Central Murray Credit Union Limited v The Estate of Cochrane
[2022] VSC 647
•14 October 2022 (given ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2022 02140
BETWEEN:
| CENTRAL MURRAY CREDIT UNION LIMITED (ABN 69 087 651 812) | Plaintiff |
| v | |
| THE ESTATE OF KEVIN BARRY COCHRANE (DECEASED) | Defendant |
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JUDGE: | Hetyey AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 October 2022 |
DATE OF JUDGMENT: | 14 October 2022 (given ex tempore, revised) |
CASE MAY BE CITED AS: | Central Murray Credit Union Limited v The Estate of Cochrane |
MEDIUM NEUTRAL CITATION: | [2022] VSC 647 |
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MORTGAGE — Default — Action by mortgagee for possession of property and for monies due under loan agreement — No grant of representation in respect of estate of deceased mortgagor — Proceeding commenced against estate of deceased person as permitted by r 9.08(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) — Where executors did not consent to appointment as representatives of the deceased estate — Rule 16.03(1)(a) of the Rules — Where order made that matter proceed to trial in absence of person to represent the estate — Where conflicting authorities on whether relief in the form of judgment in personam may be granted against unrepresented estate of deceased — Unnecessary to decide question — Orders for possession of property made together with factual findings as to amounts owing under the loan.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A L Gaber | Holman Webb |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 1
Procedural history.............................................................................................................................. 1
Evidence and analysis.................................................................................................................. 4
Debt due under Loan.......................................................................................................... 4
Entitlement to order for possession................................................................................................ 9
Formulation of final orders.............................................................................................................. 9
Conclusion......................................................................................................................................... 12
HIS HONOUR:
Introduction
In this proceeding, which was commenced by writ on 9 June 2022, the plaintiff, Central Murray Credit Union Limited (‘CMCU’) seeks an order for possession of the property located at 10 James Cook Drive, Cranbourne, Victoria 3977 contained in certificate of title volume 10124 folio 810 (‘the Property’), together with an order for payment of a debt secured by mortgage over the Property, statutory interest and costs. The Property was owned by Mr Kevin Barry Cochrane (deceased) (‘the deceased’), who died on 8 November 2020.
Background
On 27 November 2009, the deceased signed a loan agreement with CMCU, by which CMCU advanced him the sum of $151,674.20 (‘the Loan’). The Loan was secured by a mortgage registered over the title of the Property under dealing number AB628457V (‘the Mortgage’).
On 27 April 2022, as a result of various defaults under the Loan, a default notice was issued by CMCU to the deceased’s estate and other interested persons requiring the defaults to be rectified by 6 June 2022. This default notice was not complied with and, consequently, CMCU contends that it is entitled to possession of the Property and payment of the full debt owing to it under the Loan. I will return to the circumstances of the alleged default under the Loan and the applicable provisions of the Loan and Mortgage shortly.
Procedural history
As at the time of commencement of the proceeding, no grant of representation had been made in respect of the deceased’s estate. Because CMCU’s cause of action under the Loan and Mortgage survives against the deceased’s estate by virtue of s 29 of the Administration and Probate Act 1958 (Vic) (‘Administration and Probate Act’),[1] and in circumstances where no grant of representation had been made, CMCU properly commenced the proceeding against ‘The Estate of Kevin Barry Cochrane (Deceased)’ (‘the defendant’) as permitted by r 9.08(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).
[1]Bendigo and Adelaide Bank Ltd v The Estate of McLean [2018] VSC 215, [22] (Derham AsJ).
An application for grant of probate has in fact been made by Kristen New, an executor of the deceased’s will dated 7 November 2020 (‘the Will’). However, the deceased’s daughter and only child, Christine Cochrane, has contested the grant of probate in another proceeding before this Court[2] (‘the probate proceeding’) on the basis that the deceased lacked testamentary capacity during the period shortly before, and at the time of execution of the Will, and did not know or approve of the contents of the Will. The Will appears to provide for the deceased’s estate to go to Christine Cochrane and her two minor children, Nate Cochrane and Tyler Cochrane, equally, when the grandchildren attain the age of 21 years in the year 2037.
[2]Proceeding S PRB 2021 09941.
Accordingly, the plaintiff filed a summons on 17 June 2022 seeking orders that Ms New, as executor of the deceased's estate, or Darren Cochrane, who is the co-executor of the estate and also the deceased’s brother and occupant of the Property, be appointed as representative of the deceased’s estate for the purpose of this proceeding, pursuant to rr 9.08(5)(a)(i) and/or 16.03(1)(b) of the Rules. In the alternative, an order was sought under r 16.03(1)(a) of the Rules that the Court proceed in the absence of a person to represent the deceased’s estate.
