Federal Court of Australia

Houten v Lennon [2025] FCA 252

ORDERS

THE COURT ORDERS THAT:

1.    The interim application for review filed by the respondent on 14 January 2025 is allowed.

2.    The sequestration order made on 10 December 2024 is set aside.

3.    The creditor’s petition dated 18 June 2024 is dismissed.

4.    Subject to any further order of the Court, the question of costs, including the costs and expenses of the trustee in bankruptcy, Mr Stephen Dixon, will be determined on the papers as follows:

(a)    The petitioning creditors are to provide a copy of these reasons to Mr Stephen Dixon of Hamilton Murphy Advisory, Level 21, 114 William Street, Melbourne, VIC 3000 within 5 days of the date of this order.

(b)    The petitioning creditors, the respondent and Mr Dixon may each file and serve written submissions as to all consequential orders, including as to the costs and disbursements incurred by Mr Dixon in his administration of the bankrupt estate of the respondent, of no more than 5 pages. The submissions must be provided within 28 days of the publication of these reasons and with a right of reply also limited to 5 pages to be filed and served within a further period of 14 days.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ROFE J:

Introduction

1    Mr Patrick Lennon seeks to set aside a sequestration order made by a Registrar in respect of Mr Lennon’s estate on 10 December 2024. The applicants, Mr Adam Houten and Ms Veronica Finarelli, are the Petitioning Creditors. Mr Lennon seeks a review of the Registrar’s sequestration order.

2    A review is provided for under s 35A(5)–(6) of the Federal Court of Australia Act 1976 (Cth). Such a review is conducted de novo: Harris v Caladine (1991) 172 CLR 84 at 95 (per Mason CJ and Deane J); Totev v Sfar (2008) 167 FCR 193 at [52] (per Bennett J) and [91] (per Cowdroy J); Bechara v Bates (2021) 388 ALR 414 at [17]–[21] (per Allsop CJ, Markovic and Colvin JJ); Zdrilic v Hickie (2016) 246 FCR 532 at [16]–[29] (per Katzmann, Farrell and Markovic JJ). This means that the judge takes a “fresh look” at the issues by way of a complete rehearing of the facts and the law. Error does not need to be demonstrated on the part of the Registrar for success in the review.

3    The review application was heard on 27 February 2025 (first hearing). The parties were informed that I would hand down my reasons at 4.15 pm on 28 February 2025. At midday on 28 February 2025, my Chambers received an email from the Petitioning Creditors’ solicitors attaching a proof of debt signed by Maria Lantouris and dated 28 February 2025 (28 February Email). The proof of debt gave details of the debt as being in relation to orders of the Supreme and County Courts and the Court of Appeal in three proceedings, the latest dated 16 June 2022. The 28 February Email stated that the creditors sought leave to “produce and rely on further evidence” in the review application.

4    Rather than engaging in further correspondence, I set the matter down to return on 17 March 2025. My Chambers sent an email to the parties in response which stated:

Her Honour considers the way in which the Proof of Debt has been presented to chambers to be highly unsatisfactory. The document is not supported by any affidavit and has been received after the hearing has concluded and the decision was reserved. The parties are put on notice that any further attempts are not appropriate.

5    On 17 March 2025, I heard the creditors’ application to re-open the review application (second hearing).

Re-opening case

6    Counsel for the Petitioning Creditors, Mr Purton, appeared only at the second hearing. Mr Purton sought to re-open the review hearing on two bases. The first, a mistaken apprehension of the law, and the second, to adduce fresh evidence, being the proof of debt attached to the 28 February Email, which was not in evidence and was said not to be available to the Petitioning Creditors at the time of the first hearing. As the submission developed, the mistaken apprehension of the law transpired to be a misapprehension in relation to two different aspects of law. The first being the creditors’ misapprehension that the review hearing was not a hearing de novo, but rather an application to annul the bankruptcy pursuant to ss 43(1) and 153A of the Bankruptcy Act 1966 (Cth), requiring exceptional circumstances to be demonstrated. The second being a misapprehension at large as to the extent of evidence required to be put on by a party seeking to satisfy the Court for the purposes of s 52(2)(a) that they were able to pay their debts.

7    As Kenny J explained at [24] in Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22, the authorities indicate that there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive.

