, Mr. Robin Westacott that he was entitled to claim reasonable costs and commission of 5% of the corpus of the Estate.

I am instructed that Mr. Westacott is an experienced solicitor and costs consultant and has performed this task for many other solicitors’ practices over the years. He has also given expert evidence on the issue of costing over the years. Mr. Hession did not research this issue further and acted upon it. Mr. Westacott’s advice was incomplete or inaccurate in material respects. In short commission can only be charged with the agreement of the beneficiaries or by the leave of the Court.” [paragraphs 30 & 31]

28. The Commissioner decided to deal with John’s complaint as a disciplinary complaint, and referred the complaint back to the Law Institute of Victoria for further investigation.
29. On 27 November 2009, the Law Institute wrote a letter to Mr. Hession setting out the results of its investigation, in summary form. The Law Institute gave Mr. Hession an opportunity to provide “further material”. Mr. Hession responded on 21 December 2009. He enclosed a copy of an advice that he had received from Ian Hill QC, and said that the “advice states my position”. The advice of Mr. Hill took the form of a submission to the Commissioner that there had been no professional misconduct on the part of Mr. Hession. It provided little, if any, “further material”.
30. By an application to VCAT dated 25 May 2010, the Legal Services Commissioner charged Mr. Hession with professional misconduct.

THE FOUR CHARGES OF PROFESSIONAL MISCONDUCT:

31. The first charge is that Mr. Hession is guilty of professional misconduct within the meaning of s.4.4.3(1)(b) of the Legal Profession Act 2004 (“the Act”), which provides that professional misconduct includes:

“conduct of an Australian legal practitioner, whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law, that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice.”

32. The conduct alleged to justify such a finding is “the charging of executor’s commission on the Estate of Margaret Elizabeth Daley, deceased ... when you had no entitlement to do so”.
33. The second charge also alleges that Mr. Hession is guilty of professional misconduct within the meaning of s.4.4.3(1)(b). The conduct alleged to justify a finding that Mr. Hession is not a fit and proper person to engage in legal practice is:

“seeking consent of some of the beneficiaries of the Estate to the charging of executor’s commission in circumstances where you represented to them that the Supreme Court had formulated guidelines permitting a rate of executor’s commission up to 7% on the realizable value of the Estate, which was not the case, and did not inform them of the advice you had received from Robin Westacott in relation to executor’s commission, nor the provisions of  s.65  of the  Administration and Probate Act 1958 , and where you further asserted that commission is payable to an executor on the income of an estate at a rate of between 3% and 5% of the income, without informing the beneficiaries of any basis for this assertion;”

[The second charge also alleged that Mr. Hession failed in his duties towards any beneficiary who was not sui juris, but counsel for the Commissioner informed the Tribunal that this aspect of the charge would not be pursued.]

34. The third charge states that it is “Further and in the alternative to Charge 1”, but was dealt with during this hearing as an alternative to Charge 1.
35. The charge alleges that Mr. Hession is guilty of misconduct at common law “for engaging in conduct which would reasonably be regarded by legal practitioners of good repute and competence as disgraceful and dishonourable, namely the charging of executor’s commission on the Estate of Margaret Elizabeth Daley when you had no entitlement to do so”.
36. Misconduct in a professional capacity, often described as misconduct at common law, has been defined consistently for many years as conduct in a professional capacity which would be reasonably regarded as disgraceful or dishonourable by professional brethren of good repute and competency: see Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 where the definition was formulated in a case involving a medical practitioner; Re a Solicitor: ex parte The Law Society [1912] 1 KB 302 where the definition was adopted in a case involving a solicitor; Myers v Elman [1940] AC 282 where the definition was approved by the House of Lords; and Re a Solicitor [1960] VicRp 96; [1960] VR 617 where the definition was applied in Victoria.
37. Misconduct at common law continues to apply to Australian legal practitioners in Victoria by virtue of the word “including” in paragraph (a) of the meaning of “misconduct” in s.137 of the Legal Practice Act 1996 (when the conduct occurred prior to 12 December 2005) and by virtue of the word “includes” in the meaning of ‘professional misconduct’ in s.4.4.3(1) of the Legal Profession Act 2004 (when the conduct occurred on or after 12 December 2005).
38. The fourth charge states that it is “Further and in the alternative to Charge 2”, but was dealt with during this hearing as an alternative to Charge 2. Charge 4 alleges that Mr. Hession is guilty of misconduct at common law for engaging in the same conduct that is alleged in Charge 2.
39. Counsel for the Commissioner informed the Tribunal that the Commissioner would rely primarily upon the two charges of misconduct at common law.

