Federal Court of Australia

Purple Sunset Holdings Pty Ltd v Jones, in the matter of Cattana (No 2) [2025] FCA 660

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 222 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), the Personal Insolvency Agreement dated 25 September 2024 entered into between the first to fifth respondents pursuant to Part X of the Bankruptcy Act be set aside.

2.    Pursuant to s 222(10) of the Bankruptcy Act, a sequestration order is made against the estate of the second respondent, Jonathan Franco Cattana of 19 Chamberlain Avenue, Rose Bay, NSW, 2029, with the effective date of bankruptcy being 8 August 2024.

3.    Mark Roufeil and Bradley Tonks of PKF be appointed as joint trustees in bankruptcy of the estate of the second respondent, Jonathan Franco Cattana.

4.    The second respondent’s estate pay the applicants’ and the first respondent’s costs of these proceedings.

5.    The applicants’ interlocutory application dated 22 March 2025 otherwise be dismissed.

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

REASONS FOR JUDGMENT

JACKMAN J:

Introduction

1    The applicants, Purple Sunset Holdings Pty Ltd (Purple Sunset) as trustee for The Diana Super Fund of Unit and Chalton Investments Pty Ltd (Chalton Investments), seek orders as creditors pursuant to s 222(1), (2) and (5) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) that a Personal Insolvency Agreement (PIA) dated 25 September 2024 be set aside and that, pursuant to s 222(10), a sequestration order be made against the estate of the second respondent, the debtor Mr Jonathan Cattana (Mr Cattana). Alternatively, the applicants seek orders pursuant to s 222C of the Bankruptcy Act that the PIA be terminated and that, pursuant to s 222C(5), a sequestration order be made against the estate of Mr Cattana.

2    The first respondent, Mr Michael Jones (Mr Jones), in his capacity as Controlling Trustee of Mr Cattana (the Trustee), filed a Notice of Opposition on 25 March 2025, whereby he neither opposes nor supports the application. Mr Cattana filed a Notice of Opposition on 5 May 2025 opposing the application. The third, fourth and fifth respondents are entities controlled by Mr Cattana, and have not participated in these proceedings.

Salient Facts

3    These proceedings relate to earlier proceedings commenced on 14 April 2024 by the applicants in the District Court of NSW against Elevate Invest Pty Ltd (Elevate Invest) and Mr Cattana, seeking to recover a debt owed by Elevate Invest which was guaranteed by Mr Cattana (the District Court Proceedings). Those proceedings have been adjourned pending the outcome of these proceedings.

4    The District Court Proceedings concern a Loan Agreement and Mortgage Deed between the applicants and Elevate Invest, and a Deed of Personal Guarantee between the applicants and Mr Cattana (the Guarantee), all dated on or about 6 December 2022. Elevate Invest was controlled by Mr Cattana, and was deregistered on 13 October 2024.

5    Pursuant to cll 1.3 and 1.4 of the Loan Agreement, the applicants lent a principal amount of $100,000 to Elevate Invest (Loan), from which $15,000 was deducted in up-front fixed interest and $500 was deducted as a contribution to legal fees incurred in preparing the documents relevant to the Loan. The remainder of the principal amount (being $84,500) was paid by the applicants to Elevate Invest in two separate payments of $42,250 (on 8 December 2022 by Purple Sunset and 9 December 2022 by Chalton Investments). Pursuant to cl 1.4 and Sch 1 of the Loan Agreement, the term of the Loan expired on 28 April 2023, the amount to be repaid was $100,000 and the interest in the event of default was 20% per annum.

6    Pursuant to the Mortgage Deed, the applicants were to have security over the property at 61 Cinderella Drive, Springwood, QLD, 4127, However, it subsequently came to the attention of the applicants from a title search on 11 June 2024 that that property was owned by Elevate Invest Group Pty Ltd (Elevate Invest Group), not Elevate Invest. Elevate Invest Group is controlled by Mr Joseph Scarcella, a business partner of Mr Cattana.

7    Pursuant to the Guarantee, Mr Cattana personally guaranteed Elevate Invest’s obligations to the applicants pursuant to the Loan Agreement.

