Re Mayes
[2015] VSC 708
•18 December 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE LIST
S PRB 2015 03316
IN THE MATTER of the estate of JOHN LEWIN MAYES, deceased
APPLICATION BY:
| WILLIAM LINDLEY O'REILLY | Plaintiff |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 November 2015 |
DATE OF JUDGMENT: | 18 December 2015 |
CASE MAY BE CITED AS: | Re Mayes |
MEDIUM NEUTRAL CITATION: | [2015] VSC 708 |
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SUCCESSION LAW — Application by purported creditor of deceased for grant of letters of administration upon intestacy — Whether applicant a creditor of the deceased — If applicant is a creditor, whether applicant can rely on entire debt or only that part which is not statute barred — Midgley v Midgley [1893] 3 Ch 282 — In re Rownson; Field v White (1885) 29 Ch D 358 — Coombs v Coombs (1866) LR 1 P & D 288.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Mah | H C Curwen-Walker |
HER HONOUR:
Introduction
By originating motion filed 12 March 2013, the plaintiff makes application as a creditor of John Lewis Mayes deceased for a grant of letters of administration of his intestate estate.
The deceased died on 12 November 2012. In his affidavit sworn 7 March 2013, the plaintiff deposed that at the time of the deceased’s death, the deceased was indebted to him in the sum of $26,000 ‘as and by the way of rental due to me at the rate of $100.00 per week for the period 1 July 2005 to 30 June 2010 during which period the deceased lived with me in my house at … Elphinstone’. The plaintiff said the agreement to pay rent was not in writing but the:
deceased had a verbal agreement with me discussed and ratified on many occasions that he would leave the entirety of his estate to me as and by way of rental due to me at the rate of $100.00 per week for the period during which he resided in my house.
The plaintiff deposed that the deceased was unmarried at the date of his death and had no children, living or deceased. He also deposed that at the date of his death, the deceased did not have a domestic partner for the purposes of s 35(2) of the Relationships Act 2008 and that he is a creditor of the deceased and claims to be entitled to administration of the estate and is the only person entitled by law to share in the estate of the deceased. He deposed that he had ‘made careful enquiry and search but am unable to find any will of the deceased’ and that he believed the deceased did not leave a will. The plaintiff deposed that if a grant of administration is made to him, he undertakes to pay the deceased’s debts ‘notably and proportionately according to the priority required by law, not preferring my own debt nor that of any other person’.
The inventory of assets and liabilities of the estate as exhibited to the plaintiff’s affidavit disclosed that the deceased’s assets amounted to $30,793.17 (comprising money in the bank of $17,793.17 and a 1998 Toyota Landcruiser tray truck valued at $13,000) and liabilities described as ‘rental arising from 2005-mid 2010 @ $100/week for 5 years’ at $26,000.
In an affidavit sworn 12 March 2013 by Ms Andrea Howell of the plaintiff’s solicitor, Ms Howell deposed that she had searched for but not found a will of the deceased deposited with the Office of the Registrar but there was a will deposited in the name of John Bryans Lewin Mayes. Ms Howell deposed that she had conducted searches and found that no caveat had been lodged in this matter, no application for probate or administration or for sealing of a foreign grant had been made to or granted by this Court, no election to administer had been filed by a trustee company and that the application by the plaintiff was published on the Supreme Court website on 14 November 2012.
On 15 March 2013, three days after the originating motion was filed, the Deputy Registrar of Probates notified the plaintiff that several requisitions had been raised in respect of his application for administration. Some nine months later, on 12 December 2013, the plaintiff filed a further affidavit of the plaintiff sworn 2 December 2013 and an affidavit by Michael William O’Reilly (‘Mr O’Reilly’) sworn 8 December 2013 in support of his application.
On 12 December 2013, the Registrar of Probates informed the plaintiff that his failure to satisfy one of the requisitions was fatal to his application. More than two years later, on 7 January 2015, the Registrar wrote to the plaintiff again noting that the requisition sent on 12 December 2013 remained outstanding and expressed his concern about the delay in this matter. He asked the plaintiff to file a notice of discontinuance if the plaintiff did not intend finalising the application.
Seemingly unperturbed by the Registrar’s concerns, on 29 May 2015, the plaintiff’s solicitor informed the Registrar that he was able to obtain ‘further and quite specific evidence on affidavit regarding the debt from the wife of the plaintiff whom I recently interviewed’ and he also enquired whether the Registrar was ‘aware of any applications successfully going before a Judge based upon similar affidavit material’. The Registrar replied to the solicitor’s enquiry to the effect that creditor applications were very rare and he was unaware of a successful application based upon similar affidavit material to that filed in this proceeding.
On 14 September 2015, the plaintiff filed an affidavit by the plaintiff’s wife, Cecelia Irene O’Reilly (‘Mrs O’Reilly’). There was further correspondence between the plaintiff and the Registrar about the sufficiency of the plaintiff’s supporting material. On 23 September 2015 the Registrar of Probates notified the plaintiff that, in his view, the requisitions had still not been satisfied and suggested the plaintiff bring the matter before a judge if he wished to take the application any further.
The plaintiff subsequently filed a further affidavit sworn 2 November 2015.