THE IDENTICAL LETTERS DATED 14 OCTOBER 2005:

40. Charges 2 & 4 relate to these letters, which were identical save for the name and address of the addressee.
41. Mr. Hession sent the identical letters to Mrs. Daley’s children on 14 October 2005.
42. John, Sandra and Ann gave evidence in the present proceedings, and most of their evidence related to the letter they received. We will refer to the letter in the singular.
43. The letter commenced by saying that it enclosed a statement of funds that set out the amount of money held by the estate. It then reported on the progress made with the sale of Mrs. Daley’s house, and with finalisation of her taxation return. It then dealt with matters that are relevant to the Charges, so we will set out the remainder of the letter in full:

“We enclose statements of costs in relation to the sale to date and the costs in relation to the probate to date.

It is noted that the Will does not provide for payment of commission to the executor. This may well have been an oversight on the part of the Solicitors who prepared the Will, as your late mother indicated to me that commission would be payable.

There are two options open. I could apply to the Court for payment of commission or there could be agreement by the beneficiaries for the payment of executor’s commission.

Commission in accordance with the guidelines of the Supreme Court can be payable at a rate up to 7% of the realizable value of the Estate, in this instance, approximately in excess of 1.7 million dollars. Commission is also payable on the income of the Estate at a rate of between 3% and 5% on the income received from the Estate.

If an application was to be made to the Court for executor’s commission, the costs of such application would be payable from the Estate and could amount to between approximately $5,000.00 and $7,000.00.

I believe a far easier way to proceed would be to seek agreement from the beneficiaries as to the payment of the commission.

Accordingly, I would be pleased if you could within say 30 days from the date hereof, give an indication as to whether you agree with the payment of commission and at what rate.

You should not hesitate to seek independent advice should you so wish.

If in the meantime you have any queries, please do not hesitate to contact this office.”

THE EVIDENCE OF JOHN DALEY:

44. John gave evidence that he received the letter of 14 October 2005, and understood it to be a request for 7% commission. He chose not to respond. He “took it” that by not responding he would be taken as not agreeing to the payment of commission. He said that in a telephone discussion with Mr. Hession he probably said that he was “not happy” about the payment of commission.
45. In cross-examination, John said that his mother did not tell him that commission would be payable to her executor. It was put to John that the fact that the Will did not provide for the payment of commission may have been an “oversight”. John said that he disputed the proposition, because his mother was “frugal” and because the payment of commission would have been “abhorrent” to her.
46. John denied that Mr. Hession told him that the claim for commission would be withdrawn, but said he believed that he received a letter from Mr. Hession to that effect. John agreed that he thanked Mr. Hession for no longer seeking commission.

THE EVIDENCE OF SANDRA GIBBON:

47. Sandra gave evidence that she received the letter of 14 October 2005, and understood it to be a request for commission on the estate and on income earned by the estate. She said that she did not receive any statement of account with the letter. She did not respond because her husband was undergoing life threatening surgery.
48. Sandra said that she had been an executor under at least two of her mother’s previous Wills, and that those Wills did not provide for the payment of executor’s commission.
49. In cross-examination, Sandra agreed that she obtained legal advice in relation to her mother’s Will. She said that she did not obtain legal advice in relation to the letter of 14 October 2005 because her husband was critically ill.

THE EVIDENCE OF ANN RYAN:

50. Ann gave as her address an address at Moama in NSW. She acknowledged that she was an executor under the Will, and that she renounced Probate. She said that Mr. Hession advised her to renounce Probate to expedite the matter “because of where I live”.
51. Ann gave evidence that she received the letter of 14 October 2005, and understood it to mean that the beneficiaries would be charged an extra 7% by Mr. Hession. When asked whether she received a statement of account with the letter, she replied “Don’t think so”. Ann said that she sought legal advice, and then sent a letter to Mr. Hession on 4 November 2005. We will set out the letter in full, omitting formal parts:

“Firstly let me say that I am staggered by the suggested amount of commission.

It was never explained to me, or as far as I am aware to any of the other beneficiaries, the ramification of legal person being sole Executor and presumably if both myself and Colin, the other Executor had not renounced our position the Executors commission would have been shared.

As commission is payable for pain and trouble incurred please provide a copy of the Legal Cost Consultant, Robin Westcott’s detailed account for the Estate administration and the sale of 2 Peace Street, Glen Iris.

Upon receipt of accounts and after discussion with the other beneficiaries I will advise you further.”

52. Ann said that Mr. Hession did not provide a copy of Mr. Westacott’s account. She said that she then had a telephone discussion with Mr. Hession, in which Mr. Hession said that he would withdraw the 7%, but that he should get something and she should discuss the matter with her siblings. Ann said that she discussed the matter with her siblings, but “nothing happened”.
53. In cross-examination, Ann said that she recalled a telephone discussion with Mr. Hession on 29 October 2005. She denied that Mr. Hession said to her during that discussion that he sought commission up to 5%, rather than to up to 7% as mentioned in the letter.
54. It was put to Ann that, during the telephone discussion on 29 October 2005, she told Mr. Hession that she knew that her mother wanted Mr. Hession to receive commission. Ann replied that she did not recall saying that, and that “It doesn’t sound like my mother”.
55. It was put to Ann that, during a telephone discussion on 9 November 2005, she was told by Mr. Hession that he would not pursue his claim for commission. Ann replied that Mr. Hession said that he would not seek 7%, but that he should receive something, and that she should discuss the matter with her siblings.