8    On 21 April 2023, shortly before the term of the Loan expired on 28 April 2023, Mr Cattana emailed the applicants seeking an extension of the payment terms of the Loan until the end of May 2023. On 4 June 2023, Mr Cattana emailed the applicants acknowledging the 20% per annum interest and offering to pay it within a week “or so”. A further extension of the time for payment for a period of six weeks was sought by Mr Cattana on 18 September 2023.

9    On 20 October 2023, Mr Clemente Diana (Mr Diana), a director of Purple Sunset, emailed Mr Cattana, confirming that the Loan would need to be repaid by 14 December 2023. Later that day, Mr Cattana responded by email that he fully agreed and understood.

10    Between 4 November and 19 December 2023, Mr John Challita (Mr Challita), a director of Chalton Investments, and Mr Cattana corresponded by email, whereby Mr Cattana sought an extension to repay the Loan, which Mr Challita refused. After the date of 14 December 2023, Mr Cattana emailed Mr Challita indicating that he thought the $100,000 would be paid in the next month and the interest may take another four to six weeks to repay. On 29 January 2024, Mr Cattana emailed the applicants indicating that he believed that he would make payment in three to four weeks, if not sooner.

11    On 12 February 2024, the solicitors for the applicants (DME Legal), sent a letter of demand to Elevate Invest and Mr Cattana, who confirmed receipt that day. Pursuant to DME Legal’s letter, the Loan Agreement was terminated with immediate effect. On 26 February 2024, Mr Cattana sent Mr Diana of Purple Sunset an email indicating that a refinancing offer from the Commonwealth Bank of Australia was coming through, and he would then pay the debt. On 3 April 2024, Mr Cattana’s solicitors requested that the debt be paid over five monthly instalments between 25 April and 25 August 2024. On 4 April 2024, the applicants rejected Mr Cattana’s request.

12    In the subsequent District Court Proceedings (which were commenced on 14 April 2024), it is not in dispute that the Loan was advanced to Elevate Invest pursuant to the Loan Agreement and that Mr Cattana entered into the Guarantee.

13    On 28 September 2024, during the course of the District Court Proceedings, the applicants discovered through their bankruptcy searches that Mr Cattana had entered into the PIA on 25 September 2024. It later transpired that the Trustee had been appointed controlling trustee on 8 August 2024 upon execution of a Controlling Trustee Authority and confirmed by a Certificate of Appointment of Trustee. Mr Cattana had met the Trustee on about 3 April 2024 and the Trustee emailed Mr Cattana various documents to complete on 7 April 2024, including the PIA instructions and form, a Statement of Affairs, a Controlling Trustee Authority, and a draft PIA Proposal.

14    Mr Cattana had not given any indication to the applicants, through his solicitor or otherwise, that the Trustee had been appointed. On 27 August 2024, the solicitor for Elevate Invest and Mr Cattana indicated that their lay evidence would be filed by 20 September 2024 (which it was not, thereby requiring a re-listing for further directions). On 27 September 2024, the solicitor for Elevate Invest and Mr Cattana filed a Notice of Intention to Cease Acting in the District Court Proceedings.

15    The applicants also discovered on 28 September 2024 through a bankruptcy search that there were bankruptcy proceedings commenced on 18 July 2024 by the Australian Taxation Office against Mr Cattana, which were adjourned on 26 September 2024 due to the PIA.

16    On 30 September 2024, DME Legal emailed the Trustee informing him of the debt owed by Mr Cattana to the applicants. The email stated that the applicants had not been notified in relation to any proposed PIA or any meeting of creditors.

17    The Controlling Trustee’s Report to Creditors dated 4 September 2024 (which was provided by the Trustee to the applicants on 1 October 2024), included the publicly available portion of Mr Cattana’s Statement of Affairs (SOA) signed on 8 August 2024 which was made under s 188(2C) of the Bankruptcy Act. The SOA did not list the applicants as creditors. The full version of the SOA indicates that Mr Cattana did not refer to the District Court Proceedings in answer to the question as to legal processes or disputes involving him.

