Federal Court of Australia

Liu v Wang, in the matter of Wang [2026] FCA 132

ORDERS

BY CONSENT, THE COURT ORDERS THAT:

1.    The time for filing an application under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 2.02(3) of the Federal Court (Bankruptcy) Rules 2016 (Cth) be extended to 16 October 2025.

1A.    The interim application lodged on 4 August 2025 be taken to be an application under s 35A(5) of the FCA Act to review the orders made by Registrar Morgan on 15 July 2025, and otherwise be dismissed, with no order as to costs as between the applicant and the first respondent.

2.    The interim application filed on 10 October 2025 otherwise be dismissed, with no order as to costs as between the applicant and the first respondent.

3.    The creditor’s petition filed by Shouping Liu on 12 March 2025 be dismissed, with no order as to costs.

4.    Orders (1) and (2) made by Registrar Morgan on 15 July 2025 be set aside pursuant to s 35A(6) of the FCA Act, such that:

(a)    the order that the estate of Wei Ming Wang be sequestrated under the Bankruptcy Act 1966 (Cth) is set aside; and

(b)    the order that the applicant creditor’s costs fixed in the sum of $7,230.14 be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act is set aside.

5.    A copy of this order be provided by the applicant creditor to the Official Receiver in Sydney within 2 days.

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

REASONS FOR JUDGMENT

STELLIOS J:

1    This proceeding involved an application for extension of time under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 2.02(3) of the Federal Court (Bankruptcy) Rules 2016 (Cth) to review orders made by a Registrar of the Court on 15 July 2025 under the Bankruptcy Act 1966 (Cth). While documents seeking to commence the review proceeding were filed within the 21 days prescribed by r 2.02(3) of the Bankruptcy Rules, they were in irregular form.

2    The proceeding before the Registrar (the bankruptcy proceeding) arose from a creditor’s petition filed by the applicant, which claimed that the first respondent owed the applicant the amount of $418,328.43 (plus $828.08 in interest) for a judgment debt arising from orders made by the Supreme Court of New South Wales (the Supreme Court proceeding). The creditor’s petition relied upon the first respondent’s failure, within the time prescribed by a bankruptcy notice, to pay the claimed debt or to arrange for the settlement of the debt to the applicant’s satisfaction.

3    It is not in dispute that the sequestration order was made without the first respondent attending the hearing of the creditor’s petition before the Registrar. In his absence, the Registrar made the orders the subject of the review application, namely orders for the sequestration of the estate of the first respondent and for the applicant’s costs fixed in the sum of $7,230.14 to be paid from that estate in accordance with the Bankruptcy Act.

4    The amended notice stating grounds of opposition to the petition identified grounds including that the first respondent is solvent.

5    Ahead of the hearing of the application before this Court on 11 February 2026, the applicant and the first respondent presented consent orders and indicated that they had reached agreement for the payment of the claimed debt. That agreement was said to involve the sale of a property by the first respondent. The proposed orders sought (a) to dismiss the creditor’s petition; (b) consequential relief to set aside the sequestration and costs orders made by the Registrar; and (c) to regularise the application for review.

6    At the hearing, counsel for the second respondent (the Trustee) raised concerns about the basis for granting the relief sought by consent. Counsel for the Trustee indicated that the Trustee was not in a position to consent to those orders in the absence of an explanation of the grounds relied upon to set aside the sequestration order. It was submitted that the Court has a residual discretion to be satisfied that the orders should be made.

7    Following the reading of evidence and submissions by the first respondent, and the provision of revised orders to the Court following the parties conferring on their appropriate terms, the Trustee ultimately consented to the revised orders being made.

8    I now provide my reasons for making the orders by consent on 11 February 2026 pursuant to s 35A(6) of the FCA Act.

Evidence

9    In support of the grounds of opposition, counsel for the first respondent read parts of two affidavits affirmed by the first respondent, in which he deposed to the following:

(1)    Between March 2024 and July 2025, he resided in Japan and had no access to his Australian mobile phone number. Although he had access to his email account whilst in Japan, emails in relation to the Supreme Court proceeding and the bankruptcy proceeding went to his spam account. He did not discover those emails, nor did he become aware of the Supreme Court or bankruptcy proceedings, until after (a) he returned to Australia on 11 July 2025 and (b) the sequestration order was made on 15 July 2025.

(2)    He has assets to the value of $1,225,745 to $1,275,745, including $127,499 in various bank accounts, shares with a market value of $61,046.10, and a property in Zetland, New South Wales (the Zetland property).

(3)    He has total liabilities in the amount of $652,284.43 comprising a mortgage in the amount of $233,590.55 (with arrears of $1,490.18 as of 30 November 2025 as a result of his bankruptcy), the judgment debt and interest in the total amount of $419,156.51 and a credit card debt of $365.45.

(4)    Prior to receiving pro bono legal assistance, the irregular documents that were filed within time to commence the review proceeding were prepared with the assistance of Google Translate and ChatGPT.