THE EVIDENCE OF MR. HESSION:

56. Mr. Hession gave evidence that he had acted as executor of a Will on one prior occasion. He had not acted as both the executor of a Will and solicitor for the estate on any prior occasion.
57. Mr. Hession was asked why he took the commission. He said that Mr. Westacott came to his office and costed the file. He said that he was advised by Mr. Westacott that an executor is entitled to commission, and can take the commission “as you go”.
58. Mr. Hession was asked whether he considered Mr. Westacott to be “experienced”. He said that Mr. Westacott was an elderly lawyer who did part time work costing conveyancing files. He said that Mr. Westacott appeared on taxations of costs. He said that he considered Mr. Westacott to be an expert.
59. Mr. Hession said that he became aware that he was not entitled to commission when told by Mr. Appiah that he needed either the consent of the beneficiaries or an order from the Supreme Court. Mr. Hession said that he was “mortified” by what he was told by Mr. Appiah. He added that “I acted in the belief that I could do it”.
60. As to the letters of 14 October 2005, Mr. Hession said that he believed that the statement of funds was sent with the letters.
61. Mr. Hession was asked why he said in the letter that the fact that the Will did not provide for the payment of commission “may well have been an oversight on the part of the Solicitors who prepared the Will”. He said that Mrs. Daley told him that he “could be an executor”. He said that it was “true” that Mrs. Daley also told him that he would be paid commission. She told him that when Sandra made the application to VCAT for the appointment of a guardian to look after Mrs. Daley’s affairs. He added that Mrs. Daley also told him that he would “need all the luck in the world”.
62. Mr. Hession was asked about his reference in the letter to “the guidelines of the Supreme Court”. He replied that he had not seen any guidelines, but that he had been told that “Supreme Court cases showed that an executor could get commission”.
63. Mr. Hession was asked about the statement in the letter that commission “can be payable at a rate up to 7%.” He said that Mr. Appiah told him that the rate was “up to 5%”. He said that the 7% was a “mistake” and a “typographical error”.
64. Mr. Hession was asked why the letter did not inform the beneficiaries that he had taken commission, and then refunded it. His response was to refer to various telephone discussions.
65. He referred to a telephone discussion with Colin on 18 October 2005, four days after the letter was sent. He said that he told Colin that he had taken commission, but had refunded it. He said Colin agreed to the payment of commission at the rate of 5%. Colin told him that he was aware that his mother had agreed to the payment of commission. Colin also told him that it would have been impossible for Colin and Ann to have handled the estate. Mr. Hession produced a brief file note, which was consistent with his evidence.
66. Mr. Hession also referred to a telephone discussion with Ann, which took place on either 21 or 29 October 2005. He said that they discussed the payment of commission at a rate up to 5%, and that Ann agreed to the payment of commission in an amount that her siblings “think fair”. He said that Ann told him that her mother had agreed to the payment of commission. Mr. Hession produced a brief file note, which was consistent with his evidence.
67. Mr. Hession acknowledged that he received the letter of 4 November 2005 from Ann. His first response was to telephone Colin on 7 November 2005. He said that he told Colin that there was a problem with commission. Mr. Hession produced a brief file note, which recorded that “Siblings are bluing”, “Whatever is fair” and “He’s happy @ 5%”.
68. Mr. Hession said that he telephoned Ann on 9 November 2005. He said that he told Ann that he had taken commission, but had refunded it. He said that he told Ann that he would not pursue his claim for commission. Mr. Hession produced a brief file note, which was consistent with his evidence. The file note also recorded that “If they thought it was fine, then I was happy to accept it obviously but if they’re not, I’m not going to create an issue out of it”.
69. Mr. Hession said that he also had a telephone discussion with John on 9 November 2005. He said that he told John that he had taken commission, but had refunded it. He said that he told John that he would not pursue his claim for commission. Mr. Hession produced a brief file note, which was consistent with his evidence.
70. In cross-examination, Mr. Hession said that Mr. Westacott was experienced in costing. He agreed that costing was a different field to probate, but said that Mr. Westacott claimed to be an expert in probate.
71. Mr. Hession said that he was told by Mr. Westacott that he was entitled to a commission up to 5%. Counsel for the Commissioner produced a letter from Mr. Westacott to the Law Institute dated 1 October 2009, in which Mr. Westacott said that he advised Mr. Hession that he was entitled to “between 2% - 5% commission”. Mr. Hession said that was incorrect, as Mr. Westacott told him “up to 5%”.
72. Reference was made to the relevant part of  s.65  of the  Administration and Probate Act 1958 , namely:

“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.”

