PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE
CAUSE OF ACTION
OR DEFENCE – where plaintiff was mortgagor and deceased was mortgagee
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLECAUSE OF ACTIONOR DEFENCE – where plaintiff was mortgagor and deceased was mortgagee– where schedule of mortgage providedin the event of the death of themortgagee the debt was forgiven – where plaintiff alleges the firstdefendant was obligedto discharge mortgage – where first defendanttransferred the mortgage to the second defendant under s 112 Land TitleAct 1994 – where plaintiff claims declaration that the debt secured bythe mortgage is forgiven – whether claim against firstdefendant should bestruck out because it does not disclose a reasonable cause of action –whether the if the plaintiff’sclaim is struck out the plaintiff should beallowed leave to replead that claimLand Title Act 1994 (Qld), s 112,s 184Succession Act 1981 (Qld), s 45, s 49
Uniform Civil Procedure Rules 1999 (Qld), r 171
The Australian
Institute for Progress Ltd v The Electoral Commission of Queensland [2020]
QSC 54, cited
John Alexander Clubs Pty Ltd v White City Tennis Club Ltd
[2010] HCA 19
(2010) 241 CLR 1, considered
Macquarie Bank Ltd v Lin [2001] QSC 341
[2002] 2 Qd
R 188, considered
Queensland Taxi Licence Holders v State of Queensland [2020] QSC 94,
cited
Judgment (78 paragraphs)
[1]
[1] The Executors of Ms Power-Nemeth's estate, to whom probate has been granted, are the First Defendants in these proceedings as Executors and Trustees of the Will of Phyllis Power-Nemeth. The Executors seek orders from the Court striking out the Statement of Claim against the Executors and further that there be no liberty replead against the Executors:
[2]
(a) in relation to the issue of the removal of mortgage 709701630 (the Mortgage), registered in the name of Ms Walker over the land of the Plaintiff, the subject of these proceedings; and
[3]
(b) generally against the Executors with respect to their conduct as Executors in relation to their administration of the estate insofar as it concerns the Mortgage, the subject of these proceedings.
[4]
[2] The Executors also seek consequential relief that they be removed as a party to these proceedings and that they have leave to discontinue their counterclaim.
[3] Ms Walker, the Second Defendant in these proceedings, has been transferred the Mortgage to which Ms Power-Nemeth was a mortgagor, on the basis that the Executors determined that she was entitled to the transfer of the Mortgage under the terms of Ms Power-Nemeth's Will. She consents to the orders sought by the Executors.
[4] Ms Collins, the mortgagor under the Mortgage and the Plaintiff in these proceedings, opposes the application on the basis that the Executors are a proper party to these proceedings by reason of a declaration sought against the Executors in the Statement of Claim.
[5]
[5] Ms Power-Nemeth died on 13 October 2016. In 2006 she had loaned money to her niece, Ms Collins. That was a loan of some $300,000. It was secured by the Mortgage over land owned by Ms Collins. There was apparently no separate loan agreement. The schedule of the Mortgage provided that:
[6]
"1. The debt secured by this mortgage shall endure for the term of the Mortgagee's natural life, unless repaid."
[7]
[6] It provided for monthly repayments to be made and for no interest to be payable. It further provided that:
[8]
"6. In the event of the death of the Mortgagee, the debt shall be forgiven.
[9]
The Mortgagee hereby directs her trustee and executor to execute and deliver to the Mortgagor, a discharge of this Mortgage (to be prepared at the Mortgagor's cost) as soon as practicably permitted by law.
[10]
In the event of any inconsistency between the conditions of this schedule and the standard terms mortgage, the conditions of this schedule shall prevail and be of priority."
[11]
[7] The standard terms mortgage included a provision that:
[12]
"7.2. The mortgagor is only entitled to a release when:
[13]
(a) all of the secured moneys have been paid or satisfied; and
[14]
(b) the mortgage is satisfied there are no debts or liabilities which could foreseeably fall within the description of secured moneys." (italics in original)
[15]
[8] Secured monies was also a defined term in clause 36.17 of the standard terms.