The evidence
In his affidavit sworn 2 December 2013, the plaintiff deposed that the deceased was a bachelor at the time of his death. He exhibited a copy death certificate of the deceased’s father, Frank Lewin Mayes, who died on 1 August 1959, and copy death certificates of the plaintiff’s two uncles. One of the uncles had a son, the details of whom were not provided by the plaintiff. The plaintiff deposed to his attempts to locate any persons entitled to share in the deceased’s estate. The plaintiff stated that he is not aware of the nephew’s name. Finally, the plaintiff deposed that he recalls signing an acknowledgement for Centrelink in or around 2004 which stated that the deceased paid rent of $100 per week. The plaintiff exhibited a letter from Centrelink dated 11 November 2013 addressed to the plaintiff’s solicitor in his role ‘of acting for [the plaintiff], the administrator of the [deceased]’, which description is clearly incorrect as no grant for the estate has ever been made. This letter stated that the deceased applied for and received rent assistance from June 2004 to May 2007 and that he lived at the Elphinstone property until April 2011. The plaintiff deposed that he did not receive payment of rent from the deceased from 2005 until the date of death of the deceased and that from 2007 he refused to sign the Centrelink rental certificates because of the deceased’s failure to pay any rent.
In his affidavit, Mr O’Reilly deposed that he visited his father at the Elphinstone property on numerous occasions between 2001 and 2012 and was aware that the deceased lived at the property between 2001 and mid 2010. He deposed that the deceased paid rent to the plaintiff until around 2005 when he stopped paying rent despite the plaintiff continually asking him to pay rent. The plaintiff refused to sign the deceased’s Centrelink rent certificates in 2005 because the deceased was no longer paying any rent. He deposed that the deceased continued to receive rent assistance until approximately 2007. Mr O’Reilly deposed that the plaintiff allowed the deceased to continue living at his Elphinstone property because the deceased told the plaintiff that ‘the rental is all taken care of in my will’. Finally, Mr O’Reilly deposed that ‘he believed that the deceased well knew and understood that [the plaintiff] owed rental to my father from around 2005 until the time of his death at the rate of at least $100 per week because that is the amount that the deceased paid my father until 2005’.
In an affidavit sworn 7 September 2015, Mrs O’Reilly deposed that the deceased was a bachelor at the date of his death and ‘our attempts to locate a next of kin have revealed no known next of kin’. She deposed that from early 1996 to around mid-2011, the deceased lived in a bungalow at the rear of the Elphinstone property, that in mid 2011, the deceased left the property due to his ill health and that she and the plaintiff were his only close friends and visitors to him from the time he left their property to the time of his death.
Mrs O’Reilly deposed that while the deceased lived at their property, he paid rent to her and the plaintiff, and this included all utilities, and that the deceased ceased paying rent in around 2005, at which time the rent was $85 per week. Mrs O’Reilly estimated that the rent owing to her and the plaintiff by the deceased was $38,890 calculated as follows:
(a) for the latter portion of 2005: $2,750;
(b) for 2006 at $112.50 per week: $5,850;
(c) for 2007 at $130 per week: $6,760;
(d) for 2008 at $130 per week: $6,760;
(e) for 2009 at $130 per week: $6,760;
(f) for 2010 at $130 per week: $6,760;
(g) for the earlier portion of 2011: $3,250.
Mrs O’Reilly deposed that several times over 2005 and the following years, she and the plaintiff mentioned to the deceased the subject of the outstanding rent, however, the matter was not pressed, partly because Mrs O’Reilly and the plaintiff were:
… both fond of the deceased and found him to be pleasant, quiet and no trouble at all and partly because he repeatedly told us not to worry because he had no next of kin and that all of the rent would be taken care of in his will ... the deceased again affirmed to me in or around June 2012 that he intended to leave everything he had to my husband and me.
Mrs O’Reilly exhibited the same letter from Centrelink dated 11 November 2013 to her affidavit that was exhibited to the plaintiff’s affidavit sworn 2 December 2013. The letter states that, according to Centrelink’s records, the deceased lived at the Elphinstone property from 1 December 2003 to 7 April 2011 and received rent assistance from 1 June 2004 to 11 May 2007. The letter states the rent assistance to the plaintiff was verified by various rent certificates signed by the landlord and sent to Centrelink. The rent certificates provided to Centrelink stated that the deceased’s weekly rent was $105 on 1 June 2004, $110 on 4 January 2005, $110 on 8 July 2005, $112.50 on 18 January 2006, $130 on 10 August 2006, and $130 on 27 March 2007. The letter states that on 11 May 2007 no rent was paid and the deceased left the Elphinstone property on 7 April 2011.
Finally, on 2 November 2015 the plaintiff swore a further affidavit deposing that the deceased and he had been friends for many years. They were both members of the Vintage Sports Car Club of Victoria. In the winter of 1995 the deceased went to the plaintiff’s home in Brighton, and said he could not work anymore. He asked if he could move into the bungalow on the plaintiff’s Elphinstone property. By this time the plaintiff had already known the deceased for many years. He told the deceased he was welcome to move in and they then discussed rent. The plaintiff said the deceased could simply do some work on the plaintiff’s vehicles instead of paying rent. The deceased agreed to this proposal and moved into the bungalow.
For the next two years, until 1997, the deceased performed maintenance work on the plaintiff’s vintage vehicles in place of rent. The plaintiff visited the Elphinstone property almost weekly and often met the deceased at the property. During one of these visits in 1997, the two had a conversation in the living room of the house on the property. The plaintiff recalled that the conversation occurred on a Saturday morning. The deceased said he found working on the vehicles taxing, that he had qualified for Centrelink rent assistance and would rather pay rent. The plaintiff and the deceased then agreed that the deceased would pay rent of $85 per week, including electricity and water. The plaintiff cannot recall whether $85 was decided upon because that was the amount of the Centrelink benefit, or if they simply agreed on that amount.
