Plaintiff v Defendant

WILLS AND ESTATES - Debtor died leaving a will - Executor declines to apply for a grant of probate - Proceedings against the estate of the deceased by creditor who is mortgagee - Mortgagee seeking possession of property of the deceased and payment of debt - Application to appoint person to represent estate of deceased or to proceed in the absence of a person to represent the estate - Administration and Probate Act 1958 (Vic), s 29 - Supreme Court (General Civil Procedure Rules) 2015 (Vic), 9.08(1), 9.08(5)(a)(i), 16.03(1)(a), 16.03(1)(b).

1 The plaintiff applies for an order pursuant to r 16.03(1)(a) of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules') for leave to proceed against the estate of Stephen Frank McLean, deceased ('Estate') in the absence of a person to represent the Estate.[1]

2 The plaintiff also applies, in the alternative, for an order pursuant to r 9.08(5)(a)(i) and/or 16.03(1)(b) of the Rules, that Megan Elizabeth McLean ('Megan McLean'), Cameron John Stephen McLean ('Cameron McLean') and/or State Trustees Limited ('STL') be appointed to represent the Estate of the deceased for the purpose of the proceeding (subject to their consent). Megan McLean, Cameron McLean and STL had been identified as persons who may consent to being appointed to represent the Estate under the Rules.

3 The plaintiff relies upon the following affidavits of:

(a) Judith Elliott sworn 22 March 2018 ('Elliott Affidavit');

(b) Zoe Kennedy sworn 22 March 2018 ('Kennedy Affidavit') (service);

(c) Izac Griffiths sworn 17 April 2018 ('First Griffiths Affidavit') (service);

(d) Kimblee Stapleton sworn 19 April 2018 ('Stapleton Affidavit') (service);

(e) Izac Griffiths sworn 24 April 2018 ('Second Griffiths Affidavit'); and

(f) Izac Griffiths sworn 2 May 2018 ('Third Griffiths Affidavit').

4 On or about 5 March 2012, Stephen Frank McLean (since deceased) ('Mr McLean'), and Mrs Helen McLean (also since deceased) ('Mrs McLean') (together, 'the McLeans'), entered into a loan facility agreement with the plaintiff. The loan facility agreement was varied by variation letters dated 26 March 2012 and 26 June 2012. Under the loan facility agreement (as varied), the McLeans borrowed the sum of $340,000 from the plaintiff.[3]

5 The loan facility agreement was secured by a first registered mortgage over land situate and known as 136-144 Hervey Street, Elmore, Victoria 3558 ('Elmore Property').[4] At the time the mortgage was registered on 8 May 2012, the Elmore Property was registered in both the names of the McLeans as joint registered proprietors.

6 On a date unknown to the plaintiff, Mrs McLean died. On 12 March 2016, by a survivorship application, Mr McLean became the sole registered proprietor of the Elmore Property.[5] Mr McLean also became solely responsible for the loan agreement.[6]

7 In about December 2017, Mr McLean failed to make interest instalments, the facility went over its limit and the loan fell into default.[7] On 4 December 2017, the plaintiff served a notice of default in accordance with s 88 of the National Credit Code on Mr McLean.[8] Specifically, the plaintiff by its solicitor mailed the demand to Mr McLean at 106 Liddiard Street, Hawthorn, Victoria. The notice was not complied with.[9]

8 It appears that Mr McLean had been ill since late September 2017.[10] In late September 2017, the plaintiff was contacted by Cameron McLean (the son of Mr McLean) in relation to Mr McLean, and Cameron McLean followed up with an email to him. In this correspondence, Cameron McLean (among other things) provided copy documents which purported to show that Mr McLean had given his daughter, Megan McLean, power of attorney in relation to his affairs.[11]

9 On about 8 December 2017, Mr McLean died.[12] Ms Elliott deposes on information and belief that on or about 11 December 2017, Cameron McLean telephoned Mr David Gray, a bank officer in the Elmore branch of the plaintiff. In that telephone conversation, Cameron McLean told Mr Gray that Mr McLean had died on or about 8 December 2017, and a funeral service would be held for him on 12 December 2017.[13] This is supported by a search of the Herald Sun Newspaper, where a funeral notice was included in the 11 December 2017 edition. The funeral was to be held at the Kew Baptist Church, Highbury Grove, Kew, Victoria on Tuesday 12 December 2017 at 11.30am.[14] The plaintiff does not know the specific date Mr McLean died.