18    A meeting of creditors was held on 19 September 2024 to pass a special resolution of the creditors for Mr Cattana to enter into the PIA. The meeting commenced at 11am and was adjourned until 2.30pm by the Chairman, being the Trustee. The meeting was attended by Mr Jones, Mr Vu (a member of Mr Jones’s firm) and Mr Cattana. There was no creditor personally present at the meeting, although three creditors had given proxies to Mr Jones. The resolution requiring Mr Cattana to execute the PIA was said to have been passed on the votes of the three creditors which had appointed the Trustee as their proxy (in the total admitted amount of $12,266.81), there being no creditors who voted against or abstained from voting on the proposed resolution. Likewise, a resolution that Mr Jones be appointed Trustee of the PIA was passed by the proxy votes of those three creditors.

19    On 25 September 2024, the PIA was entered into by Mr Cattana and the Trustee, together with the third respondent (6 Jacinta), the fourth respondent (Forte Lending) and the fifth respondent (Habit Financial), being entities controlled by Mr Cattana. Elevate Invest was also a party to the PIA, but it was subsequently deregistered. Those entities entered into the PIA as creditors not participating in any dividend.

20    On 22 November 2024, DME Legal sent a letter to the Trustee setting out various concerns in respect of non-disclosure of the applicants’ debt in Mr Cattana’s SOA, the resulting exclusion of the applicants in the Trustee’s correspondence to creditors and the meeting of creditors, and drawing attention to various matters for investigation. On 4, 9 and 16 December 2024, the Trustee and DME Legal engaged in further correspondence, whereby the Trustee provided a partial response to the 22 November 2024 letter, and DME Legal requested a substantive response. Despite an indication from the Trustee that a substantive response would be sent by 19 December 2024, it was not forthcoming.

21    On 25 February 2025, Mr Cattana emailed DME Legal indicating that he was aiming to provide a payout in the next four to six weeks. As of 6 January 2025, the debt owed by Mr Cattana to the applicants was in an amount of $167,146.55, comprising the principal amount of $100,000, interest of $33,879.78, and $33,266.77 in legal fees and disbursements. To date Mr Cattana has not paid any amount towards the debt.

Should the PIA be set aside?

22    The applicants rely on three bases under s 222 of the Bankruptcy Act for the setting aside of the PIA. First, the applicants contend Mr Cattana has omitted a material particular in the SOA given under subs 188(2C) within the meaning of s 222(5)(e)(i). Second, the applicants contend that the PIA was not entered into in accordance with Part X, or does not comply with the requirements of Part X, because a special resolution was not validly passed by creditors under s 204, within the meaning of s 222(2). Third, the applicants contend that the terms of the PIA are unreasonable and are not calculated to benefit the creditors generally or there is another reason the PIA should be set aside, within the meaning of s 222(1). I will deal with each of those contentions in turn.

23    There is no doubt that the applicants have standing to make those applications under s 222 by reason of their status as creditors of Mr Cattana, and Mr Cattana does not dispute their standing. On the material available to me, Mr Cattana owes the debts claimed by the applicants, and he has acknowledged his indebtedness on multiple occasions. The Trustee has also acknowledged in correspondence with Mr Cattana dated 29 November 2024 that the applicants remain creditors of Mr Cattana’s estate. It may well be that Mr Cattana would wish to rely on additional evidence in the District Court Proceedings, but I must make findings based on the evidence before me.

24    As to whether Mr Cattana omitted a material particular in his SOA, it is well-established that a particular is material if it is relevant to and might be likely to affect the making of a decision by creditors: Beard v Prestige Baking Industries Pty Ltd [1981] FCA 97; (1981) 36 ALR 307 at 319 (Fox J), 336–7 (Lockhart J) and 343 (Sheppard J) (Beard v Prestige Baking). That principle corresponds to the test of materiality relating to the Court’s power to terminate a deed of company arrangement under s 445D(1)(c) of the Corporations Act 2001 (Cth) for a material omission: Project Sea Dragon Pty Ltd (subject to a deed of company arrangement) v Canstruct Pty Ltd [2024] FCAFC 141; (2024) 305 FCR 465 at [162].

