Before the Court today is a motion filed by Arun Abey as applicant seeking orders:
1. for the appointment of Special Letters of Administration to the estate of the deceased second defendant; or in the alternative
2. an order pursuant to r 7.10 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") appointing him as a representative of the estate of the second defendant.
The second defendant died on 5 June 2024 aged 79. Prior to his death he had been named as the second defendant in these proceedings.
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The nature of the proceedings
By way of a statement of claim filed on 22 January 2024, the plaintiff seeks judgment against both the defendants for possession of land situated and known as Unit 503/1 Kirribilli Avenue, Kirribilli NSW.
On 15 June 2022, the plaintiff entered into a loan agreement with the first and second defendants as co-borrowers wherein the plaintiff agreed to loan the defendants the sum of $5,434,000 and they agreed to repay that amount, with interest and charges, by 14 December 2022.
Two other persons, being the directors of the first defendant, executed deeds of guarantee and indemnity in favour of the plaintiff.
Whilst there was an extension for the loan to be repaid pursuant to a deed of forbearance, by 15 November 2023 the due date for repayment of the loan had passed and the loan had not been repaid. The plaintiff alleges that on 13 December 2023 a notice of default and demand for payment was issued to the defendants.
The proceedings were then commenced.
Each of the defendants has filed defences. The defence raised by the second defendant is to the effect that at the time the loan agreement was made he was suffering from cancer, was infirm and had limited experience in matters of banking, loans and investments.
He asserts that the plaintiff should have known that he did not know what he was doing and, as specifically pleaded, was duped by the first defendant into agreeing to mortgage his home to allow the first defendant to access funds for its business ventures.
It is also alleged that the terms of the loan were harsh and unreasonable and that the plaintiff engaged in unconscionable conduct within the meaning of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth).
Further, the second defendant says that he is entitled to relief pursuant to the Contracts Review Act 1980 (NSW).
In addition to filing a defence before he died, the second defendant purported to file a cross-claim against the first defendant and against his former solicitor, whom he asserts did not provide him with independent advice as to the nature of the transaction into which he was entering.
The cross-claim was rejected by the registry as not having been properly verified. It has thus not been filed. There was no appearance by the proposed solicitor/cross-defendant to that cross-claim on the hearing today.
The plaintiff and first defendant were legally represented.
Mr Abey was represented by senior and junior counsel.
The orders are sought at this time as it seems that under the terms of the loan agreement the defendants are liable to pay interest at the rate of 17% per annum. Interest continues to accrue on the loan at approximately $80,000 per month.
The second defendant having died, the plaintiff cannot continue the proceedings against the second defendant without further orders.
Mr Docker SC on behalf of Mr Abey points out that in circumstances in which interest is continuing to accrue in such a significant way, it is not in the interests of the beneficiaries to the second defendant's estate that the proceedings simply be allowed to languish until a grant of probate is made. In other words, the application is brought for either the appointment of Mr Abey by way of Special Letters of Administration or appointment of Mr Abey as a representative pursuant to r 7.10 of the UCPR so that the litigation can continue and be dealt with on behalf of the estate.
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The evidence
In support of the application the applicant relies on:
1. his own affidavit sworn 13 August 2024;
2. affidavit of Ms Nisanthi Kannangara sworn 8 August 2024 (the second defendant's wife);
3. affidavit of John Edstein sworn 15 August 2024, who deposes to the experience and integrity of the applicant;
4. affidavit of Mr Upul Samantha Anthony sworn 20 August 2024, who is the person named as co-executor with Mr Abey in the second defendant's last will and testament; and
5. affidavit of Alex Morassut sworn 22 August 2024, who is the solicitor on the record for the second defendant, who deposes to giving notice to the beneficiaries under the will of the application and the filing of the motion.
As set out by Mr Abey in his affidavit, at the time of his death the second defendant was married to Ms Kannangara. The second defendant is survived by three children, Kishani Kannangara, Shamila Dhanapala and Ayesha Kannangara.
Exhibited to Mr Abey's affidavit is a will dated 23 January 2023 signed by the second defendant. There appears to be no dispute that this is the second defendant's last will and testament. It is agreed that the effect of the will is to leave everything to his wife but, in the alternative, to make specific bequests to two of his children, whilst leaving the balance to his third.
Mr Abey says that he does not expect this application to be contested. In other words, there is unlikely to be any dispute as to the grant of probate. Whether a claim under the Family Provision Act 1982 (NSW) might be made in the future is not known and not relevant to this application. I am certainly not suggesting that there should or would be one.
The co-executors in the will are Mr Abey and Mr Anthony. Mr Anthony supports the current application.
Mr Abey attests to his considerable experience in business, financial acumen and general suitability to be appointed as administrator. Having regard to, in particular, his considerable expertise in business and his roles in tertiary institutions, I accept that he has the capacity to act as an administrator.