8    Two of the four classes identified by Kenny J are relevant here: (1) fresh evidence: Hughes v Hill [1937] SASR 285 at 287 (per Cleland J); Smith v New South Wales Bar Association (1992) 176 CLR 256 at 267 (per Brennan, Dawson, Toohey and Gaudron JJ); and (2) mistaken apprehension of the law: Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 at 478 (per Clarke JA, Meagher JA and Mahoney JA agreeing).

9    The overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open: see Bradshaw at [24] (per Kenny J); UTA at 478 (per Clarke JA, Meagher JA and Mahoney JA agreeing); also The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No 2) [2004] FCA 1310 at [22] and [25] (per Mansfield J). This is discussed further below.

10    For the reasons discussed below in relation to the review application, I do not consider that the interests of justice are better served by allowing the application to re-open the review hearing. That application is refused.

Evidence

11    At the first hearing the creditors relied upon the following affidavits, which were read before Registrar Ellis:

(a)    affidavit of Daniel John McDonald made 9 December 2024;

(b)    affidavit of Adam Houten made on 10 December 2024;

(c)    four different affidavits of Danielle Nicole McAleese made on 10 December 2024.

12    Mr Lennon relies upon two affidavits he made in this proceeding, the first dated 13 January 2025 and the second dated 24 February 2025.

13    In advance of the second hearing, the Trustee of the Bankrupt Estate of Mr Lennon, Mr Stephen Dixon, filed one affidavit he made on 13 March 2025. During the second hearing, the Trustee tendered a Report to Creditors outlining Mr Lennon’s assets.

14    Annexure PL-9 to Mr Lennon’s second affidavit is an email from the Petitioning Creditors’ lawyers to Mr Lennon’s lawyers dated 19 February rejecting Mr Lennon’s offer to pay the sum of $57,325.68 in satisfaction of the debt (19 February Email):

Our clients do not accept the offer. As you are aware, a sequestration order cannot be discharged unless the full outstanding debts and costs are paid. In accordance with section 153A of the Bankruptcy Act 1966 (Cth), for the bankruptcy to be annulled:

1. All debts must be paid in full, including:

•    The amount owed to our clients as petitioning creditors.

•    Any debts owed to other creditors that have become payable due to the sequestration.

•    The trustee’s fees and costs.

2. The trustee must be satisfied that all debts and expenses have been fully paid.

3. Only then can the trustee apply to the Federal Court or Federal Circuit and Family Court (FCFCOA) for an annulment of the sequestration order.

Additionally, we note that Mr. Lennon is seeking to have the sequestration order set aside on the basis that he had no knowledge of the hearing. However, our client has correspondence confirming that Mr. Lennon was aware of the hearing and the substituted petitioning creditor. This evidence contradicts any assertion that Mr. Lennon was unaware of the proceedings.

Given that the trustee has also informed our clients that other creditors are seeking payment, our clients cannot agree to the dismissal of the sequestration order until full payment is made in accordance with the above requirements.

15    At the second hearing, the Petitioning Creditors sought leave to rely upon a further affidavit of Adam Houten affirmed on 14 March 2025. That affidavit annexed:

(a)    the proof of debt from Ms Lantouris discussed above; and

(b)    a proof of debt owed to the Deputy Commissioner of Taxation dated 4 March 2025, said to relate to a Trust in respect of which Mr Lennon was a trustee.

16    Prior to the first hearing, Mr Lennon had deposed as to the $57,325.68 in trust to satisfy the debt the basis of the sequestration order. Mr Lennon had also stated on oath:

I am solvent. I am able to pay my debts as and when they fall due. I am not aware of any other debts that are due and payable (despite the assertion by the [Petitioning Creditors] to the contrary (see Annexure PL-9)

I have not been advised by Hamilton Murphy (the trustee) despite significant correspondence with them since their appointment of the existence of any other debts.

17    Despite the assertions in the 19 February Email, and Mr Lennon’s statement of solvency and absence of debt in his second affidavit, the Petitioning Creditors put on no evidence at the first hearing as to the identity of the “other creditors seeking payment” and their debts. Mr Lennon was not cross-examined. In part this may have been due to their fundamental misunderstanding as to the nature of the review hearing, which I discuss below.