The summons was duly served on Ms New, Mr Cochrane and Ms Cochrane. Judicial Registrar Englefield made orders at the return of the summons on 26 July 2022 recording that neither Ms New nor Ms Cochrane had consented to be appointed as representative of the deceased's estate in this proceeding and that Mr Cochrane did not respond to the summons. Judicial Registrar Englefield rightly observed that delay and additional costs arising from procedural difficulties in the proceeding would not advantage the persons interested in the estate as it would diminish the amount of any surplus on the sale of the security property if possession is granted to the plaintiff. Pursuant to r 16.03(1)(a) of the Rules, Englefield JR determined that the matter proceed in the absence of a person to represent the estate of the deceased. The matter was listed for further directions on 23 August 2022 and the plaintiff was ordered to serve a copy of the Court’s orders made that day on Ms New and Ms Cochrane via their legal representatives.
At the further return of the matter on 23 August 2022, Englefield JR was satisfied that the Court’s previous orders had been served on the relevant persons and ordered that the trial of the proceeding be heard on an undefended basis because no person had provided consent to appointment to represent the estate for the purpose of this proceeding. The matter was subsequently listed for trial on 14 October 2022 before me.
According to the affidavit of Mr Christopher Hadley sworn 10 October 2022, Ms Cochrane was served with a copy of the Court’s orders of 23 August 2022 and a trial notification from the Commercial Court Registry providing notice of today’s listing by letter dated 26 September 2022, which was delivered via express post and email. No response was received from Ms Cochrane. Ms New was provided the same documentation via email to her solicitors on 13 September 2022 who responded by providing the plaintiff’s solicitors with an update on the status of the probate proceeding. Those communications suggest the probate proceeding is still at the discovery stage and awaiting a mediation. Further, on 17 August 2022, Ms Cochrane’s solicitors filed a notice of ceasing to act in the probate proceeding. On 30 September 2022, Keith JR listed the probate proceeding for further directions on 28 October 2022. The Court is informed that, at any rate, there has not yet been a grant of probate.
On 31 August 2022, Connock J ordered that the writ filed on 9 June 2022 be referred to an Associate Judge for hearing and determination.
In support of its claim, the plaintiff principally relies on the affidavits of Sally Eales sworn 17 August 2022 and 12 October 2022, respectively, together with their exhibits, which include the Loan and the Mortgage. Ms Eales is the Operations Manager of the plaintiff with access to all business records of CMCU in relation to monies owing to it by its customers. She deposes to being fully apprised of the facts and circumstances surrounding the Loan. The plaintiff also relies on the affidavit of Christopher Hadley sworn 10 October 2022, which I have already referred to. In addition, the plaintiff’s counsel prepared comprehensive written submissions dated 29 September 2022, for which I am grateful. I have drawn on aspects of those submissions in delivering my reasons.
Evidence and analysis
The issues which arise for determination are as follows:
(a) whether CMCU has established that the Loan is a debt that is due and payable in full and is entitled to judgment for the amount owing pursuant to the terms of the Loan and Mortgage?;
(b) whether CMCU is entitled to possession of the Property pursuant to the terms of the Mortgage?; and
(c) what final orders can be made given the defendant is not a legal person and no person has been appointed to represent the estate?
I deal with each of these issues in turn.
Debt due under Loan
The terms of the Loan are as follows:
(a) according to the Schedule of the Loan, the amount to be advanced was $151,674.20, repayment of which was to be made weekly, over 360 months;
(b) the deceased would be in default of the Loan if, amongst other things, he did not make repayment in full by the date it is due (cl 13.1(a)) or breached any term of the Loan or the Mortgage (cl 13.1(b));
(c) clause 13.2 states that if the deceased is in default, CMCU may send him a default notice that will tell him what the default is and what he has to do to remedy the default within at least 30 days from the date of the notice;
(d) clause 13.3 goes on to provide that if the default notice is not complied with, the deceased becomes liable to pay CMCU the balance of the Loan immediately;
(e) clause 14 provides that if the deceased is in default under the Loan, CMCU may charge the deceased enforcement expenses that it reasonably incurs and these expenses may be debited to the deceased's loan account. The enforcement expenses include expenses relating to the enforcement of any right of CMCU or its attempt to enforce any such right; and
(f) clause 2.1(a) and page four of the Schedule to the Loan confirms the security for the Loan would be a mortgage over the Property. As previously mentioned, the Mortgage is recorded as registered on the title of the Property.
