In 2016 Ben’s father, Tony, passed away. Tony had appointed a professional trustee company to be the executor of his will. Ben, his brother and sister were beneficiaries of the estate, along with Cathy, Tony’s partner at the time of his death.
Ben and his siblings decided to enter into a Deed of Family Arrangement (DOFA) with Cathy to agree on how Tony’s estate would be distributed.
The primary estate asset was Tony’s house. Part of the negotiations with Cathy were that Ben and his siblings would bear the costs of the trustee company’s fees. It was important for Ben and his siblings to know what the fees were, both as part of the negotiations with Cathy and because, ultimately, the fees were being paid out of their estate shares.
Ben seeks a fee estimate
Before entering into the DOFA, Ben contacted the trustee company in March 2017 to ask about the current fees, and what the future fees would be to finally wind up the estate. The trustee company said the fees were $2,871 and the final winding up of the estate would incur further fees of approximately $1,800, unless something unforeseen happened, or there was a breakdown in communications, or other problems. Based on this estimate, Ben and his siblings continued finalising the DOFA.
Changes to the DOFA
Before the DOFA wording was finally agreed, there were changes to it (which the trustee company assisted with). The original plan was that Cathy would buy out Ben and his siblings’ shares in the value of Tony’s house. However, Cathy was unable to raise adequate finance and the DOFA needed to be changed.
At this stage, Ben asked for a fee update, and the trustee came back with a figure of $7,132. Ben complained to the trustee that there had not been additional work to justify the increase of fees to $7,132 and complained to FSCL.
Part of Ben’s complaint was that the trustee company had appeared to add charges to its work in progress for dealing with his complaint. Ben wanted to reach an agreement with the trustee company for him and his siblings to pay an amount he considered reasonable for the administration of Tony’s estate.
In the meantime, Tony’s house had been placed on the market and settlement was drawing nearer. Ben and his siblings were keen to see the matter resolved quickly so that the sale proceeds could be distributed and the entire matter brought to an end.
The trustee company said that, in mid-November 2016 (several months before the March 2017 $4,500 to $5,000 estimate was provided), it had given Ben an indication its current fees were already at $4,500. The trustee company apologised for the human error in later indicating that the work in progress was only sitting at $2,871, but said that fee indications are only ever estimates and the total fees were still going to be at least $7,132.
We looked through the trustee company’s time records and reviewed all the file information. While we acknowledged the trustee had indicated in November 2016 that the fees were already in the vicinity of $4,493, it was clear Ben and his siblings were relying on the trustee company’s indication of the fees given on 14 March 2017 ($2781) before entering into the DOFA. In addition, there was a further opportunity for the trustee company to correct the error after Ben later asked it to confirm the estimate of $4,500 - $5,000.
Although it was arguable the trustee company should be held to the total fees of $2,871 set in the March 2017 estimate, we could also see that the March 2017 estimate could never have represented fees and disbursements incurred in the estate administration. This was because $2,732 in disbursements had also been incurred. In addition, after 14 March 2017, there were further fees of $1,620 which appeared to be fair for the work the trustee company had undertaken since that date.
Our suggested resolution
The amounts of $2,871, $2,732, and $1,620 gave a figure of $7,223. We suggested the trustee company could make an offer to Ben and his siblings that the total amount payable for the estate administration was $7,223.
The trustee company came back to us and said that although a final figure of $7,223 would result in a significant reduction in the fees it considered payable, and although there was still some residual work to be carried out, it agreed to reduce the fees to $7,223 as a fair and reasonable way to resolve the complaint, given its errors.
Ben did not accept the offer of $7,223 because he said that some of the disbursements had been charged twice, and some of the costs had been paid by Cathy. Ben considered that a more reasonable settlement offer would be $6,000.
The trustee company considered Ben’s counter- offer of $6,000 and accepted this. The complaint was resolved.
Insight for participants
Simple human errors can be costly and often lead to complaints. This complaint is a reminder to financial service providers to ensure information provided to clients is accurate. In particular, when sending specific facts and figures, it’s best to triple check you are providing accurate information.