[9] The Mortgage was amended by a registered amendment executed on 26 November 2007 such that the principal advanced was increased by $700,000 to $1 million. Clause 4 of the schedule provided that the original obligation shall continue and remains in full force and effect pursuant to the Securities. The term "Securities" is expressly defined to include "Form 2 Mortgage date 21 June 2006".
[10] In July 2012, a document was signed by Ms Collins and Ms Power-Nemeth (the July 2012 Agreement), the status of which is the subject of considerable controversy in these proceedings. The Defendants claim it varied the Mortgage as amended by the Form 13 Amendment registered on 27 November 2007.[1] The Plaintiff, in her Amended Reply contends that the July 2012 Agreement did not represent a concluded agreement between Ms Collins and Ms Power-Nemeth and that the registered mortgage and the amendment prevails.
[11] Probate of Ms Power-Nemeth's Will was made on 1 February 2019 to the Executors. That will provided, inter alia, that:
[16]
(g) I give devise and bequeath the rest and residue of my estate upon trust as follows:
[17]
I give, devise and bequeath to Christine Alma Walker the full benefit and burden of the Mortgage between myself as Mortgagor and Angelique Collins as Mortgagee dated 29 August 2007 over the property known as 43 Cairns Street, Loganholme, Queensland 4219 (the Mortgage) including all sums secured by or payable under the terms of the Mortgage and all rights granted by the mortgage. I direct that the said Angelique Collins pay to Christine Alma Walker all sums due and payable under the Mortgage and Christine Alma Walker shall have the powers and rights there under including the power to give a valid receipt for such sums and the execute a discharge of the said Mortgage."
[18]
[12] The Will also provided for the residuary of Ms Power-Nemeth's estate to be divided equally between three charities, namely (1) Guide Dogs for the Blind; (2) Gold Coast Hospital Foundation and (3) the Red Cross.[2]
[13] Following Ms Power-Nemeth's death in 2016, correspondence was exchanged over a three year period between solicitors acting for Ms Collins and solicitors acting for the Executors. On 24 October 2016 Ms Collins' solicitors wrote to the Executors referring to the fact that the Mortgage provided that on the death of the deceased, the debt was forgiven, that her obligations under the Mortgage had terminated and any liability under it had ended. The letter asked for various information and stated that upon the receipt of the information, Ms Collins' solicitor would prepare an appropriate release of mortgage.[3]
[19]
[14] On 17 January 2019 solicitors acting on behalf of Ms Collins asserted in correspondence that the debt that was secured by the Mortgage had been forgiven and requested that the Executors' solicitors attend to registering a Transmission by Death of the Deceased's mortgage and then sign a Release of Mortgage. The Executors' solicitors, on 11 February 2019,[4] sent a letter to Ms Collins' solicitors asserting that their client disagreed that the debt secured by the Mortgage was forgiven upon the deceased's death. It further stated that they intended to observe the provisions of Ms Power-Nemeth's Will pursuant to which the full benefit and burden of the mortgage is gifted to Ms Walker.
[15] On 2 April 2019, the Executors' solicitors wrote to Ms Collins' solicitors stating that they now acted for the Executors and stated that they were investigating the matter. The Executors' solicitors also asked Ms Collins' solicitors not to take any further steps without providing reasonable notice to them.[5]
[16] On 16 April 2019, Ms Collins' solicitors advised the Executors' solicitors that they had instructions to institute proceedings against the Executors and asked whether the Executors' solicitors had instructions to accept service. The Executors' solicitors did not respond. Between 26 April 2019 and 1 May 2019, the Executors' solicitors prepared a transmission of Mortgage 709701630 to Ms Walker to which all the Executors consented.[6] On 1 May 2019, the transmission was lodged. The Plaintiff's solicitors provided the Executors' solicitors with a copy of the originating application and material on 12 June 2019 and asked whether the Executors' solicitors had instructions to accept service. On 14 June 2019, the Executors' solicitors advised they had instructions to accept service on behalf of the Executors.
