Sergei Ivanovski v Walter Perdacher

Supreme Court of NSW|2009-09-01|Before: Hammerschlag J

CITATION : Sergei Ivanovski v Walter Perdacher [2009] NSWSC 913

DECISION : Keith Stevens McConnell be appointed as the representative of the first defendant's estate. Title to the proceedings be amended so as to reflect the first defendant as Keith Stevens McConnell as representative of the estate of Walter Perdacher, deceased. Proceedings stood over for further consideration.

CATCHWORDS : PRACTICE AND PROCEDURE - Proceedings brought against two defendants and one of them, against whom money judgment is sought, dies before the proceedings are heard - Uniform Civil Procedure Rules 2005 r 7.10 - before hearing order made that the proceedings continue in the absence of a representative of the deceased person's estate and hearing takes place in such absence - after hearing but before judgment plaintiffs seek appointment of a representative because money judgment sought against the deceased estate - other defendant seeks dismissal of the proceedings

Uniform Civil Procedure Rules 2005 LEGISLATION CITED : Property Law Act 1974 (Qld) Trade Practices Act 1974 (Cth) Civil Procedure Act 2005 (NSW)

Duke v Davis [1893] 2 QB 260 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 CASES CITED : Colquhoun v Graffione (Administrator) in the matter of Colquhoun [2000] FCA 325 Joint Stock Discount Company v Brown (1869) LR 8 Eq 381 Colliss v Hector (1875) LR 19 Eq 334 Vukic v Luca Grbin & Ors [2006] NSWSC 41

TEXTS CITED : C Dale, Daniell's Chancery Practice, 7th ed (1901) Stevens and Sons

Sergei Ivanovksi - First Plaintiff PARTIES : Galina Ivanovsky - Second Plaintff Walter Perdacher (deceased) - First Defendant Marie Perdacher - Second Defendant

COUNSEL : J Horowitz [Plaintiffs] G.M. Egan [Defendants]

SOLICITORS : Horowitz & Bilinsky [Plaintiffs] Bolster & Co [Defendants]

14 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50091/2006 SERGEI IVANOVSKI & ANOR -V- WALTER PERDACHER & ANOR JUDGMENT 1 On 12 July 2006 the plaintiffs sued Walter Perdacher ("Walter" or "the deceased") claiming damages of approximately $2.9M for breach and repudiation of a loan agreement entered into on 18 August 2005 by them as lenders and Walter as borrower ("the Loan Agreement"). 2 Walter was resident in Papua New Guinea. He died there on 8 February 2007. His will appointed his wife, Marie Eustice Perdacher ("Marie") executor and bequeathed 51% of his estate to her and the remainder to his daughters Elke and Annina. 3 Walter and Marie owned, as joint tenants, a house at 14 Tranquil Street Sunnybank Hills, Brisbane ("the Property"). 4 On 22 December 2005 Walter had transferred his interest in the Property to Marie. 5 Marie did not seek a grant of probate with respect to Walter's estate. 6 Rule 6.23(1) of the Uniform Civil Procedure Rules 2005 ("UCPR") provides as follows: Proceedings are not defeated merely because of the misjoinder or non-joinder of any person as a party to the proceedings. 7 UCPR r 6.30(1) provides as follows: Proceedings do not abate as a result of a party's death or bankruptcy if a cause of action in the proceedings survives.