10 As a result of the contact with Cameron McLean (and some prior dealings between Mr Gray of the plaintiff and Cameron McLean in relation to development of the Elmore Property), Judith Elliott of the plaintiff concluded, not unreasonably, that Cameron McLean and Megan McLean are (or were) Mr McLean's next of kin.[15]

11 On 18 December 2017 and 29 January 2018, the plaintiff's solicitors wrote to Cameron McLean and Megan McLean (as next of kin) in relation to the loan agreement, and the recovery of the loan from the Estate.[16] In each of these letters, Cameron McLean and Megan McLean were informed of the ownership of the Elmore Property by the Estate, the amount of the facility, the default, the mortgage, the indebtedness of the Estate to the plaintiff, the notice of default under s 88 of the National Credit Code and asked that they contact the plaintiff's solicitors to discuss how the Estate intends to remedy the default. No response was received by the plaintiff's solicitors to these letters.

12 On 7 February 2018, the plaintiff's solicitors sent a notice to pay under s 76 of the Transfer of Land Act 1958 (Vic) ('TLA') dated 7 February 2018 to Cameron McLean and Megan McLean, and to the last known address of Mr McLean.[17]

13 On 23 February 2018, the plaintiff commenced this proceeding, naming the Estate as the defendant to the proceeding.[18] The writ and statement of claim seeks, among other things, an order for possession of the Elmore Property.

14 On the same day, 23 February 2018, the plaintiff's solicitor wrote to Cameron McLean and Megan McLean as next of kin, and because the plaintiff considered they were persons who may be most likely to either apply for a grant of probate or letters of administration, or who may consent to representing the Estate for the purpose of the proceeding.[19] The letter (among other things) asked whether they intended (or had notice of another person intending) to apply for a grant of probate or letters of administration of the Estate, or alternatively whether they would consent to being appointed to represent the Estate for the purposes of the proceeding pursuant to the procedure permitted by r 9.08 or r 16.03 of the Rules. There was no response to this correspondence.[20]

15 On or about 6 April 2018, the plaintiff filed the summons and Elliot Affidavit. The writ and statement of claim, summons and Elliott Affidavit were then served on Megan McLean, Cameron McLean and STL.[21]

16 Since filing the summons and application, Megan McLean has expressly refused to provide her consent to being appointed to represent the Estate for the purposes of this proceeding.[22] The plaintiff has not received any response (nor consent) from Cameron McLean.

17 On the day before the hearing of the application, the solicitors for the plaintiff received a telephone call and a letter from and officer of STL in relation to the application. In the telephone conversation, the plaintiff's solicitor was told that STL had received copies of the plaintiff's Outline of Submissions and proposed form of order, that STL does not intend to appear at the hearing of the application and that STL is not currently authorised to act on behalf of the Estate. The letter was to much the same effect, save that STL acknowledged receiving a copy of the Writ and Summons as well as the Outline of Submissions and proposed form of order, and went on to state that there may be a role of STL in the future. The letter asked that it be kept informed of the progress of the matter.[23]

18 Following the service of the application, on 17 April 2018 the plaintiff's solicitor received a telephone call from Sharelle Staff of Scanlon Carroll Lawyers. She informed the solicitor that she acted for the 'executor' of the Estate, that the executor did not intend to apply for a grant of probate in relation to the Estate and that the executor had received various court documents filed in this proceeding.[24] Shortly after this telephone call, the plaintiff's solicitor sent a confirmatory email to Ms Staff confirming the conversation and asking further questions.[25] On 24 April 2018 the plaintiff's solicitor received an email from Ms Staff attaching a copy of a written statement from Megan McLean, the 'executor' of the Estate, dated 20 April 2018 stating that:[26]

(a) Megan McLean is the substitute executor of the will of Stephen McLean dated 19 December 2014;

(b) Megan McLean does not intend to apply for a grant of probate or letters of administration in relation to the Estate;

(c) Megan McLean does not give her consent to being appointed to represent the Estate for the purposes of the proceeding;

(d) Megan McLean does not intend to participate or be heard in the proceeding in any capacity;

(e) there are no other executors named in the will of Mr McLean (save for Mrs McLean, who predeceased Mr McLean);

(f) Megan McLean does not have knowledge of any other person who intends to apply for a grant of letters of administration in relation to the Estate, or who may intend to be appointed to represent the Estate for the purposes of the proceeding; and

(g) no contact has been made by Cameron McLean following service of the summons and application.