After the conversation, the deceased paid $85 per week in rent in weekly or fortnightly instalments. The deceased handed the rent directly to the plaintiff whenever the plaintiff visited the Elphinstone property. In the following few years the deceased was ‘pretty good at paying the rent’. In around 2000, the plaintiff and the deceased discussed increasing the rent because the plaintiff had been receiving and paying rather large accounts for electricity, used mainly by the deceased. They agreed that the rent would be increased to $110 per week in order to cover the electricity accounts. The deceased then paid $110 rent per week until around mid 2005 when his health began to deteriorate noticeably. The plaintiff believed the deceased was an alcoholic and that his heavy drinking was taking a toll on him.
As the deceased was less and less able to drive and go out, he was unable to access any cash to pay rent. When he needed to go somewhere the plaintiff or Mrs O’Reilly would drive him. The plaintiff deposed that the deceased was a good friend and neither the plaintiff nor Mrs O’Reilly ‘felt like annoying him about the rent he had ceased paying’. However, the plaintiff deposed that he never agreed to waive any rent due to him. He deposed that:
I did not like hassling Jack about the rent, but on the half a dozen or so occasions when we discussed it Jack would just say words to the effect that I would get it eventually and that he had no relatives and that anything he had left when he died he would leave to me to “…cover everything”.
After the deceased’s death, the plaintiff and Mrs O’Reilly arranged the deceased’s funeral, with the costs of it paid from the deceased’s bank account with the National Australia Bank Ltd. To the best of the plaintiff’s knowledge, no other payments have been made from the deceased’s bank account since his death. The plaintiff deposed that as at 30 October 2015 the estate’s entire assets consist of $18,821.30 in the bank account. No mention was made of the deceased’s Toyota LandCruiser in the affidavit.
The plaintiff’s submissions
Counsel for the plaintiff submitted that in aid of the application there are various searches that can be conducted and advertisements that can be made, however, they have not been done because the estate is very small. Further, if the debt is accepted by the Court, it is unlikely there will be any amount left in the bank account to pay to any next of kin.
Counsel submitted that the deceased’s estate comprised money in the National Australia Bank account and a Toyota LandCruiser currently located at the plaintiff’s property. After initially submitting that the LandCruiser was ‘basically a bit of a bomb’, the plaintiff accepted its valuation at $13,000. With the $18,821.30 cash in the bank account as at 30 October 2015, the estate is $31,821.30.
As to the rent agreement, counsel submitted that it was an agreement between friends of longstanding, so nothing was in writing. It was contended that rent was paid first, and the rent assistance came later, rather than rent being paid on the basis that the deceased received rent assistance. He said rent was paid from 1997 to 2004 without rent assistance. He submitted that the deceased stopped paying rent in 2005 and the fact that the plaintiff did nothing about the payment of the rent does not amount to waiver. Rather, there must be an act that leads the debtor to assume the debt is waived. The reason the plaintiff decided not to do anything about the rent was because the deceased was a friend, and because the deceased said he would put the plaintiff in his will.
Counsel submitted that between 2005 and 2007 the plaintiff knew the deceased was receiving rent assistance despite not paying rent. No submissions were made as to why the plaintiff continued to sign rent certificates for approximately two years after the deceased stopped paying rent.
Counsel submitted that the deceased was a little bit of a loner, and the plaintiff was ‘sort of the only friend’ and there is, therefore, unlikely to be any independent person who witnessed the conversations between the deceased and the plaintiff concerning the rent agreement.
As to the rate of rent, counsel submitted that the best amount to use is $110 per week because that is the last amount agreed between the plaintiff and the deceased. He submitted that the unbarred portion of the debt is 78 weeks of rent at $110 per week, totalling the sum of $8,580. The period of 78 weeks represents the period from November 2009 to April 2011, in respect of which the rent is not statute barred. According to counsel, the full amount of the claim for rent back to mid 2005 is approximately $38,000.
Counsel submitted that although part of the debt is statute barred, the Court may nevertheless grant administration to the plaintiff, and it is open to the plaintiff to pay off the debt, including the statute barred portion, relying on the decision of Coombs v Coombs[1] to submit that when applying for administration, a creditor can rely on a statute barred debt and can pay that debt after obtaining administration.
[1](1866) LR 1 P & D 288 (Coombs).
Finally, counsel said that if the Court required a surety guarantee in respect of the application for a grant, his instructions were that the plaintiff’s solicitor would provide the surety personally. He also said that if administration were granted to the plaintiff, the plaintiff would advertise for other creditors of the deceased and, if creditors came forward, the plaintiff would pay other debts on a pro rata basis.
General comments on the evidence
No documentary evidence was produced to support the alleged debt of the deceased owing to the plaintiff or Mrs O’Reilly. Instead, to establish the debt, the plaintiff relied on affidavit evidence given by him, his wife and his son of events many years ago. The plaintiff produced no documentary evidence of the fact that the deceased paid rent for the period 1997 to June 2005 and did not explain why this evidence was not produced. The Centrelink letter specifically notes that a rent certificate is not a record of the payment of rent.
There are obvious difficulties with evidence that is not supported by contemporaneous documentary evidence. Documents provide valuable factual information compared to oral evidence as the credibility and veracity of the evidence of a witness can be tested by reference to the objectively established facts and contemporaneous documents. The recollection of events or details of conversations occurring many years ago are not as reliable as documentary evidence, particularly by witnesses who have an interest in the outcome of the litigation, as is the case on this application.
Was the plaintiff a creditor of the deceased?