25    Question 7 in the SOA asked: “Are you involved in any legal processes or disputes?”, to which Mr Cattana answered “No”. That was incorrect and omitted a material particular, in failing to disclose the District Court Proceedings. Further, Question 40 (which was included in the publicly available portion of the SOA attached to the Report to Creditors) required Mr Cattana to list his unsecured creditors, noting that unsecured creditors can include personal guarantees and contingent debts. Mr Cattana did not include the applicants in that list.

26    Mr Cattana submits that the failure to disclose the Guarantee arose from a genuine, albeit mistaken, belief held by Mr Cattana at the relevant time regarding the necessity for disclosure. There is no evidence to support that submission, but more fundamentally the omission of a material particular in the SOA is not confined to wilful or negligent omission. It extends to a debtor who in good faith and without negligence omits a debt, overstates or understates the debt, or misdescribes its nature: Beard v Prestige Baking at 324 (Fox J).

27    In addition, the Trustee confirmed in email correspondence with DME Legal on 4 December 2024 that the District Court Proceedings and the Guarantee were not disclosed to him by Mr Cattana until after the execution of the PIA. The Trustee was not aware of the applicants’ debt or the District Court Proceedings until DME Legal contacted the Trustee on 30 September 2024.

28    As to materiality, not only would the omissions be likely to affect the making of a decision by creditors, but they also had the capacity to alter the Trustee’s assessment of Mr Cattana’s insolvency and the Trustee’s recommendations to creditors. Indeed, the omissions were so significant that the Trustee has subsequently lodged an Australian Financial Security Authority (AFSA) Referral Form on 29 November 2024 in relation to an alleged offence under s 267(1)(f) of the Bankruptcy Act for a false declaration by a debtor. On 19 December 2024, AFSA confirmed that it had decided to accept the matter for investigation. The Trustee marked the impact of the omission on the administration of Mr Cattana’s estate on the Referral Form as “significant”. As the Trustee further disclosed in the Referral Form: (a) the SOA did not indicate any amounts owing to the applicants; (b) if the debt of $125,921.04 was disclosed, then the total debts in the administration would have increased by approximately 27.7% (that is, from $454,839 to $580,760.04); (c) this has resulted in creditors receiving inaccurate information on the total amount of debts owing by Mr Cattana; and (d) it has resulted in a misleading estimated rate of return for creditors under the proposed PIA, in that if Mr Cattana had disclosed this debt, the dividend rate would have decreased by approximately 10 cents in the dollar.

29    Further, Mr Cattana had earlier failed to rectify any omission despite having the opportunity to do so upon requests for information by the Trustee. The Trustee’s office emailed Mr Cattana on 22 July 2024 requesting an amended SOA and further requesting confirmation whether the SOA would still be current and correct at that time. Mr Cattana responded by email the same day, saying “Yes”. In addition, on 1 August 2024, prior to Mr Cattana signing the SOA on 8 August 2024, the Trustee’s office emailed Mr Cattana stating in relation to the SOA previously provided, “Can you please review this to ensure it is still correct and sign and date it and return to our office?”

30    When the Trustee was appointed, his office emailed Mr Cattana a letter on 9 August 2024 outlining his responsibilities, including: “If you are aware of any material changes to the Statement of Affairs and a proposal for dealing with your affairs under Part X of the Act (section 188A of the Act), you must notify me prior to the creditors meeting so it can be tabled at the meeting”. After signing the SOA on 8 August 2024, Mr Cattana also failed to take the opportunity to disclose the District Court Proceedings and the applicants’ debt over a period of almost a month while corresponding by email with the Trustee’s office in relation to the proceedings with the ATO and the PIA generally with an email instruction to proceed with the PIA proposal on 4 September 2024. The PIA was then forwarded to him for review on 23 September 2024 and arrangements were made for signing on 25 September 2024 (along with arrangements made to inform the ATO on 23 September 2024 of recent developments in respect of the ATO proceedings). When the Trustee’s office contacted Mr Cattana on 30 September 2024 after being notified of the applicant’s debt the same day, correspondence was exchanged to discuss the matter and Mr Cattana acknowledged that “one of my companies borrow [sic] those funds I intend to repay them back [in] the coming months”.