19 On 22 March 2018, the date of Judith Elliott swearing her affidavit, she undertook a search of the probate register in this Court. The results indicate that there had at that stage been no application by any person for a grant of probate or letter of administration of the Estate.[27]

20 In Victoria, the procedure to be followed by a plaintiff in circumstances where a defendant is dead at the commencement of a proceeding is governed by r 9.08 of the Rules, subject to the operation of r 16.03. I will not set out those rules here as they are set out in my decision in Australia and New Zealand Banking Group Ltd v The Estate of Balding.[28]

21 The plaintiff submits, and I agree, that it cannot proceed against the Estate by serving the proceeding by way of substituted service on the Estate. So much has been made clear in my decision in Balding. In that decision, I emphasised that it is impossible to effect substituted service where there is no person upon whom to serve process. The substituted service rule (r 6.10 of the Rules) is predicated on the existence of a person, that is a legal person, who can be served. Because the object of service is to bring the document to the notice of 'the person to be served', it is impossible to have substituted service where the defendant is an estate without a personal representative.[29]

22 The plaintiff's submits, and I again agree, that the cause of action under the loan agreement and mortgage the subject of the proceeding survives against the Estate under s 29 of the Administration and Probate Act 1958 (Vic) ('A&P Act').[30] The proceeding was commenced at a time when no person had, at that time, applied for or received a grant of representation (being a grant of probate or a grant of letters of administration).

23 The plaintiff seeks to proceed against the Estate and, in particular, seeks an order for possession of the Property in rem so it can sell the property as mortgagee and recover the outstanding monies owing to it.

24 The plaintiff submits, and I agree, that the taking of further steps by the plaintiff depends upon whether a person may be appointed to represent the Estate under r 9.08(5)(a)(i) or r 16.03(1)(b) of the Rules. If no person can be appointed to represent the Estate (because that person cannot be identified and their consent obtained), the Court has the discretion to grant leave to the plaintiff to proceed against the Estate without a person appointed to represent the Estate under r 16.03(1)(a) of the Rules.

25 Accordingly, the plaintiff is faced with two options under the Rules:

(a) to apply to have a person appointed (with their consent) to be the representative of the Estate for the purposes of the proceeding (pursuant to r 9.08(5)(i)(a) and/or r 16.03(1)(b) of the Rules); or

(b) in the absence of a person to represent the Estate, seek the leave of the Court to proceed against the Estate without a person appointed to represent the Estate (under r 16.03(1)(a) of the Rules).

26 In the circumstances described above, the plaintiff submits that it would not be appropriate to order Megan McLean or Cameron McLean to represent the Estate for the purposes of the proceeding as they have not indicated their consent.[31] That submission is clearly right. For the reasons that follow, STL may not be an appropriate body to represent the Estate for the purposes of the proceeding.

27 The Court has provided practical guidance to plaintiffs in relation to how it might proceed in such circumstances. In Balding, I explained:

(a) the plaintiff should give notice to persons who, as far as the plaintiff knows, are interested in the estate of the deceased, before seeking to take any other step in the proceeding. This may or may not lead to the appointment of a person to represent the estate for the purposes of the proceeding;[32]

(b) an order is never made where the proposed appointee is unwilling to act;[33]

(c) if there is no person willing and able to act, the Court may proceed, as contemplated by r 16.03(1)(a) of the Rules so that, at least, a judgment in rem for possession may be obtained against the estate which will bind it by virtue of r 16.03(2) of the Rules;[34]

(d) for the Court to proceed either to appoint a person as representative of the estate of the deceased for the purpose of this proceeding or to proceed in the absence of a person to represent the estate pursuant to r 16.03(1)(a) of the Rules, it is necessary for the plaintiff to make an application by summons directed to the person or persons most appropriate to be appointed to represent the estate of the deceased and include as an alternative an application to proceed in the absence of a person to represent the estate pursuant to r 16.03(1)(a) of the Rules.[35] This is reflected in the discretionary power given by r 16.03(3) of the Rules.

28 The plaintiff has followed the procedure set out by the Court in Balding. Specifically, upon filing the proceeding, the plaintiff immediately wrote to Cameron McLean and Megan McClean, the persons who it identified as being next of kin, or the persons who may be most likely to either apply for a grant of probate or letters of administration, or who may consent to representing the Estate for the purpose of the proceeding.[36]

29 One object of this notification was to determine whether an appropriate person would consent to represent the Estate for the purposes of the proceeding. Unfortunately, this did not result in any response, so the plaintiff filed the summons seeking the alternative orders referred to in Balding.