10    None of these matters were contested by the applicant or the Trustee at the hearing.

11    The Trustee’s report (dated 7 November 2025) was filed pursuant to an order of the Court made under r 7.06 of the Bankruptcy Rules. It set out the following information:

(1)    The Trustee’s estimated realisable value of cash at bank was $117,979.90.

(2)    The Zetland property was subject to a mortgage to Bankwest in the approximate amount of $231,459.41.

(3)    An agent’s appraisal indicated that the Zetland property was valued at $650,000–$700,000, leaving an estimated equity of approximately $468,000 (before costs). (The first respondent indicated in his affidavit that he did not disagree with that valuation.)

(4)    In relation to liabilities, the first respondent owed: (a) the claimed debt of $419,156.51 arising from the Supreme Court proceeding; (b) $7,230.14 to the applicant arising from the Registrar’s costs order in the bankruptcy proceeding; (c) $231,459.41 to Bankwest (the Zetland mortgage); and (d) $365.45 to the Commonwealth Bank of Australia (presumably the outstanding credit card charge).

12    Counsel for the first respondent stated from the bar table that (a) upon the sequestration order being set aside, the first respondent would put the Zetland property up for sale in order to pay the debt owed to the applicant; and (b) the applicant was satisfied with that arrangement.

13    The following matters should also be noted:

(1)    The first respondent jointly owns a property with his ex-wife in Sylvania Waters. The first respondent stated that he had an agreement with his ex-wife and son that he would only retain a 5% beneficial interest in that property. He agreed with the Trustee’s valuation of this property at $1,000,000, giving the first respondent an interest valued at $50,000. The Trustee’s report indicates that the mortgage on that property has been fully paid.

(2)    The first respondent has a vehicle registered in his name which he claims was given to his ex-wife.

(3)    The first respondent claims that he is owed $330,000 in unpaid director wages. The Trustee’s report indicates that the claimed debtor is an associated entity of which the first respondent was the director and secretary. As at the date of the report, the Trustee had only made preliminary enquiries in relation to that amount.

(4)    In relation to the shares that the first respondent claimed to own, the Trustee’s report indicates that CommSec had advised the Trustee that the first respondent does not hold any shares.

(5)    The Trustee’s preliminary enquiries suggest that the first respondent might have a superannuation account with a balance in the amount of approximately $40,000. However, further investigations were required.

14    The first respondent did not rely on these assets in his submissions as to solvency. Accordingly, I have not taken these amounts into account in my assessment.

Consideration

Extension of time

15    I accept the first respondent’s submissions that time should be extended for applying to the Court to review the sequestration order. On uncontested evidence, the first respondent:

(1)    was unaware of the Supreme Court and bankruptcy proceedings until (a) he returned to Australia and (b) after the sequestration order had been made; and

(2)    acted promptly within the prescribed period to seek to apply for a review; albeit that, because of limited English skills, lack of legal assistance, and misguided reliance on ChatGPT, he filed irregular documents to commence the review proceeding.

16    In the absence of any opposition to the application for an extension, I am satisfied that the extension should be granted.

Review application

17    The principles to be applied on a review application were not in dispute. The hearing of an application under s 35A(5) of the Bankruptcy Act is by way of de novo review: Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34 at [17]. As a Full Court said in Bechara, “[t]he review does not hinge, or focus, upon error in the decision of the registrar. It is a hearing de novo, in which the matter is considered afresh on the evidence and on the law at the time of the review, that is at the hearing de novo”: at [17]. The Court “is to rehear the case and decide the facts for itself” and “exercise the discretion unfettered by the decision of the Registrar”: West International Pty Ltd v Ultradrilling Pty Ltd [2008] FCA 1443 at [6]; see also Bechara at [21], quoting from Totev v Sfar (2008) 167 FCR 193; [2008] FCAFC 35 at [13].

18    Section 52(1) of the Bankruptcy Act provides:

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.

19    Section 52(2) of the Bankruptcy Act relevantly provides:

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

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

it may dismiss the petition.

20    In accordance with the agreement reached between the applicant and the first respondent for the payment of the claimed debt, and the proposed consent orders dismissing the creditor’s petition, the applicant did not move on the creditor’s petition; nor did counsel for the applicant read any evidence or make any submissions in support of the petition. In those circumstances, I cannot be satisfied that the requirements in s 52(1) have been met.

21    Even if counsel for the Trustee is correct that the Court has a residual discretion to be satisfied whether the grounds of opposition have been established, it is difficult to overcome the simple fact that the applicant has not sought to prosecute the petition and has consented to its dismissal.