[17] On 28 June 2019, the Executors' solicitors informed Ms Collins' solicitors for the first time that a transmission of the Mortgage to Ms Walker was registered and requested that the Executors not be the respondents.
[18] Ultimately, after further exchanges between the parties, orders were made by consent on 5 July 2019,[7] which provided that the Executors remained as the First Defendant and Ms Walker was joined as a Second Defendant in her personal capacity. The matter was then ordered to proceed by way of claim and directions were made as to pleadings and disclosure.
[20]
"Clause 8(q) [sic] of the will was ineffective as on the death of Ms Power the debt was extinguished and the mortgagee's personal representative was directed to execute and deliver to the mortgagor a discharge of the mortgage."
[21]
[26] Pleadings closed in October 2019. Disclosure between the parties has occurred.
[27] On 2 June 2020 the Counterclaim was amended to plead that it was made by Ms Walker although the Executors did not discontinue the counterclaim. Notwithstanding the amendment to the counterclaim, paragraph 40 of the counterclaim still alleges that:
[22]
"Further in the premises of the matters in paragraphs 19 to 30 above, and in the alternative to the Mortgage as amended having been varied by the 20 July 2012 Agreement, the first defendants are entitled to specific performance of the 20 July 2012 Agreement such that the plaintiff is obliged to execute a form of amendment to the Mortgage as Amended and Varied."
[23]
[28] Paragraph 3 of the relief sought by Ms Walker still claims:
[24]
"Further consequent upon 1., a declaration that the first defendants were, and are, under no obligation to execute and deliver up to the plaintiff any discharge of the said bill of mortgage."
[25]
[29] The Executors now seek to discontinue parts of the counterclaim as part of this application.
[30] The present application was filed on 30 July 2020.
[26]
[31] The Executors accept that it has to meet a high bar in order to have the statement of claim struck out as against them under r 171 of the Uniform Civil Procedure Rules1999 (Qld) (the UCPR) and be removed as a party from these proceedings. They contend that no cause of action has been pleaded against it. Counsel for the Executors also contends that there should be no liberty to replead against the Executors in relation to the removal of the Mortgage, or with respect to their conduct as Executors in relation to the administration of the estate insofar as it concerns the Mortgage. In that regard, the Executors' counsel provided detailed submissions outlining the basis upon which it considers there could be no action against the Executors. In particular, they contend that:
[27]
(a) The misdescription of the Mortgage in clause 8(g)q. of the Will does not have the effect of vitiating the gift so that it fell into the residue of the estate;
[28]
(b) It was appropriate to then give the gift to Ms Walker on the footing that it was a specific devise that she was entitled to, even if Ms Collins' assertion that it was valueless in the monetary sense was correct;
[29]
(c) That the transfer has been perfected and there is no basis to vitiate it on account of the fact that no s 199 Notice of Assignment has been served;[8]
[30]
(d) That the Will properly construed means that any payments that fell due between the time of the deceased's death and the time the Mortgage was transferred are rights that belong to Ms Walker, such that the estate has no financial interest in the outcome of these proceedings on account of that.
[31]
[32] Counsel for the Executors provided detailed and considered submissions in this regard.
[33] The Executors contend that the debt secured by the Mortgage is inseparable from it. Given that the Mortgage has been transmitted and now registered, the Executors assert that that means that the question of any debt, having been extinguished or not, is only relevant in the context of the Mortgage. That dispute, according to the Executors, lies with Ms Walker and Ms Collins. The Executors contend that clause 8(g)q. of the Will, being a specific bequest to Ms Walker where the benefit or burden of the gift is hers, was properly transmitted by the Executors to Ms Walker as beneficiary. The Executors contend that whether the Mortgage has any value or no value, is not a matter for the Executors to take a position. The Executors contend that they are not a proper party to any dispute about payment of monies under the Mortgage or whether the Mortgage should be discharged. If the gift has no value, Ms Walker will be obliged to provide the discharge of mortgage. The Executors state that no cause of action is pleaded against them in the Statement of Claim and that alone is sufficient for the Court to strike out the claim against the Executors. That is refuted by Ms Collins on the basis that, as part of the relief sought, it seeks a declaration against both the Executors and Ms Walker.