8 UCPR r 7.10 provides as follows: (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. 9 On 27 July 2007 the plaintiffs filed a motion seeking to join Marie to the proceedings "in her capacity as representative of the estate of the late Walter Perdacher" and as second defendant in her own right. 10 Marie objected to being appointed representative of the estate. 11 On 21 September 2007, pursuant to leave granted by the Court on the motion, the plaintiffs filed a Further Amended List Statement joining Marie as second defendant in the proceedings in her own right. 12 The balance of the motion seeking her appointment as representative of the estate under UCPR r 7.10(2)(b) was deferred. 13 In their Further Amended List Statement the plaintiffs made claims against Marie: a that she had personally guaranteed Walter's obligations under the Loan Agreement; b for damages for conduct on her part which they alleged was misleading and deceptive, and which induced them to enter into the Loan Agreement; and c under s 228 of the Property Law Act 1974 (Qld) that the transfer of the Property was effected with intent to defraud the plaintiffs as creditors of Walter ("the fraudulent conveyance claim"), and seeking to avoid it. 14 The balance of the motion seeking appointment of Marie as representative of the estate was listed for hearing on 18 April 2008. 15 In a letter dated 10 April 2008, Marie's solicitors informed the plaintiffs' solicitors that she had not obtained a grant of probate and that she did not intend to do so. The letter went on to say the following: "Further, due to the civil disturbance in Papua New Guinea it is likely, if not certain, that any assets owned by the deceased have effectively been appropriated by local tribes people and the estate may well be insolvent. In those circumstances, our client cannot be forced to assume the mantle of representative of the estate in circumstances where she will be obliged to incur the costs and act in circumstances where there is no reasonable likelihood she will recover any indemnity from the estate. We advise that we are prepared to offer your client an opportunity to have the balance of the motion dismissed without penalty as to costs provided that we are notified of the acceptance of this offer prior to the close of business on Friday, 11th April 2008. In considering this matter might we respectfully draw your attention to Part 7.10 of the Uniform Civil Procedure Rules." 16 The plaintiffs then changed course. By letter dated 16 April 2008 they wrote as follows: "Further to your letter of 10 April 2008, we advise that our client will not be proceeding to have your client appointed as a representative of Mr Perdacher's estate for the purposes of the proceedings. Our client is seeking an order that the proceedings continue in the absence of a representative of the deceased person's estate. We refer you to UCPR 7.10(2)(a)." 17 Marie's solicitors responded as follows: "We refer to the above matter and advise we are instructed that our client will not be taking an active role in your application. In the circumstances, we are instructed not to appear tomorrow." 18 On 11 July 2008 on the plaintiffs' application, McDougall J made an order under UCPR r 7.10(2)(a) that the proceedings continue in the absence of a representative of Walter's estate ("the no representative order"). His Honour's ex tempore reasons include the following: "The deceased appears to have died testate, having made a will dated 1 November 1995. By that will, he appointed his now widow to be executrix and trustee and gave her some 51 per cent of his estate. The balance of the estate was given to two females who I assume to have been daughters of the deceased and his now widow. It must be said that the terms of the trusts in favour of the beneficiaries are, in some respects, less than clear: but fortunately I am not required to resolve those matters. I am satisfied that the widow has been notified of the application that has been made today. That application, although not one expressly flagged by the notice of motion, is for an order under UCPR Rule 7.10(2)(a). By rule 7.10(1)(a) the rule applies to any proceedings in which it appears to the Court that a deceased person's estate has been interest in the proceedings but is not represented in those proceedings. Clearly, that requirement is met. Where the rule applies, sub-rule (2)(a) empowers the Court to order that the proceedings continue in the absence of a representative of the deceased person's estate. Where such an order is made, and the proceedings so continue, any judgment or order made in the proceedings binds the estate as though a legal personal representative of the deceased had been a party to the proceedings.

The widow has made it clear that she does not intend to participate in the proceedings and that she does not wish to put herself to the expense of obtaining a grant of probate. That is her decision. The order that is sought provides an alternative whereby the estate will be bound (and she will be bound personally, being a party) regardless of the question of any grant.

In my view, having regard to those matters, it is appropriate that the order sought be made.