A loan transaction printout exhibited to Ms Eales’ affidavit of 17 August 2022 shows that on 30 November 2009, CMCU advanced the amount of $151,674.20 under the Loan to the deceased.
The Mortgage incorporated the terms contained in the ‘Memorandum of Common Provisions’ retained by the Registrar of Titles in No AA673. These provisions include:
(a) the deceased must pay on time all amounts for which the deceased is liable as owner of the Property, including rates, taxes, and shared scheme levies (cl 2);
(b) the deceased is in default if he does not pay the amount owing on time or did not carry out in full an undertaking given in connection with the Mortgage or an agreement covered by the Mortgage (cl 18);
(c) if the deceased is in default and CMCU chooses to enforce the Mortgage, CMCU must give notice stating that the deceased is in default and specify a period of grace of at least 31 days (cl 19.1);
(d) if the deceased does not correct a default within the grace period specified in the default notice under cl 19.1, CMCU may sue the deceased for the amount owing and take possession of the Property (cl 19.3);
(e) further, the deceased must pay CMCU’s reasonable expenses in enforcing the Mortgage after default (cl 20);
(f) provision is made for the making of communications from CMCU, including by post to the deceased’s residential or business address (cl 23.3); and
(g) CMCU may give the deceased a certificate about a matter or about an amount payable in connection with the Mortgage and the certificate is sufficient evidence of the matter or amount, unless it is proved to be incorrect (clause 24).
By a letter dated 5 March 2021, Waters Lawyers, who purported to act for the deceased’s estate, informed the plaintiff that Kevin Barry Cochrane died on 8 November 2020 and enclosed a copy of the deceased's death certificate. On or about 13 November 2021, CMCU received from Waters Lawyers a copy of the Will which, as I have mentioned, lists Kristen New and Darren Cochrane as co-executors.
The evidence demonstrates that as of 27 April 2022, the deceased was in default of the Loan because:
(a) as of 21 April 2022, the Loan was in arrears of repayments in the amount of $8,682.14;
(b) as of 15 December 2021, $7,596.16 was outstanding for land rates owing to the City of Casey in respect of the Property; and
(c) as of 30 March 2022, $1,034.45 was owing to South East Water for outstanding water rates on the Property
(collectively, ‘the defaults’).
By a letter dated 27 April 2022, CMCU issued a default notice to the defendant pursuant to s 76 of the Transfer of Land Act 1958 (Vic) (‘TLA’) and ss 88 and 93 of the National Credit Code, found in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth) (‘the default notice’). The default notice provided that the defendant was required to remedy the defaults by no later than 6 June 2022, failing which the whole amount under the Loan would be immediately due and payable and CMCU may commence enforcement proceedings against the defendant in relation to the defaults. I observe that the default notice permitted more time than that stipulated by cl 13.2 of the Loan (30 days) and cl 19.1 of the Mortgage (31 days). The default notice was signed by Amanda Seccull, a Loan Manager employed by CMCU and was sent by express post to the defendant at the Property (which was the deceased’s last known address), to Ms New (care of her solicitors) and to Mr Cochrane at the Property. Delivery of the default notice occurred on 29 April 2022 in the case of Mr Cochrane and Ms New and on 2 May 2022 in the case of the named defendant.
In the event, the defaults were not rectified. A loan transaction printout records that between 27 April 2022 and 6 June 2022, only two payments of $200 each were made by ‘K New’ on 29 April 2022 and 25 May 2022, respectively. A land information certificate issued by the City of Casey on 16 August 2022 records a total balance outstanding of $9,646.80. Additionally, an information statement issued by South East Water dated 16 August 2022 records a total unpaid balance of $1,450.79.
The case of Commonwealth Bank of Australia v Jackson[3] sets out the mortgagee’s task when it comes to claiming possession of mortgaged land by virtue of alleged defaults. In Jackson, Tadgell J made the following statement in relation to s 78 of the TLA, the statutory provision enabling a mortgagee to enter into possession of the mortgaged land upon default:
… s 78 of the Transfer of Land Act made the mortgagee’s task a comparatively simple one. It merely needed to allege in the statement of claim and prove upon an application for summary judgment the execution of the mortgages, the advances, default by the failure of the mortgagors to pay anything under the mortgages, and that the defendants as mortgagors were in possession.[4]
[3](1992) V Conv R 54-447 (Tadgell J) (‘Jackson’).
[4]Ibid [2].