22    In any event, I would have been satisfied that the creditor’s petition should be dismissed under s 52(2)(a) of the Bankruptcy Act. The onus is on the first respondent to satisfy the Court that he can pay his debts at the time of the review hearing: Mangano v Bullen [2025] FCAFC 42 at [162]; Balwyn Nominees Pty Ltd v Culleton [2016] FCA 1578 at [44]; Pineview Property Holdings Pty Ltd v Dimitriou (No 2) [2019] FCA 1416 at [105] and [110].

23    The test for solvency “is a cash flow test”: Mangano at [162]. That is, “the ability of the [debtor] to pay [their] debts as and when they fall due”: Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) (No 2) [2018] FCA 530 at [145]. The question of “whether the evidence is sufficient to reasonably ‘satisfy’ the Court that a debtor is able to pay his or her debts is fact dependent”: Mangano at [163]; see also Stone at [146].

24    The fact that the debtor has a “preponderance of assets over liabilities” “may be a useful indicator of solvency”; however, “the balance sheet test is only useful as a ‘rule of thumb’”: Tarwala v Amirbeaggi as trustee for bankruptcy [2022] FCA 1593 at [23], quoting Quick v Stoland Pty Ltd (1998) 87 FCR 371; [1998] FCA 1200 at 380. As Murphy J said in Tarwala (at [21]–[22]):

Notwithstanding the availability of assets that may be converted into cash whether by sale, mortgage or pledge, they must be able to be realised within a relatively short period of time and be of a certain class in order to establish solvency: Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCAFC 18 at [32]‍–‍[40] (Rares, Flick and Bromberg JJ). What is a “relatively short time” is not defined, but in [Bank of Australasia v Hall (1907) 4 CLR 1514] at 1543 Isaacs J held that the cash must be realisable “in time to meet the indebtedness as the claims mature”.

It is not for the Court to guess when funds may become available. It is for the party bearing the relevant onus to adduce evidence as to the date upon which the funds are likely to become available so that the court may consider whether or not this is reasonable: Big River Group Pty Ltd v Visnic [2010] FMCA 276 at [9].

25    The ready realisation of the first respondent’s Zetland property was part of the concern raised by counsel for the Trustee, who drew attention to what was said by Pagone J in Brett Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 13 at [11]: “an asset cannot be taken into account in assessing solvency without reference to the time it would take to effect realisation and produce cash: see Sandell v Porter (1966) 115 CLR 666 at 670; Hall v Poolman (2007) 65 ACSR 123 at 163 [187]”.

26    I accept that:

(1)    The first respondent’s assets exceed his liabilities. The Trustee’s estimate of equity in the Zetland property (after the mortgage is repaid) is approximately $468,000. Furthermore, the Trustee’s estimate of available cash at bank is $117.979.90. Those amounts are sufficient to meet the liability claimed by the applicant of $419,156.51 and the credit card debt of $365.45 (noting that the consent orders set aside the Registrar’s costs order).

(2)    The first respondent has agreed to sell the Zetland property to pay the claimed debt.

(3)    The first respondent was in no position to take steps to sell the property whilst bankrupt, but has agreed to do so as soon as the sequestration order is set aside.

(4)    The period it will take to sell the property is unknown, but I infer (as invited to do by counsel for the applicant), that the period is likely to be relatively short, and one that is acceptable to the applicant.

27    Even if the applicant had moved on the petition and satisfied me of the requirements in s 52(1) of the Bankruptcy Act, I would have been satisfied on the facts in this case that the first respondent is able to pay his debts, including the claimed debt underlying the creditor’s petition.

28    To the extent that the Court has a residual discretion, I consider that the sequestration order should not be made in this case. The first respondent should not be burdened with the incapacitating status of a bankrupt in circumstances where the creditor’s petition is not pressed by the applicant creditor in accordance with an agreement for the payment of the applicant’s claimed debt.

Conclusions

29    Accordingly, in the circumstances, I am satisfied that the consent orders should be made. The creditor’s petition should be dismissed with no order as to costs as between the applicant and the first respondent.

30    I am also satisfied that consequential orders should be made pursuant to s 35A(6) of the FCA Act:

(1)    setting aside the sequestration order: Robson (as former trustee of the bankrupt estate of Samsakopoulos) v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 392 ALR 93; [2021] FCAFC 143 at [3], [38], [40];

(2)    setting aside the costs order made by the Registrar; and

(3)    other orders regularising the proceeding.

31    As noted in my orders made on 11 February 2026, the parties will be invited to apply for any other consequential relief, including in relation to the payment of the Trustee’s costs, disbursements and expenses.

32    In written submissions, the Trustee suggested that the Court was equally able to make an order to annul the bankruptcy under s 153B of the Bankruptcy Act as an alternative to consequential orders under s 35A(6) of the FCA Act. However, it was conceded at the hearing that, in the event that I made orders dismissing the creditor’s petition and setting aside the sequestration order under s 35A, there was no scope to consider making an order to annul the sequestration order under s 153B. That concession was correctly made: see Robson at [21], [38], [40], [262]–[264], [298].

Associate:

Dated:    20 February 2026