Plaintiffs v First Defendant

1 Alfred Basil Jack ("the deceased") died on 18 September 2009.

2 The plaintiffs are two of the deceased's children.

3 Prior to his death and on 18 February 2008, the deceased transferred the property known as 7 Thackeray Court, Croydon ("the Property") to his youngest daughter, Elizabeth Michaela Jack ("Elizabeth"), the second defendant. The Property was the deceased's largest asset.

4 In his last will dated 24 March 2009, the deceased made no provision for the plaintiffs.

5 The plaintiffs have commenced proceedings in this Court against the first defendant, Ewan Bruce McLean, as executor of the estate of the deceased ("Executor"). They are seeking orders pursuant to Part IV of the Administration & Probate Act 1958 (Vic) to the effect that provision be made for them from the estate of the deceased ("the Part IV proceeding").

6 In addition to commencing the Part IV proceeding, the plaintiffs have commenced this proceeding against the Executor and Elizabeth, their sister.

7 The amended statement of claim alleges that at the time the Property was transferred to Elizabeth, the deceased was in a position of special disadvantage. The nature and extent of the special disadvantage is set out in paragraph 10 of the amended statement of claim.

8 Pursuant to paragraph 11 of the amended statement of claim, it is alleged that the transfer was made in circumstances in which it would be unconscionable for Elizabeth to accept or retain the gift.

9 By summons filed 6 October 2010, the Executor made application for the dismissal of the proceeding pursuant to rule 23.01(1)(a) of the Supreme Court (General Civil Procedure) Rules 2005. The basis of the application was that the proceeding does not disclose any cause of action against the defendants because the plaintiffs lack standing.

10 The plaintiffs contend that they have standing to bring this proceeding and that it is necessary in order to have certainty about the assets of the deceased at the time of the hearing of the Part IV proceeding. They claim that the transfer of the Property to Elizabeth should be set aside and as a consequence, that the Property is properly an asset of the deceased's estate.

11 The application came on for hearing before Daly As J on 25 October 2010. Her Honour refused the application and ordered that the costs of the application be reserved. By a notice of appeal filed 29 October 2010, the Executor appeals from the orders of Daly As J. The second defendant appeared at the hearing of the appeal and in addition to supporting the submissions and contentions made by the Executor, has raised some other matters in support of the appeal.

12 In essence, the defendants contend that they should not be put to the trouble of a trial. They contend that as a matter of law the position is clear and because the plaintiffs lack standing to bring this proceeding, it should be dismissed right away.

13 On an application to strike out or dismiss (or stay) a claim on the basis that no cause of action is disclosed, the threshold for a plaintiff is very low. The claim must be plainly hopeless and bound to fail.[1]

14 Associate Justice Daly refused the application, in effect, on the basis that the claim was not plainly hopeless or bound to fail.

15 I have heard full argument in the matter and am in no different a position to the trial judge. I am able to determine the argument as a matter of substance and not merely identify its existence and the quality of the rival contentions in order to assess whether the claim gets over the threshold for summary dismissal.

16 A procedural question is immediately apparent. Am I obliged to consider the matter only on the basis of an assessment - summary in nature - of whether the claim is bound to fail or am I entitled to deal with the matter as if it were the determination of a preliminary question of law? It is obvious that the result of the application may differ depending on the approach taken. On a summary basis and without the benefit of full argument, a conclusion that the claim is not plainly hopeless and deserving of full argument may be intuitive, particularly in light of the gravity of the result. However, having heard the argument the result may and often will differ.

17 Despite the traditional approach[2], there is high authority to the effect that the distinction between summary determination and determination of a point of law should not detract from - in an appropriate case - an extensive analysis of the law to determine the futility of the plaintiffs' case.[3] This is what happened in Harpur.

18 The basis of the plaintiffs' claim is that because the Executor has failed to commence proceedings to set aside the transfer of the Property, they have standing as contingent beneficiaries by virtue of the Part IV proceeding.

19 The cases relied on by the plaintiffs[4] in support of the contention that they have standing, in effect, because they are contingent beneficiaries, do not assist them.

