FEDERAL COURT OF AUSTRALIA

Budimir v McMahon [2000] FCA 1312

BANKRUPTCY – Bankruptcy Notice issued in name of a deceased person – whether a nullity

Marshal v DG Sundin and Co Pty Ltd (1989) 16 NSWLR 463 – applied

MILLIE BUDIMIR v BASIL McMAHON

V 7200 of 2000

JUDGE:          MERKEL J

DATE:            11 AUGUST 2000

PLACE:          MELBOURNE

THE COURT ORDERS THAT:

1.      The Bankruptcy Notice issued in the name of Basil McMahon against the applicant, Ms Millie Budimir, dated 27 October 1999, be set aside.

2.      The Transport Accident Commissioner pay the legal costs of the applicant of and incidental to her application to set aside the Notice.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant, Millie Budimir, has brought an application against Basil McMahon, seeking to set aside a Bankruptcy Notice issued on 27 October 1999 in the name of Basil McMahon.  The sole question at issue in the present application is what effect the death of Mr McMahon, at a time prior to the issue of the Bankruptcy Notice, had on the Notice’s validity.  The facts that are relevant in that regard can be briefly stated.

2                     In proceedings in the County Court, Mr McMahon obtained judgment against the applicant on 6 June 1997 for costs to be taxed.  In obtaining the judgment the Transport Accident Commission (“the TAC”) was exercising its rights of subrogation by standing in the shoes of Mr McMahon in contesting the proceedings.

3                     Mr McMahon died on 18 August 1997, an occurrence apparently unknown to the applicant and the TAC.  The costs proceeded to taxation on 17 November 1997 when a certificate was issued in respect of costs to be taxed in the sum of $5673.30.  A Bankruptcy Notice was issued in the name of Mr Basil McMahon on 27 October 1999, claiming the amount of the judgment for the costs to be taxed, together with an additional amount in the sum of $1639.97, being interest claimed on the judgment from 10 June 1997.

4                     After service of the notice, pursuant to an Order for Substituted Service made by a Registrar of the Court, on 18 April 2000 the applicant issued an application to set aside the Notice and applied to extend the time for compliance with the Notice.  Extensions of time for compliance with the Notice were granted by a Registrar of the Court until 25 July 2000.  On 25 July 2000, the Registrar dismissed the applicant’s application to set aside the Notice.  The applicant thereafter failed to comply with the Notice and, as a result, an act of bankruptcy was said to have occurred on or about 15 August, being 21 days after 25 July 2000.  On 14 August 2000 the applicant took out the motion to review the decision of the Registrar and that motion and has come on for hearing before me today.

5                     Counsel for the applicant has submitted that, in accordance with well‑established authority, any step in a proceeding taken in a deceased's own name, or by any other person without legal authority to act for the deceased (such as pursuant to a grant of probate) is a nullity.  He relies on the decision of Marshal v DG Sundin and Co Pty Ltd (1989) 16 NSWLR 463 and the cases discussed therein.

6                     Counsel for the TAC has been unable to point to any authority that would suggest that a valid legal step could be taken in a proceeding in the name of a deceased after the death of the deceased.  Whilst it is true that death does not bring to an end the rights of subrogation of the TAC, that is not the question before me.  The sole issue in the proceeding before me is whether a Bankruptcy Notice issued in the name of a deceased person is a nullity, and therefore is liable to be set aside as invalid.

7                     I am satisfied that it clearly is and therefore ought to be set aside.  The substantive argument put by counsel on behalf of the TAC is that, as the extension of time to comply with the notice had run out on or about 15 August 2000, the applicant had committed an act of bankruptcy and it was too late for her to apply to set aside the notice.  In that regard, reliance was placed on s 41G of the Bankruptcy Act 1966 (Cth).  In my view, that argument is misconceived.  An act of bankruptcy can only occur in respect of a Bankruptcy Notice that is a valid notice.  An act of bankruptcy could not be committed in respect of a Bankruptcy Notice that is invalid and therefore a nullity.  I am satisfied that the Bankruptcy Notice in the present case is a nullity, and therefore could not give rise to an act of bankruptcy.  In those circumstances it must follow that the applicant is entitled to have the Bankruptcy Notice set aside.

8                     I would add that the death of Mr McMahon is also likely to have had consequences for the taxation that occurred after his death.  However, in view of the conclusion I have reached on the validity of the Notice it is unnecessary to pursue this aspect of the matter further.

9                     The order of the court is that the Bankruptcy Notice dated 27 October 1999 issued in the name of Basil McMahon against the applicant be set aside.  I also order that TAC pay the legal costs of the applicant of and incidental to her motion to set aside the notice.

Associate:

Dated:              11 September 2000