[34] The Executors contend that Ms Collins pleaded the allegation that the Mortgage was transmitted to Ms Walker "as beneficiary under the Mortgagee's will",[9] which is an acknowledgement that it was a specific legacy that was properly transmitted by the Executors. The Executors admitted that allegation.
[35] Ms Collins asserts that that is simply a statement of what occurred and not any concession that the transmission was appropriately made. I think in the context of the Reply and Answer referred to above, that contention has considerable weight.
[36] The Executors' counsel however also placed weight upon Ms Collins' Reply and Answer to the Defence and Counterclaim as supporting the fact the Executors were a proper party. In particular it refers to Ms Collins' reply to paragraph 18 of the Defence, that no allegation of fact appeared to be made against the Executors and no relief appeared to be sought from them apart from costs being pleaded in the past tense, namely in alleging that it was reasonable and necessary to join them as parties and that the Executors of the estate, who were granted probate, were appropriate parties. (emphasis added)
[32]
"If the Will could not be construed on the basis that the Mortgage was the mortgage referred to in the Will, then the specific legacy of the 'mortgage' to Ms Walker referred to in the Will would fail such that the Mortgage would fall into residue.
[33]
On that scenario, the executors would have an interest in the outcome of Ms Collins' and Ms Walkers [sic] competing positions. Whilst Ms Collins says that the mortgage secures nothing, if Ms Walker's contention that the 2012 Document secures $1M plus $4K monthly payments is correct, those amounts fall into residue and consideration would need to be given to whether steps will need to be taken in the current proceeding to try and recover the Mortgage from Ms Walker and enforce it against Ms Collins.
[34]
[REDACTED] the Court would be unlikely to construe the Will so that the gift falls into residue (rather than being for Ms Walker), the existence of the small likelihood that it could fail impacts the interests of the residuary beneficiaries who on that scenario would stand to receive a distribution from any amounts that can be brought in from enforcement of the mortgage if it does in fact secure the funds stated above.
[35]
Our clients are minded to apply to have themselves removed from the proceeding on the basis that the will properly construed does leave the mortgage as a gift for Ms Walker. It may be that they can do that as part of an interlocutory application in the current proceeding without the need for a separate origination application on the construction issue."[14]
[36]
[44] The Plaintiff further contends that the fact that there remains a possibility that a residuary beneficiary may challenge the Executors' construction is supported by a response received from the solicitors acting on behalf of one of the residuary beneficiaries, which while it indicated it was appropriate for the Executors to seek to be removed from these proceedings, stated that it was not a party and would not be bound by paragraphs 2 and 3 of the application.[15] Counsel for Ms Collins contends that the response, of itself, shows that the application is misconceived.
[45] The solicitors acting on behalf of the Guide Dogs originally stated that they agree that the Executors should be removed from these proceedings as soon as possible and as cost effectively as possible.[16] However, subsequently, in response to an email of 5 August 2020 providing a copy of the application and asking whether they wished to be heard and agreed with the orders sought, the solicitors for the Guide Dogs responded that they did not wish to be heard, would not be represented at the hearing and did not oppose the order sought being made, "but fully reserves its right in this matter against the Executors. For avoidance of doubt, the position of our client is that orders pursuant to paragraphs 2 and 3 of the application apply only to the named applicant and respondents to the proceedings and not to our client or the other charities in their capacity as the residuary beneficiaries of the estate of the deceased."[17] Those paragraphs seek orders that there be no liberty to replead against the Executors in relation to the issue of the removal of the Mortgage registered in the name of Ms Walker and further with respect to their conduct as Executors in relation to their administration of the estate insofar as it concerns the Mortgage the subject of these proceeding.
