Duty of executor
Ford v Princehorn; Estate of Ford  NSWSC 1165. White J.
28 The duty of an executor is to act with reasonable diligence in both realising the estate's assets and discharging debts, and also in distributing the estate to those entitled (Mavrideros v Mack  NSWCA 286; (1998) 45 NSWLR 80 at ; Garthshore v Chalie (1804) 10 Ves. Jun. 1; 32 ER 743; and Re Tankard  Ch 69).
Bird v Bird (No 4)  NSWSC 648. Rein J. 5.6.12.
104 There is no dispute that executors are under a positive duty to call in and collect the assets of the deceased: see Re Whelan (Deceased)  VR 706 at 719 per Sholl J.
The executors, if necessary, must bring proceedings to that end but can, in the alternative, set off a debt owed to the estate against a legacy due to a beneficiary: see Cherry v Boultbee (1839) 4 My & Cr 442; (1839) 41 ER 171.
The executors have the same remedies available to them as the deceased to recover monies due to the estate: see Dalrymple v Melville (1932) 32 SR (NSW) 596 at 602.
An executor, in relation to a debt due to the estate, is required to demand payment and, if payment is not made, to take proceedings to recover the debt, even if that involves taking action against relatives of the deceased (and the executor): see In re Brogden; Billing v Brogden (1888) 38 Ch D 546 per Cotton LJ at 546, Fry LJ at 570 and Lopes LJ at 574.
The rule in Cherry v Boultbee referred to above does not in terms apply where there is no "debt" owed by the legatee, but it seems to be accepted here that Mona had received funds of Percy to which she was not entitled and which the executors could set off. That is the plaintiff's claim and the defendants have not asserted otherwise.
105 Once it is established that there is a debt owed to the estate, it is incumbent on the executor to "show why he did not get it in": see Stiles v Guy (1848) 16 Sim 230 and In re Brogden; Billing v Brogden per Cotton LJ at 568.
An executor who fails to call in a debt is liable in devastavit: National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (1940) 63 CLR 1 per Latham CJ. Devastavit or "waste" includes both the wrongful distribution of assets depriving the estate of funds to meet the other beneficiaries' needs and the failure to get in assets, debts or liabilities and failure to preserve. As is explained by Perram J in Bovaird v Trustee of Bankrupt Estate of Frost  FCA 1159, the approach of equity that "wilful default" is required has prevailed.
What is required to constitute "wilful default" however is "a want of prudence": see J R Martyn and N Caddick, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th ed (2008) Sweet & Maxwell at [55-13].
106 The defendants' case has been that:
(1) they did not know that Mona had obtained the sale proceeds for herself;
(2) they did not know that the powers of attorney prevented Mona from obtaining the proceeds for herself; and
(3) even if the powers of attorney did prevent Mona from receiving the proceeds, Percy ratified her conduct.
107 The defendants also point out that an executor, in performing his office, must conduct the business of the trust estate with the same care as an ordinary prudent businessman would apply to his own business affairs: In re Speight, Speight v Gaunt (1883) 22 Ch D 727 per Jessel LJ at 739 - 740 and see Williams, Mortimer and Sunnucks on Executors, Administrators and Probate at [55-07].
The executor will be exonerated if he proves that the steps would not have been effective (or there are reasonable grounds for thinking the steps would not have been effective), and secondly, personal representatives have wide powers to compound, compromise and release liabilities to the estate and by the estate.
110 In Austin v Austin (1906) 3 CLR 516, the High Court per Griffith CJ, Barton and O'Connor JJ, held that a trustee, including an executor, "sufficiently discharges his duty if he takes in managing trust affairs all those precautions which an ordinary man of business would take in managing similar affairs of his own", applying the dictum of Lord Blackburn in Speight v Gaunt (1883) 9 App Cas 1 at 19.
In Austin v Austin at 526 - 522 the High Court held that executors cannot be sued for a technical breach of trust where no loss has ensued.