The approach adopted by Tadgell J in Jackson has been applied in a number of other cases such as National Australia Bank Ltd v Lawrence[5] and in Wren Close Nominees Pty Ltd v McCulloch.[6] The former case proceeded as an undefended trial. After reciting uncontroverted evidence from the plaintiff that default notices were supplied to the defendant and remained unremedied, Gardiner AsJ ordered that the plaintiff recover possession of the relevant properties and the defendant pay the plaintiff the debt owing under the mortgage, including interest to date of judgment and the plaintiff’s costs of the proceeding.[7]
[5][2011] VSC 556, [39]–[40] (Gardiner AsJ) (‘Lawrence’).
[6][2002] VSC 138, [29] (Beach J).
[7]Lawrence, [49].
Having regard to the principles articulated in Jackson, I consider that CMCU has established the matters it is required to satisfy to obtain possession of the Property. In particular, CMCU has established: the execution of the Mortgage (and the Loan itself); the advance to the defendant and the defaults under the Loan (which remain unremedied); and the fact that Darren Cochrane (the deceased's brother) is currently in possession of the Property. I note that CMCU prudently directed the default notice to the relevant interested parties, including the executors of the Will. It is noteworthy that the default notice allowed more time than the time prescribed by the Loan and the Mortgage to rectify the defaults. Nevertheless, the defaults were not redressed and during the period between the issue of the default notice (27 April 2022) and the final date to rectify the defaults (6 June 2022), only two nominal payments were made towards the Loan, totalling $400. Moreover, monies remain outstanding and owing to the City of Casey for land rates and South East Water for water rates and those sums are increasing.
I accept CMCU’s submission that because the defaults were not rectified by 6 June 2022, or at all, the full amount owing under the Loan became due and payable by the defendant. It follows that pursuant to the terms of the Loan and Mortgage, CMCU would be entitled to judgment for the amount owing.
As of 15 August 2022, the amount owing to CMCU was $157,375.05. Ms Eales’ affidavit of 12 October 2022 and the statement exhibited to it establish that the amount owing to the plaintiff under the Loan and Mortgage as at 12 October 2022 is $174,523.43. The increase in the amount owing is attributable to enforcement costs and interest. Almost $36,000 of the $174,523.43 total is referrable to enforcement expenses which largely comprise legal costs in the proceeding. Given the complex issues raised in the matter, these enforcement expenses appear to be reasonable in the circumstances.
Entitlement to order for possession
At the same time and in view of the above matters, I accept that CMCU has an entitlement to possession of the Property under the terms of the Loan and Mortgage.
Formulation of final orders
Whilst as a general rule, a mortgagee may proceed against the assets of a deceased mortgagor,[8] there is some controversy over what form of relief may be granted by the Court. A judgment for possession of land is a judgment in rem.[9] A monetary order against the mortgagor for payment of the sum owing under a loan and mortgage, including interest, is an order made in personam. An important question arises as to what relief can be granted in circumstances where no person has been appointed to represent the defendant. In particular, can an in personam judgment be entered against the defendant in addition to an order for possession?
[8]King v Smith (1843) 67 ER 99.
[9]GEL Custodians Pty Limited v The Estate of the late Geoffrey Francis Wells [2013] NSWSC 973,
[61]–[62] (Davies J).
There are conflicting lines of authority on the point. The conventional and perhaps predominant view has been that it is necessary for there to be an identified person against whom a judgment is given, particularly if it is a money judgment in personam. In other words, it is not possible to render judgment against a deceased estate where no grant of representation has been made. The exception to this rule appears to be in respect of judgments in rem for possession of the mortgaged property. Cases such as Colquhoun v Graffione;[10] Sergei Ivanovski v Walter Perdacher;[11] GEL Custodians Pty Ltd v The Estate of the late Geoffrey Francis Wells;[12] Australia and New Zealand Banking Group Ltd v Estate of Balding;[13] and Bendigo and Adelaide Bank Ltd v The Estate of McLean[14] stand as authorities for those propositions. However, there are other authorities which appear to have taken a more flexible approach to applications that proceed under the equivalent of r 16.03 of the Rules against a deceased estate, such as Green v Green;[15] Vukic v Grbinin[16] and more recently Bayside Council v Estate of Goodman,[17] in which Robb J comprehensively reviewed the authorities and rules of court[18] and concluded that there may be exceptions to the general proposition that the court can only enter judgment or make an order against a living defendant, particularly where the deceased’s estate has been appropriately protected.[19] In the later related case of Bayside Council v Estate of Goodman(No 2),[20] Lindsay J gave monetary judgment in favour of the plaintiff against the deceased estate.
[10][2000] FCA 325, [25]–[27] (Katz J).