Mr O’Reilly’s evidence is not reliable as he has deposed to matters of which he has no direct knowledge and he failed to state the basis on which he gave his evidence. Further, his evidence is inconsistent with the plaintiff’s evidence in several respects. First, Mr O’Reilly stated that the plaintiff refused to sign the deceased’s rent certificates from 2005, when the deceased stopped paying rent yet the Centrelink letter dated 11 November 2013 and the plaintiff state otherwise. Secondly, his evidence as to the rate of rent differed from the evidence given by his parents. Finally, he said that the deceased owed rent up until the date of his death. This is plainly incorrect as the deceased left the plaintiff’s bungalow in either mid 2010 or mid 2011 due to his ill health.
Mrs O’Reilly’s evidence also raises several issues concerning her veracity. First, her evidence as to when the deceased left the Elphinstone property differs from the plaintiff’s evidence. While the plaintiff said it was in mid 2010, Mrs O’Reilly said it was in mid 2011. Mrs O’Reilly’s evidence is corroborated by the Centrelink letter. Secondly, she deposed that the deceased stopped paying rent in around 2005, at which time the rent was $85 per week. This is contradicted by the information in the Centrelink letter that states that the weekly rent assistance was $105 on 1 June 2004 and $110 on 4 January 2005 and by the plaintiff’s evidence that the rent was $110 per week. Thirdly, Mrs O’Reilly’s calculation that the total unpaid rent was $38,890 is at odds with the rent assistance figures in the Centrelink letter and with the amount of $26,000 claimed by the plaintiff.
The plaintiff’s evidence also raises serious concerns. In his affidavit sworn 2 November 2015, the plaintiff deposed that the deceased qualified for rent assistance in 1997, that the initial rent was $85 per week, and then $110 per week from 2000 to 2005. The Centrelink letter states that the deceased started receiving rent assistance on 1 June 2004 and that the rent payable was $105 per week. The rent was not raised to $110 until 4 January 2005. The plaintiff’s evidence that the deceased qualified for rent assistance before beginning to pay rent in 1997 is also problematic because it supports the view that the obligation to pay rent was connected to the entitlement to rent assistance. If the obligation to pay rent was dependent on the deceased receiving rent assistance, the obligation would have ceased in 2007.
The amount of the weekly rent poses further issues for the plaintiff. First, counsel’s submissions were inconsistent. In his submissions, counsel stated that the total debt was approximately $38,000 seeming to rely on Mrs O’Reilly’s affidavit. However, when it came to the unbarred part of the debt, counsel used the weekly rate of $110 and multiplied it by 78 weeks which is inconsistent with Mrs O’Reilly’s evidence. Secondly, as stated above, Mrs O’Reilly’s evidence is not consistent with the figures in the Centrelink letter. Thirdly, under Mrs O’Reilly’s calculations the rent did not change after 2007, despite several increases in rent between 2004 and 2007. There is no explanation as to why the rent did not change after 2007. Fourthly, the plaintiff’s evidence was inconsistent. His initial evidence was that the deceased only owed him $26,000, being $100 per week for the period 1 July 2005 to 30 June 2010. His later evidence was that he signed a rent certificate in or around 2004 which stated that the rent was $100 per week.[2] In his last affidavit, his evidence was that the rent was increased to $110 in 2000. He did not give evidence of any further rent increases. The lack of certainty about the rate of rent and the inconsistencies within and between the witnesses’ evidence militates against the existence of an agreement to pay rent after mid 2005.
[2]This is inconsistent with the Centrelink letter dated 11 November 2013 which says that on 1 June 2004 the rent was $105 per week.
It is also troubling that the plaintiff failed to explain why he continued to sign rent certificates until early 2007 when the deceased stopped paying rent in 2005. The plaintiff, Mrs O’Reilly and Mr O’Reilly all depose that the deceased stopped paying rent in 2005. They also all say that the reason the plaintiff stopped signing the rent certificates was because the deceased had stopped paying rent. Yet no one was willing or able to explain why rent certificates were signed for a further two years after the deceased stopped paying rent.
On the evidence, it is far from clear what happened in mid 2005 and mid 2007. It may be that the plaintiff relieved the deceased of the obligation to pay rent, possibly due to their friendship and the deceased’s poor health. It may be that in mid 2005 or mid 2007 the deceased agreed to waive the rent in return for a promise by the deceased to leave his entire estate to the plaintiff. It may also have been the case that the plaintiff and the deceased agreed that the deceased would pay rent as long as he received rent assistance.
On the plaintiff’s case, the deceased promised to leave his estate to the plaintiff, but the plaintiff did not waive his right to enforce rent. In other words, the plaintiff would have the benefit of the bequest in the will and the right to enforce the rent contract. Such an arrangement seems unlikely and contradictory.
Further, on the plaintiff’s case it is not clear what the deceased is alleged to have said to the plaintiff and Mrs O’Reilly. Mr O’Reilly said the deceased said ‘the rental is all taken care of in my will’. This is different to leaving the entire estate to the plaintiff. The plaintiff said the deceased said he would leave his entire estate to him. Mrs O’Reilly’s evidence is also inconsistent. As stated, she deposed that the deceased said all of the rent would be taken care of in his will, but she also deposed that in 2012 he said he intended to leave everything he had to her and the plaintiff. There is nothing in writing to suggest that the deceased said any of those things to either the plaintiff or Mrs O’Reilly. Had the deceased said these things, it could be expected that something in writing would have been produced, particularly at the time the deceased left the plaintiff’s Elphinstone property in either mid 2010 or mid 2011 due to his ill health.