Accordingly, I order that these proceedings continue in the absence of a representative of the deceased estate of the first defendant. I order that the costs of the application be costs in the proceedings. I order that the exhibits on the application be handed back." 19 On 14 July 2008 the plaintiffs' solicitors notified Marie's solicitors of the no representative order. 20 On 1 May 2009 the matter was set down for hearing to commence on 17 August 2009 on an estimate of three days. 21 The hearing commenced on 17 August 2009. 22 Mr J Horowitz of counsel, appeared for the plaintiffs. Mr G Egan of counsel appeared for Marie. The estate of Walter was not represented. In the plaintiff's opening, reference was made to the no representative order. 23 Counsel for the plaintiffs opened on the footing that as against Walter, the unpaid interest instalments under, and loss of bargain damages for breach of, the Loan Agreement were sought, and that as against Marie the fraudulent conveyance claim, and the claims against her as guarantor and for damages for contravention of the Trade Practices Act 1974 (Cth) were being prosecuted. 24 The plaintiffs each swore a number of affidavits and they were cross examined at some length by counsel for Marie. Their credit was attacked. Marie was cross examined at some length by counsel for the plaintiffs. Her credit was attacked. An affidavit of Walter was read. Documents were tendered. There was no other evidence in the trial. 25 On conclusion of the evidence, counsel for the plaintiffs abandoned the claims against Marie as guarantor and for damages. Only the fraudulent conveyance claim and the money claim against Walter remained. 26 During final submissions I requested the plaintiffs' Counsel to address me on the identity of the party against whom the money judgment would lie (and on the form of the order sought) given that Walter is deceased so that judgment cannot effectively be given against him and there was no named defendant against whom a money judgment could lie. Counsel requested time to consider these questions and sought leave to provide a written submission by 20 August 2009. I gave that leave. 27 I received a brief written submission which appeared to offer a concession that the no representative order might have been inappropriately made because UCPR r 7.10(2)(a) contemplates cases where a deceased person's estate has an interest in proceedings between others, whereas here, more than having an interest in the proceedings, judgment is sought against the estate of the deceased.

28 In their submission, the plaintiffs requested the Court to appoint, under UCPR r 7.10(2)(b), a representative of Walter's estate for the purposes of the proceedings. 29 I directed that an application for such an order was to be made by motion, properly supported. 30 The plaintiffs filed and served a motion. It is that motion and the future conduct of the proceedings (should I accede to it) with which I am presently concerned. 31 On the hearing of the motion Mr Horowitz appeared for the plaintiffs and Mr Egan for Marie. 32 The motion was amended during argument. By it the plaintiffs seek orders that Mr Keith Stevens McConnell, a solicitor, "be appointed to represent the estate of the First Defendant, Walter Perdacher, deceased, for the purposes of these proceedings", and that the title of the proceedings be amended accordingly. 33 There was no opposition to Mr McConnell as an appropriate appointee (if a representative is to be appointed). A consent by Mr McConnell to be appointed "as the representative of the first plaintiff's (sic) estate for the purposes of these proceedings" was tendered. 34 Marie opposed the motion on the basis only that the appropriate course was for the Court now to dismiss the proceedings because: a the no representative order should not have been sought or made where judgment was being claimed against a deceased person, and that the plaintiffs should have moved for an order appointing a representative at the outset. Reliance was placed on a passage of commentary in UCPR 6.30 in Ritchie's Uniform Civil Procedure to the following effect: " If a sole defendant dies and the cause of action survives, the plaintiff may obtain an order to continue the proceedings against the defendant's executor or administrator. Alternatively, the executor or administrator may himself apply. Unless and until the executor or administrator is added or a representative order made under r 7.10 of the UCPR, the proceedings cannot be continued: Duke v Davis [1893] 2 QB 260".

