Colquhoun v Graffione

REASONS FOR JUDGMENT 1 On 14 September 1999, the Acting Official Receiver for the Bankruptcy District of New South Wales issued a bankruptcy notice on the application of Mr Fabrizio Graffione, as administrator of the estate of Ms Amelia Elisa Scheer ("the creditor"). The bankruptcy notice was issued in relation to Mr Peter Leslie Colquhoun ("the debtor"), who was then a practising solicitor. It was based on an order which had been made in the Probate Division of the Supreme Court of New South Wales on 5 May 1999 that the debtor refund to the estate of Ms Scheer the sum of $60,729.55. 2 On 21 September 1999, the bankruptcy notice was served on the debtor. 3 On 11 October 1999, the debtor applied to this Court to set aside the bankruptcy notice and also applied for an extension of time for complying with the bankruptcy notice. 4 The extension of time sought was granted for a particular period and, later, extensions of time for further particular periods were also granted, the last of which was granted by me on 10 December 1999, that being the first occasion on which the matter had come before me. On that day, I also fixed for hearing before me on 21 February 2000 the debtor's application to set aside the bankruptcy notice and I therefore made the extension of time which I then granted effective until that date. 5 On 2 February 2000, the debtor died. 6 On Monday, 21 February 2000, when the (now deceased) debtor's application was called on for hearing, Mr France, solicitor, who had, as he reminded me, earlier appeared for the debtor in the proceeding, announced his appearance. While doing so, he told me that he did not, at that stage, have "formal" instructions from "the executors" of the deceased debtor's estate. Later, he returned to that topic, telling me, "I don't have formal instructions today. I did speak to a representative of the estate on Friday and I said that I'd come up here and preserve their position as best I could". I infer that, when Mr France referred to preserving "their" position as best he could, he was referring to preserving the position of the "executors" to whom he had earlier referred. Further, accepting for that purpose the accuracy of what Mr France told me, I also infer that, since Mr France did come to Court, the "representative of the estate" to whom he said he had spoken a few days before had agreed with the course which he proposed. 7 After Mr France had announced his appearance, Mr Angyal of counsel announced his appearance for the creditor and argument then ensued between Mr France and Mr Angyal as to what should be done regarding the (now deceased) debtor's application to set aside the bankruptcy notice. 8 At first, Mr France submitted that, simply in view of the debtor's death, the proper course was that the bankruptcy notice should be set aside. In fact, immediately after telling me that he had told "a representative of the estate" the previous Friday that he would "come up here and preserve their position as best I could", he told me, "My application would be that … the bankruptcy notice be set aside". However, after further argument, he accepted, as I understood him, that it was a matter of no moment (except as it might have some impact on the question of costs) whether the bankruptcy notice was set aside or whether, alternatively, the (now deceased) debtor's application to set aside the bankruptcy notice was dismissed. The consequence in either case (leaving aside any question of costs) was, in circumstances in which the debtor had now died, identical. 9 Mr Angyal's position throughout was that the proper course was dismissal of the application to set aside the bankruptcy notice. 10 Having heard the respective submissions on the matter, I then announced that it appeared to me that the better course was to dismiss the (now deceased) debtor's application to set aside the bankruptcy notice and ordered accordingly. 11 Further reflection on the matter has confirmed me in the view which I then took as to that matter. I set out below my reasons. 12 The Bankruptcy Act 1966 (Cth) ("the Act") makes express provision in certain respects for the consequences of the death of a debtor, whether or not that debtor is a bankrupt. 13 First, the Act makes express provision for a case in which a debtor who is a bankrupt dies before he or she is discharged from the bankruptcy: see s 63. In such a case, the proceedings in bankruptcy are, unless the Court otherwise directs, to be continued, so far as they are capable of being continued, as if the bankrupt were alive. 14 Secondly, the Act makes express provision for a case in which a debtor dies after he or she has been served with a creditor's petition, but before that petition has been dealt with: see s 245. In such a case, provided that the creditor proves those things which would have been required to be proved in order to obtain a sequestration order against the estate of the deceased debtor if he or she were alive, then an order may be made for the administration in bankruptcy of the deceased debtor's estate. 15 However, the Act makes no express provision for a case in which a debtor dies after he or she has been served with a bankruptcy notice, but before the time fixed for compliance with it has expired. 16 The question arises whether it was the legislature's intention, in such a case, that the deceased debtor's estate would commit an act of bankruptcy if it did not comply, before the expiration of the time fixed for compliance, with a bankruptcy notice served on the deceased debtor while still alive. 17 I infer that it was not. I am influenced in reaching that decision by two matters: first, by the fact that express provision is made, in the cases in which the bankrupt dies before discharge of the bankruptcy or the debtor dies after service on him or her of a creditor's petition, for the proceedings to continue as if the deceased were alive, but that no equivalent provision is made in respect of bankruptcy notices; and, secondly and more importantly, by the terms of s 244 of the Act. That section provides for the presentation of a creditor's petition in respect of a deceased debtor's estate and for the making of an order on such a petition that the estate be administered in bankruptcy. However, s 244 makes no reference to the failure, either by the deceased debtor or by his or her estate, to comply with a bankruptcy notice as giving to a creditor a prima facie right to obtain an order for the administration in bankruptcy of a deceased debtor's estate. 