[37]
[46] Bradley J in Queensland Taxi Licence Holders v State of Queensland[18] recently summarised the principles as to the strike out of a pleading in the following terms:
[38]
"...The court uses the power to strike out a pleading (or parts of it) on this basis "sparingly and only in clear cases". The onus rests on the party seeking a strike out order.
[39]
The court is enjoined to avoid undue technicality. Defects of form, omissions and inaccuracies may be cured by amendment. Where adding missing elements or amending erroneous ones appears possible, if a strike out order is made, the court would ordinarily give leave to replead. Where there is nothing in the material before the court to suggest that a party could plead a cause of action known to law, leave to replead would be refused. Indeed, a logical consequence may be to give judgment for the defendant...." (footnotes omitted)
[40]
[47] The Executors submit that no cause of action is pleaded against them. They further contend that no cause of action can be pleaded against them in relation to the Mortgage being removed.
[48] It is correct that the Statement of Claim does not plead a cause of action, per se, against the Executors, but it does seek a declaration. A declaration is sought against the Executors, by which the estate is sought to be bound, arising out of a dispute, where the Executors and Ms Walker originally pleaded that they were not obliged to discharge the Mortgage because of the matters set out in the counterclaim.[19]
[49] Applegarth J in The Australian Institute for Progress Ltd v The Electoral Commission of Queensland,[20] at [34]-[35] stated that:
[41]
"[34] The discretionary power to grant declaratory relief is wide. However, it is "confined by the considerations which mark out the boundaries of judicial power". A judicial determination includes a "conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy". It involves the application of the relevant law to facts as found in the proceeding. The High Court in Bass v Permanent Trustee Co Ltd stated:
[42]
"It is contrary to the judicial process and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case."
[43]
[35] Declaratory relief must not be directed to answering "abstract or hypothetical questions". (footnotes omitted)
[44]
[50] A declaration will not necessarily be hypothetical because future facts have not occurred.[21]
[51] As to whether a party should be made a party to proceedings, the test under r 69(1)(b)(i) of the UCPR in Macquarie Bank Ltd v Lin,[22] the Court of Appeal followed Pegang Mining Co Ltd v Choong Sam,[23] where Lord Diplock put the test as:
[45]
"Will the [person's] rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"
[46]
[52] While the Executors now seek to take a neutral position, Ms Collins has pleaded correspondence where Ms Collins' solicitors requested that the Executors discharge the Mortgage on the basis that the debt ceased to exist.[24] It further pleads that the Executors and Ms Walker refused to discharge the Mortgage and asserted that the debt had not been forgiven by the Mortgagee's death and asserted that Ms Collins was liable to make repayments to Ms Walker as the purported assignee of the mortgage debt pursuant to the Mortgagee's will.[25] Those matters are admitted in the Defence but the Executors and Ms Walker allege that they were not obliged to discharge the Mortgage because of the matters in the counterclaim.[26] While the Statement of Claim pleads the direction to the Executors obliging them to discharge the Mortgage as soon as practically permitted by law which, the Executors counsel submitted with much force, imposed no legal direction upon the Executors, that is no more than a defect in the pleading. The Plaintiff's counsel also relied, in oral argument, on the legal obligation to release the Mortgage in the standard terms of the Mortgage given no debt was owing, and given that the Mortgage debt and estate or interest of a mortgagee in the mortgaged property devolve upon the mortgagee's death to the personal representatives[27] which is not pleaded.
[53] The Executors have sought to remove themselves from the dispute by transferring the Mortgage to Ms Walker.[28] Rather than registering the Mortgage in their name, the Executors agreed to the beneficiary's (Ms Walker) request to register the Mortgage in her name.[29] The fact that the Mortgage has been transferred in those circumstances is pleaded in [16] of the Statement of Claim which has been admitted.