It is incongruous that despite the plaintiff and Mrs O’Reilly accepting the arrangement by which the deceased would not pay rent because he would leave his estate to them or would leave enough money to them to cover the rent, they continued to raise the matter with him. The plaintiff said he raised the matter on ‘half a dozen or so occasions’. If the plaintiff accepted that the deceased would not pay rent because it would all be taken care of in the will, there would be no reason for the plaintiff to continue to raise the matter with the deceased. There is also no evidence of any discussion of a will being in existence or being brought into existence, for instance, there is no evidence that the plaintiff or Mrs O’Reilly ever asked the deceased if he had a will. They knew he was a ‘loner’, yet it appears they never asked him about a will, who would be his executor or where the will was located. If the plaintiff accepted that the deceased would not pay rent because it would all be taken care of in the will, it is to be expected that there would be further discussion about the existence, location and the content of the will. All of these matters support the conclusion that there was no agreement to pay rent after the deceased stopped paying the rent.
I am satisfied that, on balance, the deceased probably paid rent to the plaintiff although when he started to pay rent and when he ceased to pay rent is unclear. I am not, however, satisfied that the deceased continued to be liable to pay rent after he ceased paying it. There are too many uncertainties about the alleged rent agreement to be satisfied on the balance of probabilities that the deceased continued to be liable to pay rent to the plaintiff after he stopped paying rent. First, the amount of the rent is unclear. Secondly, the reason he stopped paying despite continuing to receive rent assistance is unclear. Thirdly, the reason the plaintiff continued to sign rent certificates despite not being paid rent is unclear. Fourthly, the terms of any agreement by which the deceased would not have to pay rent but would leave his estate to the plaintiff are unclear. Fifthly, no will of the deceased has been found, nor is there any documentary evidence of the alleged agreement or any intention to include the plaintiff in the deceased’s will.
Accordingly, the plaintiff has failed to prove the debt and has failed to establish that he is a creditor of the deceased.
If the debt had been established, could the plaintiff rely on the whole of the debt, including that part which is statute barred, for this application?
Even if the plaintiff had established that he was a creditor of the estate of the deceased, part of the debt owed to the plaintiff is statute barred and the issue of the limitation period of the debt becomes relevant which, in turn, requires a consideration of whether this Court should follow the decision of Coombs.
Counsel submitted that the unbarred part of the debt was $8,580. Based on the decision of Coombs, the plaintiff relied on the entire debt, both the barred and unbarred portions, for the purposes of his application.
In Coombs, the brother of the deceased applied for a grant of administration of the deceased’s estate. The deceased died intestate and insolvent more than six years before the application was brought. The brother was a creditor of the deceased but the debt was statute barred. The question for the Court of Probate was whether the brother could obtain letters of administration, despite the debt being statute barred.
Sir JP Wilde noted that while a limitation defence is ‘an absolute legal answer’ to the creditor’s claim, it only ‘extinguish[es] the debt at his volition’. If the debtor does not rely on the defence, ‘the law would treat the debt as an existing obligation and lend the process of the court to enforce its discharge’.
The Court then quoted from Williams on Executors, which stated that an executor or administrator may ‘retain a debt due to himself though it may be more than six years old’. The text relied on several cases for that proposition: the reason executors and administrators were permitted to choose not to plead the limitation defence against themselves was that it had ‘long been established’ that executors were not bound to plead the limitation defence against a third party creditor and if the executor could choose not to plead the defence against another, he or she ought to be able to choose not to plead it against himself.
Applying those principles, the brother was granted administration to the deceased’s effects, subject to a bond requiring the brother to administer according to law, and to distribute assets rateably with other creditors and without any preference to his own debt.
In Williams, Mortimer and Sunnucks on Executors, Administrators and Probate[3] the decision of Coombs is cited in support of the proposition that:
(a) if all persons entitled to share in the estate have been cleared off by renunciation or citation, a grant may be made to a creditor of the deceased, even if his debt is statute-barred;[4] and
(b) administration will not be granted to a person who has brought up a debt of the deceased after his or her death.[5]
[3]John Ross Martin and Nicholas Caddick (eds), Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (Sweet & Maxwell, 20th ed, 2013).
[4]Ibid 319 [19]—[41].
[5]In support of this proposition the text relies on Baynes v Harrison (1856) 1 Dea & Sw 15 and Re Coles (1863) 3 Sw & Tr 181. In these cases the debt was ‘brought up’ after the deceased’s death in the sense that after the deceased’s death the debt had been assigned to the creditor seeking administration. So, at the time of the deceased’s death, he was not indebted to the creditor seeking administration.
Griffith’s Probate Law and Practice in Victoria also cites Coombs for the proposition that a creditor whose debt is statute barred may obtain administration.[6] Wills Probate & Administration Service Victoria states that it appears not to matter that the claim of a creditor seeking administration is statute barred, and refers to Coombs in this regard.[7]
[6]Ross A Sundberg, Griffith’s Probate Law and Practice in Victoria (The Law Book Company, 3rd ed, 1983) 196.
[7]Ken Collins, Richard Phillips and Carolyn Sparke, LexisNexis Butterworths, Wills Probate & Administration Service Victoria, vol 1 (at Service 54) [635E.1].
The decision in Coombs is not binding on this Court. It is useful and will be followed only to the degree of the persuasiveness of its reasoning.[8]
[8]See Cook v Cook (1986) 162 CLR 376, 390 (Mason, Wilson, Deane and Dawson JJ) and 394 (Brennan J), overruled by Imbree v McNeilly (2008) 236 CLR 510 but not on this point. See also Re French Caledonia Travel Service Pty Ltd (2003) 59 NSWLR 361, [156].