31    Sub-section 222(6) provides that the Court must not make an order under subs (5) unless it is satisfied that it would be in the interests of the creditors to do so. It is well-established that it may be in the best interests of creditors to set aside a personal insolvency agreement so as to enable a full investigation of the debtor’s affairs to be made, which the making of a sequestration order will facilitate, even if it cannot be postulated that the creditors will necessarily be financially better off if the debtor’s affairs are administered in bankruptcy: see Deputy Commissioner of Taxation v King [2016] FCA 1281 at [62] (Rares J). In my view, it would be in the interests of creditors for a full investigation of the debtor’s affairs to be carried out, in light of the matters calling for further investigation which I set out below. While a number of the creditors have relatively small debts, that cannot be said of the applicants and the ATO. In relation to the ATO, Mr Cattana is wrong in submitting that the ATO has not been informed of this application. I am therefore satisfied that it would be in the interests of creditors to set aside the PIA under subs (5)(e).

32    Sub-section 222(7) provides that the Court must not make an order under subs (5) unless the application for the order is made before all the obligations that the personal insolvency agreement created have been discharged. As at 21 January 2025, when the application was made, there remained to be performed many of the obligations created by the PIA, in particular the payment of monthly instalments over 18 months by Mr Cattana, and indeed there still remain many obligations to be performed as at today.

33    As to the contention that the PIA was not entered into in accordance with Part X, or does not comply with the requirements of Part X, the applicants’ submission is based on r 75.105 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth), which provides that:

(1)    A quorum consists of:

(a)    the trustee present in person;

(b)    one person entitled to vote present in person; and

(c)    if the number of persons entitled to vote is 2 or more – one or more other persons entitled to vote present in person or by proxy or attorney.

34    As I have indicated above, the minutes of the meeting of creditors held on 19 September 2024 indicate that three creditors attended the meeting by proxy (with debts totalling $12,266.81), but no creditor was present in person. Accordingly, the meeting was not quorate, given the lack of a person entitled to vote being present in person. Accordingly, no special resolution was passed in relation to the PIA for the purposes of s 204 of the Bankruptcy Act, and s 222(2) is satisfied.

35    Section 222(3) provides that the Court must not make an order setting aside a personal insolvency agreement on the ground that it does not comply with the requirements of Part X if the agreement complies substantially with those requirements. Contrary to Mr Cattana’s submission that there has been substantial compliance, I accept the applicants’ submission that a quorum is not a purely technical matter but is fundamental to the validity of resolutions passed at a creditors’ meeting. I also note the evidence of Mr Challita that, if the applicants had been afforded the opportunity to attend the meeting of creditors, the applicants would have voted to reject the PIA.

36    In addition, subs 222(4) provides that the Court must not make an order under subs (2) unless the application for the order is made before all the obligations that the personal insolvency agreement created have been discharged. As I have noted above in relation to subs 222(7), the application was made before all the obligations that the PIA created have been discharged, and they are currently ongoing.

37    I turn then to the third of the bases relied on by the applicants, that the terms of the PIA are unreasonable and not calculated to the benefit of creditors generally, or there is another reason the PIA ought to be set aside, within the meaning of s 222(1) of the Bankruptcy Act.

38    In Moss v Gunns Finance Pty Ltd (Receivers and Managers Appointed) (in liq) [2018] FCAFC 185; (2018) 131 ACSR 462 at [12]–[13], Gleeson, Lee and Banks-Smith JJ set out some of the relevant factors concerning s 222(1)(d) in assessing whether a personal insolvency agreement is unreasonable or not calculated to benefit creditors, namely:

(a)    the relative size of the debts owing and the proposals;

(b)    the nature of the relationship between the debtor and the creditors who voted in favour of the personal insolvency agreement;

(c)    whether the circumstances call for a greater opportunity to inquire into the debtor’s affairs and the closeness of the creditors’ vote, particularly if influenced by creditors who are not at arm’s length from the debtor; and

(d)    the inadequacy of a return may also constitute a sufficient basis to set aside the personal insolvency agreement, especially when other factors point in favour of setting it aside.