[54] Unless that position in respect of the Mortgage is somehow altered,[30] an order to discharge the Mortgage must be sought against Ms Walker, which is the course adopted by Ms Collins in the relief sought.
[55] The Executors have, in transferring the Mortgage, acted on the basis that Ms Walker was entitled to have the Mortgage transferred to her given that, on the construction of the will they adopted, it was a specific legacy to which she was entitled and the Executors' counsel has raised a number of compelling reasons why that was a proper position for the Executors to adopt. The Executors raise the fact that no allegation has been made by Ms Collins against the Executors, even though in correspondence a potential breach of of the (Qld) was raised by Ms Collins. However, as was pointed out by Ms Collins' counsel, Ms Collins does not bring the present action as a beneficiary but rather as a mortgagor. According to her contentions, no debt ever passed to the estate which could subsequently devolve to any beneficiary. Thus she seeks a declaration against the estate as well as Ms Walker.
[47]
[62] While the Executors' counsel presents compelling arguments as to why there could be no action successfully brought against the Executors arising out of the transfer of the Mortgage to Ms Walker, there is a proper basis for the Executors, as representatives of the estate, to be a party to these proceedings. There is an arguable basis, in the circumstances, for Ms Collins to seek a declaration that the debt was forgiven upon Ms Power-Nemeth's death not only against Ms Walker but against the estate through the Executors. Whether or not the debt was ever part of the estate of Ms Power-Nemeth is a matter which directly affects the rights and obligations of the Executors and Trustees of Ms Power-Nemeth's estate and for such a declaration to be sought, the Executors must be a party as representatives of the estate.
[63] While the Executors have sought to bring the application in order to minimise costs and finalise the estate, it is still open to the Executors to take steps so that the Executors do not have to take any active part in these proceedings and abide by the order of the court if they consider that is the appropriate course. The Executors may also, if necessary, seek the advice of the court under s 96 of the Trusts Act in that regard.
[64] There being a proper basis for seeking the declaration sought against the Executors, the application to strike out the Statement of Claim and the incidental relief sought must fail. I will hear the parties as to costs.
[48]
[65] I order that:
The application is dismissed; and
The parties will be heard as to costs.
[49]
[1] Defence and Counterclaim at [1] of the Relief although the Executors now adopt the position that it is a matter for the second defendant not them to pursue.
[50]
[2] Court Document 2, Affidavit of A Collins at exhibit AAC-5.
[51]
[3] Court Document 2, Affidavit of A Collins at exhibit AAC-6.
[52]
[4] Court Document 2, Affidavit of A Collins at exhibit AAC-14.
[53]
[5] Court Document 2, Affidavit of A Collins at exhibit AAC-16.
[11] In later correspondence the Executors asserted that as the benefit and burden of the Mortgage were gifted to Ms Walker, any obligation to discharge the Mortgage lay with her.
[60]
[13] While that position had been expressed by solicitors acting on behalf of the executors in previous correspondence, the terms of the Defence asserted that the Mortgage had been varied. See above and [4(e)] of the Defence.
[61]
[14] Affidavit of A Moore, filed by leave 7 August 2020 at exhibit AJM-2, p 4.
[62]
[15] Affidavit of A Moore, filed by leave 7 August 2020 at exhibit AJM-2, p 20.
[63]
[16] Court Document 20, Affidavit of A Moore at exhibit AJM-1, p 21.
[64]
[17] Affidavit of Ashley Moore, filed by leave 7 August 2020 at exhibit AJM-2, p 20.
[24] Statement of Claim at [13]; Although the Plaintiff does not plead the conclusion that the debt has been forgiven it does plead the schedule to the mortgage by which in the event of the death of the mortgagee the debt secured shall be forgiven at [4(c)], and that the mortgagee had died at [10].
[30] Which, given that Ms Walker has the benefit of indefeasibility of title would be difficult. While a power is provided for a Court to make an order removing a person as a proprietor in circumstances outlined in s 114 of the Land Title Act1994 (Qld), it is discretionary and applied in limited circumstances. cf Hammill v Wright[2018] QSC 197 at [162].
