Re Hanayama (Dec'd)

IN THE SUPREME COURT
OF QUEENSLAND

No. 9300 of 1998

[Re Hanayama (dec’d)]

IN THE MATTER of Section 68 of the Trusts Act 1973 (Qld)
- and -

IN THE MATTER OF THE ESTATE OF NORIYUKI HANAYAMA (DECEASED)

CATCHWORDS: Section 68 Trusts Act - loan made in Japan - claim made in correspondence - proceedings not commenced in Queensland - claim disbarred.

Counsel:Mr D Clothier for applicant
No appearance for respondents

Solicitors:McCullough Robertson for applicants
No appearance for respondents

Hearing Date: 9 November, 1998

REASONS FOR JUDGMENT - WHITE J

Delivered the 11th day of November 1998

The applicant, Permanent Trustee Company Limited (“Permanent Trustee”) is the administrator of the Australian estate of the late Mr Noriyuki Hanayama who died intestate on 12 December 1989.
Permanent Trustee was appointed Administrator of his Australian estate on an interlocutory basis by an order made by Byrne J on 6 August 1993 and on a final basis by an order made by Shepherdson J on 17 August 1993.
After its appointment Permanent Trustee became aware of a transaction recorded in the books and records of Mr Hanayama indicating that he had lent the sum of $5,412,200 to Seabank International Pty Ltd for the purchase of the Seabank building at Marine Parade, Southport. It appears that Mr Hanayama borrowed that sum from a Japanese bank, Dai-Ichi Kangyo Bank Ltd (“DKB”), one of the respondents, which he then onlent to Seabank International Pty Ltd. The loan was secured by a mortgage over a property owned by him in Tokyo.
From information received from the Japanese lawyers of DKB and DKB Finance Corporation (“DKBFC”) (an affiliate of DKB and the other respondent), Nishimura & Sanada, it is asserted that on 8 May 1989 that loan was converted at the request of DKB into a Japanese yen loan which Mr Hanayama would use to repay fully the first loan advanced on 2 October 1987. DKB made a loan of 550M yen to Mr Hanayama with which he retired the first loan. The loan agreement was attached to the correspondence. The lawyers asserted that DKBFC provided DKB with a guarantee on the second loan on that date but did not include evidence of it.
Mr Hanayama’s heirs have not made any payment on the second loan since February 1992. The lawyers asserted that on 24 March 1994 DKBFC honoured its guarantee and repaid to DKB 518,584,036 yen in principle, 39,446,669 yen in interest and 1,609,037 yen in deferred interest then owing on the second loan. They maintain that DKBFC did not repay fully the second loan so that 32,554,472 yen was still owing as at 24 March 1994. According to the solicitors DKBFC was entitled under Japanese law to require Mr Hanayama’s heirs to repay the amount paid under the guarantee and DKB could look to the heirs for the shortfall.
On 8 April 1994 Permanent Trustee’s solicitors received a letter from Freehill Hollingdale & Page, agents for the respondents’ solicitors in Japan, that the Bank was currently considering whether it was worthwhile seeking payment from the Australian assets in respect of the loan and guarantee and would advise of their decision in about 10 days.
Permanent Trustee seeks orders pursuant to s.68 of the Trusts Act 1973 barring claims by DKB and DKBFC against the estate of Noriyuki Hanayama or, alternatively, permitting the property in his estate to be dealt with without regard to those claims.
Since it became administrator of Mr Hanayama’s Australian estate, Permanent Trustee has attempted to ascertain the nature of the claim by DKB and DKBFC and its progress in respect of Mr Hanayama’s Japanese estate. Matters have been protracted in Japan apparently because of heirs in China and the nature of the process. Mr Hanayama’s widow resides in Australia and is separately represented by Brisbane solicitors. Through 1994 to 1997 correspondence took place between Permanent Trustee’s Brisbane solicitors, the respondents’ solicitors in Brisbane, as well as solicitors appointed by Permanent Trustee in Japan and the respondents’ Japanese solicitors.
It appears from various advices that under Japanese law the liabilities of a deceased person are succeeded to by his or her heirs in accordance with their statutory inheritance shares. Proceedings were commenced in the Tokyo Family Court in respect to Mr Hanayama’s Japanese estate in February 1993 and were finalised in May 1996 at which time the inheritance shares of Mr Hanayama’s heirs were settled by order of the court.
On 4 February 1997 Permanent Trustee’s solicitors wrote to the respondents’ solicitors in Japan to ascertain their clients’ intentions regarding a claim on Mr Hanayama’s Australian estate. They responded that they were taking their client’s instructions. On 24 February 1997 the respondents’ Japanese solicitors indicated that DKBFC had commenced foreclosure proceedings in the Tokyo District Court on 15 August 1996 in respect of the property secured by the loan. On about 20 March 1997 Permanent Trustee received advice from Dr Pasteur Lai, the husband of a beneficiary of the estate, that Mr Hanayama’s Tokyo property, the subject of the foreclosure proceedings, had been sold and that there was a US$250,000 surplus on the sale which had been distributed to Mr Hanayama’s heirs. Permanent Trustee’s solicitors wrote immediately to Freehill Hollingdale & Page seeking clarification in respect of the foreclosure proceedings but no reply has been received. Shortly afterwards those solicitors wrote to Permanent Trustee’s solicitors about the respondents’ claim. The solicitors responded that the Bank could not demonstrate that it was entitled to be paid any money from the Australian estate nor had it quantified the amount of the claim. Permanent Trustee’s solicitors complained that the respondents’ had temporised about whether or not to claim against the Australian estate.