18    Neither of the proofs attached to Mr Houten’s second affidavit were in existence at the time of the first hearing. Mr Houten did not depose as to why the proofs of debt were only prepared after the first hearing. As noted above, Ms Lantouris’s proof relates to Court orders from June 2022 and before. It is beyond coincidence that her proof suddenly appeared on 28 February 2025, the day after the first hearing, and after the parties had been notified that I was to hand down my reasons. There is no explanation as to why Ms Lantouris’s proof was not able to be obtained prior to the first hearing. Nor is there any explanation as to whether Ms Lantouris and the Deputy Commissioner of Taxation were the creditors asserted in the 19 February Email.

19    As the proofs all post-date the first hearing and there is an absence of any explanation as to why they, or some evidence as to their existence, could not have been put before the Court at the first hearing, I refuse leave to the Petitioning Creditors to rely on the second affidavit of Mr Houten.

Issues summary — review application

20    At the first hearing, Mr Lennon contended that he was able to pay the debt of the Petitioning Creditors and, as noted above, prior to the first hearing he stated on oath that he was not aware of any other debts. He further contended that he was unaware of the original 10 December 2024 return date before the Registrar, or that a sequestration order was to be made against him on 10 December 2024. Had he been aware, Mr Lennon submits that he would have been in a position to discharge the debt to the Petitioning Creditors prior to 10 December 2024. Mr Lennon contends that this is relevant to considerations under s 52(2)(b) of the Bankruptcy Act and it will be discussed under that heading below.

21    As discussed above, prior to the first hearing, Mr Lennon deposited an amount of $57,325.68 into the trust account of his solicitors, A B Legal, which he contended was sufficient to discharge the debt of the Petitioning Creditors in full. A B Legal had informed the Petitioning Creditors of the money it held in trust and the Petitioning Creditors had refused to accept the payment. In the 19 February Email, the reason for the refusal was put on the basis that the bankruptcy could not be discharged under s 153A of the Bankruptcy Act unless all debts and the Trustee’s fees were paid. At the second hearing, Mr Purton submitted the reason for the refusal was the Petitioning Creditors’ concern that any payment to them might be clawed back by the Trustee as a preferential payment to unsecured creditors.

22    The Petitioning Creditors contend that Mr Lennon’s claim that he did not receive notice of the return date is untenable on the evidence, it did not amount to exceptional circumstances, and that the sequestration order should not be set aside.

23    The issue before me at the first hearing was whether Mr Lennon was able to pay his debts as at the date of the hearing.

Chronology of key events prior to first hearing

24    The original creditors’ petition was filed by the Victorian Legal Services Board on 19 June 2024. The petition sought a sequestration order against Mr Lennon, based on his failure to comply with a Bankruptcy Notice issued on 3 May 2024. The act of bankruptcy occurred on 24 May 2024.

25    The Board ceased to be the petitioning creditor after Mr Lennon satisfied the debt owed to it. The Board withdrew from the proceedings, and Adam Houten and Veronica Finarelli were substituted as the petitioning creditors pursuant to s 49 of the Bankruptcy Act, by order of Registrar Ellis made 17 October 2024.

26    Also on 17 October 2024, Registrar Ellis ordered the Petitioning Creditors to file and serve written submissions in support of their application for a sequestration order of no more than 5 pages in length by 4pm on 22 November 2024. The hearing of the creditors’ petition was adjourned to 10am on 10 December 2024.

27    On 22 November 2024, solicitors for the Petitioning Creditors, McDonald Legal, served a ‘Notice of Acting – Appointment of Lawyer’ and written submissions required pursuant to Order 3 of Orders of Registrar Ellis of 17 October 2024 on Mr Lennon by way of email to his email address, being Email Address 1. An affidavit of Daniel John McDonald, a solicitor employed by McDonald Legal, confirming service of the Notice of Acting and submissions by email to Email Address 1, was filed on 9 December 2024.

28    During the proceeding, Mr Christian Teese of Rigby Cooke provided evidence that the solicitors for the Board had received emails from Mr Lennon from Email Address 1.

29    On 10 December 2024, the Federal Court sent Mr Lennon a copy of the sequestration order via email to Email Address 1 and two other email addresses associated with Mr Lennon, Email Address 2 and Email Address 3. That 10 December email was received by Mr Lennon on 12 December 2024.