His reputation, experience and record is supported by Mr Edstein, who is now the special legal counsel of Walsh Bay Partners and was formerly a longstanding partner of King & Wood Mallesons. Again, there is no issue in these proceedings as to the suitability of Mr Abey to be appointed having regard to his expertise and experience in dealing with matters which will arise consequent on his appointment.
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Determination
The Court has power to make an order appointing an administrator ad litem (see s 40 of the Probate and Administration Act 1898 (NSW); In the Estate of Coe [2013] NSWSC 968 at [7] ("Coe")).
Further, as set out in s 42 of the Probate and Administration Act, all applications for probate or Letters of Administration may be made to this Court. The power to appoint an administrator in these circumstances may be exercised even only for the purposes of pursuing or defending proceedings (see Bayside Council v Estate of Goodman [2019] NSWSC 530 at [57] ("Bayside Council")).
In Coe, Young AJ set out the following principles concerning the appointment of an administrator ad litem at [10]-[12]:
"I need to give some background as to the remedy sought. The authorities clearly say that an administrator ad litem is not merely a token representative of the deceased in the proposed action. He or she is virtually for all purposes the representative of the estate within the limits of the grant. In Faulkner v Daniel (1843) 3 Hare 199 at 207-8; 67 ER 355 at 359, Wigram VC said:
'In principle, I think it is clear that, where a limited administration is granted...and the limited administrator is made a party to a cause, the estate of the deceased is perfectly represented for all purposes, to the extent of the authority conferred by the letters of administration.'
Lord Cottenham LC took up those words in Davis v Chanter and the head note of that case reflects what his Lordship said, namely:
'The grant of letters of administration ad litem makes the grantee complete representative of the estate to the extent of the authority which the letters purport to confer, and a decree obtained against such grantee is therefore binding upon anyone who may afterwards take out general administration to the estate.'
Thus to appoint an administrator ad litem without the involvement of the persons named as the deceased's executor or the beneficiaries under the will, is an extreme step. The administrator ad litem not only has to be the defendant in the suit, he or she also needs to raise moneys to retain lawyers and to investigate the allegations made by the plaintiffs, and, if a verdict is suffered, then he or she needs to raise moneys by selling the deceased's assets or otherwise so as to provide for the verdict. That probably means, though this has never been decided in any case that I have found to date, that that person also has fiduciary duties, so that he or she cannot do what might be called a 'sweetheart deal' with the plaintiffs and must be fair in and about raising the funds to meet costs and verdict. So that it is an extreme step to appoint an administrator ad litem. However, on the other hand, as Mr Edwards has said more than once, unless someone is appointed to represent the deceased he cannot be sued."
See also Bayside Council at [59].
In this matter, Mr Abey seeks to be appointed only for the purposes of defending the action and pursuing the cross-claim. This is obviously a proper purpose having regard to the nature of the proceedings currently being pursued by the plaintiff. Of course, I am not making any determination or comment on the merits of the second defendant's defence or cross-claim but there are plainly issues to be pursued and determined having regard to the pleadings.
I am satisfied that the appointment of either an administrator or representative is appropriate having regard to the nature of the proceedings. I accept that if there is no appointment, it may not be until 2025 that the issues can be properly investigated, evidence obtained and steps are taken to represent the second defendant.
Having regard to the amount of money involved and the interests of all parties, it seems to me that it is appropriate that either an administrator or representative be appointed.
The question is which of the alternative orders sought by the applicant should be made.
Rule 7.10 of the UCPR provides as follows:
7.10 Interests of deceased person
(1) This rule applies to any proceedings in which it appears to the court -
(a) that a deceased person's estate has an interest in the proceedings, but is not represented in the proceedings, or
(b) that the executors or administrators of a deceased person's estate have an interest in the proceedings that is adverse to the interests of the estate.
(2) The court -
(a) may order that the proceedings continue in the absence of a representative of the deceased person's estate, or
(b) may appoint a representative of the deceased person's estate for the purposes of the proceedings, but only with the consent of the person to be appointed.
(3) Any order under this rule, and any judgment or order subsequently entered or made in the proceedings, binds the deceased person's estate to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceedings.
(4) Before making an order under this rule, the court may order that notice of the application be given to such of the persons having an interest in the estate as it thinks fit.
Rule 7.10 UCPR provides a mechanism whereby a representative can be appointed to allow proceedings to continue. That may be an appropriate course, but Mr Abey submits that there are certain limitations on the appointment of a representative which may limit that which the representative can do.
In particular, the representative may not be able to obtain judicial advice having regard to the provisions of the Trustee Act 1925 (NSW). As set out in s 63 of the Trustee Act, a trustee may apply to the Court for an opinion, advice or direction on any question in respect of the management or administration of the trust property or respecting the interpretation of the trust instrument.
"Trustee" is defined in s 5 to have a meaning corresponding with that of a trust. It includes legal representative and the New South Wales Trustee and a trustee company. "Legal representative" is then defined to mean executor or administrator.