Their Honours said in relation to s 222(1)(e) that there are no particular limits circumscribing the discretion under that paragraph.

39    In Bendigo & Adelaide Bank Limited v Clout (2016) FCA 119 at [18]–[20], White J appeared to accept the submission of counsel for the applicant that the factors bearing upon the exercise of the power in s 222 could be grouped into three categories:

(a)    “composition-related factors”, such as the amount of payment to the unsecured creditors under the composition, whether the trustee considered the composition contrary to the interests of creditors, and whether the obligations under the composition have been carried out fully;

(b)    “investigation-related factors”, such as whether the trustee’s investigation was full and complete, whether a greater opportunity to investigate by the trustee, employing the coercive powers which the Bankruptcy Act provides, may be beneficial to the unsecured creditors and in the public interest, and whether or not there is a possibility of financial benefit to the creditors in setting aside the composition and the trustee undertaking further investigations; and

(c)    “process-related factors”, such as the closeness of the vote approving the composition, whether one or more creditors had been denied the opportunity of voting on the composition and, if so, the effect that had on the voting outcome, whether in all the circumstances the will of the creditors should be respected or not, whether the approval of the composition was colourable for any reason, whether the trustee’s report was deficient or incomplete in any way, whether there were any false or misleading statements by the bankrupt in the statement of affairs, creditors’ meetings or otherwise, and whether or not all relevant information had been provided to the creditors.

40    In the present case, there are investigation-related factors that would benefit from further investigation by a bankruptcy trustee. They include the following:

(a)    DME Legal’s letter dated 22 November 2024 sets out various properties including: 19 Chamberlain Avenue, Rose Bay, NSW; 61 Cinderella Drive, Springwood, QLD (which was purportedly sold by Mr Cattana around 18 September 2023); and Burpengary in QLD (in respect to which Mr Scarcella was proposing to buy out Mr Cattana). The Trustee said in section 6 of the Report to Creditors that he did not undertake searches of property in states and territories of Australia other than NSW.

(b)    The DME Legal letter also refers to the statement in the Report to Creditors to the effect that Mr Cattana is earning income as a finance broker. As stated in Note 4 in Annexure D to the Report to Creditors, relevant to a composition-related factor, income contributions are not available to creditors under a personal insolvency agreement. Note 4 also indicates that in a bankruptcy, it is assumed that Mr Cattana will derive income and be liable for compulsory income contributions, dependent on the actual income derived over three years. The Trustee has estimated the range of Mr Cattana’s income as being from $150,000 to $300,000 gross. Despite that projected income range, Mr Cattana’s recent ATO Notices of Assessment for 2020–2022 indicate that Mr Cattana has no taxable income.

(c)    There is a large number of transactions in a Xero Report of Forte Lending (of which Mr Cattana is director and shareholder) which appear to be a salary and directors’ loans to Mr Cattana, as well as large amounts titled “Mandated funds” and it is not clear what those payments are for.

(d)    Bank statements for Forte Lending indicate that the entity has made at least two contributions under the PIA of $10,000 each on 22 October 2024 and 26 November 2024. Those amounts have also been paid in circumstances where the Trustee describes Forte Lending as having minimal net assets and retained losses, and therefore limited value, on page 11 of the Report to Creditors (while a Bankruptcy Form indicates Forte Lending’s estimated annual turnover as $150,000).

(e)    The balance sheet of 6 Janita (of which Mr Cattana is a director) as at 27 June 2024 shows a property asset at 6 Janita Drive, Browns Plains in Queensland. Nostros Vires Pty Ltd (Nostros Vires) is the sole shareholder of 6 Janita, with the address of 19 Chamberlain Avenue, Rose Bay, being Mr Cattana’s address.