[76]
[31] It is unlikely that the transaction can be undone given the Mortgage, if the Will is construed as contended by the Executors, is a specific legacy (See McBride v Hudson[1962] HCA 5; (1962) 107 CLR 604 at 617) and Ms Walker has the benefit of indefeasibility of title pursuant to s 184 of the Land Title Act1994 (Qld).
[77]
[32] The effect of which is the subject of controversy.
[19] The Plaintiff's Statement of Claim is reasonably straightforward. She relies on the Schedule in the Mortgage and pleads that it was a term of the Mortgage that, in the event of the death of the Mortgagee, the debt secured by the Mortgage shall be forgiven. The Plaintiff pleads the direction to the Executors to deliver a discharge of the Mortgage as soon as practically permitted by law. She subsequently pleads the death of Ms Power-Nemeth. The Statement of Claim then pleads the grant of probate, the request for the discharge of the Mortgage, its refusal and the transfer of the Mortgage to Ms Walker as beneficiary.
[20] The Plaintiff seeks a declaration that the debt secured by the Mortgage as Amended was forgiven on 13 October 2016, being the date of Phyllis Power-Nemeth's death. Other relief is then sought against Ms Walker to effect the discharge of the Mortgage.
[21] The Executors and Ms Walker, who were jointly represented up until 16 January 2020, filed a defence and counterclaim contending, inter alia, that the debt was not extinguished and that the Mortgage was not obliged to be discharged. By the counterclaim it was asserted that the Mortgage was varied in terms pleaded according to the July 2012 Agreement.
[22] Counsel for the Executors emphasises that they admit the allegation in the Statement of Claim that the Mortgage was transmitted by the Executors to Ms Walker and that she became the sole registered Mortgagee on 1 May 2019 as beneficiary under Ms Power-Nemeth's Will, and contend that paragraph 12 of the Statement of Claim was an acknowledgment that that the Executors properly transmitted the Mortgage to Ms Walker.
[23] While the Defence at paragraph 18 pleads that the Executors deny that they in any way liable to Ms Collins either as alleged in any way, or at all, because no allegation of fact appeared to have been made against them and no relief appears to have been sought against them apart from costs being claimed on an indemnity basis. The allegations in the defence that the Mortgage was varied by the July 2012 Agreement have been jointly pleaded to by both Defendants and both Defendants originally counterclaimed against Ms Collins.
[24] In Ms Collins' reply she pleaded in response that it was reasonable and necessary for the Executors to be a party and that whilst Ms Walker admits acting as an Executor de son tort pursuant to s 49(2) of the Succession Act1981, the Executors of the estate who were granted probate were appropriate parties and no leave has been granted to Ms Walker to act on her own.
[25] Ms Collins also in her Reply and Answer pleads that:
[37] Ms Collins contends that the Executors are necessary parties in order for the estate to be bound, particularly in relation to the declaration sought that the debt secured by the Mortgage as amended was forgiven on 13 October 2016.
[38] Dr Morgan, counsel for Ms Collins, indicated that notwithstanding the Executors' stratagem to transmit the Mortgage, despite having received demands for a discharge of the Mortgage from Ms Collins and then receiving notice of imminent proceedings, the estate has to be bound to the outcome of the adjudication. In order for that to occur, the Executors need to be a party to these proceedings. In that regard, counsel for Ms Collins referred to a number of matters demonstrating that the estate is a proper party.[10] Those included, that the Executors denied, in some correspondence, that the Mortgage debt was extinguished by the death of Ms Power-Nemeth and claimed that the Mortgage was varied.
[39] It should be noted that initial correspondence was responded to by solicitors acting for Ms Walker, albeit responding to correspondence addressed to the Executors.[11] Further, Ms Collins asserts that by transmitting the Mortgage to Ms Walker the Executors took the position that it was capable of transmission to the beneficiary. That is consistent with the Defence and Counterclaim.[12]
[40] Notwithstanding the terms of the Defence, the Executors now contend that given it was a specific bequest it was properly transmitted, whether the debt was extinguished or not.