20 In each of the cases referred to, the plaintiff has been a specific beneficiary of the relevant trust or a member of a class of beneficiaries within the trustee's discretion. On this basis, the Court in each case held that the beneficiary had a sufficient interest in the trust property to make a claim on behalf of the trust against a third party.[5]

21 The authorities clearly demonstrate that in order to bring such a proceeding, the plaintiffs must have a present interest or an actual existing interest. A mere possibility or even probability will not be sufficient.[6]

22 Mr Newton of counsel, who appeared for the plaintiffs, essentially conceded that the authorities relied on do not deal with the specific question as to whether a person who is not a beneficiary, but rather a claimant under a Part IV claim who in effect seeks to become a (statutory) beneficiary, can bring such a claim if the executor refuses to do so. He submits that on principle the plaintiffs should be permitted to bring the claim.

23 It is clear in my opinion, that the plaintiffs are not beneficiaries in the relevant sense. They do not have a present interest or an actual existing interest so as to fall within the scope of the cases referred to by the plaintiffs.

24 However, Mr Newton suggests that it is a logical corollary and only a short step to include a contingent beneficiary in the class of persons who may bring a claim on behalf of the estate in the event that the executor is unwilling to do so.

25 In my opinion, the plaintiffs do not have standing to make the claim pleaded in the amended statement of claim on the basis that they are contingent beneficiaries.

26 The beneficiary cases are a peculiar and specific class of cases. They permit someone with an actual legitimate interest, namely a beneficiary, to sue in his or her own name, but in effect, on behalf of the estate when the executor has failed to do so. There are other requirements. However, the critical threshold question is whether the proposed plaintiff is a beneficiary. The plaintiffs in the present case are not and accordingly, cannot maintain a claim on such a basis.

27 It should be emphasised that an executor is charged with various statutory and general law duties. It is an important office and an executor is entitled to exercise his or her own judgment and discretion in the administration of an estate. A party should not lightly be entitled to, in effect, step into the shoes of an executor. To do so, the party must at the very least have a sufficient interest. That is why the class of persons that may sue is limited to beneficiaries with an actual interest. Further, even such persons (with an obvious interest) need to make out a case as to why they should be permitted to sue.

28 In developing his submission, Mr Newton stated that in any event and apart from the beneficiary cases, whether or not a plaintiff had standing to commence a proceeding depended on whether the plaintiff had an "interest" in the proceeding.

29 In support of his submission, Mr Newton relied on a number of additional cases.

30 The cases all stand for the proposition that a party with a sufficient interest in a proceeding or a real connection with a dispute has standing to bring and maintain the proceeding.

31 In Australian Conservation Foundation v The Commonwealth[7] ("Australian Conservation Foundation case"), Mason J said the following:

"Depending on the nature of the relief which he seeks, a plaintiff will in general have a locus standi when he can show actual or apprehended injury or damage to his property or proprietary rights, to his business or economic interests (as to which see New South Wales Fish Authority v Phillips (5)) and perhaps to his social or political interests. Beyond making this general observation, I consider that there is nothing to be gained from discussing in the abstract the broad range of interests which may serve to support a locus standi for, as I said in Robinson v. Western Australian Museum (6): "The cases are infinitely various and so much depends in a given case on the nature of the relief which is sought, for what is a sufficient interest in one case may be less than sufficient in another" (citations omitted).

32 In JN Taylor Holdings Ltd (in liq) v Bond[8] ("JN Taylor Holdings v Bond"), Debelle J permitted the joinder of preference shareholders as plaintiffs to a proceeding by a company against former directors for breach of duty. His Honour held that they had a sufficient interest to warrant adding them as plaintiffs.

33 In Russo v Russo[9] ("Russo"), Hargrave J held that the daughters of a deceased man had standing to bring proceedings to remove the son of the deceased as executor because they had a sufficient interest in the estate. His Honour said the following at paragraph 32:

"My opinion does not depend upon crystallisation of a constructive trust in favour of the daughters prior to the death of their mother. The existence of the 'floating obligation' or 'floating trust' described by Latham CJ and Dixon J in Birmingham v Renfrew, combined with the qualification that their mother may only use the assets of their father's estate (and her own assets) bona fide without any intention to defeat the mutual wills agreement, provides a sufficient, albeit indirect, interest in their father's estate."

34 Mr Newton also made reference to two probate cases. In the first case, In Re Seymour[10] ("Seymour"), the Court held that a caveator who was a secured creditor of a son of the testator had a sufficient interest in circumstances where the son's estate would receive a substantial benefit (falling within the security) if an earlier will of the deceased was valid.

35 In the second case of In Re Finn[11] ("Finn"), the Court held that an undischarged bankrupt was competent to lodge a caveat and that he did have a sufficient interest under a prior will.