The reasoning in Coombs comprises three elements. First, a creditor whose claim is statute barred is nonetheless a creditor because the limitation statute extinguishes the remedy, not the right. Secondly, executors and administrators have been held not to be bound to plead the limitation defence against a third party creditor. Thirdly, if executors and administrators can forego the limitation defence against a third party’s claim, they should be able to do so in respect of their own claim on the estate.
Before considering whether to follow Coombs, it is helpful to investigate how persuasive later English decisions have found the second strand of Coombs’ reasoning to be.
In Re Rownson; Field v White[9] the English Court of Appeal was highly critical of the authorities holding that executors and administrators may choose not to plead a limitation defence. In Rownson, the administrator sought to retain a sum of money out of the deceased’s assets pursuant to an alleged contract with the deceased. The Statute of Frauds provided that no action could be brought on such a contract unless it was in writing. Similar to the traditional form of limitation legislation, the effect of the Statute of Frauds was to bar the remedy, not the right.
[9](1885) 29 Ch D 358 (‘Rownson’).
Before the Court of Appeal, the administrator argued that she was entitled to retain the sum of money by reason of a general principle that where it is only the remedy that is barred by statute, and not the right, an executor or administrator may choose not to plead the statute against the claim. The Court of Appeal unanimously rejected that argument.
Cotton LJ explained that the general principle is that an administrator is bound not to pay any claims made against the estate unless they are those which may properly be paid.[10] If the administrator pays unnecessarily, he or she is guilty of a devastavit.[11] Put another way, it is:
…the duty of an executor or administrator not to pay claims he is not bound to pay; that is, he is not unnecessarily to diminish the estate which comes to his hands by paying a claim to which he has a defence.[12]
[10]Ibid 361.
[11]Ibid.
[12]Ibid 362.
While it has been held that an executor or administrator is not bound to plead limitation defences, it has never been held that he or she is at liberty to pay a claim under a contract unenforceable by reason of the Statute of Frauds.[13] The liberty given to the executor or administrator in respect of the limitation defence is not an instance of a general principle. Rather, it is ‘an exception from the general rule, admitted on the ground of the dislike which is entertained by many people to the plea of the Statute of Limitations’.[14]
[13]Ibid.
[14]Ibid 362-363.
Bowen LJ referred to the executor’s liberty not to plead a limitation defence as a ‘qualification of the general rule’.[15] He refused to extend the qualification:
…although we are bound by a current of authority with regard to the Statute of Limitations we should not be justified in extending that exception further than the authorities have gone.[16]
[15]Ibid 363.
[16]Ibid 363-364.
Fry LJ referred to the executor’s liberty not to plead a limitation defence as an exception to the general rule. If the exception were an illustration of a general right in an executor to pay more than he or she is bound to pay, there should be other illustrations of it, but none were found. That was ‘very cogent evidence…that the case of the Statute of Limitations is an anomaly – a single exception and is not to be extended’.[17]
[17]Ibid 365.
Accordingly, the Court of Appeal refused to extend the exception and the administrator was not entitled to retain the sum she sought to retain. This approach of not extending the anomalous exception was followed by the Court of Appeal in Midgley v Midgley.[18] There, two co-executors disagreed on whether a statute barred debt should be paid. A court determined that the debt was statute barred. One of the co-executors paid the debt despite that determination. The Court of Appeal unanimously held that the executor who paid the statute barred debt was guilty of a devastavit.
[18][1893] 3 Ch 282 (‘Midgley’).
Lindley LJ explained that the general principle is that executors must not pay on demands which by law cannot be enforced against the estate.[19] However, it was settled as an exception that executors could choose to pay a statute barred debt. After noting that there were no cases deciding that an executor could pay a debt once it had been judicially held to be irrecoverable, Lindley LJ decided to maintain the ‘wholesome and general principle’ rather than extend the anomalous exception to cover that circumstance. He said:
…an anomalous principle is not to be extended, but is to be confined within the limits of its own anomaly. That rule was distinctly enunciated and acted upon in [Rownson], and unless there is authority which drives me to say that an executor can pay a debt which has been judicially determined not to be recoverable, I will not be the first to say he can.[20]
[19]Ibid 299.
[20]Ibid 299-300.
Lopes LJ referred to the general principle as ‘good and sound’ and to the exception as anomalous.[21] He said ‘it has over and over again been said that [the anomalous exception] ought not to be extended’.[22] Smith LJ agreed with Rownson and said the exception to the general principle was an ‘anomaly…not to be extended’, and this was ‘firm ground’.[23]
[21]Ibid 303.
[22]Ibid.
[23]Ibid 307.
The result in Midgley was that while an executor is not bound to set up a limitation defence against a claim, he or she must set up against the claim a plea of res judicata, namely a judicial determination that the claim is statute barred.
In Angullia v Estate and Trust Agencies (1927) Ltd, the Privy Council agreed with the decision in Rownson.[24] The Privy Council also said ‘it seems to be settled that [a legal personal representative] is not bound to plead the Statute of Limitations, and may pay a statute barred debt unless it has been judicially declared to be so’.
[24][1938] AC 624, 634-635.
In England, therefore, it is established law that an executor or administrator may pay a statute barred debt. However, the Court of Appeal was extremely critical of that exception to the general rule that executors and administrators should only pay what they are bound to pay. The exception has not been permitted to develop into a principle of its own, and the English courts appear to apply it simply because they are bound to do so. The only reasoning behind the exception appears to be individual judges’ dislike of limitation defences.
Should this Court follow Coombs?