(f)    Part E of the SOA and page 10 of the Report to Creditors indicates that Nostros Vires is the trustee of a trust which owns the property at 61 Cinderella Drive, Springwood, which has a resale value of $33,000. The Trustee has formed the view that Mr Cattana is a discretionary object of that trust. However, the title search indicates that the property at 61 Cinderella Drive is owned by Elevate Invest Group as trustee, of which Mr Cattana is a director.

(g)    The balance sheet of Elevate Invest as at 25 June 2024 shows a property asset at 16 Mays Avenue, Logan Central, QLD. There are also loans recorded as owing to Mr Diana and Mr Challita in the amount of $42,250 each, which is the subject of the District Court Proceedings brought by the applicants.

41    The applicants submit, and I accept, that the ownership structure and transactions of these entities should be investigated, particularly in the context of Note 5 in Annexure D of the Report to Creditors, where the Trustee has stated that Mr Cattana is a shareholder in a number of companies and the Trustee has not received the financial statements of such companies and thus is unable to ascertain how much they are worth. The companies referred to on page 10 of the Report to Creditors in which Mr Cattana holds shares include Forte Lending, Nostros Vires, Sei La Mia SMSF Pty Ltd, My Future My Super Pty Ltd and Uplift Living Pty Ltd. By contrast, Mr Cattana answered “No” to the question in the SOA as to whether he owned any shares. Further, as referred to on page 14 of the Report to Creditors, it appears the Trustee has not yet carried out significant investigations into antecedent transactions, which (if any) would become recoverable to the benefit of creditors in a bankruptcy.

42    It is also unclear whether there has been any further investigation into potential debts owed to Mr Cattana as outlined in Part C of his SOA, and section 5 of the Report to Creditors, some of which are referred to as not recoverable. The potential debts include: $185,000 owed by Mr Dermott Lynch; $135,000 owed by Michael Baker and Uplift [Living] Asset Management; and $95,000 that is owed by the Cinderella Trust (subject to the sale of the Cinderella Drive property). There is also a further expense owed by Uplift Living Asset Management for approximately $49,000, which the Trustee indicates would be recoverable in a bankruptcy.

43    Separately, in an email dated 30 July 2024, Mr Cattana indicated to the Trustee that $140,000 should be recoverable within four to six months, and in an email dated 29 August 2024, Mr Cattana indicated that he is owed approximately $125,000 in relation to the Cinderella Drive property.

44    In my view, it is clearly in the public interest that a trustee in bankruptcy be able to exercise the full powers of a trustee to investigate these matters, and examine the affairs of Mr Cattana, to ensure that all his assets and liabilities have been properly and fully disclosed. Further, as I have indicated above, inclusion of the applicants’ debt in the Report to Creditors would have decreased the proposed dividend rate by approximately 10 cents in the dollar. Annexure D of the Report to Creditors estimates a dividend in a bankruptcy to be between 5.26 and 20.37 cents in the dollar, which is much closer to the PIA dividend rate with a decrease of 10 cents in the dollar (which would produce about 24 or 25 cents in the dollar).

45    Accordingly, I am satisfied that the terms of the agreement are unreasonable and not calculated to benefit the creditors generally and that there is ample reason for the agreement to be set aside.

46    Having reached those conclusions in relation to s 222, it is not necessary for me to consider the alternative propounded by the applicants of an order for termination of the PIA pursuant to s 222C of the Bankruptcy Act.

Should a sequestration order be made against the estate of Mr Cattana?

47    Sub-section 222(10) provides relevantly that a creditor may include in an application under subss (1), (2) or (5) an application for a sequestration order against the estate of the debtor. Sub-section 222(11) provides in effect that the application for a sequestration order under s 222 is taken to be the equivalent to the presentation of a creditor’s petition. The usual requirements for a creditor’s petition under ss 47 and 52 of the Bankruptcy Act thus do not apply in express terms to a sequestration order under s 222. However, it is appropriate for the Court to have regard to the same kinds of considerations that apply when the Court is exercising its discretion under s 52, including the potential benefit to creditors and the potential detriment to the debtor.