30 Following the filing of the summons and application, on 17 April 2018 and 24 April 2018, the communications received from Megan McLean (through her solicitor) revealed the following information:

(a) Mr McLean does not appear to have died intestate (and his Estate is not an intestate estate). Mr McLean appears to have died leaving a will dated 14 December 2014;

(b) this is important because unlike an intestate estate (which automatically vests in STL upon death pursuant to s 19 of the A&P Act), the A&P Act is silent on what happens to the real estate of a testate estate between the date of death and the grant of probate on the will. Section 13 of the A&P Act provides that the real estate of a testate estate vests in the executor of an Estate upon the grant of probate by the Court (i.e., realty will vest retrospectively in the executor upon the grant of probate from the date of death). Accordingly, the vesting of real property of an estate in an executor is premised on a grant of representation being made by the Court.[37] In Victoria, it would appear that the real property in the Estate vests in the heir at law between death and the grant of probate of the will of the deceased;

(c) this is relevant because if the Estate is not an intestate estate, the real property of the Estate (being the Elmore Property) does not appear to automatically vest in STL by operation of the A&P Act. In these circumstances, STL may not be able to be appointed the representative for the Estate for the purposes of the proceeding (insofar as orders for possession are sought) if the Elmore Property has not vested in it by operation of law;[38]

(d) the sole executor of Mr McLean's will appears to be Megan McLean (as Mrs McLean, the other person named as executor, predeceased Mr McLean). It is unclear who are the beneficiaries of the will. It is unclear whether the estate is solvent or insolvent;

(e) for reasons unknown to the plaintiff, Megan McLean is not willing or prepared to prove and apply for a grant of probate of the will of Mr McLean dated 14 December 2014. Despite this, Megan McLean (through her solicitor) has not indicated that she will renounce her position as executor of the will of Mr McLean;

(f) Megan McLean is not prepared to consent to being appointed a representative of the Estate for the purposes of the proceeding pursuant to r 9.08(5)(1)(b) or r 16.03(1)(b) of the Rules;

(g) Megan McLean has not identified or named any other person who she considers may be prepared to be appointed a representative of the Estate for the purposes of the proceeding pursuant to r 9.08(5)(1)(b) or r 16.03(1)(b) of the Rules. Megan McLean has not identified Cameron McLean as a person who may be a person interested in being the representative of the Estate.

(h) Megan McLean does not intend to participate or be heard in the proceeding in any capacity.[39]

31 Having regard to the endeavours of the plaintiff to identify appropriate persons who may represent the Estate, and refusal or failure of Megan McLean and Cameron McLean to consent to represent the Estate for the purposes of the proceeding, the plaintiff submits, and I agree, that it would not be appropriate for the Court to order Megan McLean or Cameron McLean to represent the Estate under r 9.08(5)(1)(a) or r 16.03(1)(b) of the Rules.

32 Having regard to the fact that STL is not vested with the real property of the Estate, and having regard to the fact that it has stated that it has no formal role 'in the matter' nor any authorisation to act for the Estate, it is not appropriate to appoint it to represent the Estate.

33 In circumstances where there is no person known to the plaintiff willing and able to represent the Estate for the purposes of the proceeding, the plaintiff submits that the Court ought to exercise its discretion to grant leave to the plaintiff to proceed as contemplated by r 16.03(1)(a) of the Rules so that, at least, a judgment in rem for possession may be obtained against the Estate for possession of the Elmore Property, which will bind the Estate by virtue of r 16.03(2) of the Rules.

34 The plaintiff submits that the Court should also exercise its discretion having regard to the terms of s 7 of the Civil Procedure Act 2010 (Vic), which provides that the overarching purpose of the Act and the rules of court in relation to civil proceedings is to facilitate the just, timely, efficient and cost effective resolution of the issues in dispute. The plaintiff submits that it is not in the interests of the Estate for interest and costs to continue to accrue under the terms of the loan agreement. The plaintiff foreshadows making a summary judgment application for possession.