It was put that the effect of this passage is that where judgment is sought against an estate a no representative order is not available; b the plaintiffs were entitled to one fair opportunity to prosecute their claim, and that they had had that opportunity. They had made a deliberate forensic decision to seek an order that the proceedings proceed in the absence of a representative of the estate and needed to show special circumstances which would justify the appointment of a representative at this late stage; and c to accede to the application would not facilitate the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings as required by s 56(2) of the Civil Procedure Act 2005 (NSW). 35 The recent decision of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 was cited as providing support for Marie's position. In that case the Court set aside orders of a primary judge and the Court of Appeal of the Supreme Court of the Australian Capital Territory granting leave to a plaintiff to amend during the course of a hearing which, amongst others, had the effect of derailing a four week trial. The Court made it clear that a party does not have an entitlement to amend a pleading to raise an arguable claim subject to payment of costs by way of compensation and that all matters relevant to the exercise of the power to permit amendment should be weighed. Substantial delay and waste of costs and concerns of case management are important. 36 Despite the criticism of the no representative order, it was made clear that Marie was not moving for its recision (ab initio or at all).

37 On behalf of the plaintiffs it was put that: a the no representative order was (notwithstanding the apparent concession earlier made) properly made, but that the Court should nevertheless now appoint a representative. It was put that the commentary in Ritchie's Uniform Civil Procedure, where it refers to a representative order under UCPR r 7.10 includes a reference to a "no representative order". It was accepted, however, that an order appointing a representative would be inconsistent with the maintenance of the no representative order and that if the motion succeeded the no representative order should be discharged; b the Court should do no more than to appoint a representative, and then immediately proceed to judgment in the substantive dispute. As a fall back position it was put that a representative should be appointed who should then be afforded an opportunity of putting submissions to the Court on the future conduct of the proceedings including whether, in the events that have occurred, there should be any further hearing, given the estate's absence during the trial. 38 My attention was drawn to the decision of Katz J in Colquhoun v Graffione (Administrator) in the matter of Colquhoun [2000] FCA 325 at [26]-[27]. His Honour's view was that the Federal Court equivalent of UCPR r 7.10(3) did not authorise the Court to pronounce any judgment or make any order otherwise than against an identified person or persons but rather that when such an order is made then that judgment or order will be taken to create an estoppel against a particular deceased person's estate as well, provided an antecedent order has been made under the equivalent of UCPR r 7.10(2). Reference was also made to a number of other writings and decisions which, while not directly dealing with the point, do not apparently exclude a no representative order where judgment is sought against an estate (see Joint Stock Discount Company v Brown (1869) LR 8 Eq 381; Colliss v Hector (1875) LR 19 Eq 334; Vukic v Luca Grbin & Ors [2006] NSWSC 41; C Dale, Daniell's Chancery Practice, 7th ed (1901) Stevens and Sons at p 178). The transcript of the hearing before McDougall J reveals that His Honour's attention was not drawn, as it should have been, to these or any other relevant authorities on the scope and operation of the relevant rules. 39 For the reasons which follow I do not accept that the proceedings should now be dismissed as Marie submits. 40 Firstly, Marie has not moved to have the no representative order set aside and the attitude of the estate to it is not yet known. In Duke v Davis, one of a number of defendants died intestate soon after a statement of defence was delivered. Shortly thereafter, there was an order transferring the proceedings from the High Court to the County Court. The action was tried against the other defendants and they succeeded. Later an administrator of the deceased's estate, wishing to receive the same result, moved the High Court for an order to compel the plaintiffs to proceed against him or in default for judgment. The administrator contended that he was not bound by the County Court judgment. The plaintiffs contended that the action was no longer in the High Court. Both Bowen LJ and Kay LJ considered that whilst on the death of the deceased the action ceased to exist against him, the most that could be said about the order for transfer was that it was irregular. It was not void. The representative could either "rest satisfied with it" to seek to have it set aside on the ground that it was made at a time when there was no representative of the deceased's estate before the Court and so might be to the prejudice of the estate. Marie has chosen the former course and the estate might do likewise. 41 Secondly, it may be observed that in the present case, unlike the position at Common Law that pertained when Duke v Davis was decided, by reason of UCPR r 6.30(1), the plaintiffs' action did not abate on Walter's death. 42 Thirdly, as in Duke v Davis, the most that can be said of the no representative order is that it was irregular. It was not void. Whether or not it was regularly made, for the duration of the hearing the plaintiffs had the benefit of the no representative order and Marie has not moved to set it aside. What is more, Marie was given notice of the application for the no representative order and took no part in it. In her solicitors' letter of 10 April 2008 attention was drawn to UCPR r 7.10. After that letter the plaintiffs' solicitors notified her solicitors of their intention to move under UCPR r 7.10(2)(a). The response on her behalf was that she would not be taking an active role in the application.