73. Mr. Hession agreed that he did not read the Act before taking the commission. When asked when he last read s.65, Mr. Hession replied “Probably 30 years ago”, which we take to mean when he was a law student 30 years ago.
74. Mr. Hession agreed that he commenced to take commission before Colin and Ann renounced Probate. He agreed that he took commission before he obtained a grant of Probate. He agreed that he did not confer with Colin or Ann before taking commission. He agreed that Colin and Ann might also have been entitled to commission.
75. In a letter of explanation written by Mr. Hession to the Law Institute on 14 February 2007, he stated that “When the auditor attended at the office the transactions were transparent and readily recognisable”. Mr. Hession agreed that he recorded the taking of commission in his trust account ledger as “Transfer of Costs”. He said, in substance, that the taking of commission was transparent because it was apparent from his ledger that his legal costs were too high, and therefore apparent that “Costs” must include commission. He said that his calculations of the various amounts transferred as “Transfer of Costs” were based upon the advice of Mr. Westacott that he was entitled to a commission of 5%, and an estimate given by Mr. Westacott that his legal costs would be about $50,000.00. He agreed that he did not have any written record of his calculations.
76. Mr. Hession agreed that he advised Colin and Ann to renounce Probate; in Colin’s case because Colin worked long hours and in Ann’s case because she lived in New South Wales. Mr. Hession denied that he advised them to renounce Probate so that he would not have to share commission. He said it was “not a motive”.
77. Mr. Hession agreed that he did not read any cases or commentary on executor’s commission before writing the letter of 14 October 2005. He said that he relied upon the advice of Mr. Appiah.
78. As to the statement of funds referred to in the letter, Mr. Hession said that he believed that the statement was enclosed because it was his practice to check. The statement is in evidence. It bears the same date as the letter, 14 October 2005. It shows that Hardys had charged legal costs of $4,275.20 in respect of the sale of Mrs. Daley’s house, and legal costs of $29,757.61 in respect of the grant of Probate [and presumably the administration of the estate] by that date.
79. As to the claim in the letter that there may have been an “oversight” on the part of the solicitors who prepared the Will in 1998, Mr. Hession accepted that the Codicil prepared by Hardys in 2003 also did not include provision for the payment of commission. He said that instructions for the Codicil were taken by Ms Meg Griffin, a member of his staff. Mr. Hession said that he did not realise at the time that he could have included an entitlement to commission in the Codicil.
80. Mr. Hession said that Mrs. Daley came to his office with Colin, and informed him in Colin’s presence that he would be paid commission. Mr. Hession said that Mrs. Daley did not nominate a rate of commission. Mr. Hession agreed that he did not make a note of the discussion. He could not remember when the discussion took place.
81. As to the “guidelines of the Supreme Court” referred to in the letter, he agreed that there were no guidelines.
82. As to the figure in the letter “up to 7% of the realizable value of the Estate”, Mr. Hession agreed that he had not told the Legal Services Commissioner before he gave evidence at this hearing that the 7% was a “mistake” or a “typographical error”. He added that he did not mention it because he had withdrawn his claim for commission, so the issue was “done and dusted”.
83. As to the figure in the letter “between 3% and 5% on the income received from the Estate”, Mr. Hession said that he could not explain the figure, so he must have got it from Mr. Westacott. He agreed that he did not carry out any research into the payment of a commission in respect of income.
84. Mr. Hession agreed that he did not tell the beneficiaries that the full amount of commission could not be determined until the work required to administer the estate had been carried out.
85. It was put to Mr. Hession that he might not be entitled to both legal costs and commission. He replied that “costs would be offset against commission”. He agreed that he received $34,032.81 as legal costs before he wrote the letter. He agreed that he did not tell the beneficiaries, before he gave evidence, that the legal costs might be offset against commission.
86. As to the costs involved in making an application to the Supreme Court, Mr. Hession said that the figure of “between approximately $5,000.00 and $7,000.00” was a “guestimate”. When asked why the estate should bear the costs of an application to the Supreme Court, Mr. Hession replied that it was because costs follow the event and because he had suggested to the beneficiaries that they obtain independent advice.

LEGAL ISSUES RAISED BY CHARGE 3:

87. Charge 3 is the charge of misconduct at common law arising from the taking of executor’s commission from monies held by Mr. Hession in trust for the beneficiaries of the estate.
88. As we have mentioned, Mr. Hession gave evidence that he took the commission because he was advised by Mr. Westacott that an executor is entitled to commission, and can take commission “as you go”. There is in evidence a letter dated 1 October 2009 from Mr. Westacott to the Law Institute which states that “I wish to advise that I advised Mr. Hession that as executor of the Estate of Daley, he was entitled to between 2%-5% commission”. Neither the Commissioner nor Mr. Hession called Mr. Westacott to give evidence.
89. If Mr. Westacott gave advice in the terms indicated by his letter, namely that an executor has an unqualified right to commission, then it is common ground that the advice given by Mr. Westacott was incorrect. Stated briefly, in the absence of a provision in a Will directing that the executor be paid a commission, an executor is entitled to commission only if all the beneficiaries have full capacity and give informed consent to the payment of commission, or if an order for the payment of commission is made by the Supreme Court.
90. It is necessary for the Tribunal to determine whether the conduct of Mr. Hession in taking executor’s commission would be reasonably regarded as disgraceful or dishonourable by legal practitioners of good repute and competency. In making that determination the evidence of Mr. Hession and the letter from Mr. Westacott will be taken into account.
91. Counsel for the Commissioner placed considerable reliance upon the decision of the NSW Court of Appeal in Law Society of NSW v Moulton [1981] 2 NSWLR 736. Mr. Moulton was a solicitor. He regularly borrowed money from his clients, without giving his clients sufficient information to enable them to make informed decisions as to their investments. He used the money to trade in land and develop real property. In one case, he was the executor of a Will and held legacies in trust for infant beneficiaries. He borrowed the legacies for the same purpose, not being an authorised trustee investment.
92. Moulton’s Case and the present case have factual similarities. In both cases, the solicitor was the executor of a Will and held monies in trust for beneficiaries in the estate. In both cases, the solicitor contended that he was not aware of legal restrictions placed upon the use of trust monies. In both cases, the conduct of the solicitor as trustee was of financial benefit to the solicitor. In both cases, there was no allegation that monies were lost. Bearing in mind these similarities, the following passages in Moulton’s Case are pertinent:

“It is no answer to a charge of professional misconduct in relation to transactions with his clients’ money that the solicitor did not appreciate that what he was doing constituted misconduct.” [per Hope JA @ 740]

“It was urged, in defence of the respondent [Mr. Moulton], that he had little experience of probate and trustee matters. I do not propose to set out the numerous breaches of the law involved in this conduct. The fundamental matter is that it demonstrates beyond argument that the solicitor was wholly ignorant of the law of trusts, the legal position of minors and those holding property on trust for them, of the nature of the fiduciary relationship, of the necessity for executors to act gratuitously unless authorized by a will or by a court, and this was of such depth that he did not feel prompted to refer to books and statutes in order to refresh the knowledge which, as he qualified to be a solicitor, he must once have had.” [per Hutley JA @ 754]

“If they [the transactions] were done because of ignorance or lack of concern as to what his duty was, Mr. Moulton puts himself forward as a solicitor who has accepted the position of trustee for infants but who has no inkling of his obligations to infant beneficiaries and has not troubled to find out what they were. Such an unawareness of and lack of care about the most elementary propositions of law concerning the responsibility he had taken on and the standards required of solicitors are themselves sufficient to justify the protection of the public by his removal from the roll.” [per Hope JA @ 743]

“A solicitor, while on the roll. is publicly held out by the Supreme Court as a person to whom the citizen may entrust his private confidences, his business affairs and his liberty on the basis that the solicitor is grounded in the law and will not undertake work where his private interests will be in conflict with his client’s interests. The minimum standards include, to my mind, basic legal knowledge and application to keep abreast of the law in his field of practice.” [per Hutley JA @ 751]

“If the acts or omissions of a solicitor constitute professional misconduct, they do so at the time when they occur. Their character is not changed by the fact that subsequently a loss, or no loss, is sustained.” [per Hope JA @ 740]

LEGAL ISSUES RAISED BY CHARGE 4:

93. Charge 4 is the charge of misconduct at common law arising out of the letter sent by Mr. Hession to Mrs. Daley’s children on 14 October 2005.
94. The letter provided information about executor’s commission, and then asked the recipients to “give an indication as to whether you agree with the payment of commission and at what rate”.
95. The thrust of Charge 4 is that some of the information set out in the letter was false, and that the letter omitted relevant information. The conduct of Mr. Hession in sending the letter in that form is alleged to be disgraceful or dishonourable.
96. The letter is alleged to have been deficient in five respects. First, it is alleged that the letter falsely represented that the Supreme Court had formulated guidelines for the payment of executor’s commission. Secondly, it is alleged that the letter falsely represented that commission can be payable at a rate up to 7% of the realizable value of the estate. Thirdly, it is alleged that the letter omitted to mention that Mr. Hession had received advice from Mr. Westacott in relation to executor’s commission. Fourthly, it is alleged that the letter omitted to mention the provisions of  s.65  of the  Administration and Probate Act . Fifthly, it is alleged that the letter asserted that an executor is entitled to commission of between 3% and 5% on the income earned by an estate, but omitted to set out the basis for that assertion.
97. Counsel for the Commissioner drew three cases to the attention of the Tribunal. In each case a legal practitioner was both the executor of a Will and the solicitor handling the administration of the estate. In each case the practitioner wrote a letter to the beneficiaries seeking their consent to the payment of commission. In each case it was submitted that the letter was ineffective because it failed to provide all of the information required to enable the beneficiaries to make an informed decision about the payment of commission.
98. In Patterson and Woodhouse v Sharkeys [1998] VLPT 11 the beneficiaries had signed a form of consent. Their consent was set aside for two reasons. The first reason was that the executor had failed to provide full and accurate information to the beneficiaries, in breach of his fiduciary obligations, with the result that the consent of the beneficiaries was not an informed consent. The second reason was that the letter attempted to persuade the beneficiaries to consent to the payment of commission, and the executor had not rebutted the presumption of undue influence.
99. In Walker v D’Alessandro [2010] VSC 15 the beneficiaries again had signed a form of consent. Their consent was set aside because the executor had failed to provide full and accurate information to the beneficiaries, in breach of his fiduciary obligations, with the result that the consent of the beneficiaries was not an informed consent. The breach included a false representation that an interim distribution to the beneficiaries would need to be delayed if the beneficiaries did not consent to the payment of commission [33]. T Forrest J described the fundamental obligation of an executor seeking consent to the payment of commission at [27]:

“Any benefit or gain acquired by a fiduciary in circumstances where a significant possibility of a conflict existed or where the benefit or gain was acquired by reason of the fiduciary position itself must be the subject of a full account by the fiduciary to the person to whom the obligation is owed. In other words a beneficiary must be fully informed as to any potential benefit to be made by the fiduciary before he can give an informed consent to the fiduciary receiving that benefit.”

100. In Re Estate of Zsuzanna Gray [2010] VSC 173, the executor sent correspondence to the beneficiaries seeking their agreement to the payment of commission. They did not consent. The executor then applied to the Supreme Court seeking an order for the payment of commission.
101. Daly AsJ commenced by explaining the difference between “pains” and “trouble” as they appear in s.65 of the  Administration and Probate Act . The difference is that “pains” relates to the responsibility, anxiety and worry generated by the executorial function, and “trouble” relates to the administration of the estate [7]. Daly AsJ accepted that the executor should be awarded commission of approximately 2% for his trouble, being work carry out by him in addition to the legal work for which he was separately remunerated [29-30].
102. However, she found that the correspondence sent by the executor to the beneficiaries, seeking their consent to the payment of commission, did not provide full and accurate information [32-34]. Her findings included a finding that “The letter would no doubt have the effect of providing the beneficiaries with the impression that any substantial distribution of the estate was contingent upon the beneficiaries agreeing to commission at the rate claimed by [the executor]” [32]. She concluded that the deficiencies in the correspondence were the substantial cause of the executor’s pains, and refused to award commission in respect of his pains [38].
103. It must be said that none of these cases concerned the bringing of disciplinary charges against a legal practitioner. The Commissioner relied upon Hannebery v Legal Ombudsman [1998] VSCA 142, a case where a legal practitioner misled his client as to the nature and purpose of a mortgage and guarantee, and allowed the client to sign the mortgage and guarantee in order to obtain a financial advantage for himself [12]. Tadgell JA (with whom the other members of the Court of Appeal agreed) said at [23]:

“The reasons [of the majority of the Legal Profession Tribunal] indicate to my mind no more than that, in fixing the penalty of cancellation of the appellant’s practising certificate, and specifying the period during which he should be disentitled to apply for another, the majority took account of his failure to acknowledge and understand the significance of his dereliction of professional duty. This, in the circumstances, was an entirely appropriate consideration, disclosing no error of principle.”

104. This passage gives consideration to a lack of awareness of fiduciary obligations as it relates to disposition. However, both Moulton’s Case, to which we have referred, and Hannebery’s Case indicate that breach of a fiduciary obligation by a legal practitioner may amount to professional misconduct even if the practitioner was unaware of the obligation when it was breached.

THE FINDINGS OF THE TRIBUNAL:

105. Having considered the Statement of Admitted Facts, the oral evidence given by the witnesses, the documents tendered when they gave evidence and the submissions of counsel, the Tribunal makes the following findings:

As to Charge 3:

(1) Mr. Hession is the executor of the Will and trustee of the estate of Margaret Elizabeth Daley deceased, who died on 15 March 2005. As trustee of the estate, Mr. Hession owed fiduciary obligations to the beneficiaries under the Will.

(2) The Will authorised the payment of legal costs to an executor or trustee who was a solicitor and carried out legal work on behalf of the estate. Mr. Hession carried out legal work on behalf of the estate. Between 19 May 2005 and 3 October 2005, Mr. Hession transferred $34,032.80 from the estate in payment of his legal costs.

(3) Neither the Will nor a Codicil to the Will authorised the payment of commission to an executor. Mr. Hession received advice from Mr. Westacott, a lawyer and legal costs consultant. The advice was to the effect that Mr. Hession was entitled to a commission of between 2% and 5% of the value of the estate, and that he could take the commission “as you go”. Between 19 May 2005 and 3 October 2005, Mr. Hession transferred $109,669.00 from the estate in payment of executor’s commission. Mr. Hession calculated the commission of $109,669.00 on the basis that it represented 5% of the value of the estate, without ascertaining why Mr. Westacott had advised between 2% and 5%, rather than 5%.