18 Thus, it appears to me that the debtor's death in the present case had the dual effects that the bankruptcy notice served on him was spent and that his application to set aside the bankruptcy notice was rendered moot. 19 To return now to the events of the hearing of 21 February 2000, I having announced, after hearing argument on the matter, that I would dismiss the application to set aside the bankruptcy notice, the next question which arose was that of the costs of the proceeding. 20 Mr Angyal sought the making of an order which would have the effect that the creditor's costs of the proceeding would be paid out of the deceased debtor's estate. Having heard his submissions on that matter, I expressed the provisional view that, if I had power to make an order having that effect, I would do so. However, when I requested information from Mr Angyal as to the source of my power in the circumstances, he was not then in a position to provide that information. I therefore suggested the filing and serving of written submissions by both Messrs Angyal and France on the question of my power to make such an order. That was a course acceptable to Mr Angyal, but Mr France, not yet having made any oral submissions on the costs question, expressed a preference that the proposed written submissions deal, not only with the "power" question, but also with the question of the proper exercise of that power, assuming I had it. With the concurrence of both Mr Angyal and Mr France, I therefore laid down a timetable for the filing and serving of written submissions on both costs questions. 21 In the result, I received written submissions on both costs questions from Mr Angyal, but no written submissions at all from Mr France. After the time for the filing and serving of written submissions by Mr France had expired, he notified the Court that he had received instructions not to file or serve any written submissions on the two costs questions. Accepting for that purpose the accuracy of the matter of which Mr France notified the Court, I infer that those instructions came either from the person he had earlier identified as the "representative of the estate" or from the persons he had earlier identified as the "executors". 22 In the absence of written submissions to the contrary by Mr France, I adhere to the provisional view which I expressed at the hearing, for the reasons which I then gave, that I should make an order having the effect that the creditor's costs of the proceeding will be paid out of the deceased debtor's estate, provided that I have the power to do so. 23 As I understood it, Mr Angyal's position on the "power" question, as disclosed by his written submissions, was essentially as follows: presently, the deceased debtor either has or does not have personal representatives. If he does, then I can make an order for the costs of the proceeding against those personal representatives without making them parties to the proceeding, by exercising the Court's power to make orders for costs against persons not parties to a proceeding. If he does not, then, by virtue of O 6, subr 15(2) of the Federal Court Rules ("the Rules"), I can make a costs order which will bind his estate to the same extent as the estate would have been bound had a personal representative of his been a party to the proceeding. 24 As matters stand presently, I have difficulty with both of Mr Angyal's alternatives. 25 As to the first of those alternatives, it appears to me proper to infer, accepting for that purpose the accuracy of what I was told by Mr France at the hearing, that the persons described by him at the hearing as the "executors" of the deceased debtor's estate are his personal representatives for present purposes, if not as the result of a grant of probate, then as a result of their acquiescence in Mr France's appearance before me: compare Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (1993), 95. They are also persons not parties to the proceeding against whom, in the circumstances, I have the power to make an order for the costs of the proceeding. The difficulty is that I do not know their identities and, without knowing that, I am unable to see how I can make such an order against them. 26 As to the second of those alternatives, it is probably best that I set out the terms of O 6, r 15 of the Rules in its entirety before discussing it: "15. (1) Where in any proceeding it appears to the Court that a deceased person was interested, or that the estate of a deceased person is interested, in any matter in question in the proceeding and that he has no personal representative, the Court may, on the application of any party: (a) order that the proceeding continue in the absence of a person representing the estate of the deceased person; or (b) by order (with the consent of the person appointed) appoint a person to represent that estate for the purposes of the proceeding. (2) An order under subrule (1), and any judgment or order subsequently pronounced or made in the proceeding, shall bind the estate of the deceased person to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceeding. (3) Before making an order under this rule, the Court may require notice of the application for the order to be given to such (if any) of the persons having an interest in the estate as it thinks fit." 27 It is sufficient to say about O 6, subr 15(2) of the Rules that I do not understand it as purporting to authorise this Court to pronounce any judgment or make any order otherwise than against an identified person or persons. The subrule's effect, as I understand it, is instead that when such a judgment is pronounced or such an order is made, then that judgment or order will be taken to create an estoppel against a particular deceased person's estate as well, provided an antecedent order has been made under O 6, subr 15(1). That being so, O 6, subr 15(2) cannot avail the creditor in the present circumstances, even if it had appeared to me (which it does not) that the deceased debtor has no personal representatives for present purposes. 28 The situation in which I find myself as a result of the above is, it appears to me, quite unsatisfactory, but, in the circumstances, all that I can do now is to state that I would be willing to consider the matter further if, for example, the creditor is able to put before me evidence which satisfies me as to the identities of those persons on whose instructions Mr