48    In the present case, the matters set out in s 52(1) have been complied with, including evidence of the basis for seeking the sequestration order, service of the application, and proof that the debt relied on by the applicants is still owing. The potential benefit to creditors is established by way of the benefit of the potential investigations to which I have referred above, together with the impact on the dividend rate attributable to Mr Cattana’s omission of the applicants’ debt. In addition, the four non-participating creditors under the PIA would be able to participate in a bankruptcy distribution. As for any potential detriment to Mr Cattana, I regard him as being the author of his own misfortune.

49    In his Notice of Opposition at [11(d)], Mr Cattana contends that the Court ought to exercise its discretion against making a sequestration order having regard to five matters:

(a)    first, Mr Cattana relies on what he says was the unintentional nature of the omission. However, as I have indicated above, that has not been established by evidence and it is irrelevant whether the omission in the SOA was wilful or mistaken. The question is simply whether it was material.

(b)    Mr Cattana refers to the existence of a bona fide dispute regarding the amount of the liability under the Guarantee, which is the subject of the District Court Proceedings. However, on the material available to me, there is no bona fide dispute in respect of that liability, and Mr Cattana has on multiple occasions admitted his liability.

(c)    Mr Cattana relies on the availability of less drastic alternatives including variation of the PIA under s 221A. However, in light of the desirability of further investigations into Mr Cattana’s affairs, I regard the setting aside of the PIA as the proper outcome, rather than any variation of it.

(d)    Mr Cattana then refers to the significant prejudice that would be caused to him if his estate were sequestrated, but as I have indicated above, I regard him as the author of any misfortune which he now faces in that regard.

(e)    Mr Cattana finally refers to the public interest favouring the use of bankruptcy only as a last resort and after other alternatives have been exhausted. In my view, it is in the public interest that the rights of creditors be protected and that further investigations take place into Mr Cattana’s affairs.

50    Accordingly, in my view, it is appropriate to make a sequestration order.

51    A question arises as to the date of bankruptcy from which the sequestration order is effective. The date on which the application for the sequestration order was filed by the applicants was 21 January 2025. However, there was an earlier date of bankruptcy, namely Mr Cattana signing an authority under s 188 on 8 August 2024 (see s 40(1)(i)). That strikes me as the appropriate date from which the sequestration order is effective, consistently with the reasoning in Mouglalis v Bendigo & Adelaide Bank Ltd [2017] FCAFC 47; (2017) 250 FCR 92 at [8] (Besanko J), [44] (Logan J) and [63]–[65] (Charlesworth J).

52    On 8 January 2025, Mr Mark Roufeil and Mr Bradley Tonks of PKF signed a Trustee Consent to Act Declaration pursuant to s 156A of the Bankruptcy Act. In circumstances where there are issues concerning the Trustee’s investigations, new and independent trustees should be appointed to act in an impartial and independent manner to administer Mr Cattana’s estate in bankruptcy. Accordingly, Mr Roufeil and Mr Tonks should be appointed joint and several trustees.

Costs

53    The applicants seek an order that the Trustee should pay the applicants’ costs of the proceedings and be denied the indemnity under s 189AC. Their submission is based on the observations of von Doussa J in Re Hughes; ex parte Australian Mutual Provident Society v Kennedy [1996] FCA 1286 at [15] to the effect that it would be normal and expected for the trustee to file an affidavit informing the Court of the procedural steps which had occurred in relation to the meeting of creditors and (where the composition is alleged to be unreasonable) the business affairs of the debtor, as well as the claims that had been received.

54    In the present case, the Trustee made his file available to the applicants. Counsel for the applicants accepted that the documents speak for themselves, and an affidavit by the Trustee would not have told them anything which was not in those documents. In my view, no criticism can be made of the Trustee’s conduct in that regard. Indeed, it would have been a waste of time and expense for the Trustee to have made an affidavit in those circumstances, and the Trustee is to be commended for the course which he adopted.

55    Accordingly, the appropriate costs order is the usual one, whereby the applicants’ and the first respondent’s costs are to be paid by the estate of Mr Cattana.

Associate:

Dated:    18 June 2025

SCHEDULE OF PARTIES