[41] According to Ms Brooks (one of the Executors), the Executors "became resolute in their satisfaction that it [i.e. the Mortgage] was a gift left to Ms Walker, even if Ms Collins' contentions about the Mortgage securing nothing were correct".[13]
[42] Dr Morgan contends that the correspondence that occurred between the residuary beneficiaries and the Executors in respect of this application supports the fact that there is uncertainty, even on the Executors own case, that the estate is a disinterested party. In that regard, Dr Morgan referred to the correspondence from Ms Collins' solicitors to each of the residuary beneficiaries outlining a scenario where the Mortgage could fall into the residue of the estate. On that scenario, the Executors would have an interest in the outcome of Ms Collins' and Ms Walker's competing positions.
[43] In that regard, clause 8(g)q. refers to Ms Power-Nemeth as Mortgagor and Ms Collins as Mortgagee (rather than vice versa) and refers to the mortgage being dated 19 August 2007 and also refers to the address of the property being "43 Cairns Street, Loganholme, Queensland", all of which do not correlate to the Mortgage. The letter to the residuary beneficiaries stated:
[56] While it may be unlikely that there will be any party who ultimately contends that the debt incurred by Ms Collins to the deceased secured by the Mortgage would fall to the residue of the estate, and the prospects of success of such a contention appear limited for the reasons outlined by the Executors in their Outline of Submissions, the possibility cannot be excluded.
[57] The residuary beneficiaries are not parties to the present action. While the Executors have sought to have them ventilate any issues so they could be resolved in the context of this application to show that there is no basis upon which they should remain in the action and the residuary beneficiaries have generally supported the orders being sought, at least one residuary beneficiary has made clear that they would not be bound to the orders sought that there be no liberty to replead against the Executors in relation to the transfer of the Mortgage to Ms Walker.
[58] While the Executors have contended that the residuary beneficiaries have waived any right to pursue any legal redress challenging the transfer of the Mortgage, given they were not parties to the present action, that position is far from certain, particularly where one residuary beneficiary has reserved their rights and made clear they do not consider themselves bound. Any such action would likely be founded in damages rather than exposing Ms Collins to action by the Executors in the future. If however the Executors are not a party to this action and not bound by the declaration sought by Ms Collins, the estate would not necessarily be bound to the position it presently adopts.
[59] Ms Collins submits that she is not a beneficiary to the estate and can have no clear indication whether the estate has been properly administered and whether the transmission of the Mortgage to Ms Walker is actually final, or whether it could be undone by a creditor or beneficiary of the estate other than Ms Walker seeking to treat the Mortgage as an asset of the estate.
[60] The Executors' arguments fail to recognise that facts have been pleaded in relation to a dispute between Ms Collins and the Executors and Ms Walker in relation to whether the debt secured by the Mortgage was forgiven or not upon Ms Power-Nemeth's death, giving a basis for the declaration sought against both parties in circumstances where the declaration cannot be regarded as inutile as against the estate.
[61] It may well be that there is, in fact, no legal redress against the Executors in relation to the transfer of the Mortgage to Ms Walker and by the estate against Ms Collins,[31] however the possibility that it may be pursued by a non-party to the present proceedings cannot be dismissed. Further, the Executors have, at least in their Defence and some correspondence,[32] disputed that the debt secured by the Mortgage was forgiven upon Ms Power-Nemeth's death, which supports the fact that the Executors are not a disinterested party. Although the factual basis for which the declaration is sought could have been pleaded with greater precision, the Statement of Claim pleads an arguable basis upon which a declaration may be pursued not only against Ms Walker but the estate through the Executors. To be bound by a declaration that the debt secured by the Mortgage was forgiven at the time Ms Power-Nemeth died such that it never became part of the estate, the Executors, as her personal representatives must be a party to these proceedings. [33]