[11][2009] NSWSC 913, [49] (Hammerschlag J).
[12][2013] NSWSC 973, [64] (Davies J).
[13](2016) 51 VR 137, 142 [16] (Derham AsJ).
[14][2018] VSC 215, [36] (Derham AsJ).
[15](1989) 17 NSWLR 343 (Hodgson J).
[16][2006] NSWSC 41 (Brereton J).
[17][2019] NSWSC 530.
[18]Including r 29.12 of the Uniform Civil Procedure Rules 2005 (NSW), which is the equivalent of r 49.04 of the Rules.
[19]Ibid [112], [193]–[194].
[20][2021] NSWSC 654.
In addition, I note the operation of s 40(1) of the Administration and Probate Act, which may also have application to the question of available remedy in this case and is in the following terms:
Where a person dies possessed of or entitled to or under a general power of appointment (including the statutory power to dispose of entailed interests) and the will disposes of an interest in property which, at the time of the deceased’s death is charged with the payment of money whether by way of mortgage charge or otherwise (including a lien for unpaid purchase money) and the deceased has not by will signified a contrary or other intention the interest so charged shall as between the different persons claiming through the deceased be primarily liable for the payment of the charge; and every part of the said interest according to its value shall bear a proportionate part of the charge on the whole thereof.
(Emphasis added)
In essence, the section provides that as between persons entitled to the deceased mortgagor’s property, the mortgagor’s property is the primary fund for the payment of the debt.[21] It is unclear whether this provision may also operate as another exception to the general rule that it is not possible to render judgment against a deceased estate where no grant of representation has been made. The Court did not have the benefit of submissions on this question.
[21]ELG Tyler, PW Young and CE Croft, Fisher and Lightwood’s Law of Mortgage (LexisNexis, 3rd ed, 2013) [29.2].
However, it is ultimately unnecessary to determine whether in personam orders can be made in the present case. In an exchange with the plaintiff’s counsel, I queried whether it might be more efficient for the plaintiff to simply seek an order for possession of the property and to proceed on the basis of the Court’s factual findings as to the precise amount owing under the Loan which is secured by the Mortgage. This would militate against the possibility of future disputation concerning the amount owing under the Loan and Mortgage at the time of entry of the Court’s orders. The merit of this approach is evident in circumstances where, as the plaintiff submits and the evidence of Ms Eales confirms, the full amount owing under the Mortgage, including interest and costs, will be recovered as a consequence of the sale of the Property and it is not expected that there will be any need for CMCU to take additional enforcement action to recover the monetary sum. However, in the event that CMCU needs to pursue additional remedies following an order for possession, it will not be estopped from bringing such an action.[22] In Alliance & Leicester Plc v Slayford,[23] Gibson LJ, who gave judgment for the English Court of Appeal, said:
[I]t would not help mortgagors, mortgagees or the courts if mortgagees had to claim and pursue to judgment all the possible claims at one and the same time. Mortgagees usually only go for a possession initially and pursue other remedies later if they have to, and that practice is entirely sensible and to the advantage of all concerned.[24]
[22]Ibid [17.12].
[23](2001) 33 HLR 74.
[24]Ibid 752 [20] (Mummery LJ agreeing at [33], Latham LJ agreeing at [34]), applied in Cheltenham & Gloucester Plc v Appelyard [2004] EWCA Civ 291, [94], where the Court of Appeal said possession applications ‘should be kept as simple as possible and that … a mortgagee should not normally be penalised for having sensibly limited the points it raises in a mortgage possession application’ (at [95]).
Following a short adjournment, counsel for CMCU indicated that her client was amenable to this proposed course. In particular, she confirmed her client was no longer pressing for judgment in the amount owing under the Loan and Mortgage or for orders seeking statutory interest or legal costs. I note that the plaintiff’s legal costs will be subsumed within CMCU’s enforcement costs under the Loan and Mortgage in any event.
Finally, and for completeness, I note that following the hearing this morning and before the delivery of these ex tempore reasons, Ms Cochrane contacted the Court’s Principal Registry and inquired as to the status of the hearing. She was informed that the trial had proceeded this morning and that judgment had been reserved for delivery this afternoon. Ms Cochrane was invited to attend Court in person or participate in the hearing via audio visual link. She did not do so.
Conclusion
In view of the above matters, I order as follows:
(1) The plaintiff recover possession of the land contained in certificate of title volume 10124 folio 810 and situated at 10 James Cook Drive, Cranbourne, in the State of Victoria (‘the Property’).
(2) The plaintiff has liberty to apply.
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