35 Furthermore, the plaintiff has secured a prospective purchaser of the Elmore Property (Grange Pastures Pty Ltd) for the sum of $280,000 plus GST upon plaintiff obtaining possession of the Elmore Property, and enforcing its rights to exercise its power of sale.[40]

36 I agree that, in the circumstances of this case, the appropriate course is to grant leave to the plaintiff to proceed as contemplated by r 16.03(1)(a) of the Rules. That may enable it to obtain a judgment in rem for possession against the Estate for possession of the Elmore Property, which will bind the Estate by virtue of r 16.03(2) of the Rules. Accordingly, the Court will exercise its discretion to so order.

37 The plaintiff also seeks directions for the timetabling of a summary judgment application for the purpose of seeking orders for possession of the Elmore Property. That too is the sensible course to follow.

38 This is an appropriate case in which to grant leave to the plaintiff to proceed as contemplated by r 16.03(1)(a) of the Rules. Orders will be made accordingly.

[2] Counsel for the plaintiff, Mr K Hickie, provided a very helpful outline of Submissions which I have drawn on heavily in setting out the facts and law in these reasons .

[3] Elliott Affidavit [8], exhibit JE-1 (Loan Agreement).

[4] The land more particularly described in certificate of title volume 11334 folios 802 to 806; Elliott Affidavit [9], exhibit JE-2 (Historical title searches of the Elmore Property), exhibit JE-3 (Mortgage).

[5] Elliott Affidavit, exhibit JE-2 (Historical title search of the Elmore Property).

[8] The Code is in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth).

[10] Elliott Affidavit [14], exhibit JE-6 (Email correspondence between the Cameron McLean and the plaintiff in September 2017).

[11] Elliott Affidavit [14], exhibit JE-6 (Correspondence from Cameron McLean attaching powers of attorney in favour of Megan McLean).

[13] Elliott Affidavit [17], exhibit JE-7 (File note taken by Mr Gray in relation to the conversation with Cameron McLean on 11 December 2017). See also Elliott Affidavit [18], exhibit JE-8, in relation to the funeral notice published 11 December 2017 for a service for 'Stephen Frank McLean' on 12 December 2017.

[14] Elliott Affidavit [18], exhibit JE-8.

[16] Elliott Affidavit [24], exhibit JE-11 (Letter dated 18 December 2017); Elliott Affidavit [26], exhibit JE-12 (Letter dated 29 January 2018).

[17] Elliott Affidavit [28], exhibit JE-13 (Notice to pay under s 77 of TLA dated 7 February 2018), exhibit JE-14 (notice to pay on the last known address of the deceased).

[18] Elliott Affidavit [34], exhibit JE-17 (Writ and Statement of Claim).

[19] Elliott Affidavit [35], exhibit JE-18 (Letter to Cameron McLean and Megan McLean dated 23 February 2018).

[21] Stapleton Affidavit (served by post on 9 April 2018); and see First Griffiths Affidavit (sent by email to Cameron McLean and Megan McLean on 13 April 2018).

[22] Second Griffiths Affidavit [6]-[7], exhibit IG-3 (Statement of Megan Elizabeth McLean re Estate of the Late Stephen Frank McLean dated 20 April 2018).

[23] Third Griffiths Affidavit [4]-[5], exhibit IJG-4.

[25] Second Griffiths Affidavit [5], exhibit IJG-2.

[26] Second Griffiths Affidavit [6]-[7], exhibit IG-3 (Statement of Megan Elizabeth McLean re Estate of the Late Stephen Frank McLean dated 20 April 2018).

[27] Elliott Affidavit [33], exhibit JE-16.

[28] [2016] VSC 728 ('Balding').

[29] Balding [2016] VSC 728 [13]-[15].

[30] Youngman v Health [1974] WLR 135; New South Wales Technical & Further Education Commission v Fines (1993) 32 NSWLR 385; cited in Balding [2016] VSC 728 [8].

[31] Balding [2016] VSC 728 [27], [31]-[33] and r 16.03(1)(b) of the Rules.

[32] Balding [2016] VSC 728 [33].

[33] Ibid [30]-[33] citing Talacko & Ors v Talacko [2015] VSC 654 [165]; [2015] VSC 624; (2015) 305 FLR 353; Hewitt v Gardiner [2009] NSWSC 705 [78].

[36] Elliott Affidavit [35], exhibit JE-18 (Letter to Cameron McLean and Megan McLean dated 23 February 2018).

[37] Dal Pont et al, Law of Succession, LexisNexis Butterworths 2013 [11.71].

[38] Cf Balding [2016] VSC 728, where the estate was an intestate estate.

[39] Second Griffiths Affidavit [6], exhibit IJG-3.