On 28 May 1997 Permanent Trustee’s solicitors wrote again to Freehill Hollingdale & Page mentioning the failure to particularise the claim and giving notice that they would proceed with the distribution of the Australian assets unless the respondents could establish entitlement at law and quantify its claim. No response has been received.
Under cover of letters to each of DKB and DKBFC Permanent Trustee’s solicitors gave notices dated 19 February 1998 in both English and Japanese requiring either or both of them to commence legal proceedings against the estate within six calender months of service of the notice upon them to enforce the terms of any alleged agreement between Noriyuki Hanayama and either/or both of DKB and DKBFC and to prosecute those proceedings with all due diligence. The notice stated that in default the administrator may apply to the Supreme Court for orders barring the claim or enabling the estate property to be dealt with without regard to any claim made or asserted by each of them. The covering letters strongly recommended the recipients to take Australian legal advice regarding the notice. No responses to those notices has been received by Permanent Trustee or the solicitors and DKB and/or DKBFC have not commenced proceedings in relation to any claim.
Mr Anthony Steele, the Manager, Personal Services, Queensland, of Permanent Trustee, has deposed that at no time has Permanent Trustee been provided with a copy of the guarantee alleged to have been provided by DKBFC in connection with the loan of 8 May 1989, evidence that DKBFC repaid to DKB the whole or any part of the loan, or evidence as to the amount outstanding under that loan.
Before turning to the merits of the application it is necessary to deal with Permanent Trustee’s application for leave to proceed since the summons and supporting affidavit was served outside Australia, O.11 r.4.
The subject matter of the proceedings is property situated in Australia, that is Mr Hanayama’s Australian estate, and therefore the originating summons can be served on a person outside Australia without the leave of the court, O.11 r.2(b)(i) and (s). Order 11 r.3 provides that subject to the provisions of the rule O.10 rr.1 and 16 apply in relation to the service of an originating proceeding or notice thereof even though it is to be served out of the jurisdiction.
Order 10 r.1 provides that unless otherwise prescribed or allowed, service of an originating proceeding shall be made personally and r.16 provides for substituted service by order of the court. Order 11 r.3 does not expressly provide for service upon a corporation which is provided for in O.10 r.6 and which provides inter alia in the absence of any statutory provision regulating service of process on a corporation that it may be served on an appropriate officer. There is, however, statutory provision regulating the service on a corporation which is to be found in s.220 of the Corporations Law which provides for service on a corporation by prepaid post to its registered office. Personal service as so described in O.10 r.2 cannot be effected upon a corporation. In Richard Crookes Constructions (Qld) Pty Ltd v Wendell [1990] 1 Qd R 392 Cooper J at 394 held that although O.11 r.3(1) made no specific reference to O.10 r.2, the reference to O.10 r.1 was sufficient to catch up the obligation to serve in accordance with O.10 r.2. Thereafter the rules specify what is to happen to effect personal service on different “persons” for example, infants, persons of unsound mind and corporations. Following the approach of Cooper J, in my view a reference to O.10 r.1 in O.11 r.3, necessarily includes O.10 r.6 relating to service on a corporation.
I think it unnecessary to embark upon a consideration of O.93 r.7. Both respondents were served by sending the originating summons and the affidavit of Mr Steele to attorneys in Tokyo who then sent the documents by registered certified mail to each of the respondents. Affidavits of service are from Mr Kanazawa and Mr Kogo, both attorneys of the firm Kogo, Mori & Fujimoto who received the certificates of delivery. Mr Kanazawa wrote to Permanent Trustee’s solicitors by letter dated 26 October 1998 that he was informed by a representative of DKB by telephone that DKB had received the documents and asked what procedures should be taken with respect to the summons. Mr Kanazawa told the officer that DKB would not need to take any action if it did not wish to be involved in any court proceedings in Australia and recommended that advice be sought from an attorney familiar with Australian law. No enquiry was received from DKBFC, but I note that the same firm of solicitors, both in Japan and Brisbane, act for both respondents.