The first element of the reasoning in Coombs applies in this case, as the relevant limitation, s 5(1)(a) of the Limitation of Actions Act 1958, bars the remedy not the right.[25]
[25]Wintle v Stevedoring Industry Finance Committee (2003) 9 VR 235, [49]; Commonwealth of Australia v Mewett (1997) 191 CLR 471, 511 (Dawson J); Commonwealth of Australia v Mewett (1995) 59 FCR 391, 398 (Cooper J, with whom Spender J agreed) and 418 (Lindgren J). Cf s 60 of the Limitation Act 1969 (NSW) which bars the right not the remedy.
As to the second element of the reasoning in Coombs, I am not aware of any authority binding on this Court that an executor is at liberty to pay a statute barred debt.
In Motor Terms Co Pty Ltd v Liberty Insurance Ltd, Kitto J referred to English cases holding that in the administration of assets under a creditor's bill, executors are not bound to plead a limitation defence.[26] His Honour did not need to decide whether that exception applied in Australia because the limitation defence was pleaded.
[26](1967) 116 CLR 177, 184.
In Ellis v Ellis, EM Heenan J stated that personal representatives ‘may pay a statute barred debt of the deceased if under the limitation statute only the remedy and not the claim is extinguished’.[27] His Honour relied on Rownson and Midgley in support of that proposition. The Court ordered an inquiry into, among other things, whether and to what extent debts repaid by the executor to himself were time barred.
[27][2015] WASC 77, [45].
There are conflicting statements on the matter from the Supreme Court of New South Wales. First, in Jackson v Stothard[28] the administrator sued the defendant for amounts owing by the deceased’s estate to third parties. The debts to the third parties were time barred. The defendant initially resisted the claim based on the limitation legislation. The defendant then withdrew his opposition after Rownson and Midgley were raised in argument and he became satisfied that the administrator could properly authorise payment of the time barred debts. Sheppard J said it ‘is clear that she will commit no devastavit if she pays the amounts, although they are statute barred’.[29]
[28][1973] 1 NSWLR 292.
[29]Ibid 299.
Just over 30 years later, Young CJ in Eq said that ‘the only special rules with respect to limitations that apply in an administration suit are that the executor is not compelled to plead the statute…’.[30] Jackson v Stothard was not mentioned.
[30]Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd (2004) 182 FLR 431, [67].
Most recently, however, in McGrath v Troy,[31] White J explained the position in New South Wales as follows:
… an administrator is not chargeable if, after the exercise of due diligence he or she forms an honest judgment that the deceased owed a debt and pays the same, rather than defending the claim. Nor is an administrator chargeable if, after the exercise of due diligence, he or she forms an honest judgment that it would be in the best interests of the estate to pay the claim rather than to incur expense and delay in defending a claim whose outcome is doubtful.
[31][2010] NSWSC 1470.
The law formerly allowed an exception to the general rule that it was a devastavit for an executor or administrator to pay a debt that need not be paid. A debt barred by the Statute of Limitations could be paid, although the statute would provide a good defence. The exception was recognised to be anomalous and was not to be extended. The rationale for the exception was that the Statute of Limitations did not destroy the debt but only the remedy. More elaborately, it was thought that the plea of the Statute of Limitations was unconscionable and that an executor had a liberty not to plead it. That latter rationale was also, it seems, based upon the Statute of Limitations not destroying the debt.
The basis for this anomalous exception no longer exists. Section 63 of the Limitation Act 1969 (NSW) now extinguishes the debt on the expiry of the limitation period. That is so notwithstanding that if any question arises in any judicial proceeding whether the debt has been extinguished, the party claiming extinction must plead the statute (s 68A).
The view expressed by the learned authors LG Handler & K Neal in Succession Law and Practice New South Wales is that the earlier decisions permitting a personal representative to pay a statute barred debt are no longer authoritative in New South Wales in light of s 63 of the Limitation Act. Accordingly, an administrator who pays a statute barred debt will be liable to make good the estate, unless the debt was paid after the administrator, having exercised due diligence and honest judgment, formed the view that the debt was not extinguished, perhaps because there was an answer to a limitation defence, or, if the administrator, having exercised due diligence and honest judgment, formed the view that the costs of defending the claim, or the delay in completing the administration whilst the claim is adjudicated, meant it was in the best interests of the estate to pay or compromise the claim.[32]
[32]Ibid [55]—[58]. (Citations omitted.)
White J did not mention Jackson v Stothard or Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd.
The anomalous exception to the general rule has been confined by English courts within the limits of its own anomaly. The only apparent reasoning behind the exception, as explained in Rownson, is unpersuasive. The exception came about due to the aversion of individual judges to reliance on limitation defences. The views of those judges came to be followed rather than the view of Baron Bayley, whose view was set out in Midgley.[33]
[33][1893] 3 Ch 282, 297.
The English Court of Appeal has refused to allow the exception to develop into a general principle. Unless there is authority that drives the Court of Appeal to do so, it appears the Court will not give the exception any broader application. This is unsurprising given the exception is based on idiosyncratic views of individual judges towards the Statute of Limitations. It seems that were it not for a current of authority, the Court of Appeal would not acknowledge the exception at all.
Given this treatment of the exception in England, in my view, this Court should not apply such an exception at all unless driven to do so by binding authority. As there appears to be no such binding authority, the anomalous exception is unlikely to apply in Victoria. Applying in Victoria an exception that English courts call ‘anomalous’ and repeatedly refuse to extend, despite a lack of authority requiring this Court to apply it, would appear not to be the most sensible approach.