30    Mr Lennon denies receiving the documents emailed to Email Address 1 on 22 November 2024, or any communications from the Petitioning Creditors’ solicitors or the Court informing him of the 10 December 2024 hearing date.

Legislation

31    Rule 3.11 of the Federal Court Rules 2011 (Cth) provides that a party may apply to the Court under s 35A(5) of the Federal Court Act for review of the exercise of the power of the Court by a Registrar. Such application must be made within 21 days after the day on which the power was exercised.

32    Section 35A(1) of the Federal Court Act sets out the powers of the Court which may be exercised by a Registrar. Sub-section (5) provides that a party may within a prescribed time apply to the Court to review the exercise of the Registrar’s power.

33    Section 43(1) of the Bankruptcy Act empowers the Court to make a sequestration order on satisfaction of certain criteria. Specifically, s 43(1) relevantly provides that:

Jurisdiction to make sequestration orders

(1)     Subject to this Act, where:

(a) a debtor has committed an act of bankruptcy; and

(b) at the time when the act of bankruptcy was committed, the debtor:

(i)     was personally present or ordinarily resident in Australia;

…

the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.

34    Section 51 of the Bankruptcy Act provides that:

Subject to section 109 [of the Bankruptcy Act], the prosecution of a creditor’s petition to and including the making of a sequestration order on the petition shall be at the expense of the creditor.

35    Section 52 of the Bankruptcy Act provides as follows:

(1)    At the hearing of a creditor’s petition, the Court shall require proof of:

(a)    the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)    service of the petition; and

(c)    the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. …

(2)    If the Court is not satisfied with the proof of those matters, or is satisfied by the debtor:

(a)    that he or she is able to pay his or her debts; or

(b)    that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.

36    Section 153A of the Bankruptcy Act states as follows:

(1)    If the trustee is satisfied that all the bankrupt’s debts have been paid in full, the bankruptcy is annulled, by force of this subsection, on the date on which the last such payment was made.

(1A)    In determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid.

(2)    The trustee must, before the end of the period of 2 days beginning on that date, give to the Official Receiver a written certificate setting out the former bankrupt’s name and bankruptcy number and the date of the annulment. …

Principles

37    The Full Court in Bechara explained at [2] that it is now an accepted incident of judicial power that it may be exercised by an order being made by a Registrar pursuant to a delegation, but only if the order may be reversed or otherwise corrected by a judge on review.

38    Section 35A(5) of the Federal Court Act provides that a party may apply to the Court to review the exercise by a Registrar of a power under s 35A(1). Mr Lennon is entitled to a review as of right. There is no requirement to establish exceptional circumstances or a denial of procedural fairness.

39    The review is by way of a de novo hearing: Harris v Caladine at 95 (per Mason CJ and Deane J). Fresh evidence may be adduced. Error does not need to be demonstrated on the part of the Registrar for success in the review.

40    In Totev at [14] (per Emmett J), it was noted that the judge who hears the review application must hear the petition afresh, must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act and be satisfied with the proof of:

    the matters stated in the petition;

    the service of the petition; and

    the fact that the debt or debts on which the petitioning creditor relies is or are still owing.

41    The onus is on the creditors to prosecute their petition at the rehearing. The only onus on the debtor/bankrupt against whose estate the sequestration order has been made is to prove the matters in s 52(2) of the Bankruptcy Act, either solvency or any other sufficient cause: Bechara at [27(d)] (per Allsop CJ, Markovic and Colvin JJ).

Parties’ submissions

42    The Petitioning Creditors established the matters required by s 52(1) of the Bankruptcy Act before the Registrar on 10 December 2024. They rely on the same material in the review hearing. The Petitioning Creditors contend that the matters required by s 52(1) of the Bankruptcy Act are satisfied and that the Court should uphold the sequestration order.

43    At the first hearing, the Petitioning Creditors initially relied on ss 43(1) and 153A of the Bankruptcy Act to contend that the sequestration order should not be set aside unless Mr Lennon established exceptional circumstances, such as a denial of procedural fairness or a substantial defect in the proceedings. At the second hearing, the Petitioning Creditors admitted that this reliance was misplaced. One of the bases on which they sought leave to re-open was their misunderstanding of the law as to the nature of the review hearing.

