On 1 May 2014, the Creditor commenced proceedings against the
Debtor for a sequestration order against his estate in respect of
unpaid legal costs awarded by the Magistrates Court of Western
Various preliminary issues protracted the case, including:
failure to effect personal service - an order for substituted
service ultimately being obtained;
the validity of service of a creditor's petition on a
person suffering from an incapacity;
a concurrent application to the State Administrative Tribunal
(SAT) by the Debtor to revoke an order appointing
the Public Trustee as Plenary Administrator of his estate; and
the lapsing of the creditor's petition due to delays,
necessitating interlocutory proceedings to extend its life.
At the hearing on 29 January 2015, the Court considered this
history in determining:
whether conditions for adjournment were met;
whether there was proof of matters necessary for making an
sequestration order; and
whether there was sufficient cause not to make a sequestration
PRIMA FACIE RIGHT TO A SEQUESTRATION ORDER
In this case, the court accepted that the Creditor had filed the
necessary affidavits mandated by the rules prior to the hearing to
service of all required documents;
performance of the required searches of the National Personal
and Insolvency Index; and
that the debt was still owed.1
Consequently, the Creditor proved the matters required under
section 52(1) of the Bankruptcy Act 1966, giving it a
prima facie right to the granting of a sequestrian
GROUNDS OF OPPOSITION
Where a prima facie case is made out, the Court may
decline to issue a sequestrian order if the debtor evidences that
he or she is able to pay the debts and there is sufficient cause
that the order should not be made.2
In this case, the Debtor opposed the petition on the grounds
the petition was founded upon a fraud by the Creditor and his
the petition was actuated out of malice; and
insolvency had not been determined and the petition was
otherwise an abuse of process.
The Debtor alleged that the Creditor's solicitor had
confessed to him that the solicitor was not charging the Creditor
for the unpaid legal costs which underpinned the application for a
sequestration order. The Debtor further alleged that he had
documentary proof to support his position, however, such proof was
never provided to the Court.
Pursuant to section 140(1) of the Evidence Act 1995
(Cth) and the principles espoused in Qantas Airways v
Gama,3 the gravity of the matters alleged will be a
relevant consideration for the Court in determining whether or not
the burden of proof (i.e. the balance of probabilities) has been
An allegation of fraud and malice, particularly one involving
the provision of professional services by a lawyer and one which
suggests that the Court was misled, would require specific
particulars and cogent and clear evidence.
In this case, no notes or documentation relevant to the
allegation of non-payment of legal costs, criminal fraud and malice
were in evidence. As such, the Debtor did not discharge the burden
of particularisation, or of proof as required by s 140(1) of the
Evidence Act 1995 (Cth).
On the basis that the Debtor failed to provide any evidence of
special circumstances or prove he was able to pay his debts, the
Court granted the order because there was a prima facie
basis for making a sequestrian order, and no basis for not making a
This case illustrates that the principle in Sanders v
Sanders4 is still good law in Australia. When a
creditor has a prima facie right to a sequestration order, the
Court will make that order unless special circumstances are
sufficiently evidenced to justify the Court departing from its
Further, the discussion by the Court in this case reinforces the
principle in Qantas Airways Ltd v Gama1that
serious allegations will require cogent and clear evidence to
satisfy the balance of probabilities threshold under the
Evidence Act 1995 (Cth).
1  FCAFC 69.
1FCC (Bankruptcy) Rules, r. 4.06(1),
(2), (3) and (4).
2Bankruptcy Act 1966,
3  FCAFC 69.
4  FCA 1079; affirmed on appeal in
Sanders v Knudsen & Yates trading as The Hargreaves
Practice  FCAFC 305 at  per Whitlam, Branson and
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