(4) Except for the advice received from Mr. Westacott, Mr. Hession had little or no familiarity with the law concerning the entitlement of an executor to commission. In those circumstances, a competent legal practitioner would have made proper enquiry to ascertain whether the advice given by Mr. Westacott was correct and complete, or whether the advice should have been given subject to qualifications.

(5) Mr. Hession did not research the law or make any other enquiry to ascertain whether the advice given by Mr. Westacott was correct and complete. If Mr. Hession had researched the law, he should have been able to ascertain, quickly and without difficulty, that the advice of Mr. Westacott was incomplete. Proper research of the law would have made Mr. Hession aware:

(a) that in the absence of a provision in a Will authorising an executor to charge commission, an executor is entitled to commission only if all the beneficiaries have full capacity and give informed consent to the payment of commission, or if an order for the payment of commission is made by the Supreme Court;

(b) that pursuant to  s.65  of the  Administration and Probate Act 1958  the Supreme Court may allow payment of commission to an executor not exceeding 5% “for his pains and trouble as is just and reasonable”;

(c) that “pains” as it appears in  s.65  relates to the responsibility, anxiety and worry generated by the executorial function;

(d) that “trouble” as it appears in  s.65  relates to work performed by the executor in the administration of the estate;

(e) that in determining whether commission should be awarded for trouble, and in determining the rate of any commission, the Court will take into account whether the work performed by the executor includes legal work for which the executor has been separately remunerated.

(6) The beneficiaries did not consent to the payment of commission to Mr. Hession.

(7) Mr. Hession did not apply to the Supreme Court seeking an order for the payment of commission.

(8) Mr. Hession calculated the commission that he received as 5% of the value of the estate, the maximum amount allowable by the Supreme Court. Mr. Hession did not base his calculations upon his pains and trouble, or ensure that the calculated amount was just and reasonable.

Furthermore, Mr. Hession did not take into account the fact that he had transferred money from the estate to his own use as legal costs for the provision of legal services. In In re Whitehead deceased [1958] VicRp 27; [1958] VR 143, a case where there was no provision in the Will authorising the executors to charge for the provision of professional services to the estate, the Full Court allowed commission in respect of the trouble involved in providing the professional services. However, “double dipping” is not allowed, meaning that professional work cannot be the subject matter of charges both for legal costs and commission: see Gray’s Case @ [29]. Most of the work performed by Mr. Hession on behalf of the estate was work for which he had been separately remunerated in the form of costs for the provision of legal services.

(9) Mr. Hession transferred part of the commission before the other executors, Colin Daley and Ann Ryan, renounced Probate. Mr. Hession did not seek the approval of Colin Daley and Ann Ryan, prior to their renunciation of Probate, before taking commission. Mr. Hession did not ask Colin Daley and Ann Ryan, prior to their renunciation of Probate, whether they intended to seek commission.

(10) Mr. Hession transferred part of the commission before he obtained a grant of Probate.

(11) The transfers of executor’s commission were not recorded transparently in Hardys’ trust account. They were recorded as transfers of costs, not as transfers made in payment of executor’s commission. The Tribunal does not accept the claim made by Mr. Hession that the transfers were transparent because the total amount transferred was so large that it must have included commission.

(12) The conduct of Mr. Hession in transferring $109,669.00 to his own use as executor’s commission, without making proper enquiry as to his entitlement to commission in that or any other amount, was reckless. His conduct displayed indifference to, and disregard for, his obligations as trustee to administer the estate in the best interests of the beneficiaries and according to law.

(13) The conduct of Mr. Hession as a whole, as it related to the taking of executor’s commission, would be reasonably regarded as disgraceful or dishonourable by legal practitioners of good repute and competency. Mr. Hession is guilty of misconduct at common law in relation to Charge 3.

As to Charge 4:

(14) As trustee of the estate, Mr. Hession owed fiduciary obligations to the beneficiaries under the Will.

(15) On 14 October 2005, Mr. Hession wrote identical letters to beneficiaries under the Will. The letter asked the beneficiaries to “give an indication as to whether you agree with the payment of commission and at what rate”. The three beneficiaries who gave evidence understood the letter to be a letter seeking their consent to the payment of executor’s commission to Mr. Hession.

(16) When seeking the consent of the beneficiaries to the payment of commission from the estate, as trustee of the estate Mr. Hession had a fiduciary obligation to provide the beneficiaries with full and accurate information. Any consent obtained in the absence of full and accurate information would not be an informed consent.