44    In seeking leave to re-open, the Petitioning Creditors also relied on a further misapprehension as to the law: what was required to prove an ability to pay debts for the purposes of s 52(2)(a) of the Bankruptcy Act.

45    Mr Lennon contended that he is able to pay his debts and that accordingly the sequestration order should be set aside. Mr Lennon opposed the re-opening of the review hearing.

Consideration

46    The Petitioning Creditors’ reliance on ss 43(1) and 153A of the Bankruptcy Act was misplaced. The sequestration order was made by a Registrar in the exercise of delegated judicial power, not by a judge.

47    Whilst an applicant seeking to annul a sequestration order made by a judge faces a heavy burden, an applicant seeking a review of a sequestration order made by a Registrar, is entitled to a review as of right.

48    Federal judicial power may be delegated to Registrars if the power exercised by them is subject to review or appeal by a judge or judges of the court: Harris v Caladine at 94–5 (per Mason CJ and Deane J), 123, 126 (per Dawson J), 150–1 (per Gaudron J) and 164 (per McHugh J). The opportunity for a review by way of hearing de novo is sufficient to satisfy this requirement: Harris v Caladine at 95 (per Mason CJ and Deane J), 123 (per Dawson J) and 164 (per McHugh J); Bechara at [1] (per Allsop CJ, Markovic and Colvin JJ).

49    The sequestration order made by a Registrar takes effect as an order of the judges of the Court but on the basis that a judge may be asked to make an order in place of the exercise of delegated authority: Bechara [3] (per Allsop CJ, Markovic and Colvin JJ). In contrast, a sequestration order made by a judge pursuant to s 43(1) of the Bankruptcy Act, may only be annulled pursuant to s 153A of the Bankruptcy Act.

50    Mr Lennon is entitled to make an application for review of the sequestration order made by the Registrar. The application for review is a demand that the claim for a sequestration order be heard by a judge. There was no suggestion that the application was brought out of time. As noted above, the review is by way of a hearing de novo. There is no requirement for Mr Lennon to demonstrate exceptional circumstances or a denial of procedural fairness in order to trigger the review.

51    A B Legal in a letter to the Petitioning Creditors’ lawyers dated 20 February 2025, in response to the 19 February Email, noted that Mr Lennon was not seeking to annul the bankruptcy. Rather, he was seeking to set aside the orders of 10 December 2024. Mr Lennon’s second affidavit also noted that on the basis of the 19 February Email that the Petitioning Creditors’ lawyers had “misunderstood the nature of my review”.

52    Mr Lennon’s submissions dated 20 February 2025, a week prior to the hearing, squarely put that the review was a re-hearing de novo of the creditors petition — a fresh look at the issues by way of a complete rehearing of the facts and the law. Whilst Mr Lennon may have inadvertently cited the Federal Circuit Court case, Bates v Bechara [2016] FCCA 3489 (instead of the Full Court’s reasons in Bechara), he also cited the Full Court’s explanation in Totev.

53    Any misapprehension on the part of the Petitioning Creditors as to the nature of the review should have been banished by reading the Full Court’s explanation of the nature of a review of a Registrar’s order in Totev at [9] and following. Failure to realise the correct position after receipt of Mr Lennon’s submissions, can only be put down to a failure to read the submissions. That failure is not grounds to re-open the review hearing.

Section 52(1) matters

54    On the hearing de novo, the Petitioning Creditors bear the onus of establishing the matters set out in s 52(1) of the Bankruptcy Act. The Petitioning Creditors relied upon the material before Registrar Ellis to establish the matters set out in s 52(1) at the time of the first hearing.

55    The affidavit of debt made by Mr Houten on 10 December 2024, states that the debt amount owed to the creditors is $45,168.05, which is in respect of two unpaid costs orders (6 April and 8 August 2023) together with interest in the sum of $7,157.63. At the first hearing, the Petitioning Creditors accepted the total debt, excluding interest, was $45,168.05.

56    As at the date of the second hearing, the debt remains unpaid, although on the basis of the correspondence discussed below, it appears that the debt amount (plus interest and a sum for costs) has been offered to be paid, and that amount currently sits in Mr Lennon’s lawyers’ trust account.