43 Fourthly, no objection to the trial proceeding in the absence of the estate was made on her behalf.

44 Fifthly, Marie participated fully in the trial and no prejudice suffered by her by reason of the estate's absence was identified. 45 Sixthly, Marie took a deliberate decision not to seek a grant of probate in respect of Walter's estate. In the light of the renunciation by her daughters of their inheritance, she is the sole beneficiary of the estate. No evidence before me suggests that there are creditors other than the plaintiffs who are interested in the estate and the position taken by Marie was that the estate has no assets and is probably insolvent. 46 Seventhly, Marie was sued as guarantor of Walter's alleged debt to the plaintiffs. During the trial it was open to her to challenge the existence of that debt but she did not do so. 47 Eighthly, even if the no representative order was incorrectly made with respect to the money claim, no good reason was proffered as to why it could not have been made with respect to the fraudulent conveyance claim where no judgment is sought against the estate and in which the estate has an interest. 48 Ninthly, even if the representative order was incorrectly made, that fact (or the non-joinder of the estate on Walter's death) would not have the effect of defeating the proceedings against Marie by reason of UCPR r 6.23. 49 I tend to agree with the observation of Katz J in Colquhoun that UCPR r 7.10 does not contemplate judgment otherwise than against an identified person. Given, however, that the no representative order was in force during the course of the trial and that the proceedings against Walter did not abate as a result of his death, it may well be that it is now open to the Court to appoint a representative and then to proceed directly to judgment on the substantive dispute. 50 However, it seems to me that the better course and the one which will serve the interests of justice is to appoint a representative and to afford him an opportunity to be heard on whether he, on behalf of the estate, wishes to take any part in the proceedings and if so (and the Court accedes to that wish) what course should be adopted. 51 The circumstances of this case bear no resemblance to what occurred in Aon Risk Services Australia Limited v Australian National University. Dismissal of the plaintiffs' claims (even if it be the case) for the reason that no representative order was incorrectly sought and obtained would be inimical to the just disposition of the true issues in these proceedings. The course which I propose to adopt will have little impact on the celerity of the disposition of the proceedings. 52 No money judgment is sought against Marie and her position as to costs with respect to the future conduct of these proceedings can adequately be protected by appropriate orders should the need arise. 53 As referred to above, the form of the consent provided by Mr McConnell refers to the first plaintiff instead of the first defendant. 54 I propose to appoint Mr McConnell upon provision of an accurate consent and to stand the matter over to a date upon which the attitude of Mr McConnell can be obtained and the future course of the proceedings determined. 55 I make the following orders and give the following directions:

Provided he consents in proper form, Keith Stevens McConnell be appointed as the representative of the first defendant's estate.

The title to the proceedings be amended so as to reflect the first defendant as Keith Stevens McConnell as representative of the estate of Walter Perdacher, deceased.

The order of McDougall J made on 11 July 2008 is, upon appointment of Keith Stevens McConnell as representative of the estate of Walter Perdacher, deceased, discharged.

The plaintiffs are forthwith at their cost to provide the first defendant with access to copies of the affidavits read in the trial, the transcript of the trial (including submissions), all written submissions made at the trial and the exhibits admitted into evidence at the trial, together with any further information he reasonably requires.

The proceedings are stood over to 18 September 2009.

The plaintiffs are to pay the second defendant's costs of the motion on an unopposed basis. The plaintiffs are to bear their own costs of the motion.

Other questions of costs which may be affected by the orders which I have made are reserved.

The parties have liberty to apply on 48 hours notice. **********

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Trade Practices Act 1974(Cth)

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