(17) Mr. Hession did not provide the beneficiaries with full and accurate information, in the following respects:

(a) the letter falsely represented that the Supreme Court had formulated guidelines for the payment of executor’s commission. Although there were no guidelines, the Tribunal acknowledges that  s.65  of the  Administration and Probate Act 1958  authorised the Supreme Court to make an order for payment of executor’s commission;

(b) the letter falsely represented that commission can be payable at a rate of up to 7% of the realizable value of the estate. Mr. Hession gave evidence that “7%” was a typographical error and a mistake. He acknowledged in cross-examination that he did not tell the Legal Services Commissioner that the 7% was a typographical error or a mistake. He added that he did not mention it because he had withdrawn his claim for commission. The Tribunal is not satisfied to the required degree that the mention of 7% was something other than a typographical error or a mistake;

(c) the letter omitted to mention that Mr. Hession had received advice from Mr. Westacott in relation to executor’s commission. The letter also did not mention the matters of significance that flowed from Mr. Hession’s reliance upon the advice, namely that he had transferred $109,669.00 from the estate to his own use as executor’s commission; that the advice of Mr. Westacott was incorrect and that Mr. Hession was not entitled to executor’s commission when the $109,669.00 was transferred; that Mr. Hession had been informed by a trust account inspector that Mr. Hession was not entitled to executor’s commission and that the transfer of $109,669.00 led to a deficiency in the trust monies held by Mr. Hession on behalf of the estate; and that Mr. Hession had repaid the amount of the deficiency on the same date that he wrote the letter, 14 October 2005;

(d) the letter omitted to mention the provisions of  s.65  of the  Administration and Probate Act 1958 , namely that the Supreme Court has a discretion to authorise the payment of commission to an executor, that the authorised amount can be up to 5% of the assets of a deceased person, that commission can be allowed only for pains and trouble, and that the amount of the commission must be just and reasonable;

(e) the letter falsely asserted that “Commission is also payable on the income of the Estate at a rate of between 3% and 5% on the income received from the Estate”. Commission in respect of income would be payable if authorised by the Will, or if the beneficiaries consented to payment. Commission upon income also can be awarded by the Supreme Court, because income has been held to fall with the words “assets of any deceased person” in  s.65  of the  Administration and Probate Act : see Crowley v Crane [1895] VicLawRp 50; (1895) 21 VLR 258. The assertion was false because it was not qualified by a statement that commission is payable on income only if authorised by the Will, the beneficiaries or the Court.

(f) The letter omitted to set out the basis for the assertion that the rate of commission payable upon income was “3% to 5%” but, as the rate of commission that can be authorised by the Supreme Court is an amount not exceeding 5%, the omission was unimportant.

(18) When preparing the letter of 14 October 2005, Mr. Hession relied upon the advice of the trust account inspector that commission was payable if the beneficiaries consented to the payment of commission. Mr. Hession did not research the law before he prepared the letter. If Mr. Hession had researched the law, he should have been able to ascertain, with a reasonable degree of precision, the nature and extent of the information that he was obliged to provide to the beneficiaries when seeking their consent.

(19) Mr. Hession breached his fiduciary obligation to make full disclosure to the beneficiaries by failing to include in his letter of 14 October 2005 full and accurate information when seeking their consent to the payment of executor’s commission. Furthermore, the conduct of Mr. Hession in not researching the law before writing the letter was reckless, in that it displayed indifference to, and disregard for, his fiduciary obligation to act in the best interests of the beneficiaries by obtaining only their informed consent, and his fiduciary obligation not to place his own interests above those of the beneficiaries.

(20) If the beneficiaries had responded to the letter by consenting to the payment of commission, their consent would not have been an informed consent. However, the beneficiaries did not consent to the payment of commission.

(21) Although some of the conduct of Mr. Hession in relation to the letter of 14 October 2005 was in breach of his fiduciary obligations, and reckless, his conduct as a whole would not be reasonably regarded as disgraceful or dishonourable by legal practitioners of good repute and competency. Mr. Hession is not guilty of misconduct at common law in relation to Charge 4.

(22) However, the conduct of Mr. Hession as a whole in relation to the letter was conduct “that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner”, to adopt the words in the definition of ‘unsatisfactory professional conduct’ in s.4.4.2 of the Legal Profession Act 2004. Section 4.4.20 of the Act allows the Tribunal to make a finding of unsatisfactory professional conduct even though professional misconduct is alleged. Mr. Hession is guilty of unsatisfactory professional conduct in relation to Charge 4.

As to Charge 2:

(23) The conduct of Mr. Hession in relation to alternative Charge 2, being the same conduct about which findings have been made in relation to Charge 4, would not “justify a finding that the practitioner is not a fit and proper person to engage in legal practice”, to adopt the words in paragraph (b) of the definition of ‘professional misconduct’ in s.4.4.3 of the Act. Mr. Hession is not guilty of professional misconduct in relation to alternative Charge 2.

RESUMPTION OF HEARING:

106. The Tribunal will appoint a date for the resumption of the hearing, to hear submissions as to the making of further orders. Of course, the further orders will need to be consistent with these findings
     

MH:RB