57    Mr Lennon contends that the sequestration order should be set aside as he is able to pay his debts, evidenced by the sum deposited in his lawyer’s trust account, and he is not aware of any other debts, two of the factors set out in s 52(2) of the Bankruptcy Act. Mr Lennon bears the onus of satisfying the Court of these matters.

Section 52(2)(a) — is Mr Lennon able to pay his debts?

58    Mr Lennon’s written submissions for the first hearing noted that he has deposited the sum of $57,325.68 into the trust account of his lawyers, A B Legal, which he contends is sufficient to discharge the debt of the Petitioning Creditors in full. Mr Lennon relied on his second affidavit made 24 February 2025, in which he deposed to the following matters.

(a)    Since being advised of the sequestration order on 12 December 2024, he has attempted to discharge the debt.

(b)    Mr Lennon wrote to the Official Trustee on 11 January 2025 advising that he was unaware of the application to bankrupt him, and that he wished to pay out the creditors, subject to the amount being sought.

(c)    On 13 January 2025, Mr Stephen Dixon of Hamilton Murphy was appointed Trustee of his Bankrupt Estate.

(d)    Mr Lennon provided copies of his review application to Hamilton Murphy on 18 January 2025.

(e)    On 11 February 2025, A B Legal wrote to the Petitioning Creditors’ lawyers making an open settlement offer to pay an amount to resolve the matter.

(f)    The Petitioning Creditors rejected the open offer on 11 February 2025.

(g)    On 12 February 2025, A B Legal made a further open settlement offer which included Mr Lennon paying a sum amount into their trust account, being the debt, an amount for penalty interest and another amount for costs.

(h)    On 17 February 2025, A B Legal wrote to the creditors’ lawyers confirming the deposit into their trust account of the sum of $57,325.68.

(i)    On 19 February 2025, the Petitioning Creditors rejected the offer

59    In addition to the correspondence referred to in the previous paragraph, Mr Lennon’s second affidavit annexed, amongst others, the following:

(a)    a trust account receipt from A B Legal showing receipt of $57,325.68 into the A B Legal Pty Ltd Law Practice Trust Account.

(b)    a letter from A B Legal dated 12 February 2025 setting out how the sum of $57,325.68 was calculated:

•    $45,168.05 in satisfaction of the debt;

•    $7,157.63 accrued interest on the debt; and

•    $5,000.00 legal costs and filing fees.

60    I am satisfied on the material before me that Mr Lennon is able to pay the debt owed to the Petitioning Creditors. The sum of $57,325.68 continues to sit in the trust account of A B Legal for the purposes of satisfying the debt. That sum includes an amount for accrued interest and for legal costs and filing fees. The Petitioning Creditors have not established that the proffered sum is not sufficient to satisfy the debt.

61    At the second hearing, Mr Purton contended that in order to satisfy the Court that Mr Lennon was able to pay his debts, Mr Lennon should have put on the “fullest and best” evidence showing his financial position, including assets, income and outgoings. Mr Purton cited Bullen v Mangano [2024] FCA 1199 as an example of the kind of evidence that he contended was required. The Petitioning Creditors’ failure to raise this submission at the first hearing was asserted to be the second misapprehension of law on which the re-opening application was based.

62    The sole issue in Bullen was the debtor’s ability to satisfy the Court of her ability to pay her debts for the purposes of s 52(2)(a) of the Bankruptcy Act. As Goodman J observed in Bullen at [9], the nature of the evidence necessary to discharge the onus will vary from case to case, and (at [10]), there is no universal rule that a debtor whose evidence is less than the “fullest and best” evidence available thereby fails to discharge their onus of establishing solvency.

63    Mr Lennon explained the limited evidence before the Court at the first hearing in his second affidavit (filed 3 days before the hearing):

Given that I had intended paying out any debt to the [petitioning creditors], I did not anticipate having to file any further affidavit material despite the [petitioning creditors] indicating in the email dated 19 February 2025 that there were issues with the trustee and the existence of other debts. The email from [the Trustee’s lawyers] sent on 20 February 2025 (and which they advised was sent directly to the court) is inconsistent with that assertion.