Order 11 r.3(3) permits service to be other than personal service if it is served in accordance with the law of a country in which service is effected. Mr D Cliff, a solicitor with Permanent Trustee’s solicitors, deposes that he was informed by Mr Kanazawa that court documents in Japan are served by the Japanese courts themselves and not by the parties to the action.
In my view the respondents have been served in conformity with O.11 r.3 and leave to proceed may be given.
Turning then to the application, s.68 of the Trusts Act 1973 provides:
“(1)Where a trustee wishes to reject a claim (not being a claim in respect of which any insurance is on foot, being insurance required by any Act) which has been made, or which the trustee has reason to believe may be made -
(a)to or against the estate or property which the trustee is administering; or
(b)against the trustee personally ...
the trustee may serve upon the claimant or the person who may become a claimant a notice calling upon the claimant, within a period of six months from the date of service of the notice, to take legal proceedings to enforce the claim and also to prosecute the proceedings with all due diligence.
(2)At the expiration of the period stipulated in a notice served under subs.(1), the trustee may apply to the court for an order under subs.(3), and shall serve a copy of the application on the person concerned.
(3)Where, on the hearing of an application made under subs.(2), the person concerned does not satisfy the court that the person has commenced proceedings and is prosecuting them with all due diligence, the court may make an order -
(a)extending the period, or barring the claim, or enabling the trust property to be dealt with without regard to the claim; and
(b)...
(4)Where a trustee has served any notices under this section in respect of claims on two or more persons, and the period specified in each of those notices has expired, the Trustee may, if the Trustee thinks fit, apply for an order in respect of the claims of those persons by a single application, and the court may, on that application, make an order accordingly.
...
(7)Any notice or application which is to be served in accordance with the provisions of this section maybe served -
(a)by delivering it to the person for whom it is intended or by sending it by prepaid registered letter addressed to that person at the person’s usual or last name place of abode or business; or
(b)in such other manner as may be directed by an order of the court.
(8)Where a notice is sent by post as provided by this section, it shall be deemed to be served at the time at which the letter would have been delivered in the ordinary course of post.”
The respondents have made a claim on the estate in an informal way through letters written on their behalf by their solicitors although they have not identified with any particularity the legal basis of the claim or the quantum of it.
Mr Steele on behalf of Permanent Trustee has disputed the claim as set out in paragraph 30 of his affidavit. He deposes that Permanent Trustee has received no evidence that any amount is owing to DKB or DKBFC; that in accordance with advice which it has received under Japanese law any rights of the respondents are against Mr Hanayama’s heirs and not against his Australian estate; and the security held by the respondents or respondent has been realised and the surplus distributed to Mr Hanayama’s heirs.
The respondents were served with an appropriate notice calling upon them within six months to take legal proceedings to enforce the claim and to prosecute it with all due diligence. The respondents have not commenced any proceedings within the jurisdiction against the estate.
Once the originating summons has been served upon the claimant(s) if that claimant does not satisfy the court that it has commenced proceedings and is prosecuting them with all due diligence, the court may make the orders which have been sought on this application.
Mr Hanayama died in 1989. The respondents first notified Public Trustee through their solicitors of a claim in 1994. Nothing further has been done in Australia to progress their claim. There has been much correspondence between the legal representatives of the parties. Mr Clothier who appears on behalf of Permanent Trustee has submitted that it is unjust that the beneficiaries of Mr Hanayama’s estate should have to wait until the expiration of the limitation period until their inheritance can be finalised. I accept his submission that the clear intention of s.68 of the Trusts Act is the very sound one of permitting deceased estates to be administered expeditiously and that administrators should not be unduly delayed from completing the task of administration and distribution when creditors decline to act diligently.
In my view this is a proper case to order that any claim made by either of the respondents against Permanent Trustee as administrator of the Australian estate of Noriyuki Hanayama be barred and direct that the trust property may be dealt with by the administrator without regard to the claim(s).
The administrator has diligently pursued this matter on behalf of the estate and its costs should be paid out of the assets of the estate on a solicitor and own client basis and it is so ordered.
The formal orders are as per draft.

[1998] QSC 255

11 November 1998