Whilst it is not necessary that I decide the point on this application, Mr Docker submits that it is at least not clear that a person appointed under UCPR r 7.10 would be a legal representative within the meaning of the Trustee Act and as such that person may not be able to obtain independent advice from the Court. For this reason, in particular, Mr Abey seeks to be appointed as the administrator ad litem rather than as a representative pursuant to r 7.10.
The Court should generally be cautious before making such an order particularly as the powers of the administrator may include dealing with the assets of the deceased person and making decisions as to the way in which the litigation should be conducted.
An example of an application which was unsuccessful is Coe. In that matter, Young AJ refused to make the orders listing a number of problems with the application including:
1. the failure to cite the executor;
2. the scope of the administration;
3. the need for an administration bond;
4. an absence of evidence that the proposed administrator is independent;
5. that the proceedings only had a minor connection with New South Wales; and
6. the form of the order.
None of those problems exist in this matter.
Firstly, Mr Abey is one of the executors under the will. Secondly, there is an affidavit from the principal beneficiary, the second defendant's wife, who is aware of and consents to his appointment. Thirdly, there are communications from the three children, also beneficiaries under the will, who are plainly aware of and either consent to or do not oppose the application. Fourthly, Mr Abey is independent; he has no financial interest in the outcome of the proceedings or the administration of the estate. Fifthly, he is an appropriate person to be appointed an administrator. Sixthly, there is no opposition from either the plaintiff or the first defendant to his appointment.
I accept, for the reasons outlined, that an administrator rather than a representative should be appointed. I accept that it is appropriate for such an administrator to be appointed at this time.
I accept that Mr Abey is an independent person who is an appropriate person to act as administrator.
In all these circumstances, I propose to make order 1 as set out in the notice of motion.
I should note that there are limitations on the appointment but there are also powers granted to Mr Abey to do all things necessary to conduct the litigation including taking out loans or selling assets. I raised this with Mr Docker. He appropriately pointed out that one of the assets sold might be the Kirribilli unit but that is generally not something that would be opposed. The money would be kept in some form of controlled account. Indeed, he would not have expected the plaintiff to be opposing the sale of the property if necessary.
In any event, I am satisfied that the powers and limitations set out in order 1 are appropriate.
Mr Abey also seeks orders dispensing with the publication notice, the need for an administration bond or sureties and the further requirements of the "Probate and Administration Rules" in relation to an application of this kind. Part 78 of the Supreme Court Rules 1970 (NSW) is generally described as the "Probate and Administration Rules". They plainly apply to this application as under the definitions section "administration" includes limited and special administration.
Rule 57 requires notices to be given of proceedings. Rule 3 deals with publication of notice of intended application for probate and administration.
As all of the beneficiaries are aware of and either consent to or do not oppose this application and are aware of the intention to appoint Mr Abey, I am satisfied that I should make an order dispensing with the publication of a notice of intention to make this application. I can think of no other person who would be interested in the application.
The second part of the order sought by Mr Abey is an order dispensing with the need for an administration bond or sureties.
As set out in s 64 of the Probate and Administration Act, every person to whom a grant of administration is made shall execute a bond. However, under s 65 the Court may dispense with the bond. Mr Abey asks that the administration bond be dispensed with.
Again, as all interested parties are aware of these proceedings and are aware of the application, it seems to me that it is appropriate for the orders to be made without the need for an administration bond; see, for example, Re Estate of the Late Tanju (Andrew) Assim [2015] NSWSC 337 and McCorquodale v Guth [2008] NSWSC 1420.
In all the circumstances, I am satisfied that the orders sought by Mr Abey should be made and I make the following orders as set out in the short minutes of order:
1. An order that special letters of administration of the estate of Pathmasiri Nimal Kannangara (Deceased) be granted to Arun Abey until an unlimited grant of administration or probate of the estate of the Deceased is made, or until further order of this Court, limited:
1. to defending these proceedings, being proceedings number 2024/00025939 (Proceedings);
2. to commencing and continuing a cross claim against Immuto Fleur Nominees Pty Ltd (ACN 005 540 607), Archura Capital Pty Ltd (ACN 647 302 903), Alev Dover, Andrew Stewart and Stewart Law Pty Ltd in the form of the cross claim dated 4 June 2024, or such amended form as Mr Abey determines;
3. to compromising or settling the Proceedings;
4. to seeking judicial advice in respect of the Proceedings;
5. to doing all things necessary or expedient, including to raise funds by taking out loans or selling assets, to carry out the functions in paragraphs (1)(a)-(1)(d) above and/or to obey, enforce or carry into effect any order or judgment of the Court in the Proceedings or any compromise of the Proceedings.
1. An order dispensing with:
1. publication of notice of intention to make this application;
2. the need for an administration bond or sureties; and
3. the further requirements of the Probate Rules in relation to the application for these orders.
1. An order that Mr Abey's costs of the Notice of Motion be paid on an indemnity basis out of the assets of the estate of the Deceased.
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Decision last updated: 12 September 2024