64    In the particular circumstances of this case, I consider that the evidence before the Court at the first hearing of Mr Lennon’s ability to pay his debts was sufficient. Given Goodman J’s observations in Bullen above, I do not consider that there was any misapprehension as to the nature or extent of evidence required from the debtor to satisfy the Court that he was able to pay his debts.

Costs of prosecuting the creditors’ petition

65    At the first hearing, the petitioning creditors submitted that their costs incurred in prosecuting the creditors’ petition before Registrar Ellis and on the review, had not yet been taxed and as such were not included in the costs figure included in Mr Lennon’s calculation of the total sum of $57,325.68.

66    Section 51 of the Bankruptcy Act provides that the prosecution of a creditor’s petition to and including the making of a sequestration order on the petition shall be at the expense of the creditor. Accordingly, the costs incurred by the creditors of the first and second hearing and that before Registrar Ellis cannot be included in the calculation of the debt owed.

Section 52(2)(b) — other sufficient cause

Other debts of Mr Lennon?

67    Mr Lennon contends that the absence of any other debts owed by him is a factor in favour of the sequestration order being set aside.

68    On 24 February 2025, my Chambers received an email from lawyers acting on behalf of the Trustee. The email noted that the Trustee did not want to incur funds by taking an active role in the application if it could be avoided. The email also noted that, should the application be successful and the sequestration order set aside, the Trustee wished to be heard at a later date on the question of the Trustee’s remuneration, costs and expenses. A similar approach was said to have been adopted in Roderick Group Pty Ltd (in liq), in the matter of Vlahos v Vlahos [2024] FedCFamC2G 1439 at [127] (per Symons J). I gave leave to the Trustee not to attend the first hearing.

69    Mr Lennon deposed in his second affidavit that he was solvent and able to pay any debts as and when they fell due. He also deposed that he was not aware of any other debts owed by him.

70    At the first hearing, the Trustee did not provide any evidence of other debts owed by Mr Lennon, despite the Petitioning Creditors alluding to the reference to the Trustee informing them of the existence of other debts in the 19 February Email.

71    The Trustee was aware of the possibility of the sequestration order being set aside, as his communications to the Court expressly referred to that possibility. In the event of that outcome, the Trustee wished to be heard on the question of his remuneration, costs and expenses. There was no mention of other debts owed by Mr Lennon. If there were other debts owed by Mr Lennon known to the Trustee, I would expect the Trustee to have raised their existence in the communications. In that circumstance I would have expected the Trustee to have attended the hearing, or to have filed evidence of any other debts, rather than seek to be excused to save incurring costs.

72    On the material before me at the first hearing I was satisfied that Mr Lennon did not have further debts for the purposes of s 52(2)(b) of the Bankruptcy Act.

Attempts to pay the debt

73    Mr Lennon disputed that he received notification of the substitution of the creditors, or the notification of the hearings of 1 and 17 October 2024 and 10 December 2024. Upon becoming aware of the sequestration order, Mr Lennon submits that he has made efforts to pay the debt to the creditors, and that his efforts have been rejected.

74    Mr Lennon relies on his efforts to repay the debt as soon as he became aware of the sequestration order as a further factor tending against the making of a sequestration order.

75    The Petitioning Creditors accepted that they did not file evidence in response to Mr Lennon’s first affidavit in which he deposed that he had not received notice of the creditor substitution order being made or of 10 December 2024 hearing.

76    Mr Lennon’s evidence is that since becoming aware of the 10 December 2024 orders on 12 December 2024, he has attempted to discharge the debt owed to the Petitioning Creditors. Since 17 February 2024, the sum of $52,325.68 has been in the A B Legal trust account ready to be paid to the Petitioning Creditors, who have to date not accepted payment.

77    I accept Mr Lennon’s assertions regarding his attempts to repay the debt to the Petitioning Creditors. His attempts and ability to furnish the monies in satisfaction of the debt is indicative of Mr Lennon’s solvency.

Disposition

78    I am satisfied on the material before me at the first hearing that Mr Lennon is able to pay the debt owed to the Petitioning Creditors and that there are no other debts owed by Mr Lennon for the purposes of s 52(2) of the Bankruptcy Act.

79    I will make orders allowing the interim application for review filed by the respondent and setting aside the sequestration order.

Associate:

Dated:    25 March 2025