As the second element of the reasoning in Coombs does not apply in this case, the third aspect of the reasoning falls away. I note that even if an executor or administrator were at liberty to choose not to plead a limitation defence, I am not persuaded that that means he or she should be able to choose not to plead it against himself or herself. This is so for the following reasons.
An executor or administrator at liberty not to plead a limitation defence against a third party may choose to forego the defence for various reasons, including that there are no other creditors or beneficiaries, or because it is not clear the defence would be successful and the cost of defending the claim would exceed the value of the claim. In either case, the executor would be exercising an independent and impartial mind when deciding whether to forego the defence.
When it comes to the executor or administrator’s own statute barred claim, difficulties arise. The bond imposed by the Court in Coombs required the administrator to distribute assets rateably with other creditors and without any preference to his own debt. It may be expected that an uninterested administrator would distribute assets rateably among creditors with enforceable claims, leaving out creditors with statute barred debts. It is unlikely that an interested administrator would do the same. It is not clear whether the bond in Coombs required the administrator to prefer enforceable claims to his own claim, or whether he was entitled to treat his claim as being equal in priority to the enforceable claims.
If the bond in Coombs required the administrator to prefer enforceable claims to his own, it would seem strange to grant administration to such a creditor. The Court would in effect be granting administration to the lowest ranking creditor.
If, on the other hand, the bond allowed the administrator to treat his claim as equal to the enforceable claims, such permission would only last as long as none of the other creditors (or any residuary beneficiaries) sought a determination by the court that the administrator’s debt is statute barred. If creditors with enforceable claims or beneficiaries insisted that the administrator’s claim not be paid, and sought court intervention, the administrator would most likely not be able to pay his or her own claim. This is due to the decision in Midgley.[34] If creditors with enforceable claims and beneficiaries are entitled to insist on the administrator not paying his or her statute barred debt, it makes little sense to impose a bond entitling the administrator to treat his or her debt as equal in priority to the enforceable claims. In effect it would be a bond allowing the administrator to treat his or her claim as equal unless the other creditors or the beneficiaries say otherwise. There is a further complication in that by paying the statute barred debt the administrator may have acknowledged the debt and destroyed the limitation defence. If so, a bond allowing the administrator to treat his or her claim as equal to enforceable claims would invite a race between the administrator acknowledging and the other creditors challenging the statute barred debt.
[34]See also Peter Handford, Limitation of Actions: The Laws of Australia (Thomson Reuters, 3rd ed, 2012), 93 [5.10.510].
Finally, on the bond imposed in Coombs, it is not clear what would happen if, after granting administration to the statute barred creditor, further statute barred creditors came forward. Would the second aspect of the reasoning in Coombs mean that the administrator could simply pay his own debt and then plead the limitation defence against the other creditors? This is unlikely. Alternatively, would the bond require him to distribute assets rateably with other creditors whether or not those creditors’ debts were statute barred? In other words, would the bond require the administrator not to plead the limitation defence against other creditors? Such a bond would lead to unfair results, because in line with Midgley, the other statute barred creditors may be able to insist upon the administrator not paying his own statute barred debt, but the bond would prevent the administrator relying on the limitation defence against those insisting creditors.
This consideration of the bond imposed in Coombs demonstrates the difficulties that would arise and the strange results that would obtain if administration were granted to a creditor whose debt is statute barred. Further, if it were open to the Court to grant administration to a creditor whose debt is statute barred, opportunistic creditors may be tempted not to bring their stale claims against the debtor while still alive, and instead wait until the debtor is deceased and then seek administration. The same temptation does not arise, or arises to a much lesser degree, in the case of an independent and impartial executor having the ability to choose not to plead the limitation defence.
I am, therefore, not convinced that if an executor or administrator may choose not to rely on a limitation defence against a third party’s claim, he or she should be at liberty not to rely on the defence against his or her own claim as I do not find the third element of the reasoning in Coombs persuasive.
For these reasons, were it necessary to decide, I would not follow the decision in Coombs.
Conclusions
The plaintiff has not established that he is a creditor of the deceased and his application is therefore refused.
Even if the plaintiff had established the debt, he would not have been entitled to rely on the entire debt for the purposes of the application because I would have declined to follow Coombs. Instead, the plaintiff would only have been entitled to rely on the unbarred portion of the debt to obtain administration. As long as the required searches and advertisements had been attended to, administration would likely have been granted and the plaintiff would have been required to give a surety guarantee. No affidavit of justification was filed by the plaintiff in this application. If the plaintiff paid to himself the statute barred portion of the debt, and other creditors subsequently came forward, they would likely have had a claim against the plaintiff for breaching his administrator duties by paying an unenforceable debt.
The adequacy of the plaintiff’s searches or the deceased’s next of kin has been considered only in a general manner. Had the plaintiff established the debt, it would have been necessary for further enquiries and searches to be made as the searches made by the plaintiff were perfunctory. Ms Howell deposed to there being a will deposited in the name of John Bryans Lewin Mayes in the office of the Registrar of Probates. The middle name ‘Lewin’ and the surname ‘Mayes’ of the deceased and his father suggests that John Bryans Lewin Mayes may be a blood relative and this would need to be investigated.
Finally, in respect of the surety guarantee, it was said by counsel for the plaintiff that if the Court required a surety guarantee, his instructions were that his instructor solicitor would provide the surety personally. These instructions show a disregard or misunderstanding on the party of the plaintiff’s solicitor and is counterintuitive: he is the plaintiff’s legal adviser and should not place himself in a position of conflict where he becomes involved in the financial administration of his client’s interest in the estate of the deceased or where he may become liable to pay money under the guarantee for any failure to administer the estate of the deceased in a proper manner.
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