36 Accordingly, Mr Newton submitted that based on these more general authorities the plaintiffs had a sufficient interest because they had commenced the Part IV proceeding.

37 The defendants submit that in order to have standing to bring a claim for a declaration of the kind sought by the plaintiffs in the amended statement of claim:

(a) there must be a controversy between the parties;

(c) it must be brought by a person who has a proper or tangible interest in obtaining the order, which is usually referred to as "standing" or "locus standi".

(a) there has been no prior relationship or dealings between the plaintiffs and the defendants giving rise to a dispute between the parties;

(b) there are no rights, duties or obligations as between the parties; and

(c) the plaintiffs do not have a proper, tangible or present interest in obtaining the order.

39 Therefore, it is submitted that the form of the relief sought by the plaintiffs does not, of itself, give them standing in this proceeding.

40 In my opinion, the plaintiffs do not have a sufficient interest in the dispute so as to give them standing to pursue the claim. The fact that they would like the transfer to be set aside as it may assist them if and when they succeed in the Part IV proceeding does not affect the position and does not create any present interest. Seeking to have some interest or benefit out of the estate (if successful in the future) does not give any present enforceable right at all. At present, they have nothing more than a naked statutory right to litigate. It is a personal statutory right and not a proprietary right.[12] Although they are close to the deceased in a family sense, they are strangers in a legal sense.

41 The Australian Conservation Foundation case relates to issues of public law and on that account, falls into a different category. So far as the case establishes any principle of general application beyond public law, it is that a party must have a real connection with the dispute in order to seek declaratory relief. Certain principles have developed in relation to public law. Applying the general principle to this case, I am of the opinion that the plaintiffs have not established a real connection with the dispute. They are yet to establish any interest. The proceeding that seeks to give them an interest does not advance, accelerate or re-characterise their interest to the level necessary to show such a real connection.

42 The interests of the plaintiffs cannot, as a matter of substance, compare with the interests of the preference shareholders in JN Taylor Holdings v Bond or the daughters in Russo. Nor can they compare, as a matter of substance, with the interests of the secured creditor in Seymour or in the beneficiary in Finn.

43 Assuming the Part IV case was heard and determined today against the plaintiffs, this case would be struck out. The sustainability of this case is contingent on the plaintiffs succeeding in the Part IV case. Such contingency is not, in my opinion, sufficient to give the plaintiffs standing.

44 Mr Newton posed the following hypothetical: what if the plaintiffs succeeded in their Part IV case and the transfer was indeed unconscionable? If the claim in this case is struck out, the victory would be pyrrhic as it would exclude a major asset that the plaintiffs would have been entitled to put into the mix in the determination of their Part IV case. Again, this may be an unfortunate consequence but does not (presumptively) give the plaintiffs standing. Further, I am not persuaded in any event that the plaintiffs would, in the circumstances postulated, be without a remedy.

45 I will hear from the parties as to the precise form of the order and as to costs.

[1] The authorities are helpfully collected in Williams, Civil Procedure Victoria (3rd ed) at page 3421.13.

[2] As a matter of procedural fairness a party should have the opportunity of testing the validity of his or her case through the ordinary process of litigation and only in clear cases should this opportunity be taken away: see Williams, Civil Procedure Victoria (3rd ed) at page 3418.

[3] Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 84 (Latham CJ); General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 (Barwick CJ); Harpur v Levy [2007] VSCA 128; (2007) 16 VR 587 at [32]- [37] ("Harpur").

[4] Ramage v Waclaw (1988) 12 NSWLR 84; Lidden v Composite Buyers Ltd (1996) 67 FCR 560; Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432.

[5] See also Re Atkinson, deceased [1971] VicRp 73; [1971] VR 612 where Gillard J held that a son, being a beneficiary, did have an equity so as to entitle him to pursue a remedy on behalf of the estate.

[6] This was the case in Brennan & Anor v McGuire [2010] NSWSC 1249 where Palmer J held that a caveat lodged by a non-family member against the grant of probate should be removed because the caveator did not have any not have any interest at all other than a general interest.

[8] (1994) 62 SASR 605.

[9] [2009] VSC 491.

[10] [1934] VicLawRp 24; (1934) VLR 136.

[11] [1942] VicLawRp 27; (1942) VLR 125.

[12] The claim cannot be assigned or transferred: Coffey v Bennett [1961] VicRp 41; [1961] VR 264 at 266-7.